1 Tuesday, 26 September 2017 2 (9.30 am) 3 CHAIR OF THE INQUIRY: Good morning. Yes, Mr Lake. 4 MR LAKE: Yes, my Lord. The first witness today is 5 Michael Howell. 6 MR MICHAEL HOWELL (affirmed) 7 Examination by MR LAKE 8 CHAIR OF THE INQUIRY: You will be asked some questions. If 9 you just speak clearly and not too quickly because the 10 shorthand writers have to record what you're saying. 11 A. Fair enough. 12 CHAIR OF THE INQUIRY: Yes, Mr Lake. 13 MR LAKE: Thank you, my Lord. 14 Mr Howell, could you state your full name, please? 15 A. Michael William Davies Howell. 16 Q. The Inquiry has a note of your current address. I think 17 you are retired; is that correct? 18 A. Correct. 19 Q. I would like to start by looking at a document, please. 20 The reference is TRI00000129. 21 Could you have a copy of your paper statement in 22 front of you? 23 A. Yes. 24 Q. I think we can see this is a copy of a statement sent to 25 you, to which you made some revisions and then signed; 1 1 is that correct? 2 A. Correct, yes. 3 Q. Are you content to adopt that as your evidence for the 4 purposes of this Inquiry? 5 A. I am. 6 Q. Now, I think within that statement, if you go on to the 7 second page of it, you can see there paragraph 1 which 8 runs on to the other page? I don't propose to read 9 through it, but it gives a summary of your relevant 10 experience in terms of engineering and your career to 11 date. 12 A. Yes. 13 Q. You were the Chief Executive of tie from its inception 14 in 2002 until about 2006; is that correct? 15 A. Correct. 16 Q. I want to start then by asking you a few questions about 17 tie and in particular your statement. 18 If you can go forward, please, to page 10 of your 19 statement. Pardon me, page 9. 20 We look at paragraph 26. 21 A. Mm-hm. 22 Q. You note there that: 23 "TIE was created at the behest of SE [that was the 24 Scottish Executive as it then was] who made the creation 25 of an arms-length company the condition of its 2 1 commitment of GBP375 million to the Edinburgh Tram 2 Project in 2002." 3 I just wanted to ask you about it being made 4 a condition by the Scottish Executive. 5 Do you recall any -- how you came to your 6 understanding that it was a condition of the grant that 7 there be this arm's length company? 8 A. My recollection is hazy, but I believe that my belief in 9 this came from conversations with Ewan Brown about his 10 conversations with the then Transport Minister, who 11 I think was Wendy Alexander at that time. 12 Q. I would like -- if I could ask you quickly to look at 13 another document there. It is reference USB00000232. 14 A. Mm-hm. 15 Q. You will see this is a report to Council, but what I'm 16 interested in is a letter which is included at page 10 17 of this. 18 You can see there it's a letter that's addressed to 19 Councillor Burns and if we go to the second page of 20 that, the following page. We can see that is a letter 21 from Wendy Alexander. If we go back to the previous 22 page, we can see the date was 28 February 2002. 23 If you could enlarge the second whole paragraph of 24 the letter, we can see that Ms Alexander says there: 25 "As you know I firmly believe that the private 3 1 sector has much to contribute to this process, 2 and I strongly support the principle of an off balance 3 sheet company (ENTICO) to progress the Council's plans." 4 I think ENTICO was the name by which tie was 5 initially known, was that your understanding? 6 A. Yes. 7 Q. You can see there it's been phrased as strong support 8 for it rather than making it a requirement; do you know 9 any more about that? Does that shed any light? 10 A. No, I accept that this is the situation as it was. 11 Q. You refer to it as an arm's length company. We see it 12 being referred to here as an off-balance sheet company. 13 Was there any difference in that? 14 A. Well, obviously off-balance sheet is a financial 15 description. Arm's length is more a question of how the 16 company is run. In my own context, I believe it was 17 both. 18 Q. I want to ask you then about how it was run. Do you 19 consider that it was arm's length in relation to the 20 Council? 21 A. Well, it really could not have been because after all 22 the Council was the owner of the company and the company 23 therefore was set up by Council and the people who were 24 running it either in -- on the Board or in the 25 management were therefore selected directly by the 4 1 Council's original initiative. 2 Q. But apart from choosing the people who are to manage the 3 company, was the management of the company thereafter 4 left to those people or did the Council continue to take 5 an active role? 6 A. Of course it was actively involved. I mean, there's no 7 way in which a tram system can be built in a city like 8 Edinburgh without very, very detailed connections with 9 particularly the Transport Department of the Council, 10 but many other aspects of the Council's work as well. 11 So collaboration and consultation was constant. 12 Q. Did the Council give directions or indications as to 13 what they wished tie to do in certain respects, how they 14 wished tie to respond? 15 A. In matters small, no. But I'm sure in matters big, that 16 happened. There were obviously consultations frequently 17 between myself and Andrew Holmes who was the City 18 Development Director at the time, and between Ewan Brown 19 and primarily, I think, Tom Aitchison, but also 20 Donald Anderson who was the leader at the time. 21 So we were always discussing, but those high level 22 conversations usually only took place when there were 23 matters of sort of significant import which had to be 24 addressed. 25 Q. Policy matters? 5 1 A. Indeed. 2 Q. Or strategy? 3 A. Both. 4 Q. But not the day-to-day implementation of the policy? 5 A. No. And that was, I suppose, the purpose of tie was to 6 try and give us a free hand in getting on with things, 7 because I'm sure we all know that big organisations have 8 a tendency to spend a lot of time generating material 9 which keeps people busy but not necessarily productive. 10 Q. In terms of tie implementing Council's policies, you 11 referred in your statement to Integrated Transport 12 Initiative. 13 A. Yes. 14 Q. What was tie's role to be in implementing that? How was 15 it to go about implementing that? 16 A. Well, the Integrated Transport Initiative obviously 17 embraced trams, but more important in the early days, 18 very much more important, was the congestion charging, 19 because the game plan clearly was to find a way to 20 ensure that we set up a congestion charging system which 21 would do two things: reduce traffic congestion in the 22 city centre and generate some revenues which could be 23 put into improving public transport, and the tram in 24 particular. 25 So my belief was -- and of course I was new to city 6 1 administration. My belief was that previously there had 2 been certain activities, projects which had not been 3 particularly successful, had not taken flight, and tie 4 was really there to try and ensure that a focused group 5 of professionals would change the pattern and make 6 things happen. 7 Q. I think you stated when you started work with tie, it 8 had quite a few staff? 9 A. It had very few staff. It had, as far as I remember, 10 the people I still remember are, I think, of course 11 Alec Macaulay, a gentleman called John Saunders, 12 someone -- another Burns, but I can't remember his first 13 name. These were all people who had been working within 14 the city's Transport Department on the ITI and they 15 transferred to tie when tie was established. 16 Q. With a small number of staff like that, was it 17 anticipated that tie would deliver its objectives by 18 buying in services from consultants? 19 A. No. Well, yes or no. Obviously you can't buy -- you 20 can't manage a consultant effectively unless you have 21 good knowledge of what the consultant is about. 22 And there was a limited number of what I would call 23 high-powered people who are used to handling 24 multi-billion -- multi-million pound projects. 25 So the objective and my approach to tie was to keep 7 1 tie itself very small, but to ensure that the resources 2 within tie and the people whom we hired to work for tie 3 had the background which would allow -- and experience 4 which would allow them to be effective in taking forward 5 the various activity strands which tie adopted. 6 Q. In addition to the congestion charging that you have 7 referred to, there was also the tram project, the 8 Stirling-Alloa-Kincardine Railway, and Ingliston Park 9 and Ride, just to name three of them. 10 A. And a very big one which of course -- later which was 11 the Edinburgh Airport Rail Link, and a small one which 12 was the one-ticket programme for multi -- so there were 13 quite a lot of things. 14 Q. In terms of delivering, say, the larger transport 15 projects, looking at EARL, the airport rail link and the 16 trams in particular, did you envisage that the expertise 17 to deliver those would be by engaging consultants, or 18 did you see actually employing people to provide that 19 expertise from within tie? 20 A. The legwork was -- had to be done by consultants. There 21 was no way that tie was going to hire all those people. 22 We just had to hire what I called the clients, people 23 who actually facilitate and manage the -- and integrate 24 the work of the consultants. 25 Q. If I could ask you to look back to your statement, 8 1 please. It's actually back to page 9 where we were 2 previously. 3 Paragraph 26. 4 A. Mm-hm. 5 Q. The second half of that paragraph, we read that: 6 "TIE became an independent company, and was the 7 Council's interface with the project management and 8 engineering sectors." 9 Perhaps at the same time if I could go to page 11. 10 Paragraph 33. The second half of that paragraph: 11 "TIE was indeed the entity that undertook the 12 procurement, and so we had to know what we were 13 procuring, why, when and what skill sets were required 14 to deliver. But at that stage, we did not need the full 15 skill set to be a major project management 16 organisation." 17 Both of those paragraphs give the suggestion that 18 tie were not going to project manage themselves but were 19 going to procure project management services from 20 others, and that is how the various matters have been 21 brought forward; is that a fair reading? 22 A. It's a fair reading. 23 Q. While you were there, did that intention change? 24 A. As I've covered in my statement, my background is not 25 that of a Project Director, Project Manager. I'm 9 1 a business manager in a variety of technical businesses 2 during my career. 3 I think that during early period, tie migrated 4 during the period of my employment because I knew very 5 well from the beginning that I was probably not going to 6 be the person who would be taking forward the tram, for 7 one thing, but anything in terms of the various 8 activities. 9 So we were looking at that early stage about the 10 creation of an organisation which would be able to offer 11 project management support to -- not just to Edinburgh 12 City Council but, as it turned out, a variety of other 13 clients, and I saw tie as essentially, I suppose, 14 a stable of able horses who were essentially -- each of 15 whom would have the knowledge and capability to be the 16 clients, to essentially ensure that the consultants that 17 we hired fulfilled the tasks that they were assigned. 18 Q. Looking at that, looking at the experience within tie, 19 you say in particular there, in paragraph 25, you had to 20 be able to recruit professional expertise that lay 21 beyond the limits of the salary structure of the 22 Council. 23 I'll take you to it. It's page 9, paragraph 25. 24 A. Yes. 25 Q. I was reading from the centre part of the paragraph? 10 1 A. Yes. 2 Q. This was the idea. It was partly to be in a position to 3 recruit people with the expertise in question? 4 A. Yes. 5 Q. But if you go back to page 4 this statement, and look at 6 paragraph 7, you note that the role you had in 7 recruiting people there, competent people. You say 8 that: 9 "In doing so I relied upon colleagues for 10 recommendations or used my own network of contacts." 11 Why make a decision when you had a company to stick 12 with your known contacts rather than start 13 a wider-reaching recruitment process, perhaps through 14 consultants? 15 A. Well, if you look at the people that I hired, I think 16 the only one that I had known previously was 17 Paul Prescott, who had worked with me at Railtrack in 18 the 1990s, who was based at Scotland, which is always 19 helpful, and he was familiar with the ways of the rail 20 industry. 21 Other than that, everybody was recruited through 22 a formal and essentially objective process. 23 Q. You say here that you started -- you relied upon 24 colleagues for recommendation but used your own network 25 of contacts as your starting point; is that correct? 11 1 A. I would think that statement rather -- that sentence 2 rather overstates the emphasis I placed on that. The 3 facts make it clear that these were not people who 4 I was -- who were my chums. 5 Q. I put it this way: how did you go about recruiting 6 people? 7 A. Well, it depends on which activities we are talking 8 about. In the relation to the congestion charging 9 programme, I was very comfortable and happy with 10 Alec Macaulay and I think John Saunders who worked with 11 him. They did an outstanding job in developing that, 12 with the help of a number of consultants whose names 13 I no longer recall. 14 Q. And they were essentially in position -- 15 A. They were already there, exactly. The other areas of 16 expertise that I needed in particular was finance. 17 And -- yes, I had met Graeme Bissett who -- I'm not sure 18 if he's likely to be a witness, but he was closely 19 involved in the project all the way through, and his 20 background was strategic level of finance, and he was 21 a very bright guy. 22 So yes, I had never worked with him, but I knew of 23 him and he was available because of the collapse of 24 Arthur Andersen, and so he joined. 25 Then there was, for the tram, I think I have written 12 1 later that Mr Kendall became involved in the tram at the 2 behest of Mr Macaulay, because early on, Alec was doing 3 everything, and that was one of the problems in a way. 4 He was so busy doing everything, I don't think he had 5 time to really lift his head and communicate with the 6 world outside. He wasn't -- that was one of the things 7 that I thought my job was, was to essentially raise the 8 profile of tie, raise its ability to communicate with 9 government at all the different levels and also learn 10 from what happened in similar projects in other places. 11 So that was really my role while others were getting 12 on with the nuts and bolts of the job. So back to your 13 question, how did I recruit people? It varied. And in 14 relation to the actual recruitment of consultants, of 15 course, that was done through a procurement basis on 16 a very objective basis. 17 Q. As external consultants, that would be done through 18 a public procurement process? 19 A. Exactly. 20 Q. You mentioned there the question of raising profile. 21 Within your statement in paragraph 28, you refer to 22 engaging the public relations consultants 23 Weber Shandwick? 24 A. Mm-hm. 25 Q. It's on page 10, if you want to look at it. What was 13 1 their purpose? Why did you recruit them? 2 A. Well, I think it was very clear that what we were up to 3 was going to be under the public microscope. I honestly 4 feel that professionals are always of value. 5 We felt there was quite a lot of challenge to what 6 we needed to achieve if we were going to see the 7 congestion charge happen. And I felt that it would be 8 of value and that was agreed by the Board to have 9 a professional PR firm to advise us on how to manage the 10 way we presented ourselves to the outside world. 11 Q. You've mentioned there specifically the congestion 12 charge. Were Weber Shandwick engaged to raise the 13 profile of tie in general, or the congestion charge or 14 all tie projects? 15 A. No, raising the profile of tie is the wrong expression. 16 tie itself was not anxious to be admired and applauded 17 and a household name. 18 No, the idea was to make sure that we were 19 presenting a coherent story which allowed us to support 20 the efforts that we were making to make our project 21 happen. 22 Q. Was that essentially a role that tie was performing in 23 advocating for the various projects? 24 A. Indeed. I mean, there was a certain amount of 25 dissension within the ranks of the political officers, 14 1 as always, in the Council. And that was one of the 2 reasons why things sometimes took a long time for the 3 Council to do, and the fact that tie was relatively 4 independent and set up specifically to do certain things 5 was intended to be the way that that problem of delay 6 would be overcome. 7 Q. I understand the dissension that you talk about. What 8 I'm trying to get to is what was Weber Shandwick's role 9 in relation to that? Was it promoting a project to the 10 councillors? 11 A. No, it was essentially helping us with press releases, 12 and with -- partly with relationships with journalists, 13 although I did that myself quite a lot as well. 14 To be honest with you, I found the Weber Shandwick 15 activity less than wholly satisfactory. So it was 16 useful always to have them around to give us their 17 perspectives, but in retrospect, I feel it was something 18 that perhaps we could have done on our own, perhaps we 19 could have done with having our own public relations person 20 internally. 21 Q. Again, just to be clear, is what you have found 22 unsatisfactory the whole idea of that work stream or 23 just the way it was performed by the consultants? 24 A. The latter. 25 Q. The latter. 15 1 In relation to the funding, I think it seems to be 2 clear from a number of witness statements that it was 3 always understood this was Edinburgh's project; and 4 Transport Scotland's role was simply in providing the 5 funding? 6 A. Yes. 7 Q. You refer in your statement to the GBP375 million that 8 was to come from the Scottish Executive, as it then was, 9 that initially there was reluctance even to index that 10 figure. 11 A. Mm-hm. 12 Q. But they moved while you were still with the company, 13 started to indicate that there would be indexation to 14 some degree? 15 A. The issue of indexation was incredibly obfuscated. 16 I think I made a comment. It seemed to me as though 17 they always felt that Edinburgh City Council should be 18 making bigger efforts and more effective efforts to 19 raise funds, and their share of the cost of the project, 20 and in a sense, it seemed to me that this indexation 21 business related really to trying to persuade indirectly 22 Edinburgh to focus on how to increase their commitment. 23 Q. If the Scottish Executive weren't willing even to give 24 commitment towards indexing, did you ever get any 25 indication from the Executive that they would be willing 16 1 simply to increase the amount of the grant if the 2 project costs rose? 3 A. Well, the answer was that that -- I do not recall that 4 happening. Obviously later there was a larger amount of 5 money and I don't know how that came about and when it 6 came about, but at three years or so, it was one of the 7 bugbears that we spent all our time messing with, 8 because we knew we couldn't build what we were about to 9 build on the money that had been committed three years 10 before, as opposed to the indexed demand. 11 Q. Looking at other projects for tie, then, we have already 12 made some reference to the Stirling-Alloa-Kincardine 13 Railway, and I think you note in your statement that the 14 line was built and it is in use now. You are aware of 15 that? 16 A. Yes. 17 Q. But in particular on that railway, there were certain 18 difficulties in that the costs increased quite 19 dramatically and ultimately it was delivered late. Were 20 you aware of that? 21 A. I am, although it happened after I had left. 22 Q. It happened after you left. 23 Are you aware that again after you left, it 24 became -- it was thought necessary for Scotland to take 25 back or resume control of the project? 17 1 A. Mm-hm. 2 Q. Do you have any view on why that happened? 3 A. I don't because I'm afraid it happened after I'd left. 4 I do recall that towards the end of my time there, some 5 of the issues that presumably caused that were starting 6 to emerge, but again, I'm afraid I don't remember what 7 they were. 8 Q. During the time that you were there, in relation to that 9 project in particular, were you aware of any 10 difficulties in governance of the project? 11 A. The project, if I recall, was -- the client of the 12 project was Clackmannanshire. You will know that better 13 than I. And the Project Manager's name was 14 Richard Hudson, who was a former railway person. 15 I and Paul Prescott, whom I have already mentioned, 16 and Richard, met quite frequently with certain 17 individuals at Clackmannanshire whose names I don't 18 recall. 19 And that's about the limit of my memory of that 20 particular -- I do -- I do recall Mr Prescott expressing 21 in the early stages satisfaction with progress and then 22 it was clear that there was issues that had emerged 23 and I again can't remember what they were. 24 Q. Transport Scotland were involved in that project also, 25 I believe? 18 1 A. Mm-hm. 2 Q. Were there any difficulties with Transport Scotland's 3 involvement while you were still there? 4 A. I had a good relationship with in particular 5 Damian Sharp who stayed close to all the projects during 6 the time that I was Chief Executive. I can't recall 7 whether he personally was involved. Probably some of 8 his team would have been. But I don't recall any 9 serious differences of opinion about how things were 10 proceeding. 11 Q. Do you consider -- again, I'm talking about the period 12 obviously while you were there -- that the governance of 13 the project was compromised by Transport Scotland's 14 involvement? 15 A. Again, I cannot comment. 16 Q. Looking at the governance then of the tram project, if 17 I could ask you, please, to look at page 13 of your 18 statement. Paragraph 37. I'm particularly interested 19 in the passage right at the end of this: 20 "TIE and I could no longer be a knowledgeable 21 client, which is why the setting up of the Tram Project 22 Board was envisaged, recommended and approved." 23 How was the Tram Project Board intended to work 24 then? 25 A. Well, the issue that bothered me, I suppose, about where 19 1 we were with the tram is that -- and this goes to 2 another point I made somewhere else, I think -- tie was 3 set up, as we know, by the City Council. Ewan Brown was 4 asked to be the chair. He's a very capable financier, 5 very capable man in every way. 6 I suppose I was surprised and remain surprised about 7 the people who were chosen to be members of tie because 8 tie was, after all, there to manage an array of very 9 important civil engineering projects. And we didn't 10 have anyone who was a civil engineer, I don't think, 11 with the possible exception of Jim Brown who was with 12 the water business. 13 So I honestly felt that we had to have people who 14 were closely connected and understood and had seen 15 projects like the tram brought into being closely. 16 CHAIR OF THE INQUIRY: Sorry, that's a test for the alarm. 17 I should have advised you. 18 A. It's on time. 19 Closely connected and working with Ian Kendall. 20 Ideally I would have liked independent people, which 21 is what the Board members of tie could have been. But 22 in the context of where we were, the people who were 23 obviously available were those who were working on the 24 project at senior levels, and the TPB was therefore, if 25 I recall, composed of people who were -- had an interest 20 1 in some aspect of the project and that -- and therefore 2 they could spend more time -- if you think about it, the 3 tie Board meetings did deal with an awful lot of 4 different issues, and we could only have two hours or 5 so, and that meant the tram, even though it was the 6 biggest and most important project towards the end, 7 probably only had 20 minutes, maybe half an hour 8 attached to it, and that's once a month. 9 So that is not a particularly long period of time 10 for detailed discussion and tough decisions to be made. 11 We needed to have a much more knowledgeable group 12 able to spend more time with the Tram Project Director 13 on all the many, many issues that were facing us at that 14 time at that point. 15 Q. I want to tease out a few aspects of that. One of them, 16 you said you were surprised about the people who were 17 chosen to be members of tie. 18 A. Mm-hm. On the tie Board. 19 Q. The tie Board? 20 A. Yes. 21 Q. Were they chosen by the Council? 22 A. I think they were probably chosen to a large extent by 23 Ewan. 24 Q. That's Ewan Brown, the first Chairman? 25 A. Yes. 21 1 Q. Was it at that time councillors also sat on the 2 tie Board? 3 A. Yes. Well, the one who was most evident was 4 Andrew Burns who was the member for transport. There 5 was later a Lib Dem councillor. 6 Q. What if anything do you consider that councillors 7 sitting as board members brought to the company? 8 A. Well, I was very delighted. I have a high, high regard 9 for Andrew Burns. He was an enthusiastic, honest, plain 10 speaking, a man who wanted the best for Edinburgh, 11 probably still does. I think he had later some further 12 senior appointments in the Council which I'm sure he 13 well deserved. 14 So just by virtue of who he was, he was a good, 15 sensible and able and helpful person, but the fact that 16 he was also an elected member meant that we had access 17 to the political members of the Council, and that was 18 obviously critically important in a democratic context. 19 Q. In what sense did you feel you had access to the elected 20 members? 21 A. Well, this is maybe off-track, I'm not sure. But 22 I suppose we're talking about here how helpful or 23 non-helpful or what the relationship was like between 24 the political part of the Council, particularly the 25 leader, and tie, because I never really saw 22 1 Donald Anderson. He was very remote indeed. And 2 therefore -- and yet we he wielded a lot of influence 3 and he was very opinionated and quite noisy, as 4 politicians have to be. 5 So the only way I could influence him was by working 6 closely with Andrew Burns, who was obviously his 7 colleague. 8 Q. So you hoped that if you had someone sitting on the 9 Board, a councillor, they might be able to better to get 10 the ear of the Council Leader or -- 11 A. And explain, you know, the issues we were facing and the 12 challenges we wanted to undertake, and what was going 13 on, on the basis of some evident facts. 14 Q. So that councillor sitting on the board of the company 15 might in turn be able to act as an advocate for the 16 company and the projects within the Council? 17 A. That was true. 18 Q. You also pointed out that there were a number of 19 different projects going on, being handled by tie at the 20 time, and there was limited time to consider each. Do 21 I understand that correctly? 22 A. Yes. 23 Q. So setting up a Tram Project Board, as the name 24 suggests, meant that you had a group there that would 25 give particular focus to the tram? 23 1 A. Yes. 2 Q. Now, that was really something that was in issue while 3 the company had all those projects, as it did while you 4 were there? 5 A. Yes. 6 Q. In terms of the expertise on the Tram Project Board, who 7 was to sit on it? How did you identify what that was to 8 be? What expertise did you want to be on the Board? 9 A. That was something that Ian Kendall, Graeme Bissett, 10 Finance Director and I, sat down to discuss. 11 I can't recall precisely the identity of all the 12 individuals involved, but I know you know that obviously 13 the Scottish Executive were represented. There were 14 members of the -- senior members of the consultants that 15 we had employed to undertake certain tasks related to 16 the tram project. I'm sure there was someone from the 17 Council as well, probably Andrew Holmes or Keith Rimmer. 18 I think Keith Rimmer, being his transport person. 19 So there was some obvious ones. But at the end of 20 the day, we wanted it to be a broad spectrum of those 21 who really did understand the issues and were going to 22 help us with making -- charting our way through a fairly 23 difficult landscape. 24 Q. If you could look, please, at another document. It's 25 TRS00008528. 24 1 You will see these are papers for a tie Board 2 meeting that was to take place in August 2005. If we 3 could go to page 5 of this, we can see there is 4 a reference there to the proposal to establish -- the 5 governance structure for the Tram Project Board was 6 discussed and agreed in principle -- 7 A. I'm looking at page 2 at the moment. 8 Q. It's page 5 of the electronic pages but it will be 9 page 2 of -- 10 A. Yes. 11 Q. In the centre part of that page, under the heading, 12 "Governance Matters", there's reference to a proposal 13 for a new governance structure for the tram project and 14 EARL, and the creation of a Tram Project Board, both 15 powers are delegated powers and a reporting line to the 16 tie Board. 17 Was that the time you recall setting up the Tram 18 Project Board in 2005? 19 A. Yes. 20 Q. Could we go to page 50 of this same document, please. 21 I think we see here that with the draft remit for the 22 Tram Project Board. If you enlarge the upper half of 23 the page to make it a little bit more readable, we see 24 there's a reference that it will have the key 25 stakeholders which will be tie themselves, the Council, 25 1 the Scottish Executive, TEL, Lothian Buses and Transdev. 2 Why were these the parties that were thought best to 3 bring on to a Tram Project Board? 4 A. It is because they essentially were the ones who were 5 represented already at the tie Board, and it was 6 an opportunity for them to be carved out into, if you 7 like, a sub-committee of the tie Board to focus on the 8 trams. 9 Q. The impression given here is that it's going to be 10 representative, these various bodies, rather than 11 something intended to procure particular expertise? 12 A. Well, all of those people were strongly involved in the 13 tram, and obviously we would have representatives of the 14 actual organisations that were working for tie, 15 delivering the tram, present at TPB Tram Project Board 16 meetings. 17 So this -- there's a suggestion that this was the 18 wrong list? 19 Q. I'm simply asking you -- you referred to perhaps the 20 need to get particular expertise. What was seen there 21 is not immediately obvious that these people are going 22 to bring the sort of expertise that you were referring 23 to? 24 A. No, you make a fair point. Although if you look at the 25 people who are on that list, who are up to their ears in 26 1 tram day to day, obviously it's the Tram Project 2 Director, the -- I guess PTMT is probably Damian Sharp, 3 and James Papps who was from Partnerships UK who is 4 working with us very closely on the procurement 5 strategy. 6 Then you've got Transdev too who actually know about 7 trams, they operate them around France. So that was 8 a capable person as well. 9 So there are quite a lot of effective people there. 10 And of course don't forget that this is -- and these are 11 all, if you like, much closer to the tram than either 12 the non-Executive Directors of tie, or indeed the 13 non-Executive Directors of TEL, which are mentioned 14 there: 15 So this is a better -- a more substantive group 16 which of course could call other people to the meetings 17 as required. 18 Q. We see on the second full paragraph there, the intention 19 that the tie Board would delegate substantial 20 decision-making to the Tram Project Board. We could 21 understand that the intention was that it would in 22 effect be the Tram Project Board would be the -- 23 A. The tie Board -- 24 Q. The tie Board to all intents and purposes? 25 A. Yes. 27 1 Q. Look at the lower half of the page then. You see a note 2 there that: 3 "In due course, the chairperson would either be the 4 Chair of TEL or a non-Executive Director of TEL, 5 probably to be crystallised when TEL takes on formal 6 project responsibility from tie." 7 What was your understanding as to why TEL was to 8 take over from tie? 9 A. To me, the creation of TEL and the role of TEL at this 10 point seemed to me to be -- it should have been 11 a sideshow, but it became a very important element. 12 Because actually what we were trying to do was deliver 13 infrastructure. We were trying to deliver very 14 challenging and expensive and time-constrained 15 construction projects. 16 TEL, it was obviously essential, and this is one of 17 my beefs, I suppose, as the Chief Executive of tie, that 18 we had a strong and collaborative relationship with 19 Lothian Buses, which after all is the -- operates, 20 I don't know, 80 plus per cent, 90 per cent maybe of the 21 buses in the city. And of course too I had the 22 opportunity of visiting other cities where things had 23 gone well and where things had gone badly vis-a-vis 24 tram/bus integration. We can talk about that later if 25 we wish. 28 1 So I couldn't imagine anything more important than 2 having a close and friendly and personal and trusting 3 relationship with the Chief Executive of Lothian Buses. 4 Q. Which was Neil Renilson at the time? 5 A. Who was Neil Renilson at the time, and that proved, I'm 6 sad to say, impossible. It was -- it was clear very 7 early on that, for whatever reason, Neil wanted to be in 8 charge of everything to do with the tram, even though of 9 course he wasn't a civil engineer, he didn't really know 10 anything about building a tram system. And it was 11 something that created a lot of energy and time and 12 attention on the part of the tie Board and me and my 13 colleagues, because of various filibusters from the 14 Director of Lothian Buses. 15 So TEL was a necessary thing. TEL was the single 16 economic entity which was going to run both trams and 17 buses effectively, but it only came really into play, in 18 a serious way, when the trams were close to entering 19 operation, because clearly the trams had to be 20 integrated with the bus operations network; once the 21 trams run down Princes Street, the buses presumably 22 there will be fewer of them, et cetera. 23 So I was very surprised when TEL suddenly was put 24 forward as the lead organisation in this context. This 25 was shortly after David Mackay had been appointed to be 29 1 the Chairman of TEL, and he in turn recruited 2 Neil Renilson to be the CEO of TEL, even though at that 3 time there was nothing other than Lothian Buses to 4 actually manage, because the trams were not yet built. 5 Q. So TEL was a company that had as its Chief Executive, 6 the Chief Executive of Lothian Buses? 7 A. Yes, and he appointed someone else, I think, whose name 8 I don't recall, to be the nominal Chief Executive of 9 Lothian Buses. So there was a double layer of -- above 10 Lothian Buses suddenly created. So in some ways I felt 11 that there was therefore we had Mackay and Renilson 12 looking for something to do, and what better than to 13 take over and possibly chair the Tram Project Board, and 14 that's what happened. 15 Q. This is considering -- this is contemplated in 2005 that 16 TEL would take on the formal project responsibility from 17 tie, take it away from tie? 18 A. Well, that was never formally documented, to my 19 recollection. There was, after all, a very detailed 20 Operating Agreement that existed between the Council and 21 tie, which determined what it was doing. And so I never 22 saw that formally being renegotiated in favour of TEL. 23 But that's another matter. 24 Q. In that regard, could I ask you to look with me at 25 page 55 in this document. It's further on in this 30 1 section about the Tram Project Board remit. 2 If we could enlarge the number 9 in the heading and 3 all the text underneath it, the heading is: 4 "tie Limited handover to TEL". 5 It notes: 6 "This needs to be closely controlled to ensure 7 continuity of experience and of processes and also to 8 ensure that there is no duplication of reporting lines. 9 In the period until tie hands over to TEL, TEL requires 10 to be populated at board and senior management level and 11 the Tram Project Board should take an active role in 12 ensuring that this process is handled effectively. 13 It makes sense to select a date when there is 14 a substantive change in the project's progress. The 15 main options are: 16 Handover at the point of outline Business Case 17 approval in Spring - Early Summer 2006." 18 So this is less than a year from this report and the 19 other one is: 20 "Handover at the point of Final Business Case 21 approval and financial close on vehicle and systems 22 contracts (late 2006 - early 2007)." 23 Even if we take the later of those, that seems to be 24 contemplating that tie would take over the actual 25 construction work? 31 1 A. TEL. 2 Q. Sorry, TEL would take over the construction work? 3 A. Well, take over construction work is the wrong thing. 4 Of course it is -- the issue of the single economic 5 entity is also a point in question, because of course 6 one of the issues that preoccupied Neil Renilson was 7 that a very large, substantial portion of his fare box 8 revenue would be moving across to the tram, and it was 9 necessary, as a business, to consider the two entities 10 at the same moment. 11 But yes, to concur with what you're saying here, 12 it's clear that it was decided or agreed that TEL should 13 take this role early on, and when it did take this role, 14 tie then changed to being a deliverer to TEL. 15 Q. You've already explained to us this morning that there 16 was a difficult relationship -- I'm paraphrasing -- with 17 Mr Renilson over the implementation of the tram project? 18 A. Yes. 19 Q. This would see the implementation of the contracts for 20 the tram project handed over to a company which 21 Mr Renilson was the Chief Executive? 22 A. Yes. 23 Q. How did you feel about that? What was your view of 24 that? 25 A. Well, I didn't think it was particularly helpful. You 32 1 know, I suppose, if I had to rewrite history, I would 2 have preferred to see tie strengthened with a different 3 array of skill sets within the tie Board and continuing 4 to focus on getting the tram built, rather than being 5 snarled up in a new and potentially hostile entity. 6 Q. Was TEL a potentially hostile entity? 7 A. Well, let's say the people -- the individual in question 8 had displayed a very serious measure of hostility during 9 the period when he was not in charge of it. When he 10 then became in charge of it, lo and behold, I think it 11 became perhaps a little more -- something which he 12 viewed favourably, perhaps not surprisingly. 13 But on the other hand, he didn't have the background 14 or the experience that building a tram would evidently 15 require. 16 Q. How had that hostility shown itself? 17 A. I think we get into vignettes of subjective 18 remembrances. All I can remember is that there were 19 very frequently conversations between me and Ewan Brown 20 about the latest escapade of -- which has caused us 21 difficulties. I mean, both political -- he made a very, 22 very strong use of the Edinburgh Evening News, where he 23 did have a good relationship, and therefore it was -- 24 there was always something which appeared in the paper 25 which would generally be disruptive and create a lot of 33 1 stress to a lot of people. That was the typical path. 2 Q. Could we go back to page 51 within the same document. 3 If we could just enlarge heading 5 and all the text 4 underneath it. This is looking at the responsibilities 5 and delegated authorities, and the first one is the 6 tie Board, where it's noted that the Board will take 7 over most of the authority vested in tie ltd through 8 approved delegated authorities, whilst retaining 9 ultimate overall control of the project and retaining 10 the ability to restructure or disband the Tram Project 11 Board. 12 Just pausing there, was the Tram Project Board to be 13 a sub-committee of the tie Board or if not, what was it? 14 A. Well, I just used the word "sub-committee" earlier, 15 didn't I? I think -- I viewed it as de facto 16 a sub-committee of the tie Board, yes. 17 Q. In terms then of the layers of management 18 responsibility, did that effectively create another tier 19 where there might be some duplications between the Tram 20 Project Board on the one hand and tie at the other? 21 A. Well, your answer was if it's an effective 22 sub-committee, and if it's -- and there is an effective 23 chair, who is reporting to the board itself, then 24 there's no reason for second-guessing and I don't recall 25 that happening. 34 1 Q. Do you consider that it was effective? 2 A. Was the Tram Project Board effective? 3 Q. Yes. 4 A. Well, it was only in active operation for a period of 5 about a year during my -- the latter period of my time 6 with the company. 7 I think it helped. It certainly brought to the fore 8 the issues that emerged during -- late 2005/2006, which 9 led to Ian Kendall's departure. 10 Q. I want to come back and ask you about his departure in 11 a little while. If I could just firstly look at another 12 document. It's CEC01793454. 13 This is, you see, the tie Project Readiness Review 14 which was issued on 25 May 2006. 15 This is part of what's known as a OGC Readiness 16 Review. We can see the date there, May 2006. 17 Could we look at page 7 of this. 18 If we look just below where the cursor is, there's 19 a paragraph beginning: 20 "The terms of reference ..." 21 Actually, if I could take -- pardon me, that and the 22 paragraph above it. Pardon me. 23 It's: 24 "In order for the governance of the 25 tram project to most closely reflect best practice and to be 35 1 fully effective, we recommend that a project board is 2 set up as a matter of urgency and that there is clarity 3 as to the identity of the SRO for the project. Good 4 practice suggests that this board is a small group 5 comprising the decision-makers in respect of the scope 6 and funding of delivery. 7 The terms of reference of the project board should 8 be developed as soon as possible and we recommend that 9 the project Board is the only forum through which key 10 decisions in respect of the scope of the project are 11 determined." 12 Were you surprised in May 2006 to see 13 a recommendation that you establish a Project Board? 14 A. It -- I don't -- I mean, this is 11 years ago. So I was 15 surprised when I read this document in the process of 16 preparing my statement because, as you know, a Project 17 Board existed. Notionally it existed. 18 Obviously from the point of view of those who wrote 19 this document, they felt that it didn't fulfil their 20 expectations or hopes for what it was supposed to be 21 doing. 22 I mean, curiously though, there are -- what is 23 different between what was happening versus what they're 24 suggesting should happen here, the implication is that 25 other decisions were being taken by others around the 36 1 Project Board. Is that what -- that's what I read. I'm 2 not sure that that's true. 3 Q. Do you consider that the Project Board you had was 4 fulfilling this role of having a group of 5 decision-makers in respect of scope, funding and 6 delivery? 7 A. Well, yes, I do. I mean, I think we've just talked that 8 through. 9 I don't necessarily think that all the decisions 10 that were taken were good ones, and of course ultimately 11 it depends upon the SRO, Senior Responsible Officer. 12 And that was Mr Kendall. 13 Q. Could you explain what the role or responsibility of the 14 SRO is? 15 A. I'm sure there must be an official definition somewhere, 16 but in essence it is the person who is ensuring that the 17 project meets all its objectives, obviously primarily 18 time, cost and functionality. 19 Q. Jump forward to page 13 of this. These are a summary of 20 recommendations. You can see there's a number of red 21 and a number of ambers? 22 A. Yes. 23 Q. I think you acknowledge in your report that this was not 24 a good outcome in terms of the number of things that 25 needed to be rectified? 37 1 A. No. 2 Q. Were you surprised to get this verdict? 3 A. I wasn't unduly surprised because I had just relieved 4 Ian Kendall of his responsibilities. 5 Q. What happened in relation to Mr Kendall? 6 A. In what aspect? 7 Q. Well, you say you relieved him of his responsibilities. 8 Did disagreements arise with him as to what he was 9 doing? 10 A. No, I think I have covered in my report, there are 11 certain activities that conspicuously fell behind. The 12 most obvious was the SDS project, the development of the 13 design. 14 I felt that we'd given him more than enough chance 15 to potentially deploy the resources or find the 16 resources to overcome the clear deficiencies in terms of 17 performance, not just of SDS, which is 18 Parsons Brinckerhoff, but also of other activities at 19 that time, and so I can't recall the precise trigger for 20 his departure, but it took place in May. 21 Q. What in general were your concerns about the SDS 22 contract, the design, while you were there? 23 A. Well, I think the issue obviously was slow progress. 24 I can't recall all the various stages, but there was 25 a preliminary design, and then there's a final design. 38 1 They just missed all the targets time-wise, and -- what 2 I don't recall is was this just a question of manpower, 3 or were there external reasons which meant that they 4 were unable to get on with their work? That's something 5 that I just, I'm afraid, don't recall. But it was the 6 fundamental reason why the project was falling behind, 7 and I read from other documents that, you know, this 8 essentially is one of the early evident reasons why the 9 tram project became delayed and of course added 10 significantly to cost. 11 Q. The reason being the design, you are talking about? 12 A. Mm-hm, one of the fundamental critical path items at 13 this stage, yes. 14 Q. Turning to the things we see on the screen in page 13 of 15 the last document that you were referring to, the red 16 and amber issues from the OGC report, did you discuss 17 those with anyone from the Council? 18 A. Oh, yes, I'm sure we did, yes. We will have done. 19 Q. Would you be able to remember who you discussed it with? 20 A. Well, if it was anyone, it would have certainly been, 21 for a start, been Andrew Holmes who was de facto my 22 functional report. But thereafter it would have been -- 23 presumably it could have been Tom Aitchison. I don't 24 recall. 25 Q. Can you remember whether Andrew Holmes or Tom Aitchison 39 1 expressed any view about these findings? 2 A. Well, needless to say, when you look at the amount of 3 red ink there, versus anything else and the absence of 4 green, I'm sure that they were concerned, as indeed was 5 I. 6 I suppose the one thing I felt good about was that 7 I had recruited, albeit on a temporary basis, 8 Andie Harper, and he was at the review and he received 9 good marks. 10 I mean -- and I realise immediately, what had been 11 missing. Andie was inclusive. He got the best out of 12 people. He listened, and these were all attributes that 13 some -- were somewhat lacking with Mr Kendall. 14 So I must say, I had to place my bets very firmly on 15 what Andie Harper would be able to do for the project, 16 and I guess subsequent events proved to some extent to 17 justify that feeling. 18 Q. Jumping back a little bit in time, if I could ask you to 19 look at your statement again. It's page 46, 20 paragraph 150. This is to do with the links between the 21 Tram Project Board and the TEL Board. What you note 22 there, this is with reference to a date of 23 November 2005, that TEL didn't wait and the merger of 24 the Tram Project Board and TEL moved ahead within weeks 25 and well before the financial close of the contracts. 40 1 You've already described how the Tram Project Board 2 was in effect, or perhaps indeed was, a sub-committee of 3 tie. And here we see it merging with the board of a 4 different company entirely. What was your view of that? 5 A. Well, it seemed to me confusing. And I use the word 6 "merger" with the quotes here, because of course this 7 was a quote from Mr Mackay at the meeting which took 8 place, I think, probably in January or February the 9 following year, when he said: from now on the TEL Board 10 and the Tram Project Board are one and the same; which 11 is not true. I mean, the two are different entities 12 with different responsibilities. 13 But I suppose because he was chair of both, perhaps 14 the distinction between the two was not evident to him. 15 Q. You described it in your early answer there as 16 confusing. In practice, did the Tram Project Board 17 continue to work? 18 A. It continued to meet under the chairmanship of 19 David Mackay, since Gavin Gemmell, who had been briefly 20 the Chair of that Board, stepped down. 21 But I honestly think that in mitigation for 22 Ian Kendall, that he was facing quite a difficult 23 governance structure. He was reporting to me. He 24 was -- and yet he had this Board -- and he had 25 a responsible reporting relationship clearly to both 41 1 specifically, I think, to David Mackay, but also to some 2 extent to Neil Renilson who was there, and it did never 3 surprise me that Neil, who was always a difficult 4 person, did not get on well with Kendall. They were 5 somewhat similar. 6 Q. It's partly looking at the role of the Project Director 7 that I'm trying to understand. On the one hand I've got 8 the Tram Project Board, and then they have got the 9 tie Board and now they have got the TEL Project Board. 10 Who was in charge of the project? 11 A. That's a very good question and I at the time would have 12 liked to have asked particularly Tom Aitchison, because 13 I think he should have helped us to figure it out. 14 Q. To put it mildly, even in the role that you held within 15 tie, it's not clear to you who was in charge of the 16 project? 17 A. At that moment it wasn't, because Ewan Brown who had 18 been my boss, who was an exceptionally capable and 19 effective and useful chairman, who knew the role and 20 performed it extremely well, and he'd gone. And nature 21 abhors a vacuum, and in theory it was going to be 22 Willie Gallagher who took on the chairmanship, but as 23 you have heard, and as you will hear later, that didn't 24 quite happen. 25 So it became David Mackay who suddenly sort of 42 1 marched in and occupied the vacuum. 2 Q. I think he was ultimately -- David Mackay was replaced 3 in turn by Willie Gallagher as Chairman of tie. Was 4 that your understanding? 5 A. David Mackay, yes, he did eventually. 6 Q. And Willie Gallagher became -- 7 A. Yes, I understand that. I was not following things 8 closely, but I understand that. 9 Q. So while you were Chief Executive, you did have 10 Willie Gallagher as the Chairman? 11 A. Yes, briefly. 12 Q. How did you feel you were able to work with 13 Willie Gallagher? 14 A. That's a new subject. 15 Q. Yes. 16 A. I think -- well, I think I have -- there are documents 17 which make it fairly clear how I felt about that, 18 because it was written into my letter of resignation. 19 Q. If we could have a look at that. It's document 20 WED00000030. 21 It is easiest if we first of all just enlarge the 22 upper half of the page. 23 You say: 24 "I am writing to you to note that you have made it 25 clear since your appointment, by your actions and words, 43 1 that you do not subscribe to the customary role of the 2 non-executive Chairman, ie that the Chairman should run 3 the Board, whilst the Chief Executive should run the 4 company. 5 You say that you had made it clear to the 6 City Council that you will operate in a role akin to 7 that of Chief Executive and that you have their support 8 for your approach. You also said yesterday that, were 9 I to depart, there would be no obvious need for a new 10 Chief Executive. 11 Consistent with this, since your appointment on 12 1 June, you have, amongst other actions, spent four of 13 the past five days in the tie office meeting every one 14 of my direct reports and asking pointed questions, often 15 about my performance, with an implied inference of 16 discontent; Chaired a procurement committee for the tram 17 project, thereby removing the ownership of both of 18 Andie Harper, Tram Director, and myself; Written 19 unilaterally to the Chamber of Commerce to respond to 20 a letter that was addressed to me, before you had spoken 21 to me; Continued to communicate directly with my reports 22 and given them assignments despite my request that you 23 act through me." 24 I'll read past the next paragraph, you go on to say: 25 "After having run the company successfully for the 44 1 past 4 years, these circumstances are not acceptable 2 to me." 3 Was that that sort of conduct that led to your 4 decision to resign from the company? 5 A. Yes. I should make it clear that I was, I feel, the 6 right person to lead tie during that four-year period, 7 and I had never set myself out to be the person who was 8 going to take the tram through to final construction, 9 and when Ewan Brown left the Board, he and I discussed 10 the fact that I would be happy to stay on for the next 11 six months or so, to bed in the new chairman and bed in 12 my successor. 13 So that was my thinking and my game plan, and I had 14 an assignment in London which I went to -- chairing City 15 and Guilds Institute, which was of -- perfect for me in 16 terms of what I wanted to do at that point in time. 17 So this was not the wrong time. It was just the 18 wrong manner of my departure. 19 Q. Did anyone discuss with you the role that Mr Gallagher 20 was to play and the fact that he would in a sense be 21 taking over from what you had been doing as 22 Chief Executive? 23 A. No. No. 24 Q. I want to turn back a little bit then from the time when 25 you left, when you were still there. 45 1 If you could look at page 24 of your statement, 2 please. 3 If we could look at paragraph 72. You refer to 4 "This meeting" and the text above makes it plain that 5 that was referring to a meeting, a quarterly meeting of 6 Transport Scotland in May 2006. It was immediately 7 after Ian Kendall's departure: 8 "At that point, it was quite clear that the project 9 was in difficulty." 10 Now, what was the difficulty at that time? 11 A. At this point? Well, I mean, obviously the red ink 12 which obviously came from a meeting a few months later 13 highlights what the difficulties were, but these were 14 already emerging at this stage. 15 Q. Those are difficulties internal to tie? 16 A. They were difficulties -- I mean, I say here we had no 17 tram director in place. And the focus of my time then 18 was on finding someone to take that role. I myself was 19 not the right person to take on the tram director job, 20 obviously, and I had found Andie Harper, and we had to 21 recover the position, that means we were well behind. 22 We were behind. And money, time is money, as we all 23 know. 24 Q. I referred there to a meeting that took place on 25 8 May 2006. I would like to refer to the minutes of 46 1 that, please. 2 It's document reference TRS00004679. 3 We will see, just looking at the whole page, this 4 was a meeting for the Review of Major Projects, that is 5 a Transport Scotland meeting, and you were in attendance 6 from tie. 7 A. Mm-hm. 8 Q. Look at page 4 of that. If we enlarge the text. Look 9 at the second and third paragraphs: 10 "Slippage on procurement programme was evident. 11 Whilst it was accepted that Tramco [that's the contract 12 for the vehicles] may be ready following the readiness 13 review, Infraco [infrastructure contract] is unlikely to 14 be ready until the end of June. 15 The draft Final Business Case has also slipped to 16 end of November (previously October). Endorsement by 17 ministers not now anticipated before end of ... 2007." 18 This doesn't describe the reasons for that slippage. 19 What were your understandings as the causes of these 20 slippages in the Infraco contract and the Draft Final 21 Business Case? 22 A. Well, finger pointing is never particularly helpful, but 23 I honestly felt that the calibre of the management 24 assigned by Parsons Brinckerhoff to the SDS contract was 25 poor. In fact, there were two meetings, one where we 47 1 invited senior management of Parsons Brinckerhoff to 2 visit Edinburgh, and one later, after Andie Harper's 3 appointment, when we went down to London together to 4 visit them, and actually I think we met somebody who was 5 visiting from the United States at that time. 6 And we pointed out the financial implications to 7 them of -- and to the project at this very serious delay 8 which had emerged. 9 I was very disappointed that they didn't take a more 10 speedy action to address the issues. 11 Q. You referred there to the management. The calibre of 12 the management assigned by Parsons. What were the 13 concrete problems that were happening? 14 A. Well, there was -- here I think I probably should demur, 15 simply because it's too long ago and my -- the closeness 16 that I had to the issues faced by the design team means 17 that I can't speak authoritatively to that. 18 Q. Can I ask then to return to your statement. If we go to 19 page 27, paragraph 80. It's back to the issues 20 surrounding Ian Kendall, where you note that: 21 "Ian Kendall's comments were pertinent. However, 22 the issues were both external, in that we had not 23 received enough bidders, and internal, in that the 24 statutory consents and the approvals were all overdue." 25 Just pausing there, those were design issues; is 48 1 that correct? 2 A. Yes. 3 Q. "This poor performance, which emerged late in the day in 4 relation to these matters, was almost certainly the 5 reason why it was finally decided that TIE should seek 6 Ian Kendall's resignation from his position as Tram 7 Director." 8 We see there you have qualified what you say by the 9 inclusion of the words "almost certainly". Did that 10 indicate that's a matter you're not quite sure? 11 A. I mentioned my memory. 12 Q. Yes. 13 A. And that's what I would ... 14 I said there was some specific issue which was the 15 cause for our meeting on whatever date it was, when he 16 agreed to leave, and that I cannot remember. 17 Q. Were you aware of any suggestion that the problems that 18 arose in relation to design and consents were ones that 19 actually had their seat within the Council or tie 20 itself? 21 A. I was, and I have seen the evidence of prior witnesses 22 to -- which have highlighted that. 23 Q. Was that your understanding at the time? Could you 24 comment on that? 25 A. I'm afraid, again, this is one issue where my memory is 49 1 not good enough to give you a clear answer. 2 Q. You have talked within your statement about the 3 introduction of bonuses for the tie staff. Can I ask 4 you why you felt it was appropriate and necessary to 5 introduce bonuses? 6 A. I think I've mentioned in my statement, my rationale for 7 that. As you know, I've worked for the private sector 8 exclusively with the exception of this particular 9 assignment, and I honestly felt that some of the people 10 that we had transferred across from the Council were not 11 particularly impressive, and I just really felt that we 12 needed to have better measurement, and measurement often 13 goes hand-in-hand in the private sector with some 14 measure of reward, and I put that to the Board, 15 and I indicated that we would be measuring people's 16 performance very carefully, that the level of bonus 17 payment would be probably on average somewhere around 18 10 per cent, although the maximum available was 15, and 19 that was broadly felt to be an indication of our desire 20 to fulfil our commitments to our owner, the Council. 21 Q. What did you envisage that bonuses would be based upon? 22 What would decide, what would determine how much to pay? 23 A. I do not recall the precise templates that we utilised 24 for determining bonus payments, but we very clearly at 25 the beginning of every year had obligations or 50 1 objectives for each individual, which were hard, in 2 other words if they happened, they got a sum of money. 3 If they didn't, they didn't. 4 So I think this was largely objective, an objective 5 bonus, rather than a -- the halo effect, giving the good 6 guys their bonus and the others not. 7 Q. But in terms, you say, about particular matters, the 8 hard thing, as you refer to them, what sort of thing did 9 you have in mind? 10 A. Well, for example, we were talking about consents. You 11 know, progress on achieving a design. There were 12 obviously, in the case of every project, very defined 13 dates by which things had to happen, and those were 14 their commitments, and they had to make those happen. 15 If they didn't, then they didn't get their bonus. 16 Q. Would that take in something such that a particular 17 contract was concluded by such and such a date? 18 A. Of course. 19 Q. Do you consider that might cause a situation where there 20 is a desire to conclude the contract at all costs in 21 order to get the bonus? 22 A. The scale of this bonus, these bonuses were not 23 significant in my judgment to generate that sort of 24 result. I mean, at the end of the day, every contract, 25 as you know, involves a large number of different 51 1 people. Obviously counterparty, on the one hand, 2 lawyers on our side, on the other. So you get the thing 3 done because you manage the process well and you get the 4 right people on the job at the right time, not because 5 you decide to sign it on Tuesday, because that's when 6 you get your two and sixpence. 7 MR LAKE: Thank you, Mr Howell. Those are the only 8 questions. 9 CHAIR OF THE INQUIRY: I don't think anyone else has 10 indicated any questions. So thank you very much, 11 Mr Howell. You're free to go. You're not excused from 12 your citation, just in case you need to be recalled, but 13 I hope that won't be necessary. 14 A. Okay. 15 CHAIR OF THE INQUIRY: Thank you very much. 16 A. So is that the end? 17 CHAIR OF THE INQUIRY: That's the end. 18 A. Thank you. 52 1 INDEX 2 PAGE 3 MR MICHAEL HOWELL (affirmed) .........................1 4 5 Examination by MR LAKE ........................1 6 7 MR STEVE CARDOWNIE (sworn) ..........................53 8 9 Examination by MR LAKE .......................53 10 11 Questions by CHAIR OF THE INQUIRY ...........138 12 13 MR AINSLIE MCLAUGHLIN (affirmed) ...................142 14 15 Examination by MR LAKE ......................142 16 17 18 19 20 21 22 23 24 25 230