1 Wednesday, 11 October 2017 3 (3.52 pm) 4 CHAIR OF THE INQUIRY: Mr Mackenzie. 5 MR MACKENZIE: Thank you, my Lord. The next witness is 6 Steve Reynolds. 7 MR STEVE REYNOLDS (affirmed) 8 CHAIR OF THE INQUIRY: Have a seat, Mr Reynolds. I'm sorry 9 you've been delayed in the start. The other -- the 10 previous witness took longer than scheduled. 11 A. Not a problem, thank you. 12 CHAIR OF THE INQUIRY: If you just listen to the questions 13 and answer them as directly as possible, and if it's 14 capable of a yes answer or a no answer, then that should 15 be the answer, subject to any qualifications you might 16 then want to add. 17 Could I also ask you to speak clearly into the 18 microphone and reasonably slowly, because the shorthand 19 writers have to keep up with you. 20 A. Okay. 21 Examination by MR MACKENZIE 22 MR MACKENZIE: Good afternoon. 23 A. Good afternoon. 24 Q. Could you state your full name, please? 25 A. My name is Stephen Christopher Reynolds. 172 1 Q. And your current occupation? 2 A. My current occupation is retired from my full-time role 3 with WSP, but I'm currently on a zero hours contract 4 with WSP for consultancy services. 5 Q. Now, you have provided a CV to the Inquiry. That will 6 come up on the screen in a second. The number is 7 CVS00000035. We can see at the very top paragraph, it 8 sets out in summary your profession. You're a Chartered 9 Electrical Engineer, with specialisation in business 10 management and programme management. 11 This must be your former position in the firm; is 12 that correct? 13 A. Correct, yes. 14 Q. As Director of Major Projects and Commercial Services. 15 Now, you referred to WSP. Did they take over 16 Parsons Brinckerhoff in some way or what? 17 A. Yes. As it says in the paragraph there, following the 18 acquisition of Parsons Brinckerhoff by WSP in 2014. So 19 that was November 2014 that WSP acquired 20 Parsons Brinckerhoff. 21 Q. We also see years of experience, 39 years of experience, 22 27 of which were with Parsons Brinckerhoff. 23 If we could then please go over the page to page -- 24 sorry, this page, go down a little bit. Scroll down. 25 We'll see that there we see you were a Director 173 1 responsible for light rail major projects between 2007 2 and 2013. 3 If we then go over to page 2, we'll see that in this 4 role, the second bullet point states you were Project 5 Director for the Edinburgh Tram Network Systems Design 6 Services Contract. 7 I think in short when we come on to look at your 8 statement, you fulfilled that role from around 9 February 2007 to around May 2008 full time, and then on 10 a part-time basis; is that correct? 11 A. Yes, that's correct. 12 Q. Thank you. Back to page 1, please. We can also see the 13 very last bullet point on the page that you were 14 Principal-in-charge of the Metrolink Delivery Partner 15 Contract with Transport for Greater Manchester. I'll 16 come back and look at your statement to see the 17 differences between Manchester and Edinburgh. 18 Put that to one side, please. Thank you. 19 Now, you have provided, Mr Reynolds, two statements 20 to the Inquiry. If we can go first, please, to 21 TRI00000124. This is stated to be -- you can see the 22 Burness Paull logo, witness statement of Steve Reynolds. 23 In short this was a voluntary statement provided back in 24 October 2005. 25 If we can go to page 40, we can see a signature and 174 1 a date, 8 October 2015. 2 I should ask you to confirm, please, is this your 3 signature and is this a written statement you have 4 provided to the Inquiry? 5 A. Yes. 6 Q. Thank you. 7 Now, second -- put that to one side. The second 8 statement provided will come up. It's TRI00000124_C, 9 and this one was provided in answer to the Inquiry's 10 various questions, and if we can please again go to the 11 last page, to page 196. Could I again just formally ask 12 you to confirm, please, that is your signature. We see 13 the date, 4 May 2017, and that this is a written 14 statement you have provided to the Inquiry? 15 A. Yes. 16 Q. Thank you, Mr Reynolds. 17 So your evidence to the Inquiry will comprise both 18 of these written statements, together with the evidence 19 you give at these hearings. Thank you. 20 Now, I would like to stick with this statement and 21 go to page 1, please. We will start by getting an 22 overview of your role in the Edinburgh Tram Project. 23 So in paragraph 1 in this statement, you explain 24 your immediate predecessor was David Hutchison who was 25 the Project Director up until your appointment in early 175 1 February 2007. 2 You refer to Parsons Brinckerhoff experiencing 3 commercial difficulties in the project. I'll come back 4 to ask about that later. 5 We can see what is said there. 6 We then go back, please, to the bottom of this page, 7 paragraph 3. You refer to Jason Chandler. I think he 8 was the Project Manager; is that correct? 9 A. Correct, yes. 10 Q. And Alan Dolan was the Deputy Project Director; is that 11 correct? 12 A. That's correct. 13 Q. Did both report to you? 14 A. Yes. 15 Q. And was Mr Dolan beneath Mr Chandler in terms of 16 seniority? 17 A. Yes. 18 Q. Thank you. 19 I would like then, please, to go to page 4 of this 20 statement. In paragraph 11 you explain a few lines 21 down, you focused full time on Edinburgh from 2007 until 22 contract novation in July 2007. At that point you'd won 23 the contract in Manchester, and you say: 24 "During May 2008, following novation in Edinburgh, 25 I took on the Principal in Charge role for Manchester. 176 1 My time, at that point, in Edinburgh was reduced to part- 2 time." 3 Page 5, please, of the statement. In paragraph 16 4 you explain your day-to-day involvement in the Edinburgh 5 Tram Project ended in early 2011. You explain after 6 novation, you were probably only spending a couple of 7 days a week on the Edinburgh Tram Project. 8 Could I also just ask, in the period between 9 February 2007 and May 2008, during that period was your 10 principal place of work in Edinburgh? 11 A. Yes, it was. 12 Q. Did you actually go to tie's offices to work or did you 13 have a separate office? 14 A. It was CityPoint, tie's office. 15 Q. Thank you. 16 Going back to the statement, please, looking at 17 page 6, page 6 in Manchester. I'll try and summarise or 18 paraphrase what you set out in your statement. 19 In short, I think you say that Parsons' involvement 20 in Manchester was very different to the involvement in 21 Edinburgh; is that correct? 22 A. Yes, that's correct. 23 Q. I should perhaps just ask you to -- overview, to 24 summarise the differences between the involvement in the 25 two projects. 177 1 A. Well, whereas in Edinburgh we'd been appointed as the 2 System Designs Services Provider, so we were doing 3 detailed design in summary, in Manchester we were 4 appointed in a programme management capacity with the 5 overall programme management for Manchester Metrolink 6 being a joint obligation on GMPTE as it was, 7 subsequently TFGM and ourselves. 8 So we were in a management capacity in Manchester. 9 We were in a detailed design provision capacity in 10 Edinburgh. 11 Q. So just for the avoidance of doubt, Parsons did not 12 provide design services in the Manchester project? 13 A. Correct, we provided limited design management, but not 14 detailed design services. 15 Q. So there's no question of there being any overlap in 16 Parsons design staff between Manchester and Edinburgh 17 because you certainly weren't providing those services 18 in Manchester? 19 A. Correct. 20 Q. I think you have also explained in your statement that 21 Manchester was a design and build contract; is that 22 correct? 23 A. Yes. That's correct. 24 Q. So that's another difference with Edinburgh. 25 In short, in Manchester, were Parsons playing part 178 1 of the tie role as project managers? 2 A. It was -- I think yes, you could say that. It was an 3 integrated delivery team structure. So, as I say, we 4 were working with TFGM, with TFGM staff and 5 Parsons Brinckerhoff staff, in an integrated delivery 6 team which then carried out that programme management 7 function. 8 So it was a more collaborative approach, if you 9 like, than it was in Edinburgh with tie in their own 10 right being the programme manager. 11 Q. When you refer to Parsons in Manchester carrying out 12 a programme management role, are you making 13 a distinction there between programme management and 14 project management? 15 A. Yes, because the -- the Manchester programme, as it's 16 turned out over time, is a GBP2 billion programme of 17 several projects to create the new light rail 18 infrastructure. So we were there not just managing 19 individual project delivery, but managing the 20 programming, the co-ordination, the various different 21 aspects of pulling those different projects together 22 under that one umbrella. 23 Q. I see. Just sticking with Manchester, am I right in 24 thinking there was a phase 3a which was completed in 25 2013, a phase 3b which was an extension to the airport 179 1 completed in 2014, and also a phase 2cc which I think 2 was just under a mile city centre crossing completed 3 this year, I think; is that correct? 4 A. Last year, for second city crossing, yes, that's right. 5 Actually no, this year, you are right, my apologies. 6 Q. And were Parsons involved in the programme management of 7 all three of these phases? 8 A. Yes. 9 Q. I understand. Thank you. 10 A separate point, please. Could we look at page 8 11 in your statement. In paragraph 26 you say, midway 12 through: 13 "There was not a pragmatic approach to delivering 14 planning consents for the scheme … The Edinburgh Tram 15 Project became bogged down with what you could argue was 16 an overly detailed approach to planning." 17 Is that another distinction you were seeking to make 18 with the Manchester project? 19 A. Yes, I think the key difference there is that Manchester 20 had been, as you rightly say, we started out with 21 phase 3a. Manchester had already been through phase 1 22 and phase 2, so there was experience from the 1990s of 23 actually having a tram system in Manchester, and there 24 was a desire for more. 25 Now, in Edinburgh it was different. It was green 180 1 field. There hadn't been that experience, and I think 2 not unsurprisingly, there was perhaps feeling the right 3 way to go about defining what that scheme should be. 4 CHAIR OF THE INQUIRY: In paragraph 26 you say there was 5 a lack of understanding, arguably, of the planning and 6 consents approach. Where do you think that lack of 7 understanding lay? 8 A. I think because the context was different. In 9 Manchester the context was adding to a tram system. So 10 the planning requirements, the consents requirements, if 11 you like, had already been proven on the earlier phases. 12 With Edinburgh, with what was a challenging, large 13 project, there was a need to develop those processes 14 from scratch almost. So it was -- it was far more 15 difficult in Edinburgh to address the major scheme and 16 create those specific processes for that scheme. 17 CHAIR OF THE INQUIRY: But was that a lack of understanding 18 by the planning authority or by Parsons Brinckerhoff or 19 by -- 20 A. By the planning authority, in my view. 21 MR MACKENZIE: Thank you. 22 Again, sticking on this page, could I also please 23 ask, in paragraph 27 on page 8, you explain: 24 "Manchester was different because it was an 25 integrated management team." 181 1 Then you say: 2 "The Edinburgh Tram Project was much more of 3 a supplier/client ring-fenced approach to delivery." 4 I wasn't quite sure of the differences you were 5 making there. Could you explain that, please? 6 A. Yes, I think -- partly this is with the benefit of 7 hindsight, but I think if you're looking back at lessons 8 learned and drawing the distinctions between the two 9 schemes, what we can look at now with the success in 10 Manchester was what we called the Metrolink family. We 11 took the initial delivery partner philosophy which was 12 a delivery partnership between ourselves and the 13 ultimate client, and we extended that into the supply 14 chain, which was Laing O'Rourke, Tallis. We extended it 15 into the operator, which was RATP, and everybody was 16 brought together in that integrated team approach. 17 Whereas the Edinburgh Procurement Strategy, and as 18 I say, part of this was with the benefit of hindsight, 19 was set up more as a set of individual organisations 20 with the interfaces between them where the management 21 focus was. 22 So it was a different approach. 23 Q. Thank you. Again, still on this page, bottom of 24 paragraph, paragraph 28, you say: 25 "During the early stages Parsons staff did not work 182 1 alongside TIE/CEC staff in an integrated delivery team. 2 It was only later in 2007 that we moved over to 3 CityPoint." 4 Do you remember approximately when in 2007 Parsons 5 staff moved into the tie office? 6 A. It would actually have been in 2006, and that was before 7 I got there. The point here, I think, is that we did 8 then get CEC planning staff alongside us in CityPoint, 9 and my recollection is that was very early in 2007. 10 Q. So just for clarity, Parsons were working in tie offices 11 in 2006? 12 A. Yes. 13 Q. The change you're referring to here is that in early 14 2007 Council staff also went into tie offices? 15 A. Correct. 16 Q. You also then, at the very bottom, you say: 17 "That problem was due to there being a gulf between 18 Parsons and CEC." 19 Can you explain, please, what you meant by a gulf 20 between Parsons and the Council? 21 A. The two bodies were operating in isolation. So it 22 was -- we would have been producing designs which were 23 then being passed over for review and approval in 24 isolation. 25 So gulf is perhaps the wrong word, but there was -- 183 1 there was definitely a separation between the two 2 organisations, whereas bringing us together in CityPoint 3 allowed for much more rapid communication and picking up 4 on particular issues, you know, face-to-face. 5 Q. Did that help? 6 A. Yes, it did. 7 Q. So with the benefit of hindsight, is that something that 8 may have helped to have in place from the outset? 9 A. Yes, I believe it would. 10 Q. Thank you. Over to page 9 of your statement, please. 11 You explain in paragraph 29 -- we can read for 12 ourselves -- the number of Parsons staff involved in the 13 project. 14 Then in paragraph 31, please, you say: 15 "We were not really all that close to CEC ... CEC 16 were kept at an arm's length from us." 17 I just wondered, was that even after the 18 co-location, or does that refer to before the 19 co-location of staff? 20 A. That's even after the co-location. The co-location was 21 the -- at the detailed level with the detailed planning 22 people, but beyond that, there was more of an arm's 23 length relationship, which you could argue was justified 24 by tie's programme management role. 25 So again, this is a difference between the 184 1 integrated philosophy in Manchester and the more sort of 2 point to point structure that was here in Edinburgh. 3 Q. Then please jump to page 22. In paragraph 76 you 4 explain: 5 "The way to avoid issues, such as the problems we 6 faced with obtaining approvals and consents, is to 7 introduce a collaborative culture across all parties so 8 that everyone is then focused on the ultimate intent, 9 rather than getting side-lined with specifics." 10 You explain that's your own personal view. And 11 you've seen it work in Manchester. 12 I wondered, would it have been possible in Edinburgh 13 to have produced that sort of collaborative culture, 14 given the separate contracts that were in place for 15 design, utility diversion and infrastructure 16 construction? 17 A. I think that's a very good question indeed, and the 18 truth of the matter is back in 2007, you didn't hear 19 people talking about collaboration, whereas these days, 20 everybody in the construction industry is talking about 21 collaboration. 22 I think if you -- if you wind the clock forward, 23 the -- if you were doing this again, you would use 24 different contract terms that promoted collaboration as 25 a way of doing business, but you're absolutely right. 185 1 The contract structure as it was didn't facilitate that 2 effective collaboration. 3 Q. Thank you. I would like now to move on to the issue of 4 why you became involved in the Edinburgh Tram Project. 5 I'll go to three documents shortly. 6 Could you perhaps just give an overview of the 7 reasons why you became involved? 8 A. Yes. It was towards the end of 2006, and the project 9 was -- it was a problem as far as Parsons Brinckerhoff 10 were concerned, because the monthly reporting on the 11 financial performance was showing that the results were 12 going in the wrong direction. The margins that were 13 being delivered were reducing. We were looking at 14 a seriously loss-making project. 15 Certainly early 2007, it was number 2 on PB's global 16 list of problem projects. So it needed senior 17 involvement to address that problem and come in and work 18 with all concerned to recover the commercial position 19 from PB's point of view. 20 Q. Did you know at that stage why it was becoming 21 a loss-making project for Parsons? 22 A. No, but I very quickly learned. As I arrived in 2007, 23 then it became apparent, as I went through the project 24 history in detail, and it wasn't solely focused on 25 recovering the commercial position. It was also focused 186 1 very heavily on improving the client relations across 2 the board, but particularly between ourselves and tie. 3 Q. You were brought in as a very senior Parsons man. You, 4 I think, sat on the board; is that correct? 5 A. That's correct, and on this particular project 6 I reported direct to New York, which was 7 Parsons Brinckerhoff's Headquarters. 8 Q. When you did become involved as Project Director, what 9 initial impressions did you form both as to why it was 10 becoming a loss-making project for Parsons, but also any 11 impressions about the project more generally? 12 A. The headline impression was that change control hadn't 13 been managed effectively, that the team here was bending 14 over backwards trying to accommodate repeated change, 15 but in trying to deliver the Parsons Brinckerhoff 16 services had lost sight of the need to enforce rigorous 17 commercial control on that change control process. 18 So one of the things I did very quickly was put in 19 a proper change control regime which achieved two 20 things. It highlighted to all parties the volume of 21 change that we were experiencing, and it made sure there 22 was better commercial assessment of the consequences of 23 change. 24 Q. Thank you. I'll take you now to three documents, if 25 I may. They will come up on the screen. 187 1 The first one is PBH00020993. We will see from the 2 top of the page it's an email very early in your 3 involvement as Project Director. It might even have 4 been slightly before that. I don't know. It's dated 5 1 February 2007 to Greg Ayres. Now, who was Greg Ayres? 6 A. Greg Ayres was my Managing Director in the UK. He was 7 the Managing Director of Parsons Brinckerhoff UK, 8 Europe, Africa. 9 Q. The main paragraph starts by saying: 10 "The project management structure is confused; 11 commercial control is inadequate; and in simple terms 12 the overall management of the project under Mike's 13 direction has been poor." 14 Is that a reference to what you told us a little bit 15 earlier about essentially change control and Parsons 16 making a loss in the project? 17 A. Correct. 18 Q. Does it go any wider than that? 19 A. No. It was -- as I say, I think coming in as I did in 20 February 2007, you can immediately look back over the 21 preceding months, and you can view what had been 22 happening in the round, whereas I think the people who 23 were here working day in, day out, they were attempting 24 to address issues, and things were getting out on a limb 25 and they had to be brought back under more effective 188 1 control; and as I say, the way to do that was to ensure 2 that the change log was available to everybody and that 3 focused people on delivering that commercial rigour. 4 Q. Could we next please go to another document. 5 PBH00027328. 6 CHAIR OF THE INQUIRY: While we are waiting for that, the 7 last sentence on that email says: 8 "We must not proceed any longer with the wool being 9 pulled over our eyes." 10 Who did you think was pulling the wool over your 11 eyes? 12 A. I think what that's saying is with the monthly financial 13 reviews, because we did a monthly project status 14 assessment, and I think things were -- were diverging 15 from the forecast, but there was a temptation on the -- 16 perhaps on the project team's behalf not to fully bring 17 that to the fore from a senior management perspective. 18 Again, that's because it may be diverging slightly, 19 then a little bit more, a little bit more. It's when 20 you can look back at perhaps a six-month period, you can 21 see how far it's moved away from the original forecast 22 intent. So that was the thinking there. We've got to 23 draw a line. This is the position now. This is the 24 status. This is how far adrift it is. This is what we 25 have got to address. 189 1 CHAIR OF THE INQUIRY: So it was really a failure on your 2 management team to recognise reality, as it were, and 3 to -- 4 A. Yes, you could say that. 5 Now, you know, it is a very complex project. So 6 it's not as if we were trying to do something that had 7 been done before and it was a readily available 8 solution, working with stakeholders who could appreciate 9 necessarily the bigger picture. So there were 10 mitigating factors, but that was what needed to be 11 confronted. 12 CHAIR OF THE INQUIRY: Thank you. 13 MR MACKENZIE: Just for clarification, why do you say it was 14 a very complex project? 15 A. Because the environment in the City of Edinburgh is 16 unique. It's a World Heritage site in part. There are 17 specific characteristics that are entirely different 18 from other cities in the UK with tram systems. It's 19 a different set of stakeholders. It's a different set 20 of aspirations. There are unique challenges with the 21 technical aspects. Every one of these tram schemes is 22 unique in that sense. 23 So from that point of view they are all complex. 24 Q. I think, just going back to Manchester briefly, I think 25 I'm right in saying that phase 3a used an existing rail 190 1 corridor; is that correct? 2 A. In part. The lines up to -- up to Oldham were existing 3 rail corridor. The lines out to the east weren't. They 4 were new build green field. So there was a mix. 5 Q. Thank you. 6 Now, this next document, PBH00027328, that's up on 7 the screen, we can see this was another email from 8 yourself, Mr Reynolds, dated 26 July 2007, again to 9 Greg Ayres. 10 The heading is "Tie Deliverables Analysis". I'm 11 interested in the paragraph in the bottom half of the 12 page which commences: 13 "Let's talk separately on the IDR strategy..." 14 What's the IDR strategy? 15 A. Interdisciplinary Design Review. 16 Q. You go on to say: 17 "... but I can't see that we have a strong case for 18 pressing IDR when we have still to respond to 19 yesterday's tie feedback. (some of which really came 20 as no surprise - at several points on this contract we 21 really didn't perform very well and whilst I hadn't been 22 made aware of the poor quality of the Requirements 23 Definition Report that statement has now been confirmed 24 to me." 25 I'm interested in what you say there of "several 191 1 points on this contract we really didn't perform very 2 well". What did you mean by that? 3 A. That does go back to that requirements definition phase 4 which was the very early months of the contract. And 5 the reality is that requirements definition duration was 6 concertinaed, because the contract was awarded later 7 than had been expected, so there was a very short period 8 of time to pull together quite a volume of work. 9 I think when you looked at it through the lens from 10 mid-2007, you would say that there had been some 11 shortcomings with that requirements definition 12 deliverables at December 2005. 13 Having said that, those problems were addressed in 14 the next phase, which was the preliminary design phase, 15 and I think if you go to the end of that phase, then the 16 problems have been -- well, have been addressed to the 17 point where that requirements definition shortcoming 18 wasn't a problem any more. 19 Q. Thank you. Then on to the third document in this 20 regard, is PBH00028567. If we go to the very bottom of 21 this email chain, please, we can see it's an email from 22 Chuck Kohler. Who is Mr Kohler? 23 A. Mr Kohler was the Chief Ops Officer for 24 Parsons Brinckerhoff in the UK. So he was alongside me 25 on the UK Board. 192 1 Q. Mr Kohler sends an email of 31 August 2007 to Greg Ayres 2 and copied to yourself in relation to Edinburgh Tram, 3 providing a draft lessons learned document, and asking 4 for a review and edits. 5 Then scroll up. We can see Mr Ayres on 1 September 6 has added his thoughts, and then, with the very top, we 7 see, I think, you, email of 4 September 2007, have added 8 some additional comments. 9 If we then go to the draft lessons learned document, 10 it's PBH00028568. If we can blow the whole page up 11 a little bit, please, if we can. 12 Now there are comments in all sorts of different 13 colours. I wonder, Mr Reynolds, if your comments might 14 be in red as the last set of comments. Take a minute 15 just to look at that, to see if that seems right. 16 A. That would seem to be right looking at the general 17 observations column. That would square with my thinking 18 at the time. 19 Q. I'll try not to take up time going through every point, 20 but if we look in the left-hand column, 21 Parsons Brinckerhoff factors, there's reference to 22 changed PM twice. Is that Project Manager? 23 A. Correct. 24 Q. Is that a reference to the very early days? 25 A. Yes, that's right. 193 1 Q. And PIC, is that Person-in-Charge? 2 A. That's right. 3 Q. Is that different to the Project Director? 4 A. Yes. 5 Q. So who is the person in charge? 6 A. Having said it's different, the PIC is often the person 7 co-ordinating activity, whereas the Project Director is 8 more of an executive role. But for this project the PIC 9 would have been Mike Jenkins who was the Rail Business 10 Unit Director and this project sat within the rail 11 Business Unit. 12 Q. In the red text it states: 13 "I would say the PIC was unable to establish an 14 effective working relationship with the client. The PIC 15 failed to educate the client as to how the scheme would 16 be engineered and was unable to work with the client to 17 agree a workable delivery plan." 18 Is that again a reference to the early days of the 19 project? 20 A. Yes, and I think you could argue it's as a consequence 21 of not being resident, and the point I made a little 22 while ago about my twin goals were to establish 23 commercial rigour, but also, more importantly, arguably, 24 to generate a closer client relations -- client 25 relationship, and that then addressed that point that's 194 1 made there, if you like. 2 Q. Did you become Parsons' person in charge from around 3 February 2007? 4 A. Essentially, yes, because what happened was the -- the 5 project with me coming on board as Project Director, 6 that essentially meant the project didn't need to report 7 into the rail unit. As I say, I was reporting direct to 8 New York. So essentially I took on board the PIC 9 duties, because of the strength of the management team 10 underneath me. 11 That worked very much better in my view. 12 Q. And the bullet point beneath that, the original text had 13 been: 14 "First major multi office delivery." 15 Someone had added: 16 "First major multi-office design delivery." 17 Possibly then your text: 18 "I think the key issue here is that it was the first 19 LRT detailed design delivery project (for a rail 20 inexperienced client)." 21 A. Correct. 22 Q. Are there two parts to your comment there? Firstly, 23 that it was the first LRT detailed design delivery 24 project by Parsons, and then secondly, for a rail 25 inexperienced client? 195 1 A. Yes, by Parsons in the UK, that would be right, in terms 2 of the first LRT project, and then the fact, I keep 3 coming back to it, it's a rail inexperienced client. So 4 there needs to be that much closer interaction to ensure 5 that the opportunities are taken advantage of and the 6 issues are discussed and addressed jointly. 7 Q. The fact that this was a first major multi-office design 8 delivery, was that a factor in the problems that 9 occurred at least in 2006? 10 A. No, I don't think so, because the multi-office 11 requirement, given that we had such large numbers of 12 people on the job, and there were different areas of 13 specialty, so structures design, roads design, for 14 example, those competencies resided in different offices 15 across the UK, and I don't believe that was a problem 16 because the coming together of those different aspects 17 of the deliverables were controlled by design managers 18 who did meet regularly here in Edinburgh with the 19 management team in Edinburgh. 20 Q. Thank you. Then two bullet points beneath that: 21 "A major subconsultant not co-located with 22 Parsons Brinckerhoff." 23 Is that a reference to Halcrow? 24 A. It is indeed. 25 Q. Who I think were subcontracted by Parsons? 196 1 A. Correct. 2 Q. Somebody, perhaps not you, had written in a purpley 3 colour -- somebody in blue had written: 4 "Is this key?" 5 To which somebody responded: 6 "It is if you don't effectively measure and control 7 his production." 8 I think in short, do you consider that Parsons did 9 effectively measure and control Halcrow's production? 10 A. Yes, we did. Inevitably there are shortcomings that 11 have to be addressed. That's part of a major project 12 like this, but by working closely with Halcrow, 13 ultimately we delivered a good product in my view. So 14 I believe we did control Halcrow effectively. 15 Q. I'm now going to ask you one further question about this 16 document. We can read about the tie factors in the 17 middle column, and then in the right-hand column, 18 general observations, the very last bullet point starts 19 with: 20 "The extended period of negotiation pre-contract 21 meant that contract award was delayed beyond the 22 client's business case aspirations. The client enforced 23 an unreasonably short period of time for the 24 requirements definition phase and this was signed up to 25 by Parsons. There was insufficient time for orderly 197 1 mobilisation and quality and timeliness of deliverables 2 suffered. As a consequence Parsons' reputation suffered 3 and the client's perception of Parsons' poor performance 4 carried through into preliminary and detailed design." 5 Is that point essentially again going back to the 6 very early stages of the contract? 7 A. It is, and bear in mind I wasn't there. So what I'm 8 reporting there is my interpretation of events as 9 reported to me. But certainly that was how I saw it, 10 and yes, it was those first three months from September 11 through December 2005. 12 CHAIR OF THE INQUIRY: Mr Mackenzie, is this -- 13 MR MACKENZIE: My Lord, I have finished with that document. 14 I just have three final tidy-up questions on this 15 chapter, if I may. 16 CHAIR OF THE INQUIRY: Yes. 17 MR MACKENZIE: Mr Reynolds, do you consider that there were 18 things that Parsons could have done better in this 19 project? 20 A. I think there are always things that you can do better, 21 particularly when you're engaged in something that is 22 unique. You can always look back and say yes, we could 23 have done that differently. 24 But I think we had a very strong team here in 25 Edinburgh who were working diligently to deliver 198 1 a successful scheme. 2 Q. What were the things by way of overview that you 3 consider Parsons could have done better? 4 A. I suppose if you look at it from the overall project 5 delivery, we could have been more vocal in highlighting 6 the consequences of, for example, the charrettes process 7 that was embarked upon in July 2006, which had a severe 8 impact on programme. We should probably, rather than 9 going along with that as the design provider addressing 10 changing requirements, we should have been more vocal to 11 make sure people appreciated the consequences of going 12 down that side-track, as it were. 13 Q. Is there anything else? 14 A. There are details. We should have done the 15 electromagnetic interference part of the project rather 16 better. But that's a very small part of the whole. 17 As I say, you'll always find elements of technical 18 detail that you could have done better. But nothing 19 that was significant from a critical path point of view, 20 I would argue. The critical path was overwhelmingly 21 impacted by the repeated change problems. 22 MR MACKENZIE: Thank you, my Lord. That's perhaps a good 23 point to pause for today. 24 CHAIR OF THE INQUIRY: Thank you very much. We will adjourn 25 for the night, Mr Reynolds. We will resume again 199 1 tomorrow at 9.30. 2 Ms Fraser will speak to you about arrangements. 3 A. Thank you very much. 4 CHAIR OF THE INQUIRY: We will adjourn until tomorrow at 5 9.30. 6 (4.35 pm) 7 (The hearing adjourned until Thursday, 12 October 2017 at 8 9.30 am) 9 10 200 1 INDEX 2 PAGE 3 MR ANDREW FITCHIE (continued) ........................1 4 5 Examination by MR LAKE ........................3 6 7 Examination by MR FAIRLEY ....................89 8 9 Examination by MR DUNLOP QC .................106 10 11 Examination by MR MARTIN ....................147 12 13 MR STEVE REYNOLDS (affirmed) .......................172 14 15 Examination by MR MACKENZIE .................172 16 17 18 19 20 21 22 23 24 25 201 1 Thursday, 12 October 2017 2 (9.30 am) 3 MR STEVE REYNOLDS (continued) 4 Examination by MR MACKENZIE (continued) 5 CHAIR OF THE INQUIRY: Good morning. It's been announced 6 that because of the overrun of the witness, Mr Fitchie, 7 we are going to sit tomorrow at 9.30 to finish the 8 evidence this week. 9 You're still under oath. 10 MR MACKENZIE: Thank you, my Lord. 11 Good morning? 12 A. Good morning. 13 Q. Mr Reynolds, I would like to turn now to the question of 14 the various approvals and consents that required to be 15 obtained for the tram project. 16 Now, we know, I think, under the SDS contract signed 17 in 2005, Parsons as the designers were required to 18 obtain the various approvals and consents. Now, is that 19 normal in the industry for a designer to have to secure 20 these things? 21 A. Yes, is the straightforward answer. I think as time has 22 moved on, there's perhaps more of a recognition these 23 days that there's a joint responsibility. So you could 24 argue that the contract was overly specific in the 25 obligation it placed on SDS. 1 1 But yes, there's certainly a heavy responsibility on 2 the designer for securing approvals and consents. 3 Q. Thank you. Could I ask you perhaps to speak into the 4 microphone just so I can hear you quite clearly, please? 5 A. I beg your pardon. 6 Q. In this project did this cause any difficulties? 7 A. The real difficulty was the conditions attached to those 8 approvals, where there was a requirement to satisfy the 9 needs of the approval bodies, and this was something 10 that we changed, or we got agreement to change at 11 novation because the reality was the needs of the 12 approval bodies could change, but there was still 13 a contractual obligation on SDS to meet those changed -- 14 changed needs, and this is what we found was happening, 15 that there was, if you like, changes to what people 16 thought they needed, and then we were expected to change 17 our designs to accommodate those late changes. 18 Q. Thank you. We've not yet looked at the provisions in 19 the design contract in relation to approvals and 20 consents. I think it would be helpful just to briefly 21 look at those. So we will bring up the contract which 22 is CEC00839054. Go to page 29, please. We can see 23 clause 5.1, under "Consents", states: 24 "The SDS Provider shall (at its own cost and 25 expense): obtain and maintain in effect all Consents 2 1 which may be required for the construction ... of the 2 Edinburgh Tram Network as is consistent with, required 3 by or contained within the services." 4 If we could also then please go back a page, 5 clause 4.8 provides: 6 "If it should be found that the Deliverables do not 7 fulfil the requirements of this Agreement or the needs 8 of any Approval Bodies, the SDS Provider shall at its 9 own expense amend the Deliverable." 10 Then, please, if we can go to page 87, and paragraph 11 2.6.1.2 -- sorry, 6.2.2.1 provides: 12 "The SDS Provider shall: ... produced the detailed 13 design of the Edinburgh Tram Network ... such that the 14 detailed design has full approval of the Client and the 15 relevant Approval Bodies." 16 CHAIR OF THE INQUIRY: Where are you -- which box? 17 MR MACKENZIE: It's paragraph 2.6.1.2. That's the one 18 that's blown up. 19 CHAIR OF THE INQUIRY: Yes. 20 MR MACKENZIE: 2.6.2.1. There are too many numbers for this 21 time in the morning. I'll read that again. The SDS 22 provider -- I'm confusing myself. It is 2.6.1.2. It is 23 in fact that one, thank you. 24 The SDS provider is required to have: 25 "... produced the detailed design of the Edinburgh 3 1 Tram Network ... such that the detailed design has full 2 approval of the Client and the relevant Approval 3 Bodies ..." 4 So that's that one. 5 Then lastly in this regard, if we can go over the 6 page, please, to page 88, we see under "Key Design 7 Elements", I should say this is Schedule 1, the services 8 to be provided by the SDS provider, under 2.7.1, it 9 provides: 10 "The SDS Provider shall design: the route from 11 Haymarket to Ocean Terminal via Princes Street so as to: 12 provide a look and feel that is at one with its 13 surroundings whilst not detracting from the design 14 elsewhere on the Edinburgh Tram Network." 15 We can read the other bullet points for ourselves. 16 In short, I think, Mr Reynolds, under, for example, 17 there, the clause we are looking at, these are pretty 18 vague requirements. I do suggest that because of that 19 vagueness, it really is essential that the designer 20 engages with the approval body at the earliest possible 21 stage to obtain clear guidance of what will be required. 22 A. That's certainly one aspect of it. 23 If I can take you back, if I may, to clause 4.8, 24 which I think is the nucleus of this -- 25 Q. That's at page 28? 4 1 A. That's right. Okay, thank you. This is what I was 2 referring to a couple of minutes ago: 3 "If it should be found that the Deliverables do not 4 fulfil the requirements of this Agreement ..." 5 Yes, absolutely fine. No problem with that. We are 6 obviously obliged to deliver to meet the requirements of 7 the agreement: 8 "... or the needs of any Approval Bodies, the SDS 9 Provider shall at its own expense amend the 10 Deliverable." 11 Now, the problem that we experienced was that the 12 needs of the Approval Bodies, as described in 13 Clause 4.8, that's a very open-ended obligation. It 14 doesn't say at which point in time the needs of the 15 Approval Bodies, and what we were finding was that the 16 project became bogged down because new needs of the 17 Approval Bodies could be introduced essentially at any 18 time. 19 So what happened was that the preliminary design was 20 delivered. The Approval Bodies then had second thoughts 21 from our point of view, and that introduced the need for 22 change, against what in our estimation was something 23 that was compliant with the requirements of the 24 Agreement. 25 So you see these two apparently consistent 5 1 obligations, but the way they were applied to the SDS 2 Agreement resulted in delay, and that impacted the 3 programme going forward. 4 So whilst what you say I would absolutely agree 5 with, there's an obligation on the designer for early 6 engagement with the Approval Bodies, there's equally an 7 obligation on the programme manager to ensure that you 8 don't get protracted debate on the deliverables, and 9 that is what we found, that the programme manager, ie 10 tie, didn't perhaps work as effectively as we would have 11 liked with CEC to ensure that any review of the 12 Deliverables and the requirements didn't become 13 protracted to the extent the programme was itself 14 protracted. 15 That was our view. 16 4.8 is an absolutely key clause, and it's that 17 clause that I personally ensured was changed before we 18 signed the Novation Agreement, where the overriding 19 importance of complying with the requirements is the 20 driver. Should anybody wish to change beyond that, yes, 21 fine, but understand the impact, understand the 22 consequences of introducing change. 23 CHAIR OF THE INQUIRY: You speak about the obligation of the 24 programme manager, tie. Is that written into the 25 contract or is that a custom -- 6 1 A. It's tie -- it was tie's responsibility to enforce the 2 master programme, and you can argue therefore this is 3 consistent with that obligation, because any -- any 4 delay in order to meet the revised needs of the Approval 5 Bodies would impact the master programme, and tie was 6 the holder of that responsibility. 7 So the programme manager would usually be the body 8 who was there to ensure that the parties understood the 9 impact of any changed requirements that may be 10 introduced. 11 CHAIR OF THE INQUIRY: It might be argued, I suppose, that 12 the failure of SDS to satisfy the requirements of the 13 Approval Body was the cause of the delay to the 14 programme. 15 A. But I would argue that that was because those 16 requirements changed. For example, requirements for 17 tram stops changed subsequent to the production of the 18 preliminary design. So from our point of view, we 19 produced a preliminary design that was compliant with 20 the requirements, and at that point the client started 21 to review and reconsider some of those requirements, 22 which then necessitated additional design work which 23 took longer, and that was the main impact. Yes, you can 24 obviously produce revised designs, but the client then 25 not recognising the impact on the programme going 7 1 forward. 2 CHAIR OF THE INQUIRY: Thank you. 3 MR MACKENZIE: Thank you. We've also heard, Mr Reynolds, 4 that it's good practice to obtain agreement or approval 5 for one design stage before going on to the next design 6 stage. Is that something which in principle you agree 7 with. 8 A. Absolutely. 9 Q. That may be another way to address the problem or 10 difficulty of people changing their mind or 11 requirements, than if agreement is reached at the 12 requirements definition stage and then the preliminary 13 design stage, and one has a fixed agreed baseline before 14 going on to the next design stage; is that correct? 15 A. Which was indeed the basis of this contract, and that 16 was one of the problems, that the preliminary design 17 having been produced, there was an obligation on tie to 18 review and come back on that design within 20 days, and 19 tie failed to do that. 20 There was then a companion clause, if you like, 21 which allowed us then to deem acceptance of that 22 preliminary design, and then work moved forward into 23 detailed design. But exactly what you say is exactly 24 what I would have expected and what should have happened 25 but didn't. 8 1 Q. I think we have heard evidence that some issues in the 2 requirements definition phase required to be addressed 3 in their preliminary design phase? 4 A. Correct. 5 Q. Is that correct? 6 A. That's correct. 7 Q. And equally, in this contract, some -- a number of 8 issues that arose in the preliminary design stage were 9 rolled over and addressed in the detailed design phase; 10 is that correct? 11 A. That's what happened, but the preliminary design was 12 completed on schedule at the end of June 2006. As 13 I say, what should have happened, that preliminary 14 design should either have been accepted or comments 15 received against it within a 20-day period. That didn't 16 happen. So what happened in order to keep the job going 17 was preliminary design revisions were accommodated as we 18 moved into detailed design. 19 Q. Presumably by stopping at each stage and approving each 20 stage, agreeing each stage before moving on to the next 21 stage, that's a way of keeping control of the process? 22 A. Precisely. 23 Q. If one doesn't do that, one is likely to lose control of 24 the process? 25 A. Exactly right. 9 1 Q. Sticking with the SDS contract, looking at the question 2 of responsibility for stakeholder engagement, if we can 3 go to page 92, please. Paragraph 3.3, we see 4 "Stakeholder Management". Clause 3.3.1 states: 5 "The SDS Provider shall assist the Client to 6 minimise the adverse impact of the implementation of the 7 Edinburgh Tram Network on stakeholders (both statutory 8 and non statutory) and general public. This shall 9 include: securing, implementing and incorporating into 10 the design all necessary Network Rail, BAA and other 11 third party agreements." 12 The third bullet point: 13 "liaising with CEC ... and others as required by the 14 Client in relation to the performance of the Services." 15 Does this clause, do you know, address the question 16 of obtaining approvals and consents? Is that part of 17 the stakeholder liaison that is referred to? 18 A. It's closely linked to it. The primary body for 19 approvals and consents was CEC. But given the 20 dependence or the interaction with other stakeholders, 21 then yes, it's closely linked with it. 22 I think a keyword in this 3.3.1 is the obligation on 23 the SDS to provide -- to assist the client. What that 24 doesn't spell out perhaps as clearly as it would have 25 been helpful is the balance of responsibilities between 10 1 ourselves and the client, but certainly interacting with 2 all the various third parties, interacting with the 3 approvals bodies, yes, it's -- that's setting out the 4 context, if you like. 5 Q. Whatever this clause means, I think on any view it must 6 mean there is a joint responsibility on tie and SDS to 7 liaise with stakeholders; is that correct? 8 A. Correct, yes. 9 Q. Now, can I go back to your statement, please, at 10 page 23. In paragraph 78 you say: 11 "We were, as the SDS Provider, the party primarily 12 responsible for obtaining the views of the various 13 stakeholders so they could be incorporated into the 14 design." 15 Just pausing there, I just wondered if that was 16 consistent with the clause we've just looked at in the 17 contract. 18 A. I think primarily responsible for ensuring the views of 19 the stakeholders could be reflected in the design as it 20 was developed. So the joint responsibility for actually 21 engaging with those stakeholders is as you said. The 22 product of liaising with those stakeholders, we would be 23 the ones who had the view on how that could be 24 incorporated to deliver the optimum design. I think 25 that's what I was trying to get over in that paragraph. 11 1 Q. Then the next paragraph, 79, please. Again, you say: 2 "It was our responsibility to obtain the views of 3 the various stakeholders. That was spelt out in the SDS 4 contract. With regards to industry practice, that 5 responsibility would usually be assigned to the best 6 party who was able to obtain the views of the different 7 stakeholders. In the case of the Edinburgh Tram Project 8 the best person able to do that was the programme 9 manager (which was TIE). On the Manchester Tram Project 10 it was the same ie it is the programme manager who 11 undertakes this role." 12 In the last sentence you say: 13 "It would usually be a client responsibility, having 14 regard to good industry practice, to secure those 15 views." 16 Just for the avoidance of doubt, why would it 17 usually be a client responsibility? 18 A. To ensure that the balanced view is taken of those 19 requirements. The client has the authority to ensure 20 that unreasonable requirements aren't carried forward 21 into the project so that you've got the bigger picture. 22 You're not looking for perfection, necessarily, which 23 may impact programme performance, so that the client has 24 the relationships locally. It's often the case the 25 client has the understanding of the local politics, the 12 1 geography, the people. 2 The designer would have the understanding of the 3 optimum way to deliver a comprehensive design. So it 4 is, as you say, the two working together in reality. 5 CHAIR OF THE INQUIRY: So should that have been written into 6 the contract? 7 A. I think this would be one of the lessons learned, 8 exactly how you apportion those different 9 responsibilities and how you take advantage of the 10 different specialisms if you like and ensuring that, 11 yes, a state-of-the-art design is delivered, but 12 ensuring that that state-of-the-art design can be fitted 13 to the particular characteristics of the local 14 environment, if you see what I'm saying. 15 MR MACKENZIE: Thank you. I would like now to move on, 16 please, Mr Reynolds, to around February 2007, when you 17 started as Project Director. 18 A. Yes. 19 Q. On the question of programme, you've mentioned in your 20 statement that one of the concerns we had was that the 21 master project programme was not being maintained. 22 Could you explain that comment, please. 23 A. This comes back to the point that when I arrived in 24 February 2007, clearly the project was in delay, and we 25 were responsible for producing the SDS design 13 1 programmes, but given, as I said, we'd produced the 2 preliminary design on time, but then the programme had 3 gone off to address change, to address revisions, and 4 that master programme in our view wasn't being 5 maintained by tie, such that the impact of those changes 6 could be forecast going forward. 7 Now, had that been done in mid-2006, it comes back 8 to, well, if the various stakeholders wished to see 9 a different design going forward, that has got to be 10 weighed in the balance against how long is that going to 11 take to implement by the designer. 12 So the master programme should have set that out 13 in -- with the clarity that everyone could have 14 understood, yes, you can't keep changing, it is going to 15 delay the end date. 16 Q. The master project programme, that was something that 17 tie were obliged to maintain; is that correct? 18 A. That's correct. 19 Q. Now, what sort of detail would be in it? We know, for 20 example, at the very highest level we have heard dates 21 for completion of each of the design stages, 22 requirements definition, preliminary and detailed. Is 23 that all the master project programme would contain, 24 those dates, or would it contain more detail? 25 A. What you would expect to see is a tiered document. So 14 1 at the headline level, you would expect a pretty 2 condensed version of the programme. 3 But that would derive from the more detailed 4 elements of the different levels beneath that. 5 So you would be looking at a detailed design 6 programme. You would be looking perhaps at a detailed 7 roads integration programme that may come from 8 elsewhere. You would be looking at a detailed traffic 9 modelling programme. 10 They would roll up and be combined in the master 11 programme such that you could then deliver a top level 12 view which the major stakeholders could appreciate, and 13 you would be able to look at that, and say: well, yes, 14 I can make changes at this detail level; but then at the 15 top bar level, which might be each of the sections, so 16 not many bars on that programme, you could say: that is 17 going to impact this particular section or delivery. 18 You can then take a view: is that a problem, is that 19 critical path? And, depending on that assessment, that 20 will determine how you take on board the request for 21 change. 22 Q. So the clue really is in the name. It's a master 23 project programme for the project overall, not just for 24 design? 25 A. Correct, which you can then filter, depending on your 15 1 audience, to be able to paint a picture that that 2 audience can appreciate. That's the real skill from 3 a master programme management capability. 4 Q. So in the case of the Edinburgh Tram Project, one may 5 expect the master project programme to include the 6 design works, but also the MUDFA works and perhaps the 7 procurement of the infrastructure contract and the tram 8 contracts. One can see how all of these interrelate? 9 A. That's right. And as I say, traffic modelling. Traffic 10 modelling was always a key aspect because of the 11 particular characteristics of the City of Edinburgh, and 12 if you pull them all together and then see how they 13 relate, then you can present a number of views that take 14 on board those different aspects, and that means that 15 you don't have the problem where one particular aspect 16 may override other aspects of the delivery. 17 Q. This master project programme, is that the sort of thing 18 that Parsons produced in the Manchester Project in their 19 role as programme managers? 20 A. Yes. 21 Q. Now, without such a programme, does the project manager 22 really know what's going on in the project? 23 A. It's -- again, you've got this balance between 24 monitoring and control. So the programme from the 25 various different inputs, as you say, from the various 16 1 different aspects of the project delivery, allows the 2 monitoring. It allows you to look at the criticalities, 3 the real sensitivities. That then allows you to go 4 back, having made that assessment, and control -- and at 5 the end of the day, say whether you're prepared to 6 accept a request for change or not. 7 Q. So does the master project programme help, say, the 8 designer to plan their works? 9 A. Yes. Yes, because a key aspect is the resourcing to 10 deliver the obligation, and depending on the interaction 11 with the other aspects of the programme from our point 12 of view, that would determine when resources were needed 13 to actually produce the designs. 14 Q. Yes. We had looked with an earlier witness at a clause 15 in the contract which obliged the SDS Provider to 16 progress the services with true expedition, and in 17 accordance with the master project programme. 18 Do you say that in this project, you had concerns 19 that the master project programme was not being 20 maintained? 21 A. Correct. 22 Q. What were those concerns based on? 23 A. That we weren't seeing any evidence of it. So we 24 weren't -- the bigger picture wasn't being communicated 25 to us. So we didn't -- from our point of view, we 17 1 weren't seeing evidence that that master programme -- 2 master project programme was being maintained. 3 Q. Thank you. 4 Now, moving to a different aspect of the 5 programming, if we can go to page 15 of your statement, 6 please. At paragraph 52, I think we had asked about the 7 design programme in place, and you say in paragraph 52: 8 "There was a new programme put in place following my 9 arrival. There were regular updates to the 10 programme ... There is a later programme which sets out 11 the requirements definition as being completed by the 12 end of 2005 and the preliminary design being completed 13 by mid-2006. I cannot recall when the detailed design 14 was due to be completed by." 15 On that point, if we go to another document, please, 16 CEC01821403. This is the Draft Final Business Case 17 which went to the Council in December 2006. It will 18 come up on the screen. 19 We are trying to find a date for when detailed 20 design was due. That's the only reason I go to it. We 21 can see this is the Draft Final Business Case dated 22 November 2006. It went to the Council in December 2006. 23 Go, please, to page 164. We can see at the top it's 24 headed "Programme summary". If we can then please go to 25 page 167, we see a table headed "Design and Traffic 18 1 Regulation Orders Milestones". We can see, I think, 2 completion of detailed design for phase 1a and phase 1b 3 by 4 September 2007. 4 If we go down a few lines, we can see completion of 5 approvals and consents for phase 1a, again the same 6 date, 4 September 2007. 7 In short, Mr Reynolds, is that the date you were 8 working towards when you first arrived in February 2007 9 for completion of the detailed design? 10 A. I certainly would accept that was -- that was what was 11 in the Draft Final Business Case, and the -- in my 12 statement it was just when I was being interviewed, 13 I didn't have the dates in front of me, which is why 14 I said I didn't recall. They would be entirely 15 consistent, yes. 16 Now, as to whether -- when I joined those were the 17 dates we were aiming for, I think in February 2007, it 18 was already clear there was a very high risk that that 19 September date for completion of detailed design 20 wouldn't be met. But that was the target, yes, most 21 certainly. 22 Q. So do you remember having a view around that time when 23 you started as to whether, assuming those were the 24 target dates, they were likely to be met? 25 A. Well, this is in part what introduced the need for the 19 1 critical issues reviews, because, as I say, it was clear 2 that there was a high risk that the programme was 3 becoming repeatedly prolonged, and the critical issues 4 had to be addressed in order to achieve certainty in an 5 end date. Whether that end date was going to be 6 September 2007 is open to question. But what was 7 required was certainty, rather than the circumstances at 8 the time, the design programme was running out month on 9 month. 10 So we had to introduce a change of culture to make 11 sure people were focused on achieving certainty of end 12 date. 13 Q. I'll come back to that shortly. Just to finish off this 14 document, if we may please go to page 165, just to 15 remind ourselves what the intended date of the Infraco 16 award was. 17 We can see at the very bottom of the page, "Infraco 18 milestones", and over the page, please, page 166 -- 165, 19 we can see the top, "Award of Infraco contract following 20 CEC/TS approval + cooling-off period 11 October 2007". 21 So that was the date, I think, tie were working 22 towards at this stage, albeit we know that was then, 23 I think, changed to January 2008? 24 A. Correct. 25 Q. And eventually became May 2008. 20 1 A. Correct. 2 Q. So we can leave that document. 3 You mentioned the question of the critical issues 4 and need for a change in the change culture. 5 I think we can take this quite shortly, because we 6 have heard quite a lot of evidence that essentially in 7 early 2007, there were around 80 unresolved critical 8 issues, which meant that it was not possible to 9 meaningfully progress detailed design. Do you agree 10 with that, broadly? 11 A. Yes, indeed. 12 Q. We've heard from Mr Crawley that in fact Parsons had 13 stood down parts of their design team. I think he 14 described them as having been sent back to Birmingham. 15 Is that correct? 16 A. I did actually see that in the statement that I read 17 online. We didn't send people back. We did suspend 18 work for a very short period, but that was in July 2007 19 when we were waiting for instruction. So we didn't 20 actually send people back to Birmingham. But I can 21 understand why David might have said that with the 22 passage of time. There was a very short period of: 23 look, we can't proceed on the basis of the uncertain 24 instructions; therefore we are going to stop and focus 25 attention on getting the correct instructions. 21 1 As I say, that was a very short period, a matter of 2 days. 3 Q. We had also previously looked at a letter from you in 4 July 2007. It might be worth us bringing it up 5 actually. PBH00003595. You can see this is dated 6 11 July 2007. It's from yourself to Tony Glazebrook, 7 and the first paragraph states: 8 "We can confirm that SDS has now remobilised those 9 areas of design activity which have been held awaiting 10 resolution of the Critical Issues." 11 The impression is that that is for more than just 12 a few days, but what's your position on that? 13 A. It was a very short period. If it was two weeks, that's 14 all it was. It was a matter of days because the -- in 15 some respects, this was to focus attention -- I think 16 this is partly what I was saying yesterday, arguably we 17 should have done this earlier to focus attention on the 18 impact of the continual going round the circle on 19 several of these issues. 20 So let's make sure that we have got a crystal clear 21 foundation on which to move forward, and the reality is, 22 after this, the performance against forecast improved 23 dramatically because we were able to proceed on the 24 basis of clear instruction. 25 Q. I think whatever the details of how long the designers 22 1 had been stood down, I think you agreed with the 2 proposition that because of these outstanding critical 3 issues, it simply hadn't been possible to make 4 meaningful progress on detailed design? 5 A. That's right. There was -- shortly after I arrived and 6 it was coincident with Matthew Crosse's arrival and 7 David Crawley shortly after that. There was a meeting, 8 it must have been February, at the very latest 9 March 2007, which did a thorough programme review, and 10 it was that meeting that I think Matthew Crosse 11 concluded there was probably the need for a five-month 12 delay, and then, you know, immediately following that, 13 or even coincident with it, we started the focus on the 14 critical issues. 15 So we ran through, what, March, April, May. It 16 became apparent those issues still weren't being 17 resolved. The programme was still going backwards, and 18 that's what really led to my thoughts being expressed in 19 this letter that we have got to move this forward, 20 otherwise we risk the whole programme being cancelled. 21 Q. We saw a chart, I think produced by Mr Crawley, showing 22 the critical issues reducing from about 80 in 23 February 2007 to, I think, all but being resolved by 24 about June 2007; does that accord with your general 25 recollection? 23 1 A. Substantially. The reality is there were still issues 2 outstanding come probably even January 2008, but 3 certainly that change in culture that was brought about 4 under Matthew Crosse's project directorship and with 5 David Crawley's experience coming into play, that 6 certainly introduced a step change in the way this 7 project was being delivered. 8 Q. Thank you. Could we then go back to your statement, 9 please, at page 54. Paragraph 173, the first sentence, 10 you say: 11 "We did undertake detailed design between July 2006 12 and March 2007 but that process was frustrated to 13 a certain extent." 14 Then the next page, please, page 55, paragraph 177, 15 you say: 16 "The changes, whether as a result of the charrettes, 17 change orders or informal discussions, in late 2006 and 18 early 2007 substantially resulted in the detailed design 19 being required to be redrawn during that period." 20 A. Correct. 21 Q. Then back, please, to page 32, paragraph 107. The third 22 sentence, you say: 23 "There was a minimum of six months delay introduced 24 by CEC's changes. It could have been as much as a year. 25 That was the whole period between June 2006 and 24 1 June 2007. I am on record in June 2007 as saying in 2 relation to these and similar topics, we have been 3 iterating the design and there is little to be gained by 4 continuing to do so. We need to agree that we are 5 moving on. It was a pivotal point in the whole 6 programme. It would not be stretching it to say that 7 there was a year's delay introduced because of the 8 revisiting of the scheme fundamentals. The revisiting 9 of the design fundamentals by CEC and the difficulties 10 with getting the third party agreements agreed cannot be 11 pulled apart from one another." 12 So I think that sums up your view in respect of the 13 effect this process had on the design programme; is that 14 fair? 15 A. Yes, that's fair. 16 Q. Thank you. Now, you did then say that following the 17 step change, it did result in some progress improving. 18 Look, please, at page 34 of your statement. In 19 paragraph 110, it's in relation to an email exchange 20 between yourself and Mr Crawley on 2 July 2007, and on 21 page 34, towards the top, you say, second line: 22 "In summary, we were informing TIE that we had been 23 through a whole year of going round the houses and that 24 we could not continue. I am saying that if we continued 25 in this manner then the programme would be absolutely 25 1 blown out of the water. As it was, we had already gone 2 beyond the point where it was impossible to complete 3 100% SDS design prior to novation in any 4 sensible time frame." 5 To pause there, so this was dealing with July 2007. 6 Was it your view at July 2007 that things had already 7 gone beyond the point where it was going to be possible 8 to complete 100 per cent of the design before novation? 9 A. If you go back to the original question with the 10 programme outlined in the Business Case for Infraco 11 procurement, that's exactly right. By that point it was 12 clear we weren't going to meet that September date. 13 You can take two views, can't you? There's the 14 requirement for novation. Ideally on 100 per cent SDS 15 design. But also at a point in time. 16 So am I going to focus on achieving 100 per cent 17 design, or am I going to focus on novating at a point in 18 time? And where is the balance? 19 Now, if we were going to continue to focus on 20 a September end date or a September completion date, we 21 couldn't have been 100 per cent complete by that date. 22 How much longer would it have taken to achieve 23 100 per cent completion? That's what we then turned our 24 attention to, because that was still my focus under the 25 terms of the contract, to deliver 100 per cent complete 26 1 SDS design. 2 The real worry in my mind as expressed in the letter 3 was we were running out so much that, as I say, the 4 entire scheme could have been in jeopardy. That was 5 what I was trying to get through to tie, and 6 Dave Crawley obviously agreed with me. 7 Q. What do you mean by the entire scheme could be in 8 jeopardy? 9 A. Well, there was pressure, there was a political 10 environment at the time. I know Willie Gallagher was 11 under extreme pressure. We had to be giving everybody 12 confidence that things were moving forward to a positive 13 conclusion, and the months immediately prior to this, as 14 I say, February, March, April, the design programme was 15 running out because of its dependence on others taking 16 decisions. Had that continued, people would have lost 17 confidence that we were going to get to an end point in 18 my view, or there was a risk that people would lose that 19 confidence. 20 Q. Thank you. Go on to page 51 of your statement, please. 21 Paragraph 165 in the last sentence. The last sentence 22 states: 23 "When the various critical design issues were 24 resolved they were simply carried forward to and 25 reflected in the detail design." 27 1 Now, going back to a discussion we had earlier, in 2 an ideal world, would the various critical design issues 3 have resulted in the preliminary design being revisited 4 and agreed before then moving on to detailed design? 5 A. Ideally, yes. I think in the circumstances the calibre 6 of the people that we had addressing these issues meant 7 there was that broader perspective of the integration of 8 the critical issue resolutions with the rest of the 9 design. 10 The reason you would go back to preliminary design 11 in the textbook, as it were, would be to make sure that 12 everything remained consistent, even having resolved the 13 critical issues, but I think there was, you know, 14 sufficient senior focus on this to take on board -- take 15 on board as part of resolving those issues that they 16 were consistent with what was out there. 17 So I think at the time it was -- that was the only 18 way to go, really, to make sure progress was maintained. 19 Q. I can understand why that was done to meet the 20 procurement timescale, but again, in an ideal world, 21 does that not run the risk, if one does that, of further 22 and future change, if one doesn't have an agreed fixed 23 baseline one can refer back to and say this was agreed 24 and approved; so if you're making further change to 25 that, it's going to have cost and time implications? 28 1 A. Correct. 2 Q. Could I also then, please, look at page 85 of your 3 statement. Paragraph 250, it's in relation to a meeting 4 of the Design, Procurement and Delivery Sub-Committee on 5 2 August 2007, where David Crawley had explained the 6 concept of just in time delivery and the fact there was 7 no margin for error. 8 Then about five lines from the bottom, you said: 9 "It was not like we were suddenly working to 10 a sensible programme, we were working to a programme 11 that was as a consequence of previous delays." 12 Could you just explain what you meant by that, 13 please, that "it was not like we were suddenly working 14 to a sensible programme"? 15 A. I think it comes back in part to what you have just 16 said. If you're following the textbook, you would 17 backtrack as issues were resolved. You would make sure 18 they were consistent with the rest of the design. You 19 would make sure the periods for consideration of those 20 changes, for the integration of those changes, were 21 sufficient. 22 In reality we were working hard to minimise the 23 impact on programme going forward. So we were juggling 24 to incorporate change in the design whilst continuing to 25 produce design. 29 1 So in that sense it wasn't sensible from an optimum 2 technical standpoint, but, as I say, within the 3 political environment we were operating in, it was 4 pretty essential to keep the job moving up to the point 5 where Infraco came on board as preferred bidder. 6 Q. Now, when you say political environment, is that with 7 a big P or a small P? 8 A. That's with a big P. That's having regard to the 9 ultimate stakeholder, as it were. So Scottish 10 Government, City of Edinburgh reputation, the need to be 11 moving forward. 12 Q. Now, in terms of -- we have heard it described as 13 a political imperative to drive forward the programme. 14 Was that a view you had come to yourself, that there was 15 a political need to make progress or was that a view you 16 had heard from others? 17 A. That's a good question. I suppose it was a view that 18 I developed through working fairly closely with 19 Willie Gallagher on and off through that period, that 20 there was clearly a need to maintain confidence from the 21 major political stakeholders. Particularly in an 22 atmosphere where not all of the parties in government 23 were backers of the tram scheme. So we needed to be 24 demonstrating that the project team could deliver 25 something of value. 30 1 Q. Because the Inquiry may hear evidence from Mr Swinney in 2 due course, who was the Minister responsible at the time 3 for finance, and his evidence may be that he had made 4 a commitment to Parliament in around June 2007 that 5 funding would be made available up to the cap of 6 500 million, and he would keep to his word. 7 So what is perhaps slightly puzzling is why after 8 that commitment had been publicly stated in Parliament, 9 parties were still concerned about the political 10 background to all of this. 11 A. Well, I think the word "cap", you can take that as key 12 to that debate, because the -- one of the biggest 13 reasons a cap gets exceeded is because of prolongation 14 of the programme. So what needed to happen was this 15 programme needed to be delivered on time to maintain 16 that political support. 17 Q. It's perhaps not a question for you. Again, 18 Mr Swinney's position may be that he had stated the 19 support for the project. It wasn't -- conditional on 20 certain things, but not very many things. I think we'd 21 better leave that for other witnesses. 22 Just on page 87, please. Just above paragraph 254, 23 this was in reference to an email exchange in July 2007 24 involving Jason Chandler, and you referred to Jason's 25 response as basically criticising misplaced procurement 31 1 programme pressure. Why do you say this was misplaced 2 procurement programme pressure? 3 A. Sorry, could you just take me back to the beginning of 4 that, 253? 5 Q. Yes, go back to the previous page at paragraph 253. So 6 it's David Crawley's email of 19 July 2007. An email of 7 19 July 2007 from Jason Chandler to Andy Conway. I'll 8 give you a minute to read it yourself. 9 A. Yes. 10 Yes, so this is -- this goes back to what I was 11 saying a little earlier about the traffic modelling: 12 "In an ideal world we would wait for all modelling 13 to be complete before completing the design but this 14 would add unacceptable delays to the programme and 15 delivery unfortunately this would mean that the design 16 would be completed later and the design for the whole 17 route would land for review and approval in one ..." 18 Tranche, would it be? Could we move forward now to 19 page 87: 20 "... one package which would be a very tall order." 21 So the email in response to an email from 22 Andy Conway. So if we're talking misplaced procurement 23 programme pressure, I think this is the consequence of 24 the pressure building to that point where everything 25 comes in one package. 32 1 Q. It's simply your use of the word "misplaced", I was 2 interested in. The fact you say "misplaced procurement 3 programme pressure". 4 A. Mis -- I can only think, reading it now, that it would 5 be misplaced because it was focusing on the delivery of 6 everything without perhaps recognising the pressure that 7 would put on the approval body. So it may have been 8 better to have it drip-fed. Whether that would have 9 been acceptable at this point in time, I cannot say. 10 Q. Did you have a view at the time as to whether the need 11 to procure the Infraco contract was putting undue 12 pressure on the design programme? 13 A. No, I think if you turn that round, we understood the 14 urgent need to maintain realistic Infraco dates. So it 15 was then more a matter of: well, what's the risk 16 assessment associated with the fact that we may not be 17 complete ahead of those dates, how does that impact the 18 scheme going forward? 19 Q. So in short, Parsons were trying to deliver as much of 20 the design as they could within the time available? 21 A. Yes, we tried to appreciate the bigger picture and we 22 tried to work hard to at least complete the critical 23 aspects of that work that was outstanding at the time. 24 Q. Thank you. Can we now look at another document. It is 25 PBH00014489. We see from the top of the page it's an 33 1 email from Carla Jones of Parsons, dated 2 21 November 2007, in relation to the weekly deliverables 3 tracker. 4 Ms Jones explains that of the 344 deliverables on 5 the tracker, two lines down: 6 "SDS have delivered 227 deliverables." 7 Simply a point of detail in passing, Mr Reynolds. 8 The 227 out of the 344, I think from my calculations, 9 was about 66 per cent. So about two-thirds. So it's 10 really just to try and note in passing that according to 11 Ms Jones' email, about two third of the deliverables had 12 been delivered as at November 2007. 13 I'll ask you to keep that thought in your head, and 14 simply to compare that with something you say in your 15 statement. If we then go to that, please, in your 16 statement at page 116. 17 About five or six lines down from the top, it's in 18 relation to a reference to -- at the top of the page: 19 "... 23 November ... of the 344 design deliverables, 20 236 have been delivered, representing 63 per cent of the 21 tram system design. 66% of phase 1a detailed 22 design is now complete ..." 23 After the quote in italics, you say: 24 "The percentage completed figure in this document is 25 low. It was not as low as 63%. It was more 34 1 between 70% and 80%." 2 It may be a point of detail, but simply from going 3 to Carla Jones' email in November 2007, it does appear 4 that the figure of about 66 per cent is correct as at 5 that time. Are you prepared to accept that? 6 A. I think if you just go further down that quote on the 7 screen at the moment, I say near the bottom: 8 "I think the percentages are understated. TIE are 9 saying there were 344 packages. I would say there were 10 325 on the log that we were using." 11 What you have to, or what I have to explain more 12 clearly, the programme would have been set up with 13 a number of design packages. Through the course of time 14 some of those packages would actually have been removed, 15 but they would still have been on there as a programme 16 statistics. Some of them would have been combined. 17 So reviewing it when I was asked the questions here 18 for the statement, I had 325, that there was the 19 substantive number that we were working to. 20 The other point to make numerically, yes, I'm not 21 going to argue with you obviously. It's a statement of 22 fact. But the percentage complete is purely 23 a mathematical assessment of the number of packages 24 versus the forecast. There's no weighting in that 25 percentage as to the substance of those packages. 35 1 So a package that may have taken five months to 2 complete would still be one package, and a package that 3 may have taken one day to complete would be one package. 4 So just with that note of clarification. 5 Q. I understand. And you do explain that in your 6 statement. 7 A. Thank you. 8 Q. Now, moving on, please, to December 2007, another 9 document. PBH00032472. 10 Now, this is a -- what we've called a weekly report 11 that you prepared. Can you just perhaps, because it's 12 the first one we've looked at, explain what the purpose 13 of your weekly reports were. 14 A. As I said yesterday, when I was appointed in 15 February 2007, reporting to Keith Hawksworth in 16 New York, because of the very high profile of this 17 project, because of the importance of it to PB, I was 18 asked by Keith to prepare a report every week, to 19 summarise the various different aspects of our 20 engagement. So I did that diligently from February 2007 21 certainly all the way through May 2008. So that's 22 the -- that's the -- as you say, the first example we 23 have seen. It's an internal document. It's reporting 24 matters of fact and matters of opinion as they may be 25 useful to my senior management. 36 1 Q. Thank you. Most of the reports are dated. This one 2 doesn't have a date on the face of it. But I think we 3 have otherwise established that it's 7 December 2007? 4 A. Okay. 5 Q. What I'm interested in is page 3, please. Under 3.3, 6 "Procurement", the second paragraph there, you said: 7 "Speaking with Willie Gallagher on the pricing, he 8 is relatively comfortable that presentations can be made 9 to Council which will secure acceptance of the current 10 offer. I understand from talking separately with BBS 11 that whereas tie had been demanding a 97% fixed 12 price for next week an offer of no more than 13 75% fixed will be provided. Willie appears to 14 be working on the basis that he has a sufficiently 15 positive presentation to make to Council and that 16 assuming the contract can be started well with 17 significant progress made over the first nine months or 18 so the question will have moved from the price for this 19 offer for Phase 1a of the scheme to questions over 20 affordability and funding for subsequent phases." 21 Just to pause there, you refer to having been 22 talking separately with BBS. Did you have separate 23 discussions with them around this time or what? 24 A. Well, following BBS's appointment or confirmation of 25 preferred bidder, which was late in the October 2007, 37 1 then increasingly we came together with BBS, we had an 2 obligation to do that, to work with BBS to clarify the 3 integration of the SDS design; and then it must have 4 been from around that December 2007 point on, certainly 5 through intense joint negotiation sessions with BBS 6 ourselves and tie on the meetings that ultimately led to 7 the Infraco contract being signed. 8 So yes, we had to work closely with BBS to ensure 9 there was a commonality of understanding. 10 Q. From what is stated in your report, there seems to be 11 a gap or a bridge between what Mr Gallagher was wanting 12 and what Bilfinger Berger Siemens were prepared to 13 offer; is that a fair way to put it? 14 A. Yes, it is, because, you know, to be fair to Willie, the 15 procurement strategy outlined in the Draft Final 16 Business Case had been for a fixed price, from my 17 recollection now, for the Infraco. But BBS, as the 18 Infraco was concerned that they weren't able to provide 19 a fixed price because of certain aspects of the design 20 being incomplete, so I think you can see both points of 21 view there. Yes, there was 75 per cent that could be 22 fixed. The balance would be up for review. 23 Q. If we could then, please, go back to your statement, if 24 I may, to page 117. Paragraph 325, there's a reference 25 to the quote I just read out. You then say: 38 1 "It was not a direct concern that Willie would be 2 presenting the 97% because that had not come to 3 me from Willie. It would have been a concern that the 4 presentation to Council, whilst it could have been 5 positive, may not have been presented in a risk-assessed 6 way." 7 Is that a concern you had at the time? 8 A. Yes. 9 Q. Why? 10 A. Again, from my point of view, looking at the bigger 11 picture, it's always -- the one thing that's paramount 12 on all of these schemes is everyone's reputation. So it 13 was a concern to me that whilst there may be a perfectly 14 reasonable explanation for the pricing scenarios that 15 we've talked about there, that they've got to be 16 presented properly to ensure that people are aware that 17 where the risks lie, and then people can take account of 18 those, react appropriately for the good of the scheme. 19 Q. Thank you. Over the page in your statement, please. 20 Paragraph 326, you say: 21 "All I can really comment on is BBS's stance. Their 22 stance was that there were a number of risks and 23 deliverables which could not be priced to a sensible 24 fixed price." 25 In the last sentence: 39 1 "I would say that, at that time, a 97% fixed 2 price would have resulted in a very high price because 3 it would have accommodated an awful lot of risk." 4 To pause there at that last sentence, is that a view 5 you held at the time or is that a view with the benefit 6 of hindsight? 7 A. That was at the time. Now, to an extent that's a worst 8 case, because you could say: well, if the parties put 9 the various issues on the table, then you could take 10 a view of that risk pricing; but acting in isolation, if 11 BBS were to put risk against every item still wasn't 12 fixed, then it would produce a very high price. So yes, 13 that was my view at the time. 14 Q. So what were the sort of risks that would have been in 15 your mind that would have resulted in a very high price 16 in order to get a 97 per cent fixed price? 17 A. Well, the key example from the time was the trackform 18 development where there was a significant difference of 19 opinion from BBS versus our view. Again, it's not just 20 the substance of the design. It's the time period over 21 which any changes to the BBS offer would have to be 22 implemented. 23 Q. What do you mean by that last sentence: 24 "It's the time period over which any changes to the 25 BBS offer would have to be implemented." 40 1 A. Well, taking that example with the trackform design, in 2 our view there was a need for a more complex design for 3 the trackform, and that would probably have led to 4 a correspondingly longer construction period. So you've 5 immediately got the duration over which the construction 6 is taking place. You've then got the interaction with 7 other aspects of the design that would have to integrate 8 with that trackform, and the programme becomes longer. 9 CHAIR OF THE INQUIRY: Whose view prevailed about trackform 10 design? 11 A. Well, interestingly, I think you could argue that we 12 did, because much later on in the process, we were being 13 pressured by tie to accept a much cheaper, much simpler 14 trackform design, and we pointed out the risks inherent 15 in doing that, and subsequently, when Princes Street was 16 excavated, we were proved to be right. So the need for 17 the more robust trackform design was proven then. 18 Now, that ensured quality of delivery, but what that 19 did mean was that the original BBS offer couldn't be 20 implemented. It had to be the more robust solution. 21 CHAIR OF THE INQUIRY: And that would involve additional 22 cost. 23 A. Yes. 24 MR MACKENZIE: Just on the question of trackform, could you 25 explain to us what you mean by trackform? 41 1 A. Trackform is the rails and the immediate foundation for 2 those rails, and out in the country the so-called grass 3 track, where you've got grass in between. 4 The trackform through the city is on concrete 5 foundation, but it's the immediate sub-base plus the 6 rails and the various points and so on and so forth. 7 Q. And in short, what trackform had SDS proposed and what 8 trackform had the consortium proposed in their offer? 9 A. In short, we defined what's known as full depth 10 reconstruction, which is excavation of the base, the 11 putting in place a sub-base underneath the immediate 12 foundation for the trackform. So you're going down 13 significant way into the roadway, using that as the 14 example, whereas BBS had come up with an offer that was 15 using a prefabricated trackform which would only require 16 planing off, in their words, of the immediate surface 17 and then insertion of that prefab trackform in place. 18 So it was a much simpler solution. 19 CHAIR OF THE INQUIRY: So did BBS start with the -- their 20 form of trackform. 21 A. Yes. Now, from memory -- I stand to be corrected if I'm 22 wrong -- that's what initially was used on the first 23 Princes Street excavation. As I say, I may be wrong on 24 that, but that was the -- BBS certainly pursued 25 something initially that then had to be changed for our 42 1 design later on. 2 CHAIR OF THE INQUIRY: Could that explain resultant faults 3 in Princes Street alongside the line cavities? 4 A. The cavities were there as a characteristic of what was 5 there before excavation started. The faults that 6 I think you're referring to with the initial 7 implementation of the trackform, yes, because a part of 8 the trackform design, just to amplify what I was talking 9 about there, is the so-called shoulders that run 10 alongside the rails, and our preference was for concrete 11 shoulders to contain the trackform, as it were, whereas 12 the initial BBS offer didn't have those concrete 13 shoulders. 14 That then resulted in problems with the heavy 15 traffic on Princes Street cutting across the track, the 16 buses and so on and so forth, and then you got the 17 cavities that you were just talking about. 18 CHAIR OF THE INQUIRY: Thank you. 19 MR MACKENZIE: So in short, Mr Reynolds, why wasn't it 20 possible to build the consortium's proposed trackform on 21 Princes Street? 22 A. In our view it wouldn't have been safe because a further 23 characteristic of the trackform design necessary for 24 inner city circumstances like Princes Street, you need 25 what's called void spanning, because you've got to 43 1 anticipate that there will be cavities under the 2 roadway, and subsequently when Princes Street was 3 excavated, that's exactly what we found. You will get 4 drainage channels. You will get all sorts of reasons 5 why the sub-base may have moved, may have resulted in 6 voids. 7 So you need the trackform to be capable of spanning 8 those voids so you don't get rail breakage, and 9 obviously if you get rail breakage in an inner city 10 environment, you get a derailment. That's particularly 11 unsafe. You need to be able to avoid that, obviously. 12 Q. So at the time of contract close or just before it, tie 13 chose the cheaper option; is that correct? 14 A. This is interesting because this was flagged up before 15 contract close, and it was actually one of the bullets 16 noted in the so-called Schedule Part 4. And that was 17 tabled for resolution in the design development 18 workshops which were scheduled very shortly after 19 contract close. So that was a specific issue that was 20 noted for resolution post Infraco contract award. Then 21 that was -- there must have been eight or ten issues 22 that were noted. 23 Q. We will come back to those workshops. Maybe it's an 24 unfair question to you, and I suppose you don't know on 25 what basis the consortium priced. We should ask other 44 1 witnesses about that? 2 A. That's exactly right. I don't. The only -- with -- 3 just to develop that Schedule Part 4 issue, we were -- 4 because we had the right, and you could argue the 5 obligation, to have been aware of all the terms of the 6 Infraco contract before we signed up for novation. 7 Schedule Part 4 was clearly part of that Infraco 8 contract, but we had to press quite hard to be shown it 9 at all, and speaking now, I'm still not -- I wouldn't be 10 confident that we ever saw the totality of Schedule 4. 11 We saw what we needed to see as it impacted the design 12 development going forward. But you're absolutely right, 13 it's not for me to say how that was priced. 14 CHAIR OF THE INQUIRY: Who was reluctant to give you the 15 full schedule? 16 A. I suppose logically that would have been tie, because we 17 were requesting it through tie as part of the novation 18 negotiations. So they were reluctant. And as I say, 19 come the end, we saw what we needed to see to be able to 20 ensure that our design obligation wasn't overly onerous, 21 but I am not convinced we saw the whole thing. 22 MR MACKENZIE: Thank you. Moving on to a different point, 23 please, to a different document, if I may. PBH00033339. 24 We are moving on to January 2008. We can see the top of 25 the page, an email from yourself to Greg Ayres, 45 1 7 January 2008, headed "Novation planning". About 2 halfway through the second paragraph, you say: 3 "The sensible course of action which everyone except 4 tie understands is to delay novation to the point where 5 the design is nearer 100% complete - to be fair 6 even Gallagher sees this as a potential option. The 7 likes of Crosse and Gilbert though are being more 8 blinkered - driven largely by their desire to be clear of 9 Edinburgh as soon as the BBS ink is dry on the deal." 10 I'm interested in you say: 11 "The sensible course of action ... is to delay 12 novation to the point where the design is nearer 13 100 per cent complete." 14 Why was that the sensible course of action? 15 A. This is an interesting debate, and this is one where, 16 with the benefit of hindsight, you could say there would 17 be a different course of action that may have been 18 better. 19 But I think you referred to it yesterday, with the 20 adversarial nature of the procurement and contract 21 structure, that from my point of view, the novation 22 terms had been defined before we started in 2005. So 23 they were defined on the basis that the SDS design would 24 be 100 per cent complete. 25 And there were certain obligations on the SDS for 46 1 indemnification of the Infraco, which would have been 2 absolutely fine had the design been there as a product 3 on the shelf. 4 In the circumstances of that design not being 5 complete, then they were -- they were onerous to the 6 point where they represented a serious risk to us. So 7 from my point of view, talking it through with 8 Willie Gallagher in January 2008, my preference against 9 that contract framework was to have a 100 per cent 10 complete design. 11 Now, sitting here now, ten years -- getting on for 12 ten years on, you could say a better course of action 13 would be to revise the contract terms to develop more of 14 a collaborative approach for all parties to deal with 15 the fact that the design wasn't 100 per cent complete. 16 Q. Did you discuss with Mr Gallagher around this time, in 17 early 2008, that it would have been more sensible to 18 delay novation until nearer the point where design was 19 100 per cent complete? 20 A. Yes, I did. Now, that's not to say that the Infraco 21 contract needed to be delayed. The Infraco contract 22 could have been awarded and then the design could have 23 been novated subsequently. 24 I think that was the arrangement with CAF, the CAF 25 contract was novated at some point after Infraco 47 1 contracts award, from memory. But in any event, that is 2 what I discussed with Willie, that there was no need to 3 have the novation coincident with the Infraco contract 4 award. 5 Q. What would be the advantage in completing the Infraco 6 contract award but delaying design novation until later? 7 A. Because there were certain aspects of the Infraco 8 contract that could have been delivered in the absence 9 of a 100 per cent complete design across the board. 10 Indeed, there was an advanced works contract. So the 11 Infraco was working on the scheme in advance of the 12 formal Infraco completion. 13 So it would have allowed work to continue, but it 14 would have -- it would also have ensured that the design 15 could be completed to my satisfaction, continuing to 16 work with tie. 17 Q. What was Mr Gallagher's response to the suggestion? 18 A. He took it on board. We had a very constructive 19 conversation about it. He went away to think about it. 20 We had more than one meeting on it, and it was certainly 21 something that was considered for a time, but ultimately 22 it was decided to go with the Infraco award and the 23 novation together without 100 per cent complete. 24 Q. Thank you. 25 I then want to go to another document, please. 48 1 PBH00015934. Again, it's towards the top, we can see 2 it's sent by yourself on 21 January 2008 to 3 Jason Chandler, subject "Where we are". You start 4 saying: 5 "As much for my benefit as anything else I thought 6 I'd try and get my thoughts straight after Friday's 7 events." 8 Just in passing, you refer to a Susan Clark 9 outburst. Do you recall what that was about? 10 A. It was just one of those things that, I suppose, gets us 11 all occasionally. It was a Friday morning, it was the 12 weekly critical issues meeting, and I think Susan was 13 particularly frustrated for some reason and gave vent to 14 her feelings. It was one of those things. 15 Q. So not a matter of any consequence for us? 16 A. No, I think it was frustration at lack of progress. 17 I suppose it was just a different way of showing it. 18 I suppose in many respects everybody else was frustrated 19 about lack of progress. 20 Q. The second paragraph, however, you say: 21 "On the other issues I feel that tie is completely 22 disorganised and a number of very key issues are just 23 being allowed to float." 24 Can you recall why you consider tie was completely 25 disorganised at this time and what were the very key 49 1 issues that were just being allowed to float? 2 A. There were -- from memory, there were three things, two 3 of which are described here. The Employer's 4 Requirements and the critical issues, but there was also 5 the concern about the conduct of the clarification 6 meetings with the Infraco consortium, where in the 7 period, what, November/December, so slightly prior to 8 this, my feeling was that tie was allowing BBS to direct 9 proceedings, rather than the other way about. 10 So that to my mind showed disorganisation, lack of 11 control over BBS. 12 But then that sort of led into the issues with the 13 Employer's Requirements, where there was a lack of 14 organisation and a lack of focus on resolving what was 15 a significant issue, but something that could be 16 resolved with appropriate control. 17 Q. Thank you. I'll come back to the question of the 18 Employer's Requirements and the Civils proposals, but 19 just sticking with this email, towards the bottom: 20 "Then there was the fiasco that was the Critical 21 Issues Meeting on Friday ..." 22 I'm interested in the sentence where you say: 23 "I was frankly dismayed that so many of the things 24 we talked about were the same as the issues on the table 25 six months ago." 50 1 Is that a reflection of issues being re-opened? 2 A. In part. There's a table on one of the other document 3 references which shows the position about this time, and 4 it shows the majority of those issues requiring action 5 by people other than SDS for resolution. 6 So yes, some of them would have been re-opened. 7 Some of them hadn't been resolved in the intervening 8 period, which was the comment I made a little while ago, 9 about yes, you were absolutely right, the critical 10 issues initiative did see the resolution of a 11 significant number of those critical issues, but not 12 all, and then the remaining ones seemed to take a very 13 long time to address, and that was the position here in 14 January 2008, I was looking at. 15 Q. Also, I'm lastly interested in the third line from the 16 bottom of that paragraph, where you say: 17 "Especially with novation upon us and these very 18 issues likely to be the major cause of construction 19 programme disruption. And tie seemingly devoid of ideas 20 or even common understanding at their management team 21 level. Probably I need to alert Willie." 22 The question of common understanding at their 23 management team level, what is that a reference to? 24 Common understanding of what? 25 A. Common understanding of the impact of some of those 51 1 issues still being outstanding. I know there was 2 still -- I think there was still an issue with the 3 Scottish Rugby Union Agreement, for example, but that's 4 just one example from that table I reference. I think 5 there was still issues with Forth Ports. So the common 6 understanding, certain people were just focused on 7 trying to get resolution, but failing to, but the common 8 understanding was, well, this is going to impact the 9 construction programme, if these issues are not resolved 10 prior to Infraco award. 11 Q. Thank you. 12 We can leave that, please, and go back to look at 13 another of your weekly reports, please. PBH00035854. 14 We will see from the bottom right-hand corner, this one 15 is dated 29 February 2008. 16 If we go, please, to page 3, we can see the second 17 paragraph states: 18 "With regard to the technical scope, tie concluded 19 from a separate meeting on Thursday convened to review 20 the Civils proposals that the current state of the BBS 21 Offer was seriously incomplete and therefore 22 unacceptable. BBS's commercial manager stated that for 23 BBS to comply fully with the SDS design could inflate 24 the offer price by an amount in excess of 25 GBP10 million." 52 1 Then the next paragraph states: 2 "An attempt was then made to water this statement 3 down but in separate discussions with Richard Walker he 4 has mused that if tie understood the likely true cost of 5 building the scheme then it would be cancelled. This is 6 not idle chat:- it is Richard's view of the strategy he 7 has adopted to retain as much flexibility pre-contract 8 with a view to securing substantial variations post- 9 contract. On a related note, Richard has also informed 10 me that he and his manager (from Wiesbaden) have seriously 11 discussed withdrawing from the bid. The main factor 12 preventing this is the desire to build a business in the 13 UK and the ETN contract would be the foundation for any 14 future developments. Against that BBS has other 15 emerging opportunities and is becoming increasingly 16 frustrated at the time and cost impact of the current 17 bid process." 18 Presumably, Mr Reynolds, this reflects something 19 that -- matters you had heard at the time; is that 20 correct? 21 A. That's correct. 22 Q. In particular, from Mr Walker himself? 23 A. Yes. 24 CHAIR OF THE INQUIRY: Can I just be quite clear on what 25 that means. Looking at this or from that conversation, 53 1 was the strategy of BBS to come in low, as it were, and 2 reach agreement, and thereafter maximise the extras, as 3 it were, after the event? 4 A. I'm sorry, I just missed the -- 5 CHAIR OF THE INQUIRY: So maximise additional costs? 6 A. I think the context of this was that the Civils 7 proposals, we hadn't actually seen any Civils proposals 8 until fairly late on. Clearly before the end of 9 February 2008, but certainly significantly after the 10 preferred bidder declaration. When we did see Civils 11 proposals from BBS, they weren't comprehensive at all. 12 They were very, very high level. So the concern was, 13 well, this is not reflecting the SDS design, and then 14 you get on to this statement. Well, if we were to 15 deliver the SDS design in full, it would be high price. 16 I suppose the question then comes: was the intent to 17 close that gap by staying within the envelope or was the 18 intent to take advantage, if you like, of that gap and 19 take further variations? 20 I suppose I'm really not qualified to give you 21 a direct answer on that. It was, again, from my point 22 of view, there was the risk that if -- if you moved away 23 from the sort of collaborative approach, then that gap 24 as it existed in February 2008 could be the basis for 25 significant price increase. 54 1 CHAIR OF THE INQUIRY: Did you become aware of when BBS 2 entered into subcontracts for delivery of the project? 3 A. We were aware that an advance contract had -- advance 4 works contract had been awarded. Sitting here now, 5 I can't remember exactly when that was, but it was 6 earlier in 2008, from recollection. 7 CHAIR OF THE INQUIRY: Thank you. 8 MR MACKENZIE: Thank you. You said that it is Mr Walker's 9 strategy he has adopted to retain as much flexibility 10 pre-contract with a view to securing substantial 11 variations post-contract. Why was he sharing that 12 strategy with you? 13 A. Because we were going to be novated to BBS. So he 14 needed to understand my view on the SDS product. So 15 this is where you come back again to my views on their 16 Civils offer. So debating with Richard or discussing 17 with Richard how that would be taken on board. 18 Now, this, whilst it was February 2008, whilst it 19 was beyond the January 2008 target for Infraco contract 20 award, this was at a time when the -- there was -- there 21 were regular meetings. There was clearly a divide 22 between the parties. And I suppose to be fair to 23 Richard, he was making sure he was protecting BBS's 24 interest and maintaining flexibility against a backdrop 25 of potentially a more onerous design being -- a more 55 1 onerous construction being required than they'd allowed 2 for. 3 But there was -- there was a developing -- and there 4 had to be. There had to be a developing close 5 relationship between ourselves and BBS to ensure that we 6 were working closely together immediately we were 7 novated. 8 Q. Given the state of matters at the time, did it surprise 9 you from a commercial point of view that that was 10 Mr Walker's strategy? 11 A. I suppose you could say that some of it was positioning 12 to ensure that BBS came away with the best deal that 13 they could secure in the circumstances. 14 So from that point of view, not surprise. But 15 something that had to be taken on board and to an extent 16 countered to make sure that the final solution was 17 a sensible one that was fair to them, fair to us. 18 Q. Do you know whether that strategy was shared with tie? 19 A. I don't. And I suppose you would have to go back to 20 Schedule 4, how the negotiations on -- Schedule 4, if 21 you like, was the incarnation of -- the consequences of 22 this strategy being pursued. How that was negotiated, 23 we weren't there. That was between BBS and tie solely. 24 Q. In all of your discussions with tie, from really late 25 2007 up until signature of the contracts in May 2008, do 56 1 you know whether tie were aware of the risk of there 2 being substantial variations post contract? 3 A. They were aware -- on the specifics, Willie 4 and I discussed, as it happens, the trackform. Now, 5 that may sound like a detail. I was discussing that 6 with the Exec Chairman. But it was a significant part 7 of the overall scheme. The trackform runs end to end. 8 So it was a significant element. It is a significant 9 cost element. So Willie and I did discuss that. To 10 what level of detail, I can't recall. 11 But the consequences of where we were at were 12 enshrined in the Infraco contract, and this is where you 13 come back to the design development workshops that were 14 obligated on everybody. 15 So there was an awareness that elements had to be 16 completed, but of course that doesn't automatically say: 17 well, there's going to be a price increase. Some of 18 those discussions could have resulted in a price 19 reduction, potentially, if you'd found a better 20 solution. 21 So it was outstanding items that were going to be 22 addressed and closed out post-contract. 23 Q. Thank you. I'll come back to the question of 24 misalignment and the workshops. 25 Just two final pages in your statement, if I may. 57 1 Page 139. Now, about ten lines down, after the quote, 2 which we looked at in the weekly report, so after the 3 numbering in bold, you say here: 4 "Richard's comment came in an atmosphere of trying 5 to stay within a budget sum. This is where you come 6 back to the concern about a programme for doing one 7 thing and a price for doing another (which was largely 8 in relation to the value engineering)." 9 Just to pause there, what do you mean by that, the 10 concern about a programme for doing one thing and 11 a price for doing another? 12 A. In very simple terms the price depended on securing 13 reductions through value engineering but the -- for 14 example, the design, the additional design required to 15 realise that value engineering wasn't included in the 16 programme. At a very high level that's a simple 17 explanation of my concern. 18 Q. You then say: 19 "There were things that might have to be done which 20 were not either programmed or costed eg no allowance was 21 made from a time or cost point of view for a potential 22 requirement for full depth reconstruction. There were 23 concerns within Parsons that BBS was putting forward 24 a solution that would not really be fit for purpose. 25 I do recall talking with Willie Gallagher about 58 1 trackform and Willie informing me that trackform had 2 been a key part of the competitive assessment between 3 BBS and Tramlines." 4 So just to pause there, and going back to the 5 question of trackform, was it essentially agreed to 6 leave that matter until after contract award to take 7 a final view on what trackform would be required? 8 A. Ultimately, it was, that's right. 9 Q. The question of trackform, would that be an 10 insignificant sum if that had to be changed, or 11 a significant sum or what? 12 A. It's a significant sum, and at the end of the day, it 13 could be a substantial sum if you were looking at long 14 sections of route that had to be amended. Certainly as 15 a minimum from our point of view, you would likely be 16 looking at the city centre sections. You wouldn't be 17 looking at, for example, the sections out beyond 18 Haymarket, which were on ballasted track alongside 19 Network Rail, but certainly the city centre sections 20 which were a significant part of the overall scheme, 21 yes, you are looking at an issue that could be serious. 22 Q. If the more extensive full depth construction trackform 23 you had proposed or rather SDS had proposed, if that had 24 been required rather than the shallower consortium 25 proposal, is that the sort of thing that could add 59 1 millions to the cost of the scheme? 2 A. Yes. 3 Q. For simply the build cost, there might be an effect on 4 the design programme to design that? 5 A. Certainly an effect on the design programme. Yes, the 6 build cost and, again, there, to be fair, you would -- 7 the proper estimate would come from the construction 8 contractor, but yes, from my background, millions is the 9 right sort of order of magnitude. 10 CHAIR OF THE INQUIRY: It would involve deeper excavation 11 and wider excavation because of the wings that you have 12 described. 13 A. Yes. That's right. 14 CHAIR OF THE INQUIRY: And would the railtrack itself 15 require to be different or -- 16 A. Yes, and that is actually an important part of it, 17 because the BBS offer, whilst it was essentially 18 prefabricated trackform, and on the design concept, you 19 would think, yes, that's a nice straightforward way to 20 go, you just drop in that prefab trackform, the 21 corresponding requirement for the foundation was pretty 22 onerous. 23 So you've then got a sort of compete -- you've got 24 a conflict really. You are saying the requirement for 25 the foundation is more onerous, but I am proposing just 60 1 to plane off the surface. Actually, I'm going to need 2 to focus more on the foundation than perhaps I would 3 have done with a traditional construction. So you've 4 got a number of factors in play, but certainly it was an 5 issue that had to be addressed in more detail than it 6 had been at that point. 7 CHAIR OF THE INQUIRY: Okay. Is this a convenient point? 8 MR MACKENZIE: My Lord, perhaps just two final short points, 9 if I may, to finish this chapter off. 10 At the very bottom of the page, please, Mr Reynolds, 11 you say: 12 "We flagged this up to TIE. We were aware that BBS 13 intended to inflate their offer post-novation ..." 14 I was just wondering what that was a reference to. 15 Was that a reference back to the weekly report we have 16 just read, the strategy, or is that something else? 17 A. That's right, yes. 18 Q. I understand. And then finally, if I may -- 19 CHAIR OF THE INQUIRY: Well, sorry, which was it? The 20 result of the weekly report or -- 21 A. Yes. It's that same issue that was outlined in the 22 weekly report. 23 MR MACKENZIE: That's a reference to Mr Walker's strategy? 24 A. I suppose what you could say is we were aware that 25 BBS -- that's a bit definite, isn't it; I think we were 61 1 aware of the potential, building from the weekly report, 2 of the potential for BBS to inflate, because, as I say, 3 logically it could have gone the other way. Having had 4 clarification on all these issues, it could have 5 resulted in a reduced overall solution. Unlikely. So 6 the risk was that everything was going to become more 7 expensive as a result of the trackform issue. 8 Q. Why do you say it was unlikely to have gone the other 9 way? 10 A. Well, because of what you have said there. The costs 11 associated with the trackform are likely going to 12 overwhelm any savings that you might make elsewhere. 13 You might make savings, for example, in OLE bases 14 because you have been able to do something clever with 15 the trackform. Because of the proportion associated 16 with the trackform, it is unlikely that your savings are 17 going to overcome that. Therefore the chances were post- 18 novation or post-Infraco contract award, the price was 19 going to go up. That was the risk. 20 Q. And in general, in the commercial world, do contractors 21 in general seek to claim additional sums after contract 22 close or less? 23 A. Well, that's again a very good question. If you were 24 asking me that now, in relation to the climate in the 25 construction industry, I think there is, as we talked 62 1 about yesterday, there is now more of a focus on 2 collaboration. There's more of a focus on recognising 3 that everybody's reputation suffers if things go wrong. 4 Back in 2007 I think you could say, yes, there was 5 more of an appetite for what you have just described. 6 Q. And finally -- this is finally -- page 141, please. 7 Paragraph 378, you say: 8 "In terms of whether anyone in TIE or CEC was aware 9 of BBS's strategy to go in low and then claim on 10 variations further down the line, you only have to look 11 at schedule 4 to appreciate that that was BBS's 12 philosophy." 13 To pause there, can you explain briefly what you 14 mean by that? 15 A. It's an inference. When you look at the -- as I say, 16 bearing in mind I have not seen all of Schedule 4, but 17 when you look at the aspects of Schedule 4 as they 18 relate to the design, and you pick up the concerns about 19 trackform, about OLE, then you would infer from that 20 that there were going to be variations associated with 21 those particular elements. 22 Now, as I say, to caveat that, because I wouldn't 23 like to accuse anybody of trying to do something 24 untoward, they may deliver savings elsewhere in the 25 overall scheme. But Schedule 4 was certainly providing 63 1 an avenue for change and price change, be that up or 2 down, subsequent to the Infraco contract award. 3 So I think the key factor here is Infraco contract 4 award didn't convey the certainty that people might have 5 expected it to. 6 Q. When you say in the first sentence of paragraph 378 that 7 you only have to look at Schedule 4 to appreciate that 8 that was BBS's philosophy, is that a view you held at 9 the time or is that a view expressed with the benefit of 10 hindsight? 11 A. That was a view at the time, and I think it's fair to 12 say through that period of negotiation from January 13 through May, there was -- there were some difficult 14 times. The relationships between the parties were 15 strained at times. And the perception we had of 16 Schedule 4 through that period was that it was a vehicle 17 for future change. As I say, ten years on, you could 18 look back and say it was a reasonable de-risking 19 process, but through that period, as I say, there were 20 some strained relationships. 21 MR MACKENZIE: That may be an appropriate time, my Lord, to 22 pause. 23 CHAIR OF THE INQUIRY: We will have a break for the 24 shorthand writers. We will resume again at 11.25. 25 (11.10 am) 64 1 (A short break) 2 (11.29 am) 3 MR MACKENZIE: Mr Reynolds, I would like to continue looking 4 at a number of weekly reports you produced in the period 5 up to contract close. The next one is dated 6 7 March 2008. It is PBH00017343. 7 If we can go to page 2, please. About halfway down, 8 commencing: 9 "I didn't on this call tell tie that a PCG ..." 10 Was that parent company guarantee? 11 A. Correct. 12 Q. "... would not be forthcoming. What I did do was take 13 the opportunity in Willie's presence to remind tie that 14 despite declaring BBS as Preferred Bidder more than four 15 months ago, (end October 2007), a Civils Offer had only 16 been delivered on 26 February. In these circumstances 17 it was unreasonable to be expecting signature on an 18 Agreement next week. Willie then suggested he had some 19 sympathy with my stance on LDs ..." 20 Is that liquidated damages? 21 A. It is. 22 Q. "... and also commented that in light of the absence of 23 a clear definition of scope it was unlikely that we 24 would be in a position of full agreement by Wednesday 25 next week." 65 1 What was the reference to a clear definition of 2 scope? 3 A. That refers back to the Civils Offer being -- from 4 Bilfinger Berger Siemens being very high level, and 5 therefore the detail scope arising from that had yet to 6 be defined. 7 Q. Was there a clear definition of scope in that regard 8 before contract close? 9 A. To -- yes, but with the caveat that there were things 10 held over to be finally resolved in terms of design 11 integration, as we've said. But yes, there was at least 12 a definition -- a clear definition of what was known and 13 there was a definition of what was yet to be agreed. 14 Q. In terms of the things held over, is that a reference to 15 the misalignment causes we will come on to shortly in 16 the SDS Novation Agreement? 17 A. Yes. 18 Q. Thank you. Then at the bottom of this paragraph: 19 "One final point worthy of note. Despite the Civils 20 Offer received on Friday not being an agreed document it 21 is BBS's declared final basis of pricing - this I picked 22 up from a discussion with Richard Walker on Friday 23 evening. I asked him about the assertion that agreement 24 had been reached with tie and he told me that the only 25 agreement that had been reached was on a final price - 66 1 caveated by the content of Schedule 4, the Civils Offer 2 and the other contract documents. So, the Civils Offer 3 should be treated more as a set of pricing assumptions 4 and should any aspects of the offer have to be amended, 5 BBS's price will change." 6 So to pause there, that presumably was your 7 understanding based on your discussion with Mr Walker; 8 is that correct? 9 A. Correct. 10 Q. Had you in any event reached that view independently 11 from reading Schedule 4 when you did see it? 12 A. The first time I saw a draft Schedule 4 I think was in 13 February. The main focus here was the Civils Offer 14 which dealt with roads, embankments, all the various 15 Civil aspects of the scheme, and as I have said, they 16 were treated at very high level. So it was certainly 17 not a clear definition of the scope of work to be 18 undertaken. 19 But perhaps in this instance, more than with the 20 trackform, it's feasible that there would have been 21 savings through value engineering on some of the Civil 22 construction. So it was perhaps less of an issue than 23 the major example of trackform. But it was still an 24 open-ended commitment, if you like. 25 Q. Over the page, please, page 3. 67 1 Top of the page states: 2 "The Civils Offer contains the same major departures 3 from the SDS design as it did at first draft, notably 4 that the Roads design is a much simpler lower quality 5 offering." 6 To pause there, is the reference to Roads design 7 a reference to the trackform issues or is that something 8 different again? 9 A. No, that's the highways design which the trackform 10 integrates with, but it's over and above -- it's 11 alongside trackform. It's different. 12 Q. So that's a separate issue? 13 A. Yes. 14 Q. Thank you. 15 "tie's view is that we should now carry out an 16 exercise to determine the degree of misalignment between 17 that Offer and our Design. In my view there is 18 insufficient detail to allow us to do that and that will 19 be subject to debate on Monday. But, more importantly, 20 the philosophy adopted by BBS is radically different 21 from the SDS designs which have already been through 22 informal consultation with CEC and, in some cases, been 23 submitted for formal technical approval. I have been 24 making the point to tie since the issue of misalignment 25 with the Requirements ..." 68 1 That must be a reference to Employer's Requirements; 2 is that correct? 3 A. Yes. 4 Q. "... first emerged that in addition to achieving 5 alignment, tie must manage the stakeholders to ensure no 6 surprises in future. From informal discussions over the 7 last few weeks with senior members of CEC it would 8 appear that this has not been done. So, in the position 9 we now find ourselves (which is frankly indefensible 10 from tie's point of view - an incomplete Civils offer so 11 late in the process), I believe the first action, rather 12 than Parsons Brinckerhoff undertaking an assessment of 13 misalignment, should be for tie to put the BBS proposals 14 in front of CEC to see if they are acceptable. If CEC 15 declares itself content, that is the time for 16 Parsons Brinckerhoff to embark on the misalignment 17 assessment. To do so before receiving this endorsement 18 would incur unnecessary cost and would simply move the 19 real problem - the likely refusal of CEC to approve the 20 revised design - some weeks beyond novation. That 21 would introduce all sorts of contractual and commercial 22 problems." 23 Do you know whether the Civils Offer proposals were 24 put to the Council at this stage for their approval? 25 A. No, I don't formally. This paragraph covers a number of 69 1 significant issues clearly, and that was a major 2 concern. Let's not focus on the -- bearing in mind that 3 we'd been through months and months and months of 4 refinement to satisfy CEC, and then here we are late in 5 the process with an offer that is clearly less than 6 where we'd got to. So the notion that we were going to 7 be focusing on that rather than maintaining the CEC 8 requirement was misplaced, in my view. 9 Q. Is the issue of potential problem in short that if the 10 consortium's proposals are accepted, that may require 11 design already carried out by Parsons to change, and the 12 design that had already been carried out by Parsons had 13 at least been through the CEC process, whether formally 14 or informally, and if the Parsons design was to change, 15 it may not have the acceptance of the Council? 16 A. Spot on, yes, that's right. 17 Q. Do you know whether post financial close that came to 18 reality? Was that a problem? 19 A. I can't say. I haven't got anything that I can hold up 20 and say: here is an example of CEC or the approval body 21 refusing to approve a change. But the conduct of the 22 scope beyond novation, there was certainly -- and the 23 trackform is the best example in my mind where we did 24 work to ensure the compliant solution, as it were, were 25 implemented. 70 1 Q. So what you're expressing here is a risk? 2 A. Yes, and as I say, the focus -- you can understand why. 3 There was a set of requirements, there was a design that 4 had been prepared against those requirements, there was 5 now an offer from BBS that didn't comply with those 6 requirements. 7 The temptation was somehow to work with that, but, 8 as we said, through months and months and months, the 9 overriding focus here was to make sure the approval 10 bodies were going to be happy. Were they going to be 11 happy with the BBS offer? Highly unlikely in certain 12 instances. Okay, it may be there's good reason for the 13 approval bodies to change their stance, but they have 14 got to be made aware of it to make sure that everything 15 moves forward without problems downstream. 16 Q. In short, introduces a risk of design change after 17 financial close? 18 A. Yes. 19 Q. Now, I propose to move on from this document, but you 20 had mentioned this paragraph raising a number of 21 important issues. Is there anything else you would like 22 to draw attention to before I move on? 23 A. I think we have probably covered them there. I think 24 it's just almost an end-to-end summary, if you like, of 25 some of the significant issues from our point of view. 71 1 Q. Thank you. Could we then dip back into your statement, 2 please, at page 147. 3 Paragraph 390. You note that: 4 "By email dated 26 March 2008 Jim McEwan sent you 5 a draft of schedule 4." 6 Also in the email dated 27 March 2008, Bruce Ennion, 7 who I think was employed by Parsons? 8 A. Yes, he was. He worked in our engineering team. 9 Q. He noted that he had "grave concerns as to which way 10 this is going!". And he attached a draft of Schedule 4 11 with his comments, et cetera. What I'm then interested 12 in is a bit later down, where you say: 13 "We had various meetings with TIE where we discussed 14 technical issues and civils. In those meetings we did 15 advise persons at TIE of our concerns in relation to 16 schedule 4. There was a continuing negotiation to 17 secure the INFRACO contract award on the basis of 18 a clear definition of scope. TIE's response to our 19 concerns regarding schedule 4 was that they were 20 continuing to engage with negotiations and it was not 21 yet available." 22 I think we should also read that paragraph with 23 another paragraph in your statement at page 157, please. 24 In paragraph 414, at the very bottom, last sentence, 25 where you say: 72 1 "I am pretty sure I expressed my concerns 2 surrounding the price on the table but I cannot 3 honestly, with the passage of time, explicitly say 4 I told Willie Gallagher or Jim McEwan. I think with 5 schedule 4 there, it was self-evident that there were 6 risks surrounding the agreed price." 7 Now, you told us just before this morning's break 8 that the view within Parsons at the time was that 9 Schedule 4 was a vehicle for change. Do you remember 10 discussing those types of concerns with anyone in tie 11 before contract close? 12 A. As part of giving the statement, I was racking my memory 13 to try and recall saying something explicit as I have 14 said there, but in all honesty I can't. But the 15 circumstances of the time, with the issues that we were 16 working on, you know, at that point still delivering to 17 tie and the way that the caveat had been spelt out in 18 Schedule 4, and almost more importantly, with the Civils 19 Offer, it was there on the table, but I can't sit here 20 now and say: yes, I actually put the red flag up 21 directly with Jim or with Willie. 22 Q. I understand. I would like to go to a separate 23 document, please, another weekly report. We are now on 24 to 28 March 2008. The reference is PBH00036973. 25 CHAIR OF THE INQUIRY: While we are waiting for that, 73 1 could I just clarify in my own mind. You spoke about 2 the clarification meetings in November and December, and 3 your feeling that tie was allowing BBS to direct 4 proceedings. 5 A. Correct. 6 CHAIR OF THE INQUIRY: Rather than the other way about, and 7 you've subsequently mentioned tie's approach to the 8 receipt of the Civils, that Parsons Brinckerhoff should 9 determine any misalignment between the Civils and your 10 design. 11 Is that an illustration of the same point or is that 12 something different? 13 A. No, that is definitely in the same context, with tie 14 sort of responding to an initiative from Bilfinger 15 Berger rather than -- Bilfinger Berger Siemens, rather 16 than insisting on the tie perspective being the point of 17 reference. 18 CHAIR OF THE INQUIRY: So it's really the client, as it 19 were, allowing the contractor to run the show? 20 A. Correct. 21 CHAIR OF THE INQUIRY: Thank you. 22 MR MACKENZIE: Thank you, my Lord. 23 I will come back to this point in a little more 24 detail, but just while we are on it, I think we have 25 heard evidence, or you say in your statement, that in 74 1 relation to the misalignment between the SDS design, the 2 Employer's Requirements and the Civils Proposals, we 3 will hear evidence, I think, that the Employer's 4 Requirements were watered down, were made more general, 5 so that the Civils Proposals could align with them. Is 6 that your understanding? 7 A. Yes. 8 Q. So that seems to be an example of the Employer's 9 Requirements changing to meet the offer by the bidder; 10 is that correct? 11 A. That's correct. 12 Q. Do you have any views on whether that is a usual 13 practice? 14 A. No, it's not a usual practice at all. I mean, 15 inevitably there will be certain aspects of an offer 16 that may present a better solution against an overall 17 need, which then may be reflected in a change in 18 a requirement. But it would be ringfenced. It would be 19 a small part of the whole. 20 The way this was being done was almost to take the 21 offer, as I say, as the reference point and to amend 22 everything else around it, be that the requirements, our 23 design, or at the end of the day, even the requirements 24 of the approval bodies. 25 Q. So in short, here the Employer's Requirements were 75 1 changed to meet the offer; is that correct? 2 A. Yes. 3 Q. Also it turned out the SDS design was changed to meet 4 the offer? 5 A. To -- I suppose what you could say is the requirements 6 were changed to meet the offer. The SDS design was then 7 changed to meet the requirements, which was why I had to 8 then confirm compliance with the requirements, but that 9 was compliance with those changed requirements, rather 10 than the requirements we'd been working to up to that 11 point. 12 Q. Thank you. 13 So looking at the weekly report, we can see the 14 bottom right-hand corner of the page, I think it's dated 15 28 March 2008. 16 The first paragraph explains: 17 "Having set a target of 29 March for the award of 18 the Infraco Contract, tie has now had to acknowledge 19 that with negotiations continuing the target cannot be 20 met." 21 Then the next paragraph deals with novation 22 meetings. About a third of the way down, the sentence 23 begins: 24 "The programme review only touched on the topic of 25 timescales required to accommodate design revisions 76 1 suggested by the BBS Offer so it remains the case that 2 tie has a price on the table which assumes approximately 3 GBP12 million of value engineering improvements will be 4 delivered and a construction programme which does not 5 reflect the design effort required to deliver those 6 improvements." 7 To pause there, is that the point you made earlier 8 about the design programme not reflecting any changes as 9 a result of value engineering? 10 A. That's absolutely correct. 11 Q. What effect might such change have on the design 12 programme? 13 A. It would in all probability lengthen the overall 14 programme because depending on the complexity of the 15 value engineering that was agreed, the design could 16 be -- you know, could be significant. A major 17 structures redesign would take a period of time, would 18 have to be reapproved. So you could be looking at 19 a significant impact on programme. 20 And if that happened to be on a critical path 21 element, then that would impact the programme overall. 22 That was the worry. 23 Q. So it's not just change in design, of course. It's also 24 obtaining any statutory approval and consent? 25 A. That's right, yes. 77 1 Q. Now, picking up again your weekly report, you go on to 2 say: 3 "tie appears comfortable with the state of affairs 4 and has suggested that changes will be instructed on day 5 one of Infraco contract to address the imbalance. I do 6 not believe the major stakeholders, including CEC are 7 aware of the position and we must ensure that the 8 Novation Agreement is worded such that it protects PB 9 from any accusations of deception which could be 10 levelled at tie in future." 11 Why did you use the word "deception"? 12 A. The concern was that we were part of the team delivering 13 to that milestone. So there was -- there was going to 14 be a product in place at that novation and Infraco 15 contract award milestone, and I was anxious to ensure 16 that the substance of that product was appreciated by 17 everybody involved. So we didn't want to be in 18 a position where people thought this was a product with 19 all the characteristics required, when in fact there may 20 have been things that were going to have to change. 21 The strategy that there were going to be changes 22 instructed on day one, I was anxious to make sure 23 everybody who had an interest was aware of that. 24 Otherwise it could be viewed as, well, you're selling as 25 one thing, but in reality it's not the full shilling, if 78 1 you see what I mean. 2 Q. Thank you. I would like to leave that document and go 3 on to the next weekly report, please. It's 4 4 April 2008, and the number is PBH00017966. 5 The first paragraph, please. You refer to your 6 weekly meeting with Willie Gallagher: 7 "... concentrated on accelerating the process for 8 securing Prior and Technical Approvals from CEC. The 9 Construction Programme is critically dependent upon the 10 achievement of Approvals dates." 11 Pausing there, what were your views at the time on 12 the likelihood of achieving the planned approval dates? 13 A. We were making progress. Technical approvals on the 14 major structures elements, we didn't have a problem 15 with. They were proceeding pretty well, from memory. 16 We did have an air of problem with roads associated 17 approvals. So roads, drainage, and so on and so forth. 18 But we were making progress, and Jason Chandler had 19 instituted an initiative with CEC to try and accelerate 20 progress. So the report I put together immediately 21 prior to novation had the status on prior and technical 22 approvals. The contract changes we instituted at 23 novation made it more likely that the forward programme 24 would be less risky. So it wasn't a major issue in my 25 mind going forward. We were clearly in the position 79 1 where there were not as many prior approvals as should 2 have been achieved at that point in time, looking 3 backwards. 4 Q. Just again sticking with this, at this point in time, in 5 early 2008, it may be suggested that the whole history 6 of the design process was one of delay. 7 A. That's -- the whole history up until that point in 8 mid-2007 when David Crawley and I agreed we were going 9 to do things differently and everybody was going to sign 10 up to making progress. Up until that point, yes, there 11 had been a year of delay, let's be honest, between the 12 preliminary design submission in June 2006 and that 13 point in July 2007 when things started to move. Beyond 14 that, we were making significant progress on many 15 aspects of the design. There were still issues. The 16 one that sticks in my mind is the approval of tramstop 17 designs, where there were delays in my view due to an 18 overly pedantic approach to an approval of tramstop 19 detail. 20 But yes, if you encapsulated it, standing back from 21 the project as a whole, yes, up until that point the 22 characteristic would be in design delay. But largely 23 due to the lack of clear instruction to allow design to 24 proceed. 25 Q. Even from July 2007 when things on any view picked up, 80 1 from July 2007 on to early 2008, there was still some 2 delay and slippage in that the target deliverables were 3 still not being met? 4 A. There was. That was principally the tramstops, where, 5 as I say, there was an overly pedantic approach to 6 looking at level of detail that in my view was 7 inappropriate. 8 There were also agreed slippages on some of the 9 structures designs that wouldn't be required until later 10 on in the process, particularly when people were talking 11 about value engineering for major structures, once BBS 12 were able to look at the designs from a construction 13 optimisation point of view. Because you will always get 14 to the point, you will have a design package, but 15 depending on which construction contractor is selected, 16 they will have a preference for certain aspects of how 17 it's to be constructed. 18 So it was agreed by everybody that certain of the 19 structures would be slipped back on that programme. 20 CHAIR OF THE INQUIRY: You referred to value engineering for 21 major structures. I think there's been a suggestion 22 from an earlier witness that value engineering should 23 come in at the earliest stage of design, and shouldn't 24 just be concentrating on structures. Is that a fair 25 comment. 81 1 A. That's a very fair comment, yes. I think you're 2 absolutely right. You will try and design 3 a state-of-the-art design, but you do then come to: 4 well, is the construction contractor going to, like 5 a prefabricated approach, off-site prefabrication or 6 construction on site, at a particular tiling solution 7 that that contractor may have, for example. So there 8 will be the opportunity for further value engineering 9 when it comes to construction. 10 CHAIR OF THE INQUIRY: So in the early designs by 11 Parsons Brinckerhoff, did that take account of value 12 engineering at that stage? 13 A. I suppose I can't say explicitly, but we would always -- 14 the company philosophy would have been to design to the 15 state of the art, for want of a better word. So one of 16 the accusations levelled against us on trackform was 17 that we were overengineering and it was somehow 18 gold-plated. But as I have explained previously, that 19 was looking at it from a safety point of view as much as 20 anything else. You needed a robust solution. So you 21 get to that question of: well, robustness versus 22 cost-effectiveness, where is the balance? 23 CHAIR OF THE INQUIRY: Finally, on the question of 24 trackform, I should have asked earlier. The effect of 25 requiring your design of trackform was, I think, we 82 1 established, deeper excavations, but also wider 2 excavations to account for the concrete shoulders. 3 A. That's correct. 4 CHAIR OF THE INQUIRY: Would that -- could that impact upon 5 the diversion of utilities if you're going wider and 6 deeper? 7 A. You would still be within the limits of deviation, 8 I think it's fair to say, with the concrete shoulders. 9 That is worth double-checking. And you've also got the 10 issue of the tram envelope that you've got to take 11 account of. But given that the shoulders are at road 12 level, I don't think that would affect the tram impact. 13 So I think you would be okay. You would still be 14 within the swept path that would have been allowed for, 15 for utility diversions. 16 CHAIR OF THE INQUIRY: Thank you. 17 MR MACKENZIE: A theme seems to run throughout the design 18 evidence that the Council's approach was to require 19 a very high standard of design. By that I mean they 20 wanted every detail to be in place before considering 21 whether to grant an approval or not, on the one hand; 22 and other parties perhaps, designers saying, that was an 23 unduly onerous standard. 24 Would you agree, broadly, with that theme? 25 A. Yes. 83 1 Q. So I just wonder if that was the Council's approach, and 2 that was well known by early 2008, what reasonable 3 belief or basis would there have been for thinking that 4 was going to change? 5 A. If for no other reason than the Clause 4.8 of the 6 revised SDS Agreement was changed to change the order of 7 priority to conformance with the Employer's 8 Requirements. So conformance to the Employer's 9 Requirements was over and above any needs of the 10 approval bodies, and to the extent that the needs of the 11 approval bodies were outwith the requirements, then that 12 would be cause for change. 13 Now, that doesn't stop you changing but it makes you 14 stop and think: well, do I really want to make these 15 changes? 16 Q. I can see how that would protect Parsons' position and 17 interest. But if the Council maintained their previous 18 approach of requiring every last detail to be in place, 19 and wanting a particular standard for whatever design, 20 whether it's structures or old junctions or planning 21 matters, the Council could still delay the programme? 22 A. It's a very fair point, and I think the reality, looking 23 back, is that that approach only really changed with 24 Colin Smith and Sue Bruce's intervention post Mar Hall. 25 There was -- if there were a step change previously, 84 1 there was a cliff edge change post then which a large 2 part of that change was to address what you've just 3 described there and remove those constraints. 4 Q. So given the Council's approach at the time, I just 5 wonder if you have any views on whether it was sensible 6 to proceed with a construction programme which was 7 critically dependent on the achievement of approvals 8 dates? 9 A. Well, we'd certainly made BBS very much aware of our 10 concerns over CEC performance to date, which is why we 11 got full backing from BBS to change that order of 12 priority on satisfying the requirements. 13 You can only go so far. There was a requirement to 14 get that contract signed, and the fact it was signed 15 with a different set of conditions helped not just SDS, 16 but helped BBS as well. 17 Because the other thing to remember is whilst the 18 SDS was responsible for, you know, the large parts of 19 the design, we weren't responsible for all of the 20 design. An obligation on the Infraco was to carry out 21 design on other aspects of the scheme. 22 So the approvals risk didn't just impact the SDS 23 component. It was project-wide. 24 Q. Thank you. Just two final weekly reports to look at, if 25 I may. 85 1 The second last one is dated 18 April 2008, and the 2 number is PBH00018333. In paragraph 1.3, please, we 3 see: 4 "Richard Walker indicated to me on Friday that he 5 has concerns ..." 6 I think on the bottom right-hand corner of the page, 7 we see the date is 18 April 2008. Back to 8 paragraph 1.3: 9 "Richard Walker indicated to me on Friday that he 10 has concerns over the presentation of the Infraco 11 Contract deal to Council. Some weeks ago I had 12 expressed my concerns that the price on the table from 13 BBS did not align with the programme contained in the 14 offer. For example, the price assumes that value 15 engineering savings will be made whereas the programme 16 has no allowance for the design and approvals time which 17 would be required. I had suggested that tie would have 18 to be careful in the form of presentation so as not to 19 mislead CEC." 20 Pausing there, did you discuss these matters with 21 tie at all, Mr Reynolds? 22 A. I'm sorry, I really can't remember. I can't. It's so 23 long ago. 24 Q. Carrying on: 25 "Richard is now expressing (to me) similar concerns 86 1 and has suggested that he will take this up with tie 2 separately. To a large extent the current position is 3 one of BBS's making where the offer is dependent upon 4 a set of pricing assumptions which can be interpreted by 5 the informed reader as a basis for price increase and 6 programme prolongation. It may be that Richard is 7 belatedly expressing worries which have more to do with 8 his concern over working with tie as a client or may 9 even be due to friction between Bilfinger Berger and 10 Siemens. Whatever the reason I detect an air of 11 uncertainty and last minute concern over whether BBS 12 should be taking the job." 13 Is there anything you wish to add to what is set out 14 there? Does that adequately reflect matters at the 15 time? 16 A. I think it is fairly clear opinion at the time, if you 17 like. So what value it is to Lord Hardie is obviously 18 for him to consider. But I think everything -- you can 19 see the concerns that I had, I think, being expressed 20 fairly clearly. 21 Q. Thank you. Then over the page, please. Page 2. I'll 22 try not to read it all out, if I can. It's the top 23 bullet pointed paragraph which refers to Parsons having 24 worked hard to issue two reports on the misalignment 25 between the BBS Civils and Systems Offers and the SDS 87 1 Design by 27 March. And tie providing a draft response. 2 About halfway down you say: 3 "The lack of response from tie has meant that 4 uncertainty remains over construction scope of work." 5 A. Yes. 6 Q. There's then a reference to proposed compromise is to 7 have a detailed design workshop to define the scope to 8 the level of detail required prior to construction. 9 Then: 10 "With an early May target for contract award such 11 a workshop would have to be held post novation: The 12 alternative is to hold the workshop first and delay 13 Infraco contract award until such time as the scope of 14 work, price, and programme are all defined more 15 accurately." 16 To pause there, by deciding to have any workshop or 17 workshops after contract close, does that mean that the 18 scope of work, price and programme were not accurately 19 defined? 20 A. Correct. 21 Q. Presumably in an ideal world, one would hold any such 22 workshop before contract award, in order to accurately 23 define the scope of work, price and programme? 24 A. That's right, yes. 25 Q. Did you have any discussion with tie that that was the 88 1 better course of action? 2 A. I'm sure we did as part of the negotiation meetings. As 3 I say, they went on January through May. Again, 4 I haven't got a record that says this is what we said, 5 but it would have been as part of those negotiations 6 when would be best to hold the -- hold these meetings. 7 Q. This isn't a matter for you, Mr Reynolds, but if one 8 were the client in this position, how can one quantify 9 these unknown matters before contract award and make 10 sense of a risk allowance? 11 A. It's really down to having a comprehensive quantified 12 risk assessment. So being able to, you know, assign 13 limits to the consequences of not having these things 14 defined, and then working within the contingency 15 provisions to ensure that the scheme can go ahead from a 16 financial standpoint. 17 Whether that was done by tie, I don't know. 18 Q. We will have to explore that with tie. 19 Then the last, please, weekly report, if I may go to 20 PBH00018873. 21 Go to the bottom right-hand corner of the page, we 22 will see the date is 2 May 2008. 23 If we then go to page 1, I'm interested in all 24 that's said on page 1, but I'll try not to read it all 25 out. 89 1 In the first paragraph it states: 2 "The plan devised by tie two weeks ago to ensure 3 substantial completion of all contract documentation to 4 allow a recommendation to be made to Council on 1 May 5 was working well and Willie Gallagher had arranged to 6 meet with the CEO of the Council privately on the 7 evening of Wednesday 30 April to brief him ahead of the 8 formal debate in Chamber on Thursday." 9 The next paragraph refers to a meeting internally 10 within Bilfinger Berger chaired by the CEO in Wiesbaden, 11 where there appears to have been a commercial review of 12 the pricing schedules which apparently showed 13 a significant shortfall in comparison with revised cost 14 estimates prepared by Bilfinger Berger in Germany. 15 Bilfinger's decision was to advise a price increase, and 16 Mr Walker contacted Mr Gallagher on Wednesday morning to 17 inform him that the price had to be increased by 18 GBP12 million. 19 To pause there, is that information that came from 20 Mr Walker? 21 A. I can't be definite. It was either Mr Walker or 22 Mr Gallagher. I can't remember, sitting here. It could 23 have been either. 24 Q. Thank you. You then refer, if we can go to the next 25 bullet point, please, the first bullet point states: 90 1 "A paper had been prepared two weeks ago for 2 submission to Council ..." 3 Then a few more bullet points down: 4 "The decision must have been taken to proceed with 5 the tabling of the Council Paper ..." 6 Then you had two observations at the bottom. One: 7 "tie has sponsored a paper which was materially 8 incorrect at the time when it was presented to CEC." 9 Pausing there, I assume, Mr Reynolds, that's the 10 view you arrived at yourself at the time? 11 A. That's very fair comment, and I have said, bearing in 12 mind this was an internal document that was -- that was 13 my view. But yes, that's fair. 14 Q. Then the second bullet point states: 15 "The price increase proposed by BBS would result in 16 an overall price of GBP520 million in comparison with 17 the overall funding limit of GBP545 million. This is 18 without any allowance for costs to cover changes to 19 scope and programme necessary to bring about alignment 20 of the BBS Offer and the SDS Design." 21 We've touched upon that. Presumably there's also 22 the point we mentioned about value engineering works may 23 have an impact on the programme? 24 A. That's absolutely right. So you can see even allowing 25 for contingency, you're closing the gap to the funding 91 1 limit beyond what would have been desirable. 2 CHAIR OF THE INQUIRY: So is the inaccurate information 3 related to the GBP12 million? 4 A. Reading this now, I think what I was inferring at the 5 time was the paper had already been prepared so it would 6 have had to -- it would have had to have been 7 a supplement to that paper. But I haven't got that 8 information in front of me. So I think it's probably 9 better to ask somebody else that question. 10 CHAIR OF THE INQUIRY: It seems from this that the paper 11 that had been prepared was tabled anyway, although on 12 the Wednesday, the additional sum of GBP12 million had 13 been advised. 14 A. Certainly reading this, the paper was presented on the 15 Thursday. But obviously I wasn't there. So hopefully 16 the context was revised to allow for the changing 17 circumstances. But I think what I was suggesting there 18 was that the wording of the paper was no longer 19 accurate. But I haven't got that paper in front of me. 20 So perhaps that was an unwarranted assumption. 21 MR MACKENZIE: Thank you. Before we come back to the question 22 of the misalignment between the design, Employer's 23 Requirements and proposals, there's one issue I would 24 like to clarify, please. It arises in the first 25 statement you provided to the Inquiry, which is 92 1 reference TRI00000124. It's at page 31. 2 It's simply as a point of clarification I take you 3 to this. 4 Do you see, please, in paragraph 3.114 you say: 5 "Considering pricing, my understanding is that pre 6 contract tie removed a sum of GBP7 million for systems 7 integration, but failed to agree on responsibility for 8 systems integration. tie were trying to reduce the 9 cost, but the failure to deal with the consequences gave 10 rise to a scope gap." 11 Can you explain that paragraph, please? 12 A. Yes. This comes back to the SDS contract. We were 13 design provider for a defined part of the works. There 14 was a whole area of systems engineering that was going 15 to be the responsibility of the Infraco, and in this 16 particular example it would have fallen on Siemens. 17 Our view was that this sum was removed pre-contract 18 under the false assessment that we were somehow 19 responsible for that part of the works, which we 20 weren't. So that meant that our design, even had it 21 been complete, wouldn't have included this particular 22 part of the overall scheme. So post contract that meant 23 there was a gap. 24 Q. Did you discuss that matter with tie at the time? 25 A. I can't remember exactly when it came to light. We 93 1 would have discussed it when it came to light, and it 2 would probably have been when we were looking at the 3 split of responsibilities going forward. It certainly 4 was a key part of the discussion with BBS, which would 5 have been post contract, to look at the consequences of 6 closing that gap or look at the ways to close that gap. 7 Q. So this sum of GBP7 million, presumably this work had to 8 be done. So that sum should either have been in the SDS 9 Contract or it would have to be allowed for in the 10 consortium offer? 11 A. Which is where under the procurement strategy it should 12 have been, because the systems engineering aspects were 13 viewed as being the responsibility of the Infraco, and 14 that's part of the Infraco design obligation that I was 15 talking about earlier, was the systems aspect of the 16 scheme. 17 Q. So we should perhaps explore that with the Bilfinger and 18 Siemens witnesses? 19 A. Indeed, yes. 20 Q. Thank you. 21 Returning now, please, to the question of the 22 misalignment between the SDS design, the Employer's 23 Requirements and Bilfinger offer, I think we've talked 24 about that quite a lot already. 25 Could we look, please, at a document PBH00003634. 94 1 We may have touched upon this issue. We see at the 2 top it's an email from yourself, Mr Reynolds, dated 3 23 January 2008, to Mr Gallagher. The subject is 4 finalisation of the Employer's Requirements. You then 5 refer to -- you say: 6 "Thank you for meeting with me today. As discussed, 7 I think there may be merit in taking a different 8 approach to the consolidation of a number of outstanding 9 matters concerning the Employer's Requirements, in order 10 to raise confidence that by Financial Close all parties 11 will have a common understanding of the scope definition 12 for the Infraco contract. I believe five key topics 13 need to be addressed." 14 You set them all out there concerning the various 15 alignment/misalignment. 16 Then in the paragraph beginning: 17 "PB has a wealth of experience ..." 18 Towards the end of that, you say: 19 "By delaying now for a short period and given that 20 the advance works contract is already in place, as 21 I understand it with the Infraco there is no reason why 22 the overall programme should suffer. Indeed, by 23 attending to these matters now we can also look to 24 reduce risk for all parties in the future." 25 What did you mean by that last sentence? 95 1 A. Well, this is where, if you look at the paragraph 2 immediately following the bullet points there: 3 "Given the special circumstances of the heritage 4 city environment ... it is important that the design 5 matches the expectations of the approval bodies." 6 So this is me going into writing with Willie, to say 7 whatever we come out of the Employer's Requirements 8 exercise with, it's essential that the main stakeholder, 9 the City of Edinburgh, is signed up to it. And having 10 got that buy-in from CEC, that's a key part in reducing 11 risk going forwards, that what's planned to be delivered 12 will actually be what's expected. 13 Q. I asked you about this before but didn't press you on 14 it. 15 Do you know whether as a matter of fact the Civils 16 Proposals and any changes to the Employer's Requirements 17 were put to the Council for their approval? 18 A. No. I don't. 19 Q. Do you mean that you don't know if it happened? 20 A. I don't know if it happened. By going to Willie with 21 this, I was raising it to the highest level with my 22 client. It wouldn't have been right for me to take it 23 any further or to question Willie after the event. 24 Q. Thank you. 25 Now, again, sticking with this issue of 96 1 misalignment, I said I'd finished with the weekly 2 reports, but there's one more we should look at, please. 3 It's PBH00034982. We can see the bottom right-hand 4 corner of the page again, please. It's dated 5 15 February 2008. 6 If we then please go to page 2, paragraph 2.1.1, 7 "Employer's Requirements", if we could zoom back out, 8 please. 9 I'll leave that report for now. We may come back to 10 it. 11 If we could also please then go on to a different 12 document. It's PBH00019148. 13 Now, here, Mr Reynolds, an email from yourself dated 14 27 March 2008 to various people in tie. So I think in 15 short here Parsons have considered the BBS Civils Offer 16 and you are sending tie a commentary on the offer; is 17 that correct? 18 A. That's correct. 19 Q. I'm not going to look at the commentary in detail, but 20 I'll give the reference number in passing so people can 21 see the comments that were made. It's PBH00019149. 22 Then please go back to your statement. The main 23 statement at page 148. 24 I think it's page 137. Paragraph 371, at the very 25 bottom, we have touched upon this already, I think, but: 97 1 "The response was, nevertheless, to change the design 2 to align with the BBS offer. That was what was 3 ultimately agreed." 4 Is that correct? 5 A. That's correct, yes. 6 Q. Then if we can please go to page 164. In paragraph 432, 7 about halfway down, you say: 8 "This is the instruction for us to carry out work 9 required to make our design align with TIE's revised 10 Employer's Requirements." 11 Just to pause there, that work, I think, was carried 12 out after contract close; is that correct? 13 A. That's correct. 14 Q. You say: 15 "This resulted in a instruction of roundly 16 GBP1 million to achieve that. This is not something 17 that is usually done so late in the day. Usually the 18 Employer's Requirements would hold and the offer would 19 be amended to align with them." 20 You then go on to refer to some minor revisions. 21 If I could then please go to another document on 22 a similar theme. PBH00018764. We see at the very top 23 of the page an email from yourself dated 30 April 2008, 24 to Chris Atkins and Jason Chandler, where you say: 25 "We need to include as part of the alignment pricing 98 1 for the potentially lengthy debate with BBS re already 2 delivered designs." 3 So on the face of it you appear to be anticipating 4 that any design change required post financial close to 5 align with the offer may be potentially lengthy; is that 6 fair to say? 7 A. Could you just take it to the start of that chain. 8 Q. Scroll to the bottom of the page, please, yes? 9 A. Just to make sure we're talking about the same thing, 10 because the title is to do with construction support. 11 If you could just -- 12 Q. The middle email as well may help. 13 We can see you're concerned in the second paragraph 14 of the middle email, there may be the expectation that 15 Parsons Brinckerhoff should rework at its cost designs 16 which have already been submitted? 17 A. Yes, that's right, because the construction support 18 activity was to do with ensuring that what was built was 19 as per design intent, and was to a required level of 20 quality. So if we then go back to the lead email on 21 that, if we're talking about construction support in 22 a -- in a climate of change, so we're looking at 23 revisions to the SDS design, which may impact those that 24 have already been delivered, then that would have 25 a knock-on effect to that construction support activity 99 1 which was looking at what was constructed against those 2 now changed designs. So that's what I'm talking about 3 there. 4 CHAIR OF THE INQUIRY: The middle email refers to your 5 concern or the expectation that Parsons Brinckerhoff 6 would rework at its cost designs which have already been 7 done. 8 A. That's right. So that we needed -- and this is 9 30 April. So we're still a couple of weeks ahead of 10 final signature. So that was a topic that had to be 11 closed out with Steven Bell, which we did. We resolved 12 that. 13 CHAIR OF THE INQUIRY: But before contract close. 14 A. Yes. 15 MR MACKENZIE: Just for the avoidance of doubt, the topic 16 that had to be closed out before contract close was to 17 ensure Parsons were paid for any work that would be 18 required after contract close to revise or rework the 19 design? 20 A. Paid for the -- alignment with the requirements, that's 21 right, yes. So we got the payment beforehand. That's 22 absolutely right. 23 Q. And if in short -- if there had been alignment between 24 the SDS design, the Employer's Requirements and the 25 Bilfinger offer before contract close, then there 100 1 wouldn't have been a need to spend GBP1 million to 2 correct that later? 3 A. No. There would have been a need to spend the money 4 beforehand, but yes, not later on. 5 Q. But if the misalignment hadn't been allowed to happen in 6 the first place, then it must follow that money wouldn't 7 be required to be spent to correct any misalignment? 8 A. Correct. 9 Q. And just in short, what was the cause of this 10 misalignment? 11 A. The cause of the misalignment was essentially the BBS 12 commercial offer taking a different approach to 13 delivering the scheme from what was there in the 14 Employer's Requirements. So in simple terms, it was 15 a non-compliance with the requirement. That then left 16 tie with two options, either to enforce compliance or to 17 change the requirements, which then had the knock-on to 18 change the design which is what happened, which then 19 resulted in the roundly 1 million additional work. 20 Q. If tie had said to Bilfinger: we're not going to change 21 the Employer's Requirements or our design, you will have 22 to change your proposals; then that's a sum of money 23 that tie wouldn't have had to spend? 24 A. That's right. Yes. 25 Q. Thank you. Now, moving on to financial close, we know 101 1 that took place on 14 and 15 May 2008. I would like 2 please to look at the SDS Novation Agreement. If we can 3 bring that up, please, it's CEC01370880. We haven't 4 looked at it before. So I'll take you to some of the 5 main clauses. It's dated 14 May 2008. If we can go to 6 page 7. 7 In clause 4.6 we see reference to tie having 8 received a report from SDS setting out the misalignments 9 between the deliverables completed prior to date of this 10 agreement and the Employer's Requirements, and tie has 11 issued initial instructions to SDS to address these 12 misalignments; et cetera. 13 Then, please, if I can go on to clause 4.7, we see 14 a reference here that: 15 "As soon as reasonably practicable, the Parties 16 shall commence and expeditiously conduct a series of 17 meetings to determine the development of the Infraco 18 Proposals and any consequential amendment to the 19 Deliverables (the "Development Workshops")." 20 I think by deliverables, that means essentially the 21 SDS design? 22 A. It does, yes. 23 Q. We see then reference to the matters to be determined at 24 the Development Workshops are set out in the report 25 annexed at Part C of Appendix Part 7, the Misalignment 102 1 Report, et cetera. 2 Then order of priority. We can see some of the 3 matters that are misaligned. We see 1, Roads and 4 associated drainage, et cetera, and vertical alignment 5 with the objective of minimising the extent of full 6 depth reconstruction, et cetera. And 2, we can see 7 structures value engineering, and 3, OLE Design. 4, 8 Trackform. 9 Over the page, we can see 5, Sub-station buildings, 10 and then after that: 11 "The following to be reviewed at the end of the 12 Development Workshop to identify any issues arising from 13 the above items." 14 I won't read out what is listed, but in short is 15 this essentially saying that changes to the five numbers 16 listed, roads, structures, value engineering, et cetera, 17 may have knock-on changes or impacts on these other 18 seven matters listed? 19 A. That's right. 20 Q. We can leave that, please, and go on again. Page 8, 21 clause 4.8. We can see this provides, at the very 22 bottom: 23 "For the avoidance of doubt, the Infraco and tie 24 agree that any amendment to the Deliverables completed 25 prior to the date of this Agreement as set out in this 103 1 report will be a Mandatory tie Change under the Infraco 2 Contract, and a Client Change under the SDS Agreement." 3 Is that simply a reference to any amendments to the 4 deliverables before 14 May 2008? 5 A. Correct. 6 Q. Then, please, at page 10, we see in clause 8.2 there's 7 a reference to: 8 "tie and SDS acknowledge that tie has paid SDS in 9 respect of its existing claims for prolongation ..." 10 I'm going to come back to consider the claims and 11 the payments made, but in short, was it a condition of 12 the SDS Novation Agreement that any outstanding claims 13 by SDS against tie would be settled? 14 A. Yes. That was a longstanding part of the Agreement. 15 Q. Thank you. 16 CHAIR OF THE INQUIRY: The provisions of Clause 4.8 that you 17 referred to, is that the change that you referred to 18 earlier to the original 4.8? 19 A. The change on -- 20 CHAIR OF THE INQUIRY: On -- 21 A. No. 22 MR MACKENZIE: I'll come to that, my Lord. 23 A. It's within that, but it wasn't that point that was 24 highlighted just then. 25 CHAIR OF THE INQUIRY: I understand. Counsel is going to 104 1 refer to that. 2 Okay. 3 MR MACKENZIE: Thank you. 4 Then go to clause 8.8, please. It's a question of 5 incentivisation payment. We see: 6 "tie shall pay to the SDS Provider the 7 Incentivisation Payment ..." 8 Which is earlier referred to as a payment of 9 GBP1 million: 10 "... 14 days after the provision of the last 11 required issued for Construction Drawing save that the 12 Incentivisation Payment shall be reduced by the sum of 13 GBP8,928.57 in respect of each occasion that the SDS 14 Provider does not achieve the provision of IFC 15 Drawings ..." 16 I think in short there was a GBP1 million 17 incentivisation pot, and each time one of the 18 outstanding deliverables was delivered on time, 19 a payment would be triggered, but equally, if a date was 20 missed, then a payment would not be received; is that 21 correct? 22 A. That's correct, and this was occasioned by the fact that 23 we were now going to implement the Novation Agreement in 24 a completely different set of circumstances from what 25 had originally been contemplated, and had we novated as 105 1 originally intended, all the IFC drawings would have 2 been complete and there on the shelf. The fact that 3 they weren't, introduced this significant additional 4 risk and that was countered by what we were trying to do 5 was get to a reasonable agreement of how to deal with 6 that, and this commercial framework was the solution. 7 Q. Thank you. Simply to note in passing, if we go to 8 page 14, please, we see it's headed "APPENDIX PART 1 9 SCHEDULE OF AMENDMENTS TO THE SDS AGREEMENT". If we 10 then please go to page 15, under "Design Delivery 11 Programme", it's stated to mean: 12 "The document in Appendix Part 2 to the Novation 13 Agreement as amended or updated from time to time ..." 14 So I think in short a new programme is put in place. 15 I think we have actually had a copy supplied to us. 16 We're missing Part 2 of the Appendix, and we are taking 17 steps to recover that, but I think it may be version 31 18 of the Design Programme; does that seem correct? 19 A. It's the regular monthly update which at this point was 20 version 31, yes, indeed. 21 Q. Thank you. 22 Now, just in passing, I give a reference to 23 version 31, without going to it. It's CEC01311101. 24 Sticking with this document, please, page 20. We 25 can see under 4.8 -- I think this is a reference back to 106 1 4.8 of the SDS Contract dated September 2005 we looked 2 at earlier. We can see various amendments are set out. 3 And in fact there are various amendments to Clauses 4 4 and 5 of the original agreement set out in the SDS 5 Novation Agreement at these pages 20 to 22. I'm not 6 going to go to them in the interests of time, but 7 I think in short the change was made from there being an 8 absolute duty on the part of SDS to secure approvals and 9 consents, to move towards something which was 10 reasonable. 11 A. This was absolutely -- if I achieve nothing else in all 12 the time I was in Edinburgh, this was vitally important 13 from our point of view in turning what was applied in an 14 unreasonable fashion into a clause which was far more 15 reasonable from everybody's point of view. 16 Q. Thank you. Could we move on, please, to page 85. This 17 simply sets out the status of the design deliverables, 18 et cetera, at 13 May 2008. If we blow up the various 19 boxes, we can see 13 May, the outstanding deliverables, 20 and then we read for ourselves the outstanding prior 21 approvals and technical approvals. 22 I should just pause to ask, does this relate just to 23 phase 1a or did it also include phase 1b? 24 A. It will, in the totality, because the total number of 25 packages from a detailed design point of view would have 107 1 included 1b; come this time there wouldn't have been any 2 prior approvals going forward. It's possible there 3 would have been some prior approvals already achieved 4 for phase 1b before it was suspended, but ... 5 Q. So just for clarity, in terms of the total -- total 6 number of packages, 329, did that include both phase 1a 7 and 1b? 8 A. Yes. 9 Q. And of the 33 remaining to be delivered, was that all 10 phase 1a or would that have been some in 1b? 11 A. There are a number of deliverables which come right at 12 the end, which are so-called system-wide packages. Now, 13 in the circumstances that we were then working in, 14 phase 1b would have been taken out of that system-wide 15 assessment. So in effect they would have been phase 1a 16 only. 17 Q. Thank you. Similarly, in relation to the prior 18 approvals and technical approvals, of those that 19 remained to be approved, were they only phase 1a? 20 A. Yes, they were. 21 Q. Also the question of utility design, was that included 22 within the figures we see on this page or is that 23 something considered separately? 24 A. That's a very good question. I can't remember. I'm 25 sorry. It should be a simple check. You can see from 108 1 the titles on the package register. They may have been 2 in those total number of packages. 3 Q. Thank you. If we then please go to page 53. 4 This is "APPENDIX PART 2, CONSENTS PROGRAMME AND 5 DESIGN DELIVERY PROGRAMME", but it sets out "PART A 6 PROGRAMME ASSUMPTIONS AND CONSTRAINTS". 7 If we can go to page 55, please. I just wondered in 8 short whether the -- this contents or index page helps 9 us in identifying the design deliverables and items 10 which were outstanding. Whether it's high level listing 11 of the outstanding matters. Just take a minute to have 12 a look at that, Mr Reynolds. 13 A. No, that's absolutely right. It was Jason Chandler who 14 pulled this document together, and I know you will be 15 asking him questions. But yes, you are absolutely right 16 in that assessment. 17 Q. It is a high level indication of the outstanding 18 matters. 19 A. That's right. 20 Q. For completeness, look at the next page as well. 21 I think, without taking up too much time, it perhaps 22 includes things like structures, system-wide 23 deliverables, electrical systems, OLE and tramstops? 24 A. Yes, correct. 25 Q. Anything else? 109 1 A. Earth -- well, as it says there in section 6, general 2 comments on earthworks, drainage. But yes, the 3 different categories of design deliverable which is as 4 you said. 5 Q. One final page for just now in this document. Page 97, 6 please. This is a point of clarification. If we turn 7 that round, thank you. 8 This is part of Appendix 4, which I think set out 9 the outstanding design and deliverables status, and we 10 can see a reference to capability split. I wasn't sure 11 what this table showed. We can see, for example, 12 a column for BBS and a column for SDS. Does it show 13 which party is responsible for these works or what? 14 A. This is looking forward, and this is trying to address 15 the fact that the SDS design was incomplete, but it was 16 also looking at the optimum way to apportion effort to 17 conclude or to complete the Infraco design. So you are 18 looking at an overall design requirement, part of which 19 would be done by SDS, part of which would be done by 20 BBS, but taking advantage of the current circumstances, 21 looking at who is best equipped to deal with those 22 remaining elements. So where do the competences lie now 23 in the broader organisation. 24 So it's not just SDS anymore. It's SDS and BBS, who 25 has got the best man for the job, as it were, looking 110 1 forward. 2 Q. This table runs to some 35 pages? 3 A. That's right. 4 Q. Does it show only outstanding matters or does it also 5 include matters which have already been done? 6 A. It's -- it's trying to present an overall view. So to 7 that extent it would look at matters already -- but it 8 is a capability split so-called. So as I say, it's 9 looking at -- on that page, who has got the competence 10 to be dealing with a Civils bridge design. Well, it's 11 SDS. You will find other examples in there of where 12 it's agreed BBS would have the greater capability. 13 So as I say, it's looking forward at the split of 14 works, but based on a competence framework. 15 Q. Thank you. 16 Another matter arising at financial close. If we 17 can go, please, back to your statement to page 170? 18 CHAIR OF THE INQUIRY: Before doing that, can we stick with 19 this document, please, and go back to page 20. 20 Clause 4.8 is where the original clause 4.8 is 21 amended, and you say that that was the biggest issue 22 that you were anxious -- 23 A. From my point of view, yes. 24 CHAIR OF THE INQUIRY: -- to sort. 25 This paragraph -- in the Novation Agreement the 111 1 actual Clause 4.8 between you and tie, can you remember 2 where that is, Mr -- 3 MR MACKENZIE: Yes, my Lord. That is page 8. 4 CHAIR OF THE INQUIRY: Go back to page 8 then. 5 Again -- yes, it's 4.8 of that. 6 Now, can I just understand what is intended here. 7 At the bottom it says: 8 "For the avoidance of doubt, the Infraco and tie 9 agree that any amendment to the deliverables completed 10 prior to the date of this agreement as set out in this 11 report will be a mandatory tie change under the Infraco 12 contract, and a client change under the SDS Agreement." 13 Did that mean that where there had been change due 14 to the planning authority seeking change, that you would 15 now get paid for it? 16 A. No. I see what you're saying. It wasn't retrospective 17 looking back at events that had already occurred. It 18 was looking at changes to design packages which had 19 already been delivered. So if a package was there 20 having been delivered, and as a result of the 21 development workshops that package had to be changed, 22 that would be the mandatory tie change. 23 If in somebody's opinion approval had been 24 unreasonably withheld at some point in the past, this 25 didn't confer the right to go back and review that 112 1 decision. 2 CHAIR OF THE INQUIRY: Thank you. 3 MR MACKENZIE: Thank you. Yes, please. So your statement, 4 if I may, at page 170. We can take this point 5 reasonably shortly. 6 In paragraph 454 this concerns the issue of in 7 Schedule Part 4 of the Infraco contract, the Base Date 8 Design Information was described with reference to 9 Appendix H, but when one went to Appendix H there wasn't 10 a list of drawings. And simply, I think, one sentence 11 stating it was all drawings available to Infraco up to 12 and including 25 November 2007. 13 You go on at the bottom of this page to say this is 14 a little bit sloppy, et cetera. 15 Over the page, please, on paragraph 455, I think in 16 short, Mr Reynolds, your position is that it would have 17 been possible from Parsons' perspective to have 18 identified all of the design drawings and information as 19 at 25 November 2007 by looking at Parsons' records; is 20 that correct? 21 A. That's correct, yes. 22 Q. So it would have been possible to do that? 23 A. Yes. 24 Q. Now, I think we have perhaps heard evidence that the 25 design information delivered to the consortium was 113 1 contained on a number of CDs. It's possible that's 2 where the problem arose, I don't know. But certainly 3 you're quite clear from your point of view that if tie 4 had come back to you, for example at the time, and 5 said: we would like to identify by a list of all the 6 drawings and design information as at 25 November 2007, 7 can you provide us with that; could you have done that? 8 A. Yes, we could. 9 Q. Thank you. I would now like to look at events after 10 financial close. We remember that I think you came in 11 part time, about two days a week roughly in the 12 Edinburgh project? 13 A. Thank you for pointing that out. That's absolutely 14 right. 15 Q. The question in short is: why did it take so long to 16 complete design and obtain all approvals and consents 17 after financial close? 18 A. I'm not sure there's a simple answer to that. 19 Some of them were programmed to be completed 20 several -- certainly several weeks, probably several 21 months after, because of the complexity of the 22 structures designs, and as I say, some of those 23 structures designs will be dependent on what was 24 concluded from the development workshops. So I suppose 25 one question is how quickly did the development 114 1 workshops convene and conclude, and sitting here now, I 2 am not sure what the answer to that is, but there was 3 a dependence on the outcome from those workshops. 4 There was then this issue to resolve the gap caused 5 by the systems engineering aspects being removed and the 6 need to work out with BBS how that gap would be filled. 7 Were there continuing issues with approvals? I'm 8 not sure. I think you would have to ask BBS on that, or 9 even BSC as it became. 10 Q. Yes, and I will cover some of these matters with 11 Mr Chandler tomorrow, given his continued full-time 12 involvement. 13 A. And that as well, yes. 14 Q. Can I put two documents to you, please, in this regard. 15 The first is CEC01149381. The top of the page is an 16 email dated 30 October 2008 you sent to Mr McEwan on 17 project issues, and you say: 18 "Jim, it was good to talk earlier. I don't have too 19 many project issues to highlight, but each of them is 20 significant in my view." 21 A reference to absence of a Siemens trackform 22 design, absence of a Siemens OLE design: 23 "Both of these in the context of a supposed 24 design freeze at the end of November 2008." 25 Is that perhaps a mistaken reference to 2007? 115 1 A. No, that would be 2008 because again you come back to -- 2 just looking at these two examples there, they were not 3 an SDS responsibility. They were a Siemens 4 responsibility. So you're looking at design post- 5 Infraco contract award, and it was November 2008 that 6 that composite Infraco SDS design was supposed to have 7 been frozen. 8 Q. I see. So that's in terms of the design programme at 9 the time, and there was some -- 10 A. This was now in terms of the Infraco programme as 11 incorporating the SDS design programme, but also 12 including the Infraco design obligations. 13 Q. So just to explore this a little further, does that 14 suggest that at financial close and SDS Novation in 15 May 2008, it was intended that all outstanding design 16 matters would have been completed by the end of 17 November 2008? 18 A. At -- the original intended SDS design should have been 19 complete pre-novation. It wasn't. There would have 20 been then the development workshops and the design 21 freeze date wouldn't have been defined until those 22 development workshops had been concluded. 23 As regards the Infraco design tasks, I don't know 24 what date was programmed for those, but certainly the 25 key elements were Siemens trackform and Siemens OLE. So 116 1 it looks from this as though November 2008 had been 2 agreed. At what point that date was agreed, I can't 3 recall. 4 Q. I understand. So the reference to the design freeze at 5 the end of November 2008 is in reference to the 6 consortium designs? 7 A. Correct, yes. 8 Q. Then there's a reference to a lack of an overall 9 construction programme, et cetera. And low volume of 10 activity on BSC design development, with several 11 instances of previously granted approval conditional 12 upon ultimate design completion by BSC. What is that 13 a reference to? 14 A. That's where you'll get a provisional approval pending 15 final endorsement once the whole thing has been done, 16 and because as you move forward beyond Infraco contract 17 award, there would have been certain things that 18 required a BSC input to close out the product 19 completely. 20 Q. Thank you. Another document, please. Go back to 21 May 2009. The document is PBH00003626. We can see in 22 the top left-hand corner, the date is 6 May, and it's 23 a letter from yourself, Mr Reynolds, to Martin Foerder 24 at Bilfinger Berger. 25 It's headed "Project Management Prolongation", and 117 1 you go on to say: 2 "The SDS Contract Novation Agreement ... was signed 3 on the basis of Version 31 of the Design Delivery 4 Programme. Appendix Part 4 to the Novation Agreement 5 presented the current status of each of the phases of 6 the SDS Contract. The status of Phase III, the Detailed 7 Design Phase, was described with reference to the 8 schedules for submission of the Prior Approvals, 9 Technical Approvals, and Detailed Design Packages. The 10 final Detailed Design Package was programmed for 11 submission on 20 January 2009. The Agreement also 12 focused on the submission of IFC Drawing packages, with 13 the date for submission of the final package being 14 21 January 2009. 15 Several Change Instructions have been issued under 16 the SDS Contract in the period since Novation with the 17 result that completion of Phase III has been delayed." 18 To pause there, I think phase 3 is a reference to 19 the outstanding design deliverables under the SDS 20 contract. Is that right? 21 A. Yes, that's right. That refers back to the novation 22 agreement, from memory. Yes. 23 Q. Then going on: 24 "As a result of this delay, PB has had to retain 25 project management staff ..." 118 1 Then the next paragraph: 2 "It is now clear that the scope of work to be 3 provided under the novated SDS Contract is significantly 4 different from that envisaged at Novation. Changes are 5 still being instructed and it is currently not possible 6 to define an end date for Phase III." 7 To pause there, and just for the avoidance of doubt, 8 we have seen under the SDS Novation Agreement that 9 I think 296 out of 329 deliverables had been delivered. 10 So there was a relatively small proportion outstanding 11 at that stage. 12 But in this letter you are saying that it is 13 currently not possible to define an end date for 14 phase 3, and in these circumstances, it is proposed that 15 the SDS management staff impacted by the delay to 16 phase 3 completion should be charged on a certain basis. 17 So in that paragraph at the beginning where you say: 18 "It is now clear that scope of works ... provided 19 under the novated contract is significantly different 20 from that ... Novation ..." 21 What is that a reference to? 22 A. This -- well, this would in part be changes occurring as 23 a result of the design development workshops. And that 24 is reflected in the need to maintain our management team 25 beyond. 119 1 I think from memory what would have happened, we 2 would have been paid the design elements of those 3 packages, but the -- you would wait until you'd got 4 a overall view of the overall impact on programme, 5 because the management team has got to be there until 6 the end. The design packages can be quantified and 7 valued in their own right, but the management team above 8 the prolong programme is calculated separately, and 9 that's what this is doing, looking at the management. 10 Q. Thank you. 11 Now, standing back, we know that an important and 12 fundamental dispute or disputes arose between the 13 consortium on the one hand and tie on the other. 14 Did that dispute have any effect on the completion 15 of design after contract close? 16 A. I think in all honesty, I think you would have to ask 17 BSC because you come back to the point, by this stage, 18 we were just a part of the design activities, and at 19 some point the balance of design obligation could well 20 have been greater on BSC than it was on SDS at some 21 point in the programme. 22 Q. There is a suggestion in a tie document called a Design 23 Audit Report in April 2010 that there was little 24 evidence that Infraco had properly managed the design 25 process in a timely manner. Do you have any views on 120 1 that suggestion? 2 A. Again, that would cover the Infraco design obligation as 3 distinct from the SDS obligation. So no, I'm afraid 4 I don't. 5 Q. Is it the case that after novation, SDS were just 6 getting on with things in a similar fashion to before 7 novation, or did anything change? 8 A. It was under the terms of the Novation Agreement, and 9 that was what was spelt out, the remaining packages, the 10 remaining approval. So we continued with the obligation 11 working for BBS under the Novated Agreement. 12 Picking up on that point earlier, there were certain 13 tasks which were required to be delivered by BSC where 14 it made sense to involve SDS or Parsons Brinckerhoff in 15 assisting in that design have delivery. But that was 16 over and above anything that was in the original SDS 17 Agreement. 18 So the SDS Agreement was the provision of a design 19 by a design provider. As we started to work more 20 closely with BSC, you could argue that role was like 21 a design build designer, but the two were separate. But 22 obviously interlinked. 23 Q. Thank you. Another document to go to, please, is 24 TRI00000011. This is an agreement between Bilfinger and 25 Parsons in February 2010. 121 1 A. Yes. 2 Q. If we can go to the recital at letter A, please, about 3 halfway down. 4 CHAIR OF THE INQUIRY: Mr Mackenzie, are you going to be 5 some time with this document? 6 MR MACKENZIE: No. Thank you, my Lord. 7 We can see under recital A it states: 8 "BBUK requires the SDS Provider to provide 9 some additional design services and resource in 10 connection with the completion of the design for the 11 Edinburgh Tram Network in order to comply with Infraco's 12 duty to mitigate under the Infraco Contract and SDS have 13 agreed to provide those services." 14 Perhaps then zoom back out. I think you did sign 15 this agreement, go to page 4, please, on behalf of 16 Parsons. 17 A. Yes. 18 Q. Are you able to just briefly give an overview of what 19 this -- the purpose of this Agreement is and what it 20 did? 21 A. This -- this is related to what I was just talking 22 about, that you had the SDS -- the supply of the design 23 under the SDS Agreement, that was ringfenced, that was 24 a product. 25 Then working with Bilfinger Berger Siemens, BSC 122 1 subsequently, partly as a consequence of this systems 2 engineering scope gap, there were aspects of the whole 3 programme which were the Infraco responsibility to 4 design and deliver, where it made sense to employ 5 Parsons Brinckerhoff to assist in that design 6 completion. 7 So this is where we took on what we called the 8 Civils Design Completion Scope, which was over and above 9 anything from the SDS Agreement, but was the optimum way 10 to deliver to satisfy -- for BSC to be able to satisfy 11 their obligations under the Infraco contract. 12 So that's what this was about. 13 Q. Is this to -- what does this Agreement do? 14 A. This Agreement was for us to provide additional design 15 services direct to BSC, to deliver scope that was 16 outwith what we've been contracted to deliver under the 17 SDS Agreement. 18 MR MACKENZIE: Thank you. My Lord, this may be a suitable 19 point. 20 CHAIR OF THE INQUIRY: We will adjourn for lunch now, 21 Mr Reynolds. We will adjourn again at 2 o'clock. 22 A. Thank you. 23 (1.00 pm) 24 (The short adjournment) 25 (2.00 pm) 123 1 CHAIR OF THE INQUIRY: Good afternoon, Mr Reynolds. You're 2 still under oath. 3 A. Thank you. 4 MR MACKENZIE: Thank you, my Lord. Mr Reynolds, were you 5 still involved in the project in 2011? 6 A. Very peripherally. I did attend at Mar Hall at the 7 conclusion of those events to hear the outcome. 8 I wasn't involved in the discussions. So -- 9 and I maintained an interest working with Martin Foerder 10 occasionally on commercial issues from the project 11 delivery. But peripherally. 12 Q. Could we go, please, to a document CEC02083973. I don't 13 think you have seen this before. This document is 14 headed "Report on Progress since Completion of Heads of 15 Terms to 8 April 2011". We can see it's prepared by 16 Colin Smith of HG Consulting, and been reviewed by 17 Mr Foerder. 18 If we can go, please, to page 118, we can see it 19 contains an email dated 5 April 2011 from Andy Conway of 20 the Council. It's giving an update on approvals. If we 21 then scroll down and look at the table, we can see that 22 the open technical approval comments have reduced from 23 2,782 on 24 March 2011 down to 85 by 5 April 2011. 24 In short, do you know why such rapid progress was 25 able to be made in clearing these items over that short 124 1 period? 2 A. I don't have any knowledge of the detail. 3 Jason Chandler would, I know you are seeing. As I said 4 before, I know there was a distinct change in approach 5 on CEC's behalf, but which rippled through the rest of 6 the participants. So subsequent to the Mar Hall 7 Agreement, there was a different approach to clearing 8 outstanding issues, and I think that reflects the 9 success of that. The detail, no, I wasn't involved. 10 Q. Thank you. It has been suggested by another witness 11 that it was a tactical decision by the consortium not to 12 close these matters out while parties were still in 13 dispute, but that once an agreement had been reached at 14 Mar Hall, the consortium were able to resolve these 15 matters quickly and easily. 16 Do you have any comments or views on that 17 suggestion? 18 A. That's actually the first time I have heard that 19 assertion. So no, I'm sorry. 20 Q. Thank you. I would like now to put that to one side and 21 move on to two final matters. One is a longer matter, 22 another is shorter. 23 The longer matter is the question of payments made 24 to Parsons Brinckerhoff, including claims. I would like 25 to start, please, with a claims document which is number 125 1 CEC02085580. We can see the document is entitled "SDS 2 CONTRACT CLAIM FOR ADDITIONAL COSTS FOR ADDITIONAL 3 MANAGEMENT AND SUPERVISION SERVICES" in the period 4 3 July 2006 to 9 April 2007, and the date is 5 31 May 2007. 6 Did you have any involvement in the preparation of 7 this document? 8 A. Yes, I was responsible for preparing this document, 9 obviously with support from the team, but it was me who 10 finalised it and then negotiated with the client, 11 principally Geoff Gilbert, in those days. 12 Q. Thank you. Could we then please look at page 4 of the 13 document. We can see under paragraph 1.1, "Overview", 14 a reference to: 15 "During September 2005 PB entered into 16 a Contract with tie for a fixed price of [just over] 23 17 and a half million pounds based on the services set out 18 in Schedule 1 of the Contract." 19 It then goes on: 20 "In fulfilling its obligations PB has been 21 required to provide additional services for which 22 PB is entitled to be paid." 23 These additional services are then set out in this 24 document. We can see in summary the first bullet point: 25 "PB claims an extension of time of 40 weeks at 126 1 9 April 2007." 2 Also, PB claims additional payment of just over 3 GBP2.2 million to the same date. 4 A. Yes. 5 Q. It's then beneath that said that: 6 "Completion of the Detailed Design Phase remains 7 dependent upon the resolution of a number of Critical 8 issues ..." 9 There may be a further claim. 10 What I would then like to do is simply read out the 11 claim headings without going into the detail. 12 We can see 1.2 refers to changes due to Charrettes 13 with CEC/tie and TEL. 14 If we could then please go over the page, we see 15 a claim in relation to changes due to additional third 16 party agreements, and also changes required by tie. 17 Over the page, please, consents, changes due to 18 EARL. And tie's failure to accept and review the 19 preliminary design in a timely manner. 20 1.8, Changes due to Third Party Developers' Emerging 21 Designs. And failure to update the master project 22 programme. We discussed that earlier this morning, 23 perhaps we should blow that up to look at it. 24 We see: 25 "tie is obliged to issue the Master Project 127 1 Programme which shows the programming interfaces for all 2 Tram Network contracts." 3 Is that what we discussed this morning? 4 A. It is indeed, yes. 5 Q. "PB has only been issued with one version of the 6 Master Programme, (dated 19 February 2007), and this has 7 impacted resource planning through the resulting lack of 8 clarity on project overall requirements." 9 Is what is set out there consistent with your 10 evidence this morning? 11 A. Correct, yes. 12 Q. Thank you. 13 Now, the rest of the document simply sets out these 14 different heads in more detail. I'll simply take that 15 as read, given our limited time. 16 That document can be put to one side, please, and 17 then look at another document which is PBH00025674. We 18 can see halfway down the page this, is an email from 19 Greg Ayres dated 15 June 2007 to yourself, Mr Reynolds. 20 Then over the page, please, page 2, we can see under 21 5, CLAIM, I think this must be a reference to the claim 22 document we have just looked at; is that correct? 23 A. That's correct. 24 Q. I think this is following a meeting between Mr Ayres and 25 tie. Mr Ayres states: 128 1 "the prolongation was acknowledged as well presented 2 and worthy of consideration. Gilbert is taking legal 3 advice. We were asked not to run the FINAL through 4 document control until after the Audit Scotland report 5 is submitted to Cabinet mid next week." 6 To pause there, do you know why that request was 7 made? 8 A. Not directly. Clearly the Audit Scotland audit was 9 going on. I suspect tie wanted to have that concluded 10 before embarking on something which may have resulted in 11 that being revisited in some way. But that's an 12 interpretation rather than a definite fact. 13 Q. It may be suggested that that request by tie was an 14 attempt to conceal the claim from Audit Scotland while 15 they were carrying out their review; is that a matter 16 you would have any knowledge of? 17 A. That would -- that would be one possible interpretation. 18 You could, I suppose, also view it as not being of 19 sufficiently high priority to divert attention away from 20 the priorities in the Audit Scotland review, which was 21 looking across the board on the whole project. It may 22 have been viewed that a design claim was less important 23 than the other aspects of that document. 24 Q. So it is a claim for over GBP2 million? 25 A. Yes, it is. It's a significant figure and, as with all 129 1 claims, it also says something about the relationships 2 on the project, but, again, I wasn't involved in the 3 decision not to -- to do what's said there, obviously. 4 Q. I understand. 5 Next document, please, is PBH00003596. This updates 6 us on the claim. 7 We can see this is a letter dated 7 August. I think 8 it's from yourself, Mr Reynolds, to Geoff Gilbert. We 9 see the first paragraph: 10 "Thank you for arranging to meet with PB on 11 Wednesday 25 July to discuss the commercial issues ..." 12 Then three main paragraphs down: 13 "Enclosed with this covering letter is an attachment 14 which has been structured to provide a record of the 15 discussions held at the meeting ... and to set out our 16 understanding of tie's current position." 17 If we go then to page 3, please, it's just to note 18 the heading at the top. This is the attachment. We see 19 the very top, it states: 20 "Record of Discussions at the tie/PB meeting held on 21 25 July 2007. Without Prejudice." 22 On page 4, please, under paragraph 4, "Review of the 23 tie Response to the Heads of Claim", under 24 paragraph 4.1, overview, states: 25 "We note that: tie sees merit in the claim arising 130 1 from delays in reviewing the Preliminary Design." 2 And: 3 "tie sees merit in the claim arising from the impact 4 of the Critical Issues." 5 Then: 6 "We note that tie considers items 5, 6, 7 and 8 from 7 the list above to be grouped under the general heading 8 of Critical Issues." 9 If we could go back a page, please, to see that 10 list, we see Heads of Claim towards the bottom of the 11 page. I think in short, from what we have just looked 12 at, tie had indicated they saw merit in items 3 to 8 13 inclusive on the list; is that correct? 14 A. That's correct. 15 Q. Thank you. 16 That's that. Then on to page 5, please. We see 17 under paragraph 5, "Review of Counter Arguments tabled 18 by tie". So what appears to have happened is that tie 19 made certain counter arguments; is that correct? 20 A. Yes. 21 Q. Over the page, please, in fact page 7, paragraph 5.3. 22 One of these counter-arguments was in relation to late 23 provision of survey information and ground investigation 24 data. You note, this document had noted tie's position 25 was: 131 1 "Survey Information has been provided late and the 2 provision of Ground Investigation data has been 3 particularly poor, to the extent that tie has been 4 unable to transfer ground risk to the Infraco 5 contractor." 6 Then Parsons' position is: 7 "For the purposes of this settlement dialogue, PB 8 acknowledges that there may be merit in the tie 9 counter argument. However, PB is not presently in 10 a position to assess tie's position concerning transfer 11 of ground risk." 12 So in short, had survey information been provided 13 late, and/or was the provision of ground investigation 14 data particularly poor? 15 A. It's -- provided late against the original programme, 16 yes, but various things had slipped. So was it provided 17 late and was that a significant problem in itself, no, 18 I don't believe so. 19 Particularly poor, that's a little bit of an emotive 20 term. Was it absolutely perfect? Maybe not. It was 21 then a matter of dealing (a) with the negotiations of 22 claim against that item and the original claim sum was 23 reduced, partly in consequence, you could argue, but 24 then looking forward, right, how are we going to move 25 forward with transferring ground risk? And inevitably 132 1 we didn't want to get involved in a lot of to and fro 2 with tie, but there were reasons why all the surveying 3 ground investigation work couldn't be carried out as 4 originally envisaged due to constraints imposed on 5 access, as I understand it. I wasn't there in 2006, but 6 that's what I was told. 7 Q. In respect of the ground investigation data, I think you 8 said that there were respects in which it may have been 9 lacking. Can you explain that a little? 10 A. No, because I wasn't -- I wasn't intimately involved 11 with that ground investigation data. What I'm saying is 12 if tie's view was it had been poor, it wouldn't have 13 been all bad. Okay, perhaps it wasn't all to the 14 required standard, but it was a matter of dealing with 15 the gaps, as it were, which we had to do jointly going 16 forward. 17 So beyond that point it didn't have a significant 18 impact, and as I say, it was settled as part of the 19 overall claim settlement and then we moved forward. 20 CHAIR OF THE INQUIRY: Is this data that was required for 21 the Civils? 22 A. Ultimately it would have been, yes. 23 CHAIR OF THE INQUIRY: Did it include data that would have 24 been required by the MUDFA contract? 25 A. I can't answer that, I'm sorry. Alan Dolan will be able 133 1 to answer that one directly. 2 MR MACKENZIE: Just to finish this point, if there had been 3 any gaps or deficiencies in the survey information or 4 ground investigation data, this is August 2007. So 5 there was still time to plug or fill or remedy any 6 matters in that regard before entry into the Infraco 7 contract; is that correct? 8 A. Precisely my point there about taking that further about 9 not presently in a position to assess tie's position 10 concerning transfer of ground risk, but we will help in 11 the current circumstances in making sure that's 12 addressed, exactly, as you say. 13 Q. Thank you. I should also just for completeness look at 14 the next point on this page, please, the next 15 counter argument by tie is 5.4, headed "Inadequate 16 performance on project risk management". I think this 17 comes back to the services to be provided by Parsons 18 under Schedule 1 of the SDS contract in 2005. We can 19 see tie's position at this point was that: 20 "Performance on project risk management has been 21 poor. This is a duty which was allocated to PB but 22 which has not been delivered effectively in tie's view." 23 Over the page, please, Parsons had reviewed and 24 responded as follows: 25 "For the purposes of this settlement dialogue, 134 1 PB acknowledges that there may be some merit in the 2 tie counter argument. However, it is clear that 3 incomplete control of the Master Programme by tie has 4 also impacted adversely on the effective implementation 5 of the risk management processes defined by the 6 Contract." 7 Starting with the question of Parsons' performance 8 on project risk management, what was that a reference 9 to, and had it been poor? 10 A. I think this is another area where there's a joint 11 responsibility, and PB had an obligation to identify 12 risk heads, if you like. So where risk may arise. 13 But it was then tie's obligation to take account of 14 those potential areas of risk, and adjust or manage 15 within the master programme as appropriate. 16 So it certainly wasn't the case that it was wholly 17 down to PB, but again, for the purposes of reaching 18 a settlement, okay, perhaps we weren't perfect, but it's 19 a shared responsibility, and the -- having identified 20 areas of risk, which I would argue that we did, it's 21 then, well, what are you going to do with the programme 22 to take account of those, mitigate them, do something 23 else? That was a tie responsibility. 24 Q. Thank you. The next document I think shows us the 25 settlement reached in this claim. If we can go please 135 1 to PBH00036744. The second email on the page is from 2 yourself, Mr Reynolds, dated 6 September 2007, to 3 Geoff Gilbert, without prejudice. The first paragraph 4 says: 5 "I am pleased to advise that PB is in general 6 agreement with the principles for settlement as set out 7 in your email of 24 August." 8 If we can then scroll down the bottom of the page to 9 look at that, please, we can see the bottom of the page, 10 an email from Mr Gilbert dated 24 August 2007 to 11 yourself. We see it's headed "SDS Prolongation and 12 Disruption Claim". 13 Over the page, please, we see under paragraph 1, 14 "Basis of Claim Settlement": 15 "The agreed payment in the sum of GBP2.5 million is 16 to be in full and final settlement of all issues raised 17 in your claim letters dated ..." 18 We can see it's up until 18 August 2007; is that 19 correct? 20 A. That's correct. 21 Q. Could you also please check under paragraph 3, it says 22 "Payment Of The Settlement Sum. It appears to be 23 intended it would be paid in four tranches or 24 instalments. Is that what happened? 25 A. Yes, that is what happened. 136 1 Q. Thank you. You can leave that document. 2 I should also have asked, in agreeing the figure of 3 GBP2.5 million, to what extent, if at all, did that 4 figure take into account any counterclaim that tie may 5 have had against Parsons? 6 A. That's again a very interesting question. Early on in 7 the negotiation process, it must have been shortly after 8 the claim was submitted, there was a suggestion from tie 9 relayed by Geoff Gilbert that tie may well have 10 counterclaims against PB which could in fact be greater 11 than the claim being submitted by PB. 12 In the event and I think this had to do partly with 13 new staff coming into tie, different perspective, people 14 like Tony Glazebrook, David Crawley, in the event when 15 we got to August/September, the claim was settled and 16 there were no counterclaims articulated by tie. 17 Q. Remember we saw reference to tie's counter-arguments in 18 relation to ground investigation data? 19 A. Mm-hm. 20 Q. And the other matter. I just wonder, in the settlement 21 at 2.5 million, to what extent, if at all, did 22 settlement of that amount take into account even any 23 counter-arguments that tie may have had? 24 A. The settlement certainly took into account 25 counter-arguments. I think from memory, the initial 137 1 claim, when you pull it in all together and quantified 2 it, was approaching 4 million. Now, you are not going 3 to be expecting 4 million. There are certain things 4 that you've got to take off anyway, but certainly the 5 2.5 sum in settlement was significantly less than the 6 mathematical calculation. That took account of those 7 counter-arguments. 8 Q. Thank you. We have also heard evidence from 9 Damian Sharp, who I think arrived in tie in 10 October 2007. I think he was involved in then settling 11 a further claim, figures of either GBP1 million or 12 GBP800,000. Do you have any recollection of that 13 matter? 14 A. There were some supplementary claims as things went 15 further into delay. So yes, there were some of the sums 16 claimed and settled, but the foundation, if you like, 17 the framework for those claims was really set with that 18 April or May 2007 document as to how to go about the 19 negotiations. 20 Q. Thank you. The next document, please, is CEC01294745. 21 CEC01294745. 22 We can see this is a letter, in the top right-hand 23 corner, dated 8 May 2008 from Greg Ayres to 24 Willie Gallagher. We can see in the first three 25 paragraphs, this is intimating a further claim 138 1 essentially. 2 Paragraph 1 states: 3 "Dear Willie, I understand that the May 2008 target 4 date for award of the Infraco Contract has not been 5 achieved. According to my records, this was the sixth 6 target date since 28 January 2008. As you are aware, we 7 have maintained the Parsons management team strength in 8 Edinburgh ... 9 I would like to draw to your attention the 10 interruption which has occurred ..." 11 In the next paragraph: 12 "As a consequence, PB has incurred additional costs 13 to date as follows." 14 Firstly, management time and expenses of just under 15 GBP40,000 a week. 16 After that, costs of inefficient working of the 17 design teams in excess of GBP1.5 million. I think in 18 short, that's a further claim being intimated; is that 19 correct? 20 A. Yes, indeed. 21 Q. Was this further claim resolved? 22 A. Yes, it was. This was a difficult period, because the 23 reality was we'd been looking to achieve novation long 24 before this point, and to be honest with you, I'd been 25 trying to maintain our position without having to put 139 1 any additional claims in, but we got to the point where, 2 as Greg describes, we had to get recognition of the 3 position. 4 Q. Thank you. The next document, please, is CEC01295126. 5 We can see at the top, this is an email from 6 Dennis Murray in tie. So just before financial close. 7 The email is dated 13 May 2008, to yourself, 8 Mr Reynolds. Mr Murray states: 9 "I attach a copy of the Account status at Novation 10 as discussed and agreed yesterday." 11 Was that right, was there a discussion and agreement 12 reached on these matters at that time? 13 A. Yes, this was putting together to satisfy the terms and 14 conditions of the Novation Agreement that a final 15 account had to be prepared which could be signed off. 16 Then all payments had been made and everyone was able to 17 sign off. 18 Q. Thank you. We will come shortly to look at the table of 19 figures in the actual SDS Novation Agreement. But just 20 sticking with this email just now, we can see the amount 21 due at novation is a gross certified amount less 22 previous payments. Construction support and consents 23 support are included as provisional sums as discussed. 24 We will go back there in a second. 25 "Incentivisation is not an Infraco amount and will 140 1 be dealt with by tie direct." 2 Is that a reference to the GBP1 million 3 incentivisation pot? 4 A. It is indeed, yes. 5 Q. Thank you. Over to the other document, the attachment, 6 which is CEC01295127. 7 What I would like, Mr Reynolds, if I may is to ask 8 for your help in trying to understand what some of these 9 figures relate to. 10 So if we start, we can see three main columns, C is 11 anticipated final account. So that must be a projection 12 into the future, an estimate in the future? 13 A. That's the full contract value. So if you look at that, 14 the contract sum, the 21.882 million, that was the full 15 contract value. 16 We'd had certified for payment at that point 17 18.97 million. Therefore there was a balance of 18 2.9 million due on the contract for later payment. 19 Q. Okay. Now, just coming back to -- coming down to row 2, 20 variations agreed, we don't have to blow it up. I think 21 we're okay. We can read it. 22 Do we see the figure of 776,172. Has that figure 23 been paid? Because if we go to the far right-hand 24 column, the balance is zero. 25 A. Yes, that's been certified. Yes. So that has been 141 1 paid. 2 Q. Okay. Then under that we see agreed 1,726,171. 3 A. Yes. 4 Q. Then reading across again, does it look as though some 5 of those agreed variations have been paid, but there's 6 an outstanding balance of just over GBP500,000? 7 A. That's right. What you're looking at here is a gross 8 certification. So we need to make sure that we have had 9 that gross certification actually paid into the bank. 10 The balance is yet to come, yet to be delivered, and yet 11 to be certified and then paid. 12 Q. So I'm sorry, does the reference to balance mean after 13 novation has taken place? 14 A. Yes, that's balance of outstanding works at that point. 15 Q. Okay. 16 A. So we wouldn't be looking for payment for that at 17 novation. We would be looking to ensure we'd been paid 18 everything that had been certified. 19 Q. Then coming down to the sum of GBP800,000, do you know 20 what that relates to? 21 A. That was further variations through that period up until 22 novation. So it's again design -- additional design 23 services in comparison with the original contract 24 schedule. 25 Q. So when Damian Sharp had told us about a sum of 142 1 GBP1 million or GBP800,000, it may be that sum, put it 2 no higher? 3 A. I think that would be right, yes. 4 Q. Thank you. I think then we recognise the sum of 5 GBP2.5 million. That must be in terms of the settlement 6 we looked at earlier? 7 A. That's correct. 8 Q. Now, what's the next sum for? Further additional 9 services agreement, 450,000? 10 A. There was -- in, I believe, early 2008, there was 11 a supplementary prolongation claim after the 12 GBP2.5 million which came to 450,000. 13 There was then the -- one of the consequences of the 14 Greg Ayres email at novation, that GBP300,000 beneath it 15 was an agreed sum to cover some of the additional costs 16 we'd incurred through novation being delayed. 17 Q. Thank you. We then see a reference to 4, Employer's 18 Requirements Alignment agreement, GBP900,000. 19 A. That's what we were talking about earlier, talking about 20 it as roundly 1 million. It's actually 900,000. 21 Q. Thank you. We see the subtotal. Then carrying on down 22 under row 6, "Construction Support (Provisional Sum)" of 23 GBP1 million, what does that relate on? 24 A. Well, the original SDS contract on the basis that 25 everything would be wrapped up prior to novation, had 143 1 four phases. There was the requirements definition 2 phase, the preliminary design phase, the detailed design 3 phase, and what was called construction support, but in 4 the circumstances of everything having been delivered, 5 that construction support would have been minimal. 6 What Bilfinger Berger Siemens saw they needed in the 7 absence of a complete design was more detailed 8 construction support, which is what I talked about 9 earlier, making sure that the design intent had actually 10 been constructed, and adding to that, I suppose you 11 could say, making sure that the quality of the 12 construction was what was required. 13 So Richard Walker and I had discussed the need for 14 that through the negotiations. It wasn't possible to 15 define absolutely how much effort would be required. So 16 provisional sum was set against that activity, and the 17 other one, the consent support, it's actually wrongly 18 termed. It was more to do with design assistance with 19 some of the Siemens aspects of their design, which would 20 have to be integrated with our Civils Design. 21 Again, it wasn't possible to say exactly how much 22 effort would be required in May 2008. So again, 23 a provisional sum was put against it. 24 Q. Thank you. 25 CHAIR OF THE INQUIRY: Are these payments that -- or sums 144 1 potential liabilities for tie in the sense that tie were 2 going to pay you directly? 3 A. No, they were going to be paid by Infraco. So they were 4 construction support and consents support, they would be 5 paid by Infraco. 6 CHAIR OF THE INQUIRY: Yes. 7 MR MACKENZIE: Thank you, my Lord. 8 CHAIR OF THE INQUIRY: Because you were taking over part of 9 their obligations? 10 A. That's right, yes. 11 MR MACKENZIE: Would the sums above the yellow line 5, 12 subtotal, would everything above that be paid by tie? 13 A. The -- as I said, the gross certification at novation, 14 so the certification that, yes, we'd actually delivered 15 those services, that had to be paid by tie. So there 16 had to be the cheque, the 25,922,313 had actually been 17 paid; the balance, the 3,412,000 would then be paid by 18 Infraco as those services were delivered post-novation, 19 along with the provisional sums, however they turned out 20 for construction support. 21 Q. Now, you had discussed earlier the question of the need 22 to address the misalignment between the SDS design and 23 the consortium's offer or proposals, and we -- you 24 mentioned workshops to be carried out after novation. 25 Where would that be covered, SDS's fees for that? 145 1 A. That's where you go back to, if you remember, that it 2 would be a tie -- a tie change, as far as Bilfinger 3 Berger Siemens were concerned, and it would be a client 4 change as far as SDS was concerned. So there was no 5 forecast at this point as to what those sums might be, 6 because they could have been zero. To the extent we 7 were talking about align with the revised ERs, that's in 8 the GBP900,000 figure, but we didn't try at this point 9 to forecast what might come out of those design 10 development meetings. 11 Q. Thank you. That's very clear. We can leave that 12 document. 13 CHAIR OF THE INQUIRY: What is number 9, "incentivisation 14 (Non Infraco)"? 15 A. That's the sum associated with the outstanding -- sorry, 16 issue for construction drawings. So that's what we 17 talked about earlier, where there was the sum for each 18 drawing which would be paid, but on the other side of 19 the coin, should we be delayed, then that was subject to 20 LDs. So it was a maximum of 1 million, and it's noted 21 as "Non Infraco". That was going to be paid direct by 22 tie. 23 CHAIR OF THE INQUIRY: Thank you. 24 MR MACKENZIE: Thank you. 25 If we then please go to the SDS Novation Agreement 146 1 we looked at earlier. The number is CEC01370880. Go to 2 page 94, please. We can see the table at the bottom, 3 cost to complete. I think we can recognise some of 4 these figures. 5 We can see there's a balance to complete of 6 GBP4,983,815. For the avoidance of doubt, which party 7 was to pay that sum? 8 A. That would have to be Infraco, provided the million 9 incentivisation isn't in that figure. So that would be 10 an Infraco payment. 11 Q. Yes, I should explain, Mr Reynolds, I think the figure 12 I just read out is then broken down by the four 13 components beneath that, and they do add up to the 4.983 14 million? 15 A. Yes, in that case -- thank you, yes, that's Infraco. 16 Q. And the million pounds incentivisation isn't shown in 17 this table? 18 A. That's correct. Yes. 19 Q. So I think the detailed design deliverables of just over 20 GBP2.2 million, that must be under the original SDS 21 contract. Those are the outstanding deliverables? 22 A. That's correct, and that construction support figure 23 there, that 1.1 million, that's the phase 4 that I was 24 just talking about. So that was the original 25 construction support figure then had to be supplemented 147 1 with those two provisional sums. 2 Q. Okay. So that reflects matters at that stage. 3 If we then please fast-forward to Mar Hall in 4 March 2011, what happened was shortly before Mar Hall 5 the consortium sent tie something called the Project 6 Phoenix Proposal which was essentially an offer to 7 resolve the dispute. 8 If we can go to that, please, it's BFB00053258. We 9 can see the letter is from Mr Foerder of the consortium 10 dated 24 February 2011, and we can see: 11 "Please find attached our Project Phoenix 12 Proposal ... which is submitted in the ambit of the 13 forthcoming Mediation." 14 If we go then to page 34, actually if I could 15 perhaps start at page 33, and if we could blow that up, 16 please. So this is part of the consortium's proposal of 17 prices given for the SDS fees and claims. 18 Then we can see that price on the next page, please. 19 We can see the bottom right-hand corner, the very bottom 20 right-hand corner of the table. We see the grand total 21 on the bottom right-hand corner is now up to 22 GBP15,140,795. If we then blow that out, please, to see 23 the ordinary size, can we times it times 1? One 24 enlargement up? Never mind. I think if we -- we can, 25 I think, just see under scope works, we see a column, 148 1 "Original Subcontract Work", and I think we can 2 recognise the figures there from the SDS Novation 3 Agreement, page 94 we have just looked at, where we saw 4 in the Novation Agreement that the balance complete was 5 anticipated to be GBP4,983,015. We can see that figure 6 there under "Original Subcontract Work". We can then 7 compare how things have changed. If we take it line by 8 line, the item 1, the PH3 detailed design deliverables, 9 they stay the same at just over 2.2 million. Item 2, 10 changes, we can see a completely new figure of 11 GBP4,234,948. Do you remember what that figure relates 12 to? 13 A. It will be on BSC's change control register. But it 14 would have been developing designs, obviously additional 15 design work. I think the BSC Change Control Register is 16 the best place to identify the make-up of that figure. 17 Q. Might that include the work required by Parsons in 18 relation to the misalignment -- 19 A. Yes. 20 Q. -- between the SDS design and the proposals? 21 A. Yes. 22 Q. I see. 23 A. Yes, that's exactly where that work will be. 24 Q. Item 3, design co-ordination. This is a new figure, 25 GBP495,000. Do you know what that relates to? 149 1 A. That's the one I'm slightly struggling with on this 2 table, I have to admit. I suspect it's the figure 3 associated with the agreement we were talking about 4 before lunch, which was the Civil Design Completion 5 Agreement as far as we were concerned. So picking up 6 the Infraco design obligation with additional services 7 from Parsons Brinckerhoff. I think that must be what 8 that figure refers to. 9 Q. Thank you. Items 4 and 5, you have already explained. 10 Item 4, the phase 4 Construction Phase, I think the 11 estimate had been just over 1.1 million? 12 A. Correct. 13 Q. That's come in at just over 1.2 million. So not a huge 14 variation there. 15 Under item 5, Design Support Team, the estimate had 16 been 675K and that's come in at just over a million? 17 A. Yes. 18 Q. Do you know why there's an increase there? 19 A. Well, I say that was always a provisional sum, depending 20 on how the Siemens design evolved. So that's the way it 21 worked out on an effort evaluated basis. Similarly the 22 Extended Construction Support. 23 That was -- a million was put in as a provisional 24 sum. I think that was always viewed as no more than 25 that, because the team was up to a dozen strong to 150 1 deliver that particular service. So the 3.9 million was 2 a reasonable figure. 3 Q. We see that under that item 6, Extended Construction 4 Support, that figure of 1 million has in fact almost 5 quadrupled to GBP3.921 million. 6 A. Yes. 7 Q. Do you know why that happened? 8 A. As I say, I remember discussing with Richard Walker 9 prior to novation Infraco contract award, and if you 10 took a worst case, you could have been up to 5 million 11 for extending construction support, depending on the 12 particular requirements of the work as it mapped out. 13 Q. Were tie aware of that before contract close? 14 A. I believe so. 15 Q. Who in tie would have -- 16 A. That would have been Steven Bell. 17 Q. How would he have been aware of that? 18 A. Through the discussion, because Steven Bell 19 and I discussed at length the need for extended 20 construction support. So I would think he was certainly 21 aware that, as I say, the million was no better than 22 a provisional sum. Worst case, best case, it would be 23 highly likely to be above a million, what would it get 24 to would be taken account of as the job started to be 25 delivered. 151 1 Q. Then we see a new item 7, Additional Technical 2 Resources, 355,795. What did that relate to? 3 A. I think that was mostly to do with dealing with 4 technical queries as they arose on site. 5 Q. Then item 8, Disruption Claim of half a million. Do you 6 know what that relates to? 7 A. That would have been a claim under the normal terms of 8 the SDS Agreement for disruption that we were subject 9 to, but now working for BSC. 10 Q. Then lastly, prolongation of just over GBP1.1 million? 11 A. Yes, which we have touched on with that letter referring 12 to delays to overall scheme delivery. 13 Q. The last document in this regard, please, is a one-page 14 document. It is SIE00000184. 15 If we can blow up the left-hand corner, please, 16 I don't think you'll have seen this -- sorry, the top 17 left-hand corner. I don't think you've seen this 18 before, Mr Reynolds, but we can see this is stated: 19 "Breakdown of amounts in Settlement Agreement, 20 Schedule Part 4 ..." 21 I think this is an internal Bilfinger Siemens 22 document showing the breakdowns in the Settlement 23 Agreement. 24 If we then zoom back out, please, to normal size, 25 and if we -- can we blow up the first three columns, 152 1 please? First four columns, better still. 2 That's fine. 3 We can see there, if we go to the bottom right-hand 4 corner, you can see the reference to the figure of 5 GBP362.5 million, and in short, Mr Reynolds, that was 6 the Settlement Agreement reached at Mar Hall between the 7 parties in relation to the price for the off-street 8 works and from airport to Haymarket, and we can see for 9 ourselves how that figure has been broken down. 10 In relation to the SDS part of the claim, which we 11 have seen from the Project Phoenix document, was the 12 15,140,000. Essentially there's been a relatively small 13 discount from that figure of GBP360,336 to arrive at the 14 GBP14,780,459. 15 I don't think you would have been part of this sort 16 of breakdown. Is that correct? 17 A. That's correct. I mean, I was aware of the final figure 18 that was agreed, but no, I have not seen the breakdown 19 there with the other discounts and the other parties. 20 CHAIR OF THE INQUIRY: Did you not have to agree the 21 discount? 22 A. Yes, for my figures, but I have not seen the Bilfinger 23 Siemens information before. 24 MR MACKENZIE: Just as a point of detail, to see this 25 settlement figure, the 362.5 million relates to the 153 1 off-street section of the works. And we see that, 2 according to the consortium, they had allowed for SDS's 3 fees and claims of 14.78 million. That's in relation to 4 off-street. 5 Did SDS have a separate claim in respect of the 6 on-street works or rather were all of SDS's fees rolled 7 up into the figure of 15.14 million? 8 A. That's the total figure from the previous document. So 9 that means it's all there. There wouldn't have been 10 anything additional to that. 11 Q. I see. So just trying to stand back from all of that 12 detail, we can see at financial close we had seen 13 a figure of just under GBP5 million as the balance to 14 complete. 15 A. Mm-hm. 16 Q. We can see how that's gone up to 2011. So we're not 17 even at complete completion yet. There's still further 18 design to carry on. But at this stage the figure has 19 gone up to just over 15 million. 20 Why? 21 A. As a consequence -- well, I think as we have seen the 22 breakdown there, partly as a consequence of the firming 23 up of the sums that had previously been declared as 24 provisional sums, but recognising yet further change on 25 the project, further prolongation, and I think as we 154 1 said before, the real change in culture perhaps didn't 2 come about until the Mar Hall Agreement. It was at that 3 point where there was a cultural change to design 4 acceptance. 5 Q. In terms of the increase of the figure that was 6 anticipated at financial close of just under 5 million 7 to, in 2011, of just over 15 million, is that 8 an indication of the amount of design work that was 9 carried out post novation? 10 A. Yes. And, I keep coming back to it, the solidifying of 11 the provisional sum totals. So if you took those off, 12 then the remaining figure would be an indication of the 13 additional design and the prolongation of the management 14 team. 15 Q. Would much of that GBP15 million have been avoided if 16 design had been complete at novation and all approvals 17 and consents had been obtained and there had been 18 alignment between the design, Employer's Requirements 19 and Infraco proposals? 20 A. I think you would have to say yes to that. Or I would 21 have to say yes to that. 22 Q. Thank you. 23 That was the big thing I had, Mr Reynolds. The much 24 smaller matter is a question of MUDFA and utility work. 25 I think Mr Dolan was heavily involved in that. So 155 1 I have a number of questions for him. 2 A. That's right. 3 Q. But if I could ask you one or two questions about that, 4 please. 5 Firstly, standing back, is it good practice when 6 intending to carry out utility diversion works to survey 7 all of the intended route? 8 A. It's certainly good practice to survey, yes. But 9 a survey won't deliver all the information that you 10 need. It will deliver information that will be right in 11 itself, but it still won't give you a complete picture 12 of the work to be undertaken. 13 CHAIR OF THE INQUIRY: What would a survey entail? 14 A. A survey would entail looking at records from the 15 utility companies, selective ground investigation, 16 looking at the condition of assets out there as they 17 stand at the moment, talking with the utility companies 18 to gain an appreciation of the history of those assets. 19 So yes, to basically increase confidence in an 20 understanding of the problem to be addressed with moving 21 utilities. 22 CHAIR OF THE INQUIRY: You speak about selective ground 23 investigations. What would that amount to? What's the 24 nature of them? 25 A. It's where you would -- again, Alan Dolan is probably 156 1 better equipped to answer the question, but looking at 2 particular pinch points of where you've got narrow 3 corridors, where you've got multiple utilities. So one 4 of the things we were responsible for was the so-called 5 critical design. Whilst there's no definition of 6 critical design in the contract, it's typically where 7 you will have a narrow access where you might have 8 telecoms, water, gas, everything coming together, and 9 you've got to look at how you will address those 10 utilities not in isolation from each other, but together 11 as a full set. So you will be looking at things like 12 that. 13 CHAIR OF THE INQUIRY: Would the investigation of the ground 14 conditions normally -- if you were investigating the 15 whole route, would they involve ground penetrating 16 radar? 17 A. Yes. 18 CHAIR OF THE INQUIRY: For the whole route? 19 A. It could do. It depends on, if you were out on green 20 field location, I don't suppose you would bother, but 21 where you're in an area like in the middle of the city 22 where you know the ground will have been disturbed, then 23 yes, that would be an area where you would do that. 24 But again, you're not going to pick everything up, 25 even with ground penetrating radar. What you are going 157 1 to do is increase your understanding of the problem, but 2 you are still going to have to do work beyond a survey 3 to really quantify the work that has to be carried out. 4 CHAIR OF THE INQUIRY: Would it involve doing slit trenches, 5 occasionally slit trenches and trial pits? 6 A. Yes. Now, as I say, Alan Dolan is the -- 7 CHAIR OF THE INQUIRY: He is the man. 8 A. Sorry, I'm repeating myself. 9 CHAIR OF THE INQUIRY: I'll ask him. 10 MR MACKENZIE: Mr Reynolds, did you have an understanding of 11 the main difficulties and delays encountered in 12 producing utilities design? 13 A. You will be familiar with a letter from me to 14 Steven Bell at some point in the programme which is 15 highlighting the delays to the provision of information 16 from several of the statutory utility companies. That 17 was certainly a key factor in delays to design 18 completion. 19 You've then got other issues which come to light. 20 It's one thing diverting a water main, for example, 21 where you can divert the pipework and the job is done. 22 Diverting a telecoms network is far more complicated 23 because you can divert the routing of the cabling but 24 then you are left with the problem of terminating all 25 those cables at either end. So it tends to be more 158 1 complex than people may have appreciated at the outset. 2 Again, I think it comes back to this was a task 3 which relied on the co-ordination of several different 4 providers. 5 Q. Thank you. If we can go to -- I don't have that 6 document at my fingertips. I have another one. 7 PBH00029220. 8 If we can go over to page 2, please, we see an email 9 from Thomas O'Neill. Was he the Head of Parsons? 10 A. He was the Head of Parsons Brinckerhoff International. 11 So yes, he was in New York. 12 Q. I think this is dated 5 October 2007. The subject is 13 "Gallagher meeting", and Mr O'Neill says: 14 "Men - Willie and I met for about two hours 15 yesterday. The meeting had one major point of focus - 16 utility relocations. Willie recognises that some things 17 are going well and much is improved over the last year. 18 But he is very concerned and frustrated with the 19 slippage and apparent lack of urgency regarding utility 20 relocations. He asked my help in getting the issue 21 sorted. I said that I would certainly pitch in, but 22 that it had to be a joint effort between SDS and tie. 23 He is not focused on who has responsibility for what, 24 but wants the problem to be addressed and solved." 25 Over the page we will see your response. On page 1 159 1 we see in the middle of the page an email from you, 2 Mr Reynolds, dated 9 October 2007. I'll just let you 3 take a minute to read that for yourself. 4 A. I'm familiar with that. 5 Q. So essentially that reflected your views at the time; is 6 that correct? 7 A. Correct, yes. 8 Q. And you -- 9 A. And as I say, whether it's companion -- I can't remember 10 the exact date, but the letter on file to Steven Bell 11 goes into more detail about how each of the utility 12 companies is abiding by its agreements or not, and 13 spells out in some detail, which then allowed 14 Steven Bell to pick up actions to address the problem, 15 working with me. 16 Q. So in short your position is that Parsons were 17 frustrated in producing design by delays on the part of 18 utility companies? 19 A. That's -- that's right. And there was a knock on impact 20 as well because what would also happen is all of 21 a sudden the information would become available and we 22 were expected to be able to turn that round in very 23 short order, whereas of course you don't have people new 24 waiting for information to arrive. You've got design 25 teams who will be engaged on other things if the 160 1 information required doesn't turn up according to 2 programme. So there was that sort of second order 3 effect as well. 4 Q. Thank you. 5 Two final points on MUDFA, if I may. Both of them 6 are contained in your statement. Could we go back, 7 please, to your statement at page 14 in paragraph 47. 8 This starts with quoting from the SDS contract in 9 September 2007 in relation to Parsons' responsibility 10 for undertaking utility design, namely it was 11 undertaking critical design, et cetera. You explain in 12 this paragraph that the contract did not envisage that 13 all utility design would be undertaken by Parsons. 14 Do you know in short what happened in practice in 15 terms of what utility design was undertaken by Parsons 16 and what design was not? 17 A. Yes. What happened after this, after this episode that 18 I relate there with Matthew Crosse, everything did get 19 back on to a more reasonable footing where we did take 20 on board the aspects where there was a need for multi -- 21 multi utility co-ordination, but where an individual 22 utility company would look after its own assets on what 23 might be, you know, standard design for a water main 24 connection, say. 25 So we did get to focus on what our view of our 161 1 obligation actually was on delivering the more complex 2 areas of design for MUDFA. 3 I think again, if we are talking lessons learned, 4 this is a whole area that could have been better defined 5 because this term "critical design" is not even 6 capitalised. It's not defined. What does it really 7 mean? There were agreements in place between tie and 8 the SUCs. Were they managed effectively? I think this 9 is a whole area of concern potentially. 10 Q. Thank you. 11 The last point on page 58, please, in paragraph 184. 12 This was in relation to a report to the Council's 13 Internal Planning Group in April 2007. In paragraph 184 14 you say: 15 "The key point is that the MUDFA programme was not 16 aligned with the SDS programme." 17 Can you just explain what you mean by that, please, 18 the MUDFA programme not being aligned with the SDS 19 programme? 20 A. I think this comes back in part to our points about the 21 master programme not -- certainly not being communicated 22 to us, and potentially not being defined to encompass 23 the different project programmes. So bringing together 24 the MUDFA programme and the SDS programme. 25 My view was the MUDFA programme was being focused on 162 1 in its own right, but the interfaces with the SDS 2 programme weren't properly managed. 3 I think it goes on to talk about there was 4 a suspension to MUDFA works while the Audit Scotland 5 exercise was going on. So again, that needed to be 6 accommodated within the overall master programme and it 7 wasn't, effectively. 8 MR MACKENZIE: Thank you. I have no further questions. 9 CHAIR OF THE INQUIRY: I don't think there are any questions 10 from anyone else. 11 Thank you very much, Mr Reynolds. You're free to 12 go. Technically you're still under your citation and it 13 may be that you could be recalled, but hopefully that 14 won't be necessary. 15 A. Okay. Thank you very much indeed. 16 (The witness withdrew) 163 1 INDEX 2 PAGE 3 MR STEVE REYNOLDS (continued) ........................1 4 5 Examination by MR MACKENZIE (continued) .......1 6 7 MR ALAN DOLAN (sworn) ..............................164 8 9 Examination by MR MACKENZIE .................164 10 11 12 13 14 213