1 Wednesday, 22 November 2017 8 (3.30 pm) 9 CHAIR OF THE INQUIRY: Mr Lake? 10 MR LAKE: My Lord, the next witness is Neil Renilson. 11 MR NEIL RENILSON (sworn) 12 CHAIR OF THE INQUIRY: You are going to be asked questions 13 in the first instance at least by Counsel to the 14 Inquiry, Mr Lake. 15 If you listen to the question and answer it as 16 directly as possible? 17 A. Yes. 18 CHAIR OF THE INQUIRY: And if you keep your voice up so that 19 everyone can hear, and speak at a measured pace so that 20 the shorthand writer can keep up with you. Do you 21 understand? 22 A. I do. 23 Examination by MR LAKE 24 MR LAKE: Mr Renilson, could you state your full name, 25 please. 176 1 A. Neil John Renilson. 2 Q. I would like you to look at a document with me. You 3 should have a hard copy, but it will also be shown on 4 the screen to your right. If we start by looking at 5 TRI00000068_C. 6 A. You say I should have that here on paper.? 7 Q. No. Do you see the document on screen? 8 A. Sorry. 9 Q. Do you have a copy of that document also available in 10 paper form to you? 11 A. Yes. 12 Q. Could you look in the paper form at the final page, 13 please. Towards the end. Does that bear your 14 signature? 15 A. Yes. 16 Q. Is that a witness statement that you provided for the 17 purposes of this Inquiry? 18 A. Yes. 19 Q. I would also like to you look at another two documents. 20 First of all, one that is TRI00000175. 21 Do you recognise this -- 22 A. Yes. 23 Q. -- as a list of amendments that you wish to make to your 24 statement? 25 A. Correct. 177 1 Q. We've understood it as meaning where text is in blue, it 2 is to be added to your statement and where you reproduce 3 text in red, that is text that you wish to have removed 4 from your statement; is that correct? 5 A. That's correct. 6 Q. I think if you could also look at TRI00000176. 7 I don't know if we need to look through this a few 8 pages, but did you provide a version of your statement 9 in which you had included the text that you wished to 10 add and also deleted the text you wished to remove? 11 A. Yes. The code that I have put on the top of that 12 document, SCIC, basically the last IC means in colour. 13 So within that document, that document comprises my 14 original with the additions and deletions incorporated 15 at the appropriate place in colour. 16 So -- 17 Q. So, for example, if we look at page 30 on the screen -- 18 A. Page 30. 19 Q. -- we see -- 20 A. Yes, that's it. 21 Q. -- an example of the additional text has been included 22 there? 23 A. Correct, fine. 24 Q. So if this includes all the changes made to your 25 statement, are you happy that this be adopted as the 178 1 evidence that you give to this Inquiry? 2 A. Part of it, yes. 3 Q. In addition, I have some questions for you in addition? 4 A. Yes, and in addition, might I say that the alterations 5 I made on 2 November version, I did not -- I did not go 6 through it (a) and deal with typos. I did not add in -- 7 I didn't wish to write -- rewrite the statement because 8 the original was over six months ago, and things have 9 come to mind, et cetera, in the intervening period. 10 So what I submitted on 2 November was just what 11 I deemed to be important. 12 There are other things, but they will probably, I'm 13 sure, come out under questioning. They're essentially 14 additional things. What's the word? Not clarification, 15 but amplification. That's the word. And secondly, the 16 way this statement was prepared at the time, I was 17 presented with -- regularly presented with documents and 18 asked questions. The documents weren't necessarily in 19 date order. So they were jumping about from place to 20 place, and my answers -- therefore the witness statement 21 doesn't read in time order. 22 But as a result of that, on re-reading it again in 23 more detail, I realised on a few occasions I appear to 24 have answered a question, thinking it referred to 25 a prior document that I'd been shown. So you may find 179 1 there are some -- in fact, there are a couple of 2 inconsistencies in my statement where I've answered the 3 question relating to the document I'd been shown 4 previously, which was similar. But again, they'll come 5 up. 6 Q. Let's deal with the things in stages. 7 First of all, the question of referring to the wrong 8 versions of documents. Are these things where what you 9 say in your statement you regard now as being 10 inaccurate? 11 A. I think in some cases I've perhaps given an answer that 12 was not relevant, let's put it like that. 13 Q. You see, there may be questions of things that are 14 additional, and there may be questions I ask you which 15 bring out additional stuff. What I would like to be 16 sure of at the outset is that we have a version of 17 a written statement that you are happy to accept under 18 oath as being your evidence to this Inquiry; that is, 19 you are satisfied with its accuracy and its 20 truthfulness? 21 A. Yes. 22 Q. So can I suggest that your evidence is not going to be 23 completed this afternoon. That is, I think, certain. 24 A. Oh dear. 25 Q. So what I would like you to do before you return to 180 1 complete your evidence is to look at this statement and 2 if there is anything that you consider is inaccurate, be 3 in a position to draw it to our attention when you 4 conclude your evidence? 5 A. Okay. 6 Q. Will you do that? 7 A. Yes, I will do that. I would add that nothing is 8 grossly inaccurate. You know, there's nothing that is 9 black and becomes white. 10 Q. I just want to be sure that the Inquiry has the best 11 evidence that you are able to provide. 12 A. Sure. 13 Q. So what I will do is normally I would ask you whether 14 you would adopt your statement as your evidence? 15 CHAIR OF THE INQUIRY: Are you chewing? 16 A. Yes. 17 CHAIR OF THE INQUIRY: Would you get rid of it, please? 18 A. Certainly. 19 MR LAKE: Normally I would ask you to adopt what is in your 20 statement as your evidence. I don't want to do that 21 just now while we know that there are things that are 22 inaccurate, but I'll return to that when you complete 23 your evidence. 24 A. Yes. 25 Q. What I would like to do at the moment is turn to page 6 181 1 of your statement, please. 2 A. Yes. 3 Q. Now, you've noted that -- if you look at the lower half 4 of the screen, please, paragraphs 23 and 24, 5 particularly 24, you have noted that tie is an arm's 6 length company owned by City of Edinburgh Council. 7 A. Mm-hm. 8 Q. tie did not run in the same way as a CEC Department 9 does. Its management and staff had more freedom to make 10 decisions and run the business as they wished than 11 Council and staff officers do? 12 A. Yes. 13 Q. Perhaps if it would also be convenient if I go back to 14 paragraph 22, if you could scroll down a little: 15 "After the CERT project collapsed there was a lack 16 of trust in government of CEC's ability to deliver 17 transport projects, and of their being entrusted with 18 another project as they had failed to deliver on past 19 projects. Sarah Boyack and Wendy Alexander were the 20 Scottish Transport Ministers at the time and they 21 insisted any future transport project which received 22 government funding would not be run by CEC directly. It 23 would have to be run more professionally and a special 24 purpose Council owned company, rather than Council 25 officers directly, was seen to be the way forward. 182 1 I was party to some of these discussions involving 2 politicians at both CEC and at Scottish National level." 3 Now, was that -- you were involved in discussions 4 relating to what you say is the requirement of the 5 Scottish Government that an arm's length company be 6 used? 7 A. Sorry, could you repeat the question? 8 Q. Were you involved in discussions with the Scottish 9 Government -- 10 A. Not the Scottish Government, no. 11 CHAIR OF THE INQUIRY: Please, Mr Renilson. Don't 12 over speak. One person has got to speak, and then stop, 13 and the other person has to start. Otherwise, the 14 shorthand writers cannot record what's happening. 15 A. Understood. 16 CHAIR OF THE INQUIRY: And it's important that we do record 17 your evidence which is given on oath. 18 MR LAKE: Were you involved in discussions with 19 representatives of the Scottish Government as to their 20 requirement that an arm's length company be used for the 21 tram project in Edinburgh? 22 A. Not representatives of the Scottish Government per se, 23 but with individual politicians is what my statement 24 says, and that was the case. 25 Q. They were acting as the Transport Minister at the time? 183 1 A. No. 2 Q. In what capacity were they speaking to you? 3 A. As members of the -- well, as councillors and members of 4 the Scottish Parliament. 5 Q. In what -- I'm trying to understand what capacity or 6 authority a MSP would have to insist that an arm's 7 length company be used rather than it being done by the 8 Council directly. 9 A. My recollection is that the message that was coming over 10 was that following the CERT project, where the project 11 had not been delivered, the project had been abandoned 12 part way after a sizeable amount of money, some 13 millions -- I think the figure of 10 sticks in my mind, 14 that there was a belief that they would -- they were 15 prepared to advance money to City of Edinburgh Council 16 for another transport project. But with the memory of 17 CERT fresh in their mind, and I believe that there had 18 been prior cases, that they do not have the faith in the 19 City of Edinburgh Council to deliver it. 20 Q. Who was prepared -- 21 A. And therefore if money was to be advanced to the 22 Council, they wanted it to the project to be run by 23 a body other than the Council. 24 CHAIR OF THE INQUIRY: If you just stop, we are not getting 25 the transcript. 184 1 There's some technical problem with the transcript. 2 We will adjourn until that gets sorted out. 3 (3.42 pm) 4 (A short break) 5 (4.05 pm) 6 CHAIR OF THE INQUIRY: I understand the equipment has been 7 fixed. You're still under oath, Mr Renilson. Mr Lake? 8 MR LAKE: Mr Renilson, we were asking questions about the 9 delivery vehicle and you were talking about the reasons 10 why there was a view that there should be a company, and 11 that was that, as you put it, they were not prepared -- 12 they were prepared to advance monies, but they had lost 13 faith in the City of Edinburgh Council. What I want to 14 ask you is what do you mean by "they" in that context? 15 A. Probably -- I'm casting my mind back. I couldn't say 16 specifically which MSP or MSPs I was speaking to. This 17 was not formal. This was just in the course of ordinary 18 conversation. 19 I suspect it was probably Sarah Boyack, who was 20 Edinburgh Central at the time, and who I had a fair bit 21 to do with. 22 So by "they", I assume she meant "the Scottish 23 Government" or Scottish Executive as it was at that 24 time. 25 Q. So this was someone representing what the position of 185 1 the Scottish Government was, the Scottish Executive, 2 that they weren't willing to provide the funds to -- 3 immediately to the company. They -- to the Council. It 4 was to go to an arm's length company? 5 A. I don't think the words "arm's length" were specifically 6 used, but the impression from the conversation was that 7 CEC have not delivered in the past on transport 8 projects, that will need to be done differently, not by 9 CEC in future. And this was in the course of 10 a conversation about no doubt many other 11 transport-related things in the city. 12 Q. Part of the reason you said they were disappointed was 13 the failure, as I understand, of the CERT project within 14 Edinburgh? 15 A. Central Edinburgh rapid transit, it stood for. 16 Q. That had failed in that the contractor appointed had 17 pulled out? 18 A. Correct. 19 Q. I think you note in your statement, one of the reasons 20 that they had pulled out was when Lothian Buses didn't 21 get awarded the contract, they chose to run a high 22 frequency competing bus service, which made it 23 uneconomic? 24 A. That is not -- can you refer me to which paragraph we're 25 at? 186 1 Q. Certainly. If we look at page 4 of your statement, 2 please? 3 A. Yes. 4 Q. If you could enlarge the upper half first of all. In 5 paragraph 14, you introduce the CERT project, and you 6 say: 7 "There was no tram project at the time of my arrival 8 at Lothian Buses in 1998. The project to create the 9 Central Edinburgh Rapid Transport scheme (CERT) was 10 on-going at that time. The project died in 2000 when the 11 successful contractor pulled out. The other companies 12 who had been on the CERT bidder shortlist were 13 approached, but none of them wanted to come back in. 14 Somewhere in the region of GBP10 million had been spent 15 on the project before it was abandoned." 16 I think that figure of GBP10 million was the one 17 that you have given earlier in your evidence this 18 afternoon? 19 A. Correct. In the question you gave me was that when 20 Lothian Buses had not won the CERT project, the CERT 21 tender. Lothian Buses did not tender, did not bid for 22 the CERT project. 23 So Lothian Buses did not win it, but Lothian Buses 24 had not bid for it. So they could not win it. 25 Q. Could we scroll down the page, please. You talk in 187 1 paragraph 16 about the fact that FirstGroup were being 2 awarded the contract? 3 A. Yes. 4 Q. As you say: 5 "That resulted in there potentially being new and 6 additional direct competition to Lothian Buses on many 7 routes. 8 Lothian Buses' reaction at that point, which was 9 before I got there, was not surprisingly negative. 10 Lothian Buses introduced revised services that followed 11 the route of CERT and ran those routes on high frequency 12 with new single deck buses. FirstGroup realised that 13 they were going to face significant competition and 14 walked away from CERT." 15 Do you stand by that? 16 A. Yes. 17 Q. So Lothian Buses acted in such a way as essentially to 18 sabotage CERT? 19 A. No. 20 Q. They wanted to prevent it taking place, did they not? 21 A. There were -- no. There were -- 22 Q. What was the reason why they wanted to run high 23 frequency single deck buses on the very route being 24 served by CERT? 25 A. Can I answer the first point? 188 1 This is saying that FirstGroup were awarded the 2 contract and Lothian Buses then took a certain course of 3 action. 4 My understanding is that if any of the other 5 tenderers had been awarded the contract, and I can't 6 remember who they were, but I know Stagecoach was 7 involved as one of the consortia, Lothian Buses would 8 have been far more relaxed, in that these were 9 operators -- for the sake of argument, let's say it was 10 National Express and Go-Ahead. These were operators who 11 did not have a significant presence in the Edinburgh 12 market at that time. 13 Therefore, if a firm with no presence, say Go-Ahead, 14 had appeared in the Edinburgh market operating CERT, 15 that would not have been welcome by Lothian Buses. But 16 it would not have been the potential sword of Damocles 17 that FirstGroup, who were already an active competitor 18 to Lothian in Edinburgh, and there had been a period of 19 substantially enhanced competition following 20 deregulation in 1986 through to -- I think this is 21 199 -- I can't remember, but anyway, for a prolonged 22 period of time, to have one's main, and indeed only, 23 competitor awarded the CERT contract was something that 24 the then Lothian Buses management were not prepared to 25 sit back and accept, being as they had been -- in 189 1 popular parlance, an ongoing bus war in Edinburgh for 2 some considerable time between Lothian and First. 3 So that's why the award to First was particularly 4 unwelcome to Lothian, whereas an award to the others 5 would have been unwelcome, but not a disaster. 6 Q. You explain in paragraph 105 of your statement, on 7 page 31, I don't think we particularly need to look at 8 it, that Lothian Buses had an 85 per cent market share 9 and the other 15 per cent was operate by First Bus. Is 10 that the position that -- you say that was the position 11 at 1998? 12 A. Paragraph 105? 13 Q. Yes. 14 A. That's not in my paragraph -- no, the paragraph numbers 15 are -- on the screen are different to what I have here. 16 I think what you're -- what's on my copy is 17 paragraph 104. Yes, that seems to be it. Let me just 18 have a quick read. (Pause) 19 Yes, that's correct. The start of that, when 20 I started it was approximately an 85/15 per cent market 21 share on services within the city itself. 22 Q. Was there any marked change between that and the time of 23 the introduction of the CERT scheme in 2000? 24 A. No. Not dramatic -- no dramatic change. 25 Q. As you have explained in your evidence this afternoon, 190 1 Lothian Buses was driven by the fact it was a competitor 2 that was to run -- their nearest direct competitor was 3 to run CERT? 4 A. Their only direct competitor. 5 Q. And therefore they took steps to prevent that 6 competition? 7 A. Not to prevent it. Lothian Buses took steps to protect 8 themselves from it. 9 Q. In what sense did running a high frequency route in 10 competition with CERT protect Lothian Buses? 11 A. Lothian Buses would -- mirrored, as best they could, the 12 CERT corridor. By providing an improved quality 13 service, higher frequency, better buses, then they were 14 protecting their market because when CERT, if CERT 15 arrived, when CERT arrived, it too would operate with 16 high quality frequent buses. 17 Q. This was intended -- 18 A. May I finish? 19 Q. Yes. 20 A. So Lothian Buses' line was to ensure that they were at 21 as small a competitive disadvantage compared to the 22 forthcoming CERT as possible by concentrating modern 23 high spec resource on to the corridors where CERT would 24 run. 25 Q. They did so with the intention of taking customers away 191 1 from First Bus and CERT? 2 A. They did so with the intention of minimising the number 3 of passengers who would transfer from Lothian to CERT. 4 At that point in time Lothian had a 100 per cent market 5 share on -- more or less 100 per cent market share on 6 what was the CERT corridor. So any passengers -- at the 7 moment all passengers were effectively Lothian 8 passengers. CERT would have taken passengers from 9 Lothian. So Lothian was merely reacting in such 10 a fashion to try and protect its market. 11 Q. So would you accept that Lothian Buses, if you said they 12 had 100 per cent share in that corridor, were 13 undoubtedly in a dominant market position there? 14 A. Absolutely. 15 Q. They used that market position to undermine the 16 competition that tried to get on to that route? 17 A. They used that position to try and insure that when that 18 competition arrived, its impact would be minimised. 19 Q. They used their position to try and undermine the 20 competition setting up on that route. 21 A. No. 22 Q. Very well, Mr Renilson. 23 Could we go, please, to page 5 of your statement and 24 look at paragraph 20. 25 What you say there is: 192 1 "When you treat your external advisers on the basis 2 that here is the answer we want, now go away and come up 3 with a report that reaches that conclusion, and just 4 remember who is paying you, there is probably not a lot 5 of point in engaging external advisers." 6 Now, in respect of which advisers do you consider 7 that was done by tie or TEL? 8 A. I don't think it was done by TEL at all. I was of the 9 opinion that that, which is obviously a sentiment, I'm 10 not quoting those words exactly, but that was 11 a sentiment that appeared to me to be applied in the 12 case of advisers producing the Business Case for the 13 tram. 14 Q. Which aspect of the Business Case? 15 A. Well, if you were calculating at that point a BCR, 16 benefit-cost ratio, an IRR or DCF for the project, you 17 required to put in revenue projections. 18 So you had on one side of the equation the cost, and 19 on another side the revenue. And to cover the costs, 20 the revenue had to reach a certain level. 21 So if the revenue didn't reach that level, you 22 didn't achieve the BCR, you didn't get the approval. 23 So fundamentally it was about projected revenues. 24 Q. Were there any other instances in relation to the 25 business cases that you were aware of? 193 1 A. No. 2 Q. The Business Case, that was a document that was provided 3 by the Tram Project Board to the Council; is that your 4 understanding? 5 A. This was right -- what I'm talking about happening 6 happened right at the very beginning, the genesis of the 7 project. I'm not even sure that the Tram Project Board 8 was in existence at that point. 9 Q. I think we have heard in evidence, the Inquiry has heard 10 in evidence, that there was a Draft Final Business Case 11 in November 2006, a Final Business Case in 12 November 2007, and earlier an interim outline Business 13 Case in 2005. Which of those business cases is the one 14 that concerns you, or was it all of them? 15 A. No. This was in relation -- the first one was your 16 Outline Business Case in 2005. 17 Q. It's referred to, I think, as the Interim Business Case? 18 A. Right. It was the first one that looked anything like 19 a Business Case. So that would have been in the run-up 20 to the preparation of the Interim Outline Business Case 21 some time in 2005, but this was almost certainly -- do 22 you know what time in 2005 that was? 23 Q. I can't give you a date -- 24 A. It was -- you know, it was way at the beginning. So it 25 was probably in 2004. 194 1 Q. Now, insofar as those business cases developed forward 2 until we had the Final Business Case in December 2007, 3 do the concerns you had about information being provided 4 by experts carry forward into those Business Cases? 5 A. To a -- on this issue of the revenue projections, to 6 a much lesser degree. 7 Q. Were you content with the revenue projections that were 8 stated in the Final Business Case? 9 A. They were optimistic. Now, when you're presenting 10 a revenue projection for something that doesn't exist, 11 and where there is no direct comparator, you have to 12 take a view. 13 If I could use, for example, the case of the revenue 14 projections for line 1b to Granton, those were 15 predicated entirely on the -- or virtually entirely on 16 the projected development at the waterfront at Granton 17 harbour at the old gas works site occurring. 18 So at the moment, if you started a tramway on day 1 19 at the very beginning, you would have virtually no 20 revenue because you were serving a derelict brownfield 21 site. 22 So what revenue projection are you going to put in? 23 You estimate it based on what you believe the housing 24 and the residence in that area will be at various points 25 in the -- in the future. 195 1 So in the case of that, was I satisfied that they 2 were? It's very much a question of how long was a piece 3 of string. 4 Had I been satisfied with them, and I wasn't grossly 5 unhappy with them, they would have turned out to be 6 completely wrong, because post Lehman Brothers/Royal 7 Bank/HBOS in September 2009 and -- September 2008 and 8 thereafter, none of that development happened. 9 So if line 1b had been built, to this day it would 10 be running up and down there with virtually no one on 11 it. 12 But with the best will in the world, the revenue 13 projections produced in 2006 and 2007 were as good as 14 you could on the assumption that the economic situation 15 and the development would continue as it had been. 16 So the answer is: was I comfortable with them? As 17 comfortable as anybody can be when you're fundamentally 18 groping in the dark for something that may or may not 19 happen. 20 Q. From starting from a position where you said the experts 21 were giving the answer that the Council said they 22 wanted, is it fair to say you have come all the way 23 round then to saying that the estimates actually 24 provided were as good as they could be? 25 A. No. 196 1 Q. What are you saying? Are the figures provided -- 2 A. I used the example -- 3 Q. Would you let me finish my question? 4 Were the figures that were provided by way of the 5 fare box revenues that were going to be included in the 6 Final Business Case in December 2007 as good as they 7 could be? 8 A. No. 9 Q. Were you happy nonetheless to endorse them and have them 10 put forward in the Final Business Case? 11 A. Yes. 12 Q. The Final Business Case was being delivered to the 13 Council. Do you understand that? 14 A. Yes. 15 Q. And it would be relied upon then for taking a decision 16 as to whether or not to go ahead with the project? 17 A. Yes. 18 Q. It was something that was also at least of interest to 19 the Scottish Government in terms of making available the 20 grant funding for the project. 21 A. Yes. 22 Q. Did you not consider it would be important to have an 23 accurate statement of these matters going forward? 24 A. Yes. 25 Q. But nonetheless you were content to allow a forecast to 197 1 go forward in which you did not have confidence? 2 A. I thought it was optimistic, but as I've said, that was 3 my view. The view of other people might have been that 4 it was correct, or that it was pessimistic. You are 5 taking a judgement call on something way out in the 6 future. 7 Q. So in terms of -- 8 A. I was merely one voice. 9 Q. In terms of your voice, your view, your responsibility, 10 were you happy to let things go which you weren't 11 confident in, simply because you felt other people were? 12 A. These things were not decided by any one person in 13 isolation. There was committees who decided on these 14 things. Different people held different views, 15 expressed different views, and -- these ideas coalesced 16 into what might be termed a mid-ground consensus. 17 On that basis I was happy that it went ahead with 18 figures that I thought were optimistic, but which the 19 mid -- mid-ground consensus from those involved was that 20 they were probably about right. And -- or reasonable. 21 And there were levels of confidence applied to this, so 22 the revenue projections were based on -- I can't 23 remember the exact percentages, but something to the 24 effect of a 25 per cent chance of happening, 25 a 50 per cent chance of happening and a 75 per cent 198 1 chance of happening. In other words, low, medium and 2 high, thereabouts. 3 So there is no right answer. There is no wrong 4 answer. And the example I gave of line 1b was an 5 extreme example. Clearly the situation on line 1a, 6 where you weren't totally reliant on development taking 7 place in what was currently undeveloped brownfield site, 8 then you had much more to go at, and you could be much 9 more confident about your revenue projections going down 10 Leith Walk, where there were clearly not an awful lot 11 happening in terms of change. The people that were 12 there would still be the people that would be there when 13 the tram opened. 14 MR LAKE: My Lord, I see we've reached 4 30. That would be 15 an appropriate time to take a break. 16 Now, tomorrow this morning evidence was scheduled to 17 be given by Ian Laing of Pinsent Masons. He is not in 18 this country. He's in the Far East. So the proposal 19 would be that his evidence would be taken by means of 20 videolink, and because it's necessary to arrange a time 21 for that, it's been provisionally arranged for 9.30 22 tomorrow morning. I don't envisage his evidence will 23 take a long time. I would have thought 30, perhaps 45 24 minutes would suffice. 25 So what I would seek is leave to interpose his 199 1 evidence first thing tomorrow morning, and then we could 2 resume straight after that with Mr Renilson's evidence, 3 and then we have Mr Burt also available in the 4 afternoon. As the various parties will be aware, on the 5 timetable it was also envisaged that Brandon Nolan would 6 be giving evidence tomorrow afternoon. I think that 7 will be difficult in the time that is available, and 8 arrangements have been made now to bring him -- to move 9 him to another day, I think probably 7 December, 10 although that's yet to be fully arranged, but there is 11 a slot in the timetable that's available there. And I'm 12 hoping we can use that. 13 CHAIR OF THE INQUIRY: So we'll adjourn until tomorrow 14 morning and take Mr Laing first, but you think he will 15 be half an hour or so? 16 MR LAKE: I do. 17 CHAIR OF THE INQUIRY: In that case, we will just -- 18 A. Excuse me. I cannot be here tomorrow morning. 19 CHAIR OF THE INQUIRY: You're under citation. You've got to 20 be here. So you will be here tomorrow at 9.45. You 21 will be aware from the notice that was served on you 22 that there are sanctions for failure to comply with the 23 citation. 24 (4.32 pm) 25 (The hearing adjourned until Thursday, 23 November 2017 at 200 1 9.30 am) 201 1 INDEX 2 PAGE 3 MR IAIN MCALISTER (continued) ........................1 4 5 Examination by MR MCCLELLAND (continued) ......1 6 7 Examination by MS FORSTER ...................106 8 9 DR SHARON FITZGERALD (affirmed) ....................127 10 11 Examination by MR LAKE ......................127 12 13 Questions by CHAIR OF THE INQUIRY ...........153 14 15 Examination by MR MARTIN ....................158 16 17 MR NEIL RENILSON (sworn) ...........................176 18 19 Examination by MR LAKE ......................176 20 21 22 23 24 25 202 1 Thursday, 23 November 2017 14 (11.17 am) 15 MR NEIL RENILSON (continued) 16 Examination by MR LAKE (continued) 17 CHAIR OF THE INQUIRY: Mr Renilson, sorry we are a bit later 18 than we anticipated. There were some technical 19 difficulties at the beginning with the videolink. 20 You're still under oath. 21 MR LAKE: Mr Renilson, when I was questioning you yesterday 22 afternoon, one of the issues that arose was whether or 23 not there were changes to be made to your statement. 24 A. I don't have a paper copy of the statement that was here 25 yesterday. (Pause) 53 1 Okay, thank you. Sorry, yes. 2 Q. Did you have a chance to look at a copy last night? 3 A. I did. 4 Q. Did you discover there were things you felt it would be 5 appropriate to change? 6 A. Well, yes. Certainly things I would wish to, yes. 7 Q. Do you have a record of what they are or -- 8 A. Yes. I would say that there's over 100 pages of it, and 9 I by no means went through the whole thing. 10 Q. If you have the statement on screen, I should say, just 11 to make it easier to start with, we are looking at the 12 version with the amendment marked on to it, which is 13 TRI00000176. 14 A. Yes. 15 Q. Could you tell me, which is the first correction that 16 you -- 17 A. Well, I would like to go to paragraph 255 to start with, 18 please. 19 Q. That is on page 79? 20 A. Sounds right. 21 Q. It starts at the foot of the page. 22 A. Right. Yes. 23 Now, there's a reference there to a document -- yes. 24 Now, I see that's -- that was not on. This red mark at 25 the side was not on -- until I'd been using the version 54 1 I sent, not this version with -- that's been corrected, 2 where it picks up that the -- the document reference was 3 incorrect. 4 So that's already been picked up. 5 In which case can we just scroll down to the next 6 part of 255. 7 Okay. That document 79774, could we go to that 8 document? 9 Q. Could you call that up, please. 10 A. And to page 40 of that document. 11 Q. What is the issue that arises here? 12 A. Now, the issue here, this is -- if I remember correctly, 13 the signature sheet from a meeting on 13 May. The top 14 signature of somebody Campbell, countersigned by 15 Gill Lindsay, is dated 12 May. Scrolling down, there's 16 then my signature dated 13 May, and also the signature 17 of Bill Campbell. 18 If we can then scroll to page 44, exactly -- very 19 similar signature by Gill Lindsay and on this occasion 20 on behalf of tie, it's Willie Gallagher and Kenneth Hogg 21 who have signed it, although they haven't dated it. 22 Now, having looked at 80738 and having looked at 23 this document, and also having looked at 0129240 -- 24 sorry, 01289420, which also is a meeting that took place 25 the same day, I have a problem here in that neither 55 1 Mr Hogg nor Mr Campbell were present at these meetings. 2 Any of the meetings that day, as far as I can see. 3 There's no indication that they were on the premises. 4 I just wonder if somewhere along the lines, some -- 5 some stuff, some documents have become misplaced. 6 Now, at that point all I would say is I do not think 7 it would be helpful if I went through a forensic 8 examination looking for -- coming across things where 9 there are inconsistencies and things that aren't. 10 So to enable things to move forward, I would -- 11 Q. Could I assist here. Could you look, please, in this 12 document. You referred firstly to page 40. If we go 13 back to see the one we were looking at. 14 A. Yes. 15 Q. Above the signatures in the testing clause, we see: 16 "In witness whereof this Agreement consisting of 17 this and the preceding 15 pages." 18 Do you see that? 19 A. Yes. 20 Q. Sure enough, if we scroll down to the foot of the page, 21 this is page 16. 22 A. Mm-hm. 23 Q. If we go back through 16 pages to page 25, so going back 24 15 pages, to find page 1, we see this isn't a minute of 25 a meeting. This is an agreement that was signed between 56 1 the City of Edinburgh Council and Transport Edinburgh 2 Limited. 3 So those signatures -- do you understand those 4 signatures are not bearing to be signatures of a record 5 of a meeting, they are signatures of an agreement which 6 may or may not have taken place at that meeting. Do you 7 understand? 8 A. I understand the point you make. But those signatures 9 are dated 13 May. 10 Q. Indeed. 12 and 13 May. 11 A. All right, sorry. I'm not disputing 12th with the two 12 CEC signatures. 13 I am happy to take the evidence that has been 14 submitted in terms of my original statement, my amended 15 statement, and the amendments, as being whatever the 16 word is, as being my evidence. I don't need to pursue 17 this any further. 18 Q. Okay. 19 Now, I still want to ask you a few additional 20 questions about what's contained in your statement. 21 What I would firstly like to do -- 22 A. Sorry. May I -- things were a bit disconnected 23 yesterday afternoon with the breakdown in the machinery 24 and so on. 25 There was one question that Mr Lake asked me which 57 1 I failed to answer properly. 2 Q. Which question was that? 3 A. Well, it was with regard to the CERT project. Would it 4 be possible for me to provide what I would deem 5 a satisfactory answer to that question before we 6 proceed? 7 Q. Before we go any further, I would like to understand 8 what question in relation to the CERT project is it to 9 which you would like to provide an answer? 10 A. You were asking me about the behaviour of Lothian Buses 11 vis-a-vis the award of the CERT contract to First Bus. 12 You repeatedly asked me versions basically of 13 a question which said: had Lothian Buses -- you seemed 14 to be implying that Lothian Buses had acted improperly 15 by taking a robust commercial response to the prospect 16 of new competition from FirstGroup in that area; and 17 with the implication that because the impact of that 18 robust competitive response had been that FirstGroup had 19 then decided not to proceed with the project, CEC had 20 been unable to get somebody else to proceed with the 21 project, the project fell, and CEC lost a substantial 22 amount of money, a number of millions of pounds; that in 23 some way this was wrong or inappropriate. And I wish to 24 clarify there that my understanding is, and always has 25 been, that the primary responsibility of a company 58 1 director is to protect the interests of that company. 2 Yes, it has responsibilities towards its 3 shareholder. Indeed -- and in the case of Lothian Buses 4 at that time, it had a major shareholder of 91 per cent 5 of the shares which was CEC. 6 But on the paper wraps stone principle, the 7 responsibility to the company trumps the responsibility 8 to the shareholder. I'm not a lawyer. I don't know the 9 Companies Act off by heart, but that's obviously advice 10 I had been given over the years, certainly up until 11 2008. I'm not aware if things had changed then. 12 Therefore, the position that my predecessors took 13 and I continued with was that our primary responsibility 14 under the Companies Act was to protect Lothian Buses. 15 If as a by-product of that City of Edinburgh Council 16 were damaged financially or suffered financially, that 17 was an unfortunate by-product, but my responsibility 18 under the Companies Act, my primary responsibility was 19 to protect the business and interests of Lothian Buses, 20 not to protect the business or to protect the interests 21 of my primary shareholder; and therefore we took the 22 action we did and no doubt whatsoever in my mind, or the 23 mind of the rest of the Board at that time, that that 24 was -- and the previous Board, because this was ongoing 25 when I arrived, was the correct course of action. 59 1 Yes, primary shareholder suffered, but it was not 2 the wrong thing to do. It was exactly the right thing 3 to do. 4 Q. We have your answer to that. 5 Could you look, please, then at page 6 of your 6 statement, at paragraph 22. 7 Enlarge paragraph 22? 8 A. Yes. 9 Q. At the start of that, you can see we considered this 10 yesterday: 11 "After the CERT project collapsed there was a lack 12 of trust in government of CEC's ability to deliver 13 transport projects, and of their being entrusted with another 14 project as they had failed to deliver on past projects." 15 Now, can we just be clear, from what you're saying 16 about the collapse of the CERT project, that was caused 17 by the reaction of Lothian Buses to it? 18 A. Yes. By the reaction of Lothian Buses specifically to 19 the award of the operating contract to First Bus. 20 Q. So the failure was more attributable to that than any 21 particular aspect of CEC's ability to deliver projects? 22 A. No. I would read that the failure was due to the 23 palpably inappropriate strategy that CEC followed of 24 awarding a contract for a business that would damage one 25 of their own 91 per cent owned companies to its primary 60 1 competitor. 2 If CEC had chosen, as they did, to award that 3 contract to FirstGroup, then that was effectively on 4 their own head be it. 5 Q. Right. Now, can we just, following that through, 6 I think you said yesterday that had it been awarded to 7 someone other than First Bus, there wouldn't have been 8 concern on the part of Lothian Buses? 9 A. No, that's not what I said. 10 Q. Do we understand that anyone then that was doing that 11 project would have drawn the same response from 12 Lothian Buses? 13 A. That's not what I said yesterday. 14 Q. Can you tell me which it is? 15 A. I will tell you what I said yesterday. I said that the 16 prospect of a remote bus company that did not exist in 17 Edinburgh, did not have a presence in Edinburgh, taking 18 on the CERT project, would be unwelcome. It would not 19 be viewed, however, with the same concern, the same -- 20 anything like the same level of concern as FirstGroup 21 taking it on. 22 I will explain why if you wish. 23 Q. No, what I would like you to do is just answer the 24 question, which is: would the reaction of Lothian Buses 25 have been the same if it was someone other than First Bus 61 1 had been awarded CERT? 2 A. It would not have been the same. It would have been 3 similar, but by no means the same. 4 Q. So the only thing you consider that could be said that 5 CEC had done wrong, was awarding it to the principal 6 competitor of Lothian Buses? 7 A. At that point -- 8 Q. Could you answer my question, please. 9 A. It's not a yes or no question, I'm afraid. 10 Q. I think you will find it is. I will ask it again so you 11 can be sure. 12 The question is: would the reaction of Lothian Buses 13 have been the same -- pardon me, wrong question. 14 So the only thing that could be said that CEC had 15 done wrong was awarding the CERT contract to the 16 principal competitor of Lothian Buses? 17 A. No, that's not correct. 18 Q. What caused CERT to fail was when First Bus walked away 19 in light of the Lothian Buses response. Am I correct? 20 A. Yes. 21 Q. So essentially the problem, what CEC might be said to 22 have done wrong, was failing to accommodate or comply 23 with the wishes of Lothian Buses? 24 A. No. 25 Q. Lothian Buses gave a demonstration of their power to 62 1 scupper a City Council transport scheme? 2 A. No. 3 Q. Could we look, please, at page 9 of your statement. 4 I would like to look at the paragraph at the top of the 5 page here, above the heading "My role"? 6 A. Yes. 7 Q. What I'm interested in reading is from the sixth line of 8 this. I think I will have to read the whole thing to 9 get the context for the reference to those periods. If 10 we go to the previous page to pick up the start of 11 paragraph 31. It begins: 12 "One concern about a number of externally recruited 13 tie staff was that they had endured periods of 14 unemployment and were highly motivated to keep their 15 jobs. The tram scheme was frequently, even from the 16 early days, under threat. It was always an issue at 17 both local and Scottish elections. There was always the 18 belief amongst tie employees that the project could be 19 cancelled and they would lose their jobs. That 20 situation led to a number of things, including making 21 sure in the run up to elections that there was no bad 22 news. During those periods, delays, overspends and 23 problems were diligently suppressed from politicians and 24 the media, sometimes for six or nine months." 25 Firstly, take note of that. You're talking about 63 1 information was deliberately suppressed. 2 A. Yes. 3 Q. What information do you consider was suppressed? 4 A. The general state of the project. I think I've listed 5 them there. Delays, overspends and problems. 6 Q. When you talk about overspends, are you talking about 7 actual expenditure or projections of expenditure? 8 A. Projected. 9 Q. So basically we're just talking about estimates of cost? 10 A. Estimates of the future cost of the project. 11 Q. Which delays are you referring to there? 12 A. Delays in the progress of the project. 13 Q. Now, which elections are you referring to? 14 A. This was fairly early on. It would be difficult for me 15 to put a precise time on it, but it was certainly during 16 the period when tie were still in Verity House and we 17 had the Board meetings in Verity House, before they 18 moved to Citypoint. So this was after Hanover Street 19 and before Citypoint. 20 Q. Which elections are you referring to? 21 A. Now, the Council elections were 1999 and then they would 22 have been 2004. I think the Scottish Parliament 23 elections and the Council elections coincided at that 24 point. So if that is correct, I'm talking about the 25 run-up to the 2004 Council and Scottish Parliament 64 1 elections in May 2004. If I've got my year wrong, 2 then -- I can't have got my year wrong because it 3 wouldn't have been as early as May 2003. It must have 4 been May 2004. 5 Q. So we're talking about the period there, even at the 6 stage of trying to get the Bills through Parliament, at 7 an early stage? 8 A. Correct. Absolutely. It was early stage stuff. 9 Ewan Brown was still the Chairman. 10 Q. Could we look at page 23 of your statement. 11 Could we look at paragraph 83. You say: 12 "A clear example of bad news being suppressed was 13 the GBP375 million cost figure. That was being stuck to 14 for nine months after tie knew the final cost was going 15 to be way in excess of that figure. As soon as the 16 election was out of the way that news came out very 17 quickly." 18 Which GBP375 million cost figure are you referring 19 to there? 20 A. Yes. This is exactly the same point as you raised 21 earlier. This is an amplification that occurs later on. 22 At that point in time, and, as I say, let's -- 23 unless you can correct me, we will say this is the 24 May 2004 elections, then what I'm saying is that the 375 25 cost figure was stuck to from, let's say, late autumn 65 1 2003. Well, no, late 2003 until mid-2004. Ie the 2 election in May. 3 And that 375 cost figure was the original figure 4 that was meant to include construction of what became 5 line 1a, line 1b, the section from Granton to Newhaven, 6 and the line from Newbridge -- sorry, from -- from, 7 from, from -- Ingliston Park and ride stop to Newbridge. 8 Q. What I'm interested in is you say -- let's go back to 9 your statement -- nine months after tie knew the final 10 cost was going to be way in excess of that figure? 11 A. Yes. 12 Q. When did you say that tie knew the final cost was going 13 to be way in excess of that figure? 14 A. I've said nine months there. I might have actually been 15 strictly more accurate to say six/nine months. Clearly 16 I cannot put at this length of time we're talking -- 17 where are we? 18 Q. Can I just be clear -- 19 A. 14 years ago. 20 Q. I'm not interested in whether it was six or nine months. 21 What I'm interested is when do you say that tie knew the 22 final cost was going to be different? 23 A. Six months, say, before the May 2004 election. In other 24 words, late 2003. 25 Q. Okay. Going on now to page -- go back to page 9 of your 66 1 statement, please. 2 A. Yes. 3 Q. Paragraph 36 at the foot of the page. 4 A. Yes. 5 Q. You note here that you had concerns about tie's 6 reporting: 7 "... including, in particular, whether information 8 was always fully and accurately reported." 9 Reporting to whom? 10 A. May I read the rest of that paragraph, please. 11 Q. Of course. It starts: 12 "There were a number of close calls when the project 13 came close to being cancelled. It received considerable 14 negative publicity in the local media, and there was 15 a groundswell of negativity amongst the population and 16 the electorate. Anybody who did not show blind faith in 17 what was being promoted was viewed as being negative and 18 against the project, rather than being viewed as having, 19 perhaps, something to contribute and that perhaps not 20 everything was being done as well as it could have 21 been." 22 A. Can we go back to the point you were actually asking the 23 question about? 24 Q. My question, just to remind you, was: reporting to whom? 25 A. Can you put that bit back on the screen for me. 67 1 Q. Can you go to the previous page and enlarge 2 paragraph 36. 3 A. Right. This is really a sentence on its own. 4 Occasions would occur -- occasions would occur when 5 I would be talking to somebody, possibly a councillor -- 6 Q. Mr Renilson, can I interrupt, because I don't want this 7 evidence to take an awful lot longer than it has to. 8 I'm not interested in why you had concerns yet. What 9 I'm interested in at the moment, my question is, you say 10 you had concerns about tie's reporting; my question 11 is: reporting to whom? 12 A. Politicians. 13 Q. At what stage were you concerned about the reporting to 14 politicians? 15 A. I think in this section we are talking mid -- mid 16 project. Shall we say maybe 4, 5, 6. 17 Q. 2004, 2005, 2006? 18 CHAIR OF THE INQUIRY: When you say politician, do you mean 19 local or national or both? 20 A. If they were -- yes, local, and possibly when we use the 21 term "national", I would mean national politicians, but 22 with an Edinburgh constituency, who I had cause to be 23 having meetings or discussions with. In other words, 24 MPs or MSPs, but primarily -- yes, MPs or MSPs. 25 Primarily councillors. 68 1 MR LAKE: What did you consider was not being reported at 2 that moment or was not being reported accurately at that 3 stage? 4 A. I cannot accurately record -- recall precise issues that 5 long ago. All I can say is that instances arose where 6 I said: well, such and such, such and such; that's not 7 what I was told, that's not what I picked up. That's 8 all. 9 Q. Was that people were saying to you: that's not what 10 I was told. 11 A. That's not what I'd been -- that's not what I had heard. 12 That's not what I had been told. 13 I would have to say that certainly in the case of 14 the MP/MSP category, they had no direct contact from tie 15 anyway. So what they were receiving was second-hand via 16 whoever, the Council, Transport Scotland. 17 Q. Can we look at page 23 of your statement, please. Could 18 we enlarge paragraph 81. What you said there is: 19 "There was a desire in tie to not let it be known 20 when things had gone wrong, as it would attract media 21 attention and increase the chance of the project ending 22 and job losses. I believe it resulted in staff not 23 highlighting problems internally. No news is good 24 news." 25 Now, is there a particular time period to which this 69 1 concern relates? 2 A. It pretty much related across the whole time of the 3 project. It varied in intensity though, and, as 4 I mentioned before, in the run-up to elections things 5 became very tense. 6 It's legitimate -- this is not necessarily 7 illegitimate. It's quite legitimate to try and manage 8 your media, and latterly tie were getting -- or the tram 9 project was getting such a pasting that they quite 10 rightly wanted to try and damage limit. 11 Q. When you say latterly there, what stage of the project 12 are you talking about there, latterly they were getting 13 a pasting? 14 A. I left the project at the beginning of 2009. The 15 pastings got more and more intense as time went on. 16 I would say any time after late 2005, the media was 17 negative. And it just got more and more negative as 18 time progressed. 19 Q. You say it resulted in staff not highlighting problems 20 internally. So what I'm trying to understand is what 21 sort of staff, what role do those staff perform and to 22 whom are they not reporting internally or not 23 highlighting internally? 24 A. I think your question relates to the second sentence in 25 isolation, because the first sentence is a statement in 70 1 isolation and the two, although interrelated -- I think 2 there was definitely a situation on occasions where 3 something might not -- might not have been good news, 4 and that was -- the individual staff might have thought, 5 or the two or three staff involved, might have 6 thought: let's sit on that for a moment and see if we 7 can find a work around, a way in which we can try and 8 sort this out, so that it doesn't immediately pass on 9 the bad news. Inevitably, if they weren't, then it 10 would have to be passed on. But -- 11 Q. Is that -- 12 A. I was just going to say, but that process of delay 13 sometimes was perhaps not the best course of action. 14 CHAIR OF THE INQUIRY: I think the question was: which 15 category of staff, what functions were these staff 16 performing, and to whom were they not reporting bad 17 news? 18 A. I would have said primarily commercial, and -- 19 commercial and engineering. I had no evidence 20 whatsoever that that happened in financial. And the 21 question of whom, their superiors. 22 MR LAKE: Who do you mean by superiors, what level in the 23 company. 24 A. It depends entirely on who the staff were. Middle -- 25 lower ranking staff to middle managers, middle managers 71 1 to higher managers. 2 Q. How much involvement did you have in those matters, 3 those tiers of tie to be able to understand what was 4 going on? 5 A. I -- I should -- I worked in tie's offices most of the 6 time. Inevitably you would be dealing with a phalanx in 7 my TEL role, people right across the spectrum. So 8 sometimes I would be sorting out engineering matter with 9 the engineers, financial with the financial people, 10 et cetera. And it was large open plan offices and it 11 was inevitable that in the process of sitting with 12 somebody for half an hour or whatever, they would take 13 phone calls. Other people would come and discuss 14 things, and you just picked things up, and, you know, 15 I'm not quoting an exact example, but the principle of 16 you're there, the phone rings, he picks it up. It's 17 clearly, you know: oh dear, oh no, oh, right, okay, 18 don't mention that and try and see what we can do to 19 sort it out; sort of conversation that you -- you are 20 sort of party to. 21 And that sort of thing happened. 22 Q. Could we look at the following page, page 24. 23 A. Yes. 24 Q. And enlarge paragraph 85. 25 A. Thank you. 72 1 Q. You say here: 2 "The Government Gateway Reviews, Audit Scotland and 3 Transport Scotland were also 'managed' by tie. tie were 4 conscious that there were potential problems that might 5 result in delay, reduction or cancellation of the tram 6 scheme and did their best to ensure that the Office of 7 Government Commerce, Audit Scotland and 8 Transport Scotland were told what they wanted to hear. 9 Information, facts, figures and timescales were 10 massaged." 11 A. Yes. 12 Q. My first question: what was your involvement in the 13 Gateway Reviews dealing with Audit Scotland and dealing 14 with Transport Scotland? 15 A. I was involved in all the three Gateway Reviews. I was 16 part of the team that met with the Gateway Review 17 people. These -- these meetings were arranged some time 18 in advance. I think there were four participants, from 19 the OGC, and there was consistency between them in that 20 pretty much the same people came on each of the three 21 occasions. 22 Q. So when you were dealing with the Office of Government 23 Commerce carrying out their various reviews, were you 24 aware that information, facts, figures and timescales 25 were being massaged to provide to them? 73 1 A. Yes, because there were pre-meetings held. It was 2 decided who would go and meet them. It was a formal 3 meeting. There would be four of them in a room and 4 maybe six of us. Those six people would be advised 5 a couple of weeks beforehand. There would be a couple 6 of pre-meetings. 7 I can't remember if we were actually given like 8 advance notice of the questions or the areas of 9 discussion. We may have been. But certainly there were 10 pre-meetings held, a couple of pre-meetings, two, maybe 11 three, before the meetings with OGC took place, and the 12 meetings with the OGC weren't just a one-hour meeting. 13 They lasted a -- they were spread over a couple of days. 14 And everything was gone through as to what we have 15 to tell them -- well, what they want to know, and this 16 is -- this is what we'll say, and you'll say that bit 17 and you cover that bit, and that sort of thing. 18 So that's what I mean -- that's how I was involved, 19 quite intimately. 20 Q. Were you content that information, facts and figures and 21 timescales going to the OGC were being massaged as part 22 of that -- as you were part of that process, were you 23 content with it? 24 A. I don't think at any time were they given wildly 25 misleading information. Had they been, I wouldn't have 74 1 been content. 2 CHAIR OF THE INQUIRY: I think the question was: were you 3 content that information, facts and figures and 4 timescales going to the OGC were being massaged? 5 A. I went with it because it was of modest level. 6 CHAIR OF THE INQUIRY: Does that mean you were content? 7 A. Yes. I allowed it to happen. Therefore by definition. 8 CHAIR OF THE INQUIRY: Well, it would help if you gave 9 direct answers. We will get through this more quickly 10 to the benefit of everyone, including yourself. 11 A. Okay. 12 MR LAKE: Were you involved in dealings with Audit Scotland? 13 A. I cannot -- I cannot remember specifics. 14 Q. What is the basis for your conclusion or your view that 15 Audit Scotland were managed by tie, or that the 16 information going to them was massaged? 17 A. It's what I picked up, just the impression I got. I may 18 have been involved in the meetings. I cannot remember. 19 Q. What do you mean when you say an impression you picked 20 up? 21 A. If there was -- if there was a culture of ensuring that 22 bodies such as 1, 2 and 3, information given to them was 23 checked before it went and reviewed, et cetera, then it 24 would apply to all those three bodies. 25 Clearly I was aware in the case of OGC. In the case 75 1 of Transport Scotland, I cannot immediately bring to 2 mind specifics, but there would have been, and I'm sure 3 there were in the case of Audit Scotland. But it's 4 a long, long time ago. But that was the basic culture, 5 is what I'm trying to say. 6 Q. And you participated in that culture, didn't you? 7 A. I was part of it, and I was a moderating influence. 8 Q. Well, if you -- it would have been open to you, if you 9 felt something was going wrong, or something was 10 improper, to have spoken to representatives from any of 11 those three bodies? 12 A. Yes. 13 Q. But you didn't? 14 A. No. 15 Q. So you participated in the culture about which you 16 express dissatisfaction; is that fair? 17 A. Yes. Would you like me to answer why? 18 Q. No. 19 A. Thank you. 20 Q. I think, from reading through your statement in general, 21 it would be fair to say there is a concern that you have 22 from the actions and separating the operator of the tram 23 scheme from the delivery company. In the broadest 24 terms, is that fairly put? 25 A. Sorry, could you repeat the question? 76 1 Q. You have a concern as to the decision to separate the 2 operator of the trams from the delivery company, having 3 two separate entities, tie and TEL. 4 A. Oh, I have concerns, yes. It was to my mind not the 5 right thing -- not -- 6 Q. What I want to try and understand is what problems did 7 that give rise to in practical or concrete terms? 8 A. We were where we were. tie had been created first with 9 a specific single function, to deliver transport 10 projects, and as far as we were concerned, the tram. 11 TEL did not come along until some time later. So on 12 the basis of we are where we are, the system was 13 modified and tie was -- TEL was added in. 14 Had we been starting at that point with a clean 15 sheet of paper, we would have had one body that did 16 both. 17 Q. Can I just focus back on my question, please. What I'm 18 looking for is: can you identify any practical or 19 concrete problems that arose as a result of having one 20 company as operator and one company as delivery? 21 A. Only -- only from the administration point of view that 22 inevitably it led to duplication and also in some 23 people's minds confusion as to quite who was who and who 24 did what. 25 Q. Who was who? What did tie do? 77 1 A. tie's role, as regards the tram project, was to procure 2 the tram. Their job was to obtain prices for the 3 delivery of the project, and secure contractors to 4 deliver the project. So -- oh, and also to originally 5 obtain the parliamentary powers. 6 So their job was purely to effectively arrange for 7 the design and build of the project using outside 8 contractors. 9 Q. What was the role of TEL? 10 A. The role of TEL was twofold. If I may just say, and as 11 regards tie, the day the tram became operational, 12 effectively tie had no further role. They walked away. 13 TEL similarly had two phases. During the design 14 build phase, TEL's job was to ensure that what was being 15 designed and what was being built was what was required 16 or what was deemed best to provide an appropriate 17 tramway that could operate at break-even or better, 18 deliver a BCR of 1 plus, and thereby effectively to give 19 the design parameters from a commercial point of view to 20 tie. 21 tie would then, with their subcontractors, design 22 and build the hardware. 23 Once the tram became operational, TEL would assume 24 operational control of the tram and it would fit into 25 the TEL portfolio of transport operations in the same 78 1 way that it's actually worked out. You have Transport 2 Edinburgh with Lothian Buses and Edinburgh tram. 3 Q. In particular, what role, if any, did TEL have in 4 relation to the construction of the tram network? 5 A. In defining -- when you say the construction of the tram 6 network, do you mean the definition of the tram network 7 or the construction of -- 8 Q. The construction. 9 A. No direct role in the construction, other than that we 10 specified what we wanted and where we wanted it. We 11 want the tram stops there, there and there. We want -- 12 we're going to need this power feeds here, here and 13 here. We're -- et cetera. How -- where we would need 14 turn backs, where we could turn trams short. So you 15 would want to design it so that you didn't have to run 16 every tram from one terminus to the other. 17 If Princes Street was closed for Hogmanay or 18 whatever, marathons, you need to be able to turn the 19 trams at Haymarket. And also at York Place. All that 20 sort of operational stuff. 21 So there you are, tie. Here is the track layout. 22 And then tie's job was to go off and have it designed 23 and built. 24 Q. What was the role then of the Tram Project Board? 25 A. The Tram Project Board represented really where the hard 79 1 work was done. It drew people from tie and from TEL, 2 and it was really where the fundamental decisions and 3 the day-to-day hard work was done. 4 tie and TEL both had people on their Board -- 5 non-execs on the Board of tie, who lived in England and 6 came up for a Board meeting once a month. It was not 7 appropriate for them to spend huge amounts of time 8 getting into the minutiae of it, ditto TEL. 9 So the Tram Project Board drew on the people who 10 were really in both organisations, and outwith, with CEC 11 too, and Transport Scotland, when they were involved, 12 and the Tram Project Board -- Tram Project Board role 13 was really to make it happen, to drive it forward, using 14 resource pulled in from all quarters. 15 Q. If we look back at your statement, please, and go to 16 page 42. 17 A. Yes. 18 Q. If we could enlarge paragraphs 134 and 135. In 134 you 19 note: 20 "The only oversight TEL exercised over the Tram 21 Project Board prior to May 2008 was in as much as some TEL 22 directors and staff sat on the Tram Project Board." 23 A. Mm-hm. 24 Q. If I just pause there, did the position change after 25 May 2008, contract signature? 80 1 A. Yes. Sorry, was there a question there? 2 CHAIR OF THE INQUIRY: The question was: did the position 3 change after May 2008, after the contract signature? 4 A. It may well have changed in governance terms. In terms 5 of the effect on the ground, no. 6 Q. What do you mean, it may well have changed in governance 7 terms? 8 A. Graeme Bissett used to produce all the governance papers 9 et cetera. And following contract close it may well 10 have been necessary -- I don't know, not my area -- for 11 the governance arrangements to change. 12 But to answer the question, the Tram Project Board 13 continued to function as effectively where it happened 14 in terms of making the tram happen. 15 Q. Could we look at the start of paragraph 135. You note 16 there: 17 "TEL had no involvement or responsibility for the 18 actual construction of the tramway, that was tie's 19 responsibility." 20 A. Yes. 21 Q. Is that a summary of what you've said to me a little 22 while ago? 23 A. Yes. TEL -- I'm having a house built. I decide where 24 I want the rooms, the doors, the windows. tie, you 25 build it for me. I didn't -- you know, they were the 81 1 builder. I was the specifier. 2 Q. Could we look, please, at a document. It's CEC01395434. 3 We can see here this is the front page of a document 4 with the title, "Edinburgh Tram Network Final Business 5 Case Version 2", and a date of 7 December 2007? 6 A. Yes. 7 Q. You will be familiar with this document, I take it? 8 A. It certainly looks very familiar. 9 Q. Could we look, please, at page 90. 10 A. Yes. 11 Q. Sorry, I've got the wrong page, my apologies. Could we 12 go to page 92, and enlarge paragraph 6.45. We see here 13 noted in the Final Business Case: 14 "The Tram Project Board maintains its role as the 15 pivotal oversight body in the governance structure. The 16 TPB is established as a formal sub-committee of TEL with 17 full delegated authority through its Operating Agreement 18 to execute the project in line with the proposed remit 19 set out in Section 6.32. In summary, the Tram Project 20 Board has full delegated authority to take the actions 21 needed to deliver the project to the agreed standards of 22 cost, programme and quality. The Tram Project Board 23 also exercises authority over project design matters 24 which significantly affect prospective service quality, 25 physical presentation or have material impact on other 82 1 aspects of activity in the city." 2 A. Mm-hm. 3 Q. Now, would you agree that that tends to put -- without 4 any doubt, it puts the Tram Project Board as being at 5 the heart of the governance of the tram? 6 A. Yes. 7 Q. The Tram Project Board is clearly stated to be 8 a sub-committee of TEL? 9 A. Yes. 10 Q. So really it was TEL seemed ultimately to have the 11 responsibility for these matters through its 12 sub-committee, the Tram Project Board? 13 A. In -- in that context, that's exactly what the 14 governance says, yes. But I say, in reality, it was the 15 Tram Project Board that did the work. Whether the Tram 16 Project Board was a formal sub-committee of TEL was, as 17 I say, a governance issue. 18 It had the full delegated authority, as it says. 19 Ultimately, the authority was -- was City of Edinburgh 20 Council as project sponsor, but yes. 21 Q. But you were the Chief Executive Officer of TEL at this 22 time? 23 A. Correct. 24 Q. It seems almost to be a matter of which you were not 25 aware that it was TEL, through its Board sub-committee, 83 1 which was described as pivotal oversight body in 2 relation to this project? 3 A. I was aware that the governance frequently -- the 4 governance arrangements changed a number of times. 5 Q. This is the Final Business Case. I take it you'd had 6 a hand in approving the Final Business Case? 7 A. Yes. But we might even find my signature on the back of 8 it. 9 The governance issues were dealt with in the case of 10 TEL by the -- primarily by the Finance Director and the 11 Chairman. David Mackay had a particular interest in 12 governance, and was quite good at it, and the Finance 13 Director equally, it was his specialist subject. 14 Although I was the CEO, I was happy to leave governance 15 to the Chairman, by and large, to -- the governance to 16 the Chairman and the Finance Director, and they would 17 brief me as required while I got on with making the tram 18 happen, if I could. 19 Q. Could we look at page 94 of this document, please. The 20 upper part of the page. 21 A. Yes. 22 Q. You can see the heading "6.4. Governance structure for 23 Construction period"? 24 A. Yes. 25 Q. Right at the very top, "CEC including tram 84 1 sub-Committee", and in the same box with them, you can 2 see TEL? 3 A. Yes. 4 Q. Beneath that you can see the Tram Project Board, and 5 beneath that, in turn, a number of what are presumably 6 intended as sub-committees? 7 A. Yes. 8 Q. They have reports from various people below them, 9 various disciplines below them, all running through the 10 Tram Project Director; do you see that? 11 A. Yes. 12 Q. Now, the one organisation that's not referred to here as 13 the governance structure for the construction period is 14 tie? 15 A. Yes. 16 Q. Were you aware of that? 17 A. It may not be named, but clearly all those boxes down 18 the bottom, every function in those boxes is a tie 19 function, and indeed the Tram Project Director is a tie 20 person. 21 Q. They are an employee of tie? 22 A. They were all either employees or contractors contracted 23 in by tie. So everything from Tram Project Director and 24 below are tie -- yes, fundamentally they are -- they are 25 tie projects and people. 85 1 The only thing I'm slightly unsure of is the box, 2 "Operational Planning". 3 Now -- 4 Q. I don't need to go into that at the moment. 5 A. Sorry, okay. 6 Q. Talking about tie employees, how many employees did TEL 7 have at this time? 8 A. None. In my time, TEL had no employees. 9 Q. So did that not cause a problem with TEL discharging the 10 functions placed on it in terms of the final business 11 plan? 12 A. TEL drew what resources it required from elsewhere. It 13 drew staff and funds and facilities from CEC, from tie, 14 from Lothian Buses. 15 Where we did have people who worked for -- who were 16 outsiders who were brought in full time, and I can only 17 think of one, he was put on the Lothian Buses payroll. 18 Q. So if you had these people who were all employees of 19 other companies, does that not suggest the mere fact 20 that someone is an employee of another company, other 21 entity, doesn't make any difference to the actual 22 governance structure which puts TEL and the Tram Project 23 Board at the top? 24 A. I'm not sure -- I'll answer what I think is the 25 question. If I haven't picked it up right, I apologise. 86 1 All the people were seeking to deliver the tram 2 project. Whether they were employees of tie, TEL, City 3 of Edinburgh Council, consultants, contractors, 4 whatever, who was actually paying their wages was 5 largely immaterial. This is what we are going to do. 6 This is how we're going to get on with it. 7 Was that the question? If not, I'm sorry. Ask it 8 again. 9 Q. When I referred you to this diagram earlier you pointed 10 out that the Tram Project Director and other people who 11 discharged the functions known here would be tie 12 employees. 13 A. Below that, but if you look up above -- 14 Q. Could you let me finish, just so we understand the 15 question. 16 A. Below that, yes, but I do have a caveat that I'm not -- 17 CHAIR OF THE INQUIRY: Mr Renilson, could you wait. 18 A. Sorry? 19 CHAIR OF THE INQUIRY: Mr Lake asked you to wait because he 20 was going to go on and explain his question. 21 MR LAKE: tie discharged all its functions or most of its 22 functions through employees of other companies or 23 entities; I understand that's what you've told us. 24 A. tie or TEL? 25 Q. Sorry, TEL, pardon me. TEL discharged its functions 87 1 through employees of other companies and entities. 2 A. Yes. 3 Q. So the mere -- and the fact that they were employees of 4 other entities didn't change the fact that they were TEL 5 functions that were being discharged? 6 A. Yes. 7 Q. So the fact that the people who would, say, be involved 8 in financial management, health and safety, or 9 operational planning were employees of tie, doesn't have 10 any bearing on the fact that in terms of governance 11 these were all TEL functions, they were all the 12 responsibility of TEL, does it? 13 A. I'm -- I'm not following your question. I'm sorry. 14 Please ask it again. 15 Q. We will look at a different page then. Could we go to 16 page 91, enlarge paragraph 6.38. We can see what it 17 says here is: 18 "It is also envisaged that certain of the Elected 19 Members of the tie Board and its independent NXDs 20 [non-executive directors] will join (if not already 21 members) the TEL Board or the Tram Project Board 22 (including specific sub-Committees) to ensure 23 consistency of approach and to utilise relevant 24 experience productively. The re-deployment of the 25 Elected Members and the independent NXDs will reflect: 88 1 i. The emphasis of the TEL Board on oversight 2 (on behalf of the Council) of matters of significance to 3 the Elected Members in relation to project delivery and 4 preparation for integrated operations; and 5 ii. The emphasis of the TPB on delivery of the 6 tram system to programme and budget and the preparation 7 for integrated operations." 8 So although it initially describes the transfer of 9 directors, what we do see is an emphasis here that it is 10 to be TEL who have oversight of the project on behalf of 11 the Council? 12 A. Yes. 13 Q. Now, as Chief Executive, were you involved in directing 14 TEL as to how to provide effective oversight of the 15 project on behalf of the Council? 16 A. This is an extract from the Business Case. This is not 17 necessarily the governance arrangements that were in 18 place as at December 2007. Am I correct? 19 Q. We can take a look at those just now, if you wish. 20 Go firstly to document USB00000006. 21 We see this is a pack of papers for the Tram Project 22 Board? 23 A. Sure. 24 Q. For a meeting that was to take place in September 2007. 25 Do you see that? 89 1 A. Yes. 2 Q. Could we look, please, at page 32 within that. We see 3 this is a draft paper put forward to that Board meeting. 4 A. Mm-hm. 5 Q. If we look at the paragraph that begins "The fulcrum". 6 A. Mm-hm. 7 Q. Rather than use the word "pivot", they have elected to 8 use the word "fulcrum" here, and it says: 9 "The fulcrum of the existing governance structure is 10 the Tram Project Board and this key aspect is sustained. 11 Formally, the Tram Project Board reports through its 12 Chairman to the TEL Board and exercises powers delegated 13 to it by the Council through TEL." 14 Was that the position as you understood it? 15 A. The existing governance. So this is as at mid-2007. 16 Q. Yes. 17 A. Tram Project Board ... 18 I would say, yes, that's -- yes. 19 Q. So the Tram Project Board gets its powers from TEL. You 20 are clear about that? 21 A. I -- the Tram Project Board to my mind got its powers 22 from tie, TEL, CEC. It was the body entrusted to make 23 it happen. 24 The actual detail of the governance structure was 25 not my specialty, and to be honest, as long -- my job 90 1 was to make the thing happen. Senior responsible 2 officer, I think the words they use there. 3 Q. Look at the fourth line onwards in that paragraph. It 4 notes: 5 "The Project Senior Responsible Owner (SRO) has 6 delegated authority from the Tram Project Board and this 7 authority is mirrored in the authority given to the Tram 8 Project Director, in turn delegated on day to day 9 matters to the senior members of his tram project team." 10 It's correct to say that you were the Project Senior 11 Responsible Owner at this time, weren't you? 12 A. Yes. 13 Q. What are the functions of a Senior Responsible Owner? 14 A. As I saw them, my function was to use my best endeavours 15 to make the project happen. To make -- make it happen. 16 To drive it forward. 17 Q. And you had that role -- part of the reason it came to 18 you was because you had the position of Chief Executive 19 Officer of TEL? 20 A. I would be the guy left holding the baby when the thing 21 was finished. That's essentially why I was SRO, because 22 I had to be comfortable that what was specified and 23 built was what I needed. 24 Q. And you were the Chief Executive Officer of the company 25 that was charged in terms of the governance with having 91 1 the -- being the Council's principal oversight body? 2 A. Yes. 3 Q. How did you go about ensuring that you had sufficient 4 oversight over all that was happening? 5 A. We had -- well, we had regular Board meetings of both 6 tie and TEL. I attended the tie Board meeting. 7 I wasn't a Director of tie. I was a Director and 8 attended the TEL Board meeting, and over and above all 9 the Tram Project Board, and the reports given by all the 10 various parts of the organisation, every month, to -- 11 certainly to the Tram Project Board, and also to 12 a lesser degree the tie Board and TEL Board. As it says 13 there, the Tram Project Board was whatever the words 14 were. 15 The main driving force or whatever. 16 Q. If -- 17 A. And the Board papers were very -- the Board papers, 18 reports and presentations were how I kept abreast of 19 what was happening, and moved forward on issues where 20 I felt I needed to move. 21 Q. Could we look forward two pages to page 34 of this 22 document, please, and enlarge the lower half. You will 23 see there is a paragraph that begins "In overall terms 24 therefore", and it's got two subparagraphs noting: 25 "The emphasis of the TEL Board on oversight (on 92 1 behalf of the Council) of matters of significance to the 2 Elected Members in relation to project delivery and 3 preparation for integrated operations; and 4 2. The emphasis of the Tram Project Board on 5 delivery of the tram system to programme and budget and 6 the preparation for integrated operations." 7 That's the same wording we saw in the Final Business 8 Case. 9 A. If you say so, yes. 10 Q. If we look to the following page, page 35, if we look 11 under the heading "TPB and its sub-Committees", it says: 12 "The Tram Project Board maintains its role as the 13 pivotal oversight body in the governance structure. The 14 Tram Project Board is established as a formal 15 sub-Committee of TEL with full delegated authority 16 through its Operating Agreement to execute the project 17 in line with the proposed remit set out in Appendix 4." 18 So once again we see the same wording has finally 19 found its way through to the Final Business Case. 20 A. Yes. 21 Q. If we go to the papers of the following meeting, that 22 will be reference CEC01357124. 23 For convenience -- we can see these are the papers 24 for the meeting on 31 October 2007 of the Tram Project 25 Board? 93 1 A. Yes. 2 Q. If we jump forward to page 13, the Project Director's 3 report, and enlarge the lower part of the page, do we 4 see there noted under the heading "Governance" that: 5 "A paper on the governance structure for the 6 construction period was presented and discussed at the 7 Tram Project Board of 26 September. A slightly revised 8 version was agreed at the Tram Project Board of 9 15 October and incorporated in the Final Business Case 10 version 1." 11 A. Mm-hm. 12 Q. Now, can we go back to the slightly later version of the 13 Business Case version 2, which is December, whereas 14 version 1 was October. That's document reference 15 CEC01395434. 16 We were looking at page 91. 17 We had been looking at paragraph 6.38. 18 Now, it's when we were looking at this, and I was 19 asking you about the subparagraph 1, the emphasis of the 20 TEL Board on oversight, you suggested that this was just 21 the Business Case and perhaps not what the governance -- 22 had actually been agreed. Would you accept now that 23 that does accurately reflect the governance that was put 24 in place? 25 A. Yes, I didn't say it wasn't. I was just asking you if 94 1 that was what was in place at the time. We've -- sorry. 2 Yes, if that's what it says, that's what it says. 3 Q. Now, you've previously referred to the fact that you 4 thought that the Tram Project Board was getting 5 authority jointly from tie, TEL and the Council. 6 A. Yes. 7 Q. But when we look at the contemporaneous documents, it 8 seemed that in fact the Tram Project Board was 9 specifically a sub-committee of TEL. Do you accept 10 that? 11 A. Yes. 12 Q. Is it fair to say that the way the company was -- TEL, 13 affairs of TEL were conducted in practice was not one 14 which particularly adhered to the letter of the 15 governance structures? 16 A. Correct. 17 Q. Did you discuss with people that it wasn't being 18 conducted in accordance with the governance structure? 19 A. Not particularly, no. 20 Q. Did you not think that was something that might matter? 21 A. No. I felt that what mattered was that there were 22 appropriate arrangements in place to make sure that that 23 which needed to be supervised was supervised. Whether 24 it was one body or another body, this was about making 25 it happen. 95 1 Q. Was -- if you were not aware that TEL had been the body 2 charged with oversight, is it likely to be the case that 3 other members -- other Board members of TEL were not 4 aware that that was the company charged by the Council 5 with oversight? 6 A. If I have said I wasn't aware, then I have misled you. 7 I was aware. I didn't attach great significance to it. 8 Q. Would it be fair to say the remainder of the TEL Board 9 would not have attracted great significance to it if the 10 Chief Executive Officer did not? 11 A. I cannot speak for every member of the TEL Board. I do 12 not even know -- the membership changed as people came 13 and people went. But certainly there was not a great 14 focus on -- on the -- on the formalities of the 15 governance procedure. 16 Graeme Bissett was very largely the guy in charge of 17 governance. He sat in a desk in the corner by the fire 18 escape and when a new governance structure was required, 19 he would disappear out of circulation for a week, come 20 back with something. It would be presented to the Board 21 meeting. This ticks the appropriate governance boxes. 22 Right, okay, carry on. 23 That's how it was largely viewed. It was something 24 that had to be done to keep the administration in place. 25 Governance. It was not something that -- whenever 96 1 a question came up, we thought, now, which bit of 2 governance covers this? It was: does that need doing; 3 do it. 4 Q. When you say it was necessary to keep the administration 5 in place -- 6 A. The administration in order. 7 Q. The administration within the companies? 8 A. The administration of the whole project, and the various 9 constituents. tie, TEL, TPB, CEC, Transport Scotland. 10 Q. If no particular regard was being had to the governance 11 structures produced by Mr Bissett, was it really being 12 successful in keeping the administration in place and in 13 order? 14 A. You would really have to ask other people that. My view 15 was that the governance structures that Graeme produced 16 that were then discussed at the Project Board or the 17 company boards and were usually adopted with few, if any 18 changes, they seemed to -- bear in mind, CEC, they were 19 on these Boards as well. They were party to these 20 governance structures. Donald McGougan, et cetera. 21 Yes. You know, they clearly had the support of people 22 more specialised in that area than I. And if the 23 Finance Director of CEC, the Director of City 24 Development, et cetera, David Mackay, Graeme Bissett 25 were okay with it, that was okay by me. 97 1 Q. If the Council were being provided with, for example, 2 a Final Business Case which narrated what the governance 3 would be during the construction period, it's reasonable 4 to suppose, isn't it, that the Council would anticipate 5 that that governance structure was actually being 6 implemented and adhered to? 7 A. I'm sorry, could you repeat that? 8 Q. If the Council are sent a Final Business Case which 9 details the governance structure, it's reasonable to 10 suppose that the Council would assume that it was being 11 adhered to? 12 A. Well, yes, if it was in the Business Case, it said this 13 is what's happening, then that is what was happening, 14 yes. 15 Q. And if you weren't adhering to it, that means the 16 Council hadn't been given the correct information about 17 what was in fact happening? 18 A. The Council were part -- as I have said, the Council 19 were part of the whole thing. Their senior officers, 20 their committee conveners, sat on these Boards. If they 21 were unhappy, they would have said so. 22 Q. Were you -- 23 A. Senior -- you know, senior -- seriously senior officers 24 and politicians. They were fully involved. 25 Q. Were you happy with the terms of the Final Business 98 1 Case? 2 A. The answer to that is that I acquiesced. 3 Q. Could you explain what you mean by you acquiesced? 4 A. I was going to cover this earlier when you were talking 5 about -- when we were talking about the OGC, 6 Transport Scotland, Audit Scotland, but you didn't let. 7 It's the same basic principle that applies to if you 8 didn't -- if you weren't comfortable with something, 9 Final Business Case, if you weren't completely bought 10 into it, Final Business Case, signing the contracts, 11 even, it runs right through the whole thing; why didn't 12 you stand up and say? Why didn't you do something? 13 If we go back to when the project first gained 14 traction, there was GBP500 million of government money 15 given. The message from Donald Anderson at the time 16 that we had was -- or -- after the 500 million was 17 confirmed, was: right, we have to -- we have to do this, 18 Neil; we have to make this happen; it might not be our 19 preferred course of action, it might not be your 20 preferred course of action, but we have 500 million of 21 government money on offer to the city; we have to take 22 it; we cannot -- it would be politically suicidal or 23 whatever to actually turn round and say: no, we don't 24 want it. 25 I know some of the other parties took a similar 99 1 view. There was no opposition to that. 2 So we need to -- we need to make this happen, we 3 need to have a tramway; and from that point on it was 4 very clear that there was going to be a tram and that 5 the money would be used. 6 At first it didn't particularly bother me. As time 7 progressed, I started to have more qualms. 8 And I rationalised it with myself and allowed myself to 9 sleep at night by adopting the Schindler strategy. 10 I could have done Trudi Craggs or Rebecca Andrew, 11 stood up, made my point and been moved, because that was 12 inconvenient, not wanted: don't want to hear that, out 13 you go. 14 I didn't wish to be excluded. I thought I could do 15 a lot more good by staying there and mitigating the 16 effects as best I could, by arguing when it was 17 appropriate against things, by lobbying, by speaking to 18 people, to try and ensure that what the city got was the 19 best possible tramway we could. We were going to have 20 a tramway. That was a given now. So what was the point 21 in a futile display of -- a fruitless, futile and 22 pointless display which would result almost certainly in 23 my being side-lined, moved back to Lothian Buses: just 24 get on with running your buses, son. Meanwhile, the 25 tram would be built with not enough tram stops, the 100 1 overhead wires would be so low that you couldn't run 2 open-top tour buses because they require them to be 3 a certain height, et cetera. 4 The best I could do for myself, for the city -- 5 sorry, not for myself, for the best I could do for the 6 city, and for the city's transport network and for the 7 Council, in my view, was to do my best to come up, to 8 exert the influence I could, to mitigate the worst 9 excesses that occurred in certain areas. 10 That's how I slept with myself at night. 11 Q. What were the problems -- 12 CHAIR OF THE INQUIRY: Before we go on to the problems, 13 Mr Lake, what was the answer to the question? You say 14 that you acquiesced in the Final Business Case. Does 15 that mean that you weren't happy with it and you went 16 along with it for the reason -- for the reasons that 17 you've explained at considerable length? 18 A. Yes. 19 MR LAKE: Perhaps we can just look at paragraph 6.32 on the 20 page we were on of the Final Business Case at the 21 moment. 22 Under the heading, "Roles of TEL and tie Boards", it 23 says: 24 "The TEL Board is focused on its overall 25 responsibility to deliver an integrated tram and bus 101 1 network for Edinburgh on behalf of CEC. It will make 2 formal recommendations to CEC on key aspects of the 3 project and matters which have a political dimension." 4 You were the Chief Executive of the company charged 5 with that responsibility of making recommendations to 6 the Council on key aspects of the project, weren't you? 7 A. Yes. 8 Q. If we go briefly to page 24 of this document, and 9 enlarge paragraph 1.110, it notes: 10 "The responsibility for delivering this document was 11 given to the Tram Project Board by CEC through TEL. It 12 is these organisations who now have the responsibility 13 of concluding on the way forward for the project, based 14 on the evidence presented in this Business Case." 15 That once again underlines the key role being 16 discharged by TEL. 17 A. Yes. 18 Q. Now if anyone had qualms and should be in a position to 19 express those to the Council, was that not you as the 20 Chief Executive of the company charged with that 21 responsibility? 22 A. Yes, and I know what would have happened if I had stood 23 up. 24 Q. In terms of you being removed? 25 A. That really didn't bother me. It was not that. It was 102 1 the fact that then the thing would go ahead without 2 any -- well, with very little control. 3 I had sufficient power and gravitas in the 4 organisation, the larger organisation, to be able to 5 almost require things to happen. If I was removed, 6 then, yes, things would be done that would result in 7 a dramatically inferior tram project -- tramline at the 8 end of the day because it would then have become 9 cost-cutting by TEL. 10 Q. Can I suggest to you that what you're saying amounts to 11 this: that it was more important that you be in the 12 project than that the Council be given a view on what 13 you saw the problems as being? 14 A. No. There is an element of truth in what you say, but 15 Donald Anderson, I met him regularly. Tom Aitchison, 16 I met regularly. Donald McGougan. These people were 17 all well aware that I had concerns. I was unhappy. If 18 we go right back to where this started, we are having 19 a tram. We're going to have a tram. We have to do the 20 best we can. 21 And get something good out of this. 22 Q. How did you make your concerns known to Donald McGougan 23 and Donald Anderson? 24 CHAIR OF THE INQUIRY: And Tom Aitchison. 25 A. Right, okay. Tom Aitchison and I would meet regularly. 103 1 Not frequently, but regularly for an update. When I say 2 not frequently, maybe quarterly. 3 Additionally, I would be in phone contact and so on 4 regularly, particularly about specific issues. 5 Tom was well aware of -- that I was, how shall we 6 put it, critical in many ways of the project, but 7 committed to delivering it as best I could. 8 You can pretty much carbon copy that answer for 9 Donald McGougan, except that I saw more of Donald 10 because he was at Board meetings monthly as well, 11 and I also had occasion to see him about finances a lot 12 of the time. 13 Donald Anderson -- it wasn't just Donald Anderson. 14 Andrew Burns, the Convener of Transport of the day, and 15 the key interested councillors as well. Again, it was 16 in -- by way of one-to-one discussion. 17 I think I covered this in my statement. 18 Q. What then the Council were faced with was on the one 19 hand one-to-one discussions of the nature you have 20 described, where you say you expressed concerns. They 21 had that on the one hand. 22 On the other hand, they had the formal documents 23 being issued by TEL such as the Business Case, saying 24 ready to proceed. 25 Now, was it not incumbent upon you, if you had the 104 1 concerns, to make them plain in some way in a written 2 form or to qualify the Business Case, rather than allow 3 the company of which you were Chief Executive to give 4 advice to the Council that all was well? 5 A. No. If Oskar Schindler had followed that policy, 1,200 6 people would have burnt in the gas ovens. Because he 7 chose to follow a different policy, the policy 8 I followed, 1,200 people survived. 9 If he had followed the policy you are suggesting, he 10 would have been taken out and shot. 11 CHAIR OF THE INQUIRY: Mr Renilson, we're concerned with the 12 Edinburgh Tram Inquiry and not with Oskar Schindler. So 13 can you try to concentrate on the question. 14 A. The principle is exactly the same. The answer to your 15 question is no. 16 MR LAKE: Can we look at page 164 of the Business Case. 17 Can we enlarge paragraph 10.36. 18 This is just to identify that within the Final 19 Business Case, a figure you're probably familiar with, 20 the final cost estimate for phase 1a is 21 GBP498.1 million. 22 A. Yes. 23 Q. Once again, you allowed that estimate to go forward to 24 the Council? 25 A. I was part of an organisation and committees that did, 105 1 yes. 2 Q. In your statement, if we take a look at this for 3 a moment, please, at page 66, could we enlarge 4 paragraph 204, please. 5 A. Yes. 6 Q. We see here you set out: 7 "Regarding the issue of GBP498 million I remember 8 very clearly attending a heavyweight meeting in one of 9 the rooms at Citypoint in 2007. I recall there were no 10 politicians present, but that David Mackay and 11 Willie Gallagher amongst others were there. I recall 12 that the latest cost advice was somewhere well above 13 GBP500 million, GBP530 million - GBP540 million or 14 thereabouts. I recall Willie Gallagher saying words to 15 the effect of we can't possibly put that out because 16 that sounds like an absolutely huge increase. Let's 17 take it down, let's make it, say, GBP480 million. That 18 figure doesn't sound nearly so bad, it starts with 19 a four. Someone said that he could not do that and his 20 response was, watch me, well, all right, not 21 GBP480 million. What we are saying is we need to have 22 something that starts with four. GBP499 million is too 23 bloody obvious, let's make it GBP498 million. 24 A discussion ensued. That's where the GBP498 million 25 came from. This was not Gallagher acting alone, most 106 1 of those present either agreed, or acquiesced." 2 I presume you would include yourself in that? 3 A. Correct. 4 Q. I have to suggest to you that what the position was at 5 that meeting was that there were a range of costs 6 available, running from somewhere down to about 7 GBP480 million all the way up to GBP530 million. And it 8 was necessary to exercise judgement on various factors to 9 determine which figure within the range should be put 10 forward. 11 A. Absolutely. 12 Q. It was a question of trying to decide, rather than 13 taking the top end figure, say GBP530 million, where it 14 would be put, and there was a collective exercise of 15 judgement? 16 A. Correct. 17 Q. That came to be that the correct figure was 18 GBP498 million? 19 A. Correct. 20 Q. And it wasn't a situation that we just want to squeeze 21 it down beneath GBP500 million? 22 A. Yes. Well, it wasn't just that situation. It was 23 important. It was deemed important by all present that 24 the figure started with a 4. Well, as verbalised by 25 Willie. But it was where do we settle? It could have 107 1 been, as you say -- I can't remember the specific 2 figures, but quite possibly somewhere between 480 and 3 530. 4 Q. Could I jump back, please, to page 70 of your statement. 5 A. Yes. 6 Q. In fact, initially if we go to page 69 for context. On 7 page 69 we will see we have got a heading of Final 8 Business Case. In paragraph 216 you say: 9 "I am aware that in December 2006 the draft Final 10 Business Case was presented to Council as myself and 11 others in TEL had involvement in its drafting and 12 approval." 13 If we jump over the page then to look at 14 paragraph 218, and enlarge that, it says: 15 "The TEL Board may well have suspected the civil 16 engineering and utilities figures were not right, we 17 were not in a position to challenge them. We had lots 18 of other things to be doing that were our direct 19 responsibilities and considered that if that was what 20 they were saying, then it was their responsibility." 21 The first question: was it not in fact the 22 responsibility of TEL to finalise -- 23 A. Sorry -- 24 Q. -- the Business Case? 25 A. No, because at that point in time we're talking about 108 1 late 2006. The governance arrangements had not changed 2 in the manner in which you described, and TEL was not 3 responsible for tie, so to speak. 4 Q. But in terms of which body actually had the authority 5 for preparing the Draft Final Business Case, what was 6 TEL's role in that, in December 2006? 7 A. Can you go back to the previous page, please? 8 Q. Certainly. Could we look at the previous page. 9 A. Yes. Draft final ... okay. I understand what's said at 10 216, yes. What was the question? 11 Q. My question is: what role did TEL have in approving the 12 Draft Final Business Case? 13 A. Approving it. Well, TEL were happy that it be passed on 14 up the line to the Council. But TEL were not -- at that 15 point my recollection is that the governance 16 arrangements did not have TEL sat above tie. At that 17 time TEL's approval merely meant that TEL was 18 comfortable that what was in there was going to result 19 in the best -- the best tram we could get. 20 Q. Could you look, please, with me at another document. 21 Could we look, please, at CEC01821403. 22 You will recognise this as the Draft Final Business 23 Case from November 2006. I think I said December 24 earlier by mistake. 25 A. Okay, yes, sure. 109 1 Q. Can we look at page 20 of this, please. If we could 2 enlarge paragraph 1.91. We see that what was noted was: 3 "The responsibility for delivering this document was 4 given to the Tram Project Board by the City of Edinburgh 5 Council through Transport Edinburgh Limited and by 6 Transport Scotland. It is these organisations who now 7 have the responsibility of concluding on the way forward 8 for the project ..." 9 Is that not making it plain that Transport Edinburgh 10 Limited did have a role in relation to the Draft Final 11 Business Case even at this stage? 12 A. Sorry, can you remove -- can you remove the enlargement 13 so I can read above it? Conclusion, thank you. 14 Can I just read the whole -- 15 Q. Can we enlarge the lower half of the page to make it 16 easier. 17 A. Thank you. (Pause) 18 Thank you. Can you now ask me the question? 19 CHAIR OF THE INQUIRY: The question was: does the document 20 not make it plain that Transport Edinburgh Limited had 21 a role in relation to the Draft Final Business Case even 22 at that stage? 23 A. Yes. 24 CHAIR OF THE INQUIRY: It's a pretty simple question, 25 Mr Renilson. And if you look at the section -- 110 1 A. I have answered it, yes. 2 CHAIR OF THE INQUIRY: Well, I'm just wondering why it took 3 you so long. 4 A. I wanted to read the whole three paragraphs, I'm sorry. 5 CHAIR OF THE INQUIRY: If you just listen to the questions 6 and answer them as directly as possible. 7 MR LAKE: Could -- 8 A. I will try. 9 Q. Could we go back to your statement, please. 10 A. Yes. I'm just concerned that I give as full and honest 11 and accurate an answer as I can. 12 CHAIR OF THE INQUIRY: We don't want anything other than 13 honesty and accuracy. 14 A. Exactly. And I would like -- 15 CHAIR OF THE INQUIRY: Let's not get into a discussion, 16 Mr Renilson. 17 MR LAKE: Could we look at the following page, back to 18 page 70, please, and enlarge paragraph 218. This is the 19 one we looked at earlier: 20 "The TEL Board may well have suspected the civil 21 engineering and utilities figures were not right, we 22 were not in a position to challenge them. We had lots 23 of other things to be doing that were our direct 24 responsibilities and considered that if that was what 25 they were saying, then it was their responsibility." 111 1 Now, firstly, when you say "they were saying", who 2 are you referring to there? 3 A. I'm reluctant to say this paragraph in isolation. I'm 4 not sure what time it relates to. But if that -- the 5 "they" is almost certainly tie. 6 Q. Let's just provide context. We went there before, but 7 we will go back there, so there's no doubt. 8 If we look at the previous page. 9 A. Right. I understand. 10 Q. We see we have got Final Business Case, and you refer in 11 216 to the Draft Final Business Case, which is 12 December 2006, and the following paragraph, you refer to 13 the Final Business Case in December 2007. Then when we 14 come back to 218, you are talking about what TEL may 15 have suspected. So it could be either, I suppose, 16 November 2006 or December 2007. 17 A. Okay. It really doesn't matter. 18 Q. Who were you referring to when you say "if that was what 19 they were saying"? 20 A. Tie. 21 Q. Now, we've just seen that in relation to either of the 22 versions of the Business Case that it was in fact TEL 23 who had the responsibility for it; do you agree? 24 A. Yes. 25 Q. So what do you mean when you say: 112 1 "We had lots of other things to be doing that were 2 our direct responsibilities ..." 3 Did that not include the business cases? 4 A. TEL, as you pointed out earlier, had no staff and no 5 budget. TEL drew its resources from elsewhere. 6 Therefore TEL was not in a position to go and check 7 tie's figures. 8 To put in a team of -- a team of engineering 9 auditors. 10 So we took what tie supplied us with, interrogated 11 it, and accepted it. 12 Q. Who interrogated -- 13 A. That was "they". 14 Q. Who interrogated it? 15 A. TEL. TEL Board. TEL Board may have suspected, but we 16 were not in a position to challenge them. We had no 17 resource. We had nothing. 18 Q. I don't understand, on the one hand, you can say they 19 interrogated the matter. On the other hand you say they 20 weren't in a position to challenge it. Did they or 21 didn't they? 22 A. We asked questions. 23 Q. So if what you're saying that tie was hampered by a lack 24 of any staff, would it be fair to say that TEL was 25 able -- I will put it the other way round. 113 1 TEL was unable to perform any effective oversight 2 function of what was put forward? 3 A. Because of the interrelationship of the companies, 4 I think Willie Gallagher was on the TEL Board. He was 5 also IC tie. 6 So when he was at TEL, he was -- we would 7 say: Willie, is this right? 8 Q. Do you regard that as an effective oversight function? 9 A. Yes. 10 Q. Really? 11 A. No. Well, it didn't just have to be Willie. We could 12 have asked Stewart McGarrity if the finance was right or 13 whatever. 14 The people were the ones -- the people at TEL, 15 sitting on the TEL Board, many of them were also 16 intimately involved and held positions with tie. TEL -- 17 Q. Who do you mean by that? Who was sitting on the 18 TEL Board that you think had an intimate position with 19 tie that would have been relevant to oversight? 20 A. Without being presented with a list of who was on the 21 TEL Board at that time, but certainly Gallagher. 22 Mackay -- Mackay was on the -- I'm not sure if he was 23 actually on the tie Board. There was Stewart McGarrity. 24 There was Graeme Bissett. People like that. 25 Q. So these are all people from tie as well? 114 1 A. They were people from the group. Some of them were tie, 2 some were TEL, some were both. 3 Q. These were all people who were within tie as well? 4 A. They were all involved in tie, yes. 5 Q. So essentially the oversight by TEL consisted of asking 6 people from tie whether they were happy with the 7 document being put forward? 8 A. That's -- that is -- that's a somewhat cynical view of 9 it, but yes. 10 Q. If we come to the point that you say the TEL Board may 11 well have suspected that civil engineering and utilities 12 figures were not right, I assume there you're referring 13 to members of the TEL Board who weren't also part of 14 tie? 15 A. Yes. 16 Q. Now, was there a suspicion, when you say "may well have 17 suspected", did they or didn't? 18 A. I cannot recall. That's why I have said "may". 19 Q. So it's speculation? 20 A. May. 21 Q. Speculation? 22 A. May. 23 Q. Is that speculation? 24 A. Informed speculation. 25 Q. What informed it? 115 1 A. My memory. 2 Q. Sorry? 3 A. My memory. I believe that was the case. 4 Q. No, I'm talking about whether or not the people on the 5 Board -- I can leave that matter there. 6 I would like to go to a different matter. If we go 7 to page 58 of your statement. 8 A. Yes. 9 Q. If we could enlarge paragraph 179. 10 A. Yes. 11 Q. You open the paragraph by saying: 12 "There was considerable concern in late 2007 about 13 the level of design which had been completed as tie 14 moved towards contract close. We appeared to be heading 15 towards contract close with an awful lot of loose ends 16 and unfinished design business, and would be signing 17 contract completion on the basis of substantially 18 incomplete design. There was some discussion about 19 delaying the tendering until the design work was more 20 complete, but the rush to get out to tender, get prices 21 in and contracts signed overcame the more cautious 22 approach being advocated by some." 23 A. Yes. 24 Q. Now, what pressure was there not to pause at that time? 25 A. The pressure -- the pressure was -- there was concerns 116 1 as follows. And these all amounted to pressure: that if 2 we paused, the price would go up. If there was 3 a project pause, then -- if there was a project pause 4 for design and MUDFA to be completed, it wasn't going to 5 be a project pause of a week or two. We are talking 6 about a year or something. 7 And that the price would go up and the project would 8 become seriously unaffordable. 9 So there was a pressure there to see if we can work 10 around these issues and move ahead as we moved towards 11 contract close. 12 There was -- there was the pressure as well of the 13 media and public pressure, which was just relentless in 14 its build-up and had been, I think, as I mentioned 15 earlier, from mid-2005 onward. All -- if we paused the 16 project, then we were highly likely to lose a lot of 17 the -- well, it was quite possible we would lose key 18 staff from tie. It was pressure from -- yes -- and 19 those and other sources. 20 Q. Was there a concern that funding for the project would 21 be withdrawn? 22 A. I don't think there was concern that funding would be 23 withdrawn. The concern was that the funding would be 24 inadequate because the price would go up. I think the 25 fear was, if we paused this thing, we'll maybe never get 117 1 it started again. 2 Q. How much importance was placed on having the design 3 complete by the time the contracts were concluded? 4 A. Different people placed different levels of importance 5 on that. 6 Q. Who placed the greatest importance on it? 7 A. Those people with previous experience of major 8 construction problem -- projects. 9 Q. And the least? 10 A. I am not being fatuous when I say, or not trying to be 11 that, the people with least experience. You know. The 12 people who really knew about construction were the 13 people who were really wound up about it. 14 Q. Who were they in terms of names, can you recall? 15 A. I think to be fair there were some finance people 16 involved as well, because Stewart McGarrity, although he 17 was finance, had been involved in building the airport 18 in Hong Kong. So he knew about that sort of thing. 19 The Project Director and people like -- well, 20 Steven Bell, who -- people who had had significant 21 experience of major civil engineering projects. To be 22 fair, Willie Gallagher was pretty switched on about that 23 as well. Whereas somebody like Bill Campbell, no. 24 MR LAKE: My Lord, I'm about to move on to another chapter. 25 And if we are going to take a break ... 118 1 CHAIR OF THE INQUIRY: We will adjourn for lunch and resume 2 again at 2 o'clock. 3 (1.00 pm) 4 (The short adjournment) 5 (2.00 pm) 6 CHAIR OF THE INQUIRY: Good afternoon. I am satisfied that 7 Mr Renilson is no longer fit to give evidence today. So 8 we will adjourn his evidence to a date to be afterwards 9 fixed. 119 1 INDEX 2 PAGE 3 MR IAN LAING (sworn) .................................1 4 5 Examination by MR LAKE ........................1 6 7 Examination by MR DUNLOP QC ..................51 8 9 MR NEIL RENILSON (continued) ........................53 10 11 Examination by MR LAKE (continued) ...........53 12 13 MR ROBERT BURT (sworn) .............................119 14 15 Examination by MR MCCLELLAND ................119 16 17 18 19 20 21 22 23 24 25 179 1 Thursday, 14 December 2017 2 (9.30 am) 3 MR NEIL RENILSON (continued) 4 CHAIR OF THE INQUIRY: Mr Renilson, you're still under oath. 5 A. Understood. 6 CHAIR OF THE INQUIRY: If you just listen to the question 7 and answer it. 8 A. Thank you. 9 Examination by MR LAKE 10 A. Before we commence, my Lord, having reviewed the 11 evidence I gave on the two previous occasions, there is 12 one issue where I told the truth, but I didn't perhaps 13 tell the full truth. Might I be permitted a couple of 14 minutes to complete that? 15 CHAIR OF THE INQUIRY: Yes. 16 A. Thank you. It relates to governance and structure 17 questions. And I was asked about TEL and the general 18 composition of the structure and the governance, and 19 particularly the issue that TEL had no staff or 20 resources. 21 I would explain that to this day Transport Edinburgh 22 has no staff. The tram is up. The tram is functioning. 23 It has some directors. It has directors and those 24 directors, non-executive directors, most of them, do 25 receive some remuneration, but the only paid employees 1 1 it has, as I understand it, is one secretarial support, 2 which is very much the same as it was when you were 3 asking me. 4 So that hasn't changed, and it was never the 5 intention that TEL or -- should be anything other than 6 a holding company. 7 That was the intention, and that's how it's worked 8 out. The reason TEL was created, why it had to be 9 there, was twofold. The first one relates to the 1998 10 Competition Act. Following the 1997 Amsterdam protocol, 11 EU, it was a situation where two companies cannot 12 collude on prices if they are under separate ownership. 13 Lothian Buses, although 91 per cent owned by the City of 14 Edinburgh Council, was not under common ownership with 15 Edinburgh Trams, or whatever form it was going to take. 16 That would have been 100 per cent owned by the City of 17 Edinburgh Council. 18 So in order to deliver an integrated network where 19 bus and trams agreed common fares, common terms and 20 conditions, effectively colluded to provide a common 21 service, they had to be under common ownership. 22 So TEL had to be created, if for no other reason 23 than to allow an integrated transport system to be 24 implemented, or City of Edinburgh Council had to acquire 25 the other 9 per cent of the shareholding, but 2 1 East Lothian, West Lothian, and Midlothian were not 2 minded at all to sell. 3 It was called Transport Edinburgh Limited because 4 really TEL was Lothian Buses under a different name. It 5 was called Transport Edinburgh Limited because 6 Lothian Buses -- City of Edinburgh Council would love to 7 call Lothian Buses at that time Edinburgh buses, but 8 clearly, with the three other shareholders, and all four 9 councils were under Labour control at that time, there 10 was no desire on the part of the Labour Party or the 11 Labour Council in Edinburgh to fall out with the other 12 three surrounding authorities who were, you know, all of 13 the same mind. 14 So Lothian Buses stayed, following the dissolution 15 of Lothian region, as Lothian Buses, whereas City of 16 Edinburgh Council would have liked to call it Edinburgh 17 Buses, but as I have said, didn't. 18 Edinburgh Tram, however, was never going to be 19 Lothian Tram, quite simply from the point of view that 20 as far as City of Edinburgh were concerned, it's ours, 21 it's 100 per cent ours. So we are not giving any 22 recognition to any other body. 23 So Transport Edinburgh was essentially Lothian Buses 24 in a different guise. It was necessary for the 1998 25 Competition Act to allow an integrated operation and it 3 1 was never ever intended to be anything other than 2 a holding company and that is the way it is to this day. 3 Thank you. 4 MR LAKE: Thank you, my Lord. 5 Mr Renilson, when you last were giving evidence, we 6 finished off by talking about the obtaining of approval 7 for the Final Business Case and that aspect of close -- 8 A. Sorry, could you repeat. 9 Q. When you were last giving evidence, you were speaking 10 about obtaining approval of the final business case and 11 the Council decision to proceed in December 2007. 12 A. Yes. 13 Q. What I want to do now is just look what was happening 14 the following month, in January 2008. 15 A. Yes. 16 Q. Do you recall, after the close, a committee being set up 17 that consisted of you, Willie Gallagher and 18 David Mackay? 19 A. Yes. Is this what was essentially -- was it termed the 20 Approvals Committee? 21 Q. Yes. That's the one I'm thinking of. 22 A. This was -- if it's the one I'm thinking about, it was 23 essentially one person each from tie, TEL -- anyway, the 24 objective of it was to formally sign off on behalf of 25 the companies the business plan, and I think that took 4 1 place immediately prior to contract closure. 2 Q. Yes. I just want to ask you a little bit more details 3 about this committee, and I would like to ask you to 4 look at one of the resolutions that established it. It 5 is CEC -- 6 A. I have nothing on the screen. 7 Q. It will come up. CEC01515189. 8 If we look at the upper half of this so we can make 9 it larger to see. The title is -- it's headed "TRAM 10 PROJECT BOARD", and then it has the title, "RESOLUTION 11 OF THE MEMBERS OF THE Tram Project Board AT A MEETING ON 12 23 JANUARY 2008, HELD JOINTLY WITH THE BOARDS OF Tie Ltd 13 AND Transport Edinburgh Limited". Do you recognise this 14 document? 15 A. Not immediately, but -- 16 Q. We will look through the details -- 17 A. If you want me to browse quickly through it, I'll see if 18 that triggers anything. 19 Q. I'll let you read through it. I'm more interested in 20 stuff at the end, but if you look at the whole of it 21 just now. 22 A. Okay, thank you. (Pause) 23 CHAIR OF THE INQUIRY: When you get to the bottom, if you 24 just -- 25 A. Yes, thank you. Yes. 5 1 This isn't exactly what I thought we were talking 2 about. 3 This committee appears to be established to approve 4 final execution of notification to award ITN, the 5 Infraco and related. The one I was thinking of came 6 somewhat later and it was actually, I think, the same 7 people in May, and that was to actually sign the 8 contracts. 9 Yes, I understand this, yes. 10 Q. If we just look at paragraph 4 of this resolution at the 11 moment, this is to approve -- the Tram Project Board 12 decision is simply to approve delegated authority 13 arrangements, to ensure, as it is put, an efficient and 14 properly controlled process was followed through to 15 contractual commitment and during project 16 implementation; do you see that? 17 A. Yes. 18 Q. Then underneath that: 19 "The delegated authority arrangements ..." 20 That is approved is that a committee of the boards 21 of the company, the Tram Project Board and tie Ltd would 22 immediately be formed consisting of Messrs Gallagher, 23 Mackay and Renilson, and you recall there being 24 a committee of the three of you? 25 A. Yes. 6 1 Q. "... to whom authority is delegated to approve final 2 execution by the tie Chairman of Notification to Award, 3 the Infraco Contract Suite, and any necessary related 4 agreements ..." 5 So there's three things you can approve execution 6 of: the Notification to Award, the Infraco Contract 7 Suite and related agreements; do you see that? 8 A. Yes. 9 Q. Was it the case that ultimately this three-man committee 10 did sit in order to approve the execution of the Infraco 11 Contract Suite? 12 A. I cannot bring that immediately to mind. I can 13 definitely clearly remember the meeting in May of the 14 same people, but whether this actually met or whether 15 this was a paper exercise, I don't know. I can't 16 immediately remember. But, I mean, I guess there will 17 be minutes or a record. 18 Q. I will take you to the main minute in a little while. 19 I just want to look at this at the moment to see what 20 the criteria are for giving your approval. There's 21 three given. 1 is that the final terms of the 22 contractual arrangements are within the terms of the 23 Final Business Case, subject to slippage of up to one 24 month in programmed revenue service in 2011, and 2, they 25 unanimously conclude that it is appropriate to do so, 7 1 and 3: 2 "Approval has been received from the Council 3 Chief Executive to proceed to execution of the Infraco 4 Contract Suite." 5 Obviously the third of those is really nothing to do 6 with the three of you. It's to do with a third party; 7 do you agree? 8 A. Yes. 9 Q. In terms of the first of these, though, being satisfied 10 that the terms of the contractual arrangements are 11 within the terms of the Final Business Case, can you 12 recall what work you undertook to satisfy yourself? 13 A. No. I mean, I can't. I can guess at it, but I can't 14 recall. 15 Q. Was this simply a paper exercise? 16 A. I cannot remember, I'm sorry. It may have been. It may 17 not have been. 18 As I say, I can clearly remember subsequent meeting 19 of these three people in a slightly different form. 20 This doesn't ring a bell particularly though. 21 Q. If we come back to this in a moment, but for the moment 22 I would just like to look at the Business Case to see 23 what some of the key elements of it were. Could we have 24 CEC01395434. 25 You will recognise this as being the version 2 of 8 1 the Final Business Case from December 2007. 2 A. Yes. 3 Q. I want to look at a number of parts of it. There will 4 be a degree of overlap. If we could start with page 18. 5 Can we enlarge paragraph 1.77. This is in the summary 6 section. 7 A. Mm-hm. 8 Q. We have "Procurement strategy and risk allocation": 9 "The Procurement Strategy followed by tie responds 10 to feedback from the National Audit Office in 2004 on 11 the effectiveness of light rail schemes. The objectives 12 of the Procurement Strategy are summarised as follows." 13 The first is: 14 "Transfer the design, construction and maintenance 15 performance risks to the private sector." 16 Does that accord with your understanding that one of 17 the key elements of the procurement strategy was that 18 risk be transferred? 19 A. Absolutely. 20 Q. If we go then to page 115 of this, this time could we 21 enlarge paragraph 7.111 at the foot of the page. The 22 more detailed section under the heading, "Benefits and 23 risk allocation", this paragraph says: 24 "The key benefits of the Infraco procurement 25 strategy are primarily through the award of a single 9 1 turnkey fixed price contract and in the novation of the 2 SDS and Tramco contracts and the transfer of risks to 3 the Infraco." 4 Then it goes on to describe the benefits of this. 5 Again, does that accord with your understanding that key 6 elements of the strategy were to be a fixed price 7 contract and once again the transfer of risks? 8 A. Certainly it was the strategy to achieve, to try and 9 achieve a fixed price contract. Yes, that was the 10 strategy. 11 Q. Perhaps just for completeness, if we go to page 166, and 12 enlarge paragraph 10.53. We can see once again 13 reference to fixed price here because the paragraph 14 says: 15 "The contractual terms agreed with the bidders 16 accommodate the phased approach. Fixed prices have been 17 agreed for Phase 1a and an option arrangement has been 18 negotiated which will allow the Council to commit to 19 Phase 1b by March 2009 for commencement of construction 20 in July 2009." 21 So again, there was no doubt this was to be fixed 22 price? 23 A. No. What that's saying to me, they accommodate the 24 phased approach. Fixed prices have been agreed for 25 phase 1a, and throughout there was never any claim that 10 1 it was 100 per cent fixed. Various percentages were 2 used, like 95 and so on, and it was always fully 3 understood that there would be issues outwith the 4 contract that could result in a change to that fixed 5 price; a very obvious one would be ground conditions. 6 For example, Leith Walk, it's fundamentally built on 7 sand. If they had priced it on that and then suddenly 8 came across a load of rock at Pilrig or something, that 9 would be a change to the price. 10 So there clearly were -- it was always understood 11 there were exceptions to it. 12 But as I say, various percentages were bandied 13 around, but 95 was one that was regularly used. So 14 fixed, largely fixed, but never in my mind, or indeed as 15 far as I'm aware in anybody's mind, was it 100 per cent 16 fixed. 17 Q. What was the understanding as to what elements might 18 bring about a change in price? You've referred to 19 ground conditions being an obvious one? 20 A. Ground conditions is a pretty standard one in that sort 21 of contract. 22 Unforeseen circumstances. It's not exactly 23 force majeure, but let's say there was major flooding 24 out at Murrayfield, the Water of Leith decided it was 25 going to flood the work site or whatever. These sort of 11 1 things. 2 Things essentially that hadn't been priced in by the 3 contractor. But this is December 2007. 4 Q. Yes. 5 A. Yes, by that time, you know, it was well understood that 6 MUDFA and SDS, the design, were not on time. 7 Q. Well, that really -- 8 A. But -- sorry -- 9 Q. That comes to be the point. That you knew that MUDFA 10 wasn't on target and the design was behind. 11 A. Correct. 12 Q. Did that not provide an indication that the price wasn't 13 going to be fixed in the way it was intended to be? 14 A. I think -- I assume this -- is there an actual date on 15 this in December? 16 Q. On the Final Business Case? 17 A. The FBC. 18 Q. I think it's 7 December. 19 A. Fine, okay. Clearly it wasn't written on the 6th. This 20 had been written over a number of months and indeed was 21 a rework and update of previous business cases, and yes, 22 there was exactly as you say: look, you know, this is 23 not as fixed as we want it to be. And that resulted, 24 I think, subsequently, 7 December, in Willie and Matthew 25 flying off to meet in Wiesbaden, and that was again an 12 1 attempt to move it further towards fixed. 2 So it wasn't a question that on 7 December, this was 3 released and it was then a question of: well, it's not 4 fixed but don't mention it, we will sit on our hands. 5 All sorts of efforts were made to try and make it more 6 fixed. 7 But yet it was not, over and above the sort of 8 geographical and extra -- and geological terms, yes, 9 there were elements that weren't fixed and everybody was 10 doing what they could to try and fix them. 11 Q. If I could go back to the resolution in relation to the 12 Approvals Committee, that was document CEC01515189. 13 A. Yes. 14 Q. Once again, if you look at the lower half of the screen, 15 you were given three conditions you have to consider 16 there, and the first is whether or not the final terms 17 of the contractual arrangements are within the terms of 18 the Final Business Case. 19 In deciding whether or not you could give approval, 20 how did you judge whether or not it was fixed price? 21 A. As I said, I can't be sure that anything -- whether this 22 was a paper exercise or whether a meeting took place. 23 I just genuinely cannot remember. 24 The final terms of the contractual arrangements are 25 within the terms of the Final Business Case. That was 13 1 certainly the objective. 2 I'm very happy to sit here and say at that time 3 that's what we were trying to do, which is why there was 4 various fairly intense activities taking place in the 5 first five months of 2008 to try and ensure it as far as 6 possible did. 7 That's all I can say. But yes, technically, there 8 may well be a situation where, you know, that very stark 9 absolute commitment was not met. 10 Q. Looking -- apart from the question of the fixed, the 11 transfer of risks? 12 A. Yes. 13 Q. What did you, the Approvals Committee, do to ensure 14 there had been transfer of risk, and in particular, did 15 you have in mind which risks were to be transferred? 16 A. The objective clearly was to transfer all risk, but that 17 was not going to be possible. 18 I think the largest single concern was around the 19 design, and that, for various reasons, was just really 20 going nowhere. Not going nowhere, but not proceeding at 21 the rate necessary to achieve concluded design by May. 22 That was pretty obvious. 23 So the objective was to try and get that design risk 24 novated across to the consortium on signature. 25 I wasn't closely involved in that personally, but 14 1 I was well aware of the principles of what was going on, 2 and it was becoming -- it was becoming fairly clear that 3 BBS, particularly Bilfinger, Siemens weren't really an 4 issue, but Bilfinger were pretty uncomfortable about 5 taking on all the design risk. Hence, among other 6 things, Wiesbaden. 7 Q. You talked about the novation of design. 8 A. Yes. 9 Q. Had that always been part of the procurement or the 10 contract strategy or was that put in simply because the 11 design was lagging? 12 A. No. I hesitate to use the word "always", but it had 13 certainly been the -- certainly been the strategy long 14 before it became obvious that MUDFA and SDS were not 15 going to make it. It had always been -- by this rather 16 cockeyed system that had been adopted on day 1, it was 17 always intended that the design and -- yes, the SDS and 18 MUDFA would have been novated into Infraco. I don't 19 think it was originally intended that Tramco be novated 20 into the -- or be incorporated in the consortium. 21 I think that did come later, but certainly very early 22 on. 23 Q. So what was the relationship between the novation of the 24 design contract on the one hand and the transfer of 25 design risk on the other? 15 1 A. Effectively that when that -- my understanding, as 2 I say, this wasn't my specialist area. But my 3 understanding was that if or as and when the novation 4 took place, the agreed design risk would transfer to 5 BBS, and BBS's price included not just the cost of 6 building the thing, but a premium, a risk premium, for 7 taking on these undetermined design issues, but it was 8 never expected -- it was never expected that they would 9 take on all the design risk. Because in the same way as 10 you had issues like ground conditions, flooding, 11 whatever it might be, you also had the situation where 12 CEC were deemed to be a major blockage in the design 13 approvals system. 14 Again, not -- not something I was directly involved 15 in personally, but I was well aware through board 16 meetings and Project Board meetings what the mood was, 17 and the mood was we send, you know, the designers send 18 completed designs off to CEC and they don't come back, 19 and they don't come back, and we chase them and we get 20 them far, far too late, and that was slowing the whole 21 thing down. 22 The second issue was that CEC were rejecting designs 23 because they didn't meet their aesthetic requirements, 24 and BBS were not prepared to take on at the risk of CEC 25 not performing or being recalcitrant. 16 1 Q. I just want to clarify -- we've been talking about the 2 transfer of design risk, exactly what we mean. It could 3 mean on the one hand they were taking on the risk of 4 completing the designs. That's actually employing 5 designers to produce the drawings and things, or it 6 could be that they would take on the responsibility of 7 building the tram according to whatever the final design 8 turned out to be. 9 A. My understanding is the former. That, for example, such 10 and such a bridge has been roughly designed in outline. 11 It's not the design has not been fully completed. And 12 on novation, and when they take on the design risk, 13 that -- at that point, BBS will become -- they will take 14 the SDS team and staff into -- into effectively their 15 body, and they will be responsible for finishing off the 16 design of that bridge, designing it in detail, getting 17 permissions, et cetera, et cetera. 18 Q. If the final design costs more to construct than the 19 design that was available, say, in December 2007 -- 20 A. Yes. 21 Q. -- what was the arrangement for who was going to pay for 22 the increase in cost of that risk? 23 A. I cannot quote contractually what the arrangement was. 24 I can give you my understanding. 25 Q. What was your understanding of the intention? 17 1 A. My understanding was that if the reason that the item of 2 design, let's use the bridge at Gogar, if the Gogar 3 bridge was half designed at the time of novation, and in 4 completing the design it was going to cost more to build 5 than they had included in their prices, that was 6 their -- they were -- that was their problem. They were 7 carrying that cost. If, however, it was because 8 Riccardo Marini had decided that it was the wrong shade 9 of concrete or the wrong shape and they had to go away 10 and redesign it, that was very much CEC/tie's costs. 11 Q. I just want to be clear. You did understand that if the 12 completion of the design pushed the cost up just from -- 13 A. Yes. 14 Q. -- not Mr Marini's input, but just completion of the 15 engineering process -- 16 A. If it was nothing to do with an outside factor such as 17 CEC or related people, then, yes, that was Bilfinger's 18 responsibility, was my understanding. 19 Q. Right. In carrying out the work of the Approvals 20 Committee, can you recall what steps you took to ensure 21 that risk had been passed to the contractors? 22 A. Well, not specifically in terms of carrying out the -- 23 the Approvals Committee, because I say, I can't be sure 24 if it ever actually happened. But in general, just as 25 in terms of one's responsibilities for the project 18 1 overall, it was -- I'm not a contract lawyer, but it was 2 down to taking advice from the -- listening to and 3 taking advice from those people who were specifically 4 employed to cover that issue, and to advise on that 5 issue. By that I mean fundamentally two or three groups 6 of people. The tie specialists in design, and tie's 7 legal, DLA, Andrew Fitchie, et cetera, and if they were 8 saying: yes, you know, the design risk passes; then I'm 9 not going to question Fitchie. 10 Q. Were you aware of any quality assurance procedures in 11 place in relation to the terms of the contract? 12 A. Sorry, could you expand. 13 Q. Were you aware of any quality assurance that had been 14 put in place to check the terms of the Infraco contract? 15 A. When you say quality assurance, do you mean from a legal 16 point of view? 17 Q. Legal and general drafting? 18 A. Well, yes. 19 Q. Legal and commercial? 20 A. That basically was the lawyer. That was -- the -- 21 I mean, Andrew and his people were involved in drawing 22 up the contracts. They'd produced them. They allegedly 23 knew what they were doing, and had experience of similar 24 work. 25 So I essentially, because they'd produced it, yes, 19 1 one assumed they knew what they were doing. 2 In terms of independent review, I'm unaware of any 3 independent review being undertaken into the contract 4 accuracy or validity. Although with hindsight, clearly 5 that would have been a good idea. 6 Q. I'll come back to that in a little while because it's 7 something you deal with in your statement. We have been 8 looking at the first of these numbered paragraphs at the 9 foot of the page in the resolution? 10 A. Yes. 11 Q. The second one is that they unanimously, that's the 12 committee unanimously conclude that it is appropriate to 13 do so, to conclude the contract? 14 A. Yes. 15 Q. What factors did you take into mind there? Was it 16 simply that all the other formal process were in place, 17 or did you stop to consider commercial, legal, 18 engineering aspects? 19 A. I would have -- well, I would, and indeed did later, 20 take the view there that the key -- the key point about 21 2 was unanimously, that if David and Willie and I were 22 all in agreement, fine. If we weren't, then there was 23 an issue. 24 So if we all thought it was -- it's a unanimity. 25 This wasn't going to be a majority decision. It had to 20 1 be unanimous. 2 Q. Were you exercising any discretion or judgement other 3 than that, the terms of the contract were within the 4 terms of the Final Business Case? Or was that it? 5 A. I don't really understand what you're -- 6 Q. You had to make a decision as to whether or not to 7 approve final execution? 8 A. Yes. 9 Q. What I'm interested to know is what criteria you applied 10 in your mind to make that decision? Was it simply -- 11 just hold on a moment. 12 CHAIR OF THE INQUIRY: Just carry on. 13 MR LAKE: I'm interested in what the criteria was. Was the 14 thing that you turned your mind to whether or not the 15 contract was in the final terms of the Business Case, or 16 was it that plus other things? 17 A. I would have said it was that plus other things. 18 Q. What I'm interested in is: what were the other things? 19 A. Well, when I say other things, I'm not entirely sure 20 whether these sort of things -- without re-reading the 21 Business Case, which I haven't done, and the three 22 guiding principles were: can it be done for 545; will 23 it, once it's operational, operate at break even or 24 better; and will it have a BCR of 1 or greater? 25 Q. Those are all matters within the Business Case? 21 1 A. And they really were the key things that I was -- and 2 really points 2 and 3 were the key things that I was 3 absolutely focused on. 4 1 was really a bit -- you know, can it be done for 5 545? I'm not that closely involved with the contracts 6 with the suppliers. If that's what everybody is saying, 7 they are far more skilled than I. 8 My skill and focus is on what's it going to be like 9 once it's switched on. Is it going to lose money? Is 10 it going to, you know -- or is it -- whatever. 11 Q. Just for completeness, I would like to look at two 12 further documents. The first is CEC01515190. The first 13 document we looked at had the heading: Tram Project 14 Board had set up the committee. 15 Here we can see that it's headed up "tie LIMITED", and 16 again, it's a resolution of the 23 January. If we 17 scroll to the foot of the page, we can see it's the same 18 delegated authority put in place. It will be the 19 three-man committee and it's the same terms of 20 reference. Do you see that? 21 A. Yes. 22 Q. Finally, if we go to another document, which is 23 CEC01515192, to complete the set, this time we see the 24 document is headed "TRANSPORT EDINBURGH LIMITED". Again 25 it's a resolution of 23 January, and if we scroll down, 22 1 it's the same delegated authority arrangement for the 2 three-man committee with the same terms of reference? 3 A. Might I ask, are these effectively the same documents 4 with different company names on the top? It appears to 5 me they are. 6 Q. In effect, that's what they look like, isn't it? 7 A. In which case I think that possibly lends weight to -- 8 no, I don't remember meetings taking place and that's 9 possibly why. This was a -- this is a governance issue. 10 We have to have these things in place. You know. 11 Because they're all the same time, the same date, the 12 same words, just change the name at the top. I'm not 13 saying that was the case, but that would lend weight to 14 my lack of recollection about it actually happening. 15 Q. We have seen all three bodies, the Tram Project Board, 16 tie and TEL, joining to set up this committee, a joint 17 committee of these three entities. Do you know why it 18 was all three had to join in, tie, TEL and Tram Project 19 Board? 20 A. Well, clearly tie had to because they were the ones who 21 were actually going to sign -- they had the authority to 22 sign the contracts. They were a given. 23 Q. Yes. 24 A. Because under the governance arrangements, tie 25 theoretically was reporting through or operated with 23 1 powers delegated by TEL, then clearly TEL also had to be 2 involved. 3 Why Tram Project Board? Probably because it was the 4 body, if I recollect correctly, that had power delegated 5 to it from CEC. 6 So I can certainly see why tie and TEL had to be 7 there. 8 Q. Might this have been a reflection on the fact it really 9 wasn't clear at that time which of these bodies was 10 ultimately responsible for taking the decision to go? 11 A. I understand where you're coming from. It was quite 12 clear that the mechanics were that tie were the ones 13 entering into the legal agreement. Equally, it was well 14 understood by most that TEL were the people -- TEL were 15 the people who were going to carry the -- who were going 16 to carry this thing forward. tie were just the builder. 17 Five years' time, tie go. Next 40 years, TEL have it. 18 So they have to be closely involved. 19 Tram Project Board just because that was where the 20 real decisions were taken. That was where -- yes, that 21 was -- that was really the body that made it happen. 22 I don't -- a lot -- you know, we're going back perhaps 23 to the very first thing I said. I didn't have any 24 confusion as to who was where in terms of 25 responsibilities. 24 1 If we were starting with a blank sheet of paper, we 2 wouldn't have had that structure, but when this first 3 commenced there was no concept of TEL. It was to be 4 competitive. It was to be a re-run of CERT, the tram 5 was to be run by CEC, possibly through a contractor, as 6 a competitive operation. 7 We didn't start with a blank sheet of paper. What 8 then happened was I and the Chairman and the rest of the 9 Board lobbied every politician, councillor, MP, MSP, 10 even MEPs, everyone we could get our hands on, that this 11 was crazy, this was crackers. And very quickly it was 12 changed to integration, and from that -- from that point 13 on, TEL had to be there. But tie were so far down the 14 parliamentary powers route by then that they couldn't 15 just say: all right, we got this wrong, we are going to 16 have one body and we will incorporate the two into one, 17 so it carried on. 18 And it kind of developed by accident. 19 Q. When you say: I and every other members of the Board, 20 lobbied every politician, et cetera; was that the Board 21 of Lothian Buses? 22 A. Yes. 23 Q. So this was Lothian Buses -- 24 A. TEL did not exist at that time. 25 Q. So Lothian Buses resisted having the trams as an entity 25 1 in competition with the bus service? 2 A. Yes. We wanted an integrated network, and to be fair, 3 once it was explained to most of the politicians that 4 this was not what they were going to get, they were not 5 at all amused. That's what they wanted as well. 6 Q. There was initially some -- I hate to use the word 7 hostility, but some opposition by Lothian Buses towards 8 the tram and the project, because it was going to be 9 running in competition with them? 10 A. No, you're right, hostility, yes. My job, and the job 11 of the directors, was to protect the interests of the 12 company. We went through this last time. Therefore, my 13 job was to protect -- my primary function under the 14 Companies Act was to protect Lothian Buses. We already 15 had a run-in with the Council over CERT. It looked like 16 they were going to re-run it. We'd had another run-in 17 with the Council over concessionary fares, but which you 18 may or may not be aware of. I know Mr Martin is. 19 And yet again I found myself to discharge my duties 20 as a Director of Lothian Buses, and the same thing went 21 for the Chairman and the other directors, we had to -- 22 we had to take issue with something that was being 23 proposed by our major shareholder, and we did. And we 24 lobbied as hard as we could, and it didn't take long. 25 We were kind of pushing at an open door. Once the 26 1 politicians realised that they hadn't really been 2 explained properly, and this was actually going to be 3 a competitive thing against Lothian Buses, it was: we 4 don't want that. 5 Q. You said that the effect of that was that the tram was 6 transferred into TEL, and TEL was in essence 7 Lothian Buses? 8 A. TEL -- TEL was the body that was going to run bus and 9 tram. With 650 buses and 20 trams, clearly it made 10 sense, if you're going to integrate it. So TEL, I said 11 in all but name, TEL was going to be the body going 12 forward. 96 per cent of its passengers would travel on 13 buses and 4 per cent would travel on tram. 14 Q. And once that transfer was completed, Lothian Buses were 15 content with the situation? 16 A. Absolutely. Not only were we content, we were actually 17 very happy to be getting GBP500 million of investment 18 into transport. One of the problems I had, though, was 19 that having its -- you never get a second chance to make 20 a first impression, and having spent six months or maybe 21 nine months, you know, doing our damnedest to make this 22 not happen in that form, when it changed the other way, 23 Lothian Buses were still tarred with, you know, the anti 24 thing. 25 So that first impression, those first nine months 27 1 when we had to do our level best to stop it happening in 2 a competitive format, coloured an awful lot of people's 3 view for an awful long time. 4 Q. Can we look at another document now, please. It's 5 reference CEC01289240. 6 If we just look at the whole page for the moment, we 7 can see the heading. It's the meeting of the tie and 8 TEL Approvals Committee to confirm the authority to 9 proceed with completion of Infraco Contract Suite. 10 It has a date of 13 May 2008. And the three people 11 attending are yourself, Willie Gallagher and 12 David Mackay? 13 A. Yes. 14 Q. So this was a meeting of the Approvals Committee that we 15 just saw established? 16 A. Correct, this is the one that I have clear recollection 17 of. 18 Q. Did that committee meet periodically or at all between 19 being established in January and this May meeting? 20 A. I could not say yes or no. All I can say is I had no 21 recollection of it meeting, but that's not to say it did 22 or it didn't. This is the meeting I did remember. 23 Q. Could we enlarge the upper half of the screen now for 24 readability. 25 Can you recall, was this minute of meeting prepared 28 1 in advance of the actual meeting taking place to guide 2 what you were supposed to do? 3 A. I can't answer that. What I can say is I think if you 4 were to dial up 79774, that would be very illuminating 5 on this issue. 6 Q. 79 -- 7 A. 79774 CEC. 8 Q. I might do that a little bit later. I want to stick 9 with this for the moment. 10 A. Sure. 11 Q. You can see the introduction here that is -- 12 A. Yes. 13 Q. The committee had been established on 23 January as 14 a means of ensuring the integrity of the governance 15 process? 16 A. Yes. 17 Q. Controlling the approval. Now, that chimes slightly 18 with an answer you gave earlier that this was really all 19 a governance issue. Is that what it was, or was there 20 actual substance to the consideration you were giving? 21 A. Now, there was substance at this meeting on the 13th, 22 and there was questioning done. 23 Q. There was what? 24 A. Questions were asked. 25 Q. Of whom? 29 1 A. Well, if you -- I say, I realise this is, you know, it's 2 you're asking the question, but if you look at 79774. 3 It will give you some answers. Because it's minutes of 4 the meeting, I think, or the agenda or it's a different 5 version of something relating to this meeting. 6 Q. We will look at that document then. Can we have 7 CEC00079774. 8 A. Yes. I just hope I've got the right number remembered. 9 That's it. 10 Q. We can see, this is an agenda for a Tram Project Board 11 meeting that was also to take place, we can see from the 12 date, on 13 May 2008? 13 A. Okay. Can I first of all point out that that funny 14 squiggle mark in the top corner is my filing mark. This 15 is one of my papers. I have ringed the date and time. 16 Now, unfortunately -- it seems to be the only one of 17 mine that I have come across, although I haven't checked 18 them all. If we can scroll down. 19 Q. You want to look at further pages? 20 A. Sorry, yes, next page. 21 Q. If we go to the second page, we can see this is a paper 22 relating to finalisation of the SDS novation? 23 A. If you look at the top there, you will see I have 24 written in the margin, and this is how I know it wasn't 25 a paper exercise. Because I remember the meeting 30 1 anyway. 2 545, 512, 33 within 545, 31 R&C. 3 So what I have done there is I have taken 512 being 4 the price of 545, the budget, which means that there's 5 33 within the 54 -- within the 545, and within the 512, 6 there's 31 for risk and contingency, giving 64 million 7 of what you might term cover for the unexpected or the 8 unbudgeted. 9 Now, that represented, if I remember correctly, 10 14 per cent at that time. I thought, well, that seems 11 reasonable. In fact, we now know that 2 in 150 per cent 12 would have been inadequate, but at that time to me 13 inexperienced, but clearly at that meeting I had asked 14 questions and got those figures and done the wee sum. 15 Q. That's a question of what was termed the headroom and 16 the risk allowance? 17 A. Yes. 18 Q. What I'm interested in is the three-man committee -- 19 A. Yes. 20 Q. -- and the exercise it had to do of considering whether 21 or not something was in the Business Case. We can do it 22 within this. 23 If you go to page 4, we find the same meeting that 24 we were looking at a minute ago? 25 A. Yes. 31 1 Q. Now, in terms of this committee meeting, not the Tram 2 Project Board, this committee, was that simply 3 a governance process, or was it a substantive discussion 4 of whether or not the criteria for approval were met? 5 A. Can I talk you through the 13 May? There was a meeting 6 of -- 7 CHAIR OF THE INQUIRY: Well, before doing, that can you 8 answer the question? 9 A. I don't know, is the simple answer as to whether -- 10 CHAIR OF THE INQUIRY: That's what the answer should be. If 11 you don't know, say you don't know. 12 A. I don't know, but I can put that into context, if I may. 13 13 May, there was a meeting of P and S -- sorry, 14 policy and strategy in the City Council in the morning. 15 There was then a chain of meetings to take place at 16 Citypoint. There was a meeting of the Tram Project 17 Board. There was a meeting of -- there were various 18 meetings. This -- this was one of them. And they were 19 kind of scheduled at half hourly intervals, and it 20 was -- what's the word -- yes, orchestrated, 21 choreographed. It had been choreographed in advance 22 that on the due day, the Council will do this in the 23 morning, tie will do that, TEL will do that, the Project 24 Approvals Board will do that, and then we will go round 25 to Rutland Square and start signing. So, no, no serious 32 1 debate could have taken place, although clearly I had 2 asked questions as per my handwritten notes, but it was 3 choreographed series of meetings. 4 Q. That's what -- 5 A. And they were not detailed discussions. But some 6 discussion took place. 7 Q. Thank you for that. Understanding that they were 8 choreographed, and therefore there was not time for 9 detailed consideration to take place on the 13th, when 10 did the detailed work of the Approvals Committee, the 11 three-man committee, take place? 12 A. Clearly some time between its establishment on -- in the 13 middle of January, early January and then. 14 Q. How did that committee go about doing its work? Did you 15 sit with the three of you? Did you do it individually? 16 A. No. Well, I cannot remember, but the three of us, two 17 of us shared an office and the third guy was next door. 18 We were in and out of each other's offices all the time. 19 You know: what do you think about this? Okay. You 20 know, we didn't formally say: we will book a meeting 21 room for two hours and go and discuss this. It was just 22 part of everything, of the general high tension activity 23 that was in place in the run-up to contract close. 24 So no, you know, I can't say it happened at 2.00 pm 25 on such and such a date in such and such a room. 33 1 Q. I'm less interested in the time, but understanding was 2 there a time when the three of you came together and 3 applied your minds to the question of: does this 4 contract come within the terms of the Final Business 5 Case? 6 A. All I can say is almost certainly. That's all. I'm 7 sorry. I cannot remember something as specific as that 8 from ten years ago. 9 Q. If we can enlarge this document, so it's a bit more 10 readable and look under the heading, "Infraco Contract", 11 we can see that: 12 "The Committee and each member individually noted 13 that adequate information had been provided on which to 14 competently proceed." 15 If I pause there, were you quite happy then with all 16 the information being provided and you considered you 17 had enough on which to make a decision? By the time you 18 got to the 13th? 19 A. Yes. Now, I have to qualify that and say yes, I was 20 happy to make the decision, and yes, I was happy that 21 I had all the information that was available. I'm not 22 necessarily saying that all the information that one 23 might have liked was available. 24 Q. Did you have in mind any information that you would have 25 liked that you did not have? 34 1 A. I'm thinking particularly around some of the -- an awful 2 lot of people got awfully hung up on SDS, but I actually 3 got very, very worked up about MUDFA. But I wasn't that 4 comfortable with the progress and where we were and more 5 importantly, where the future progress would be on 6 MUDFA. 7 But it was swimming in treacle. 8 Q. What was swimming in treacle? 9 A. Trying to get the information about MUDFA, how things 10 were, what the projected timescale was, et cetera. 11 I don't think the contractor actually knew himself. 12 Q. Were you aware by then that one of the Pricing 13 Assumptions contained within the Infraco contract that 14 was about to be signed was that the MUDFA works would be 15 completed by the time the Infraco works got under way? 16 A. Yes. 17 Q. You knew that the MUDFA works weren't going to be 18 completed? 19 A. Yes. 20 Q. Was that a concern that this was going to generate 21 a liability? 22 A. It was a big concern, yes, and I remember it was 23 discussed as well that there might well be mitigation 24 that could be undertaken whereby the delay or -- 25 mitigation, that's a posh word, we could do something 35 1 else to either reduce or negate the impact of that by 2 getting -- getting Infraco working in areas where MUDFA 3 had been completed, or indeed where there was no MUDFA 4 required on the off-road sections and so on. 5 Q. Okay, so the MUDFA wasn't complete -- MUDFA works 6 weren't completed on time, that was immediately 7 a departure from the strategy in the Final Business 8 Case? 9 A. Agreed. 10 Q. If it was going to give rise to additional costs because 11 it would generate a deviation from a Pricing Assumption, 12 that too could undermine the fixed cost aspect of the 13 strategy? 14 A. We are getting into an area in terms of the cost. My 15 understanding was -- it may be faulty -- 16 CHAIR OF THE INQUIRY: Before you go into your 17 understanding, can you apply your mind to the question, 18 please? 19 A. Which was? 20 CHAIR OF THE INQUIRY: Which was: if it was going to give 21 rise to additional costs because it would generate 22 a deviation from a Pricing Assumption, that too could 23 undermine the fixed cost aspect of the strategy. 24 A. The answer is: I was not convinced that it would produce 25 a deviation from the agreed price. 36 1 MR LAKE: When you say you weren't convinced that it would, 2 does that suggest you thought it might and you weren't 3 sure? 4 A. No, I was being told there were ways round it. 5 Q. By whom? 6 A. The -- those responsible for the programme. The 7 Susan Clarks, the Steven Bells, those sort of people, 8 that they could manage this by getting the MUDFA 9 contractor to do other things -- getting Bilfinger to do 10 other things while MUDFA finished off the other stuff. 11 Q. Was this possibility of the -- this departure from the 12 strategy and the possibility of additional costs 13 something that you discussed with Mr Mackay and 14 Mr Gallagher? 15 A. Oh, yes. I mean, it was discussed -- it wasn't just 16 discussed among the three of us. It was discussed at 17 Tram Project Board and so on. 18 Q. I'm particularly thinking in the context of the 19 Approvals Committee, the three of you having to decide: 20 should this contract be executed? 21 A. Not that I can recollect, but it was discussed widely 22 within tie at the time, and TPB and TEL. But I can't 23 specifically remember a special meeting in the context 24 of this sub-committee to discuss that issue. 25 And I doubt it happened. 37 1 Q. Did the three of you have any special meeting as this 2 sub-committee to consider the effect that the delayed 3 design might have on the prices under the contract? 4 A. You can -- you can put ditto to my last question. It 5 was -- it was widely discussed and talked about at 6 all -- almost all levels throughout tie, CEC, Tram 7 Project Board. 8 Q. Was there a specific time that either you individually 9 or the three members of the Approvals Committee 10 collectively applied minds to the question: does this 11 contract come within the terms of the Final Business 12 Case? 13 A. As three of us in a separate meeting, as we were talking 14 about earlier, no, I can't bring that to mind. I cannot 15 recollect it. I think it's unlikely because we were all 16 involved in all these issues regularly. 17 Q. Was there a time that you individually sat and applied 18 your mind to the very question: does this question fall 19 within the terms of the Final Business Case? 20 A. Probably not. 21 Q. If we scroll down here -- sorry, now on the top of the 22 screen, pardon me. After the reference to information, 23 it says: 24 "In particular, the terms of the Infraco Contract 25 Suite and all key related information had been set out 38 1 in successive versions of ..." 2 We see: 3 "The Close Report prepared by tie Limited. 4 A letter from DLA providing an opinion on the legal 5 competence of the Infraco Contract Suite and including 6 a comprehensive risk matrix. 7 Supporting papers prepared by tie Limited addressing: 8 Detailed Infraco Contract Suite terms and 9 conditions. 10 Procurement process and risk of challenge. 11 The final deal terms and relationship to value for 12 money and the risk of challenge." 13 Now, the Inquiry has already seen these various 14 documents. Were you aware of what they are referring to 15 or would you prefer that I show you what they are? 16 A. If you just give me a minute to re-read it, thank you. 17 (Pause) 18 Yes, right. I now -- I have now read that, and 19 absorbed it. The question is ...? 20 Q. Do you recognise which documents it's referring to? 21 A. The close report prepared -- close report, sorry, 22 prepared by tie Ltd, yes, I'm conscious that there was 23 one and that I read it. 24 Letter from DLA, I'm sure there was one. I wouldn't 25 have read it, but, you know, as long as the letter from 39 1 DLA said you're good to go, I would have taken that at 2 face value. 3 Supporting papers prepared by tie, if I -- I would 4 not have read detailed Infraco Contract Suite and terms 5 and conditions, no. I would not. I would have read -- 6 had I been provided, a summary, an executive summary. 7 Q. With the exception of obviously the DLA report, these 8 were documents prepared by tie? 9 A. Yes. 10 Q. So essentially, having to decide whether or not to enter 11 into the contract, you were entirely dependent on 12 information provided by tie? 13 A. No. 14 Q. Did you -- 15 A. Very largely, very largely. Some of this was TEL stuff. 16 The thing about, say, the risk of challenge, I'm 17 assuming that's risk of challenge from unsuccessful 18 bidders. So in that case TEL handled the Tramco 19 procurement. So that was something that I'd dealt with, 20 but it's a very minor matter in the context of the 21 whole. But by and large, you're right, yes. By and 22 large, tie. 23 Q. If I bring it to this: in deciding whether or not the 24 contract did fall within the Business Case, there was no 25 independent scrutiny provided. You relied upon the 40 1 reports as to that provided by tie and TEL? 2 A. Correct. 3 Q. Do you think it might have been preferable to have some 4 independent scrutiny of this issue at that time? 5 A. With hindsight, yes. 6 Q. Were you given opportunity to question the various 7 people involved in production of these various 8 documents? 9 A. Oh, yes. 10 Q. Go behind them? 11 A. Yes. 12 Q. Did you? 13 A. I would have done on certain issues. I almost certainly 14 did not, for example, go through the entire contract 15 suite. But I would have questioned issues related to 16 them or raised by them. 17 Q. If we look at the close report that's referred to there, 18 if we see document CEC01338853. 19 This, we can see from the heading, is the report on 20 the terms of financial close or the close report. 21 If we go down to page 7 within this, and look at the 22 upper half of the page, we can see, although it's under 23 the heading "Tramco relationship", the second paragraph 24 there deals with an SDS issue, by saying: 25 "Programme version V31 will be contained within the 41 1 SDS novation agreement. Any variance between V26 and 2 V31 which has an impact on the BBS programme will be 3 dealt with through the contract change process." 4 A. Yes. 5 Q. Was there enquiry made as to what the effect of that 6 might be on the Pricing Assumptions and therefore the 7 cost that would be payable? 8 A. Sorry, can you repeat the last part of the question? 9 Q. Did you make any enquiries as to what the effect of that 10 would be on the contract change mechanism and the price 11 payable? 12 A. Yes, very much so. If this is what I think it is, 13 I think this is -- because it was an ongoing project, 14 and things like MUDFA and SDS were not concluded at the 15 time of contract close, at some point we had to draw 16 a line in the sand and say: we are going to do the 17 contracts on the basis of where we are today, and that 18 would be from reading this, version 26. 19 By the time we actually got to contract close, 20 reading this, I assume we were now on version 31. 21 So in that intervening period, various issues had 22 been finalised or new ones appeared and so on. So there 23 would -- there was -- I can't remember the detail of 24 this, but there certainly was discussions as to, right, 25 how is it different today to how it was six weeks ago or 42 1 whenever that line V26 was drawn in the sand? 2 Some of it was positive, some of it was things that 3 had now been bottomed out and cleared, and other ones 4 were less positive. 5 Q. Had you formed a view as to the actual extent of the 6 liability that might arise for these changes? 7 A. Purely on those V26 through V31 changes, my recollection 8 is that it was not material -- the net effect was not 9 material in the context of the contract sums. 10 Q. Looking at the DLA letter that's referred to, could we 11 see CEC01033532. 12 We can see this is a letter on DLA headed paper, 13 addressed to both Gill Lindsay at the Council and 14 Willie Gallagher at tie. 15 I should just say it's dated 12 May 2008. 16 Could you look, please, at page 3, and the heading, 17 "RISK", and the two paragraphs underneath it. 18 A. Yes. 19 Q. You see: 20 "Following on from our letter of 12 March we would 21 observe that delay caused by SDS design production and 22 CEC consenting process has resulted in BBS requiring 23 contractual protection and a set of assumptions 24 surrounding programme and pricing. 25 tie are prepared for the BBS request for an 43 1 immediate contractual variation to accommodate a new 2 construction programme needed as a consequence of the 3 SDS Consents Programme which will eventuate, as well as 4 for the management of contractual Notified Departures 5 when (and if) any of the programme related pricing 6 assumptions fall." 7 That seems to be referring to the same matter of the 8 programming? 9 A. Yes. 10 Q. That we've just been talking about? 11 A. Yes, exactly. That would be my read of it. 12 Q. In relation to the question of what changes there might 13 be to the design that would lead to claims for increase 14 in price, design variation generally, did you have any 15 view on to what extent that might give rise to liability 16 or claims for additional cost? 17 A. Well, he covers two issues here. Or two causes. 18 One of which is CEC consenting process, and I was -- 19 as I have mentioned earlier, that was 100 per cent our, 20 tie, City Council's risk. If the planners weren't 21 turning the stuff round or whatever, not granting 22 things, then that was our cost. No doubt about that. 23 And I have no idea -- I had no feeling at all for 24 what that might be. Quite simply because you can't 25 predict which side of bed they're going to get out on 44 1 that day when they look at the design for something. 2 You know, it's not -- it's an intangible. 3 Planners, it's just whatever they feel like. 4 Q. In the course -- 5 A. So we can leave that to one side. I was fully expecting 6 that, and I had no way of putting a value on that. 7 Q. In the course of the committee work of ensuring that the 8 goals of risk transfer had been achieved, what did you 9 do, either individually or as the three of you together, 10 to satisfy yourself that risks had been transferred 11 where appropriate? 12 A. Specifically, as a committee, as I've said, of three 13 people, I have no recollection of that happening 14 other -- I have no recollection of there being formal 15 meetings of that committee, other than the one that we 16 saw on 79774. 17 Q. As an individual, what did you do to satisfy yourself 18 that risks had been effectively transferred? 19 A. Participated in the various discussions and meetings, be 20 they tie Board, TEL Board, Tram Project Board, asked 21 questions, when there was something that bothered me, 22 I would track down the person who I thought most likely 23 to give me an answer and ask them. 24 Q. In that regard, if you could look at your statement, 25 please? 45 1 A. Yes. 2 Q. And page 78 of that. Paragraph 250 at the foot of the 3 page. 4 A. Yes. 5 Q. You say there: 6 "At the time of contract close, I was given to 7 understand that BBS and tie had agreed that they both 8 bore risks and liabilities arising from incomplete 9 design and outstanding statutory approvals and consents. 10 But with BBS taking on the lion's share of the risk, ie 11 there was still some potential liability to remain with 12 tie but a minor share. While I might have had my doubts 13 that this was the case, I had no reason to go and start 14 investigating. This was not my department." 15 A. Yes. 16 Q. Now, in terms of the some things rested with tie, did 17 you have in mind the regulatory approvals? 18 A. That was one. Yes, the regulatory approvals, and as 19 I mentioned earlier, unforeseen ground conditions or, 20 you know, weather or whatever. 21 Q. This is specifically in relation to incomplete design? 22 A. In relation to incomplete design, my understanding at 23 that time was that that risk passed to BBS, barring 24 those exceptions I have just mentioned. 25 Q. The exception being ground conditions? 46 1 A. And CEC planning issues, and granting approvals. 2 Q. The last few lines of this, you say: you might have had 3 your doubts that this was the case, but you had no 4 reason to start investigating. Did you have doubts as 5 to whether or not the risk had been transferred? 6 A. No. That's not what I'm actually referring to. What 7 I'm referring to was BBS taking on the lion's share of 8 the risk. 9 Q. Did you doubt that? 10 A. I just -- already I was beginning to get the impression, 11 the feeling, that BBS were -- I'm just trying to find an 12 appropriate form of words. That BBS were pretty sharp 13 or perhaps maybe, I think, a bit slippery. I'm not 14 intending to be critical by saying that, you know, these 15 were -- this was a pretty -- this was whatever it was, 16 the fifth biggest civil engineering firm in Europe. 17 They don't get to be that size without knowing which 18 side their bread is buttered on, and I was just wary 19 that these guys were probably a fair bit cleverer than 20 us and our guys were, and I was just always a bit ... 21 umm, I'm not too sure, but it was no more than that. 22 I would defer to DLA. 23 Q. You say here you had no reason to go and start 24 investigating. 25 A. Reason is the wrong word. I had no -- I had no ability, 47 1 or it wasn't appropriate for me to then go and 2 say: I want to open up this whole issue of this element 3 of the contract with BBS. That was very much a tie 4 responsibility, and if they were saying and DLA were 5 saying it's done, then, you know, it's not for the 6 outsider who has no skills in that area to go and start 7 questioning. 8 Q. Was that not precisely your role on the Approvals 9 Committee, to question, and if you had doubts, perhaps 10 to require someone else to look at it, or to get further 11 assurance? 12 A. The problem is I wouldn't have understood what I was 13 told anyway, not being a lawyer. You know, the 14 intricacies of however many pages of legalese, on 15 construction contracts, would have been beyond me. 16 I would have been very easy to bamboozle, to be 17 bamboozled, to pick up the wrong end of the stick or 18 anything like that. It would not -- you know, I wasn't 19 qualified, you know. I might have just had a: I'm not 20 too sure about that. I wasn't in a position to do that. 21 Q. If you can look at the following page, page 79. 22 Paragraph 250 at the top of the page. 251, pardon me: 23 "At the time of contract close my understanding of 24 the purpose of an agreed base date for design 25 information was that it was the date when the design was 48 1 taken as being priced firm to." 2 A. V26. 3 Q. Did it follow from that that if it was priced firm to 4 that date, that what was going to come afterwards would 5 be at tie's expense? 6 A. No, loose wording on my part. 7 What I intended to say there -- at the time of 8 contract close, my understanding of the purpose of an 9 agreed, call it V26, was that that was the date when the 10 design was to be frozen and the contract based on or 11 being priced from. The word "firm", that's ... I would 12 say loose wording on my part. I would delete "firm" too 13 and put in "from" or "at". 14 Q. Even taking "at" or "from", if it was priced at that 15 date, does that infer that where there were changes 16 after that date, they would be at tie's expense? 17 A. There would be changes between, I can't remember the 18 numbers, 26 and 32, and it depended how those changes 19 netted out. But if they were net increase, then -- then 20 depending on what the changes were and why they'd 21 arisen, they would be at tie's expense, and if they 22 weren't, they would be at BB's. So for example, if in 23 the intervening period, something had been signed off, 24 a design element, that had got -- that had got 25 a provisional sum against it, that could now be firmed 49 1 up and the provisional sum might yield a surplus or -- 2 a positive or a negative, a credit or a debit. 3 Q. The possibility of those matters being at tie's expense, 4 was that not a highly material factor in deciding 5 whether or not to approve the contract? 6 A. Yes, it was, if those sums -- if the sum was material. 7 Now, I think I said earlier, I can't remember the 8 numbers. But my understanding was that between V26 and 9 V whatever, when they were netted out, it was not 10 a material sum. At the time, it was, oh, right, you 11 know. So I might be wrong. No doubt you have the 12 figure for what it was. But that was my recollection. 13 Q. If it was priced firm -- if it was priced, leaving out 14 the word "firm", to a certain date, it's not just from 15 V26 to V31 because you were aware, weren't you, that the 16 design wasn't complete at the contract close? 17 A. Yes. 18 Q. Is that correct? 19 A. Correct. 20 Q. So it was going to continue developing? 21 A. Yes, but my understanding was under the novation 22 arrangements, with the previously expressed exceptions, 23 design change thereafter, the cost thereof, fell to BBS. 24 Q. Okay. 25 A. Sorry. 50 1 Q. That's useful to clarify. 2 Could we then look at page 81 and paragraph 259. 3 What you say here is: 4 "Overall, I was not confident that the contracts 5 should be awarded. I felt pressurised to sign. I was 6 in a situation where, if I refused to sign, the 7 Council Solicitor, Donald McGougan, David Anderson and 8 others would say I was holding things up. I felt 9 I might be told that if I didn't sign an immediate Board 10 meeting would be convened and I would be removed from 11 the Board." 12 Was someone actually pressurising you or was this 13 pressure you felt from circumstances as a whole? 14 A. This was the pressure -- there was nobody standing over 15 me. This was a pressure I felt from circumstances as 16 a whole. We covered it on either my first or second day 17 of evidence, and I used -- I used an example, Schindler. 18 And that's what I'm saying there; that -- and I took the 19 liberty of reading one or two of the other transcripts 20 since mine, and I see I'm by no means the only person 21 who has made that point. I see Tom Anderson -- 22 Tom Aitchison and others said it had to go ahead. That 23 was the pressure that we were under. They were under, 24 we were under. This has to happen. 25 Q. They said they felt under pressure because the matter 51 1 had to proceed. Here you're specifically referring to 2 feeling a pressure from a number of other individuals, 3 and you might be removed? 4 A. I've picked those names essentially as being people who 5 were senior to me in some way or another. I'm not 6 specifically singling out Gill Lindsay, Donald McGougan 7 or Dave Anderson, no. 8 Q. This is not just a question of actually stating your 9 views or not stating your views and whatever is 10 righteous in that regard. This is a question where 11 you're called upon, actually, should you give approval 12 to enter into the contract. 13 If ever there was a time to say: I have my doubts; 14 was that not it? 15 A. No. Actually I would disagree with that. I would say 16 that was far too late. If I had been going to stand up 17 and, you know, as I mentioned on a previous case, we 18 know what happened to people who did. I have learned -- 19 I observed that. I knew what the position was. 20 And I still believed -- it was going to happen anyway 21 and I believed I could do more good by trying to guide 22 it and mitigate it and reduce -- get the best outcome 23 possible. That was the mission I'd been given, to do 24 the best we could. We are going to have a tram. Will 25 you do the best you can, Neil? And yes, it wasn't -- it 52 1 wasn't the right thing to do. 2 I could have at that point said: no, I'm not doing 3 it; but that wouldn't have stopped it happening and it 4 wouldn't have stopped it happening because I would have 5 been replaced by someone who would sign. 6 Q. You don't think if you had taken a decision to say no, 7 such as the Approvals Committee couldn't give the 8 go-ahead, whilst it is possible, of course, that you 9 could have been removed, that would have created enough 10 of a notice that something was not right, that something 11 might have been done if someone had said no? 12 A. I don't think so. 13 Q. And that, while you say you've been trying for years to 14 steer it in certain directions, this was the crunch 15 point. This was the last possible point to say: we need 16 to change things. 17 A. If I had take -- yes, you are right, it was the last 18 possible point. If I had taken the line you say, 19 and I could have, then I'm confident I would have been 20 back at Annandale Street looking after some buses with 21 no other involvement thereafter. Somebody else would 22 sign. It would have gone ahead, and the -- some of the 23 more asinine proposals that I managed subsequent to 24 contract signature to get rid of would have been 25 implemented. 53 1 Let me -- may I give you a very simple example? One 2 minute. 3 In the -- in the -- I'm just struggling to find the 4 right word for it. 5 It's not panic, but in the pursuit of cost reduction 6 through value engineering, one of the proposals that 7 they were seriously going to do was to reduce the height 8 of the overhead wires in Princes Street. Now, that 9 would save you a few hundred thousand pounds because the 10 poles would be a couple of metres shorter and also the 11 pantographs on the trams would be a couple of metres 12 shorter. That would, however, if I hadn't -- and this 13 was one of about 20 examples. That would have happened 14 and they would have saved their GBP200,000, GBP400,000, 15 but we would not have been able run open-top tour buses 16 thereafter, because the height requirement was that 17 which had been used to set the height of the wires. 18 So we would have saved GBP300,000, GBP500,000, and 19 lost GBP5 million worth of profitable business. So 20 that's why I was better on the inside than being sent 21 back to Annandale Street to play with my buses. Sorry. 22 That's the way it was. 23 Q. Go back to page 73 of your statement, please, and look 24 at paragraph 231. This is just in the consideration of 25 the development of the infrastructure contract. What 54 1 you say is: 2 "With hindsight, and in view of Andrew Fitchie's 3 position and behaviour, there is absolutely no doubt 4 that it would have been a good idea to have had an 5 independent legal review of the contracts. I think 6 I would have thought that at the time due to my concerns 7 already mentioned." 8 A. Yes. 9 Q. Now, can I ask you firstly what you mean by position and 10 behaviour? 11 A. I think I have said in the statement that I was -- I'd 12 concluded -- well, we had, me and various -- I and 13 various others, Andrew had gone native. He was meant to 14 be, to my understanding, representing the interests of 15 tie and CEC with a joint remit. 16 Now, tie and CEC's interests ought to be pretty 17 closely aligned. One is a wholly-owned subsidiary of 18 the other and it's trying to deliver a project under 19 direct instruction from CEC. 20 As I have said at various other points in my 21 statement, that wasn't necessarily the case. tie had 22 developed a -- had gone its own way in many areas. 23 And I sensed that Andrew had bought in probably from 24 a very early day, and I was by no means the only one, 25 had bought in from a fairly early day to being tie's 55 1 legal support. 2 I'm not suggesting he did anything directly negative 3 to TEL, to Lothian Buses -- well, no, to CEC, but he did 4 seem to be focused entirely on tie. 5 That was not helpful to us, when tie's objectives 6 did not align with TEL or Lothian Buses' objectives. 7 Q. When was that? In what respect did they not align? 8 A. I'm not being fatuous, but the most recent example that 9 I have just used. Let's save GBP500,000 by making the 10 wires lower. That's -- tie's objectives are getting the 11 price down. It's certainly not TEL or Lothian Buses or 12 City of Edinburgh Council's objective to lose GBP5 13 million worth of revenue which is earning a significant 14 profit to cross-subsidise the red buses to Niddrie and 15 Wester Hailes on Sundays or whatever it might be. 16 I mean, there was something earlier on in my 17 statement where Alastair Richards, who was -- 18 Alastair Richards was TEL's only employee. He wasn't 19 paid by TEL. He was paid by Lothian Buses. But 20 Alastair spent -- worked full-time on the tram project 21 and he had sent me an email some time after the event, 22 saying, I can't remember the precise wording, but: hey, 23 no surprises here, look what Fitchie did to us. It had 24 come out later that he'd supplied in -- he'd edited 25 something, he'd taken stuff out and claimed it was 56 1 because we'd said take it out. You know. He was no 2 friend of ours. So I was very wary. We were all very 3 wary of Andrew's motivation. 4 He seemed to be -- yes, he was motivated to serve 5 tie, not the greater interests of the whole project. 6 CHAIR OF THE INQUIRY: You say that it would have been 7 a good idea to have an independent legal review. To 8 what extent did you get the impression that Gill Lindsay 9 as Council Solicitor and her department were performing 10 that function? 11 A. I didn't -- I didn't attend legal affairs. It's not my 12 subject. Therefore, my opinion is based purely on what 13 I picked up along the way at Board meetings, Project 14 Board meetings, et cetera. And the contact I had with 15 the people from Finance and Legal, who spent a lot of 16 time at the tie office, and certainly some of the -- not 17 Gill Lindsay. She was pretty much Board meetings only, 18 but some of the lesser individuals who were there and 19 really in about it, in both commercial and legal, they 20 had to my mind a pretty good grasp of what was going on. 21 And were certainly asking -- asking the awkward 22 questions, perhaps privately or amongst -- amongst their 23 own, but yes, I certainly got the impression that 24 they -- they were acting as a sort of independent review 25 of what was going on from a legal and commercial point 57 1 of view. 2 CHAIR OF THE INQUIRY: Did you get the impression from these 3 people on the legal side that they thought that the 4 contract shouldn't be signed? 5 A. Not that specific, no. I'm not saying that they didn't 6 hold that view, but I didn't actually pick that up from 7 them. But I wasn't meeting them all the time. I might 8 just be, you know, passing the time of day, or sat -- 9 sat beside, because it was an open plan office, sat with 10 them -- or sat with somebody else and they were next 11 door and you got into a conversation. 12 But no, I never got the impression that it was: you 13 must not sign this. 14 You know, they certainly were -- they clearly had 15 their reservations. 16 CHAIR OF THE INQUIRY: And you say they were asking awkward 17 questions and they had their reservations. Did you pick 18 up on that and raise it at meetings to say that you 19 understood that junior lawyers had reservations? 20 A. I think -- I remember an incident certainly -- the 21 answer to your question is no, I didn't raise it, but -- 22 at the meetings, because I think -- I remember there was 23 an incident with Trudi Craggs where she did, and, you 24 know, she was quite upfront about it in a Project Board 25 or something. And I think, you know, I said to her, 58 1 after the meeting, you know: good on you, you know; you 2 actually said your bit there. 3 I think she got her head in her hands, if I remember 4 correctly, she got her head in her hands for doing so 5 and it's not legal, but on -- I'm pretty sure that 6 happened with Rebecca Anderson (sic) -- Rebecca Andrew 7 on the commercial side. Similarly, she -- she stuck her 8 head above the parapet and got it shot off. 9 As I have said before, no, my view very simply was 10 head down, do the best I can, in the circumstances I'm 11 in, to try and mitigate the effects, because I don't 12 want to end up like others who have put their head above 13 the parapet. That will do nobody any good, and we 14 wouldn't be in the position we're in today where the 15 tram is actually doing as well as you could hope in the 16 circumstances. And the buses have survived largely 17 unscathed. 18 CHAIR OF THE INQUIRY: Thank you. 19 MR LAKE: I want to move on to a slightly different matter, 20 Mr Renilson. Could we look at page 93 of your 21 statement. 22 A. Yes. 23 Q. Paragraph 300. What you say here is: 24 "The election ..." 25 The Scottish general election: 59 1 "... was in May and Parliament did not recommence 2 until around September. Over that summer they tasked 3 Transport Scotland with looking for ways out of both the 4 tram project and EARL. Transport Scotland were to 5 consider whether a large section of tram could be built 6 as a guided busway, or something that would cost an awful 7 lot than, at that time, their GBP500 million contribution. 8 I had involvement with the Transport Scotland team 9 looking at the other options but, Bill Reeve who led the 10 Transport Scotland review was not keen on any of the 11 alternative possibilities, and was far more interested in 12 finding reasons why the Tram should/could not be 13 cancelled." 14 Do you see that there? 15 A. I do indeed. 16 Q. I think for completeness, if we look at page 98 -- 17 A. Before we leave that page, can I just say there may be 18 one thing in there that's not quite right. 19 Q. What is that? 20 A. The election was in May. I've -- I have said Parliament 21 did not recommence until around September, over that 22 summer. What I think that should say, because I can't 23 remember the precise timing, but I think that ought to 24 read is "following the election they tasked 25 Transport Scotland". It might have been over the summer 60 1 or it might have been very quickly after the election. 2 But that's just a timing issue. Basically, yes, stand 3 by that completely. 4 Q. I will come back to the timing in a moment. If to 5 complete this we go to page 98, we have that on screen 6 now, and look at paragraph 316. Reading from the fourth 7 line, we can see: 8 "When Transport Scotland were tasked by the SNP 9 between May and September 2007 to come up with some 10 alternatives that would give Edinburgh something 11 cheaper, but not the tram, I was very firmly left with 12 the opinion after spending time with him that 13 Bill Reeve's view was not to genuinely look for 14 alternatives." 15 That's your view; is that correct? 16 A. That was my view at the time and that remains my view. 17 Q. We have evidence -- obviously we know the date of the 18 general election was in May? 19 A. Yes. 20 Q. But the vote in Parliament to proceed with the tram 21 project was actually on 27 June 2007. 22 A. So is what you're saying it took -- I have said between 23 May and September. You are saying it was between May 24 and June. 25 Q. That's what I'm asking. Were you involved with this 61 1 prior to the vote in Parliament, or are you suggesting 2 it continued after the vote in Parliament? 3 A. I couldn't be absolutely clear, but the reason 4 I corrected the first one is on reflection, I think it 5 happened very quickly after the election that -- because 6 the SNP manifesto was to cancel EARL and to cancel tram. 7 Although it wasn't spelt out quite so clearly on tram. 8 But it was words of one syllable on EARL. 9 Q. What was your involvement? 10 A. Well, can I finish this wee bit before we go on, please? 11 And it may indeed be that it occurred immediately 12 after the election and the vote took place, as you say, 13 at the end of June, before the recess. 14 It certainly was after the election shortly. 15 What was my involvement? My involvement was -- 16 don't get me wrong. I like Bill Reeve. Very, very good 17 guy -- 18 Q. I'm less interested in Bill Reeve, I'm more interested 19 in what was your involvement -- 20 A. My involvement was Bill came and said right, he and a 21 couple of other people from Transport Scotland: let's go 22 out for a couple of days and let's go and drive the 23 route and see what else we can do. So there was four of 24 us in a car, trundling round west Edinburgh, stopping, 25 looking at bridges, saying: what can we put down here, 62 1 what can we do; can we do a guided busway extension; you 2 know, what are the other possibilities for something -- 3 some public transport improvement in that area which 4 would cost some millions of pounds, but would be -- 5 would release basically the 500 million for the A9 6 dualling. And you were looking at maybe, I don't know, 7 somewhere less than 50 million as opposed to 500, and 8 that was exactly the same thing happened with EARL, but 9 in the case of EARL, they got the station on the 10 tramway. That was a sop for cancelling EARL. 11 Q. Now, I'm going to ask you one more question. 12 Can I impress upon you this time that what I'm looking 13 for initially is a yes-or-no answer? 14 A. Understood. 15 Q. I'm going to be quite limited. 16 It's: do you have information to the effect that 17 there were employees or agents of tie soliciting or 18 receiving corrupt payments? 19 CHAIR OF THE INQUIRY: Just answer yes or no. 20 A. Can I ask you to rephrase -- repeat the question? 21 MR LAKE: Do you have information as to whether employees or 22 agents of tie were soliciting or receiving corrupt 23 payments? 24 A. Yes. 25 Q. Would you be willing to provide that information to the 63 1 Inquiry? 2 A. Yes. 3 Q. Will you do so, please, by midday on Monday? 4 CHAIR OF THE INQUIRY: In writing. 5 MR LAKE: In writing, to the solicitor to the Inquiry, and 6 address and contact details can be provided. 7 A. Mr McNicholl? 8 Q. Yes. And you undertake to do that? 9 A. Yes. Yes, is it possible for me to dictate it this 10 afternoon? I mean, through there, with one of your 11 staff? I'm very happy to do that. 12 CHAIR OF THE INQUIRY: We'll discuss that over -- at the 13 coffee break. 14 A. Thank you, okay. I'm just going to be away this 15 weekend. So Monday would be a bit of a problem, but I'm 16 happy to do it this afternoon if I've finished -- if 17 you've moved on to Stewart by this afternoon. 18 MR LAKE: My Lord, I have no further questions for 19 Mr Renilson. That was my last. 20 CHAIR OF THE INQUIRY: Mr Dunlop? 21 Examination by MR DUNLOP 22 MR DUNLOP QC: My Lord, just one question that was rather 23 left hanging, if I might, on the question of the DLA 24 advice letter. 25 Does your Lordship want to know first what I want to 64 1 ask before he gives permission or is your Lordship 2 prepared to -- 3 CHAIR OF THE INQUIRY: If it's about the DLA advice letter, 4 I'm quite happy. 5 MR DUNLOP QC: I'm obliged. It's CEC01033532. 6 It's page 3 of that letter. Paragraph 5, 7 Mr Renilson. You were looking at this earlier with my 8 learned friend. You indicated in the second paragraph, 9 under section 5, that Mr Fitchie was advising of two 10 things. You mentioned the first thing, and then you 11 were interrupted and I think the discussion moved on. 12 You didn't mention the second. I wonder if I could just 13 ask you to explain what the two things were that you 14 were -- 15 A. Can I just have a minute to re-read it again. 16 Q. Please. (Pause) 17 A. tie are prepared for the BBS request for an immediate 18 contractual variation, blah blah blah. That, my 19 understanding, was basically the day after we signed, we 20 were going to be putting in a variation to handle V26 to 21 V31 issues. 22 Q. So on that first issue, you were aware that there would 23 be an immediate Notified Departure -- 24 A. Yes. 25 Q. -- immediately following this signature of the contract? 65 1 A. Yes, thank you. Was that the question? 2 Q. That was the first one. I think you had addressed that. 3 Then there's a second point that you had identified, 4 and I just want to understand what your understanding 5 was of that second point as well, please. 6 A. "As well as for the management of contractual Notified 7 Departures when (and if) any of the programme related 8 pricing assumptions fall." 9 Now that you've pointed that out, tie are prepared 10 for the BBS request for an immediate contractual 11 variation to accommodate, and if you were to put in a 1 12 at that point, we have talked about it, and a 2 in at 13 the beginning of "as well as ... the management of 14 contractual Notified Departures". 15 Now, that to me sounds like a non-cash issue that as 16 soon as we've signed the documents, BBS are going to 17 want a different protocol for management of Notified 18 Departures. 19 If that is what it is saying, then that would have 20 been of no concern to me whatsoever because that just 21 sounds like making an alteration to, you know, who tells 22 who what when or whatever, a non-cash issue. 23 The first one would have been a cash issue, but 24 I may be misreading that. 25 Q. What it's clearly identifying under the topic of risk 66 1 is: Notified Departures, when and if any of the 2 programme-related Pricing Assumptions fall. 3 A. Fall, yes. 4 Q. Now, you were aware that the contract contained a number 5 of Pricing Assumptions, weren't you? 6 A. Yes. 7 Q. You were aware that if those Pricing Assumptions did not 8 hold good, then that would be a change and that would be 9 at tie's risk? 10 A. In its -- if in its most simplistic form. If during the 11 construction period the Water of Leith floods and washes 12 away half the embankment, yes. 13 Q. If any of the Pricing Assumptions did not hold good, 14 then that was at tie's risk? 15 A. Any of the Pricing Assumptions, no. It depends what -- 16 I mean, things like the price -- the price for -- the 17 price for Siemens' substations, for overhead copper 18 wire, that was all fixed. And if the prices still went 19 up, that was Siemens' problem. 20 Q. I'm talking about the Pricing Assumptions in Schedule 21 Part 4 of the contract. You know that there were 22 Pricing Assumptions contained in the contract 23 saying: this price is based on the following 24 assumptions. 25 A. I'm aware of that, yes. 67 1 Q. You know that the price would not hold good if the 2 Pricing Assumptions did not hold good? 3 A. No. 4 Q. You weren't aware of that? 5 A. May I explain? I was not -- I had not invest -- or 6 reviewed that part of the contract -- I think I have 7 said earlier a number of times, the full contract suite, 8 particularly with relation to Infraco, I had not 9 reviewed the contact -- contract in great detail. 10 I wouldn't say I was word perfect on Tramco, but I had 11 a pretty close handle on Tramco. 12 But Infraco, no. I had not gone into the innermost 13 details of the contract. My assumption or my 14 understanding was that barring the sort of things we've 15 talked about, ground and weather and so on, and CEC 16 planners' moods, then the price from BBS was fixed. 17 I'm sorry, that may be incorrect, and I think, with 18 hindsight, based on the outcome of adjudications and so 19 on, my view was incorrect, but that was my understanding 20 at the time, and had I read the detail of these elements 21 of the Infraco contract, as I said earlier, I would not 22 have understood them. I'm not a contract lawyer. I had 23 to rely on the advice being provided by Andrew Fitchie 24 and -- and the people -- the Steven Bells and so on and 25 Susan Clarks at tie who were -- had experience in that 68 1 field. 2 Q. So if his Lordship has heard evidence from Mr Bell, for 3 example, that Mr Bell fully understood where the 4 incidence of risk lay, and fully understood what the 5 Pricing Assumptions meant, should we understand that 6 Mr Bell, for whatever reason, did not pass that on to 7 you? 8 A. I think you're jumping two -- making too large a jump 9 there. I do not in any way think Mr Bell deliberately 10 withheld. It may be that I had not asked the question, 11 or I had not been present at the meeting when this 12 subject had been gone through in detail. All I can say 13 is I was not aware of it. 14 But I don't think -- I doubt Steven would have held 15 out, you know, deliberately kept it to himself, and 16 maybe -- maybe it had been explained but it hadn't 17 registered. 18 I was of the opinion, the understanding that it 19 was -- it was with the exceptions that we've talked 20 about, it was essentially on the part of BBS, Bilfingers 21 and Siemens, and to be fair, CAF, fixed price. 22 Q. I'm not sure why you think I'm making too great a leap 23 there, Mr Renilson. What I'm putting to you is that if 24 his Lordship has heard evidence, which he accepts, that 25 Mr Bell fully understood the risks, does that mean 69 1 Mr Bell did not pass that understanding on to you? 2 A. Yes. 3 MR DUNLOP QC: Thank you. I'm obliged, my Lord. 4 CHAIR OF THE INQUIRY: I don't think there are any other 5 questions. 6 A. My Lord, can I -- just to say apologies for that, but 7 I thought you were implying that Mr Bell had wilfully 8 withheld information. I would just say that at no time 9 at tie did I ever get the impression that any of the 10 senior staff at tie or TEL or CEC were acting other than 11 in what they perceived to be the best interests of the 12 project. We may have had -- well, we did have differing 13 objectives. We all had our character flaws. And we're 14 all human beings. But nobody took it lightly. Nobody 15 took it lightly amongst the senior staff that I dealt 16 with. You know, everybody was very committed to doing 17 the very best as they saw it, as they saw their 18 responsibilities, for their, you know, who they were 19 responsible to. 20 Yes, poor decisions were taken. Some of those poor 21 decisions were recognised as poor decisions at the time, 22 and with hindsight, they were a damn sight poorer, but, 23 you know, conflicting motivation, yes, they were there 24 and we knew they were there. 25 So I just wanted to say, nobody tried to -- nobody 70 1 sat there and did what they did lightly. 2 Thank you. Sorry for that. 3 CHAIR OF THE INQUIRY: We'll adjourn until 11.30. During 4 that period, representatives of the Inquiry can speak to 5 you about -- 6 A. Sure. 7 MR DUNLOP QC: My Lord, just before your Lordship rises, 8 I was completely unsighted on the last topic raised by 9 my learned friend and the point that Mr Renilson is to 10 advise of in due course. 11 I just would like some clarity on how that is going 12 to be dealt with. 13 CHAIR OF THE INQUIRY: I think in the first instance I want 14 to see the allegations. 15 MR DUNLOP QC: Yes. Is there a reason why they're not 16 simply being taken from him -- 17 CHAIR OF THE INQUIRY: Yes. 18 MR DUNLOP QC: Doubtless we will all be able to see it and 19 respond in due course. 20 CHAIR OF THE INQUIRY: Yes, certainly, in due course, but 21 I don't want disclosure to be made publicly of 22 allegations until at least I know what they are and some 23 investigation is made into them. 24 MR DUNLOP QC: I'm obliged. 25 CHAIR OF THE INQUIRY: So we'll adjourn until 11.30. 71 1 (Witness withdrew) 2 (11.12 am) 72 1 INDEX 2 PAGE 3 MR NEIL RENILSON (continued) .........................1 4 5 Examination by MR LAKE ........................1 6 7 Examination by MR DUNLOP .....................64 8 9 MR STEWART MCGARRITY (continued) ....................72 10 11 Examination by MR MCCLELLAND (continued) .....72 12 13 Examination by MR DUNLOP ....................119 14 15 Examination by MR FAIRLEY ...................131 16 17 18 19 20 21 22 23 24 25 135