1 Thursday, 19 October 2017 16 MR LAKE: My Lord, the next witness is Geoff Gilbert. 17 MR GEOFF GILBERT (affirmed) 18 CHAIR OF THE INQUIRY: You're going to be asked some 19 questions by Mr Lake, Counsel to the Inquiry. If you 20 just listen to the question and answer it as directly as 21 possible. If it's capable of a yes or no answer, that 22 should be the answer. If you then want to qualify it, 23 by all means do. 24 Can you speak clearly and slowly into the microphone 25 so the shorthand writers can keep up with you. Thank 74 1 you very much. Mr Lake. 2 Examination by MR LAKE 3 MR LAKE: Mr Gilbert, could you state your full name, 4 please. 5 A. Geoffrey Hancock Gilbert. 6 Q. What is your present occupation? 7 A. I'm the Head of Commercial for the south section of HS2. 8 Q. I think back in 2007 and 2008 you worked at tie? 9 A. I did. 10 Q. On the tram project? 11 A. Yes. 12 Q. And your role there was commercial director? 13 A. Yes. 14 Q. Could I ask you is to look at a document, please. It's 15 reference TRI00000038_C. You should have a paper copy 16 of that in front of you. Is that a copy of a statement 17 that you prepared for the purposes of this Inquiry? 18 A. It is. 19 Q. I think the hard copy will have your signature on the 20 final page of it? 21 A. It does. 22 Q. Are you content that that be adopted as your evidence 23 for the purposes of this Inquiry? 24 A. I am. 25 Q. I would like to carry on and you some additional 75 1 questions about this. I would like to start, if I may, 2 in December 2007. Are you aware there was a desire to 3 get the Final Business Case to the Council and get their 4 decision made by the end of December 2007? 5 A. I recollect, yes. 6 Q. Also do you recollect at that time that the detailed 7 design which it was hoped might be 100 per cent complete 8 was not in fact complete? 9 A. Yes. 10 Q. And that that was having an effect on the ability to 11 secure a firm price from the preferred bidder for the 12 Infraco contract? 13 A. Certainly it was slowing progress to the finalisation of 14 the deal. Part of that process in accordance with the 15 original strategy was to develop the design. The 16 original strategy not necessarily 100 per cent of the 17 detailed design, but the significant elements of it. 18 Q. You were aware that in December 2006, the Council had 19 approved the Draft Final Business Case in which there 20 was a statement that detailed design would be 21 100 per cent complete -- 22 A. I don't recollect that. 23 Q. But nonetheless in December 2007 it was really quite 24 clear that the detailed design was not 100 per cent 25 complete and was not going to be 100 per cent complete 76 1 at contract award? 2 A. We -- as we hadn't got to contract award at that point, 3 I don't think I could absolutely say that, but it wasn't 4 progressed to the plan that was set out at the time, as 5 I recollect. 6 Q. Was consideration given within tie to postponing the 7 award of the contract until such time as the detailed 8 design was 100 per cent complete? 9 A. Possibly, but I don't recollect. 10 Q. Was any advice given to tie by the legal advisers to the 11 project at DLA that it would be appropriate to put the 12 project on hold rather than trying to award the Infraco 13 contract at that time? 14 A. I don't remember that there was any such advice. 15 Q. Do you recall at any stage being advised by Andrew 16 Fitchie at DLA to put the project on hold rather than 17 proceeding? 18 A. I don't recollect that. 19 Q. Were you aware that there were discussions taking place 20 by your colleagues with the preferred bidders, with the 21 intention of trying to firm up the prices that they were 22 offering? 23 A. Yes. 24 Q. Can you recall what was the sticking point at that time? 25 A. Perhaps if we could go back to the appointment of 77 1 preferred bidder. Preferred bidder, then there was 2 a process which was set out to provide designs to the 3 Infraco for them to then firm up on some of the aspects 4 of their proposal. 5 That process was going much slower than the schedule 6 that we'd set out. I don't think designs were coming 7 through as quickly as originally planned. So there was 8 a proposal to go to -- I think some of this is in my 9 statement -- for Willie Gallagher and Matthew Crosse to 10 go and meet with BBS in Germany, and to get them to 11 provide a firm price for the scheme that essentially 12 then required them to include within that price 13 everything that was necessary to deliver the scheme. 14 Perhaps with a few exclusions. 15 So effectively to then transfer the residual or 16 remaining design risk to BBS which would then sort of 17 get round the impasse -- not the impasse, but the slow 18 progress that was being made to date. 19 Q. Asking them, would you say, to accept that residual 20 design risk, did you anticipate there would be a cost 21 consequence to that? 22 A. I think there inevitably would be, because there would 23 be some risk at least in taking on that liability at 24 that stage. 25 Q. Can I just be quite clear about what we're talking about 78 1 when we refer to design risk. There was obviously 2 a need to actually carry out the design work in order to 3 finish the design. And there would be a cost in that. 4 You understand that? 5 A. Yes. 6 Q. There would also be -- if the design was going to take 7 longer, it might result in delays and delays, there was 8 a cost in that as well? 9 A. There would be a cost in that, but I think the more 10 substantive issue was the construction cost consequences 11 that might arise from the -- progressing the design from 12 the stage it was at at that time. 13 Q. That's what I was going to say. That's really the third 14 meaning of design risk. It's the cost of constructing 15 according to the finalised design? 16 A. Exactly. 17 Q. When you talked about transferring design risk, is it 18 that latter, that last mentioned risk, that you were 19 talking about transferring? 20 A. Yes. Yes. 21 Q. Now, the Inquiry has heard some evidence already that 22 the -- Mr Fitchie, the solicitor at DLA advising tie, 23 was told by the contractors and passed on to the senior 24 management in tie in early December 2007 that the 25 contractors had said it would cost GBP80 million more to 79 1 build than the price that had been provided to that 2 date. Were you aware of that? 3 A. I think you asked me this in some supplementary 4 questions. I don't recollect it. If it had been of -- 5 sorry, let me put it another way. 6 If it had been something that BBS wanted to 7 communicate to us, then I think it would have come in 8 writing. Certainly should have. So that we could 9 consider what they were proposing. Ad hoc comments to 10 third parties -- not third parties, but ad hoc comments, 11 perhaps just negotiation games. 12 Q. I think we have seen that the price that was being 13 talked about at that time for the Infraco works was 14 a little bit in excess of GBP200 million? 15 A. I don't remember the exact figures, but I'm sure that's 16 in the documents. 17 Q. If it was suggested that there would be an increase of 18 GBP80 million or some 40 per cent increase, would you 19 expect that to have stuck in your mind? 20 A. I would have thought so. It would certainly give you 21 pause for thought. 22 Q. You've mentioned that there was a proposal for a meeting 23 taking place in Germany. 24 A. Mm-hm. 25 Q. I think you said that Willie Gallagher and -- I can't 80 1 remember who you said -- Matthew Crosse went there also. 2 Was there any consideration to you going to that 3 meeting? 4 A. There may have been, but I don't recollect that. 5 Q. What was your role in the contract negotiations at that 6 time, December 2007? 7 A. I was part of the team that was negotiating the various 8 emerging issues as we progressed. Probably at that time 9 we were managing and having regular meetings with BBS to 10 progress the firming up of their proposals against the 11 emerging design information. 12 Q. How did your role at that time compare to the role being 13 carried out by Matthew Crosse and Willie Gallagher? 14 A. I reported in to Matthew Crosse. I reported in to the 15 project directors. Andie Harper initially, 16 Matthew Crosse, and then latterly Steven Bell. 17 Q. Were you the one actually carrying out the negotiation 18 under his direction or was Matthew Crosse carrying out 19 the negotiation with you assisting? 20 A. Sorry, this is not a direct answer, but as is often the 21 case within projects of this nature, there was 22 a negotiating team. It would shift a little bit 23 depending what the issues were. I was very much a part 24 of that negotiating team at that time. I think it was 25 probably myself, Matthew Crosse, perhaps Susan Clark. 81 1 I don't remember clearly, I'm afraid. 2 Q. Was Willie Gallagher part of the negotiating team? 3 A. I don't recall him being in the room directly, but we 4 would have had regular briefings with Willie throughout. 5 Q. In that he was one of the two people who went to 6 Wiesbaden for this meeting in December, were you aware 7 why it was decided that he should go? 8 A. Other than speculating as to why, given that he's the -- 9 he was the -- effectively the Chief Executive of the 10 project, ie the most senior person. 11 Q. Any reason why he would be required to attend that 12 meeting when he hadn't been attending the ones before 13 it? 14 A. I think that we'd come to a point where there was 15 a desire to achieve a contract close. I think at that 16 time, the documents say that it was around January, and 17 therefore he was perhaps looking to force the pace. 18 Q. You say in your statement that it wasn't intended that 19 agreement reached in Wiesbaden would be legally binding. 20 What was the intention then? 21 A. The -- sorry, are you referring to the Wiesbaden 22 Agreement? 23 Q. Yes. 24 A. Yes. The intention certainly in my mind at the time is 25 that given that there would be further work that would 82 1 need to be done in order to take those proposals into 2 a complete contract package, that it was more of 3 a statement as to what had been reached out of the 4 Wiesbaden discussions. So reconciliation of all aspects 5 up to that point in time. 6 Q. When you say it's what had been reached or would have 7 come out of the Wiesbaden discussions, what are you 8 talking about there? What would the process be for 9 having discussions and taking it forward to the 10 contract? 11 A. There would have been a need to take the output of the 12 things that had been agreed in, if you like, lay 13 person's terms into contractual language and to put that 14 within the contract package. 15 Q. Was any consideration given to a legal adviser going 16 with the tie personnel to Wiesbaden? 17 A. Not that I recollect. 18 Q. No consideration at all? 19 A. I don't remember any such consideration. That's not to 20 say that there wasn't. 21 Q. You were, you indicated, contemplating the intention 22 that risk be -- the question of transfer of risk be 23 addressed at that meeting? 24 A. Mm-hm. 25 Q. Was that something that generally you had legal advice 83 1 in relation to? 2 A. I don't recollect, I'm afraid. 3 Q. I would like, please, to look at a document. It's 4 reference TIE008 -- sorry, I'm missing a number here. 5 Apologies. 6 (Pause). 7 I'm sorry about this. Sorry about the delay. Could 8 we have document TIE00087524. 9 You will see this is an email that went from you to 10 Matthew Crosse and Steven Bell on 11 December. The 11 subject matter is Infraco deal parameters. You say: 12 "Matthew/Steven, starter for 10 for settling a deal 13 with BBS. Can we discuss in the morning." 14 Was that you having some thoughts as to how you 15 might close matters with the consortium to get a firmer 16 price? 17 A. Given what's said, yes. 18 Q. If we look at the attachment to that, it's TIE00087525. 19 Do you recognise this paper? 20 A. Yes, I have seen it in the information that was provided 21 by the Inquiry. 22 Q. Is this the paper that you provided to send to 23 Steve Bell and Matthew Crosse? 24 A. If it was attached to that email, then yes. 25 Q. Just looking at what you suggested here, the first thing 84 1 is described as financial negotiating parameters. You 2 set out there what the total cost would be under the 3 contract after making allowances for value engineering; 4 is that correct? 5 A. Yes. 6 Q. Then you've got underneath that, available to negotiate 7 contingency, GBP2 million, and pre financial close risk 8 allowances, GBP14.5 million. 9 In what sense were those monies available to 10 negotiate? 11 A. Those figures would have been taken from the prevailing 12 costs report at the time. So they would have been 13 break-out of the total project costs. We would have 14 made some or other judgement around the elements of risk 15 in contingency or other allowances within that overall 16 cost report that we would use to set the boundaries of 17 a negotiation. 18 Q. Were these sums already included within the project 19 budget contingency and pre financial close risk 20 allowances? 21 A. They would have been. Exactly where they were within 22 that build-up, I wouldn't know. But somewhere within 23 that. 24 Q. You were going to take these sums away from contingency 25 and pre financial close and in a sense spend them on the 85 1 contract to try and achieve the objective -- 2 A. Yes. 3 Q. -- that you required. 4 You go on to note that: 5 "We need to reserve a proportion of the contingency 6 and risk to uncertainties in the things that are outside 7 the deal. Reserve GBP6.5 million for this." 8 Is that reflecting the fact you still need to have 9 some risk allowance and some contingency? 10 A. Yes. 11 Q. How did you get a feel for how much should be held back 12 there, GBP6.5 million out of the 16.5 million? 13 A. It would have been a judgement, or perhaps based on 14 a more detailed build-up of those numbers. Probably 15 would have looked at the things that related to other 16 aspects of the project and, if you like, carved those 17 out. 18 Q. Was that your judgement or -- your judgement informed by 19 other people? 20 A. I don't recollect. Certainly I would have been 21 involved, given what I have stated here. 22 Q. You then note the proposition. The proposition is that: 23 "BBS agree a contract sum of GBP226.5 million for 24 delivering the scope; agree to deliver a minimum value 25 engineering saving of GBP19.2 million; plus GBP3 million 86 1 to GBP10 million for pricing risk." 2 A. Yes. 3 Q. What do you mean for pricing risk there? 4 A. That relates to the transfer of risk that we discussed 5 earlier. 6 Q. They would be paid something between those two sums in 7 order to accept that risk transfer? 8 A. Yes. 9 Q. If we look at the following page, and if we enlarge the 10 sub-heading, "Scope", and the text underneath it, you 11 can see when it's talking about the scope to be 12 delivered for the negotiating price, the second bullet 13 point is: 14 "Technical scope". 15 The last sub-bullet point is that: 16 "BBS take design development risk". 17 A. Yes. 18 Q. Is that what we've discussed? 19 A. Yes. 20 Q. They would be responsible for building, however the 21 design turned out? 22 A. Yes. Well, sorry, because I think that comes on to 23 perhaps further points. That risk would need to be 24 bounded in some respect, but we weren't thinking about 25 that at that stage. 87 1 Q. Did you in fact discuss this with Matthew Crosse and 2 Willie Gallagher before they went to Wiesbaden? 3 A. I don't recollect specific discussion but no doubt we 4 would have discussed the broad proposition before they 5 went. 6 Q. Was the question of transfer of design development risk 7 something that would have been discussed or do you 8 recall discussing? 9 A. I don't recall discussing it, but I think -- I can't 10 think why it wouldn't have been discussed. 11 Q. Now, you were informed presumably of what had been 12 achieved in Wiesbaden? 13 A. I was. 14 Q. What did you understand had been achieved? First of 15 all, just looking at what any verbal report was to you? 16 A. I don't recollect the verbal reports. But I believe 17 that BBS had agreed to take on the design development 18 risk. 19 Q. You refer in your statement to a PowerPoint presentation 20 in this regard. I'm just wondering if we could take 21 a look at that. It's reference CEC01483731. You can 22 see these are prints of certain slides from a PowerPoint 23 presentation. You can see that has obviously been given 24 to the Tram Project Board on 19 December 2007. If we 25 could look at the third sheet of this, we see that the 88 1 presentation -- this part of it is entitled "INFRACO/ 2 TRAMCO", and you are noted as being one of the people 3 responsible for that part. Your name is given there? 4 A. Mm-hm. 5 Q. Do you recall giving this? 6 A. I don't. 7 Q. If you look on two pages to page 5 -- actually, first of 8 all go to the next page for completeness, to page 4. We 9 see there's a heading "Price", Stewart McGarrity, and 10 then if we go on to page 5, we have got headlines of 11 deal agreed in Wiesbaden. It's to be based on, and the 12 first thing is: 13 "BBS taking detailed design development risk". 14 Do you see that? 15 A. Yes. 16 Q. Is that reflecting what you had been told at that time? 17 A. It is, yes. 18 Q. Why was it that the presentation was being given by you, 19 Steve Bell and Stewart McGarrity, rather than the people 20 who were actually over there, indicating what had been 21 agreed? 22 A. I'm afraid I don't recollect. 23 Q. I think we see afterwards as it came to negotiate the 24 terms of the contract and particularly Schedule Part 4, 25 that was taken forward very much by you to a large 89 1 extent, and not either Matthew Crosse and no input from 2 Willie Gallagher. Was there a reason for that? 3 A. I think it was part of my job to, if you like, translate 4 what had come out of the Wiesbaden discussions into the 5 ongoing negotiations and into the contract package. 6 Q. I want to look at some exchanges of correspondence now 7 which seek to document what was agreed at Wiesbaden. 8 The first thing I would like to see is an email 9 reference CEC01494927. You see this is an email that 10 went from Matthew Crosse, who obviously had been there. 11 It's dated 17 December, to Richard Walker at Bilfinger, 12 but it's copied to you. 13 A. Mm-hm. 14 Q. He says: 15 "Further to last mail, now please see attached. 16 Please can you confirm your acceptance by return 17 email - or/at the latest by 1600 hours, because we then 18 meet with the Council." 19 Is the point that there was a meeting with the 20 Council to try and achieve financial close of the 21 project happening at that time? Is that your 22 recollection? 23 A. Sorry, could you repeat the question. 24 Q. Was there a meeting to take place with the Council that 25 soon after the Wiesbaden Agreement -- 90 1 A. I'm afraid I don't remember. 2 Q. Can we look at the attachment to this. It's reference 3 CEC01494928. We can see the first page of this is 4 entitled "AGREEMENT FOR CONTRACT PRICE FOR PHASE 1A". 5 It's dated 14 December 2007? 6 A. Mm-hm. 7 Q. Then if we look at the third page of this, we can see 8 the heading, "Basis of the price", 3.0, "Basis of the price", 9 if we could enlarge 3.3 underneath that, we can see it 10 says: 11 "Detailed designs - BBS included in their price for 12 the construction cost risk in the development and 13 completion of detailed designs being prepared by SDS, 14 save for ..." 15 The first thing is: 16 "Any future changes to elements of the design for 17 civils works that are substantially different compared 18 to those forming the current scheme being designed by 19 SDS." 20 A. Mm-hm. 21 Q. Now, had you had any discussion with Matthew Crosse as 22 to this wording before this Agreement was sent out? 23 A. Sorry, could you repeat -- 24 Q. Had you had any discussion with Matthew Crosse as to 25 this wording before this draft Agreement was sent out? 91 1 A. I don't recollect, but conceivably. 2 Q. Would you have expected to have it? 3 A. We worked pretty closely together, particularly at this 4 point in time. We were sitting in the same offices. So 5 I would have thought so. 6 Q. What was this Agreement intended to do? 7 A. It was intended to document the outcome of the 8 discussions that had been had in Wiesbaden. 9 Q. At this stage, just looking at this draft, was it 10 intended to go any further than that? 11 A. Sorry, in what respect? 12 Q. In any respect at all, to include other things which 13 hadn't been discussed? 14 A. I'm afraid I don't recollect. 15 Q. Could we look at another document which followed on from 16 this. It's reference CEC01494961. If we could start by 17 looking at the foot of the page, we can see there's an 18 email there from Richard Walker to Matthew Crosse. 19 It's: 20 "Matthew, please see comments below." 21 If we go below his telephone numbers, we can see it 22 is: 23 "My comment is that this does not look like a good 24 deal (understatement) unless there is some side 25 agreement that I don't know about." 92 1 And we see the name at the foot of the page there, 2 Scott. Is Scott someone who worked with Richard Walker? 3 A. Scott McFadzen, I think. Yes, he worked for 4 Richard Walker. 5 Q. If you look further up the page, we can see that 6 Matthew Crosse has forwarded this to you? 7 A. Mm-hm. 8 Q. Saying: 9 "Let's discuss in the morning." 10 What was your reaction to seeing the initial comment 11 from Bilfinger being that this does not look like a good 12 deal? 13 A. I think it would have been that that was Scott's view. 14 He was perhaps trying to develop a negotiating 15 proposition, trying to change our view of what had been 16 agreed. Sorry, I can't really speak for Scott. 17 Q. Just picking up that thing at the end, you say "trying 18 to change our view of what had been agreed". 19 Did you think that the draft -- 20 A. Can I put it more simply. It looks like a bit of 21 a negotiating game. 22 Q. Did you think that the draft that you'd sent out just 23 reflected what had been agreed, or had been agreed at 24 the meeting in Wiesbaden? 25 A. I believe so, yes. 93 1 Q. So this then would appear to be them not adhering to 2 what had been agreed in Wiesbaden? 3 A. I think it was Scott's view communicated to 4 Richard Walker. 5 Q. Can you remember what you and Matthew Crosse decided to 6 do in respect of this, when you had a discussion? 7 A. I'm afraid I don't. 8 Q. Follow through the correspondence that takes place. If 9 we look, please, at an email reference, CEC01430733. 10 You can see this is an email from you to 11 Stewart McGarrity, Alastair Richards and Jim McEwan, 12 copied to Matthew Crosse. What you say is: 13 "Enclosed is the latest position on the draft deal 14 for your review and to inform discussions at 2.00 pm. 15 Please note that this is still under discussion with 16 Bilfinger Berger Siemens to get full and final agreement 17 to the words. I'll keep you all posted. 18 Please note that we inadvertently double counted 19 the CAF into the consortium discount so the figure has 20 moved up by GBP1 million." 21 Had you redrafted this Agreement at this stage? If 22 you're sending it out? 23 A. I don't recollect. Presumably -- sorry, presumably 24 there's a draft -- that says there's a document 25 attached. 94 1 Q. Do you have no recollection of whether following these 2 negotiations and the -- that took place in Wiesbaden, 3 that you were drafting documents intended to reflect 4 that or otherwise? 5 A. Sorry, could you repeat -- 6 Q. Do you have any -- start that again. 7 I take it the agreement that was reached in 8 Wiesbaden was regarded as an important one? 9 A. Yes. 10 Q. Finalisation of the price was important? 11 A. Yes. 12 Q. It was on the basis of that meeting that takes place 13 that a report was being made to the Council in December? 14 A. Conceivably, but I don't recollect. 15 Q. Then you had had an email back from Richard Walker, 16 forwarding a view that it didn't look like a good deal? 17 A. Mm-hm. 18 Q. Was there no concern at the time or no importance 19 attached to this that it had appeared that the deal that 20 had been done might be unravelling? 21 A. I think it -- as the emails say, it was still being 22 finalised, and there were ongoing discussions, clearly. 23 Q. How important was this amongst the things that tie were 24 facing at the time? 25 A. At the time it was important and it was -- I think, 95 1 given perhaps the volume of documentation, as provided 2 to me for my evidence, then it was taking up quite a lot 3 of our time. 4 Q. We see there's a number of attachments to that, and one of 5 them is entitled "BBS Deal 141207". Can we look that. 6 It's got document reference CEC01430735. 7 We can see the front sheet of this is really just as 8 it was before, with the date of 14 December. 9 If we look at page 3 of this, we can see at the 10 large clause 3.3, can I just ask to check with the 11 document display, do we have a version of this that's 12 also in colour? 13 We will just stick with this one. 14 We see a lot of the text that we saw before, that's 15 in normal type, but then in italics at the end, there's 16 been added the words: 17 "In respect of pavements, full reuse of existing 18 curbs and flags and minimal reinstatement behind curb 19 lines is assumed, ie not wall to wall. Design must be 20 delivered by the SDS in line with our construction 21 delivery programme previously submitted." 22 A. Mm-hm. 23 Q. Had you provided that wording? 24 A. In line with our construction delivery programme 25 suggests not, in that it would have been BBS's delivery 96 1 programme. 2 Q. So where had the idea come from for adding this 3 additional text to the Agreement? 4 A. I don't recollect, but given that there were ongoing 5 discussions with BBS at the time, Richard Walker in 6 particular, then conceivably from them. 7 Q. Could we look then, please, at another email. It's 8 reference CEC00573352. 9 This is an email dated 19 December now from 10 Richard Walker to you and Scott McFadzen where it says: 11 "Geoff, thanks for your latest updates. In respect 12 of new clause 3.7, the description is fine but this must 13 cover the on street area of Shandwick Place and 14 Haymarket junction, ie Haymarket to the far end of 15 Princes Street. 16 Secondly, having consulted with my team and 17 reviewed emails and meeting minutes, our firm price 18 including the additional GBP8 million to fix the 19 'variable' sums noted." 20 What did you understand that to mean? 21 A. Sorry, I'm just paraphrasing the email that I think that 22 he's referring to having been back and looked at what 23 they thought was the outcome of the discussions in 24 Wiesbaden, and that something had been missed in what 25 we'd been -- had put forward. 97 1 Q. I think it recognises that tie had ceded an additional 2 GBP8 million to the consortium in the course of the 3 Wiesbaden negotiations? 4 A. Mm-hm. 5 Q. What had tie got in return? 6 A. I think if you go back to the summary document that 7 I wrote initially, then we thought that we'd got the 8 things that were set out in that paper. 9 Q. At this time there was -- a significant element of the 10 consortium bid was made up of provisional sums. 11 A. There were provisional sums in there. I don't think it 12 was a substantial -- excuse me, a substantial 13 proportion. I don't recall the exact numbers. 14 Q. Just hold on one moment. If we could go back to another 15 email from you, I think. If I give you a reference, 16 TIE00035209. Hold on one moment. 17 Sorry, I have given you the wrong reference. Could 18 we look, please, at CEC00573343. 19 We see this is an email from you to Matthew Crosse, 20 copied to Stewart McGarrity and Steven Bell, dated 21 13 December 2007. 22 A. Mm-hm. 23 Q. You say: 24 "Updated deal paper and current Infraco cost 25 report." 98 1 If we just go to the second page of this, we can see 2 details of the cost report there. Is this something 3 that you had prepared? 4 A. I don't recollect whether I did or I didn't. Quite 5 conceivably. 6 Q. If you look under the heading "Infraco", we can see it 7 at the top left. Next to that we've got different parts 8 of it. We've got firm elements of the bid, provisional, 9 and confirmed normalisations. Under the heading of 10 "Preferred bidder", we can see that the firm elements 11 was GBP159 million and the provisional was GBP49 12 million. 13 A. I understand what you're getting at. I think I dealt 14 with this in my statement. 15 There were -- "provisional" can mean a number of 16 things within conventional construction language. 17 Provisional sums, as you suggested, is one. The 18 other is -- I think I refer to in my statement, as 19 provisional items. So aspects of the scheme which -- 20 where the scope is known, but not entirely finalised. 21 So I gave the example of roads finishes, I think, within 22 my statement. And I recollect that as we were going 23 through the bid process, information was being issued, 24 design information was being issued, and one of the 25 things that we issued was a set of drawings that had 99 1 been developed from discussions with SDS and our 2 engineers to set out what they believe the extent of the 3 road finishes would be. In the final designs. 4 But it wasn't the final design. So hence 5 a provisional item, if you like. In other 6 circumstances, ie, a bill of quantities type 7 arrangement, then those aspects perhaps would have been 8 included as provisional quantities. 9 Q. We see under the heading, "Current position", it was 10 noted that there was a little under GBP15 million of 11 what were termed provisional at that time? 12 A. Yes. 13 Q. I would like you also to look at a correspondence that 14 came from the consortium prior to the Wiesbaden 15 Agreement. Could we look, please, at the document 16 CEC00547788. 17 This is a letter dated 12 December 2007 from 18 Richard Walker at the consortium, Bilfinger Berger - 19 Siemens Consortium, and it's addressed "Dear Willie" at 20 the start of the letter, which indicates presumably it 21 was intended for Willie Gallagher? 22 A. Mm-hm. 23 Q. Did you see this letter at the time? 24 A. I don't recollect. 25 Q. We see in terms under the heading, "Price Confidence", 100 1 it says: 2 "We have considered fixing our price to the 3 information provided and believe that we are able to do 4 this in all areas where the design is available. See 5 attached schedule." 6 If we go to the following page for the schedule, 7 there are seven different areas where the consortium 8 indicate that it will fix the price for a price of 9 GBP8.12 million. 10 A. Mm-hm. 11 Q. When we come -- once we have got into January, to the 12 discussions about how the price is to be fixed, and 13 Richard Walker's comments, is he simply indicating that 14 the GBP8 million was for these sums? Rather than all 15 sums? 16 A. Our discussion was about -- sorry, I'm not -- to answer 17 your question directly, I'm not entirely sure. I don't 18 recollect that document. But the discussions at that 19 time were about fixing their price for all remaining or 20 virtually all remaining issues. 21 Q. Those were the discussions, but are you certain what the 22 agreement had been made in respect of? 23 A. The Wiesbaden Agreement, what had been discussed, do you 24 mean? 25 Q. Yes. 101 1 A. I wasn't there. I would have taken the output from 2 Willie and Matthew and taken it on that basis. 3 Q. Okay. If we were looking there at the email -- we 4 looked at one of the attachments to it, if we look at 5 document CEC01384942. We can see a version of the 6 Agreement this time with the date that's been put on it 7 of 19 December 2007. If we look at the third page of 8 this to see the changes that have been made, again, do 9 we have a colour version of this? 10 I think what I have done is I have taken things 11 slightly out of sequence. If I could go back a moment, 12 could I go back to document CEC00573352. This is the 13 email we were looking at a minute ago, where the second 14 point was related to the additional GBP8 million and 15 what it was fixing. 16 When it refers to the variable sums, did you regard 17 that as all matters which had previously been stated 18 provisional? 19 A. That's my recollection of where we were trying to get to 20 with the Wiesbaden Agreement. 21 Q. That's where you were trying to get to, but what did you 22 understand this was saying? 23 A. It was making reference to, in italics, the variable 24 sums noted, just taking the email as literally. 25 Q. I can see that is what it says, but what did you 102 1 understand it meant? 2 A. I'm afraid I don't recollect. 3 Q. Let's look at the rest of the email: 4 "In our tender is based on all the additional 5 information which we received from SDS via the four 6 number CDs. The last of which was delivered to us on 7 25 November 2007. We therefore insist that our contract 8 be related to this." 9 A. Yes. 10 Q. What did you understand that to mean? 11 A. In order to give meaning to what I described in my 12 statement as the envelope for the scheme costs, then 13 I think he was referring to the information that would 14 form at least part of the baseline of that envelope. 15 Q. It might be suggested that by referring to the design at 16 a certain date, tends to indicate an intention on their 17 part not to accept responsibility for design development 18 after that date. 19 A. Perhaps that's one interpretation, but I don't recollect 20 that being the discussions at the time. In my statement 21 I make reference to a telephone conversation with 22 Richard Walker which he was struggling with the issue of 23 how to bound the emerging designs. So designs is an 24 evolutionary process, through various stages, different 25 definitions of those stages, and you reach a certain 103 1 stage, certainly preliminary design, and that sets the, 2 if you like, the design envelope for the scheme and the 3 detailed designs then are an evolution of those designs 4 to fill in the detail, if you like. 5 So if you were to think of it in terms of the design 6 process being length, then the concern was about the 7 width, and the preliminary designs are the, if you like, 8 set the width of the emerging design, designs for the 9 scheme. 10 Q. Thank you. I would like to see an email which you sent 11 following that now. Could we look at CEC01384941. 12 This is an email from you dated 19 December 2007, 13 and it's addressed to Richard Walker and copied to 14 various others on both sides of the negotiation. 15 A. Yes. 16 Q. You say: 17 "Further to our discussion earlier ..." 18 I just pause. Is that the discussion we've just 19 been referring to? 20 A. I suspect so. But I can't be sure. 21 Q. "... I have amended the agreement (in red italics) for 22 the wording we agreed. We are I believe now clear to 23 sign up on this basis and move forward. For the 24 avoidance of doubt please confirm this by return." 25 From the way you have expressed yourself there, you 104 1 sound like you think everything is tied up and now 2 essentially agreed? 3 A. Mm-hm. 4 Q. You weren't expecting any further difficulty? 5 A. Not at that time. 6 Q. If we could then go to the document I'd previously 7 referred to, CEC01384942. 8 You think see this is the front page. If you go to 9 page 3, unfortunately this version has not been rendered 10 in colour, but if I tell you which are the things that 11 were in red italics that you refer to in your email. If 12 we look at clause 3.3, we can see in sub-clause a) the 13 word "intent" has been inserted in italics? 14 A. Yes. 15 Q. Then at the end of the clause: 16 "As typically represented by the drawings issued to 17 BBS with the design information drop on 18 25 November 2007." 19 So what this is saying is that they would take the 20 development and completion of detailed designs save for 21 future changes to elements of the design intent for 22 civils works that are substantially different, compared 23 to those forming the current scheme being designed by 24 SDS as typically represented by the 25 November design 25 drop. 105 1 Did you regard that as something which 2 Richard Walker had signed up to in your conversation 3 with him? 4 A. Yes, otherwise I don't think I would have used those 5 words. Whether -- sorry, whether it related to -- we 6 had many conversations, I think, over that period. 7 Whether it related to the conversation I have just 8 described, I can't really say, I can't recollect. 9 Q. In essence what I am really getting at is did you think 10 in drafting this or sending it out, you were taking 11 a position which he might or might not agree with, or 12 that you were recording something that was discussed and 13 agreed? 14 A. I think, given my language, I thought that we would 15 have -- had agreed it. It's not quite the same as the 16 other side confirming that they've agreed it. 17 Q. If could you see the response from Richard Walker to 18 this, please, could we look at the email reference 19 CEC00573351. 20 We can see, if we look at the foot of the screen, 21 lower half first, it's an email from Richard Walker to 22 you. It's dated 19 December 2007. Richard: 23 "We went through this at the Board today and 24 generally everyone was ok with it. However, to get 25 CEC's buy in we need to make a few changes. I have also 106 1 corrected a few typos as well. I don't think there is 2 anything controversial in this but call me if you wish 3 to discuss." 4 A. Mm-hm. 5 Q. Sorry, I'm just realising I don't think I have given the 6 right reference. Could we look at the reference on the 7 screen? 8 If you look up the screen to see the email further 9 up, that's from Richard Walker to you? 10 A. Yes. 11 Q. We can see that what he says is: 12 "Geoff, we still have issues with accepting design 13 risk. We have not priced this contract on a design and 14 build basis, always believing until very recently that 15 design would be complete upon novation. With the 16 exception of the items marked provisional which we have 17 now fixed by way of the 8 million, we cannot accept 18 more ..." 19 It says "drain", I think it should be "design": 20 "... development other than minor tweaking around 21 detail. Your current wording is too onerous. Trust we 22 can find a solution." 23 If you look further up, you can see that you 24 forwarded that to Matthew Crosse with a number of 25 exclamation marks by way of comment? 107 1 A. Yes. 2 Q. You were clearly surprised by that response from Geoff 3 Gilbert (sic) there on 20 December? 4 A. From Richard, yes. 5 Q. From Richard, sorry, yes. What was your reaction to 6 that email? 7 A. Probably unprintable. 8 Q. Was it a source of concern to you? 9 A. Yes. Hence I forwarded it on to Matthew and Steven. 10 Frustration, I think. 11 Q. Did this appear -- when he says we have issues with 12 accepting design risk, how did that correspond or 13 otherwise with the agreement that you thought you had? 14 A. I thought it was completely contrary to the agreement 15 that we had, completely contrary to what had been agreed 16 at Wiesbaden. Hence the exclamation marks. 17 Q. So is it clear by this time, did you think you were 18 still trying to implement the Wiesbaden Agreement, or 19 you weren't trying to implement the Wiesbaden Agreement, 20 you were doing something new? 21 A. We were still trying to implement the Wiesbaden 22 Agreement. 23 Q. If we could look then, please, at an email from you 24 again to Richard Walker, reference CEC01495066. 25 This is dated 20 December, sent out at seven minutes 108 1 past 2 in the afternoon, by you to Richard Walker and 2 Steven Wright. You say: 3 "Electronic copy of the agreement". 4 Was this, I think a further draft that you were 5 sending out, following Richard Walker's comments? 6 A. Without seeing the document, I can't say. 7 Q. If we go to it, it's document CEC01495067. 8 Again, it's a recognisable front sheet, if we look 9 again at page 3. And enlarge clause 3.3. We can see 10 this is -- has various mark-ups on it? 11 A. Yes. 12 Q. Now, do you recall making these changes? 13 A. I don't specifically, but presumably it was my document, 14 so -- and if I sent it, then it was probably me. 15 Q. What were you trying to achieve in making these changes? 16 A. I was trying to ensure that the intent of the Wiesbaden 17 Agreement to fix the transfer of risk for the remaining 18 design development to BBS was articulated. 19 Q. So you weren't taking account of what Richard Walker 20 said and no longer seeking to transfer the design risk? 21 A. Well, no, I don't think that would have worked. 22 Q. What do you mean -- 23 A. Well, sorry. Difficult to just impose conditions on 24 another party. If not impossible. So I would have 25 thought it had arisen out of some further discussions or 109 1 some statement that we would set out to them what we 2 required. 3 Q. What you've done by changing the wording is that it now 4 makes reference to the fact that: 5 "The BBS price for civil works includes for any 6 impact on construction cost arising from the normal 7 development and completion of designs based on the 8 design intent for the scheme as represented by the 9 design information drawings issued to BBS up to and 10 including the design information drop on 11 25 November 2007." 12 If we just pause there, that seems to have a lot of 13 the elements that we've seen in the previous draft? 14 A. It does. 15 Q. It goes on to say: 16 "The price excludes ..." 17 Now we see, if we go over the page to subparagraph 18 (b) as renumbered, (b) is now: 19 "Any material changes to the design resulting from 20 the impact of the kinematic envelope of the CAF tram 21 vehicle on the civils design." 22 A. Mm-hm. 23 Q. So it's the all design development save for that? 24 A. Yes. 25 Q. If you go further down the page, you can see it 110 1 highlighted there? 2 A. Yes. 3 Q. The text has been added: 4 "For the avoidance of doubt, normal development and 5 completion of designs means the evolution of design 6 through the stages of preliminary to construction stage 7 and excludes changes of design principle, shape and form 8 and outline specification." 9 A. Yes. 10 Q. Where did that wording come from? 11 A. It conceivably came out of discussions between myself 12 and Richard. If you go back to the telephone 13 conversation that I recollect, I described the design 14 process as being length, as it travels through the 15 various design stages, and width being what the envelope 16 of the scheme is. 17 So it was trying to give some definition to width to 18 protect BBS, because I think this was their issue at the 19 time, against what would colloquially be called scope 20 creep. 21 Q. In terms of the closing words -- 22 A. Sorry, can I just add that that was their issue. 23 I think that's evident from the discussion I described 24 to you that I had with Richard Walker. It was about 25 trying to define the width, if you like. 111 1 Q. Was this provision for the avoidance of doubt part of 2 the definition of the width? 3 A. Yes. 4 Q. It's defining what normal design development is, and 5 that's what the consortium are to do? 6 A. Mm-hm, yes. 7 Q. The exclusions there, design principle, shape and form, 8 and outline specification, did you discuss these 9 particular terms with Richard Walker, as far as you 10 recall? 11 A. I don't recollect, but it seems -- I think probably yes, 12 given that I was sending him a further document. 13 Q. In particular, did you discuss what was intended -- what 14 you had in mind at that time by "design principle"? 15 A. I'm sure that was part of the discussion. Again, if you 16 go back to the telephone conversation I recollect, it 17 was all about those issues. 18 Q. Can you recall what you had in mind by "design 19 principle"? 20 A. The -- effectively the design principles that would have 21 been enshrined in the work that had been done to date. 22 Q. Are you able to give an example of what is a design 23 principle? 24 A. A design principle would perhaps be the nature of the -- 25 a bridge, whether it's steel or concrete. The nature of 112 1 the foundations that had been decided. 2 There are, you know, different construction methods, 3 different design approaches, perhaps, for different 4 assets, different aspects of the scheme. 5 So those would be design principles. 6 Q. And shape and form, how does that relate to a tram? 7 A. I think given that it was Richard Walker that was having 8 the discussions with me, it was more about the civils 9 aspects of the scheme, rather than the systems aspects. 10 So the preliminary designs would have had 11 preliminary designs for, say, some of the structures 12 which would have been dimensioned. So they would be 13 a certain width, certain depth, perhaps. So that's, if 14 you like, the envelope -- excuse me, the envelope of 15 that structure. 16 So it's referring to that. The broad form of the 17 structure. 18 Q. The last thing is "outline specification"? 19 A. Mm-hm. 20 Q. Was there a document or something you clearly had in 21 mind there as being the outline specification, or is it 22 more abstract? 23 A. That was probably the specifications that were issued 24 with the design information provided by SDS. 25 Q. Why is it an outline specification? Is that 113 1 a particular stage of it? 2 A. At the preliminary design stage, then the specifications 3 were perhaps outline, ie not finalised. 4 Q. Did you intend that there would be a stage of 5 specification after outline specification? 6 A. Specifications will have been finalised on completion of 7 the design. So yes, there would have been more 8 specifications, perhaps would have been different stages 9 of development for different aspects of the scheme. 10 That's not unusual in projects of this nature. 11 Q. If you look then at another email, please, it's 12 CEC01431385. 13 You see, this is an email from you, again on 14 20 December, later in the day, to Stewart McGarrity, 15 copied to others. Saying: 16 "Copy of BBS deal (as signed by Bilfinger Berger but 17 not Siemens yet), regards." 18 So this appears that what you've offered has now 19 been accepted and we have a signed agreement, a 20 partially signed agreement? 21 A. Yes. 22 Q. If we look at the attachment for that, it's CEC01431387. 23 The usual front sheet. If we look at page 3 to see 24 where we are now, clause 3.3, you can see the reference 25 in the initial wording to design intent and it's 114 1 represented by paraphrasing it, the design drop on 2 25 October 2007. Paragraph (b) has the reference to the 3 kinematic envelope, and if you go over the page, we have 4 the "for the avoidance of doubt" provision at the top 5 there? 6 A. Yes. 7 Q. So this indicates that the version, as far as clause 3.3 8 is concerned, the version you had just circulated had in 9 fact been signed? 10 A. Yes. 11 Q. Had you taken legal advice as to the effect of the 12 Agreement or how it might be drafted at any time prior 13 to this stage? 14 A. I don't recollect whether I did or I didn't. 15 Q. If we heard evidence there's no indication that any 16 legal advice was taken, you can't recall whether or not 17 there was a conscious decision not to seek legal advice? 18 A. No. 19 Q. I think then you had some responsibility for completion 20 of the Infraco contract, and in particular for the 21 present purposes for drafting of Schedule Part 4 of the 22 contract? 23 A. Yes. 24 Q. Now, to what extent was Schedule Part 4 of the contract 25 intended to be a reconsideration of the sort of things 115 1 in the Wiesbaden Agreement, or what extent was it simply 2 to incorporate things from the Wiesbaden Agreement? 3 A. Certainly where we started, then to incorporate the 4 things that had been settled by the Wiesbaden Agreement. 5 Q. The sort of things that we see, with that wording, did 6 you regard that as up for negotiation once again? 7 A. Not at that time. 8 Q. Did it turn out that it was? Did you feel it up for 9 negotiation? 10 A. I think the subsequent documents showed that it did. 11 Q. I think during the course of the discussions or 12 negotiations on Schedule Part 4, you had dealings with 13 Andrew Fitchie at DLA at that time? 14 A. He was part of the team and so no doubt, yes. 15 Q. Did you and anyone else at tie decide that Schedule 16 Part 4 would be something that the lawyers would not be 17 involved in? 18 A. Schedule 4 started, as I think I have said in my 19 statement, Schedule 4 started out as a rather 20 mechanistic commercial document. So certainly at the 21 outset, I don't think I did. 22 Q. You don't think you ... 23 A. I didn't think that they needed to be involved in the -- 24 certainly in the initial drafting of that document. 25 Q. Did that change? 116 1 A. The -- further down the line I think there are documents 2 that show that Ian Laing of Pinsent Masons who was -- 3 who represented Bilfingers, as I recall, decided that he 4 was unhappy with some of the wording. So at that stage 5 it became much more legalistic. 6 Q. What did you do in respect of legal advice at that 7 stage? 8 A. I don't recollect what specifically -- what I did, but 9 I believe that some of the emails indicate that DLA 10 representatives were at some of the meetings to discuss 11 those things. 12 Q. What was the function of DLA representatives at the 13 meeting? 14 A. They would be there to provide legal advice. That was 15 their job on the team. 16 Q. If it is suggested that the representatives from DLA 17 were there simply to mark up the draft of the Agreement 18 as it was being discussed and circulate it afterwards, 19 would you agree with that? 20 A. I don't recollect but it seems a little odd. 21 Q. Do you ever recall getting advice from Andrew Fitchie at 22 DLA that the -- as far as Schedule Part 4 was concerned, 23 the deal had essentially been done in Wiesbaden and was 24 no longer open for negotiation? 25 A. That being Andrew Fitchie's view or someone else? 117 1 Q. That being what he had been advised by the contractors' 2 consortium? 3 A. I'm afraid I don't recollect. 4 Q. Does that mean you just don't recollect whether or not 5 that was said to you or it was not said to you? I'm not 6 clear. 7 A. I don't recollect whether it was said to me or not. 8 Q. Do you have any recollection then of whether you were 9 informed by Andrew Fitchie that he'd been advised by the 10 contractors that there was essentially a bar on a fixed 11 price deal? 12 A. I don't recollect that. 13 CHAIR OF THE INQUIRY: If that had been said, would that 14 have been a significant matter for you? 15 A. I think it would, because it would have meant, my Lord, 16 that the Wiesbaden deal was being unpicked. 17 CHAIR OF THE INQUIRY: Well, when you say you don't 18 recollect anything of that sort, what do you mean? You 19 just don't remember? 20 A. I'm sorry, I don't remember. Some time ago there were 21 lots of discussions, probably evident from the documents 22 that you have, in the period from January through to the 23 end of March. 24 MR LAKE: I want to follow through that trail of 25 correspondence to see to what extent it might jog your 118 1 memory in relation to things that were happening. 2 If we could start by looking at an email 3 CEC01495585. Enlarge the upper half. We can see this 4 is from Bob Dawson to you, copied to Stewart McGarrity, 5 dated 13 January. The subject matter is "Contract 6 Package Completion Status - Schedule 4". It says: 7 "As just discussed, I done an initial draft of the 8 above as requested. 9 I have incorporated the figures from the email 10 titled 'Wiesbaden Deal' that you sent me on Wednesday 11 9 January 2008 but I'll need to have your input on a few 12 things I don't know the background to and I have made 13 a few comments in red. 14 Unfortunately I can't attach it remotely for some 15 reason but I'll try to send it on my home email." 16 Had you decided that it should be Bob Dawson was the 17 person that draft -- the first draft of this Agreement? 18 A. Yes. 19 Q. Why did you give that to him? 20 A. There was an awful lot going on at the time, and I felt 21 that he was capable to start the development of that 22 schedule. 23 Q. We saw from the email exchanges that we looked at, you 24 had a very prominent position in relation to the 25 documentation of the Wiesbaden Agreement immediately 119 1 afterwards. Would it not have been better for you to 2 carry on with that if that was what was to form Part 4 3 of the Schedule? 4 A. I think I would be speculating. Clearly I didn't at the 5 time. 6 Q. Would it have been better if you had? 7 A. Not necessarily. As I said, I felt that certainly at 8 that time, and I think it's evidenced by the nature of 9 the drafting, that it was a relatively straightforward 10 commercial document, at least in its initiation. 11 Q. I think we will come to look at this email 12 correspondence and we will see that Richard Walker of 13 Bilfingers is involved in it; would that be your 14 recollection? 15 A. Yes. 16 Q. He was also involved in your emails documenting the 17 Wiesbaden Agreement. 18 A. Mm-hm. 19 Q. Were you aware that he was also at the Wiesbaden 20 meeting? 21 A. Yes. 22 Q. Whereas on the tie side, by the time we get here, things 23 going to Bob Dawson, we are on the -- personnel of the 24 three different sets of personnel trying to get this 25 into effect? 120 1 A. Yes. 2 Q. How much discussion was there between the various teams 3 by way of handover and passing information about what 4 had taken place? 5 A. We were working as a single team. We were co-located. 6 So we would have had many discussions no doubt. 7 Q. If we look then at an email CEC01447445. This time it 8 comes from Robert Dawson. Again, it's to you, copied to 9 Stewart McGarrity and also himself, and this is the 10 attachment as per his earlier email. We see it's now 11 he's been able to put the attachment to this one. 12 If we look at that attachment, it is CEC01447446. 13 Schedule 4 contract price analysis. If we can go to 14 the next page, sorry, next page again, we can see the 15 terms of the agreement, as far as prices, you have got 16 1.2 saying -- I should read from 1.1: 17 "The majority of the Infraco construction price is 18 on a 'fixed and firm' lump sum basis and not subject to 19 variation unless changed pursuant to one of the 20 following clauses." 21 1.2: 22 "However, certain items are not 'fixed and firm' and 23 this Schedule sets out the various categories of items 24 that will be subject to change, together with 25 a mechanism for adjustment." 121 1 Now, is that a construction that you had given to 2 Bob Dawson as to what was to be covered by Schedule 4, 3 that it was to indicate how additional sums would be 4 price? 5 A. Yes, that was part of the purpose of Schedule 4. 6 Q. Then if we look at the whole page again, just so we can 7 pick off the headings, you can see the first heading is 8 provisional items, and then we've got provisional 9 quantities. Those are both matters where it's agreed 10 that the sum in the contract won't be fixed until it's 11 actually known what is built? 12 A. Sorry. 13 Q. Provisional sums and provisional items relate to matters 14 where it wasn't known what the sums would be until the 15 things were actually built? 16 A. Finally, yes. 17 Q. If we look at the following page, we have got value 18 engineering? 19 A. Mm-hm. 20 Q. That would be means by which the price would be reduced? 21 A. Mm-hm. 22 Q. Identified tie changes under third party agreements. Is 23 that where things would have to be changed in order to 24 suit, as it suggests, various third parties, their 25 assets? 122 1 A. Yes, I would imagine so. 2 Q. Transfer of MUDFA scope is dealing with the possibility, 3 isn't it, that certain of the utilities works might end 4 up being transferred to Infraco, and therefore they 5 would be entitled to an increase in price in that 6 situation? 7 A. Yes. 8 Q. Ground conditions, we can see, is somewhat incomplete, 9 and that the drafter's note says: 10 "Need to check latest position." 11 So that's an incomplete; do you agree? 12 A. Yes. 13 Q. Then look at the following page. Indexation has been 14 left blank. Then we have got "SCHEDULES OF RATES, 15 CONSTRUCTION PRICE ANALYSIS, PHASE 1B AND FINAL ACCOUNT 16 REQUIREMENTS. For construction price analysis, there's 17 really nothing provided at this stage at all in the 18 draft? 19 A. Mm-hm. 20 Q. So we can see at this stage, none of the wording that we 21 have seen in the Wiesbaden Agreement as documented by 22 you had found its way into Schedule 4? 23 A. No. 24 Q. Was there a reason for that? 25 A. Not that I recollect. 123 1 Q. Did you expect it to find its way into Schedule 4 even 2 by this stage? 3 A. I'm afraid I can't say. I don't remember. 4 CHAIR OF THE INQUIRY: Well, you've been spending some time 5 on Schedule 4, and you delegated Mr Dawson to draft this 6 document. Did it not come as a surprise that your work 7 hitherto wasn't reflected in it? 8 A. It's possible -- 9 CHAIR OF THE INQUIRY: Anything is possible, Mr Gilbert, but 10 I'm just asking. If you spent a considerable time on 11 a document, getting it right after negotiations, and 12 then you're faced with Mr Dawson's version which doesn't 13 include your work, did you not think -- did you not 14 speak to him and say: this is not what I wanted. 15 A. Presumably we would have spoken after he'd prepared his 16 drafts, if not before. But I don't recollect those 17 discussions. 18 Sorry, my apologies. I'm not looking to be evasive 19 or difficult. It's some period of time ago. There were 20 lots of discussions, lots of things going on. Much of 21 which was in parallel to try and bring about a timely 22 close of this contract, which was quite a difficult 23 exercise. 24 CHAIR OF THE INQUIRY: I appreciate that, but one might 25 think that that was all the more reason that the events 124 1 might stick in your mind, particularly unusual events, 2 where you've spent some time drafting a document and 3 you're faced with your delegate coming up with a totally 4 different one ignoring all your work. 5 A. I don't recall, I'm afraid. 6 MR LAKE: Can we look at another email, this time between 7 tie and Bilfinger. It's CEC00592608. 8 If we look at the lower, the bit that starts from 9 Bob Dawson, this is an email dated 16 January from 10 Bob Dawson. It goes to Scott McFadzen and 11 Michael Flynn, both representing the consortium, but 12 it's been copied to you. You will see that? 13 A. Yes. 14 Q. He says: 15 "Attached are our thoughts on the above. 16 This is very much an outline framework and requires 17 some further work, particularly input and co-operation 18 from BBS." 19 I take it Mr Dawson will have discussed this with 20 you before he sent it to the consortium members? 21 A. Quite likely, yes. 22 Q. If we look at the attachment to that email, it's 23 document reference CEC00592609. You can see the front 24 page, "CONTRACT PRICE ANALYSIS". Then if you go to 25 page 3, we can see in clause 1.1 and 1.2 what I've 125 1 already referred to, the indication firstly that prices 2 are fixed and firm, and then in 1.2, the indication that 3 this schedule sets out the areas where the prices are 4 not fixed and firm. That's adhering to the provisional 5 rationale for this, this would indicate where there 6 would be extras or adjustments? 7 A. Yes. 8 Q. We can see number 2 there, provisional sums, once again 9 set out? 10 A. Mm-hm. 11 Q. Over the page, I think we can get to see provisional 12 quantities. Then if we go forward to page 6, under the 13 heading, "CONSTRUCTION PRICE ANALYSIS", it's still been 14 left blank. There's simply a statement: 15 "DRAFTER'S NOTE: need stuff for BBS." 16 So once again there's absolutely no reference within 17 this that I can see to the sort of terms that were 18 contained within the Wiesbaden Agreement and which had 19 been negotiated by you in your emails? 20 A. Yes. 21 Q. Why were you sending Schedule 4 out without any 22 reference to those matters? 23 A. I don't recollect why. Much of what this document is 24 about at this stage is about how the adjustments would 25 be made to the price. 126 1 Q. Schedule 4 is essentially the price of the contract? 2 A. It is. 3 Q. Presumably it's a matter of some critical importance? 4 A. Conceivably. I don't -- I don't remember -- 5 CHAIR OF THE INQUIRY: Really, Mr Gilbert, are you saying 6 that the price, conceivably, the price of a contract 7 might conceivably be of some importance? 8 A. Sorry. Of course it's important. Yes. 9 CHAIR OF THE INQUIRY: Can we not just have straight 10 answers, please. 11 A. Apologies. 12 MR LAKE: Look at a document now sent by the consortium. If 13 we look at email reference CEC00592614. 14 If we could look at the email on the lower half of 15 the page, we can see it's moved forward now to 16 4 February and Scott McFadzen of Bilfinger replies to 17 Bob Dawson and copies you and other people, saying: 18 "Please find attached our document Schedule 4 19 Pricing Assumptions. 20 We look forward to discussing this with you 21 tomorrow." 22 Can you see that? 23 A. Mm-hm. 24 Q. If we look up the page, Bob Dawson then sends it to 25 Andrew Fitchie, and copies you, saying: 127 1 "Geoff says that we are meeting at your offices at 2 10.00 am to discuss the issue and thus I have forwarded 3 Scott McFadzen's email and BBS's Schedule 4 as an 4 attachment together with a further copy of a BBS 5 Schedule 4 with Tom Hickman's comments in pink and mine 6 in blue." 7 A. Mm-hm. 8 Q. Before we look at that attachment, I think it -- we see 9 there a reference to your meeting at your offices at 10 10.00 am. That's presumably on 6 February, the day of 11 at that email. 12 If we look down to the foot of the page again, we 13 can see that Scott McFadzen is referring on 4 February 14 to a meeting to take place between the parties, the next 15 day, 5 February. Was there a meeting that took place on 16 5 February? 17 A. I'm afraid I don't know. 18 Q. Could we look, please, at the attachment with the 19 mark-ups that are referred to there. It's reference 20 CEC00592615. 21 First, can I just take a look at the various pages, 22 just to gain an impression. We can see that on the 23 first page, if we look at the various defined terms. If 24 we look at the second page, there's further defined 25 terms, and the third, fourth, we can see that there's 128 1 a number of assumptions being set out here. 2 If we go all the way to page 8, you can see various 3 contract terms set out there; including references to 4 Notified Departures. 5 This seems to be a very much more formal document -- 6 A. It does. 7 Q. -- immediately that's come back. It's been filled in 8 essentially by the consortium? 9 A. Mm-hm. 10 Q. Was this what you expected from them? Had you had any 11 prior inkling that this was to happen? 12 A. Not that I -- excuse me. Not that I recollect. 13 Q. If we look at what they are saying, if we go back to 14 page 1, I'll come back to the comments in a moment. If 15 I just read the black text, the definition of: 16 "Base Date Design Information", means [save to the 17 extent qualified by the Base Case Assumptions,] the 18 design issued to the Infraco on or before 19 25 November 2007 ... in each case as identified in the 20 Base Date Design Information Schedule excluding the 21 Accommodation Works." 22 So we have a much more detailed definition of what 23 the route of the design was that's to be taken forward. 24 A. Yes. 25 Q. If we go to the Base Case Assumptions on page 2, we see: 129 1 "Base Case Assumptions" mean the following 2 assumptions: (a) that the Design prepared by the SDS 3 Provider will ..." 4 If we look at number (i): 5 "Be issued by the SDS provider to Infraco ready for 6 construction by no later than the earlier of ... four 7 weeks in advance of the Programme and ... such longer 8 period that shall be reasonably necessary to allow the 9 Infraco to procure plant and materials in sufficient 10 time to carry out and complete the Infraco Works in 11 accordance with the Programme." 12 That seems to be something entirely new. That's 13 relating to the programme of delivery of design 14 information? 15 A. It is, yes. 16 Q. Had there been any discussion prior to this that this 17 was to be an assumption on which the price was to be 18 based? 19 A. Possibly. I don't recollect. 20 Q. It's not reflected in the Wiesbaden Agreement, is it? 21 A. It's not. 22 Q. That was dated, I think, 20 December? 23 A. Yes. 24 Q. Did tie work between Christmas and New Year? 25 A. I don't think so. 130 1 Q. So then we've had January has past and now it's the 2 start of February. Can you recall whether there were 3 any discussions about a matter such as price in that 4 month? 5 A. Quite possibly. There were lots of discussions about 6 the parallel aspects of closing the deal. 7 Q. If we look at subparagraph (ii) here: 8 "Not, in terms of design principle, shape, form 9 and/or specification, be amended from the Base Date 10 Design Information." 11 Now, that wording, "design principle, shape, form 12 and/or specification", is broadly familiar from what 13 we've seen? 14 A. It is, yes. 15 Q. Except it's no longer a reference to the outline 16 specification. It's simply a reference to 17 specification. 18 A. Yes. 19 Q. Were you aware why that change had been made? 20 A. No, I'm not, I'm afraid. 21 Q. Were you aware of what the effect of that change might 22 be? At the time were you aware of what the effect of 23 that change might be? 24 A. I'm afraid I don't remember. It's reference to 25 specification that relates to the Base Date Information. 131 1 So perhaps whether outline or not isn't that material. 2 MR LAKE: My Lord, I see it's past 1 o'clock. 3 CHAIR OF THE INQUIRY: I'm concerned about the timing here, 4 Mr Lake. 5 MR LAKE: Yes. 6 CHAIR OF THE INQUIRY: Would it help if we had a shorter 7 lunch of, say, 45 minutes? 8 MR LAKE: Yes, my Lord. 9 CHAIR OF THE INQUIRY: I think we'll break now for lunch and 10 resume again at 1.45. 11 (1.02 pm) 12 (The short adjournment) 13 (1.45 pm) 14 CHAIR OF THE INQUIRY: You're still under oath, Mr Gilbert. 15 Mr Lake? 16 MR LAKE: Thank you, my Lord. 17 Mr Gilbert, we were looking at the document we still 18 see on the screen. The reference finishes 2615. 19 We've been look at page 2. Could we go over to look 20 at page 3, please. If you look at clause (d), subclause 21 (i), and again just see what it said. Not looking at 22 the comments, just the text that has been offered by the 23 consortium. The assumption is that: 24 "In relation to utilities, the Infraco shall not be 25 required to undertake any diversions or protective works 132 1 except in relation to the Picardy Place, York Place and 2 London Road and the minor utilities diversions ... 3 That the MUDFA contractor shall have completed all 4 MUDFA works in accordance with the MUDFA Completion 5 Programme." 6 Again, that was something new that hadn't been in 7 the Wiesbaden Agreement? 8 A. Mm-hm. 9 Q. So faced with these additional requirements or 10 additional assumptions that were to be made by Bilfinger 11 and Siemens, what was the response of tie or within tie 12 to that? 13 A. I think that we would have discussed them and worked 14 through what they were looking to achieve and why they 15 were including them. 16 Q. Just looking at some of the initial concerns, if we -- 17 to complete this, if I go on to ask you first of all to 18 look at another email, it's reference CEC01448355. 19 This time we've got an email again from Bob Dawson. 20 It's also on 6 February like the last one. Once again, 21 you're included in the people to whom it's addressed. 22 It's forward Schedule 4 with Andy Steel's comments 23 and what Bob Dawson has said is: 24 "Andy's comments are now added in turquoise." 25 If we look at the attachment to that with the 133 1 comments in it, it's document reference CEC01448356. If 2 we just look at page 4, it becomes apparent why I'm 3 looking at this. 4 We can see that in addition to the previous pink and 5 blue comments, we have now got turquoise comments from 6 Mr Steel as well. Do you see those? 7 A. Yes. Yes, I do. 8 Q. If we can go back to page 1 at the moment and start 9 looking at some of the comments which had been put on. 10 In relation to the base date design information, and the 11 date that had been included is 25 November, the comment 12 is: 13 "This date seems a bit early, other relevant 14 information may have been issued after, can we not just 15 refer to the schedule?" 16 What was your view on that concern? 17 A. I think based on what's written here that Andy perhaps 18 didn't understand what we were seeking to achieve in 19 transferring risk, and that in order to do that, there 20 would need to be a defined position from which we 21 established that definition. 22 Q. I think, just so we don't get ourselves into any 23 confusion, the turquoise comments are the ones from 24 Andy Steel. We have previously seen the blue comments 25 described -- I'm just trying to check whose comments 134 1 they are. I think they're Bob Dawson himself. 2 If we go then to page 2, where we looked at the base 3 case assumption (a)(ii), right at the foot of the page. 4 We can see that where it said "not in terms of 5 design principle, shape, form and/or specification be 6 amended", the suggestion is there that the word 7 "materially" be added. Do you see that? 8 A. I do. 9 Q. What was your view on the desirability of adding that? 10 A. I think ideally if we could have included "materially", 11 then we would. 12 Q. Without that, to what extent do you consider you were 13 more exposed? 14 A. Not necessarily more exposed, but "materially" would 15 have perhaps improved the definition. Sorry. 16 Q. Then if we continue, amended from the base date design 17 information, and the comments in blue are Bob Dawson's, 18 I think we saw from the earlier email. He said: 19 "What about any specific issues that we know about, 20 such as value engineering." 21 What was your view on that? Because that clearly 22 indicated there were going to be changes, weren't there? 23 A. Yes, of a downward direction through value engineering, 24 which I think is included in a separate part of the 25 document. 135 1 Q. Did you have any discussion with the designer, the SDS 2 contractors, as to what changes were likely after that 3 date? 4 A. Not that I recollect. 5 Q. That meant in a sense that you had no idea what sort of 6 risk there would be, that there were things that were 7 changes of design principle, shape, form and/or 8 specification. 9 A. But there was nothing that I was aware of at the time. 10 Q. If you look then at the turquoise comments, Mr Steel's 11 comments, he has added: 12 "Given that a substantial amount of design requires 13 to be presented, reviewed, etc this clearly will 14 not happen. Agree with Bob's comment." 15 So that's a fairly clear indication, is it not, that 16 this assumption is simply not going to be maintained. 17 It's not going to be true. 18 A. That would appear to be -- that's Andy's statement, yes. 19 Q. Is that not a concern, if you're about to enter into 20 contract or considering entering into a contract where 21 the assumption simply isn't justified? 22 A. I think if we go back to what I explained in terms of 23 taking the responsibility for the forward risk, ie the 24 lengthwise direction of the travelling design evolution, 25 then we were seeking to pass that responsibility to 136 1 Infraco. 2 Q. Do you consider this was being successful or achieving 3 that objective, passing the responsibility to Infraco? 4 A. I thought so at the time, yes. 5 Q. Could we look at page 10 of this. If we enlarge 6 clause 1.1. The clause as proposed says: 7 "The contract price has been fixed on the basis of 8 inter alia the base case assumptions. If now or at any 9 time the facts or circumstances differ in any way from 10 the base case assumptions (or any of them) the Infraco 11 may (if it becomes aware of the same) notify tie of such 12 differences (a "Notified Departure")." 13 Bob Dawson has added to that: 14 "Can't be just any departure or all risk will come 15 back to tie." 16 A. Mm-hm. 17 Q. He seems to be contemplating there that this is 18 ineffective to transfer risk away, and as it's drafted 19 by the consortium, tie will carry all the risk? 20 A. I'm not sure if that's necessarily what he meant. There 21 would be a need, given that we -- I described it as the 22 envelope -- that we had defined the envelope. There 23 would need to be a process and procedure for the 24 notification of anything that was emerging out of the 25 designs that would mean that you -- the scheme strayed 137 1 beyond that envelope. 2 Q. What he's saying, he's talking about whether or not 3 there's a departure from the assumption. Mr Dawson's 4 concern is if there's any departure from the 5 assumptions, that means that all the risk comes back to 6 tie? 7 A. I don't think I agreed with that statement. 8 Q. Did you consider it at the time? 9 A. I would have considered it at the time. 10 Q. Were there discussions regarding that view? 11 A. Quite -- quite likely, yes. 12 Q. With whom would you have had those discussions? 13 A. I would have discussed it with Bob. 14 Q. Would you have discussed it with any of your other 15 colleagues involved in contract negotiation? 16 A. Quite possibly. I don't recollect, I'm afraid. 17 Q. Can you recall who in particular was involved with or 18 assisting you in the negotiation of Part 4 of the 19 Schedule? 20 A. Bob -- Bob Dawson most definitely. Dennis Murray, 21 I think at some points, and then others became involved 22 from -- from the various emails along the way. 23 Q. Did Jim McEwan have a role? 24 A. I don't recollect, I'm afraid. 25 Q. What was the role played by Bob Dawson and 138 1 Dennis Murray? 2 A. Start with Dennis Murray, Dennis Murray was recruited to 3 replace me. I was departing at the end of the Infraco 4 procurement process. Bob assisted me in the -- in the 5 procurement process. 6 Q. Why was it that you wished to or intended to leave the 7 project at the time of conclusion of the procurement 8 process? 9 A. I think, as I said in my statement, that I didn't intend 10 when I arrived to stay any longer than the -- than the 11 end of the procurement process, contract award 12 effectively. At that time it was anticipated it would 13 be no more than a year. 14 Q. In fact I think it was slightly longer than a year that 15 you stayed? 16 A. Yes. 17 Q. We saw reference in the emails we looked at before the 18 lunch break that it was intended that there be a meeting 19 on the 6th. Do you remember whether or not that was 20 attended by Andrew Fitchie? 21 A. I don't, I'm afraid. 22 Q. That means you wouldn't remember whether or not he said 23 anything to you at that meeting that clawing anything 24 back from the position in the Wiesbaden Agreement would 25 be difficult? 139 1 A. I don't. 2 Q. If you go then to an email, CEC00592619. 3 If you could go over to page 2, first of all, 4 please. 5 If we look at the foot of the page first, we see 6 there's on an email from Bob Dawson to Richard Walker 7 and others, saying: 8 "We need to confirm arrangements for going through 9 the balance of your points on schedule 4. 10 Geoff said tomorrow and suggests the following 11 attendees: you, Scott, someone from Siemens ... either 12 Andrew Fitchie or Phil Hecht, Dennis Murray, Geoff and 13 me." 14 This is you suggesting that there should be legal 15 representation, either Andrew Fitchie or Philip Hecht at 16 the meeting? 17 A. Yes. 18 Q. Again, it may seem obvious, but why did you wish to have 19 legal representation at that meeting? 20 A. Because I think, as you can see, it -- the document had 21 moved away from what I would call a standard commercial 22 document to one that was more legalistic in nature. 23 Q. Can you recall being given any advice about the 24 Agreement and its effect at this early stage? 25 A. I don't, I'm afraid. 140 1 Q. If you'd been given advice that this failed to effect 2 a transfer of risk to the consortium and that the effect 3 of it was that tie would retain the design risk, would 4 that have been important advice to you? 5 A. It would have. 6 Q. Do you think it likely you would remember that advice? 7 A. I think I would, yes. 8 Q. What would you have had to do if you had had that 9 advice? 10 A. In the first instance, I would have discussed it with 11 Matthew Crosse, Project Director, and others, and then 12 gone back to Richard Walker and say: this is not the 13 intent of the Wiesbaden Agreement. 14 Q. Would you just have carried on to negotiate the 15 agreement in that form and then concluded it in that 16 form? 17 A. I don't believe so; no. 18 Q. If you look up this email, to see the next one in the 19 chain, we can see it's from Richard Walker to you. It's 20 dated 12 February. It says: 21 "Geoff, last Thursday we signed a document where we 22 committed to holding our price. Schedule 4 was clearly 23 dealt with, why is Bob trying to re-engage. The 24 matter is closed." 25 Do you recall that? 141 1 A. I don't, I'm afraid. 2 Q. When he refers to last Thursday, do you recall 3 concluding an agreement in the early part of February 4 that became known as the Rutland Square Agreement? 5 A. I don't remember it. 6 Q. Could we look further up the page, please. Sorry, go to 7 the previous page so we actually see the content of your 8 email. We can see what you said in response to 9 Richard Walker's email is: 10 "Richard, this is not correct. Bob is not looking 11 to reopen anything already settled but Schedule 4 is 12 not concluded. The following remain outstanding. 1. 13 We need to settle Ian's paper ... page 6 onwards ... 2. 14 Section by section, element by element definition of the 15 basis of the price (we agreed last week that this is 16 required). 3. Detailed build up of the price for both 17 civils and systems. 4. Final agreement on a completed 18 schedule 4. 19 So that we can get to item 4 please advise when we 20 will receive item 2. 21 Ian's version of Schedule 4 does not contain all 22 the things that we practically need in order to enable 23 commercial administration of the contract following 24 award. Hence Schedule 4 is not currently clearly and 25 comprehensively dealt with. 142 1 We will issue updated Schedule 4 this morning for 2 your review. The purpose of today's discussion was to 3 conclude item 1 above to keep the resolution of this 4 Schedule moving. However, if you would prefer we can 5 meet later in the week once you have reviewed the 6 updated schedule." 7 That appears to be a rejection of the position taken 8 by Richard Walker that Schedule 4 was dealt with and 9 matters are closed? 10 A. Yes. 11 Q. In terms of the matters you raised, what did you mean by 12 point 2, section by section, element by element 13 definition of the basis of the price? 14 A. I think I was looking for more detail around their 15 definition of perhaps what was included section by 16 section. How the route was divided into sections, as 17 I recall. Element by element, asset by asset. 18 Q. The general catch-all provision number 4, final 19 agreement on a completed Schedule 4, what was included 20 there? 21 A. To bring all the remaining issues that were outstanding 22 to a close. 23 Q. The point in relation to the pricing assumptions we have 24 looked at, particularly regarding normal design 25 development, you don't make any mention here of the 143 1 qualifications that the consortium sought to introduce 2 to that. 3 A. Mm-hm. 4 Q. Did you regard them as having been agreed by this time? 5 A. I think I did assume that they were agreed. Perhaps 6 given the nature that -- of the comments that I've made, 7 then I was looking for a little more granularity. 8 Q. In terms of the transfer of -- the wording in relation 9 to the transfer of the design responsibility, and the 10 additional wording we saw in the Base Case Assumption 11 regarding that, was that still an issue outstanding 12 between the parties? 13 A. I'm afraid I don't remember. 14 Q. Can we look, please, at a copy of the Agreement known as 15 the Rutland Square Agreement, please. It's CEC00205642. 16 We see there the title page of the Agreement, it's 17 an agreement between tie and Siemens plc and Bilfinger 18 Berger (UK) Limited. 19 Could we look at page 2. Now, looking at that as 20 a whole, do you recognise that? 21 A. I don't recollect it specifically. 22 Q. If we look at page 5, we can see the signature page, the 23 dates there of 7 February 2008. Do you recall 24 discussion at that time regarding these issues? 25 A. I'm sorry, could you go back to the first page so that 144 1 I could be reminded of the issue. 2 Q. The first page of the text is page 2. Is that the page 3 you wanted to see? 4 A. Yes, thank you. (Pause) 5 I think that is a reflection of the conclusion of 6 some ongoing discussions about some of the issues that 7 hadn't been settled at that time. It mentions, for 8 example, CAF joining the BBS consortium. 9 Q. The first item it mentions is the contract price. 10 A. Mm-hm. 11 Q. Do you recall the consortium coming along and saying 12 they felt it necessary to increase their price? 13 A. I think that the background to the Rutland Square 14 Agreement was the conclusion of some arguments about 15 further price increases. 16 Q. Look at other things contained in the Agreement. Could 17 we look, please, at page 8 in the schedule. If we can 18 enlarge 2.5 in the subclauses. 2.5 is: 19 "Schedule 4 (Contract Price Analysis) is to: 20 2.5.1. contain detailed bottom up price build up 21 and description of scope for each element ..." 22 And a timescale for that. 2.5.2: 23 "concept of draft limbs (n) and (o) (in the BBS 24 Consortium draft presented on 6 February 2008) are not 25 acceptable and are not to be included in 145 1 Schedule 4." 2 2.5.3: 3 "limb (c) is deleted." 4 It's apparent from this that in the course of the 5 discussions leading to this agreement, there has been 6 discussion about Part 4 of the Schedule? 7 A. Yes, clearly. 8 Q. Would you have been involved in those discussions? 9 A. I would have, yes. 10 Q. We can see certain things are considered here. We see 11 references there to limbs (n), (o) and (c), but nothing 12 in relation to the pricing assumption as to normal 13 design development. Can you recall that being discussed 14 at the time? 15 A. I don't believe it was. I think these were related to 16 other issues that were in contention at the time. 17 Q. Was a conscious decision taken by you that the risk -- 18 the provisions for transfer of risk in relation to 19 design should not be discussed? 20 A. Not that I recollect. 21 Q. I think they continued to be -- continued to be changes 22 to the drafts after this date. So what was the 23 situation as at this date, the start of February, in 24 relation to that drafting of the transfer of design 25 risk? 146 1 A. I think it remained as it was originally drafted in 2 the -- in the Bilfinger proposal. 3 Q. Could you look at another email, please. It's reference 4 CEC01448861. 5 We can see that this is an email from Bob Dawson to 6 Dennis Murray, dated 14 February, subject Schedule 4. 7 It says: 8 "Attached is a copy of Geoff's notes from recent 9 meetings which I am incorporating into a new draft. 10 If you have any queries, please let me know." 11 If we look at the attachment, that's reference 12 CEC01448862. Do you recognise this? 13 A. That's my handwriting, yes. 14 Q. At which meeting did you make these notes? Was it 15 internal or with the consortium? 16 A. I'm afraid I don't remember. It looks as though they're 17 my comments on reviewing the document. 18 Q. If we look at the -- could we enlarge the top right-hand 19 corner. Could you tell me what these handwriting 20 annotations say and what they were intended to achieve? 21 A. I am not sure what I meant by purpose: 22 "Need detailed basis for price as discussed." 23 Is one of the points I made in the earlier email, 24 that you showed me. That I had sent to Richard Walker. 25 Similarly, detailed price breakdown. 147 1 Then there's an unfinished comment at item 4. 2 Q. It looks "not clear how this ..."? 3 A. Sorry, I didn't complete the sentence, it would seem. 4 Q. Do you have any recollection now what you were referring 5 to? 6 A. I don't, I'm afraid. 7 Q. Could we go back to the whole page and then if we could 8 highlight the definition of Base Case Design Assumption 9 with the handwritten annotations to either side of it. 10 To the right-hand side, does that say "will be 11 exception" or "exemption"? 12 A. I think it's "exception". 13 Q. What do you mean by that? 14 A. I think it means that I didn't expect there to be many 15 changes or Notified Departures. 16 Q. Why did you not expect there to be many changes or 17 Notified Departures? 18 A. Because of the -- my belief in the way in which we had 19 transferred the future design risk. 20 Q. Surely this is the means by which that design is 21 transferred. That risk would be transferred. So 22 whether or not that is achieved depends on precisely how 23 you word this. 24 A. Sorry, I can't elaborate. 25 Q. Could we look at the following page, please. Could we 148 1 just highlight -- I think that's the best. Could we 2 scroll up a little bit, please. Thank you. 3 Under the definition for Base Case Assumptions, 4 subparagraph (a)(i), this is in relation to the 5 programme, you've added -- or what is your comment to 6 the right? 7 A. "just refer to programme", I think. 8 Q. So you were content to enter into a design -- a price 9 assumption that the designs would have been provided 10 according to a programme? 11 A. Yes. 12 Q. Which programme were you thinking was being referred to 13 there? 14 A. Probably the one that was current at the time. 15 Q. Had you had any discussions with SDS or your colleagues 16 as to whether or not it was likely there would be 17 a departure from that programme? 18 A. I don't recollect specific discussions, but no doubt we 19 decided on a specific programme to reference in the 20 Agreement. 21 Q. At this time, and this is February 2008, what knowledge 22 did you have about the performance under the SDS 23 contract? 24 A. It was clear, I think, by that time that it was -- the 25 design information was not coming through as originally 149 1 intended. If you remember my comment in relation to the 2 design programme that we developed and agreed for the 3 release of information to Infraco following preferred 4 bidder. 5 CHAIR OF THE INQUIRY: When you say just referred to the 6 programme, is that the Infraco programme? 7 A. No, that would have been the SDS design programme. 8 CHAIR OF THE INQUIRY: Because we see at the bottom that 9 there's already a divergence, isn't there, between the 10 SDS programme and -- 11 A. Sorry, my Lord, I didn't quite catch that. 12 CHAIR OF THE INQUIRY: It appears from the bottom that 13 there's already a divergence between the SDS programme 14 and the Infraco programme. 15 A. My apologies, my Lord. Are you referring to this could 16 be an open-ended concern? 17 CHAIR OF THE INQUIRY: Yes. 18 A. Yes, I think there was concern that we would need to 19 define and be clear on which programme the pricing 20 assumptions were based upon. 21 CHAIR OF THE INQUIRY: And which one would it be, SDS 22 version 26? 28? 23 A. Whatever was written in the final agreement, my Lord. 24 MR LAKE: Standing the performance up to that time, it was 25 highly likely, wasn't it, that there would be further 150 1 slippage in the design programme? 2 A. Possible, yes. 3 Q. It was likely that there would be -- highly likely that 4 there would be further slippage in the design programme? 5 A. Likely. 6 Q. You don't think it would be highly likely in view of the 7 history to this time? 8 A. I think it would depend on where we'd got to at that 9 time, and how -- how much confidence or otherwise had 10 been built in the work that SDS had recently done. 11 Q. Do you remember actually evaluating that matter or are 12 you now just sort of trying to work it out with 13 hindsight? 14 A. The comments I have just made? 15 Q. Yes. 16 A. I think with the benefit of hindsight. Sorry, I don't 17 recollect specific discussions. 18 CHAIR OF THE INQUIRY: Wasn't the SDS programme a matter of 19 concern at that time? 20 A. The SDS programme was a matter of concern, certainly up 21 until that point. Various actions had been taken to try 22 and address the various problems in getting the 23 design -- designs delivered to programme. 24 CHAIR OF THE INQUIRY: Are you saying that you thought there 25 was even a remote possibility that the SDS would get 151 1 back on track? 2 A. Given the volume of attention and work that had been put 3 into it, then that was certainly the intention at the 4 time. 5 CHAIR OF THE INQUIRY: Thank you. 6 MR LAKE: If you look at the following paragraph, number 7 (ii), it is: 8 "not, in terms of design principle, shape, form 9 and/or specification, be [add 'materially'] amended from 10 the Base Date Design Information." 11 What's your comment in relation to that? 12 A. It says "not prepared in accordance with contract". 13 Q. What do you mean by that? 14 A. I'm not sure. 15 CHAIR OF THE INQUIRY: Come on, Mr Gilbert. These are your 16 notes. You've written that down. It's easy enough to 17 say it was so many years ago, but these are notes that 18 you made at the time. Presumably you know what you 19 meant. 20 A. My Lord, I'm sure I did at the time. But, as you say, 21 it is a long time ago, and they were shorthand 22 annotations for what I was thinking at the time. 23 MR LAKE: Which contract did you have in mind there? 24 A. Probably the Infraco Contract. 25 Q. This is the Infraco Contract. So there seems to be 152 1 a confusing circularity to say "prepared in accordance 2 with the contract" when this is the contract? 3 A. I'm afraid I don't recollect. 4 CHAIR OF THE INQUIRY: You were responsible for procuring 5 this, were you? You were a significant person in the 6 procurement. 7 A. Yes, my Lord. 8 CHAIR OF THE INQUIRY: And you supposedly are a professional 9 person, a member of the Institution of -- Royal 10 Institution of Chartered Surveyors. 11 A. Yes, my Lord. 12 CHAIR OF THE INQUIRY: You're even on some of the 13 professional bodies, where you assess people's ability. 14 Are you still on these professional bodies? 15 A. Yes, my Lord. 16 CHAIR OF THE INQUIRY: If you were assessing someone and he 17 or she were giving you answers that you're giving today, 18 what would be your reaction to them? 19 A. I think that the answers that I have given are unlikely 20 to arise in those circumstances. The assessment that 21 I do is in relation to submissions that candidates put 22 forward and then -- of a project that they have recently 23 worked on, and then some questioning over various 24 standard capability aspects. 25 CHAIR OF THE INQUIRY: And if they said: I can't remember 153 1 because that was something I prepared last year; would 2 that impress you? 3 A. Perhaps not. 4 CHAIR OF THE INQUIRY: Mr Lake. 5 MR LAKE: My Lord, could we look to the following page, 6 please. Sorry, could we look to the foot of this page, 7 first of all. 8 The last comment on that page, what does that say 9 and what does it mean? 10 A. "Save for design developments. Words as Wiesbaden 11 Agreement." 12 Q. What did you intend by that? 13 A. I think the qualification that was in the Wiesbaden 14 Agreement to the normal design development wording. 15 Q. Here we've got the way the words -- the clause as 16 a whole is expressed, if we scroll so we can see further 17 up the page once again, a bit further still, thank you. 18 The assumption is: 19 "That the design prepared by the SDS provider 20 will ... not in terms of design principle/shape, form 21 and/or specification, be amended from the Base Date 22 Design Information." 23 You seem to want to be adding a qualification here: 24 "Save for design development as Wiesbaden 25 Agreement". 154 1 Am I reading it correctly? 2 A. I think that I wanted the principle that the meaning of 3 what would be outside normal design development would be 4 included in this Agreement. 5 Q. Why were you interested in trying to establish what was 6 not included in reasonable design development? Surely 7 for tie your objective would be to try and make sure as 8 much as possible was included in it? 9 A. I think given where we'd got to with the Wiesbaden 10 Agreement, I was looking to stick to the principles that 11 had been established there. 12 Q. On top of the four subparagraphs there, what further 13 qualification is needed in that we've already got that 14 the design may not change in terms of design principle, 15 shape, form and/or specification? I'm trying to 16 understand what it was that you felt should be added 17 there. Would you like to go back and look at the last 18 of the letters actually documenting the Wiesbaden 19 Agreement? 20 A. It might help. 21 Q. Could we go, please, to CEC01431387. 22 If we go to the third page of this, I wonder whether 23 it would be actually possible to have that on one side 24 of the screen and the other document that we were 25 looking at, just that one minute ago, on the other. 155 1 I think the one on the right-hand side, you need to 2 go back a page. Thank you. 3 Now, what we were looking at here is page 3 of the 4 Wiesbaden Agreement and page 2 of the draft -- the draft 5 of Part 4 of the Schedule that you had marked up. 6 Now, obviously on the left-hand side, the Wiesbaden 7 Agreement, the wording of clause 3.3 goes on over the 8 page with the provision "for the avoidance of doubt". 9 If you would like to consider that, just let me know. 10 (Pause) 11 CHAIR OF THE INQUIRY: Do you want to go over the page? 12 A. Sorry, I was waiting for a question. 13 MR LAKE: Do you want to see over the page on the left-hand 14 agreement? The question is: which aspect of the 15 Wiesbaden Agreement, the one we see on the left, do you 16 consider is required as a qualification to the Base Case 17 Assumptions on the right? 18 A. Yes, if you go over the page. I think the top 19 paragraph. 20 Q. The "for the avoidance of doubt"? 21 A. I think so. 22 Q. That tells you what normal design development doesn't 23 include. 24 A. Yes. 25 Q. That is changes of design principle, et cetera. 156 1 A. Mm-hm. 2 Q. But we already see in the Base Case Assumptions document 3 on the right-hand side, a provision that the design 4 shall not in terms of design principle, et cetera, be 5 amended. 6 A. Yes, you're right. 7 Q. Is there any reference in the draft that has been put 8 back and forward in February -- that's the one on the 9 right -- to the effect that normal design development is 10 at the risk of the consortium? 11 A. I can't see it. 12 Q. Was that something that you considered at the time? 13 A. I'm sorry, I don't know. I don't remember. 14 Q. It does appear by this stage that there's been 15 a significant change from Wiesbaden, in that there is no 16 longer the inclusion of normal design development 17 responsibility falling upon the contractors. 18 A. At that stage, from that particular draft, it doesn't 19 look like it. 20 Q. If you look over the page of the right-hand document, 21 please, to page 3. 22 A. Sorry, before we leave that. 23 CHAIR OF THE INQUIRY: Go back to page 2. 24 A. I think there's some reference to it in the -- that the 25 design prepared will not in terms of design principle, 157 1 shape and form be amended from the Base Date Design 2 Information. That's a reference back to one of the 3 statements, I think, in the -- in the Wiesbaden 4 Agreement. 5 MR LAKE: That's more of the nature, it's especially the 6 nature of a prohibition on changing it in certain 7 respects from the Base Date Design Information. There's 8 nothing to say that certain other changes shall be 9 included in the price the way there was in the Wiesbaden 10 Agreement which we see -- if you go -- could I ask you 11 to the left-hand page to go to the previous page, 12 page 3. 13 Nothing in the nature of the statement that the 14 price includes for the impact on construction costs 15 arising from normal development and completion of 16 design? 17 A. I can't see it there. 18 Q. It is a while ago, but it's material. Was that omission 19 deliberate? 20 A. Not on my part, no. 21 Q. Were you taking any legal advice on the Agreement, the 22 Schedule Part 4, as it stood at this time in February? 23 A. I think we've referred to DLA being involved in -- at 24 the discussions from a point in time. 25 Q. Did you have any discussion regarding this aspect and 158 1 whether or not the Agreement was effective to transfer 2 the risk for normal design development? 3 A. I don't remember. 4 Q. Could we go over the page in the right-hand agreement to 5 page 3, please. If we see this is in relation to the 6 utilities and the second element of that, which is that 7 the MUDFA contractor shall have completed all MUDFA 8 works. What's your comment in relation to that? 9 A. (d)(i), do you mean? 10 Q. (d)(ii). 11 A. My comment is: 12 "Other than as identified on the programme". 13 Q. What did you mean by that? 14 A. The programme of the works potentially would have 15 included utilities diversions that were being concurrent 16 with the -- or potentially concurrent with the MUDFA 17 contractor -- sorry, the works of the Infraco. 18 Q. So basically, if it was programmed that they were to 19 overlap, you wouldn't assume that they are not going to 20 overlap? 21 A. Exactly. 22 Q. Could we go to page 8 on the right-hand side. Could we 23 highlight paragraph 1.1 and all the comments around it. 24 What are your comments there and what was their 25 intended effect? 159 1 A. "Subject to the requirements of the contract, employer's 2 requirements and Infraco proposals." 3 So subject to the other parts of the contract. 4 Q. Why did you want to make this subject to other parts of 5 the contract? 6 A. Because those were -- the employer's requirements were, 7 if you like, the fundamental obligations of the 8 contract. 9 Q. What did you see the effect would be of making 10 clause 1.1 subject to the requirements of these other 11 provisions in the contract? 12 A. I felt that it would strengthen tie's position rather 13 than it just being purely the Base Case Assumptions. 14 Q. How did you see it might strengthen tie's position? 15 A. Because those -- it would be clear that the contract 16 price included compliance with the -- or delivery of the 17 employer's requirements. 18 Q. Was the intention then that the compliance with the 19 employer's requirements would in a sense be put ahead of 20 or above the Base Case Assumptions, and that even if 21 there was a departure, it wouldn't matter if it was 22 necessary to satisfy the employer's requirements? 23 A. Not necessarily. Perhaps further definition of the 24 obligation. 25 Q. Which obligation? 160 1 A. The obligation to deliver the works. 2 Q. There was already in the contract elsewhere an 3 obligation to deliver the works. 4 A. Sorry, that the contract price reflected the 5 requirements of the employer's requirements. 6 Q. What is your comment to the right-hand side of that? It 7 looks like the upper word is "Infraco"? 8 A. "Infraco proposals". 9 Q. Why have you written that there? What's the intention? 10 A. The intention, I think, was -- there's reference to IPs 11 above. IPs being short for Infraco proposals. That 12 they'd put forward proposals as to how they would 13 deliver the works, and that that would be included 14 within the contract price. 15 Q. And the handwritten note below it? 16 A. "And such change should be a tie change state on 17 clause 80". 18 Q. Why was Clause 80 being brought into it? 19 A. If there were departures from what I have described as 20 the envelope, then there would need to be a means of 21 assessing the value of those, which is what Clause 80 is 22 about. 23 Q. It's clear that the way this works if there's any change 24 from the design, or the MUDFA works require to be done 25 late or even the designs are late, that generates 161 1 a Notified Departure, which would be a change here? 2 A. Mm-hm. 3 Q. The generation of the change would in a sense be 4 automatic. It would be generated by facts and 5 circumstances, rather than a decision on the part of 6 tie? 7 A. Facts and circumstances, yes. 8 Q. Was there any consideration given to how the change 9 process would work when it wasn't tiee generating the 10 change but simply facts and circumstances? 11 A. Sorry, could you elaborate? 12 Q. Was there any consideration given as to how the change 13 procedures would work if the change was to be generated 14 by facts and circumstances rather than by a decision 15 taken by tie? 16 A. I think that that would be dealt with then or be valued 17 in accordance with Clause 80. 18 Q. We have seen that your notes that you attached to -- or 19 were attached to an email of 14 February. Could we now 20 look at a follow-up email from 19 February, reference 21 CEC00592621. 22 If you look at the lower email here, it's from 23 Bob Dawson to Scott McFadzen and Michael Flynn, copied 24 to you. It says: 25 "Attached is our updated 'travelling draft' of 162 1 Schedule 4 which follows the same format as sent to you 2 in January but now incorporates some of the points 3 raised in your Schedule 4 Pricing Assumptions document 4 sent under cover of Scott's email dated 4 February 2008 5 that have been discussed at subsequent meetings. 6 As you'll see there are a number of notes in red 7 that need to be addressed, largely by BBS." 8 Would you anticipate that Mr Dawson would have 9 discussed this with you before it was sent out to the 10 consortium? 11 A. Very likely. 12 Q. Could we look at the attachment, please. It's document 13 reference CEC00592622. Go past the title page to the 14 second page. That's the contents page. One further. 15 We can see, even looking at this, that as was said 16 in the covering email, this is nothing like the 17 Agreement we have just been looking at, on which you 18 wrote your notes. It goes very much back to the 19 formality of tie's proposal in January. It doesn't 20 have -- it doesn't start with any of the defined terms 21 such as Base Case Assumptions and Base Date Design 22 Information. Was that a deliberate decision that had 23 been reached on the part of tie to stick to the tie 24 draft, rather than using the consortium draft? 25 A. I don't recollect. Sorry, could you remind me of the 163 1 dates of the two emails, the one that we were looking 2 at, my annotations. 3 Q. The previous one with your notes was dated 14 February? 4 A. Yes. 5 Q. This one is under cover of an email dated 19 February? 6 A. Right. I think there may have been two aspects of the 7 schedule that were being developed concurrently. The 8 one from Bilfingers and the one -- this one which is as 9 much about how the works or the rates and prices and how 10 the changes -- how changes would be valued. 11 Q. It seems we've got a total non-meeting of minds here, 12 and that the parties aren't even using the same draft to 13 exchange their views. Is that fair comment? 14 A. Perhaps we are coming at it from two different 15 directions, yes. 16 Q. But you can't remember whether or not that was 17 a deliberate decision to stick to using the tie draft 18 rather than -- 19 A. I don't, I'm afraid. 20 Q. Could we look in this document, please, at page 5. If 21 we look at the upper half of this. We see it's 22 assumptions similar to that we have seen before from the 23 tie side. Assumptions in pricing of the construction 24 works price are (a) design, and the first bullet point: 25 "The Infraco Construction Works Price includes for 164 1 any impact thereon arising from the normal development 2 and completion of designs based on the design intent for 3 the scheme as represented by the design information 4 drawings issued to Infraco up to and including the 5 design information drop on 25 November 2007." 6 There's added in red after that, on the original: 7 "Note: any specific issues after then?" 8 So this is going very much back to a clear statement 9 that normal design development is to be included in the 10 price? 11 A. Yes. 12 Q. You can't remember whether that was a particular concern 13 arising out of your notes on the previous document or 14 otherwise? 15 A. Perhaps, but I don't remember the sequence of events. 16 Q. We see here, now there's a reference to completion of 17 designs based on the design intent as represented by the 18 design drop. 19 A. Mm-hm. 20 Q. Was there any significance in switching to "design 21 intent" rather than "design"? 22 A. Reading the word, I think it's again to make clear, 23 clearer, perhaps, that the intent of the design as it 24 travels through the subsequent stages of design would be 25 maintained as per the designs that had been developed up 165 1 to that -- that design drop date. 2 Q. If we look at the third bullet point there, we can see 3 the "for the avoidance of doubt" drafting which I think 4 very much reflects the clause that was in the Wiesbaden 5 Agreement? 6 A. Yes. 7 Q. So that's come back in word for word. 8 A. Mm-hm. 9 Q. If we go to see, the clause after that is that the 10 design prepared by the SDS provider will not: 11 "In terms of design principle, shape, form and/or 12 specification be materially amended from the drawings 13 forming the Infraco proposals." 14 A. Yes. 15 Q. The second bullet point is that will not be materially 16 amended from the drawings forming the Infraco proposals 17 as a consequence of any third party agreement. The 18 third bullet point: 19 "Be materially amended from the drawings forming the 20 Infraco proposals as a consequence of the reasonable 21 requirements of any approval body." 22 A. Yes. 23 Q. Here we have got once again an indication that it shall 24 not change in design principle, et cetera, but now it's 25 done by reference to Infraco proposals, rather than the 166 1 design drop information? 2 A. Mm-hm. 3 Q. How did that come about? 4 A. I think there was concurrent discussion with SDS and BBS 5 around the reconciliation of Employer's Requirements, 6 Infraco proposals and the SDS designs, to make sure that 7 there weren't any gaps, ie conflicts, between those 8 documents; in order to novate the SDS contract securely, 9 we would want to avoid there being any emerging gaps 10 between those documents. 11 Q. But you referred previously to the idea that as well as 12 the length of the project, you needed to determine the 13 width and that you know within which parameters are they 14 pricing to assume the risk? 15 A. Yes. 16 Q. This is now partly defining those parameters through 17 normal development and completion of designs, excluding 18 changes of design principle, et cetera, and then also 19 going to define it now by the Infraco proposals. 20 A. Mm-hm. 21 Q. Now, why was this additional strand added in? 22 A. Because the Infraco proposals would be part of the 23 obligation to deliver the scheme. 24 Q. Can you remember discussions taking place with any party 25 as to the fact that that was to be a limitation on the 167 1 design responsibility undertaken by the contractor? 2 A. There were discussions between SDS, tie and BBS around 3 the reconciliation of the documents that I meant, if 4 that's the question that you're asking. 5 Q. That's reconciliation of the Infraco Proposals, the 6 Employer's Requirements and the design drawings? 7 A. Yes. 8 Q. That was something you were involved in as well, trying 9 to get those aligned? 10 A. Yes. 11 Q. Was this arising out of the misalignment that it was 12 discovered had developed? 13 A. No, I think if you go back to some of the papers early 14 in the -- my time at tie, I reviewed the procurement 15 strategy probably as outlined in the outline Business 16 Case, and set out my thoughts on things that needed to 17 be dealt with, and I think there we anticipated that 18 there could be divergences at that time, and they would 19 need to be dealt with. 20 Q. When I read this originally, I passed over the second 21 bullet point here: 22 "Design delivery by the SDS provider has been 23 aligned with the Infraco construction delivery 24 programme." 25 A. Yes. 168 1 Q. That seems to be what is now proposed in relation to 2 assurance as to timely delivery of designs? 3 A. Yes. 4 Q. Rather than being fixed to any SDS programme? 5 A. The two need to interleave. So particularly when you 6 get to the construction design stage, then perhaps 7 stating the obvious, but it does need to be clear that 8 the designs need to be delivered in time, to enable the 9 contractor to procure and then deliver the works. 10 Q. Could we go forward to page 7 of this, please. Could we 11 highlight paragraph (g). We can see that the assumption 12 here is: 13 "that in relation to the utilities that the MUDFA 14 contractor shall have completed the diversion of any 15 utilities apparatus forming part of the MUDFA works in 16 accordance with the requirements of the Infraco 17 Programme." 18 A. Mm-hm. 19 Q. So this seems to be broadly an acceptance of the 20 qualification that the consortium sought to add in 21 essence that the MUDFA works be finished before the 22 Infraco works get under way, in general terms? 23 A. Yes, tie were in control of the delivery of the 24 utilities diversions, and they would need to be done 25 before the tram scheme alignment could be progressed 169 1 through those sections. 2 Q. Following this through, if we could then look at another 3 email, which is CEC01449876. We can see this is an 4 email that's from Ian Laing to yourself, Andrew Fitchie 5 and Bob Dawson dated 22 February 2008. 6 A. Mm-hm. 7 Q. We see what he says is: 8 "Please find attached our mark-up of Schedule 4 9 which is issued subject to client instructions in order 10 to keep things moving." 11 Do you see that? 12 A. Yes. 13 Q. If you look at the attachment to this, it's reference 14 CEC01449877. If we go past the title pages, and go to 15 page 3, we can see that this time at least tie have 16 stuck -- the consortium have stuck with using the tie 17 draft that was sent and had marked that up? 18 A. Yes. 19 Q. If we go to page 5 we can see, however, the text in bold 20 in the lower half of the page, if you could enlarge 21 that. In relation to these assumptions, what has been 22 said is: 23 "Conceptually the pricing assumptions are statements 24 which underpin the build up of the contract price. They 25 are not statements as to what BBS will or will not do in 170 1 carrying out the Infraco works (ultimately BBS is 2 required to deliver the whole of the Infraco works). 3 So, in that regard, we consider that the correct 4 approach is not to state here what is included for or 5 excluded from the contract price but to make factual 6 statements as to the assumptions upon which that price 7 is based. This approach will require an alteration to 8 the way in which many of the pricing assumptions are 9 expressed but has no impact on the commercial 10 intention." 11 Obviously you can see that's what it says there? 12 A. Yes. 13 Q. Notwithstanding that, if we go over the page, it's 14 apparent that there have been numerous mark-ups made of 15 these various assumptions in their current form. 16 A. Mm-hm. 17 Q. If you go to the previous page just for one moment, we 18 will see that in respect of the first assumption for 19 design, there at least, there is no change on that page 20 to what was originally written by you in the previous 21 draft; do you see that? 22 A. Yes. 23 Q. On the next page, the only change seems to be the 24 insertion of the word "and" after the date of 2007. 25 A. Yes. 171 1 Q. So if we move from that to a draft after that, I think 2 I can skip forward a draft. If we go to an email, 3 that's CEC01450182. Now, that is an email from 4 Bob Dawson to you and Ian Laing on 3 March at 19 minutes 5 past 6 in the evening. Once again, sending out an 6 updated draft for discussion at tomorrow's meeting. 7 It says it was largely drafted prior to the receipt 8 of Siemens' comments. Do you see that? 9 Sticking with 3 March, before we go to the 10 attachment, looking at another email, could we look, 11 please, at CEC01450122. This is an email from you to 12 Steven Bell and Jim McEwan, dated 3 March, and you say 13 in it: 14 "Updated paper feeding in the points on my radar 15 screen. We need to sort out a running order for these 16 negotiations. Also there seems to be confusion on the 17 relationship between IPs and Schedule 4 - we need to be 18 careful that we don't compromise the position for 19 post-contract by linking them too strongly." 20 What was the concern that would arise if you linked 21 too strongly the Infraco Proposals and Schedule Part 4? 22 A. I don't recollect what was in my mind, but I suspect it 23 was about the priority of documentation. 24 Q. Why were Steven Bell and Jim McEwan the recipients of 25 this? 172 1 A. Because by that time, I think they were very firmly 2 involved in the ongoing negotiations. 3 Q. If you could look at the attachment to your email there, 4 it's document reference CEC01450123. You can see this 5 is something that's headed up "Draft negotiations paper: 6 29 February 2008". If we go to page 4, in the original 7 version of this, rather than the version on the matters 8 that display in the Inquiry room, some of the text is in 9 red and some of the text is in black. 10 Do you recall whether this is something that you had 11 drafted, or whether it is something that you had marked 12 up with your comments prior to sending it out? 13 A. I'm not sure. What did the covering email say? 14 Q. The covering email said: 15 "Updated paper feeding in the points on my radar 16 screen." 17 A. It sounds like it was something I commented on rather 18 than drafted. But I couldn't be sure. 19 Q. If you look at the lower half of the screen, under the 20 heading, "Schedule 4 Pricing", it says: 21 "Consideration in all of the items listed below 22 required to identify." 23 The first item is: 24 "Identification if item must be agreed at Contract 25 Award or if it can be addressed by Change Control 173 1 post-award." 2 Then on the original version, the following text is 3 in red: 4 "Nothing can go to post award." 5 Now, was the original text yours, or was the 6 comment, "Nothing can go to post award" yours or were 7 neither of them yours? 8 A. I suspect that the "Nothing can go to post award" was 9 mine. There are a range of things were being discussed 10 at that time which I probably felt needed to be resolved 11 before we got to contract award. 12 Q. What was it couldn't go to post-award? 13 A. I'm afraid I don't remember. It would be the things 14 that are perhaps referenced in other documentation. 15 Q. Item 3 on that list: 16 "Material impact (if any) on Risk Transfer." 17 Then in the original it continues in red: 18 "No difference with Preferred Bidder position." 19 Is that likely, that last bit, "No difference with 20 Preferred Bidder position", likely to be text that you 21 have added? 22 A. Quite possibly. I'm afraid I don't remember. 23 Q. What is that -- 24 A. Sorry, I would have thought that if it's a tracked 25 change, it should have initials or names. 174 1 Q. Not in this version. 2 A. Okay. 3 Q. What does it mean then, "No difference with Preferred 4 Bidder position"? 5 A. I think that what I'm -- what is being got at is that we 6 want to maintain that position as far as possible. 7 Q. What was the position then on risk transfer as at 8 preferred bidder stage? 9 A. What we anticipated was that the Infraco proposals, 10 particularly their price, would get updated with the 11 release of design information, thus firming up -- 12 firming up the price. That's consistent with the 13 original strategy. 14 Then that got subsumed by the Wiesbaden Agreement, 15 as we discussed earlier. I think it's a broad statement 16 that relates to maintaining as far as possible the 17 original intent. 18 Q. Looking at the table underneath, although the items in 19 the first row are all in black, the other entries we can 20 see on this page are all in red in the original. We can 21 see the first thing -- the second thing, precedence of 22 Schedule 4, the entry is: 23 "Get agreement that is subsidiary to terms, ERs and 24 IPs." 25 Do you know what was meant by that? 175 1 A. I think that that means that the terms prevail over the 2 schedules. Similarly, the Employer's Requirements, and 3 the Infraco Proposals in the event of conflict. That's 4 my reading of it. 5 Q. As the agreement in Schedule 4 turned out, it was 6 Schedule 4 that took precedence over everything else, 7 wasn't it? 8 A. I don't recollect that, but ... 9 Q. You don't recall that change being made? 10 A. I don't. 11 Q. The next thing we can see is: 12 "Definition of normal design development". 13 It is said: 14 "Get agreement that words in Wiesbaden stand." 15 Was it those words, beginning "for the avoidance of 16 doubt", that you sought to have included? 17 A. I think the principle that we'd thought we'd agreed on 18 in the Wiesbaden settlement, if you like. 19 Q. Which principle? 20 A. The principles about transfer of design risk. 21 Q. We have finished with that document, thank you. 22 If we can then look with you at an email from 23 Bob Dawson which was sent out to the other side on that 24 same day, 3 March. If we could look at the attachment 25 to that, it's CEC01449877. If we look at page 5 of 176 1 this -- apologies. I have read the wrong reference. 2 Could we look at document CEC01450183. 3 Go to page 4 of this. We seem now to have a sudden 4 change in that tie are sending out a draft which is 5 adopting what was previously the consortium approach of 6 starting with a number of defined terms. 7 A. Mm-hm. 8 Q. Do you see that? 9 A. Yes. 10 Q. However, if we then go on to page 7, we can see a number 11 of assumptions in respect of the price, and it begins 12 with the one we have seen before: 13 "The Infraco Construction Works Price includes for 14 any impact thereon arising from the normal development 15 and completion of designs ..." 16 We see that? 17 A. I do. 18 Q. So despite the earlier comment by -- the comment in the 19 earlier draft from Mr Laing that they wanted to change 20 the approach for assumptions and make them just that, 21 rather than what was included, tie, for this time at 22 least, stuck to their guns and continued with what they 23 wanted to put in? 24 A. Yes. 25 MR LAKE: My Lord, I see it is 3 o'clock now. This would 177 1 split the afternoon in half if the break were to be 2 taken just now. I think we will be some further time. 3 CHAIR OF THE INQUIRY: We will adjourn for 15 minutes, and 4 resume again at 3.15. 5 (3.00 pm) 6 (A short break) 7 (3.15 pm) 8 CHAIR OF THE INQUIRY: You're still under oath, Mr Gilbert. 9 MR LAKE: Thank you, my Lord. I think we were looking at 10 document CEC01450183 on screen, and we just have at the 11 moment page 7 on screen. 12 I think from looking at this we see the assumption 13 in relation to design. We can see most of that wording 14 is familiar from previous drafts that we have seen? 15 A. Yes. 16 Q. I want to go forward from that then to an email from 17 you. It's reference CEC01450185. 18 This is an email from you. It's dated 3 March. 19 It's sent to Michael Flynn, Richard Walker, 20 Scott McFadzen, Jim McEwan and Steven Bell, and it's 21 copied to Ian Laing and Suzanne Moir, who I think were 22 lawyers at Pinsent Masons; is that correct? 23 A. That's correct. 24 Q. Mr Gallagher, who was the lawyer for Siemens at 25 Biggart Baillie, and Andrew Fitchie and Philip Hecht who 178 1 were the solicitors at DLA advising tie? 2 A. Yes. 3 Q. It says: 4 "Dear all. Agenda for the meeting to be held 5 tomorrow at 2 pm (lawyers and commercial) at CityPoint. 6 Purpose: To agree the principles and detailed content of 7 Schedule 4." 8 Then you set out the principles. Which firstly is 9 the precedence of Schedule 4. The second is the normal 10 design development. 11 What was it that you were seeking to agree in 12 regulation to the principle of normal design 13 development? 14 A. Maintaining the principle in the Wiesbaden Agreement of 15 transfer of responsibility for design development. 16 Q. Was it your understanding that the Agreement as it 17 existed at that time, the version we've just looked at, 18 was transferring or was not transferring normal design 19 development? 20 A. The document that we've just looked at, I think, that it 21 was. 22 Q. Had you discussed that -- actually, I will leave it. 23 We can see that the second item is the review and 24 agreement of the tie current draft. That would be the 25 current draft of Schedule Part 4, I think? 179 1 A. I believe so. 2 Q. Additional information and timetable for finalising. 3 You say: 4 "Bob, Dennis, Andrew, please can you attend." 5 I take it that's Bob Dawson, Dennis Murray and 6 Andrew Fitchie? 7 A. Yes. 8 Q. Who you asked to attend. Can you recall whether or not 9 they did attend that meeting? 10 A. I don't recall. 11 Q. If you were wanting to consider normal design 12 development and the transfer of design risk, is that 13 something that you were discussing with the other people 14 from tie, including the legal advisers at that time? 15 A. I believe so, yes. 16 Q. Did you get advice or was advice offered to you as to 17 whether or not the contract was transferring design 18 risk? 19 A. I don't recollect. The documents were available for 20 review, like many others at that time. 21 Q. If you'd been told at any time that the contract placed 22 tie at risk and that they would be paying for all sorts 23 of changes to design whenever they happened, would that 24 have been of concern to you? 25 A. It would have. 180 1 Q. What would you have done in relation to that? 2 A. Again, I would have discussed it with the rest of the 3 team and would have then gone back to Richard Walker and 4 to try and take them back to what we'd agreed at 5 Wiesbaden and what we believed we'd agreed at the 6 Wiesbaden Agreement. 7 Q. To what extent would such a change be material to you 8 and of concern to you? 9 A. I think -- 10 Q. Sorry, such advice, not such a change? 11 A. Sorry, could you repeat the question? 12 Q. To what extent would such advice about changes be of 13 concern to you or be thought by you to be highly 14 material? 15 A. It would be a significant concern. 16 Q. If that advice had been given to you, do you consider 17 you would have recalled it, recalled taking action in 18 respect of it? 19 A. I think I would, yes. 20 Q. But you don't recall it? 21 A. I don't. 22 Q. Could we then go on to another email, please. This is 23 reference CEC01450544. If we just look at the upper 24 half of this screen, you see it's an email again from 25 Bob Dawson to solicitors on both sides of the 181 1 negotiation and copied to you and Dennis Murray? 2 A. Yes. 3 Q. He says: 4 "Dear all, further to my email on Thursday I note 5 below the wording agreed during the telephone conference 6 with Geoff and Dennis." 7 It's: 8 "The Construction Works Price has been fixed on the 9 basis of inter alia the Base Case Assumptions noted 10 herein. If now or at any time the facts or 11 circumstances differ in any way from the Base Case 12 Assumptions (or any part of them) such Notified 13 Departure will be deemed to be a mandatory tie change in 14 respect of which tie will be deemed to have issued a tie 15 change on the date that such Notified Departure is 16 notified by either party to the other." 17 Why had you agreed that wording with Bob Dawson and 18 Dennis Murray? 19 A. I'm not sure whether that originated from tie or whether 20 that was something that was introduced by BBS. But it 21 goes back to the principle of feeding any differences, 22 departures, into the valuation process, change valuation 23 process within the contract. 24 Q. This generates a situation in which the changes will be 25 automatic. tie would have no control over them. 182 1 A. They could issue instructions to make other changes. So 2 if it was introducing something that was beyond the 3 scope of the scheme, then they could intervene. 4 Q. But they would have to intervene. If they didn't 5 intervene, various changes would occur automatically? 6 A. Yes. 7 Q. If the tie change mechanism was engaged, that would 8 result in additional sums being payable to contractors? 9 A. It would. 10 Q. Was any assessment carried out of what the likely 11 exposure to risk was in the light of these changes? 12 A. I don't recall, I'm afraid. 13 Q. One of the things we've seen is whether or not the MUDFA 14 works were going to be complete? 15 A. Mm-hm. 16 Q. Did you know by this time that the MUDFA works were 17 behind schedule? 18 A. I recollect that they were behind generally -- sorry, 19 let me put it another way. 20 The period of time between the clearing of utilities 21 and the commencement of Infraco works in sectors, 22 I think they were referenced as, was diminishing from 23 where it was originally intended to be, but there was 24 still a programme contingency or buffer at that time. 25 Q. But it was being eroded? 183 1 A. It was being eroded. 2 Q. Was there a concern that if it continued to be eroded, 3 the day would finally come when the MUDFA works were 4 encroaching on the time for Infraco works? 5 A. I don't recollect that being discussed at the time. 6 Q. You don't recall it being assessed and the risk being 7 considered? 8 A. I don't. 9 Q. What about the design work was ongoing even at that 10 time, in March 2008? 11 A. Mm-hm. 12 Q. Was there consideration of what design changes might 13 arise after contract close that would give rise to these 14 automatic changes? 15 A. I don't recollect. 16 Q. Does that mean it didn't happen? 17 A. I don't remember. 18 Q. Can we go then to an email CEC00592628. 19 We can see this is from Bob Dawson. Again, this is 20 addressed to Suzanne Moir at Pinsents and you are among 21 the people to whom it is copied. 22 It says: 23 "Further to our meetings yesterday and today, 24 I attach an updated version of what we discussed. 25 I haven't yet compared with notes from Geoff, Dennis and 184 1 Steven as yet and thus apologies if I've missed 2 something. Obviously I haven't put anything in lawyer 3 speak." 4 Was that the intention thereafter, that these drafts 5 would be reviewed by lawyers? And the wording checked 6 by them? 7 A. I think what he's saying is he has put it in plain 8 language that would need to be reviewed by lawyers. 9 Q. So is the intention on tie's part that this would be 10 reviewed by DLA? 11 A. At that time they were involved in the ongoing 12 negotiations of -- of that contract, yes. 13 Q. Had you made it plain to DLA that there was an intention 14 to transfer risk of design development to the 15 consortium? 16 A. I don't recollect specific discussions but I think in 17 order to progress the negotiations, then yes, that would 18 have needed to be discussed. 19 Q. Do you have any recollection of whether or not you 20 sought or obtained advice from DLA in relation to that 21 issue, whether the contract was effective to achieve 22 that end? 23 A. I don't, I'm afraid. 24 Q. Could we then look at an email reference CEC01451012. 25 This time the upper email runs from Ian Laing. It's 185 1 to Bob Dawson, Suzanne Moir, but again you are copied 2 into it, and it's dated 19 March 2008. Again: 3 "In advance of our meeting tomorrow, I attach our 4 mark-up of Schedule 4 in relation to the Pricing 5 Assumptions. This is extensive simply to align the 6 content with the outcome of recent discussions." 7 Do you recall particularly extensive discussions 8 taking place about this time, mid-March? 9 A. I think, as is indicated by the various emails we 10 reviewed, there were discussions over a protracted 11 period of time. 12 Q. If we look at the attachment to this, it's got document 13 reference CEC01451013. You can see there the cover page 14 of this agreement. If we go, for example, to page 3, 15 just by looking at the page overall, we can get some 16 idea that there are a number of mark-ups on that page 17 alone, adjusting the various definitions towards the 18 foot of the page? 19 A. Mm-hm. 20 Q. If you go over the page, we can see the definition of 21 Notified Departure, which is: 22 "A "Notified Departure" is where now at any time the 23 facts or circumstances differ in any way from the 24 assumptions and exclusions set out in the Base Case 25 Assumptions." 186 1 If I read the text left in: 2 "Save to the extent caused by a breach of contract 3 by the Infraco, thereafter tie has accepted the 4 principle of Notified Departure but have kept matters 5 simple and as a tie change as per 6 Richard Walker/Geoff Gilbert discussions. 7 Pinsent Masons to check for consistency." 8 The definition there of Notified Departure largely 9 reflects the contents of the email, where it was said 10 that you, Dennis Murray and Bob Dawson had reached 11 a view on something? 12 A. Mm-hm. 13 Q. If we go to the assumptions, Pricing Assumptions on 14 page 6, please. If we go to the following page, it's on 15 page 7 of this draft. We see that Pricing Assumptions 16 are -- first of all, if we just look at that as a whole, 17 we can see there's been quite extensive amendment of it 18 carried out at that meeting. Do you see that? 19 A. I do. 20 Q. It still contains the "for the avoidance of doubt" 21 wording although it's been moved down a little. But no 22 longer are we talking about departures in design 23 principle, shape, form or specification being from 24 Infraco proposals. It's now solely from the Base Date 25 Design Information. 187 1 A. Yes. 2 Q. But we see that at the top of the page, clause number 1, 3 it's: 4 "The design prepared by the SDS Provider will not 5 (other than amendments arising for the normal 6 development and completion of designs) in terms of 7 design principle, shape, form ... change from the Base 8 Date Design Information." 9 Do you see that? 10 A. I do. 11 Q. So was the intention there to mean in the first place 12 that if such change from the design principle, 13 et cetera, arose as a result of normal development and 14 completion of design, it would be -- it wouldn't 15 generate an automatic change? 16 A. That's correct. 17 Q. However, if you look at the "for the avoidance of doubt" 18 wording further down the screen here, it says: 19 "For the avoidance of doubt, normal development and 20 completion of designs means the evolution of design 21 through the stages of preliminary to construction stage 22 and excludes changes of design principle, shape and 23 form..." 24 Do you see that? 25 A. I do. 188 1 Q. So it was a strange situation. We're told that firstly 2 there will be a contract change, if I call it that, if 3 the design changes in terms of design principle, 4 et cetera. That's stage 1, isn't it? 5 A. Mm-hm. 6 Q. Then we're told that stage 2, there won't be a contract 7 change if the design alteration is a result of normal 8 development of completion of designs. That's the 9 intention there. 10 A. Yes. 11 Q. But the stage 3, we're told that such a change of design 12 principle, shape, et cetera, isn't normal development 13 and design. 14 A. That wasn't the intention. I understand what you're 15 saying. But now looking at it. 16 Q. There's a circularity there, isn't there? 17 A. Yes. 18 Q. The effect of this wording is that there is now no 19 exception really for normal development of design. 20 A. I understand what you're saying, yes. 21 Q. Was that the subject of any discussion with legal 22 advisers on tie's part? 23 A. Not that I recollect. 24 Q. Was the meeting at which these matters were agreed, was 25 that a matter at which there had been legal 189 1 representation? 2 A. I don't recollect. If it was the meeting that was 3 referred to in the previous email, then the intention 4 was that there were legal representatives there. 5 Q. Can you remember particularly whether or not there were 6 legal representatives there? 7 A. I couldn't say reliably. 8 Q. Do you remember this issue being discussed? 9 A. I don't. 10 Q. That email we have just seen was dated 19 March. If you 11 could look at another email of 19 March at CEC01489534. 12 Give me one moment. I have just got the wrong 13 reference. (Pause) 14 It's CEC01489543. This is an email from 15 Andrew Fitchie to yourself, Bob Dawson, Steve Bell, and 16 it's dated 19 March, the same date as the email we have 17 just been looking at; do you see that? 18 A. Yes. 19 Q. What he says is: 20 "Guys, in my view, there are various entries in this 21 now which to my mind have nothing to do with pricing 22 assumptions. They have to do with possible relief of 23 comp [compensation] events. See Assumptions 32, 33, 39, 24 40. Other variety of points also on VE and ground 25 conditions." 190 1 Now, Mr Fitchie makes no reference there at all to 2 the first design -- the first pricing assumption we've 3 seen relating to the design. Can you recall whether 4 there was any discussion in relation to that with him or 5 whether you asked him to consider that, as well as these 6 other things that he appears to have looked at? 7 A. I do not, but they seem to have come from a document 8 that he's reviewing. 9 Q. I think we saw that the previous email that covered the 10 draft that we've just been looking at was copied to 11 Mr Fitchie also? 12 A. Yes. 13 Q. If you could go then to an email and version of it -- 14 the email is CEC01451053. 15 This is an email from Philip Hecht. It's addressed 16 to Steven Bell, Dennis Murray, Bob Dawson. You appear 17 to have been omitted from this one. It is: 18 "Please find attached Schedule 4 as agreed today on 19 screen. Please note the various actions on both sides, 20 as footnoted, to bring this document to a close." 21 If we look at the attachment, which is CEC01451054, 22 and if we look at page 6 of this draft, if we look at 23 the Pricing Assumption number 1 there, I think we can 24 see, or I ask you to take a look at it, and consider, is 25 it in terms of the draft we looked at, only this time it 191 1 doesn't have all the mark-ups, it's clean? 2 A. Sorry, were you asking me a question? 3 Q. Yes. If you take a look at it, does it have all the 4 same text as we saw in the previous marked-up version, 5 it's just that this one is clean and doesn't have those 6 mark-ups? 7 A. Yes, just looking at it, yes, that seems to be the case. 8 Q. Did you or anyone else at tie seek to make any changes 9 to this, prior to the schedule being concluded, this 10 particular Pricing Assumption? 11 A. Without comparing it to the final one, I am not sure. 12 Q. If we could ask you then, please, to look at an email 13 with reference CEC01451185. 14 We see the top email is one from Ian Laing? 15 A. Yes. 16 Q. To various people within tie, but not, I think, you. 17 Was there a reason why you weren't being included in 18 emails at this time? In relation to the Schedule 19 Part 4? 20 A. Not that I recollect. 21 Q. What he says is: 22 "As we discussed earlier today, the Design Delivery 23 Programme that will be v28. The Pricing Assumption in 24 Schedule 4 of the Infraco Contract assumes that the 25 Design Delivery Programme will not change from v26. It 192 1 follows that there is the possibility that there will be 2 an immediate Notified Departure on contract execution. 3 Given the unusual position that we are in, please can 4 you confirm that this is understood and agreed by tie." 5 Now, was this shown to you within tie at that time? 6 A. Not that I recollect. 7 Q. Could you look, please, at document CEC01465933. 8 If you go to the second page. Go to the third page. 9 We can see there at the top of the page, the text of the 10 email from Ian Laing that I have just been referring to? 11 A. Yes. 12 Q. If we now go to the page above this, page 2, look at the 13 foot of the page. We can see above that email there's 14 another one from Ian Laing, this time dated 31 March, 15 which might be seen as a chaser. It's: 16 "Steven/Jim, Please can you let me have confirmation 17 that the position on the Notified Departure in relation 18 to the Design Delivery Programme is understood and 19 agreed by tie." 20 Do you see that? 21 A. I do. 22 Q. Could you look further up the page, please. Do you see 23 a letter -- an email went from Jim McEwan to 24 Andrew Fitchie and Steve Bell, saying: 25 "Can you advise on a response to this, please. What 193 1 Ian is saying is factually correct albeit that we are 2 working to minimise the impact and variance between 3 critical path items. While we accept that the version 4 change will be a notified departure, we are concerned to 5 ensure that there will be no gaming of this position by 6 BBS, and that only where the change can be shown to 7 materially change the Infraco programme critical path 8 should we be liable for potential additional charges." 9 Had that been discussed with you before that email 10 was sent out? 11 A. I don't appear to be on the email chain at that point. 12 So I don't recollect it. 13 Q. Do you recollect any discussion about the notification 14 by Ian Laing that this -- as he put it, possible that 15 there would be an immediate Notified Departure on 16 contract signature? 17 A. I don't. But I think there's an email from me, isn't 18 there, at the top. 19 Q. There is further up the chain. I just wondered, were 20 people within tie already aware that there was going to 21 be an immediate Notified Departure or did this come as 22 something of a surprise to them when it was raised by 23 Pinsents? 24 A. I don't recollect the detail, but if you go to -- my 25 email above indicates that I understood the significance 194 1 of it. 2 Q. Yes. If we go further up the page, if we go to the 3 previous page, sorry, page 1. At the foot of the page, 4 you start with an email. We will come to your earlier 5 email in a moment, but we will see there's a response to 6 the email by Andrew Fitchie that he's been sent by 7 Jim McEwan, but he copies his email to, amongst others, 8 you. 9 A. Yes. 10 Q. What Andrew Fitchie says is: 11 "If the situation is that at this point SDS is 12 unable to produce a design delivery programme which is 13 reliable and static at V26 - and this is indeed the 14 situation that SDS have articulated - and that this 15 programme will need to be varied immediately 16 post contract award, tie needs to endeavour to negotiate 17 with BBS now the specifics of what is or is not to be 18 permitted as a variation to the Infraco Contract and its 19 master construction programme, otherwise the Notified 20 Departure mechanism is too blunt and will permit BBS to 21 include everything that they estimate is going to affect 22 them to be priced and to be granted relief. That 23 estimate is bound to be all encompassing and 24 conservative. 25 The only approach open to tie, in my opinion, is 195 1 a factual one, not a contractual one (since the 2 mechanism for Notified Departure puts the advantage with 3 BBS for creating an automatic tie change): to capture as 4 many identified key changes that tie knows will be 5 required and to attempt to fix them and agree their 6 likely programme and/or cost impact with BBS prior to 7 contract award, or at the least identify the reasonable 8 range of programme and cost impacts. Tie can still 9 monitor/evaluate what are the elements of this specific 10 Notified Departure for which Infraco will assert claims 11 for additional cost and time, but tie has no ability to 12 prevent there being a tie change, other than going to 13 DRP." 14 Over the page, Mr Fitchie says: 15 "This is one where Steven and Geoff must, I feel, 16 have a better sense of how factually to restrict BBS's 17 ability to exploit this. After this review we might be 18 able to go about trying to structure acceptable controls 19 in the Infraco Contract." 20 Now, dealing with that last point first, he's saying 21 there that he considers that you, along with Steve Bell, 22 are in the best position to work out what the factual 23 controls are. Would you agree that you were in 24 a position to try and work out what the factual controls 25 were? 196 1 A. I think at that time, as the contract had not been 2 signed, we would have been able to reconcile the 3 conflicting programmes. 4 Q. In what way? 5 A. The -- the impact of that disconnection in programme at 6 that early stage, particularly, would mean that it would 7 have an impact on the delivery of the Infraco works. So 8 if you go back to my point about design needed to be 9 complete to enable procurement and delivery of the 10 physical works, then it would have an impact on the 11 physical progress of those works; and that, I felt, 12 needed to be resolved before we entered into contract. 13 Q. That would deal with the one change that had been 14 immediately brought to your notice? 15 A. Mm-hm. 16 Q. I come back to my earlier question. Was it a surprise 17 to you to realise that there would be an immediate 18 Notified Departure as soon as the contract was signed? 19 A. I think, given my reaction, yes. 20 Q. Having realised and been put on notice then that there 21 would be one immediate Notified Departure there, did it 22 occur to you that there might be a number of other 23 automatic Notified Departures arising over the course of 24 the contract works? 25 A. I don't remember my thoughts at the time. 197 1 Q. You can see that Andrew Fitchie drew to your 2 attention -- if we can go to the preceding page, 3 page 1 -- what in the second paragraph of 4 Andrew Fitchie's email, the text in brackets. He 5 advises you that the mechanism for Notified Departure 6 puts the advantage with BBS by creating an automatic tie 7 change? 8 A. Mm-hm. 9 Q. Was that a source of concern, that essentially as things 10 were drafted, it was going to create an advantage for 11 the consortium? 12 A. I don't recollect my thoughts at the time. 13 I remember -- I'm reminded of the specific issue by my 14 email. 15 Q. Look at your email at the top of the screen. Scroll up. 16 It's also on 31 March 2008. It's from you to 17 Andrew Fitchie, Jim McEwan and Steven Bell. You say: 18 "My view is that we need to (a) confirm the 19 agreements made with SDS on how the differences between 20 V26 and V28 will be dealt with eg where and how they 21 have agreed to pull back those dates. (b) identify the 22 impact of these mitigations and any unmitigated changes 23 from V26 on the BBS critical path. This presumably 24 shows that their critical path is unaffected. Then 25 agree this position with BBS. (c) include the agreed 198 1 SDS mitigations in the Programme Schedule. 2 This is I think the best that we can do to pin BBS 3 and SDS down on this issue." 4 Is that to a degree, accepting or attempting to 5 adopt the advice that had been given by Andrew Fitchie 6 in his advice? 7 A. I think I picked up on the issue from Andrew copying me 8 in in his email, and then that was my proposal for 9 dealing with that issue. 10 Q. We've heard from another -- given Andrew Fitchie's 11 advice, from Jim McEwan that he didn't think that it 12 would be practicable to revisit the issues. He put it 13 that it would open a whole can of worms on the pricing. 14 And that the matter should just be concluded and then 15 a Notified Departure fought tooth and nail. What was 16 your view on that? 17 A. I saw that email in the collection that was sent to me, 18 but I wasn't copied in on that email. 19 Q. What's your view on that suggestion, that it should just 20 be concluded and fought tooth and nail? 21 A. I don't think that would have been wise. Hence I made 22 my recommendations here. 23 Q. Was your recommendation the one ultimately adhered to? 24 A. I don't know. 25 Q. But you were there for another month after this date, 199 1 weren't you? 2 A. I was. 3 Q. You left at the end of April. So these three things 4 that you said you wanted to have happen, did they in 5 fact happen? Did they happen? 6 A. I'm afraid I don't recollect. 7 Q. I mean, you addressed that email to Andrew Fitchie, 8 Jim McEwan and Steven Bell. Andrew Fitchie was 9 obviously not part of tie. He wouldn't be the one 10 carrying out the three things you said you wanted done? 11 A. Mm-hm. 12 Q. Jim McEwan, was he essentially junior to you in carrying 13 out the task of getting the contract concluded? 14 A. No. 15 Q. How did his role fit in relation to yours? 16 A. Latterly he started to take control of the negotiations. 17 Q. If the Inquiry has heard evidence that he regarded 18 himself as having just -- assisting you in the 19 negotiations, what is your comment on that? 20 A. That's not quite how I recollect it. 21 Q. And Steven Bell, he was by this time the Project 22 Director? 23 A. He was. 24 Q. Whose task would it be to carry out these three things 25 or to get someone else to carry them out? 200 1 A. Steven. I guess I perhaps should have insisted. 2 Q. In as much as the contract then went on to be concluded, 3 you were involved in that. So you must have been aware 4 whether or not your advice was implemented. 5 A. I'm afraid I don't recollect. 6 Q. In as much as you have been put on notice here of one 7 particular change -- that's in relation to the 8 programme -- and which programme would be current when 9 the contract was signed, you had had your mind focused 10 here on the possible consequences of a notified 11 departure arising; yes? 12 A. Yes. 13 Q. If we go to the foot of the page and look at 14 Andrew Fitchie's advice and the paragraph beginning "the 15 only approach". In the third line: 16 "To capture as many identified key changes that tie 17 knows will be required and to attempt to fix them and 18 agree their likely programme and/or cost impact with BBS 19 prior to contract award." 20 A reference there to "as many ... key changes that 21 tie knows will be required". Does that go beyond merely 22 the change of programme from V26 to V28? 23 A. Reading those words, then yes, it does. 24 Q. Was anything done to implement that advice, to start 25 considering all the other changes that might arise on 201 1 contract conclusion? 2 A. I do not recollect. 3 CHAIR OF THE INQUIRY: Can I be quite clear. Are you saying 4 that Mr McEwan by this stage was really senior to you in 5 this matter? 6 A. I think so. If you go to my email, then it's addressed 7 to Jim giving him advice. 8 CHAIR OF THE INQUIRY: And Mr Bell, Steven Bell, is he 9 senior to you as well. 10 A. Yes, I reported in to the project directors. 11 CHAIR OF THE INQUIRY: So having sent your email, did you 12 get any feedback from Mr McEwan or Mr Bell? 13 A. Not that I recollect, my Lord. 14 CHAIR OF THE INQUIRY: Did you think it was sufficiently 15 important to protect tie and the city by pursuing it? 16 A. On that particular issue, then I think it's evident that 17 I did. 18 MR LAKE: Look at an email, please, CEC01374219. We can see 19 this was copied to you. It's from Dennis Murray to 20 Stewart McGarrity and Andrew Fitchie, copied to 21 Steven Bell. It's dated 22 April 2008, and it notes 22 that: 23 "Schedule 4 attached for QA review. 24 "Still to do." 25 There's a number of things he put down there, the 202 1 last one of which is that the Base Date Design 2 information is to be inserted in Appendix H. 3 What was your understanding of the QA review that 4 was to be carried out on the various provisions of the 5 contract? 6 A. I think that was the final check through the complete 7 package by various parties. Various people in tie. 8 Q. How was it decided who would be carrying out the QA 9 review of any particular part of the agreement? 10 A. I don't remember. However, it would be normal that it's 11 reviewed by people, a mixture of people from the 12 project. 13 Q. Do you recall how many people were intended to review 14 each clause of the contract or each part of the 15 contract? 16 A. I think the details are set out in one of the papers. 17 Q. We've seen this particular email is sent to both 18 Stewart McGarrity and Andrew Fitchie? 19 A. Mm-hm. 20 Q. Why was it sent to Andrew Fitchie, when he was 21 a solicitor, rather than a part of the commercial 22 negotiation team? 23 A. Because he was involved in the project and as a lawyer 24 would -- drafted a lot of the terms and would understand 25 the scheme. 203 1 Q. If we look at the attachment to this email, it's 2 CEC01374220. 3 We can see the title page of Part 4 there. Could we 4 go, please, to page 6. Enlarge the upper half of the 5 page. 6 This is clause 3.4, with the Pricing Assumptions in 7 it. It's starting with the one about design? 8 A. Mm-hm. 9 Q. We can see that there are some amendments there, 10 particularly clause 1.2. But other than that, is it 11 broadly the same as the -- in substance, the same as the 12 terms that we've looked at that you were involved in the 13 negotiations? 14 A. I think so. 15 Q. Even at this stage, did Andrew Fitchie provide any 16 advice to you as to the effect of this? 17 A. Not that I recollect. 18 Q. Did he advise that this would expose tie to liability in 19 the form of a number of Notified Departures? 20 A. Not that I recollect. 21 Q. Did he advise that you would be put on risk as to design 22 changes would be paid for by tie? 23 A. Not that I recollect. 24 Q. Would that advice have been material to you at the time? 25 A. I think it would. 204 1 Q. Is it likely that you would have recollected that if it 2 had been said to you? 3 A. I think I would have, and if it was advice of that 4 significance, then I would imagine it would have come in 5 written form. 6 Q. Accepting that this is going back nine years, do you 7 have recollections of the time, things going on at the 8 time when this was being concluded? 9 A. Sorry -- 10 Q. Do you have recollections -- 11 A. Things being? 12 Q. Do you have recollections of the work that you were 13 doing at the time to conclude the contract? 14 A. I recollect that it was a protracted and difficult 15 process. 16 Q. I suppose in a sense I'm asking is it something of which 17 you have no memory or you have some memories and not 18 others? 19 A. Some memories and not others. My memories are largely 20 triggered by seeing the documents. 21 Q. Because a number of the documents I have shown you, the 22 response has been no, even then, "I don't remember". 23 A. You have asked me questions about the circumstances 24 surrounding those documents. 25 Q. Moving away -- finished with that document on screen now 205 1 to that and Clause 80, which was the change provision in 2 the Infraco contract. It has been said in evidence that 3 you provided new wording for that clause in late 4 April 2008. 5 Did you provide new wording for the clause? 6 A. Not that I recollect. If I did, it would be on the 7 email system. 8 Q. So it would be on the -- 9 A. Email system. 10 Q. Email system? You would have said something to him by 11 email? 12 A. It's normal means of communication for those kind of 13 documents. 14 Q. Is it something you might have just written something 15 out or printed something off and just handed it over in 16 hard copy? 17 A. I don't think so. 18 Q. Can you recall having particular concerns about 19 Clause 80 -- that's the change mechanism? 20 A. Not that I recollect. 21 Q. It's suggested even that the new wording of Clause 80 22 might have come to you from Ian Laing, the lawyer at 23 Pinsents and then it was provided through you to 24 Andrew Fitchie. Does that ring a bell? 25 A. It doesn't. 206 1 Q. I want to look now at some of the details of the 2 documents that were prepared on the lead-up to close to 3 advise the Council. Do you recall preparing various 4 things entitled close reports and otherwise for the 5 purpose of -- 6 A. Documents had been provided within the document pack 7 that was sent to me. 8 Q. Do you recall them from the time? 9 A. I don't. 10 Q. Can we just look at them to see what we can get from 11 them. Could we look at a document CEC01463884. You can 12 see this is an email. It comes from Andrew Fitchie. 13 It's dated 9 March. It is addressed to Graeme Bissett, 14 but copied to various senior management within tie, 15 including yourself. 16 A. Yes. 17 Q. Entitled "Close Report". 18 What he says is: 19 "Here are: DLAP version of the Close Report including 20 Tramco section, corrections and further commentary." 21 And then: 22 "The contractual Risk Matrix as at 11 pm tonight. 23 We have a check and a Consents section to review 24 tomorrow. 25 I am starting on the report to the Council now." 207 1 Now, do you recall who was -- that Mr Fitchie had 2 responsibility for drafting the report to the Council? 3 A. Sorry, could you repeat the question? 4 Q. Do you recall Mr Fitchie having responsibility for 5 carrying out drafting the report to the Council? 6 A. I don't recall it, but it appears so from the email in 7 front of me. 8 Q. The final sentence of this email, if you scroll down, is 9 that: 10 "The main mitigant (in terms of the contractual 11 position) will be that both preferred bidders 12 qualified..." 13 That's not the passage I was originally looking for. 14 My apologies. 15 If we just go on to look at the attachment to this. 16 Could we look at document CEC01463855. 17 MR MARTIN: I think my learned friend may have meant 3885. 18 MR LAKE: I'm very grateful for that. 19 Now, do you recognise this document, Mr Gilbert? 20 A. I do. 21 Q. What is it? 22 A. It's a -- the -- the table that was used to identify the 23 allocations of risk under the contract. 24 Q. We can see, if we look down the various entries in the 25 table, the number in square brackets. Does that 208 1 correspond to the contract clauses within the agreement? 2 A. I believe it does. 3 Q. Was there any discussion within this document that 4 you're aware of of where the responsibility for design 5 development risk lies? 6 A. I'm not sure without going through it in detail. 7 Q. We will leave that for the moment. Could I ask you to 8 look at another document, please. It's CEC01463886. Do 9 you recognise this document? 10 A. I do. 11 Q. What was it? 12 A. It was the draft report at a particular point in time 13 setting out where we'd got to in coming to a financial 14 close on the scheme. 15 Q. What I would like to do is if we could look at page 4 of 16 this, please. If we look at the final paragraph on the 17 page, we see: 18 "In broad terms, the principal pillars of the 19 programme suite in terms of programme, cost, scope and 20 risk transfer have not changed materially since the 21 approval of the Final Business Case in October 2007. It 22 is felt that the process of negotiation and quality 23 control has operated effectively to ensure the final 24 contract terms are robust and that where risk allocation 25 has altered this has been adequately reflected in 209 1 suitable commercial compromises." 2 Dealing with each -- the first half of the paragraph 3 initially, the statement that risk transfer has not 4 changed since October 2007, is that your view? 5 A. I don't recall my view at the time. But I think that on 6 the basis of what we discussed in terms of transferring 7 the design development risk, then broadly speaking, it 8 was the same. 9 Q. Where did the design development risk lie in terms of 10 the draft we've been looking at? 11 A. Do you mean at the time that the close report was 12 prepared? 13 Q. Yes. 14 A. I believe that it lay with Infraco. 15 Q. You hadn't had any advice warning that it in fact lay 16 with -- 17 A. No. 18 Q. With tie. 19 In terms of where it says at the end, "where risk 20 allocation has altered, this has been adequately 21 reflected in suitable commercial compromises", do you 22 know what that's intended to refer to, both by way of 23 alteration of risk allocation and by way of commercial 24 compromises? 25 A. I think that's perhaps trying to communicate the various 210 1 positions that had been achieved through the 2 negotiations through that last three-month period. 3 Q. Could you look at page 7, please. We can see right at 4 the foot of the page 7 is a heading, "Price", and if we 5 can go over the page, and highlight the upper paragraph, 6 it notes: 7 "A contract price has been agreed. The contract 8 price and pricing schedules for carrying out the Infraco 9 works is contained in schedules to the Infraco Contract. 10 A substantial portion of the Contract Price is agreed on 11 a lump sum fixed price basis. There are 12 certain work elements that cannot be definitively 13 concluded in price and as such Provisional Sums are 14 included (see Section 10 below)." Provides an up-to-date 15 view on these contract sums. 16 Now, did that accord with your understanding at the 17 time? 18 A. Yes, I believe so. 19 Q. Did you understand there to be significant risks imposed 20 on tie as a result of the wording of Schedule Part 4? 21 A. No. 22 Q. If we could look, please, at page 10, first of all. We 23 can see a heading, 2.4, just below halfway down the 24 page, "SDS Novation Agreement and design delivery and 25 approval process". We can see that? 211 1 A. Yes. 2 Q. Then if we go over the page, if we highlight the 3 paragraph after the bullet points at the top: 4 "The terms of the novation of SDS have therefore 5 been settled on the basis that BBS risk adversity 6 required accommodation, otherwise no transfer of 7 responsibility for design production and consent 8 management could have been achieved. Two prime 9 concessions have therefore been made by tie." 10 Again, was that something that you agreed with at 11 the time? 12 A. Sorry? 13 Q. Is the statement made in that paragraph something that 14 you agreed with at the time? 15 A. If I read it, then -- and didn't object, then I assume 16 so. 17 Q. Could we look on, please, to page 40 of this document. 18 Highlight 10.2 and the text beneath it. The heading at 19 10.2 is "Price certainty achieved". We can ignore the 20 first paragraph because it relates to the supply of 21 trams. Then: 22 "The Infraco price of GBP216.3 million 23 comprises ..." 24 We can see firstly: 25 "GBP219.9 million of firm costs less GBP13.8 million 212 1 of Value Engineering initiatives taken into the price 2 with the agreement of BBS but with qualifications 3 attached plus GBP10.2 million of items which remain 4 provisional at Financial Close." 5 Now, that doesn't present -- in addition to the 219 6 and the GBP10.2 million, as a significant other element 7 of price which might reflect the risk of claims being 8 made under the contract under Part 4 of the Schedule? 9 A. No, I don't think so, other than the specific items that 10 were listed. 11 Q. Going forward to another email, it's CEC01428730. We 12 can see a different email. This again from 13 Graeme Bissett to various people within tie, including 14 you. It's dated 11 March this time, he says: 15 "Colleagues, the attached is a consolidated update 16 based on your contributions over the last few days, for 17 which many thanks." 18 Do you see that? 19 A. I do. 20 Q. If we look at the attachments to the email, first, if we 21 look at CEC01428731. This is -- we can see once again 22 a draft of what is termed the close report. Do you see 23 that? 24 A. I do, yes. 25 Q. If we look at page 24 of this, we can now see it's 8.2. 213 1 We have got the same heading of "Price certainty 2 achieved", and the same text towards the foot of that 3 page and going over to the next, if we look at that. 4 Do you see that? 5 A. I do. 6 Q. If we look at page 28 under the heading 8.6, QRA and 7 Risk Allowance, could we highlight the paragraphs, if we 8 look at the final paragraph on the page: 9 "The only material change in the Risk Allocation 10 Matrices between Preferred Bidder stage and the position 11 at Financial Close is in respect of the construction 12 programme costs associated with any delay by SDS in the 13 delivery of remaining design submissions into the 14 consents and approvals process beyond Financial Close." 15 It's obviously between preferred bidder stage in 16 this stage that the whole of the Part 4 of the Schedule 17 had been concluded? 18 A. It had, yes. 19 Q. This is representing that there's been -- certainly that 20 there's no material change in the risk allocation 21 matrices in that time? 22 A. In terms of the intent. 23 Q. Yes. 24 A. Yes. 25 Q. But it says that the only exception -- the only change 214 1 is where there's been construction programme costs in 2 relation to design submissions. 3 A. It does. 4 Q. So in terms of who bore the risk of design development, 5 what do you think someone reading this would understand 6 was the position? Where did that lie? 7 A. With the Infraco. 8 Q. Was that your understanding at the time? 9 A. I think it was. I think it's referred to in other parts 10 of this document. 11 Q. Do you know who this document was eventually going to be 12 submitted to? 13 A. I assume it was going to be submitted to CEC. 14 Q. I should say for completeness, if we look back to page 1 15 of it, right to the very top of the page, it does say: 16 "FOR THE ATTENTION OF THE TRAM PROJECT BOARD, 17 TEL BOARD AND TIE BOARD". But your understanding was it 18 was also going to go to CEC? 19 A. I think they were also represented there, so yes. 20 Q. One further document that is an attachment to that same 21 email, could we look at document CEC01428734. 22 This, we can see, is the title draft of DLA Report 23 on the Infraco Contract Suite. 24 If we look to the second page of this, to the top, 25 we can see wording that's familiar from before: 215 1 "In broad terms, the principal pillars of the 2 contract suite in terms of programme, cost, scope and 3 risk transfer have not changed materially since the 4 approval of the Final Business Case in October 2007. It 5 is felt that the process of negotiation and quality 6 control has operated effectively to ensure the final 7 contract terms are robust and that where risk allocation 8 has altered this has been adequately reflected in 9 suitable commercial compromises." 10 I think that's the wording we saw last time in the 11 close report. This time it's just been transferred to 12 what's termed the DLA report on Infraco contracts? 13 A. Mm-hm. 14 Q. Did you regard that still as an accurate statement, that 15 the principal pillars of the contract suite had not 16 changed since the Final Business Case in October 2007? 17 A. Broadly speaking, on the basis that design development 18 risk had been transferred. 19 Q. If you had been advised, if you'd been given advice that 20 that risk had not been transferred and still rested with 21 tie, would you have been able to make that statement? 22 A. I don't believe so. 23 Q. It has been suggested you had been given that advice. 24 You in particular had been given that advice, and that 25 you would have understood that the design development 216 1 risk was placed by Part 4 of the Schedule on tie. 2 A. I don't recollect that, as I have said earlier. 3 Q. No further questions in relation to that document. 4 I want to move away from the contracts and the 5 finalisation of the contracts now to questions that 6 arose in relation to the design contract. 7 This is back to 2007. 8 Do you recall that a claim was made by SDS against 9 tie under the SDS contract of that time? 10 A. I do, from the information that was sent to me. 11 Q. Do you remember having responsibility at the time for 12 trying to agree a conclusion of that with the SDS 13 contractors? 14 A. I believe there were ongoing discussions about it for 15 quite a protracted period of time. 16 Q. Can we look at a document together, please. It's 17 reference CEC01632267. 18 You can see that this is a document entitled "Paper 19 to TPB", Tram Project Board. The subject is "SDS 20 Commercial Issues Resolution - Update on way forward". 21 You are the preparer of the paper? 22 A. Yes. 23 Q. Does this remind you of your involvement in settling the 24 claim of SDS? 25 A. It does. 217 1 Q. In the introduction to this paper, in clause 1.1, you 2 note: 3 "The Board paper dated 9 August 2007 seeking 4 authority to negotiate a settlement with SDS was not 5 approved at the last Tram Project Board." 6 You set out in bullet points the reasons for that 7 refusal; is that correct? 8 A. Yes. 9 Q. Nonetheless, if you look at paragraph 2.1, under the 10 heading, "Proposed way forward", you see it says: 11 "The tie Executive concluded that if possible 12 a commercial settlement should be negotiated by the end 13 of August and that this should take due account of tie's 14 potential counterclaim. This recognises that SDS have a 15 valid entitlement on two counts: 1. Delays to the 16 approval of Preliminary Design and 2. The failure to 17 resolve the critical issues in a timely manner." 18 A. Yes. 19 Q. You made those conclusions as a result of investigations 20 that you had made; is that correct? 21 A. Presumably. 22 Q. That was recognising essentially fault on the part of 23 tie in these matters, and getting the preliminary design 24 approved and failure to resolve the critical matters? 25 A. Yes. 218 1 Q. If you go to the third bullet point, you note there's 2 a major risk to the programme and budget if there was to 3 be an adjudication and legal proceedings in relation to 4 the SDS contract? 5 A. Yes. 6 Q. And the next bullet point, the termination of the SDS 7 and subsequent replacement of SDS could add up to 8 12 months to the contract terms. 9 A. Yes. 10 Q. Contract times, rather. Could it be put this way: if 11 you wanted to stick to the contract programme of getting 12 the contract concluded by the end of August, tie were 13 over a barrel? 14 A. The claim needed to be resolved in order to move 15 forward. I think that's what I'm saying in the paper. 16 Q. So you had no choice but to resolve that claim? 17 A. If we wanted to move forward and -- 18 Q. Did you want to move forward? 19 A. Sorry, it wasn't entirely my decision. I was setting 20 out, if you like, the options. 21 Q. What alternative option was there, other than settling 22 the claim? 23 A. To fight it and accept the delays to the programme. 24 Q. And accept that you weren't going to get the contract 25 concluded that year? 219 1 A. Yes. 2 Q. Go to a document reference CEC10630084. The upper part 3 of the page, we can see this is an email from you to 4 Steve Reynolds, who was at Parsons Brinckerhoff; is that 5 correct? 6 A. That's correct. 7 Q. Dated 24 August 2007. 8 A. Mm-hm. 9 Q. It's headed "WITHOUT PREJUDICE: Proposed Settlement of 10 SDS Provider Claim", and under the heading, "Basis of 11 Claim Settlement", you say: 12 "The agreed payment in the sum of GBP2.5 million is 13 to be in full and final settlement of all issues raised 14 in your claim letters dated 31 May 2007 and 28 June 2007 15 (and attached materials). This addresses all delay, 16 prolongation and disruption issues arising from the 17 various Heads of Claim set out in your submissions ie 18 Critical Issues, Changes, Charrettes, Additional Scope, 19 Consents, Third Party Agreements and Third Party 20 Developer Emerging Designs etc. All these claims 21 are extinguished and there will be no further delay, 22 prolongation or disruption claims from SDS Provider in 23 respect of any issues arising up to and including 24 18 August 2007 under the Heads of Claim detailed in your 25 submissions or otherwise." 220 1 So he was normally encompassing the second sum -- 2 A. It was. 3 Q. -- for GBP2.5 million. If we then look at another 4 document, please. It's reference, firstly, CEC01630600. 5 This is again from you, it's now dated 6 4 September 2007. It's addressed to David Mackay with 7 copies to Willie Gallagher, Steven Bell, Matthew Crosse 8 and Andrew Fitchie. You are saying you've got 9 a finalised paper for distribution at tomorrow's board, 10 and the subject being the SDS claim settlement? 11 A. Yes. 12 Q. If you could look at that attachment, please, it's 13 reference CEC01630601. Could I look at -- I have called 14 up the wrong reference. Could I have 01630602. 15 We can see this is a paper again to the Tram Project 16 Board. It's headed "SDS Commercial Settlement On Claim 17 and Historical Changes", with the date of 5 September. 18 If you go to the background, at the foot of the 19 page, we can see that: 20 "Our view in respect of the claim and 20 historical 21 changes is: There is a justifiable claim for 1.2 to 22 1.8 million for a 3 month delay ..." 23 A. Yes. 24 Q. Also you note that historical changes, a claim between 25 0.5 million and 0.97 million bringing out a total of 221 1 1.75 million to GBP2.77 million. Do you see that? 2 A. Yes, I do. 3 Q. Then 2.2 over on the following page, we can see it says: 4 "tie have identified a potential counterclaim in 5 respect of the impact of delays by SDS prior to the 6 commencement of Detailed Design. As noted in previous 7 papers, the potential value of the counterclaim is up to 8 GBP15 million." 9 Now, you set out there there's justified tie -- 10 justified SDS claim between GBP1.75 million and 11 GBP2.77 million. And a potential counterclaim of up to 12 GBP15 million. 13 A. Mm-hm. 14 Q. We've also seen that the agreed settlement was in the 15 sum of GBP2.5 million. 16 A. Yes. 17 Q. So is it fair to say that the value of the tie 18 counterclaim was essentially ignored in reaching that 19 settlement with SDS? 20 A. No, it wasn't. There was a reduction in the value in 21 order to pursue that claim. Then we would have needed 22 to have gone to adjudication, and I think I referenced 23 the consequences of that separately. I refer in 2.3, 24 sorry, to the options. 25 Q. Is the problem simply that if you had gone to 222 1 adjudication, it would have caused a great deal of 2 trouble for the project in its future? 3 A. It would have for the reasons that I outlined, and the 4 outcomes of adjudications are not necessarily certain. 5 Q. Is it for that reason that you had to essentially ignore 6 the value of the tie claim to avoid going to 7 adjudication and get a settlement? 8 A. Yes. 9 MR LAKE: Thank you very much, Mr Gilbert. Those are my 10 only questions. 11 CHAIR OF THE INQUIRY: I don't think there were any other 12 questions. 13 Thank you very much, Mr Gilbert. You're still under 14 citation and may be recalled at a future date if that 15 proves necessary. 16 In the meantime, you're excused. Thank you very 17 much. 18 A. Thank you, my Lord. 19 (The witness withdrew) 20 CHAIR OF THE INQUIRY: We will adjourn until Tuesday at 21 9.30. 22 (4.30 pm) 23 (The hearing adjourned until Tuesday, 24 October 2017 at 24 9.30 am) 25 223 1 INDEX 2 PAGE 3 MR MARK HAMILL (sworn) ...............................1 4 5 1 Examination by MR LAKE 6 7 63 Questions by CHAIR OF THE INQUIRY 8 9 66 Further 10 examination by MR LAKE 11 12 73 Questions by CHAIR OF THE INQUIRY 13 14 MR GEOFF GILBERT (affirmed) .........................74 15 16 75 Examination by MR LAKE 17 18 19 20 21 22 23 24 25 224