1 Thursday, 2 November 2017 2 (9.30 am) 3 CHAIR OF THE INQUIRY: Good morning. Yes, Mr Lake. 4 MR LAKE: My Lord, the first witness today is Allan Jackson. 5 MR ALLAN JACKSON (sworn) 6 CHAIR OF THE INQUIRY: You will be asked some questions by 7 Counsel to the Inquiry, Mr Lake. If you just listen to 8 them and answer them as directly as possible. If you 9 lean forward into the microphone so that the other 10 people can pick up your answers, and if you also speak 11 at a measured pace so that the shorthand writers can 12 keep up with you. 13 A. Thank you very much. 14 Examination by MR LAKE 15 MR LAKE: Mr Jackson, could you state your full name, 16 please. 17 A. Allan George Jackson. 18 Q. The Inquiry has details of your address, and I think you 19 were a councillor with the Edinburgh City Council until 20 May of this year? 21 A. May of this year. 22 Q. I would like you to look at a document. It will be 23 shown on screen, but you also have a paper copy in front 24 of you. It's TRI00000106_C. That should be the same 25 document as the paper copy? 1 1 A. Yes, indeed. 2 Q. If you look at the last page in the paper copy, you will 3 see you have your signature on it? 4 A. Yes. 5 Q. Do you have that? 6 A. Yes, indeed. 7 Q. This is the statement or the question and answer 8 statement that you gave for the purposes of this 9 Inquiry? 10 A. Yes. 11 Q. Are you happy that we take that as your evidence for the 12 purposes of this Inquiry? 13 A. Yes. 14 Q. There are a few additional questions I would just like 15 to ask you to go through matters. You say in these 16 questions and answers that you were a member of the 17 tie Board and the TEL Board. If you could look, please, 18 I think it's page 167 of the statement. If we look at 19 paragraph d) towards the top of the page there, you 20 were asked a question about: 21 "To whom did the TPB formally report." 22 You say you were not a member of the TPB when those 23 matters were being decided. We can go to the previous 24 page perhaps and see which matters we're looking at. 25 It doesn't precisely say which matters there. 2 1 I think we were dealing with the matters relating to the 2 tram project as a whole? 3 A. Yes. 4 Q. Are you sure that you weren't a member of the Tram 5 Project Board; is that your recollection? 6 A. As I recall, and I can't remember the exact time, the 7 Tram Project Board itself was completely meant only for 8 the tie officials, and what we would do, we would go 9 along as Board members a bit later and the transport -- 10 tie -- the TPB would report back to us actually what had 11 happened at it. 12 Eventually that was cut back to make it all the 13 same, and tie Board members were amalgamated with the 14 TPB. I can't remember the exact date when they decided 15 to put it all together. 16 Q. Just to help you with these things, could you look at 17 a document with me. It's CEC01015023. These are papers 18 for -- it was the mixture of the Tram Project Board, the 19 tie Board and the TEL Board, the meeting that was taking 20 place on 23 January 2008. We can see that you were 21 included there on the distribution list. 22 If we look at one more document -- you see that 23 there -- 24 A. I have it here, yes. 25 Q. If you look at another document, please, it's reference 3 1 CEC01246826. This time these are the papers for 2 a meeting on 13 February, and it's solely the Tram 3 Project Board. 4 A. Yes. 5 Q. We see you're not included on the distribution for 6 those; is that correct? 7 A. That is correct. 8 Q. Is this the difference, you were there for a joint 9 meeting but not for some of the other meetings? 10 A. Indeed. What happened -- as it has there, the Tram 11 Project Board was really meant for Council officials and 12 tie officials. And when it was over, and the full 13 tie Board arrived, it would be really known to us what 14 had happened at the TPB. 15 Eventually that was done away with. I'm sorry, 16 again, I can't remember when. But it all amalgamated 17 simply into tie Board, became also the Tram Project 18 Board, all amalgamated together to save the senior 19 officials at tie having to go through things twice. 20 Q. If I could ask you to look at another document, please. 21 This is reference CEC01021587. I'm jumping forward in 22 time here. We have now got a pack of papers for 23 a meeting of the Tram Project Board on 3 June 2009. 24 Again, we can see in the middle of the three columns, 25 towards the foot of the page, you're named as one of the 4 1 people, either member or attendee of the Tram Project 2 Board? 3 A. Indeed. 4 Q. If we could complete this, just to go to the fifth page 5 of this, and this is the minutes of meeting of the Tram 6 Project Board meeting that took place on 9 May 2009. 7 Can we see that you are named as someone who was in 8 attendance at the Tram Project Board? 9 A. Correct. 10 Q. Was it the case that you were someone who in fact was in 11 attendance at the Tram Project Board and were therefore 12 aware of the discussions that were taking place? 13 A. Yes. 14 Q. In terms of these -- 15 CHAIR OF THE INQUIRY: Mr Lake, I think for the record you 16 said the meeting was 9 May. It is in fact the 6th. 17 MR LAKE: I apologise. It's clearly the 6th. I read that 18 wrongly. 19 In terms of these three bodies, TEL, and tie and the 20 Tram Project Board, I just want to look a little bit at 21 what the role of each of them was. 22 In terms of responsibility for actually delivering 23 the trams, the construction of the trams, which of the 24 three bodies had the primary role? 25 A. I suppose really it was the Tram Project Board itself. 5 1 The tie Board were in attendance in this particular 2 case, as we can see. As I say, it was amalgamated. I'm 3 not quite sure when. It looks as if the Tram Project 4 Board was what it then became, or perhaps they -- those 5 who were in attendance eventually became part of the 6 Tram Project Board. It was all a bit complicated at the 7 time, but eventually it was all amalgamated. We used to 8 turn up at, let's say, 9.30, and the whole thing was 9 dealt with at once in the one meeting. 10 Q. Was there any clear differentiation or demarcation 11 between which board you were sitting on from time to 12 time? 13 A. Not that I can recall. 14 Q. Did you find it clear which role you were discharging 15 from time to time, which body you were on? 16 A. I didn't give it a great deal of thought at the time. 17 I assumed we were all amalgamated together by this 18 stage, and that was more or less it. Yes. 19 Q. So do you understand what the split of responsibilities 20 was then between TEL on the one hand and tie on the 21 other? 22 A. TEL was originally set up to run the trams when it ever 23 got going, but it seemed to gradually fade away and 24 wasn't mentioned much after a certain amount of time. 25 I'm sorry, I don't remember when that gradually 6 1 happened. 2 Q. In terms of giving advice to the Council about the 3 contracts and whether or not to enter into them, do you 4 know which of these three bodies took the responsibility 5 for that? 6 A. It should have been the tie Board itself. And of 7 course, as you can see there, senior Council officials 8 attended the Board meetings as well. So presumably they 9 reported back to the Council itself, and of course 10 Councillor Gordon MacKenzie, who was a lead member from 11 the ruling group, he would report back I guess as well. 12 Q. Could we go back to your statement, please, and look on 13 page 9. It's okay. I can come back to that another 14 time. Pardon me. 15 Returning to the various bodies, which one of them 16 was the ultimate decision-making body when it came to 17 deciding whether or not to go ahead with the tram 18 project? 19 A. Well, the decision to go ahead was taken by the Council 20 at the time. 21 Q. Mm-hm? 22 A. But of course the Tram Project Board were reporting back 23 to the Council at that stage with advice on what they 24 thought was the best way forward. And the Council was 25 in full Council meeting, would take the actual final 7 1 decision. 2 Q. The responsibility for reporting to the Council was that 3 of the Tram Project Board? 4 A. Yes. 5 Q. In terms of information you obtained in your capacity as 6 Director of -- in these various bodies or attending the 7 Tram Project Board, to what extent were you able to 8 share that with councillors, other councillors 9 generally? 10 A. Well, as I say, the other councillors, the other parties 11 were represented and presumably they reported back to 12 their own members. As I said, senior Council officials 13 were present and would have reported back to the Council 14 itself, to the Chief Executive and the various other 15 senior Council officials. 16 Q. When you say other parties reported back to their own 17 members -- 18 A. I assumed they did. 19 Q. Did that mean people of their own political grouping? 20 A. Yes, I guess that would be. They were all represented 21 apart from the SNP and the Greens. 22 Q. Is that what you were doing? You were able to report 23 back to members of your own group? 24 A. I was able to report back to senior members of our 25 group. Some things we were told at a Transport Board 8 1 were in confidence. I don't remember which now. So you 2 had to be careful with what you took back. 3 Q. If there was information there that you couldn't take 4 back, can you remember what sort of information that 5 was? 6 A. That I couldn't take back? 7 Q. Yes, the stuff that you couldn't pass on? 8 A. It would be -- I think they were concerned about perhaps 9 commercial confidentiality, would this leak out and such 10 like. I think that's something that dogged the tram 11 project for quite a while. You had to be selective in 12 what you went back with. I didn't sit in full group 13 meetings and tell them everything which had happened. 14 What I did from time to time was ask perhaps 15 Richard Jeffrey or officials to come along in the 16 meeting and speak to the Board members, and he could 17 tell them what he wished to tell them, other Council 18 groups. Sorry, our political group. 19 Q. If that created a situation where you had knowledge that 20 the other members of your group and other councillors 21 generally didn't have, did that cause difficulties? 22 A. I don't think it did, to be perfectly honest. Anything 23 which was cogent, I did take back. 24 Q. You said anything that was cogent you took back? 25 A. Anything which I considered to be important, very 9 1 relevant to what was going on, I would take back to my 2 political group. 3 Q. But what if the things that were important were the 4 things that related to items of commercial 5 confidentiality and you had been told that you shouldn't 6 take them back, what happened then? 7 A. Anything I couldn't take back would have come up in 8 Council meetings. The Full Council which is held in 9 public as we will be aware, at that stage, that's when 10 Council officials reported back in a full document to 11 Council, and councillors in full Council meetings can 12 discuss and decide where to go from there. So that 13 would be -- they would be the items which were 14 completely open for the public. 15 Q. Did situations arise where decision -- matters came up 16 for decision in the Council or its committees, and you 17 felt you had knowledge which you couldn't tell the 18 others which was relevant to the decisions being made? 19 A. Nothing that -- nothing that I can recall now. 20 Q. Did you feel any discomfort at the time about this 21 situation that you might know more than other people? 22 A. It was perhaps slightly discomforting, but overall 23 I didn't think it was a major problem. 24 CHAIR OF THE INQUIRY: Can I just clarify, you said that 25 anything that you couldn't take back would have come up 10 1 in the Full Council meeting. Is that right? 2 A. No, I'm sorry, your Honour. I didn't mean that. 3 Anything which I -- anything which could be taken back 4 would have come up at Full Council meetings, reported by 5 the officials in Council papers. 6 CHAIR OF THE INQUIRY: I think you were being asked then 7 about things that you couldn't take back. 8 A. Couldn't take back. Yes. Anything which apparently 9 I couldn't take back was for me. I could take it back 10 perhaps to the senior members of my own group, perhaps. 11 The group leader. But there weren't a large number of 12 items that I recall in that category. 13 MR LAKE: I'm just a bit puzzled by that answer. You 14 say: anything which you couldn't take back, I could take 15 back to the senior members of my own group. Does 16 that -- 17 A. I may well have discussed it with the group leader, 18 complete trust. 19 Q. Right. So there was a difficulty then that you were 20 required to speak to people within your own group on 21 matters which, as far as the companies were concerned, 22 they wanted to keep confidential? 23 A. There would have been items, yes. 24 Q. Why was it that you felt it necessary to raise certain 25 items with your group leader? 11 1 A. I think it was ongoing. I think the group leader was 2 entitled to know what was going on. I'm quite sure that 3 the other political parties would go back to their 4 groups and decide for themselves what to -- what they 5 would do. But no, I considered that fair enough, to go 6 back to my own group leader and discuss these things 7 confidentially. 8 Q. What you are saying there is it was -- I think you said 9 fair enough that -- "I think the group leader was 10 entitled to know what was going on". 11 A. I considered that I should share these things with him. 12 Complete trust in the group leader to discuss these 13 things in confidence. 14 But from memory, I don't recall any -- a large 15 number of these matters. 16 Q. So there does seem to be a tension then which on the one 17 hand, the companies and the boards are saying they want 18 matters kept confidential, but you felt it was 19 appropriate that at least the group leader know about 20 them? 21 A. Yes. 22 Q. What about the other members? You were then in a 23 situation where you and the group leader and anyone else 24 on the companies would know of a certain matter and the 25 councillors generally wouldn't. Did you expect the 12 1 other councillors simply to follow the lead given by the 2 group leader and yourself? 3 A. They would be following from the Council papers which 4 came forward from meetings. As I think I mentioned, 5 I would from time to time ask along, I think, 6 Richard Jeffrey at the time to speak to perhaps 7 a meeting over the group, and he could relay on to them 8 the matter which he thought could be discussed openly. 9 Q. But what if you thought that there were other matters 10 which should be discussed and should be passed on to 11 your group leader that Richard Jeffrey thought 12 shouldn't? 13 A. I don't recall matters like that. I don't recall 14 a great number of items which were given to us which 15 I couldn't take back. 16 Q. Could I ask about something in concrete. I'll return to 17 the adjudications and the adjudication decision later, 18 but there's been a suggestion in evidence so far that 19 the outcomes of the adjudication decisions were not 20 being reported to councillors generally. But you would 21 have known about them from sitting on the company 22 boards; is that correct? 23 A. Yes, that's correct. Yes. 24 Q. Were you aware where there was any interest within your 25 group of knowing what these decisions were and how 13 1 they'd been reached? 2 A. I don't recall. I think that they would be going along 3 with Council reports. The public ones which went to 4 Council meetings. 5 Q. So did you have any discussion with anyone in your 6 group, including the group leader, about these -- the 7 outcome of these decisions? 8 A. Not as I can recall. 9 Q. You can't remember any requests for information about 10 that? 11 A. No. 12 Q. Turning back to the councillors on the various boards 13 more generally, why did you -- firstly, did you think it 14 was appropriate that councillors sit on the boards of 15 these companies and entities? 16 A. It has been normal over a very long period of time if 17 any of these boards are set up, then the Council would 18 put some members on to them. In retrospect, and I think 19 now, they don't do it. I think they have decided in the 20 Council, not that I'm there now, I think they have 21 decided to stop doing that, and simply to have perhaps 22 outside industry experts put on them as board members. 23 At the time it was a normal thing to do, up until 24 comparatively recently, I think, that councillors would 25 go on to these boards. 14 1 Q. Did you think while councillors were on the boards in 2 the period where you were there, that it caused 3 difficulties for the councillor in the sense of having 4 a conflict between the Board's interests on the one hand 5 and possibly the Council's on another? 6 A. I don't really think so in retrospect. I don't really 7 think it was a major problem there. The ones we 8 discussed there briefly before, I suppose, items which 9 were considered confidential would only be given to 10 Board members. But I think that was the way it should 11 be. Probably that's why the Council has decided now not 12 to do that. Over many years I have been appointed to 13 various things. None quite as important as the tram 14 project. But it was the norm, and I didn't feel any 15 conflict of interest over all these years. 16 Q. You have explained how, when you were faced with the 17 desire for confidentiality on the one hand and the 18 consideration that the councillors or your group leader 19 at least should know, you favoured informing the 20 Council. Do you know what other people did when faced 21 with that conflict? 22 A. No, I don't know what others did. 23 Q. Did you ever encounter a conflict where one of the 24 companies or a board wanted to do something and you 25 thought it might not be in the Council's best interests 15 1 for them to do it? 2 A. No. 3 Q. What advantages do you think, or do you think any 4 advantages come from having councillors on the Board? 5 A. In retrospect, I don't think it was a particular 6 advantage. It just seemed to be the norm, and 7 councillors were quite keen to go on these things from 8 time to time. 9 I don't think there was a great advantage for the 10 Council now. 11 Q. I want to turn now to the movement up to the awards of 12 the contract in 2007. You had been obviously with tie 13 and TEL throughout a large part of 2007 and had seen 14 events unfolding. 15 A. Mm-hm. 16 Q. In terms of the strategy for the procurement of the 17 infrastructure contracts for the tram, what was your 18 understanding of how far advanced the design should be 19 by the time the contracts were awarded? 20 A. It was -- well, it was hoped very much the design would 21 be ready. Apparently now in retrospect, it looks as if 22 it wasn't. 23 Q. Why was it hoped that the design would be ready? 24 A. Well, it was a large contract. So perhaps you wouldn't 25 have expected the entire thing to be ready. But it was 16 1 assumed that the bulk of it would be ready, for the 2 contracts to go ahead, because it wouldn't -- the 3 contract wouldn't have happened in the entire length of 4 the proposed route. 5 So it was always thought it would perhaps start at 6 the airport end and work its way forward towards 7 Newhaven. So the design down to Newhaven, for example, 8 didn't seem quite so important at that time. 9 Q. Was that your understanding or was that your view of 10 what the Board view was at the time? 11 A. That was my understanding. I don't recall now whether 12 it was the entire Board went along with that. That was 13 what I was -- my view was at the time. 14 Q. What about the position in relation to the utility 15 works? How were they to be -- what stage were they to 16 be at when the contracts for infrastructure were let? 17 A. It was very much hoped that they would be quite far 18 progressed. As it turned out, of course, that wasn't 19 the case, but nobody thought the entire thing would have 20 been done by the time the works started on-street. As 21 again, they would have worked gradually towards 22 Newhaven. 23 Q. Starting at the airport end -- 24 A. Starting at the airport end, yes. 25 Q. Were you aware of how the design was progressing during 17 1 2007? 2 A. As far as I was aware, it was going as we would have 3 expected it to be. In retrospect, it probably wasn't. 4 Q. What about the utility works, the MUDFA works? How were 5 they getting on in 2007? 6 A. Slowly. But we were of the view it was going forward. 7 Everybody knew it was going to be a bit of a problem, one 8 of the more difficult things, but I don't think anyone 9 expected it to be very far on because there weren't so 10 many required at the airport end. It was once it was on 11 street where the problems with utilities started. 12 Q. Once you got to the stage of contract close, was there 13 either within tie, TEL or the Tram Project Board, do you 14 recall any discussion about whether or not the utilities 15 works and the design were sufficiently far advanced to 16 proceed to award the contract? 17 A. I don't recall any particular discussion. It may well 18 have been, but it's a long time ago now. I'm afraid 19 I can't remember the detail of that. 20 Q. Do you recall any consideration of whether or not the 21 design in particular was sufficiently far advanced? To 22 make it appropriate to move forward? 23 A. No. 24 Q. Do you recall any discussion taking place about whether 25 or not to award the contract at that time would be 18 1 a departure from the procurement strategy? 2 A. No. 3 Q. Did you get any advice from lawyers or the technical 4 engineering experts at that time, December, about 5 whether or not it would now be prudent or appropriate to 6 move forward with the contract? 7 A. Not as I can recall. 8 Q. In particular, did you get any advice from the legal 9 advisers that you should stop the procurement process 10 and pause for a while to allow other things to be put 11 into place or be advanced? 12 A. I'm fairly sure I can say no to that one. 13 Q. Were you given any legal advice at that time regarding 14 the set-up of the contracts? 15 A. No. 16 Q. What did you understand was to happen to the -- what was 17 termed the design risk in concluding the contract? Who 18 was to bear the risk of any development of design? 19 A. Eventually I suppose if you work your way up it was tie. 20 And presumably that was passed on to the Council. It 21 wasn't something which was gone into great detail, that 22 I can recall. 23 Q. Once the decision had been taken in December 2007 that 24 the contract should be awarded, what further involvement 25 did you as a councillor have in any of the boards or of 19 1 the Council in making a further decision as to whether 2 or not the contract should proceed? 3 A. I think the decision was taken, and that was that. 4 I don't recall any discussion at any stage and with 5 anybody as to the fact that it may -- the possibility of 6 it being cancelled or postponed. 7 Q. Once again, just looking forward from December 2007 to 8 May 2008, were you aware of any consideration about 9 whether or not there should be a pause before the 10 contract was actually signed? 11 A. Not as I can recall, no. 12 Q. Or any legal advice that it would not be safe to sign 13 the contract at that time? 14 A. No, I don't recall having any legal advice on that. 15 Q. Could I ask, please, to look at some documents that will 16 be shown on the screen. If you firstly look at 17 CEC01515189. We can see that this is a draft resolution 18 headed "TRAM PROJECT BOARD". It's a resolution of the 19 members of the Tram Project Board at a meeting on 20 23 January 2008, held jointly with the Boards of tie Ltd 21 and Transport Edinburgh Limited. 22 We can see it considers various things, and then in 23 paragraph 4, approves delegated authority arrangements. 24 Do you recognise this, just from looking at it? 25 A. It's a case of re-reading it. It was quite a while ago, 20 1 ten years ago. So I don't necessarily recognise it at 2 that time. But I'll have seen it before. 3 Q. If you look at paragraph 4, it's perhaps easier to look 4 at the whole thing. If you go back towards the start, 5 paragraph 1. It approves the terms of the Infraco 6 Contract Suite and all related agreements and documents: 7 "... as such documents were defined in the Board papers, 8 as a basis for commitment to the contractual agreements, 9 noting the main open areas and in the context of the 10 delegated authority to conclude the above agreements 11 approved under Resolution 2 below." 12 2 is: 13 "to recommend to the Board of Transport Edinburgh 14 Limited that the Board approve the terms of Infraco 15 Contract Suite and all related agreements ..." 16 3: 17 "to approve the terms of the Governance and 18 Delegations paper ..." 19 Again jumping forward to 4: 20 "to approve the proposed delegated authority 21 arrangements to be adopted in order to ensure an 22 efficient and properly controlled process ..." 23 Just before I go on to look at the delegated 24 authority arrangements, does that ring any bells with 25 you just now? 21 1 A. It's to the best of my memory, that's -- that's the way 2 it was. I accepted that at the time. 3 Q. Because it goes on to say the delegated authority is 4 this: 5 "The delegated authority arrangements proposed and 6 approved were: A Committee of the Boards of the Company, 7 the Tram Project Board and tie Limited, would be immediately 8 formed comprising Messrs Gallagher, Mackay and Renilson, 9 to whom authority is delegated to approve final 10 execution by the tie Chairman of Notification to Award, 11 the Infraco Contract Suite and any necessary related 12 agreements on condition that: 1. The final terms of the 13 contractual arrangements are within the terms of the 14 Final Business Case, subject to slippage of up to one 15 month in programmed revenue service in 2011; and 2. They 16 unanimously conclude that it is appropriate to do so; 17 and 3. Approval has been received from the CEC 18 Chief Executive to proceed to execution of the Infraco 19 Contract Suite." 20 Do you recall doing that, this sort of motion being 21 passed at the end of January 2008? 22 A. Yes. I mean, seeing it now, yes, I remember that is -- 23 that was what was accepted, yes. 24 Q. So this was the -- in this particular instance we have 25 looked at, the Tram Project Board passing over to this 22 1 sub-committee of the three named individuals' authority 2 thereafter to decide whether or not to enter into the 3 contract? 4 A. Mm-hm. Yes. 5 Q. If we look then at another document, CEC01515190, we can 6 see this time it's headed "TIE LIMITED". But it's got the 7 same wording, "RESOLUTION OF THE BOARD OF DIRECTORS OF 8 tie Limited", and the same date of 23 January, this time 9 held jointly with the Tram Project Board and the Board 10 of Transport Edinburgh Limited. 11 You see, if you look at that, it's broadly in the 12 same terms as the document we've just looked at? 13 A. Yes. 14 Q. Do you recall that being done within tie as well? 15 A. Yes. 16 Q. Just for completeness then, could we also look at 17 CEC01515192. This time to complete the three companies, 18 this is Transport Edinburgh Limited, a resolution of 19 them on the same date, and again, from looking at it, 20 it's broadly in the same terms as the previous one. 21 Were you aware that demands for additional money had 22 been made by the contractor consortium on the lead-up to 23 the award of the contract? 24 A. No, I don't recall being aware of that. 25 Q. Did you get any advice on the effect of the contract and 23 1 how it was anticipated it would operate? 2 A. No, not as I recall. 3 Q. Did you get any advice as to risks for the Council and 4 the contract, that they would be liable for additional 5 sums caused by changes in the contract? 6 A. No, I don't recall being given advice on that at all. 7 Q. Were you given any advice that there were Pricing 8 Assumptions in the contract which might not hold true, 9 with the result that there would be liabilities 10 generated for the Council? 11 A. No. 12 Q. Could we look at another document, please. It's 13 CEC01338847. We can see here a document. It's headed 14 "EDINBURGH TRAM PROJECT FINANCIAL CLOSE PROCESS AND 15 RECORD OF RECENT EVENTS". 16 Do you recall having seen this document before? 17 A. I can't recall now, but I'm fairly sure that I would 18 have, yes. 19 Q. You would have seen it. 20 Do you know in what context you saw that? 21 A. I don't recall if it was presented to a Board meeting. 22 Presumably it was. I don't know if the Inquiry knows 23 where this came from. Where it was presented. 24 Q. The Inquiry -- what I'm really trying to find out, 25 whether it was something that was presented to you and 24 1 whether or not you considered or placed any reliance on 2 it? 3 A. I don't recall seeing it. I don't recall now having 4 seen it. 5 Q. If I could ask you to look at another one, just to see 6 if that jogs your memory. It's CEC01338851. 7 This is titled "REPORT ON INFRACO CONTRACT SUITE". 8 Do you see that? 9 A. I see it, yes. 10 Q. Again, does it immediately ring any bells with you? 11 A. No. 12 Q. If I can just refer you to one particular paragraph to 13 ask whether it's something that rings any bells, could 14 we look at the second last paragraph on the page: 15 "In broad terms, the principal pillars of the ETN 16 contract suite in terms of scope and risk transfer have 17 not changed materially since the approval of the Final 18 Business Case in October 2007. The process of 19 negotiation and quality control has operated effectively 20 to ensure the final contract terms are robust and that 21 where risk allocation has altered this has been 22 adequately reflected in suitable commercial 23 compromises." 24 Does that ring any bells with you? 25 A. Not particularly at this time. If that was presented to 25 1 a Council meeting or to the tie Board, then I will 2 certainly have seen it before. If not, then I have not 3 seen it before. 4 Q. But is it something which is triggering any recollection 5 in you at all? 6 A. Not at this time, no. 7 Q. Just for completion then, if I could ask you also -- for 8 completeness, could I ask you to look at CEC01338853. 9 You can see this document is headed "EDINBURGH TRAM 10 PROJECT REPORT ON TERMS OF FINANCIAL CLOSE ('CLOSE 11 REPORT')". 12 It's the same question. Do you recall this at all? 13 A. Again, if it had been presented to the Tram Project 14 Board, if it had been presented to the Full Council, 15 I would have seen it before, but from looking at it, 16 I don't recall seeing it in any other context, no. 17 Q. We are finished with that document then. 18 Once the contracts were awarded in May 2008, I think 19 you continued to be on the boards of the various 20 companies and the Tram Project Board we have talked 21 about; is that correct? 22 A. Yes. 23 Q. Were you responsible for -- put it this way -- keeping 24 an eye on the works as they unfolded? 25 A. Yes, we would listen to -- sorry -- yes, we would -- we 26 1 would be advised, we would be discussed -- the senior 2 officials in tie would run through what was going on, 3 bring everybody up to speed. Everything would have been 4 discussed. So yes, we were aware of what was going on, 5 as -- should I say, everything that we were told by -- 6 that's something we knew about. There may have been 7 things that we didn't know about. I don't know. 8 I couldn't reply. I couldn't speak for the officials. 9 Q. You said: everything we were told by. Presumably you 10 mean everything you were told by people within the 11 companies? 12 A. Yes, when we were at Board meetings, as I suppose 13 virtually any board would be, then the officials working 14 full-time on it would bring forward, update the boards 15 on what was happening as they saw it at the time. 16 Q. Did the works unfold smoothly? 17 A. At first, I would say they unfolded smoothly, and then 18 it gradually became more difficult as time went on. 19 Q. When did things start to become difficult in your view? 20 A. I think it happened quite gradually. I think with 21 retrospect now it was regrettable that -- 22 Q. Could I ask you to speak quite slowly. 23 A. Yes, sorry. I think now, looking back, it's regrettable 24 that, for example, Transport Scotland withdrew, perhaps 25 it was becoming more obvious that the contractors got 27 1 themselves to be in a position to demand more and that 2 happened gradually. 3 However, the tie officials always defended the 4 contract as they saw it, and it was the general view 5 taken by Board members that tie was going properly and 6 that perhaps the difficulties were being caused by the 7 contractors at the time. Particularly the civil 8 engineering contractor. 9 Q. You say that the officials defended the contract as they 10 saw it, and that was the general view of Board members. 11 When did that -- the way you say that, did that change? 12 A. I don't think that it really did. Council officials and 13 tie officials had always assured councillors, and indeed 14 the Board members, that it was a good contract for the 15 Council. I think we now know that that wasn't the case. 16 And there were too many opportunities for the 17 contractors to come in and demand extra, demand more 18 money, suchlike. 19 Q. We will go on to the contract in a bit more -- but if we 20 can just step back a moment to look at what you said, 21 you were unhappy about the withdrawal of 22 Transport Scotland. Why did you think that was not 23 a good thing? 24 A. I think really the Council was a comparatively small 25 body in the overall scheme of things. 28 1 Transport Scotland, being a Scottish Government 2 organisation, would perhaps have had a bit more clout if 3 they had stayed on. I think that was perhaps -- 4 Q. I think we have lost your microphone for a second there. 5 Could you start again? 6 A. Yes. Is that okay? 7 Yes, I think that the Council was a comparatively 8 small body in the overall scheme of things. 9 Transport Scotland being a national government agency, 10 perhaps would have had more clout. So that quite 11 quickly, I think, led us to believe that we were trying 12 to run this as a city, tie itself, and that overall 13 control -- maybe not control, but supervision of the 14 contract and of the scheme diminished a bit when tie -- 15 when Transport Scotland left. 16 Q. You describe it as clout there, that Transport Scotland 17 had more clout. 18 A. Okay. Trying to think of a more diplomatic word than 19 clout. 20 I think Transport Scotland would have more 21 influence, more presence, more authority, as far as the 22 contractors were concerned. So I suppose clout may well 23 be the wrong word. 24 Q. You say also you think the supervision diminished, the 25 supervision of the scheme diminished once 29 1 Transport Scotland ... what did you think 2 Transport Scotland were doing that wasn't done or wasn't 3 done so effectively by the Council? 4 A. I hasn't been deeply involved in what Transport Scotland 5 were doing up to that stage, but it became fairly 6 obvious that them pulling right back, that grip, if you 7 like, they being the ultimate funders, was perhaps 8 reduced. And I think that was probably a problem at the 9 time, and probably is a problem because we could go back 10 to now. 11 Q. Going back to the contract and its implementation, 12 I would like you to look at a document with me. It's 13 reference CEC01210242. These are the papers for the 14 Tram Project Board of 22 October 2008. We can see that 15 you're included as someone to whom they would have been 16 sent? 17 A. Correct. 18 Q. Could we look, please, at page 10. If we look at the 19 lower part of the screen, we see it says there: 20 "Progress - Infraco (including Tramco). 21 Summary against the agreed Infraco contract 22 milestones is shown in the table below (number of 23 milestones)." 24 We can see if we look at the second line in the 25 table for construction, towards the right-hand side, 30 1 under cumulative for the contract, it would be planned 2 that there would be 85 milestones achieved. In fact 3 none had been achieved, 0 per cent. 4 Was this a cause of concern for you, that 0 per cent 5 of what was planned had been achieved by this time in 6 October? 7 A. Yes, there was a general concern about that. This is 8 when the -- particularly the Bilfinger Berger, I would 9 say, were having problems or tie was having problems 10 with them, and a bit of confrontation, I think, in 11 retrospect was now taking place. 12 I think that Bilfinger civil engineering company 13 were very well aware and their legal officials were 14 probably aware of the contract, and as we now know, it 15 favoured them rather than the Council. 16 So that was a bit of a -- that was a concern at the 17 time. 18 Q. But in terms of the lack of progress and the apparent 19 inability to make progress, what was the view of that? 20 What should be done about it? 21 A. It was discussed. It would have been discussed verbally 22 at board meetings. The best of my recollection, the 23 senior officials perhaps, Richard Jeffrey, I think he 24 was there by that time, was -- and indeed the chairman, 25 were very concerned. They were going back to Bilfinger 31 1 and discussing this; how can we get this going. 2 The Board were being told that it should be ongoing 3 now. Things should be up and running. There were 4 various things presented to us to tell us why it wasn't 5 going. None of it appeared to be the problem with tie 6 itself. And I think perhaps some members were quizzing 7 on that. I don't recall doing so myself. 8 But it continually came back that the contractors 9 were being awkward. 10 Q. Were you aware what the -- at that stage whether there 11 is any fundamental differences of agreement about the 12 contract between the parties? 13 A. What we were being told at the time was that the civil 14 engineering contractors were -- perhaps aggressive was 15 the wrong word. Firm, forward looking, as far as they 16 were concerned, group. They had -- they managed 17 contracts all over the world. Some people would say 18 they were a tough company to deal with. They wanted to 19 get their -- the best they could out of the contract, 20 and that was certainly discussed. That became a problem 21 as time went on, and as I was referring to earlier 22 perhaps, Transport Scotland would have had a bit more 23 clout, using the word again, with them than 24 a comparatively small outfit like Edinburgh and its 25 board, tie Board. 32 1 Q. Now, I think you were aware that a dispute arose in 2 relation to Princes Street, the works on Princes Street, 3 early in 2009. 4 A. Mm-hm. 5 Q. By that time you were participating in the Tram Project 6 Board; do you recall that? 7 A. That's when they were amalgamated as I recall. TPB 8 was -- just simply became part of the full Board. 9 Q. Perhaps just for recollection's sake, if you go to 10 a document, CEC00988034. 11 This is perhaps slightly tricky because the papers 12 are marked as being for a meeting on 11 February 2008. 13 We can at least see that your name was included amongst 14 the people to whom they were circulated? 15 A. Correct. 16 Q. But if we look at page 5 of this, we can see it contains 17 the minutes for the Tram Project Board meeting on 18 22 January 2009, rather than 2008. So it appears that 19 what's on the front page of it is someone mistyping the 20 date? 21 A. Yes. 22 Q. Because if we do look at these minutes, we can see 23 item 1.2 referring to what was discussed at the last 24 minute. It was the extra cost to Princes Street, and 25 the paper required to address specific or additional 33 1 cost items within the paper to what is being proposed. 2 Princes Street was something that was happening 3 early in 2009. 4 A. Mm-hm. 5 Q. Do you understand what was at the root of the dispute 6 that arose in relation to Princes Street? 7 A. Not in great detail. As far as I can recall, the -- 8 there were much more -- many more problems on 9 Princes Street than had been previously expected and 10 that was causing quite a problem. I think it was simply 11 a push on from what was happening elsewhere, that it 12 became more obvious, more problems, I think, on 13 Princes Street, than there had been on other parts of 14 the route. 15 Q. What do you mean, a push on? 16 A. I think Princes Street highlighted many more problems 17 than perhaps happened in other parts of the route. They 18 discovered the various things under -- under the road 19 surface. There were more -- more problems than had been 20 anticipated. I think that became probably a major 21 problem. 22 Q. When the dispute arose, were you aware whether or not 23 any works had been carried out on Princes Street at that 24 time? 25 A. I wasn't aware of anything. 34 1 Q. Now, the Princes Street difficulties were discussed at 2 the Tram Project Board, I take it? 3 A. They would have been. 4 Q. Do you recall being given advice in relation to the 5 contract and the problem? 6 A. I don't recall it now, but presumably there must have 7 been. I'm sorry, my memory doesn't help because I have 8 no recorded minutes, I find it difficult. 9 Q. Do you know what was done in relation to the 10 Princes Street dispute and how it was resolved? 11 A. I think the -- the discussions continued between the 12 various bodies. There were various ideas on what should 13 be done. What could be done. And it ended up that what 14 was done in the first instance wasn't good enough, had 15 to be redone. 16 I don't remember all the detail now. 17 Q. When you're talking about what was done and had to be 18 redone, those are the actual works themselves that 19 required remedial works? 20 A. Yes. 21 Q. But in terms of what had to be sorted out between the 22 parties to get the works started, do you know what 23 was -- how that was achieved? 24 A. I'm sorry, I don't recall that now. 25 Q. Do you recall there being an issue that arose, perhaps 35 1 later on or was crystallised later on, about differences 2 between what was termed the Base Date Design Information 3 and the issued for construction information? Do you 4 recall the dispute about that? 5 A. Sorry, I don't know. 6 Q. Do you recall meetings taking place once Richard Jeffrey 7 joined tie to try and decide what strategy should be 8 pursued in relation to the contractor to get them to 9 start work or work? 10 A. I don't recall particular -- the details of any 11 discussion. In retrospect, I think perhaps Mr Jeffrey 12 may have taken a slightly different tack. I think it 13 was assumed that he would continue in the same manner. 14 There were -- probably aware of being a discussion about 15 that at the time. 16 Q. Do you recall the discussion? 17 A. I don't recall the content of any discussion. 18 Q. Do you recall in any detail the decisions that were 19 made? 20 A. No. 21 Q. Or advice that was given in relation to those decisions? 22 A. No. 23 Q. Do you recall whether there were any discussions in tie 24 or the Tram Project Board or TEL for that matter as to 25 what advice should be given to the Council as to the 36 1 likely costs, outcome costs of the project? 2 A. No, I don't recall that being discussed. No. 3 Q. Okay. Do you recall any discussions within any of these 4 entities, the Tram Project Board, tie, TEL, as to the 5 outcomes of the various dispute resolution procedures 6 that were pursued? 7 A. They were reported to the tie Board. I think it's 8 perhaps in some of the papers. They were being reported 9 that -- let's say, a purely hypothetical example, the 10 contractor had come forward asking for GBP2 million 11 extra. This isn't a particular case. It's 12 hypothetical. It went to dispute resolution. And tie 13 were considering they had won it, if it came back, let's 14 say, 500,000 for tie and the rest had been dismissed. 15 That was probably the way it was being done. So 16 a complete victory, if that's the right correct way to 17 put it, over tie, that was fantastic if it happened. 18 But if the adjudicator came back and said, no, the 19 tie Board, tie itself, are responsible for perhaps only 20 25 per cent of this claim, that was claimed as to be 21 a victory, if that's the right way to put it, and they 22 were considering that had gone in tie's favour, rather 23 than a complete no, the contractor is wrong. 24 Q. Who was presenting that to you? 25 A. That would come from the officials at the time. tie 37 1 officials. 2 Q. If they said to you that they were telling you that you 3 had perhaps managed to make a saving on the costs, but 4 in fact they had been unsuccessful on the point of 5 principle, does that ring any bells? 6 A. Perhaps not the principle. I think if the contractor 7 came back and said: we've had to do this much extra work 8 and they consider under the contract they didn't have to 9 do that, that's -- it may have been a point of 10 principle, but I think it was strictly speaking, they 11 were being hard-headed with the contract. 12 Q. Are you aware of any issues of principle about whether 13 or not certain things would amount to what was termed 14 a Notified Departure? 15 A. No. 16 Q. You don't recall that. 17 You don't recall any discussion with you about how 18 the decisions on that issue had turned out? 19 A. No, they were simply reported to us, and there would 20 have been verbal discussion, I'm sure, at the time. 21 Q. My Lord, I think those are the all the questions I have 22 for Mr Jackson. 23 CHAIR OF THE INQUIRY: Yes. I don't think there are any 24 other questions. 25 So thank you very much, Mr Jackson. 38 1 A. Okay. 2 CHAIR OF THE INQUIRY: You're free to go. You're still 3 subject to your citation, in case we wanted to recall 4 you. It's highly unlikely, but there is that 5 possibility. If that arose, you would be contacted by 6 a member of the Inquiry team. 7 Thank you very much for your evidence. 8 A. Thank you, your Honour. 9 MR LAKE: My Lord, I'm sorry to say that the next witness 10 that I have planned to come in today is Mr Wheeler, but 11 in terms of timetabling, I'm afraid he's not here at the 12 moment and I'm afraid won't be here until about 13 11 o'clock. 14 So I'm sorry to cause an interruption to the 15 proceedings, but I would suggest we take the morning 16 break early and perhaps slightly longer than would 17 normally be the case. 18 CHAIR OF THE INQUIRY: We can adjourn until 11 o'clock. If 19 Mr Wheeler isn't here then, we can have a longer 20 adjournment. 21 But in the meantime, we'll adjourn until 11 o'clock. 22 A. Thank you, your Honour. 23 (The witness withdrew) 24 (10.23 am) 25 (A short break) 39 1 (11.02 am) 2 CHAIR OF THE INQUIRY: Yes, Mr Lake. 3 MR LAKE: The next witness is Phil Wheeler, my Lord. 4 MR PHIL WHEELER (sworn) 5 CHAIR OF THE INQUIRY: You are going to be asked questions 6 initially at least by Counsel to the Inquiry, Mr Lake. 7 If you listen to the question and answer it as directly 8 as possible. If you also keep your voice up by speaking 9 to the microphone so that the public, other people can 10 hear you, and if you speak relatively slowly, but at an 11 even pace, so that the shorthand writer can keep up with 12 you. 13 A. Understood. 14 Examination by MR LAKE 15 MR LAKE: Mr Wheeler, could you state your full name, 16 please. 17 A. Philip Wheeler. 18 Q. I think the Inquiry has details of your address. 19 I think you have variously been a Director of tie, 20 a Director of TEL, and a Director of Tram Project Board. 21 A. Correct. 22 Q. All to do with the tram project. 23 I would like you to look at a document with me, 24 please. You should have a paper copy in front of you, 25 but it will also be shown on the screen. It's 40 1 TRI00000092_C. 2 You can see that on screen in front of you? 3 A. I do. 4 Q. It should be the same as you have on paper. Is that 5 a copy of the statement you have prepared for the 6 Inquiry and have signed? 7 A. It appears to be so. 8 Q. Are you content that that be adopted as your evidence 9 for the purposes of this Inquiry? 10 A. Indeed. 11 Q. Thank you. I have already indicated the various bodies 12 you were a member of, tie, TEL and the Tram Project 13 Board. Were you aware of the different roles performed 14 by each of them? 15 A. There was certainly a certain amount of overlap, and at 16 times it probably wasn't clear actually quite which 17 meeting you were at, because the personnel were fairly 18 similar. And the main thing was getting on with the 19 job. 20 Q. Even allowing for that overlap in both personnel, did 21 they have distinct roles as to what each was supposed to 22 do? 23 A. Indeed. I was reasonably clear about different people's 24 roles at these meetings, yes. 25 Q. The different roles of each of these three bodies, the 41 1 role of TEL as opposed to the role of tie, what was the 2 difference? What did each of them do? 3 A. TEL was to be the holding company for both Lothian Buses 4 and the tram service when it came into place, whereas 5 tie was the facilitator, I suppose, of the actual tram 6 project and delivering the tram track and so on. 7 Q. Which company or entity did the Council look to, to 8 actually deliver the tram infrastructure for it? 9 A. I would say that was tie because that was their main 10 purpose. 11 Q. If we could look at page 9 of your statement, please. 12 If we could look at paragraph 28, right at the top. 13 You note there in that light that: 14 "The TIE Board had responsibility for the capital 15 costs of the Tram Project." 16 What did you have in mind when you said it was 17 responsible for the capital costs? 18 A. My understanding, my recollection is that tie was 19 responsible for getting the tram project, the physical 20 work done, and paying for it. 21 Q. Of these three bodies, tie, TEL and the Tram Project 22 Board, which was responsible for advising the Council in 23 relation to issues of the trams? 24 A. I suppose that -- depending on what sort of issue you're 25 talking about. Whether it was a construction issue, 42 1 procurement issue, or whether it's actual maintaining 2 a public service. 3 Q. I should have made that plain. It's construction and 4 procurement. Who -- which company provided the advice 5 on that? 6 A. My recollection was that that was tie's responsibility. 7 Q. Was there any hierarchy between these companies and 8 bodies, that one was overall in charge? 9 A. I'm not sure that there was. There seemed to be a bit 10 of parity, I think. 11 Q. If we could go into your statement again, please, and 12 look at page 3, paragraph 10. You note in the first 13 sentence: 14 "As Director of TIE, I had a duty of confidentiality 15 and a duty not to divulge matters that had been 16 discussed in confidence at the Board." 17 If I just pause there, did you understand that would 18 extend to everything discussed on the Board or just 19 specific matters that had to be kept confidential? 20 A. I had difficulty in differentiating what was not 21 confidential at the Board, and I tended to err probably 22 maybe in hindsight a bit too much on the safe side, and 23 regarded most of what I gleaned at tie Board meetings 24 and suchlike places as being confidential. 25 Q. Were there times when you were told in particular by 43 1 others that certain items must be kept confidential? 2 A. I'm sure there were. 3 Q. You can't recall any particular -- 4 A. I can't recall a particular instance, but it would have 5 been unlikely not to have happened. 6 Q. Reading on in your paragraph, in the second line, you 7 say: 8 "I felt hamstrung by this. It sometimes placed me 9 in a difficult position with my colleagues at group 10 meetings, as they wanted me to fill them in on more 11 things than I felt comfortable doing so. I had to try 12 and resolve that with my conscience as to where I drew 13 the line with confidentiality and to what extent 14 I should trust anybody." 15 How then did you decide where you were going to draw 16 the line? What guided you as to where you would draw 17 it? 18 A. Whether I -- well, I had to try and, as I said, had to 19 try and resolve it with my conscience, to decide whether 20 certain information was not particularly sensitive 21 and I could disclose it to my colleagues. And other 22 things I thought, no, I can't discuss that. That 23 obviously was an ongoing thing throughout the time I was 24 involved with the project. 25 Q. Can you remember what sort of things you felt you were 44 1 unable to discuss with your colleagues? 2 A. Certainly when it got to the dispute stage, we were 3 warned very much not to reveal what was going on lest it 4 got into the public domain and affected the negotiations 5 between the different parties. 6 Q. What sort of things were you unable to discuss at the 7 dispute stage? 8 A. Just the fact that there was a disagreement. 9 Q. Were you able to discuss what was being done in relation 10 to that disagreement, what the strategy was? 11 A. I suppose the factual matter that some matters were 12 being referred for arbitration, but not the specifics of 13 them. 14 Q. Did your colleagues -- your colleagues would be aware 15 that you knew more about these things than they did? 16 A. Indeed. 17 Q. Were they actually asking you what's going on? 18 A. Yes, but they appreciated also that I was restricted in 19 what I could share. 20 Q. Did you feel there were situations arising within the 21 Council or committees that decisions had had to be taken 22 in relation to the trams where you had material that 23 would be relevant to that decision, that other people 24 didn't? 25 A. That was bound to be the case. 45 1 Q. For example, in relation to the disputes, fellow 2 councillors might have had a different approach to the 3 tram project if they knew what was going on, on the 4 disputes, either favourable or unfavourable, it might 5 have changed their approach? 6 A. I suppose so. 7 Q. Was there a tendency for councillors generally to defer 8 to the councillors that were on the tie, the Tram 9 Project Board and TEL, on the assumption that they must 10 know more about it than the others? 11 A. I expect so, but you would need to ask the people who 12 were affected that way. 13 Q. Were you aware of it? 14 A. I don't remember there being any issues at this stage, 15 but maybe some of them did feel left out. 16 Q. What did you understand was the reason for the purpose 17 of putting councillors on the Boards? 18 A. Because the Council was the ultimate owner of all these 19 companies, it made sense to represent the Council on -- 20 Council and its interests, and the public purse, by 21 having councillors present on the Boards. 22 Q. To what extent do you think the Directors were able to 23 represent the Council, carry forward Council views into 24 the Board? 25 A. Well, we were non-executive Directors, but we had 46 1 obviously the right to make our point in committee, on 2 Board meetings, and to ask questions as appropriate. 3 Q. If you were making a point, was that really fighting the 4 Council's corner before the Board? 5 A. I think we were basically acting in the role of 6 non-executive Directors of the Board. But we were there 7 obviously by dint of being councillors. 8 Q. Were you aware of any times when there was -- could be 9 a conflict of interest between the Council on the one 10 hand and the companies on the other? 11 A. I suppose that that was a risk, yes. 12 Q. Were you aware of it happening in practice? 13 A. I can't think of instances offhand. 14 Q. As the situation got towards the contract close, it was 15 obviously in the interests of the company to get 16 a contract concluded for the trams and to deliver the 17 trams, because that was the single purpose of the 18 company; would you agree? 19 A. Indeed. 20 Q. The Council obviously had very much broader purposes, 21 the very many roles that it had to fulfil; would you 22 agree? 23 A. Yes. 24 Q. Ultimately, perhaps the major difference between the two 25 is that the Council were the body that was actually 47 1 going to be paying for the trams, whereas it was -- 2 didn't make any financial difference to tie or TEL? 3 A. The Scottish Government was the ultimate paymaster who 4 were putting up the bulk of the money for the tram. 5 Q. I think the Scottish Government put up a sum of 6 GBP500 million. 7 A. That was the eventual sum, yes. 8 Q. It was originally intended that the Council would put up 9 GBP45 million. 10 A. Yes. 11 Q. But obviously they had to make up the whole of the 12 balance over the 500 million that the Scottish 13 Government put in? 14 A. Correct. 15 Q. So the Council's very different interests from tie is 16 that it was going to be footing any overrun of the bill? 17 A. Yes. 18 Q. Did that create a conflict of interest, or a difference 19 in interest, to put it more neutrally, between tie on 20 the one hand and the Council on the other? 21 A. I suppose it did when it became clearer that we weren't 22 going to get the tram -- tram project delivered within 23 the original funding. 24 Q. Was that potential difference of interest apparent at 25 the time of the conclusion of the contracts or decision 48 1 to award in December 2007? 2 A. No. Not -- not that I recall. 3 Q. I think as well as being on the various companies, you 4 obviously also were taking decisions as a councillor and 5 that you sat on a Policy and Strategy Committee? 6 A. Indeed. All the committee conveners joined together on 7 this Policy and Strategy Committee together with certain 8 members of the opposition. 9 Q. You, I appreciate, were not the only one in this 10 position, but did you feel there was any difficulty in 11 that the Council and the Policy and Strategy Committee 12 would be overseeing the work of tie and TEL and the Tram 13 Project Board, where in fact you were on all the bodies? 14 A. We had guidance on declarations of interest which -- at 15 the start of any meeting where something affecting an 16 outside board or a company that you were involved with 17 was on the agenda, you declared that at the start of the 18 meeting. The clerk asked if there were any 19 declarations, and they were noted at the start of the 20 minutes. 21 Q. So everybody was aware if you were on the Company Boards 22 as well as sitting on the Policy and Strategy Committee? 23 A. Correct. 24 Q. But even with that openness, did you feel there was any 25 difficulty in that you were on -- effectively overseeing 49 1 work you'd taken in another capacity? 2 A. I suppose you could describe that as a potential 3 conflict, but I don't recall seeing it as that at the 4 time. 5 Q. With the benefit of hindsight, do you think it might be 6 managed better? 7 A. You could always do things better by hindsight. 8 Q. I want to look now at the lead-up to the award of the 9 decision to proceed with the project in December 2007. 10 Could we look, please, at paragraph 30 of your 11 statement. If you could look at page 9, paragraph 30. 12 You have noted here: 13 "The design and utilities works were supposed to be 14 finished before the infrastructure works commenced. In 15 practice, insufficient time was allowed for MUDFA to be 16 completed. Issues were also caused by the takeover of 17 the contractor: Carillion took over Alfred MacAlpine and 18 there were various changes of key personnel as a result 19 of that takeover. I think there were also problems with 20 some of their sub-contractors doing different streets." 21 Now, by the end of 2007, when it came to deciding to 22 proceed with the project, was it apparent to you that 23 the MUDFA works were not complete? 24 A. Indeed, it was evident on the streets. 25 Q. What was the state of the design work at that time, 50 1 completion of the design? 2 A. Do you mean the design for MUDFA or the design for the 3 tramline? 4 Q. The design for the trams generally, the infrastructure? 5 A. That was always dragging. That's my recollection, that 6 it was dragging all the time. So it was never quite 7 where it was wanted to be or where it was needed to be 8 to enable progress to be made properly. 9 Q. Now, despite the fact you had these -- the design was 10 running late and MUDFA was running late, the contract 11 was -- nonetheless in December, a decision was taken to 12 proceed with the contract. 13 Was there any consideration of whether or not there 14 should be a pause at that time, as neither the design 15 nor MUDFA were proceeding according to plan? 16 A. I don't recall that. 17 Q. Was any advice given in relation to whether or not it 18 might be appropriate to pause? 19 A. Again, I don't recall. 20 Q. If it's suggested to you that there was advice from the 21 solicitors instructed in relation to the matter, that 22 there should be a pause, would you recall that? 23 A. I'm sure I would recall it if I'd been aware of legal 24 advice to that effect, yes. 25 Q. I'm going to ask you to go on and look at paragraph 43 51 1 of your statement, which is on page 14. 2 If we look right to the foot of that page, we can 3 see, the last line: 4 "The advice I got from the lawyers and from the 5 technical people ..." 6 This is all in December 2007: 7 "The advice I got from the lawyers and from the 8 technical people was that we were ready to go. When 9 voting on the Final Business Case I was satisfied that 10 the aims of the procurement strategy had been met." 11 Can you recall what advice you were being given at 12 this time? 13 A. I'm sure that was from the Council's in-house lawyers, 14 and also no doubt at the tie Board from their lawyers. 15 And from the various executives at tie at the time that 16 everything was in place. And probably from some of the 17 senior officers of the Council as well. I was getting 18 advice in various directions or from various directions 19 at times. 20 Q. When you refer there in the sentence at the top of the 21 page to the aims of the procurement strategy had been 22 met, do you recall what aims did you have in mind? What 23 aims had been met? 24 A. The aims were to find a contractor to deliver the tram 25 scheme. 52 1 Q. Do you recall -- if I can ask you, please, to look at 2 page 21 of your statement, I want to look at some 3 questions in relation to risk in the contract. 4 If we firstly look at paragraph 58 at the top of the 5 page here. The third line: 6 "Design risk lay with TIE until such time as the 7 novation was complete, but I cannot recall if this was 8 discussed or if it was reflected in any risk registers. 9 The lawyers were told by the TPB that the risk was to 10 lie with the contractors in the contract." 11 What risk are you discussing there, can you recall? 12 A. I think particularly that the risk that the design 13 wouldn't be ready when required. 14 Q. Who was to carry the risk of that, as far as you were 15 concerned? 16 A. That was my understanding, that there was novation 17 discussions as part of the negotiation with the 18 potential contractors for them to take on the risk of 19 the designers. 20 Q. So -- 21 A. Or making sure that the designs were managed and 22 delivered. 23 Q. The risk was to be managed through the novation process; 24 is that what you're saying? 25 A. The risk would be transferred to the contractors as part 53 1 of the novation progress. 2 Q. Who was giving you that information, can you recall? 3 A. I'm sure that was information I was gleaning at the 4 Board meetings from the senior officers of tie and those 5 who were doing the negotiations. 6 Q. Can I refer you forward to page 23 of your statement and 7 look at paragraph 64. You are referring here to the 8 minutes of the 13 March meeting. They record 9 a GBP10 million increase in the project price and 10 records Stewart McGarrity as having explained some 11 components of the increase: 12 "I cannot remember why these arose." 13 The point I'm interested in: 14 "The minutes record Willie Gallagher as referring to 15 a buy out of the risk of SDS non-performance." 16 You're obviously just making a reference there to 17 what's in the minutes, but do you recall what it was 18 suggesting what risk should be bought out at this stage, 19 in March 2008? 20 A. I don't recall that detail now. It's nearly ten years 21 ago, after all. 22 Q. Were you given any advice at the stage, either in 23 December 2007 or when the contract was ultimately signed 24 in May 2008, as to what likelihood there might be 25 changes to the contract works or the programme that 54 1 might generate further liabilities on the part of the 2 Council or tie? 3 A. I was aware of the general risk that any change to the 4 programme incurred or requested by tie or the Council 5 was bound to have cost implications. The contractors 6 wouldn't do it for nothing. 7 Q. Were you given any indication of how likely it was that 8 there would be such changes to the contract? 9 A. Well, we were just warned that that was a risk that 10 would have to be accepted. 11 Q. Were you told ever that certain Pricing Assumptions were 12 contained in the contract and if those assumptions 13 didn't hold true, they would be treated as changes 14 generating an entitlement to additional payment? 15 A. I don't recall that. 16 Q. Were you ever told that it was already known that 17 certain of those assumptions were not true and that 18 there would, as soon as the contract was signed, be 19 claims for additional payment? 20 A. Again, I'm not aware of that. 21 Q. I would like to look at some resolutions that were 22 considered in January 2008. Could we have document 23 CEC01515189. If you could start by enlarging the upper 24 half of the screen, we can see it's headed "TRAM PROJECT 25 BOARD RESOLUTION OF THE MEMBERS OF THE Tram Project 55 1 Board AT A MEETING ON 23 JANUARY 2008, HELD JOINTLY WITH 2 THE BOARDS OF Tie Limited AND Transport Edinburgh Limited". 3 "The Board resolved after due consideration of the 4 papers presented and discussion of matters at the 5 meeting: 1. to approve the terms of Infraco Contract 6 Suite and all related agreements and documents ..." 7 2: 8 "to recommend to the Board of Transport Edinburgh 9 Limited that the Board approve the terms of Infraco 10 Contract Suite and all related agreements and 11 documents ..." 12 3: 13 "to approve the terms of the governance and 14 delegations paper ..." 15 4: 16 "to approve the proposed delegated authority 17 arrangements to be adopted in order to ensure an 18 efficient and properly controlled process was followed 19 through to contractual commitment and during project 20 implementation." 21 Do you recall this document? 22 A. I don't recall it offhand. 23 Q. We can see that the effect of the delegated authority 24 below was that: 25 "A Committee of the Boards of the Company, the Tram 56 1 Project Board and tie Limited would be immediately formed 2 comprising Messrs Gallagher, Mackay and Renilson ..." 3 Those would be names familiar to you? 4 A. Indeed. 5 Q. "... to whom authority is delegated to approve final 6 execution by the tie Chairman of Notification to Award, 7 the Infraco Contract Suite and any necessary related 8 agreements ..." 9 Certain conditions are there. Do you recall that 10 authority being given to that committee of three? 11 A. I'm sure it was given. I don't recall that particular 12 document, but I'm sure that that committee was the 13 relevant one set up at that time. 14 Q. If that committee had been set up, do you recall how 15 much further consideration you as a member of these 16 three entities, TEL, tie and the Tram Project Board, how 17 much further consideration you had of the decision of 18 whether or not the contract should be entered into? 19 A. Well, the authority had been delegated to that 20 committee. Therefore, it was up to them to do the 21 final -- make the final decision, and get the 22 contract -- the contract suite executed. That's my 23 reading of it. 24 Q. Could I ask you, please, to look at page 29 of your 25 statement. Could we look at paragraph 76. If I read 57 1 from the start: 2 "The Infraco contract suite was duly signed on 13 3 and 14 May 2008. The change that had been made to the 4 contract between December 2007 and contract signing in 5 May 2008 was that BBS wanted more money for more risk." 6 Just pausing there, were you aware when they had 7 requested further money and how much further money they 8 had requested? 9 A. I don't recall the detail. 10 Q. When you say "more money for more risk", do you mean 11 that that was the contractors taking on additional risk? 12 A. That must have been from the documents I was reading, 13 when I had my interviews last year, that I picked up 14 something there that I've commented on in the statement. 15 But I think that is sort of a quid pro quo. If more 16 risk was being transferred, then they wanted 17 remuneration for it as well, and you can understand that 18 point of view. 19 Q. If you have picked this up from statements within the 20 documents, had you carried out any assessment of your 21 own as to whether or not risk had been transferred to 22 the contractor? 23 A. Probably not to any extent. 24 Q. Can you remember being given any advice as to transfer 25 of risk to the contractor or the other way? 58 1 A. Only in general terms. It was discussed at board 2 meetings. I don't remember any detailed briefing on 3 risk and the elements of risk. 4 Q. We noted earlier the parts of your statement where you 5 say the intention was that risk, design risks, could be 6 transferred to the contractor? 7 A. Indeed. 8 Q. By the time you got to contract close in May, what was 9 your understanding as to where that risk lay? 10 A. Well, that -- my understanding was that the novation was 11 part of the contract suite, and therefore the risk for 12 getting the designs finished had transferred as part of 13 that suite of documents. 14 Q. In addition to the actual risk, the cost of completing 15 the design, it might be said there's another risk of any 16 increased cost of actually building the tramway as 17 a result of changes in design. 18 A. Indeed. 19 Q. Do you understand who was to bear the risk of any 20 increase in construction costs resulting from changes in 21 design? 22 A. I think that's being negotiated item by item thereafter. 23 That's my recollection. That's where the individual 24 bits of dispute arbitration came in, because they were 25 specific areas of the tram track, particular bridges or 59 1 whatever. So that's obviously when detailed design came 2 to construction, and it didn't quite match with what had 3 been originally priced. 4 Q. If I continue reading from where I left off, you say: 5 "I cannot recall if I received a briefing from 6 CEC legal officers, at any time, on the effect of the 7 contract, including the pricing in Schedule 4. However, 8 we did discuss it at TIE Board meetings or the TPB [Tram 9 Project Board]. Some of those meetings were attended by 10 DLA who probably explained it to us. At that stage 11 I was still under the impression that the risks all lay 12 with the contractor. That was what we were told by 13 Willie Gallagher, Tom Aitchison and Gill Lindsay. I was 14 not familiar with, nor did I understand the Pricing 15 Assumptions set out in Schedule 4. Once I became aware 16 that the price was fixed with the design drawings issued 17 at November 2007, I then knew that the change was going 18 to cost TIE a lot of money." 19 Just looking at one of the first points there, you 20 said that meetings were attended by DLA who probably 21 explained it to us. Is that something you recall or is 22 it something you are assuming would have happened? 23 A. I'm assuming with hindsight. 24 Q. All right. Because -- 25 A. I don't have any record one way or the other. 60 1 Q. From what you said, again further down in that 2 paragraph, it appears -- I should ask it -- do you have 3 a recollection of being told matters by 4 Willie Gallagher, Tom Aitchison and Gill Lindsay to the 5 effect that the risks all lay with the contractor, or 6 again, is that inference? 7 A. I'm sure it would be one or other of them, if not all of 8 them at different times, probably telling me the same 9 information or near enough. 10 Q. Can you actually recall having been told that by people, 11 or is it an assumption? 12 A. I don't recall any individual discussions on it, but 13 just scrolling back, I'm sure there was a discussion 14 with these people and maybe some others on the topic at 15 the time. 16 Q. You note right at the end there that once you became 17 aware the price was fixed in relation to certain design 18 drawings, you knew the change was going to cost tie 19 a lot of money. Can you recall when you became aware of 20 that? 21 A. Not offhand, but I knew it was a risk, that we were 22 talking about earlier, that if there were design changes 23 coming through, they could be expensive. 24 Q. Can you recall even in general terms, was this about the 25 contract close or was it very much later, years later, 61 1 that you had the awareness of the issue? 2 A. It's probably shortly after close that these things 3 started to emerge. 4 Q. In what context did they emerge? Was it within one of 5 these tram bodies, or was it in the Council as a whole? 6 A. It would be at one of the Tram Boards. 7 Q. I'll ask you in a little while about how matters 8 progressed with the works when they started, but for the 9 moment I would like to ask you about -- if you could 10 turn to page 18 of your statement. 11 CHAIR OF THE INQUIRY: Before doing that, you've mentioned 12 Mr Aitchison who was Chief Executive of the Council at 13 that time, and Gill Lindsay who was the 14 Council Solicitor. 15 To what extent did you as a councillor expect the 16 Council, senior Council officials and the Council Legal 17 Department to be involved in giving advice about this? 18 A. I did obviously look to them for advice, both from the 19 Chief Executive and from the Council Solicitor. Yes. 20 I had occasional meetings or periodic meetings with them 21 at the time to discuss the issues of the day. 22 CHAIR OF THE INQUIRY: Was that separate from the advice 23 that tie was receiving from DLA? 24 A. Yes, that would be probably a one-to-one meeting with 25 one of these people. 62 1 CHAIR OF THE INQUIRY: Thank you. 2 MR LAKE: Could I ask you, please, to look at paragraph 53 3 on this page. You refer there to: 4 "The same papers for the 23 January 2008 meeting 5 contained the Report on the Terms of Financial Close. 6 I do not recall the TPB [Tram Project Board] having any role 7 in the finalisation of the Close Report. That was 8 largely done by the lawyers. The function of the report 9 was to update the Board on where we were. I satisfied 10 myself that the statements made in the Report were 11 correct, but I did rely on discussions with 12 Willie Gallagher and his senior officers, and with 13 Andrew Fitchie. There were no independent checks of the 14 statements in the Close Report." 15 You said there that you took the effort to satisfy 16 yourself as to the statements in the report. Was that 17 something that was, as far as you were aware, done by 18 others on the Board or other -- 19 A. I can't comment on other people's actions. 20 Q. So this was essentially an exercise you undertook on 21 your own? 22 A. Some of the discussions were at the different Tram 23 Boards, where Willie Gallagher and his senior officers 24 and Andrew Fitchie were present, and getting assurances 25 from them. 63 1 Q. So did you ask them questions: what about this, what's 2 the basis for that? 3 A. I'm sure I did. 4 Q. Could we look, please, at the papers in question you are 5 referring to in that paragraph. It's CEC01015023. 6 We can see that these are the papers for a meeting 7 of the Tram Project Board, tie Board and TEL Board that 8 took place on 23 January 2008. You were referring 9 within your statement to page 35, if you could look at 10 that, please. 11 We can see the heading. This is "REPORT ON TERMS OF 12 FINANCIAL CLOSE ('CLOSE REPORT')". 13 Underneath: 14 "FOR THE ATTENTION OF THE TRAM PROJECT BOARD, 15 TEL BOARD AND TIE BOARD." 16 This is marked draft 21 January 2008. 17 This is the document you're referring to in your 18 statement; is that correct? 19 A. I think that would be it, yes. 20 Q. What I want to do is just look at some of the statements 21 in this report. 22 If you could turn forward to page 38 of this. If 23 you look at the upper half of the page, we'll see 24 there's a paragraph to the effect -- it is the lower one 25 we can now see on screen: 64 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." 8 Now, are you able to recall from whom you sought 9 assurance that this was correct? 10 A. I'm sure that the -- I had confidence, reasonable 11 confidence in the officers and directors and so on who 12 had drafted this report. I'm not sure whose name is at 13 the foot of it, but that was the sort of assurance that 14 I had to go with. 15 Q. I appreciate I'm asking you to look back a long time, 16 but can you recall whether this was something on which 17 you sought assurance, or can you simply say that you 18 would have sought assurance on everything that was in 19 the report so this would have been included? 20 A. I think quoted there in broad terms, I received 21 a general assurance by the fact that we had all this 22 information in the report and -- that I had no reason to 23 doubt the authors of the report. 24 Q. So is it essentially a matter of you were relying on the 25 authors of the report to ensure that it was correct and 65 1 you had no independent means of verifying what was or 2 was not correct? 3 A. Indeed. 4 Q. This report was an early draft. We can see it's dated 5 21 January. There were -- different versions of this 6 came out much later in the process, all the way up to 7 financial close. Did you continue to monitor these 8 reports and ask questions, or was your involvement 9 largely finished at an earlier stage of this? 10 A. I think when -- when the report came up at subsequent 11 Board meetings, obviously you had the opportunity to ask 12 questions about progress and so on. 13 The main concern was whether or not some sort of 14 agreement was getting close. 15 Q. What sort of agreement? 16 A. Agreement between tie and the consortium. 17 Q. So do I understand from what you're saying, the 18 principal concern was just to get a contract concluded? 19 A. Yes. 20 Q. Was there some pressure to get the contract concluded, 21 either in December or in May? 22 A. I think there was to get clarity, and to get on with the 23 job, really. 24 Q. Where was that pressure coming from, do you think? 25 A. Probably from the general sentiment of the Council. 66 1 Q. Was there any pressure within tie to get it done that 2 you were aware of? 3 A. Yes. I'm sure the people who had been involved in the 4 negotiations were getting a bit frustrated that they 5 hadn't come to a conclusion. 6 Q. Looking now -- we have finished with that document -- to 7 the contract works commenced. It's known obviously that 8 there were problems with the tram works. When did you 9 first become aware that there were problems? 10 A. I can't put a date on it. 11 Q. Can I ask you to look at a document, to try and fix 12 a date. Can we look at CEC01210242. 13 We can see that we're looking here at papers for the 14 Tram Project Board for the meeting that was due to take 15 place on 22 October 2008, which would put it some four 16 months or so after the contract had been awarded. 17 Could we look at page 10, please. And the lower 18 half of the page. There's a table there setting out 19 what the progress had been, described as "Summary 20 against agreed Infraco contract milestones is shown in 21 the table below (number of milestones)". 22 If we look, we can see that the prelims are all 23 marked as 100 per cent complete. Can you see that? 24 A. Indeed. 25 Q. If we look at the line underneath, construction, and 67 1 perhaps focus on the right-hand side, the cumulative 2 position, we can see that of 85 planned milestones, none 3 have been achieved. So there's a 0 per cent progress 4 noted. What was your reaction to getting this 5 information in October 2008? 6 A. Obviously I was very disappointed that the construction 7 work hadn't begun, given that it was some months, as you 8 said, after contract close. And that it appeared that 9 the contractors were not mobilising with any urgency. 10 Or that's certainly what we were being told; both 11 getting manpower and plant to get on with the job. 12 Q. If you could look over the page, please. We can see the 13 top of the page, if we enlarge the upper half, it notes: 14 "The project continues to experience problems with 15 slow mobilisation and, in particular, appointment of 16 direct BSC resource and final appointment of the main 17 package contractors." 18 It notes then that work has commenced on some sites. 19 If we look below the table, we can see bullet points, 20 and above it, it says: 21 "Key reasons for slippage include ..." 22 It notes difficulties in the concrete pour at 23 Edinburgh Park, redesign of Haymarket viaduct and the 24 delay of the Leith Walk as a result of utility works not 25 having been completed. 68 1 Were you told that there were any more general 2 issues with the contractor at that time that were 3 delaying the progress? 4 A. Well, the very fact that, as shown on the previous page, 5 very little work had been done. So it was obvious that 6 there was a general reluctance to get on and deliver the 7 job. 8 Q. Was there any discussion that you can recall as to what 9 was going to be done about that? 10 A. I'm sure the senior officers of tie were encouraged to 11 speak to the contractors and try and get things moving. 12 Q. Do you recall a dispute emerging in relation to works on 13 Princes Street in early 2009? 14 A. Yes. 15 Q. Now, do you recall that being discussed at the Tram 16 Project Board? 17 A. Yes, it would have been at the time. 18 Q. The difficulty was simply that the consortium were not 19 willing to start works for the infrastructure on 20 Princes Street? 21 A. Yes. 22 Q. Were you aware what the reason for that was, why they 23 were not starting works? 24 A. I can't remember the detail of it now. 25 Q. Could you look at paragraph 87 of your statement, 69 1 page 34. 2 At the foot of this page, and this is more in 3 relation to disputes generally, rather than 4 Princes Street in particular, you note: 5 "There were discussions at Board meetings and I was 6 given expert advice, both from the contractual people, 7 and Andrew Fitchie from DLA Piper. They kept 8 reinforcing the view that the contract was a sound one." 9 Over the page: 10 "My views on these matters only changed when 11 Gill Lindsay retired. It was then pointed out that 12 there might be problems." 13 Were you aware that there were arguments even taking 14 place about the contract round about this time? 15 A. I don't think -- well, the advice we were getting and 16 the tone of the Board meetings was that the contract was 17 robust and it was the contractors who were in breach. 18 And that was the point of view that was being emphasised 19 all the time. 20 Q. Were you ever given a notification that there might be 21 a weakness within the contract that would enable the 22 contractors to claim that there were what were termed 23 Notified Departures? 24 A. Not at that point. 25 Q. Just to put it quite specifically to you, did 70 1 Andrew Fitchie of DLA give advice to any of these 2 bodies -- that's the Tram Project Board, tie or TEL -- 3 to the effect that there was a problem with the contract 4 and the Council would be able to claim additional 5 monies? 6 A. Sorry, would you like to repeat that? 7 Q. Yes. Did Andrew Fitchie of DLA give advice to tie, TEL 8 or the Tram Project Board that there was a weakness in 9 the contract that would enable the Council to claim 10 additional monies? 11 A. I don't recall that. 12 Q. Had you been told that, do you think you would have been 13 able to recall it? 14 A. I'm sure if I had heard that someone like Mr Fitchie had 15 questioned the robustness of the contract, I'm sure 16 I would have remembered that. 17 MR MARTIN: My Lord, I apologise for interrupting. My 18 learned friend said the Council could claim extra money. 19 He may have meant that deliberately, but if not, in 20 fairness to the witness, I wonder if it could be 21 clarified one way or the other. 22 MR LAKE: Mr Martin is of course quite correct. I have made 23 a mistake there. It should be -- what I said was: there 24 was a weakness in the contract which would enable the 25 contractors to claim money from the Council. 71 1 A. I realised that was a slip of the tongue and that you 2 meant contractors. 3 Q. I'm obliged. 4 I'm obliged to my learned friend. 5 Are you aware how the dispute in relation to 6 Princes Street was resolved? 7 A. By a separate agreement, the Princes Street -- PSSA, the 8 Princes Street Agreement, which obviously was an 9 additional settlement. A variation on the main contract 10 obviously. 11 Q. Were the Tram Project Board, including yourself, 12 consulted on whether or not that should be entered into? 13 A. I'm sure it was brought to the Board. You'll probably 14 have the minutes at your fingertips. And we felt we had 15 little option, I think, but to go along with it. If we 16 wanted the work done with Princes Street. 17 Q. I want to go on to a wider dispute. Could we look at 18 page 44 of your statement, please. 19 Paragraph 103, you note here that there was 20 a dispute between the Base Date Design Information and 21 issued for construction drawings, had arisen by this 22 time and was considered at the meeting. I should say 23 that's a meeting of 6 May 2009: 24 "The PD [Project Director] report in the papers 25 referred to 'constructive discussions' on the issue. This 72 1 was all about the design problems between basic drawings 2 and those that were ready for construction, by which 3 time they had been vetted and gone through planning." 4 You see that's what you've recorded in your 5 statement, first of all? 6 A. Sorry? 7 Q. You see that's what you said in your statement? 8 A. Yes. 9 Q. If you could look at the document you have referred to 10 there, in the May minutes, it's CEC00633071. 11 We can see that these are the papers for the meeting 12 on 6 May 2009. And the reference within your statement 13 is to page 9. If we could look at that, please. We can 14 see this is the Project Directors' Report. 15 If we look at the foot of the page, the lower half 16 of the page, under the heading "Commercial", there's 17 a statement about: 18 "The Project Management Panel set up as part of the 19 solution to the disputes surrounding works on 20 Princes Street has now met on three occasions and has 21 been focusing on key priorities for the project which 22 are impacting on programme and commercial issues. This 23 is helping to build the relationships between both teams 24 and some successes have been delivered through this 25 process including ..." 73 1 Then if we look to the last bullet point: 2 "Constructive discussions in relation to the 3 movement between Base Date Design and IFC drawings." 4 That's the only statement that's given in relation 5 to this issue. 6 Were you given much more information about what the 7 problem was there? 8 A. There's probably a discussion to elaborate on that, but 9 I don't recall that or the Director may be -- Project 10 Director in his -- presenting his report probably spoke 11 a bit about it at the time. 12 Q. At the time, going back to May 2009, to what extent was 13 this seen as a major problem? 14 A. He certainly seems to be helping to build relationships 15 and some successes have been delivered. So there's 16 obviously some good news there. 17 Q. That's the first two bullet points, but in particular in 18 relation to the movement between Base Date Design and 19 IFC drawings, were you given any indication as to 20 whether this was a big problem or a little problem? 21 A. So many years after the event, I don't recall. 22 Q. Still staying within the same papers, can we look at the 23 risk register for it, and look at page 18. 24 Do you recognise this document? 25 A. Yes. It's one of the set of documents we got for Board 74 1 meetings. 2 Q. Was this document -- you can see it's titled "ETN 3 Primary Risk Register". Was that discussed at the 4 meeting, in your recollection? 5 A. Yes. I'm sure one of the people responsible for risk 6 management would have gone through it to talk about 7 changes from the previous time. 8 Q. If you could highlight the upper entry here, it's got 9 number 1077. Perhaps just halfway across the page so we 10 can make it large enough to read. 11 We can see the risk or ARM risk ID is 1077 and the 12 cause is said to be: 13 "Lack of visibility of design changes between 14 November 2007 and May 2008." 15 Now, I'll just ask you, was your understanding, is 16 that the same issue as the BDDI to IFC issue or do you 17 think this is considering something different? 18 A. I think it's the same. 19 Q. We see the event is described as: 20 "Tramworks price based on a design which may have 21 been altered." 22 Was there any discussion then about whether or not 23 it was only may have been altered, or whether it was 24 known that the risk had been altered by that time? 25 A. I don't recall. 75 1 Q. Could we highlight now the text to the right of this, so 2 we can see what the treatment strategy was for it. The 3 treatment strategy for that is noted as: 4 "Establish a process which will act as a control 5 mechanism for design changes. (If one exists already then 6 ensure process is complied with.)" 7 Now, reading that, that reads -- it's intended to be 8 a process for controlled design changes in future. Is 9 that correct? 10 A. Yes. Whoever put that entry on the register obviously 11 wasn't sure if there was such a process already in 12 place. 13 Q. We saw what the risk was or the cause of the risk. It 14 was a lack of visibility of design changes which had 15 taken place more than a year earlier between 16 November 2007 and May 2008. Was there any discussion of 17 what use that treatment would be for something that was 18 finished a year before? 19 A. Not that I recall. 20 Q. If we go back to your statement, please. Go back to 21 your statement, please, page 44. Looking at 22 paragraph 103 again, if we see just above halfway down 23 the screen as it is at the moment, there's a sentence 24 that begins: 25 "It was apparent from a very early stage that the 76 1 programme had slipped." 2 This is the same point you've already been noticing, 3 that matters were deteriorating in that regard. 4 A. Yes. 5 Q. Jumping around, could I ask you to look at the papers 6 for the June meeting then of the Tram Project Board, 7 which is reference CEC00983221. We can see that these 8 are the Tram Project Board papers for the meeting that 9 took place on 8 July 2009. 10 Could we go, please, to page 40 of this. 11 The original of this was in colour. So I think 12 there is a colour version available. I wonder if we 13 could put the colour version of this page on screen. It 14 involves switching to the camera to look at a hard copy. 15 The colours are not entirely easy to see, but we can see 16 a range of different colours running down the right-hand 17 side there. Can you see them now? 18 A. Yes, I have them on screen. 19 Q. If we look, for example, halfway down, if we look almost 20 halfway down the table as we see there it, there's an 21 entry, "Utilities works complete". 22 A. Yes. 23 Q. Do you see that? 24 A. Yes. 25 Q. Under the column, "Baseline programme date", we can see 77 1 it's November 2008, and the actual forecast -- the 2 actual current forecast date is now given a year later 3 as November 2009. 4 A. I see that. 5 Q. It's coloured. It's quite difficult -- it looks 6 a reddish pink colour there, doesn't it? 7 A. Yes, I could just make it out. 8 Q. If we look below that at the -- beneath that, Haymarket 9 viaduct complete, it was originally intended a date of 10 8 December 2008, and it's now noting January 2010. Do 11 you see that? 12 A. Yes. 13 Q. For example, we might look further down that to the 14 Carrick Knowe Bridge complete, and we can see there's 15 a slippage there from 11 May 2009 to 26 January 2010. 16 A. Indeed, I see that. 17 Q. Now, if we look over the page to the colour key on this, 18 I don't know if we can zoom in on it because it's very 19 small type, to make it clear. Just hold it there for 20 a second. Let it come into focus. 21 We can see that in relation to matters that are 22 pink, it's significant slippage but expect recovery can 23 be achieved. Red is: 24 "Notable/significant slippage - difficult to recover, 25 even with action." 78 1 It's difficult to see on the version, the colours 2 that are there, but if you can take it from me on the 3 original, the ones we've been looking at come within the 4 pink or purple category: 5 "Significant slippage but expect recovery can be 6 achieved." 7 Was there any discussion of whether or not and how 8 realistic it was to expect that recovery could be 9 achieved? 10 A. I think we were beginning to have doubts as to whether 11 anything could be expedited by that stage, when you see 12 the sheer amount of stuff in the red column or marked 13 red and pink on that report. 14 Q. We have finished with that. 15 I think you are aware that Richard Jeffrey joined 16 tie in 2009? 17 A. I did. 18 Q. One of the things he did was to have a review of the 19 strategic approach to dealing with the contractors? 20 A. Indeed, yes. 21 Q. Could you look at another document with me. It's 22 document CEC00379021. 23 We can see this is headed "Joint ..." 24 It's print of a PowerPoint presentation. On the 25 front page is the heading "Joint Tram Project Board and 79 1 tie Board", and a date is given as 8 July 2009. Do you 2 see all that? 3 A. I see that, yes. 4 Q. Could you look, please, at page 15 with me. We have got 5 the heading, "Recap of mediation and 8 July Tram Project 6 Board": 7 "Mediation held week covered 8 individual items 8 and whilst useful discussions were held and additional 9 information provided, no overall movement or agreements 10 were reached." 11 Do you recall a mediation having taken place shortly 12 before this in 2009? 13 A. Not offhand, no. 14 Q. We can then see there's four options presented to the 15 Tram Project Board in July. That would be the earlier 16 meeting. It's got: 17 "(a) Negotiate settlement of all issues with BSC." 18 In relation to that, it's noted that: 19 "3 months and mediation has not delivered an 20 outcome which is acceptable in terms of certainty on 21 delivery, engagement, programme and costs." 22 Now, that's obviously the view of the person that 23 prepared this presentation. Did you have a view in 24 relation to that option? 25 A. Well, certainly I think when Richard Jeffrey joined tie, 80 1 he brought a fresh pair of eyes and a fresh approach to 2 things. And obviously he was quantifying what he'd 3 found. He'd only been in the business for a few months 4 at this stage, but he was already starting to spell 5 things out in a different way. 6 Q. We can see that the next approach is respectively: 7 "Formal contractual approach; reduce/rephase BSC 8 scope", and (d): 9 "End BSC contract." 10 Do you recall discussing these various options? 11 A. I do remember those options being discussed, yes. 12 Q. The one that was ultimately selected was perhaps 13 inevitably the one that's highlighted in red, the formal 14 contractual approach. 15 A. Yes, we tried to go down that road, if that was 16 feasible, using the dispute resolution procedures and so 17 on. 18 Q. Were you in agreement with that approach? 19 A. Yes. It seemed a reasonable way to approach things at 20 that stage. 21 Q. If the decision was to use the Dispute Resolution 22 Procedures, had you the benefit of advice as to the 23 strength of the arguments in relation -- that would be 24 advanced at a Dispute Resolution Procedure? 25 A. I'm sure at that stage we were still being assured that 81 1 the contract was robust. Therefore, we reckoned if we 2 were insisting on the contract as clause (b) suggests, 3 then we were within our rights. 4 Q. Who was telling that you the contract was robust? 5 A. Nobody had told me otherwise at that point, as far as 6 I recall. 7 Q. What was the intended effect that this would have on the 8 contractors? 9 A. To persuade them to keep moving with the project and 10 keep things moving as best they could. 11 Q. Was there any discussion of what would happen if the 12 decisions went against tie in Dispute Resolution? Where 13 would that leave tie? 14 A. I don't recall discussion of that at this point. 15 Q. I think -- which issues were to be taken to Dispute 16 Resolution Procedure? 17 A. These were obviously individual areas of the -- of the 18 track and so on where there was a difference of opinion 19 about the work and the cost thereof. 20 Q. Are you aware of any particular issues that required to 21 be resolved that might unlock the contract? 22 A. Sorry, what do you mean by unlock? 23 Q. Were there particular matters in dispute between the 24 parties, issues of principle that if they were resolved, 25 might enable things to proceed more speedily? 82 1 A. We were getting the impression certainly from the 2 commercial people that the billing they were getting 3 from the contractors seemed to be generous in their 4 favour for different stretches of work. And the attempt 5 was to go to -- my recollection was to go to arbitration 6 to try and get things sorted out. 7 Q. When you're referring to arbitration, there's a process 8 that could take place under these contracts called 9 adjudication. Does that ring a bell with you? 10 A. I think that's probably the phrase I should have used. 11 Q. So the matters that were going to be taken to 12 adjudication, was it just a matter of querying the 13 bills, as it were, that were coming in from the 14 contractors? 15 A. That's certainly the nub of it, the detailed part of it, 16 that's where some of it came from, and obviously that 17 there were breakdowns in the relationship there. 18 Q. Was it the view within tie, TEL, Tram Project Board, 19 that if the decisions went in favour of them, that the 20 relationship would be repaired and things would improve? 21 A. That was the hope, I'm sure. 22 Q. What was the outcome of these matters going to 23 adjudication? 24 A. Well, we were told that the earlier items referred were 25 found in tie's favour, but then after a while, the 83 1 pendulum seemed to swing and the rulings went the other 2 way. 3 Q. What effect did that have on tie's position? 4 A. It weakened it, obviously. 5 Q. Were any decisions taken as to adopt a different 6 approach in light of that weakness? 7 A. I don't recall other than, as I say, we kept being told 8 that the contract was robust, and therefore it was the 9 contractors who were being difficult. 10 Q. So you were being told that even after the adjudication 11 decision returned? 12 A. I'm sure. 13 Q. Could you look, please, at page 51 of your statement. 14 I'm interested in paragraph 115, which begins at the 15 foot of the page here. You start by noting here: 16 "The decisions of the Carrick Knowe and Gogarburn 17 adjudications were made available." 18 Were you actually provided with copies of those 19 decisions? 20 A. No. 21 Q. What were you told about them? 22 A. We just got a summary of the outcome. 23 Q. Did you ask for copies of the actual decisions? 24 A. Probably not. 25 Q. You say, if you go to the following page: 84 1 "We had no input." 2 You might want to read that in context actually. 3 If you go back to the previous page, you say: 4 "The decisions of the Carrick Knowe and Gogarburn 5 adjudications were made available. An independent 6 arbiter who dealt with the DRP processes was conducting 7 the review. I do not know who it was. The TPB [Tram Project 8 Board] only noted the outcome. We had no input." 9 What do you mean, you had no input? 10 A. Well, we were just informed of the outcome. There was 11 no discussion of it at that stage. I think that's what 12 I meant. 13 Q. Did you want -- would you have welcomed a discussion? 14 A. With hindsight, probably yes. But at the time I didn't 15 feel it was necessary. 16 Q. From what you're saying here, it seems you were told 17 that these decisions were to be the subject of review. 18 A. Yes, I think that was the case, wasn't it? 19 Q. Do you know what -- were you ever told what the outcome 20 of that review was, can you recall? 21 A. I don't recall. 22 Q. Do you recall ever having been involved in a decision as 23 to whether or not to challenge the decisions of the 24 adjudicators? 25 A. I don't think so. 85 1 Q. If we could look, please, at page 58. And if we could 2 enlarge the upper half of the page. I should provide 3 the context of this. You're talking about a report, an 4 update report, issued by the Directors of City 5 Development and Finance to the Council in June 2010. 6 If we read about eight lines down, there's 7 a sentence which begins "The report stated that ..." 8 Towards the right-hand side: 9 "The report stated that the outcome of the DRPs was 10 'finely balanced' in terms of legal principles." 11 And that you -- I should read on: 12 "Some of TIE's claims were sustained by the 13 adjudicator but some were unsuccessful. This was the 14 nature of independent adjudication. The Report stated 15 that it was 'prudent' to plan for a contingency of 16 10% above the approved funding of GBP545 million 17 because of the current lack of clarity on programme and 18 cost. I believed that this was a realistic assessment." 19 Just pausing there, was it a concern to be told that 20 this additional money was going to have to be found? 21 A. As I say, I was being a realist that it was going to 22 cost money to keep things going. 23 Q. What did you understand the report meant when it said 24 that the DRPs were "finely balanced in terms of legal 25 principles"? 86 1 A. I think some of them, there had been a split decision by 2 the adjudicator that he'd found some points made by the 3 one side and some points made by the other about 4 individual issues. So it wasn't as clear cut that -- 5 100 per cent decision on a particular item that had been 6 referred. But sometimes certain parts of it were 7 accepted one way and certain parts were found in the 8 other party's favour. 9 MR LAKE: Thank you very much, Councillor Wheeler. 10 My Lord, those are the only questions I seek to ask. 11 CHAIR OF THE INQUIRY: I don't think there's any other party 12 who has questions. 13 Thank you very much, Mr Wheeler. That's the end of 14 your evidence. You're still subject to your citation in 15 case you need to be recalled, but I think that's 16 probably unlikely. 17 If that does happen, someone from the team will get 18 in touch with you. Thank you for your attendance and 19 your help. 20 A. Thank you, my Lord. 21 MR LAKE: My Lord, I've got no further witnesses today. The 22 witnesses who will be giving evidence on Tuesday of next 23 week are Graeme Barclay and Andrew Malkin. 24 CHAIR OF THE INQUIRY: We will adjourn until Tuesday at 25 9.30. 87 1 (12.17 pm) 2 (The hearing adjourned until Tuesday, 7 November 2017 at 3 9.30 am) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 88 1 INDEX 2 PAGE 3 MR ALLAN JACKSON (sworn) .............................1 4 5 Examination by MR LAKE ........................1 6 7 MR PHIL WHEELER (sworn) .............................40 8 9 Examination by MR LAKE .......................40 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 89