1 Tuesday, 5 December 2017 2 (9.30 am) 3 CHAIR OF THE INQUIRY: Good morning. 4 MR MACKENZIE: Good morning, my Lord. The next witness is 5 Martin Foerder. 6 MR MARTIN FOERDER (sworn) 7 CHAIR OF THE INQUIRY: You are going to be asked some 8 questions, initially at least, by Mr Mackenzie, Counsel 9 to the Inquiry. If you simply listen to the question 10 and answer it as directly as possible, and if you speak 11 into the microphone so everyone can hear what you're 12 saying, and also speak at a measured pace so the 13 shorthand writers can keep up with you. 14 A. Okay. 15 Examination by MR MACKENZIE 16 MR MACKENZIE: Good morning. 17 A. Good morning. 18 Q. Can you state your full name, please? 19 A. Martin Heinz Foerder. 20 Q. And your current occupation? 21 A. I'm a civil engineer and member of the Management of 22 Global Projects in Implenia infrastructure. 23 Q. You provided a CV to the Inquiry, Mr Foerder. We will 24 go to that first. It will come up on the screen. It's 25 CVS00000086. We can see on page 1, about halfway down, 1 1 under "Professional development", we can see you are 2 a civil engineer. 3 We can read for ourselves the summary you set out 4 there of your experience over the past 30 years around 5 the world in a variety of projects, including, but not 6 limited to, light rail systems, et cetera. 7 Go, please, to page 3. Now, 1987, is that when you 8 joined Bilfinger Berger? 9 A. That's correct. After university I joined Bilfinger 10 Berger, yes. 11 Q. Mr Foerder, maybe move the microphone a little bit 12 closer to you, it may help, and speak up a little, 13 please. 14 A. Yes, I will do, yes. 15 Q. Thank you very much. We can see the top of the page, 16 you were involved in the delivery of the Chungho Metro 17 Line in Taipei, Taiwan, between 1992 and 1997. Was that 18 an above-ground or underground system? 19 A. That was an underground metro system. 20 Q. Over, please, to page 2. We can see at the bottom you 21 were, between 1997 and 2004, responsible for the 22 delivery of the Bangkok Metro Initial System in 23 Thailand. Again, was that above ground or underground? 24 A. Also underground metro system. 25 Q. We can see that above that for ourselves, involvement in 2 1 a project in 2005, tendering in Kuwait, and also 2 tendering in Greece. 3 Then I should ask, in 2005, the metro project in 4 Athens, was that above ground or underground? 5 A. That was both. It's a railway project which brought the 6 line behind the Oresund Bridge down underground city of 7 Malmo. So it was both. It was underground and 8 above-ground rail structures. 9 Q. Then above the reference to Malmo, we then see between 10 2009 and 2013, you were Project Director for the 11 Bilfinger Berger CAF consortium in relation to the 12 delivery of the Edinburgh Tram Project. 13 A. Yes, that's right. 14 Q. Then, just to carry that on, at the top of the page to 15 finish it off, we see between 2014 and 2015 you were 16 Managing Director Civil for Bilfinger Construction. 17 Just to finish, go to page 1, please. At the very 18 bottom, we see from 2015 to present, you have been 19 employed by Implenia Construction. I think I have read 20 perhaps in your statement, you're head of major 21 projects? 22 A. Yes, you can say that, that's right. 23 Q. Is it also right to say that Implenia purchased the 24 construction division of Bilfinger Berger in 2013? 25 A. That's correct, yes. 3 1 Q. I would now please like to put your CV to one side. 2 I think you provided three statements to the Inquiry. 3 I would just like to check we have got each of them. 4 Firstly, if we could bring up on the screen, please, 5 TRI00000118. Blow up the writing, please. 6 We can see this is a statement provided by you. If 7 we go, please, to page 118, the last page of the 8 document. We can see the date of 10 December 2015. The 9 very last page, could I check, Mr Foerder, is that your 10 signature, and is this a written statement you have 11 provided to the Inquiry? 12 A. Yes, it's my signature and it's a statement I provided. 13 Q. Thank you. This, I think, was a voluntary statement 14 provided -- I'll refer to it as such. I think it also 15 came with an appendix giving your views on the 16 adjudication proceedings. If we can go to that, please, 17 the appendix should be TRI00000132. 18 I think we read at the very top, we can blow up, we 19 can see it's Appendix 1 to your statement, and it sets 20 out your views on the adjudication proceedings; is that 21 correct? 22 A. Yes, that's correct. 23 Q. I should perhaps ask, Mr Foerder, did you draft this 24 appendix, or was that drafted by legal advisers and you 25 agree with it, or what? 4 1 A. It was drafted by legal advisers and I agree with this 2 report. 3 Q. Thank you. So that's your voluntary statement and 4 appendix. The Inquiry then, I think, took a statement 5 from you. If we can go please, to TRI00000095_C. 6 If we go, please, to the last page of that, 7 page 113, I think at the bottom we can see the date, 8 12 July 2017. Again, could I ask, please, you to 9 confirm that that is your signature and this is the 10 written statement you have provided to the Inquiry? 11 A. Yes, that's correct. 12 Q. Thank you. There's a third and final short statement we 13 can go to, please. This is TRI00000183. This is 14 a supplementary statement. This is in relation to 15 trackform. We will come back to this, but if we can go, 16 please, to page 5. 17 I think the date is 15 December 2017. I think that 18 should be 15 November 2017; is that correct? 19 A. Yes. I think that you are right. I think it was 20 wrongly dated. It was 15 November. 21 Q. Could you also just please confirm this is your 22 signature? 23 A. It is my signature. 24 Q. And you provided this statement to the Inquiry? 25 A. Yes, it is my signature. 5 1 Q. Thank you, Mr Foerder. For my part, I should say that 2 your evidence to the Inquiry will comprise all three 3 statements together, together with the evidence that you 4 give to the Inquiry together today. 5 CHAIR OF THE INQUIRY: Mr Foerder, you said that the 6 appendix was drafted by legal advisers and you agreed 7 with it. What about the other documents? What about 8 your voluntary statement? Was it drafted entirely by 9 you? 10 A. It was in general drafted by me, but with the help of 11 legal advisers. 12 CHAIR OF THE INQUIRY: And what about the formal statement 13 in response to the -- 14 A. Similar to that one, yes, both. 15 CHAIR OF THE INQUIRY: And also the comments on the last 16 document which was the -- 17 A. November. 18 CHAIR OF THE INQUIRY: November, yes. 19 A. Yes, similar. 20 CHAIR OF THE INQUIRY: Thank you. 21 A. Both done with the support of the legal advisers. 22 MR MACKENZIE: Thank you. 23 If I could start then by going back to the main 24 statement, the one provided to the Inquiry. That's 25 TRI00000095_C. Just a few initial questions to begin 6 1 with, Mr Foerder. 2 If we start with page 2. In paragraph 3 you say: 3 "I was requested by my superior in December 2008 to 4 take over the Project Director role in Edinburgh, due to 5 the contractual and commercial difficulties the Project 6 was facing. It was felt that additional resources were 7 required to help address some of these issues." 8 Was that Dr Keysberg? 9 A. That's right, yes. I had a meeting with Dr Keysberg in 10 December in Wiesbaden, where he introduced that 11 opportunity to go to Edinburgh to take over this 12 project. 13 Q. What did he say to you about the project and the 14 problems it was facing? 15 A. It was very brief to this time. I was still in charge 16 in Malmo, as the PD for that project. So we had a brief 17 discussion about the problems on Edinburgh. Not very 18 detailed. I'm one of the very senior Project Directors 19 within the company, and he has seen the need to get 20 somebody there who was more experienced and that was 21 basically it. More briefs I got later when I arrived at 22 Edinburgh. 23 Q. Thank you. Reading on in the statement, in paragraph 5 24 you say: 25 "In late January 2009 I visited Edinburgh for three 7 1 days to get a briefing about the Project by Colin Brady 2 and Richard Walker, at that time the incumbent Managing 3 Director of Bilfinger Construction UK." 4 Now, what did they say to you about the project and 5 the problems at that time? 6 A. The visit had two purposes. First of all, I have never 7 been in Edinburgh before. Before I finally confirmed to 8 take over this position, I wanted to understand not only 9 the contract or the works here in Edinburgh, also the 10 city which I heading in for a few years. 11 So I got joint briefing from Colin and Richard no 12 regards to the difficulties they were facing on that 13 project, which I think I lengthily described in the 14 witness statement. So the difficult start they had from 15 early May/June 2008 on the project, with contract 16 mechanism and not really followed in principle, and 17 facing -- facing more difficulties in regards to 18 uncompleted MUDFA works, not completed design. But 19 I have not got in these three days a contractual brief 20 about the contract documents. This was very, very 21 briefly, and okay, we went along the line. So I've -- 22 I travelled through Edinburgh to see what we have to 23 build and where. So it was more this. Also to get 24 a bit familiar with the city and in regards to possible 25 accommodation when I come over, et cetera. 8 1 Q. Now, at the end of January 2009, the consortium were due 2 to start works on Princes Street very soon after that. 3 Can you remember, was there any discussion at that 4 meeting about the Princes Street works? 5 A. No, there wasn't. 6 Q. If I could move on in your statement, please, to page 3, 7 in paragraph 9, and we had asked about the reporting 8 lines to Bilfinger Germany, and set that out there. 9 You've also then, I think, over the following page as 10 well, you set out matters in more detail. 11 In short, would it be fair to say that all important 12 decisions in the project were either taken or authorised 13 by Bilfinger Germany rather than Bilfinger UK? 14 A. I wouldn't say so. Okay, I was seconded from Germany. 15 I had never a contract here in UK. So I was on 16 secondment here. So I had still my contract in Germany 17 with the company, and as you said, and I have written, 18 I was asked by Dr Keysberg to that time to come here. 19 Mr Enenkel was our Managing Director for the 20 construction business. 21 And I had a direct reporting line to both of them. 22 At the beginning it was more Mr Enenkel than 23 Mr Keysberg, and after the move of Mr Enenkel to the 24 Board of Directors of Bilfinger SE, or AG to this time, 25 Mr Keysberg took over later in 2009. 9 1 But parallel to this, Richard Walker was the 2 Managing Director of BCUK and I had a very close 3 co-operation and relationship with him. So we have 4 basically always exchanged all -- all issues, 5 discussions, decisions, in between ourselves, and in the 6 very early stage in 2009, there were very little which 7 we had to report back, apart from the monthly reporting 8 which you do on a major project like this, we have to 9 report on a monthly basis, the progress reporting back 10 to Germany, which we did. 11 But the only real issue which was also discussed 12 with Germany was when I arrived in March, very shortly 13 after my arrival, Princes Street cropped up, and the 14 problematic situation on Princes Street, and there, of 15 course, we had consultations with Germany on the issue 16 as well. 17 In the very early stages, later in 2009, there was 18 very little. It came basically later, where we had 19 close and more contacts frequently with our Directors in 20 Germany. 21 Q. You've mentioned monthly reports, and in your statement, 22 you say you did provide monthly reports back to Germany; 23 were those reports in German or in English? 24 A. Since this is an independent project, in English. 25 Q. I don't think the Inquiry has been provided with these 10 1 reports by Bilfinger Berger. Do you know where these 2 reports would be now? Where would they be stored? 3 A. Most likely in Germany, which -- these are very similar 4 reports which we do basically on a monthly basis with 5 tie to that time. I think you have seen these, and they 6 are basically with some addition of executive summary or 7 whatever, basically the same reports. But they must be 8 in Germany. So that's where we have sent them. 9 Q. Any particular place in Germany? Is there a records 10 store? 11 A. It must be in Mannheim because this is in the possession 12 of Bilfinger still, and as you may aware, BCUK haven't 13 been bought by Implenia. So I have no access on these. 14 So it must be Mannheim, but I'm not sure. 15 Q. I would like to move on to a letter which you received 16 towards the very beginning of your involvement in the 17 process. It will come up on the screen. It's 18 CEC00630202. 19 We can see at the top, it's for the attention of 20 yourself. It's dated 6 March 2009. We scroll to the 21 bottom, we'll see it's from Steven Bell, the Project 22 Director at tie. Back up to the heading please, we see 23 it's concerning lack of access at Leith Walk. 24 In the last paragraph we see: 25 "In the meantime, we agree that it would be more 11 1 appropriate to concentrate efforts outside of Leith 2 Walk." 3 There's reference then to using or diverting the 4 current Leith Walk manpower to carry out the 5 archaeological works in Constitution Street, and then: 6 "The method of reimbursement for this work will be 7 actual cost as agreed for the current works in Leith 8 Walk." 9 Now, to pause there, we've heard evidence about the 10 difficulties the consortium encountered in Leith Walk 11 because of undiverted utilities, and that they were 12 unable to make any meaningful progress. I assume you 13 had been briefed of that before you arrived or when you 14 arrived? 15 The reference to the method of reimbursement for 16 this work -- so I think that's a reference to 17 archaeological works -- will be actual cost as agreed 18 for the current works in Leith Walk; does that mean that 19 the work carried out by the consortium in Leith Walk was 20 on a costs plus or demonstrable cost basis? 21 A. Yes, I believe so. I think this work happened before 22 I arrived in Edinburgh, and as you are aware, that was 23 a bit of piecemeal work, small stretches of work, where 24 you couldn't work efficiently. Due to the presence of 25 utilities because MUDFA was still in there and 12 1 relocating the existing utilities out of the -- out of 2 the line. 3 I believe that they have made an agreement on 4 demonstrable cost for Leith Walk which wasn't paid in 5 accordance to the agreement. I think we had long, long 6 discussions even after my arrival to get reimbursed 7 properly, which didn't happen, and tie have proposed for 8 Constitution Street, a similar arrangement due to 9 archaeological access things there which would have made 10 the proper efficient work similar not possible, and that 11 was the method proposed. As you see, tie called off the 12 works basically on Leith Walk on 6 March because they 13 have realised that it wasn't possible to work properly 14 there. 15 CHAIR OF THE INQUIRY: Mr Foerder, I should have told you at 16 the beginning, there's a fire alarm test every Tuesday 17 at 10 o'clock. So if you hear the alarm, it's just 18 a test. 19 A. Thanks, my Lord. 20 MR MACKENZIE: I would like to move on, please, to the 21 Princes Street works, and dispute. 22 Now, I think you joined as Project Director on 23 1 March 2009. To what extent, if at all, had you been 24 involved in the decision not to start works on 25 Princes Street? 13 1 A. I think that was before my time, before I arrived. 2 I think we -- it was February, if I recall correctly, 3 when the issue on Princes Street arrived. 4 So the situation was existing already when 5 I arrived, early March. 6 I came to Edinburgh with the approach out of my 7 professional background, and the briefings I got, to 8 find a possible way out of this lockout situation which 9 we had. It was obvious that it wasn't working properly, 10 and as I came completely new and fresh in, and parts of 11 my team as well, I think, just a month before, new 12 contract director have arrived, and a few other guys, 13 I thought it would be a good approach to see if we can 14 unlock the situation which we have; because it was 15 obvious that there was very tense relationship between 16 tie and our remaining guys who have been from the 17 beginning there. 18 So we tried to find a way forward. A joint 19 initiative between both parties, tie and ourselves, to 20 find a way which would enable us to work on 21 Princes Street, because it was obvious that there was 22 still a huge amount of MUDFA works remaining. The 23 conditions were not as contractually required, and that 24 was a reason why when this Princes Street Agreement came 25 into place. 14 1 Q. Now, when you started on 1 March 2009, what was your 2 understanding as to the reason or reasons why the 3 consortium had refused to start work in Princes Street? 4 A. It's not only Princes Street. If you look back how the 5 contract was set up, it was very clear that works could 6 only proceed in accordance with Schedule 4 if Notified 7 Departures have been agreed and tie changes have been 8 issued. That is a base of Schedule Part 4, and the 9 Pricing Assumptions which have been defined during -- 10 during the contractual arrangements between both 11 parties. 12 And this was from day 1 never acknowledged by tie. 13 That's my opinion. So they have -- they have either 14 misinterpreted or misunderstood the contract, which is 15 their right, of course, but I think that was 16 a continuation from 2008, when the contract was signed, 17 to 2009, and Princes Street, as far as I'm aware, there 18 was an issue with an extra bus lane which was introduced 19 by tie, which wasn't originally foreseen, which should 20 have been regulated through a Notified Departure and 21 a Change Order, which tie refused to issue. And that 22 was a main issue why this -- in addition to the 23 existence of MUDFA, basically, where everybody knows we 24 couldn't have worked properly, that was the reason why 25 we had the situation on Princes Street. 15 1 Q. Thank you. I would like to go to a document, please. 2 CEC00867153. Halfway down the page, we will see an 3 email we can blow up, please, from Robert Sheehan of 4 Bilfinger, dated 18 February 2009 to Steven Bell. Do 5 you recall who Mr Sheehan was? 6 A. Yes, I know him very well, he's still working for me. 7 Yes, I know Mr Sheehan. 8 Q. What was his position at this time? 9 A. He is or was to that time on the Legal Department within 10 Bilfinger Construction, advising contractually. 11 Q. I'll just read out this email. It states: 12 "Dear Steve, as agreed please find attached the 13 response to tie's question. Could you please forward 14 this to David Mackay. 15 Following our meeting on 17 February 2009, we have 16 been asked the following question: 17 "Is it Infraco's position that there is no 18 obligation to accept a tie instruction to commence work 19 in Princes Street?" 20 Mr Sheehan says: 21 "The Infraco position is as follows: 22 The Agreement provides for exclusive licence to the 23 Infraco to enter and remain upon in Designated Working 24 Area. It is our understanding that we do not have this 25 exclusive licence to those areas inter alia due to 16 1 maintaining a bus route." 2 Just to pause, do you know what inter alia means? 3 Do you see that expression, inter alia? 4 A. I believe what he wants to say, this means that due to 5 the existence of this bus route, we were -- we had 6 restrictions in regard to access to, in and outside, 7 because you can imagine if -- if they are belonging to 8 a bus route which was originally not anticipated, you 9 have access restrictions to get equipment, et cetera, in 10 and out, and I think that's what he meant here with this 11 inter alia phrase. 12 Q. Yes, inter alia, it's an expression we tend to use as 13 Scottish lawyers as meaning among other things. I think 14 it's a Latin expression. 15 Is Mr Sheehan German? 16 A. No, he is UK citizen. And I'm not a lawyer. So that's 17 why I'm maybe not used to this phrase. 18 Q. I just wondered in short whether the inter alia was 19 wording that came from Mr Sheehan or perhaps from the 20 consortium or Bilfinger's Scottish legal advisers, but 21 that may be a question I have to ask Mr Sheehan. 22 Anyway, it's simply an aside. 23 Moving on, it provides: 24 "The Agreement provides for prior agreement to 25 an Estimate as a precursor to executing the changed 17 1 works. Currently agreement cannot be reached on changes 2 relating to these works. Given the obstacles to 3 progress, we are precluded from properly planning and 4 executing the works with the inevitable consequence that 5 those works will be delayed and disrupted." 6 Over the page: 7 "Accordingly, we cannot accept liability for 8 inevitable consequences arising from inter alia the 9 impact upon the works of maintaining bus lane. 10 In consideration of the above we do not consider 11 ourselves contractually obliged to commence works in 12 Princes Street." 13 That's essentially the position you've just set out 14 just now, isn't it? 15 A. Yes; that's right. 16 Q. Then going on, it says: 17 "However, we understand the importance of this area 18 to you. Therefore as a gesture of goodwill and without 19 prejudice to any entitlements with respect to events and 20 circumstances given rise to this action we are prepared 21 to evaluate diligently any proper instruction to 22 commence the works in Princes Street." 23 Now, to pause there, what was meant by proper 24 instruction? Did that mean an instruction under the 25 contract or was that reference to something else, do you 18 1 think? 2 A. I can only guess because that is a mail from February 3 when I wasn't on site. 4 No, I believe the proper instruction in accordance 5 with the contract, because I think a proper change order 6 should have been issued, which we have not received. 7 Q. Thank you. 8 A. I believe, so that's only guessing because I wasn't 9 there. 10 Q. Reading on: 11 "Such proper and detailed instruction is still 12 outstanding. It is our strict understanding that we 13 shall receive a proper instruction prior to our 14 commencement of the works in Princes Street containing 15 clear details on reimbursement of our actual costs and 16 overheads, prelims and profit. Further that tie accept 17 of the risks associated with proceeding with the works 18 under these circumstances. In addition that any 19 extension of time to the relevant milestones will be 20 granted where such works are delayed." 21 What was meant by the reference, do you think, to 22 the instruction, "containing clear details on 23 reimbursement of our actual costs and overheads, prelims 24 and profit"? 25 A. I can only guess. I think a similar arrangement which 19 1 happened or was agreed on Leith Walk, on reimbursable 2 cost. Since it was clear that the works differ from 3 what was contractually to be provided, due to this the 4 inefficient working, I think you need to find 5 a mechanism which guaranteed fair reimbursement in 6 accordance to the actual cost, and issues arising on 7 site, and I think that's what have been said here. 8 Similar to this letter you showed me earlier, where 9 tie proposes for Constitution Street, I think that was 10 the understanding to the time, that as the conditions 11 were differing, differing from what contractually is 12 required to find, to find a way to enable us to work. 13 Q. Stepping back a little, and looking at the contract, we 14 know that the intention or aim of tie was to obtain 15 a fixed price contract as much as possible. However, 16 Schedule 4, as we know, contained a mechanism for 17 Notified Departures. 18 Now, if a Notified Departure was intimated and 19 an estimate required to be arrived at for that Notified 20 Departure, how was that estimate quantified? Were there 21 agreed rates set out in the contract with which to 22 quantify that estimate? 23 A. There were a schedule of rates for certain works 24 which -- which should have been used if -- if these are 25 similar works than the ones to be valued here. In many 20 1 instances this was not possible because it was not very, 2 very detailed schedule of rates, but if I recall 3 correctly, out of memory, there was a schedule of rates 4 for certain works, and we had first to check if we 5 quantify if these rates could be used, because they were 6 similar to the change occurred, or we had to propose new 7 rates in accordance with construction experience. 8 Q. So if a Notified Departure under the contract produced 9 an estimate, that estimate would require to be 10 quantified using the agreed rates in the contract; is 11 that correct? 12 A. In first instance, yes, if these are available and 13 similar to the works which have to be valued. 14 Q. Thank you. 15 However, if instead there was an agreement to value 16 works on a demonstrable cost basis, then the rates in 17 the contract wouldn't have to be used. Instead the 18 consortium could value the works based on the actual 19 costs with an uplift for overheads, preliminaries and 20 profit; is that correct? 21 A. Yes, that's right, whereby the overheads and prelims and 22 profit were very clearly stipulated in the contract. So 23 these were not -- they were never used different ones 24 than the ones which are stipulated in the contract, and 25 for the actual rates, we had then to provide proof that 21 1 these were the actual costs. So we had -- as I said 2 earlier, demonstrated that these were the costs incurred 3 through invoices as a back-up from subcontractors or 4 supply, et cetera. 5 Q. So what the consortium appear to be saying in this email 6 is that they would be prepared to start works in 7 Princes Street, but not using the rates in the contract, 8 rather on a different basis of quantification, namely 9 the demonstrable cost basis; is that correct? 10 A. That's correct, yes. That's why we end up later into 11 this PSSA. 12 Q. Why wasn't it the consortium's position at this time 13 that: we will undertake the works based on the rates in 14 the contract and following the procedures under the 15 contract. 16 A. Because the works described in the contract differed 17 tremendously from what we had to do there, as I tried to 18 explain earlier. We had presence of bus lanes which 19 were not part of the contract. We had huge amount of 20 existing utilities. So we had to deal with an in and 21 out situation, piecemeal work. We couldn't properly 22 plan our work. We had to do it in smaller stretches, 23 interrupted through the presence of utilities, and this 24 is not what the contract have foreseen and therefore 25 these rates in the contract are not usable because they 22 1 have been based on a complete different circumstances. 2 Q. Would the consortium have been able to undertake the 3 works on Princes Street using the mechanisms under the 4 contract? 5 A. In theory, yes, but that would have meant that MUDFA 6 should have been completed as described in the contract, 7 and we should have given access, unlimited within 8 Princes Street, without any disturbance. Then of course 9 it could have -- but we would have had to wait another 10 year or a year and a half before that happened. 11 Q. So if the consortium had started working on 12 Princes Street, using the mechanisms under the contract, 13 is it the case that whenever the consortium came upon an 14 unresolved utility, the consortium would have stopped, 15 notified a Notified Departure, and then they -- parties 16 would have waited until that had been agreed, the 17 estimate had been agreed, before the work then started 18 again; is that correct? 19 A. That's correct, because the contract clearly describes 20 that we had the obligation to identify Notified 21 Departures. So if we identify a utility which is 22 historic, which is in the way, we would have to notify, 23 within 80 days we would have to submit an estimate. And 24 then tie would have to issue a Change Order agreeing 25 with us and -- agreeing with us the estimate, and then 23 1 issuing a Change Order, and then we could proceed 2 according to 18.13. 3 This is further complicated because the presence of 4 utilities may have caused also design changes. So in 5 the first instance you would have to ask the designer to 6 provide a design estimate for changing the design. So 7 that would be the first part of the estimate which needs 8 to be agreed that the design can proceed. As the design 9 is finished, then you have the construction element. 10 You have to price another estimate for this, get it 11 agreed, and then another change should have been issued, 12 and then would allow us to work. You can imagine with 13 the huge presence of utilities there, in Princes Street, 14 we would have never really start working. We would have 15 stopped working, stop working because there was no clear 16 stretch for the full length of Princes Street. So this 17 contractual mechanism would have not worked on 18 Princes Street, and that was also in agreement with 19 parties that this doesn't work. 20 Q. Was it the consortium's position in short that they 21 would only start work on Princes Street if they were 22 paid on a demonstrable cost basis? 23 A. I think first of all not. I think first of all it 24 was -- even for this bus lane, where we had submitted 25 an estimate for the impact of the bus lane, we have 24 1 never received a tie Change Order. So the contract 2 mechanism, it was completely neglected by tie, which we 3 couldn't tolerate actually, because that's for what you 4 have a contract, that you live and execute the contract 5 accordingly, which they haven't done to this time, and 6 of course in addition to what happened there, both 7 parties were aware about the presence of MUDFA, and that 8 is why most likely this email have been drafted in that 9 way. 10 Q. In relation to the bus lane, would the consortium have 11 started works on Princes Street if a Change Notice had 12 been issued for the bus lane issue and an estimate had 13 been agreed? 14 A. Yes, I believe so because that would have been our 15 contractual obligation, but as I explained earlier, we 16 have then ended up in a stop-starting mechanism and then 17 no progress would be really made there, which would be 18 not to the benefit of the public, and the works down 19 there. 20 Q. On a separate but related point, do you recollect around 21 this time the consortium suggesting to tie that the 22 consortium should be stood down or demobilised for 23 a period, perhaps a year, to allow the utilities and any 24 related design work to be completed? 25 A. I recall discussions about this. I think it was already 25 1 before my time. And if you look at the situation that 2 neither MUDFA was completed, which should have been in 3 May 2008, when the contract was signed, nor the design 4 was completed, which should have been completed in 5 May 2008, I think very soon after entering into this 6 contract, it was clear that these pre-condition couldn't 7 be fulfilled. As I was told, there were discussions 8 even before I arrived, to suggest -- to stop works for 9 a year, because -- and looking back now, I think that 10 would have been the right decision. I think when you 11 see in which complicated situation, not only 12 contractual, the circumstances were on that contract, 13 I think the best for all parties would have been to wait 14 a year or 18 months until that which was pre-conditioned 15 in the contract has been completed, and when then 16 I think also the defined contract mechanism would have 17 worked, because these two issues have caused basically 18 the majority of changes within the contract which made 19 it not workable. 20 Q. I should also ask, Mr Foerder, do you at any time 21 recollect anyone in the consortium advising tie that the 22 contract allowed the consortium to hold tie or the 23 Council to ransom? 24 A. No, I don't recollect that phrase. And we didn't do 25 that. 26 1 Q. I would like to move on, please, to the resolution of 2 the Princes Street dispute. To what extent were you 3 involved in the resolution of the dispute? 4 A. Deeply. As I said, I took over as Project Director from 5 early March, when the dispute really came up. And I was 6 in very detailed involved in the discussions to -- to 7 find a solution, way forward, which was at the end the 8 Princes Street Agreement. 9 Q. In short, what was the way forward that was agreed? 10 A. I think the way forward was the Princes Street 11 Agreement, the PSSA, which -- which was a separate 12 mechanism to -- on demonstrable cost, to allow us to 13 work in these changed conditions on Princes Street. 14 So I think we had meetings in March, around 15 19/20 March, lengthy meetings, to agree the general 16 approach, and I think we were starting then working from 17 23 March, if I recall correctly, on Princes Street. The 18 final agreement was -- the final document of the 19 agreement was then continued and signed in May. We were 20 working on these principles starting from late March, as 21 I recall. 22 Q. Which individuals in tie were you in negotiation with to 23 reach this agreement? 24 A. Steven Bell, Construction Director, I can't recall his 25 name, Frank McFadden, I believe. Susan Clark was in 27 1 there. There were also from lawyers' side, from -- 2 I believe somebody from DLA was there. We were 3 supported from Pinsent Masons and we had a team in there 4 as well. Myself, our contract manager, our commercial 5 manager, and a few construction guys too. 6 Q. Did you have any discussions with David Mackay? 7 A. Me personally -- possible, but can't really recall. 8 Normally David Mackay was a level above me. 9 Q. I understand. 10 A. And he has most probably spoken to same opponents, same 11 level. I have met him of course. I know him. But now 12 explicitly in detailed discussion for Princes Street, 13 I don't think so. More -- more in an introductory way 14 when meeting commence, et cetera, but not in detail. 15 Q. Thank you. I would like to go to the Princes Street 16 agreement, please. CEC00334456. 17 If we go, please, to page 6 to start with. We see 18 the dates of signature. Blow that up, please. I think 19 we can see Mr Mackay's signature for tie, 20 March 2009. 20 I think we see your signature for Bilfinger Berger (UK) 21 Limited, again, 20 March 2009. We don't have 22 a signature here for Siemens. I assume they signed the 23 agreement at some point; is that correct? 24 A. Yes, I believe so. Most probably couldn't find 25 a completed signed copy anymore, but yes, I believe 28 1 Siemens have signed it as well, because they were 2 working -- we were working on the same agreement. 3 Q. Thank you. You also mentioned a later version. I think 4 there's a version either re-executed, or a new version 5 dated 29 May 2009. I'll give the reference without 6 going to it. It's CEC00302099. 7 Why was a later version re-executed or re-signed? 8 Did it differ in any material way or what? 9 A. I think what was signed -- if I recall correctly, what 10 was signed on 20 March was only a slim first version, 11 without having all the details bottomed out. It was the 12 need to get quickly on to Princes Street, which we 13 managed then from 23 March, on the Monday, following 14 that agreement. 15 And it was only outlining this agreement on 20 16 March, the rough outline which had to be then in more 17 detailed discussion to be finalised, which we did then 18 until late May, and that was then the final agreement 19 signed which was the basis for the works executed on 20 Princes Street. 21 Q. Thank you. 22 If we could go back to page 3, please, to see what 23 it says. Paragraph 3.1 sets out: 24 "All Princes Street Works required to achieve design 25 (or amended design) formation level in the carriageway 29 1 and tie-in to footways and all Princes Street Works 2 required to build from design (or amended design) 3 formation level to the formation level included in the 4 Construction Works Price (as shown for illustrative 5 purposes at Appendix A hereto) ... will be recorded and 6 paid on a Demonstrable Cost basis ..." 7 I'm interested, Mr Foerder, in the diagram at 8 Appendix A. I think we can find that at page 9. If we 9 turn that round, please, the diagram. Thank you. 10 Are you able to explain to us what this diagram 11 shows, please? 12 A. Yes. I believe so. 13 What we have contractually included in our contract 14 was the trackform system which required 120 MPA under 15 the trackform, due to -- due to issues -- so this is 16 a required strength which you need as a formation 17 underneath the trackform. 18 As we were aware about Princes Street, due to the 19 presence of a lot of utilities, cavities, background, so 20 background conditions, we had from our designer SDS -- 21 they had identified that we had to test the existing 22 conditions to ensure we could reach the 120 MPA. 23 So -- and this hatched area is basically identifying 24 possible levels of additional excavation underneath the 25 trackform which were differing on Princes Street based 30 1 on the -- on the existing findings. So you had to do 2 compression tests to find what -- what parameters were 3 there, and either excavate deeper and then bring up 4 crushed or proper material to compact to reach this 5 required base as a formation for the trackform, and that 6 is basically what is shown here. 7 So that is what is different from what we have 8 priced in the contract and therefore that had to be 9 executed in this method. 10 Q. I see. So the hatched area, would it be correct to say, 11 the works required in the hatched area would be paid for 12 on a demonstrable costs basis? 13 A. Yes, that's correct. 14 Q. Now, were any of the other works relating to 15 Princes Street outwith the hatched area paid on 16 a demonstrable cost basis? 17 A. I think all the works on Princes Street were paid on 18 demonstrable costs, because the whole works were 19 affected that we haven't got a clear stretch from one 20 end to the other, due to the presence of MUDFA and other 21 things. 22 The Princes Street Agreement was an agreement, as 23 far as I recall, to be paid on demonstrable costs, costs 24 for works executed. 25 Q. Thank you. We see in the diagram, a white box, if I can 31 1 call it that, around the three sides of the hatched 2 area. What part of the track or what lies underneath 3 the track sits within the white box? 4 A. You are referring to this white box in the centre? 5 Q. Yes. 6 A. I believe that the track -- that is a track -- if 7 I recall correctly, that is a very bad sketch actually 8 because it was drafted up just for principle. But as 9 far as I remember, left and right is most probably the 10 road, the remainder of the road, and the box in the 11 middle is the base between the track box, where the 12 tracks go in. And you see that underneath there's also 13 some hatched area which needed to fill this requirement. 14 That's what I would -- but I'm not 100 per cent sure 15 because it's quite a time ago. 16 Q. I will come back. Some better diagrams will help 17 explain the track and what lies beneath it. 18 Page 4 of this. We can see in clause 4: 19 "The Parties agree that for process of 20 recording ..." 21 That's set out. Then also in paragraph 5, please, 22 we see that: 23 "The Infraco shall commence construction activity 24 for the Princes Street Works on Monday, 25 23 March 2009 ..." 32 1 So this allowed those works to proceed. 2 At page 11, please, lastly, if we can blow up the 3 top half of the page, please, we see this is a Schedule 4 of Rates for use in the carrying out on Princes Street, 5 et cetera. 6 Do you know, were these rates higher than the rates 7 set out in the Infraco contract? 8 A. I'm not sure that they had even for this activities 9 rates in the Infraco contract. I think the Infraco 10 contract had more rates for works that are rates here 11 for employees and for labour, and for plant. And 12 I think these were not even part of the Infraco 13 contract. If I recall correctly, but I would have to 14 check. 15 Q. I see. Under this Schedule of Rates, when hourly rates 16 were set out, was it essentially the case that while 17 these rates were agreed because it was a Demonstrable 18 Costs Contract, Infraco would be paid essentially for 19 however long the work took at these rates? 20 A. Can you repeat your question? 21 Q. Yes. It's perhaps a bad question. Let me put it 22 another way. 23 So under the Demonstrable Costs Agreement, the 24 quantification of the costs of the works must have been 25 based on these hourly rates? 33 1 A. That's right, yes. 2 Q. It's then just times the amount of time it takes to 3 complete the work? 4 A. Yes. That's right. These rates were used for the 5 attendance, for example, for these employees, if it 6 comes now to site agents, engineers, et cetera, who have 7 been on site supervising the works, these have been 8 used, yes. 9 Q. Now, I think we've heard evidence -- you touched upon it 10 yourself there -- that in Princes Street, deeper 11 excavations were undertaken than were undertaken in the 12 other on-street sections that were completed after 13 Mar Hall; is that correct? 14 A. This is correct in regards to the road reconstruction, 15 not for the track. For the track area we had also after 16 Mar Hall this requirement to achieve this 120 MPA under 17 the trackform, and therefore tests have been required to 18 confirm this requirement, and so where we had background 19 conditions in the other areas of the on-street, apart 20 from Princes Street, similar procedure was proceeding. 21 In the -- in the road areas, there was kind -- after 22 mediation, there was similar to our Infraco proposals, 23 I think, there was the approach taken on board to -- to 24 identify the ground conditions of the road surface, and 25 if I recall correctly, I think in the Infraco proposals, 34 1 we had only proposed planing off of the road surface, 2 and basically then the reconstruction by a wearing 3 course, and a similar approach, maybe not as -- as this 4 one, have been executed after mediation on parts of the 5 other off-street, where CEC have recognised that the 6 conditions of the existing road were on an acceptable 7 level and the complete full depth reconstruction of the 8 road surface was not required. 9 Q. I think I'll come back to this issue with reference to 10 diagrams and photographs shortly. 11 Could I also go back to your main statement, the one 12 provided at the request of the Inquiry, please, at 13 page 16. 14 In paragraph 57 you explain: 15 "The Programme which was submitted with the PSSA 16 [the Princes Street Supplementary Agreement] showed 17 works commencing on 23 March 2009 and going all the way 18 throughout March 2010 without a break for either the 19 Festival or Christmas. But tie and its stakeholders 20 made it clear early on at the project management panel 21 meetings ... that Princes Street would need to re-open 22 to traffic on 29 November 2009. We were therefore 23 instructed to use whatever resources we needed in order 24 to make this happen, including working 24 hours a day, 25 seven days a week." 35 1 This is being paid on a demonstrable costs basis. 2 If the contractor is working 24 hours a day, seven days 3 a week, does that increase the costs or not? 4 A. Yes, of course. It increases the cost because if you 5 work 10 instead of 12 hours, 24 hours with the presence 6 of the construction guys, then of course it increases 7 the costs. 8 Q. Is that because you have to pay overtime for working 9 outwith normal hours? 10 A. Yes, of course, you have to pay extra overtime for these 11 night shift hours, but of course you -- you have also, 12 and this is what we didn't really prefer, we had -- we 13 had the requirement under the PSSA to submit a schedule, 14 to identify when the works could be completed, which we 15 have done. It showed an end date of March 10. tie and 16 the stakeholders have made clear very early this is not 17 acceptable for them, and they have forced basically an 18 opening of Princes Street through the Christmas embargo, 19 on late November. 20 The way to achieve was by instructing overtime, 21 which they did, so we had, not right from the beginning, 22 but for long stretch of this time, worked 24 hours, 23 Saturday, Sundays as well, to achieve this, but as also 24 written here, we were not able really to finish all the 25 works, and the Princes Street have been opened without 36 1 completing this works in full. There were smaller 2 things outstanding which should have been definitely 3 completed before traffic goes back on Princes Street, 4 which we then had to do in night shifts during January, 5 February, and that was also one of the main arguments we 6 had. tie had forced us to open it in November and no 7 cost for the completion of the works were paid 8 afterwards. 9 So this was one of the big obstacle of the 10 Princes Street dispute which we had, because they have 11 not followed the agreement, and basically their view was 12 works were completed or should have been completed on 13 29 November, and all the works which we were afterwards 14 executing to complete the works were not to be paid 15 anymore. 16 Q. Thank you. Now, if the consortium had been able to 17 undertake the Princes Street works according to their 18 preferred programme, ie between March 2009 and 19 March 2010, is that likely to have reduced -- I'm sorry, 20 is that likely to have led to overall a reduced cost for 21 the Princes Street works or not? 22 A. Yes, I believe so. It would have reduced the cost 23 because, as I explained earlier, if you work Saturday, 24 Sundays and night shifts, you pay more than you pay on 25 the regular shift. 37 1 So it would have -- although the period is longer, 2 but you pay less money, because you have lower rates for 3 this. On the other hand, I believe also for us that 4 would have been cheaper because, as you are aware, we 5 had to go back to Princes Street, to do remedial works 6 on the track rail interface issue, and although there 7 are most probably two circumstances why these remedial 8 works were required, one definitely was that tie had 9 allowed traffic right after -- a few hours after the tar 10 was laid, which first of all you should not do. 11 Secondly, the joint filler along the rails was not 12 installed, which gives rise to cracking there, because 13 due to the load from buses, et cetera, which goes on, 14 because it's not supported by a filled joint, in 15 addition to also the design aspects which I explained in 16 our -- in my third witness statement. 17 So there are two respects. I think it could have 18 saved us as the consortium money because we had to go 19 back to do the remedial works on our own behalf, which 20 maybe -- we don't know, nobody can 100 per cent judge 21 this -- would have not occurred, and this drastic 22 occurrence there that we have changed the design 23 completely, and secondly, yes, there were higher rates 24 paid due to weekend and overtime works. 25 Q. We will come back to the question of the defects with 38 1 reference to some photographs. Just to finish off this 2 line of questioning, if the consortium had been allowed 3 to undertake the Princes Street works in accordance with 4 the their preferred programme of a year, essentially, 5 I think you explained that would have led to reduced 6 costs because of reduced rates. Are you able to give 7 any indication at all of approximately by how much the 8 costs may have been reduced? I know you can't give an 9 exact figure, but are we talking about it being less by 10 tens of thousands, hundreds of thousands, millions or 11 what? 12 A. This is difficult. In general, yes, it would have 13 reduced the cost. In which magnitude, I had -- I can't 14 tell you this. I wouldn't give you a percentage figure, 15 or if it's several hundred thousand. I don't think it 16 goes into millions, but it would be guesswork. No, 17 I can't do that. 18 Q. I understand, thank you. 19 Now, we have touched forgotten works which required 20 to be redone in Princes Street after the Mar Hall 21 Agreement. Are you able to just give a summary of the 22 works that required to be redone and why? 23 A. Yes, of course. My third witness statement refers to 24 that point basically. It was also to clarify statements 25 given by -- by our designers, Mr Chandler and 39 1 Mr Reynolds, which either have mixed up something or 2 were not properly recorded, I don't know; because they 3 actually should know what happened on Princes Street. 4 They were deeply involved there. They were our 5 designers and they had to approve the design which was 6 executed. 7 I think -- so there were two issues. As I explained 8 earlier, we haven't completed the works on 9 Princes Street due to the state for us to open 10 Princes Street. So the works were not completed in 11 a way as it should be, before re-opening for traffic. 12 Secondly, the works at the end were in very harsh 13 weather conditions, because, as you remember, in 14 November 2009 was one of the very harsh winters, unusual 15 for Edinburgh. I was even stuck in snow a few times. 16 There was cold weather conditions, frost, in which we 17 had to lay tar, and other things, which are not ideal to 18 do so. 19 That was one aspect, and therefore it's difficult 20 really to judge afterwards how much effect that 21 circumstance had in regards to the failure which 22 basically required the remedial works later on. 23 The remedial works for Princes Street were executed 24 after the mediation because we have seen the failures 25 already before, and also during, and we had investigated 40 1 further. So that was one course I explained early 2 earlier. The other was that you have in Princes Street 3 heavy traffic loads of turning buses in and out over the 4 rail asphalt joint, and we had then basically forwarded 5 alternative proposal from the previous approved one, 6 which was going through the approval process; so what we 7 had originally was that the top layer between the rails 8 and left and right to get back to the road surface was 9 executed in a normal asphalt condition. So you had the 10 normal -- normal asphalt with the finishing wearing 11 course on top, three layers. And that have been not 12 robust enough for the conditions on Princes Street, and 13 therefore -- as I say, this design was gone through the 14 approval process, also through SDS was approved, as seen 15 reasonable and robust enough to work with the conditions 16 on Princes Street. 17 As we then have seen failure, we had come forward 18 with the proposal to replace the asphalt layers with 19 concrete. So what we have done then after mediation was 20 taking out the asphalt and replacing with concrete on 21 our own cost, as remedial costs on Princes Street, which 22 was the most robust solution for the traffic situation, 23 which have also proven afterwards to be not only more 24 robust, also from a maintenance point long term the more 25 effective solution to be executed. 41 1 Q. Thank you. Some diagrams may help explain or illustrate 2 the points you have made. If we can go, please, to 3 TRI00000183, this is the supplementary statement you 4 provided recently. 5 CHAIR OF THE INQUIRY: While we are looking for that, you 6 mentioned that the joint filler along the rails was not 7 installed. Why was that? 8 A. Yes, my Lord. We were not able to finish it due to the 9 requirement from tie to open traffic on 29 November. We 10 were physically not able, because the asphalt was just 11 laid, and hours later it was open for traffic again. So 12 we had no time to do this, and I was aware about this, 13 and we agreed that we had to do this afterwards in 14 January, after the Christmas embargo, to go back in and 15 finish these works. 16 CHAIR OF THE INQUIRY: Did you tell tie that this was 17 a problem? 18 A. Yes, of course. 19 CHAIR OF THE INQUIRY: So that should be in some documents 20 that we will find. 21 A. There are definitely some documents, minutes. It was 22 clearly addressed that the works were not completed and 23 we had also an agreement or we were discussing with them 24 when we can complete it, and during the Christmas 25 embargo, that was not possible. So it was agreed to go 42 1 back then in January to do these outstanding works. 2 CHAIR OF THE INQUIRY: When you went back after Mar Hall, 3 the solution was to put a concrete base with an apron. 4 Did that still need a filler? 5 A. Yes. It has also a joint filler between the concrete 6 and the rail. 7 CHAIR OF THE INQUIRY: Thank you. 8 MR MACKENZIE: Thank you. Go, please, to page 7 of the 9 diagram there. 10 Is it possible to blow it up a little? 11 Thank you. 12 Now, I think very simply we see three different 13 layers. At the bottom, a formation improvement layer. 14 We then see a track concrete layer. And we then see 15 a layer called coverage. 16 Starting at the bottom, I think I'm right in saying 17 the formation improvement layer is the 25 centimetres 18 thick reinforced concrete layer; is that correct? 19 A. That's correct. I think that is basically -- this is 20 a sketch from the Infraco proposals, which was the 21 contractual basis, what we have bid for. So they chose 22 the radar track system, which was proposed, chosen by 23 tie to be used on this contract. You see also this 24 120 MPA above this formation level, which is required 25 for this kind of radar system. 43 1 Q. But the formation improvement layer wasn't part of the 2 consortium's proposals or price? 3 A. That's right. 4 Q. But what is above that, the two layers and the 5 components above that, presumably, were part of the 6 consortium's proposals and price? 7 A. That's right. It was a simplified sketch here to show 8 basically the radar system which sits in concrete, and 9 coverage, which you can assume was asphalt to that time. 10 I think there are two more slides which shows it in more 11 detail. 12 Q. So the layer that's entitled "coverage", that's the 13 asphalt layer you have referred to earlier? 14 A. Yes, not only one layer. More than one layer. 15 Finishing wearing course with some asphalt layers below. 16 Q. Go then to the next slide at page 8. I think we can in 17 fact there see, as you say, that the coverage layer, the 18 asphalt layer, does in fact comprise three different 19 layers. Can we see that there? 20 A. That's right. Those are three layers, finishing with 21 the wearing course and the binder course below, and 22 a base course below that. So that is the total called 23 in the former sketch as coverage. 24 Q. The next slide again, please, at page 9, I think we'll 25 see the coverage layer replaced with a layer of 44 1 concrete, is that right? 2 A. Yes. That is correct, and you can also see what 3 Lord Hardie said, left and right of the rail. This is 4 the filler which goes in there, this black stuff from 5 the rail, which is the joint filler to basically fill 6 the gap between the concrete and the actual rail at the 7 end of the day, and that was missing in 2009 when we had 8 to open Princes Street. 9 Q. Is the filler indicated by any colour in this diagram we 10 are looking at? 11 A. To the left and right of the rail, this grey solid stuff 12 which you see there. 13 Q. So it's at the top of the rail? 14 A. Left and right on the top of the rail. 15 Q. We can see that. 16 A. Yes. Exactly. That's the filler which goes in there. 17 Q. Thank you, that's clear. 18 In general, is it correct that concrete is harder 19 wearing for road surfaces than asphalt? 20 A. Yes, definitely. But it's unusual actually. If you 21 look throughout tram systems, even in Europe or 22 worldwide, in most circumstances you find asphalt left 23 and right of the rails. The conditions here on 24 Princes Street are pretty harsh. You know, there's 25 a lot of bus traffic and also turning bus traffic on 45 1 Princes Street. So I think we concluded altogether, 2 including our designer, that here a more robust solution 3 is more adequate, and that was then the proposal 4 approved for the remedial works to be executed. 5 Q. I think we can also look at another document, at some 6 photographs of the defects. I think the diagrams we 7 have just seen in your supplementary statement have been 8 taken from a PowerPoint presentation which we also have. 9 We don't have a number for it yet, so I'll just bring it 10 up and put a number on the system later. 11 But in short we see it's a document. It appears to 12 be from the consortium. We can see: Edinburgh Tram 13 Network, on-street trackform; Edinburgh, 14 2 December 2010. 15 Do you remember this presentation at all? 16 A. Yes, of course. That was prepared jointly between the 17 consortium partners in anticipation to come up with 18 a proposal to agree on remedial works on Princes Street. 19 Q. If we can go, please, to page 19, this, I think, slide 20 is entitled, "Asphalt adjacent to the rails breaking 21 up". Is that indicated between -- the area between the 22 rails and the white line in the road we see, is that the 23 area of asphalt breaking up? 24 A. You see longitudinal, a crack running parallel to the 25 rail, and you see besides the rail, that's the joint 46 1 filler I was referring earlier to, and you can imagine 2 if this joint filler is missing in the beginning and you 3 get load on the asphalt, the likelihood that cracks like 4 these occur are imminent. 5 So if this was the only causes, it's another story, 6 but it definitely haven't helped not to complete the 7 works prior to opening. 8 Q. I'm sorry if you've explained this previously, but why 9 was the joint filler missing? 10 A. Because tie had to -- forced us to open for traffic. We 11 laid the asphalt a few hours before they opened the 12 traffic, and you have to wait until all the asphalt is 13 finished before you execute the joint filler. This is 14 not just a five minutes exercise. tie insisted to open 15 for traffic on 29th, and these works were not completed. 16 Not for the full stretch. Some works were done, but 17 partly not. 18 Q. Did the consortium not say to tie at the time: this is 19 silly, this isn't proper construction practice. 20 A. Yes, of course we did, Mr Mackenzie. We did, we were 21 not recommending to open, but they had a deadline and 22 they opened it, or forced us to open it, because we took 23 away the barriers after getting instructions. 24 Q. Just to be quite clear, the consortium's recommendation 25 to tie was: don't open the road because the works aren't 47 1 finished; is that correct? 2 A. That's right, yes. 3 Q. And tie went ahead and did it anyway? 4 A. Yes, because they had this deadline with the 5 stakeholders to open for the Christmas embargo. So 6 there was -- for them, there was -- seemed to be -- it 7 was important to keep this deadline, instead of waiting 8 another one, two days to get this work done. Because 9 this was not weeks. This could have been done in a few 10 days. 11 Q. Usually in that situation one would have expected the 12 contractor to say to the client: we don't recommend 13 this, if you do it, it is entirely at your own risk. 14 Did you do that? 15 A. That was the general attitude of our opponents. They 16 haven't listened to our recommendations. They had their 17 own view and they have just instructed, say: we do it 18 like that. So we had a lot of these issues, this was 19 only one typical example. 20 Q. The question in short is: we've heard evidence that the 21 consortium later redid certain works on Princes Street 22 to make good the defects. Why did the consortium agree 23 to do that free of charge if they had given that 24 recommendation to tie not to open the road because the 25 works weren't finished? 48 1 A. Because as I said earlier, we could not really 2 100 per cent determine that this is the only default on 3 the issue occurring here on Princes Street. So by 4 reviewing the design solution, and the loads and the 5 axle loads which go over there, everybody or jointly we 6 came to the conclusion that a more robust solution is 7 more effective here. Also, for maintenance reason will 8 give a better quality for long-term wise, and it was 9 part of the negotiation settlement in the mediation. If 10 you go into a mediation, you can't force all your points 11 over, and we had them clearly -- because we were not 12 clean completely here, because you can't really say it's 13 just for that, and we have clearly agreed that the 14 remedial works on Princes Street are part of our 15 responsibility, and we executing this on our own cost. 16 Q. Would it be fair to say in short that the consortium 17 accepted some responsibility for the defects on 18 Princes Street? 19 A. Yes, definitely. 20 Q. Thank you. Just to finish -- continue with the 21 photographs, page 20, please. This is headed, "Asphalt 22 near the rails subsiding below rail level". I'm not 23 sure I can myself see that in this photograph, but is 24 that what's shown in this photograph, subsidence in the 25 road? 49 1 A. Sorry, what was your question? 2 Q. The slide caption is "Asphalt near the rails subsiding 3 below rail level". I just wondered where was the 4 subsidence in the photograph. Is it the bit in between 5 the rails or is it somewhere else in the road? 6 A. I think it's between the rails, but I'm not sure, 7 because you see on the left, it could be also rail 8 there. But I'm not sure. It could be also -- it looks 9 like between the rails. I'm not 100 per cent sure. 10 From the photograph it seemed to be that the asphalt 11 between is a bit low, just from the way the photograph 12 is taken. Could be that it was here a bit too low. 13 Q. Thank you. 14 A. But difficult to say. So it's a picture. But I think 15 that was the reason for the photo. There might be some 16 spots where asphalt could have been a few millimetres 17 higher to support then also the joint and the rail more 18 properly. 19 Q. I see. I think the one over the page is a little 20 clearer. We can see here the rail asphalt joint. We 21 can see them coming loose, and that's perfectly clear. 22 Page 23, please. We will see: summary of the 23 investigation conclusions. We can read that for 24 ourselves. 25 Perhaps we also look at page 27. Then page 28. We 50 1 can see pavement damages due to unfinished work. 2 Traffic loads cause the surface to fracture over the 3 chamber filling elements. 4 Is this back to the point you made about the lack of 5 filler or is this a different point? 6 A. No, I think that's right. It's clear when the 7 supporting filler is missing that maybe the picture is 8 not 100 per cent correct, but these chamber filling 9 elements on the top, they needed to be supported to 10 close basically the gap between the road asphalt and the 11 rail joint, and if this is missing, and loads get on it, 12 of course there is no resistance there, and it tends to 13 crack. That is what is indicated here. 14 Q. Thank you. Just over the next page as well, please, 15 I think it's then a photograph from the road saying: 16 "First damages of cracking asphalt on top of chamber 17 filler blocks visible." 18 The next slide continues the damage: 19 "Soon the surface adjacent to the rails is 20 completely broken up." 21 Then the last slide over the page, please, we see 22 how that looks on the road. 23 Page 46, please, I think, deals with lessons learned 24 from this investigation. 25 We can see the investigation findings for ourselves. 51 1 And the matters which were considered to be preventable 2 and avoidable. 3 Then finally, please, over the page, we've spoken of 4 putting concrete down, the concrete shoulders. Did that 5 only occur at these particular junctions on 6 Princes Street where traffic turns on to other roads? 7 Is that correct? Or the concrete shoulders, were they 8 laid the whole length of Princes Street? 9 A. They were laid throughout Princes Street and also later 10 on the complete on-street. So that solution was after 11 mediation applied everywhere on the on-street. 12 Q. Thank you. 13 CHAIR OF THE INQUIRY: Go back to previous slide on lessons 14 learned. The second last one: 15 "Rails not sandblasted before the sealant applied." 16 Were they supposed to be sandblasted? 17 A. Yes, because you need to clean the rails from slight 18 corrosion, et cetera, to have proper bonding. So, as 19 I said earlier, we had really done an investigation 20 open-minded to identify what could have gone wrong 21 there, and there is an acknowledgment from the 22 consortium that it's not only caused due to the missing 23 road rail joints sealant. There were other smaller 24 findings which also identified we could have executed 25 these works in a better quality. That was the whole 52 1 purpose of this investigation, to really identify what 2 could have been done better and have been taken on 3 board, also for the concrete solution because you have 4 also between the concrete at the rails such a joint 5 filler. 6 So we had really looked to make it as best as 7 possible, and that was the purpose of this 8 investigation. Also the conclusion what I told 9 Mr Mackenzie before, that there is some default and that 10 is why we have clearly indicated we take that on board 11 and we do these remedial works on our own cost. 12 CHAIR OF THE INQUIRY: When would they be sandblasted? 13 Would they be sandblasted once they have been put in? 14 A. Yes. After the installation, because they are laying 15 there of course and you have some small fly rust on the 16 rails and you need to clean it properly up before you 17 apply the joint filler to have a proper bonding between 18 the joint filler and the rail itself. That's why you 19 sandblast, to clean it basically, a cleaning exercise. 20 CHAIR OF THE INQUIRY: Were you able to discover whether the 21 failure to sandblast had occurred throughout 22 Princes Street? 23 A. No, not throughout, but on certain spots because we 24 could see this through the quality records. We have 25 reviewed our quality records. We have a quality system 53 1 in accordance to ISO9001 where you record actually all 2 the works what have been done, and we have seen then by 3 reviewing these records that the works were not in all 4 instances executed as they should, out of human error 5 or -- my Lord, you know how these things happen. It was 6 night-time work. As I said earlier, we had instruction 7 to work 24 hours. There were small defaults also 8 identified from the execution from ourselves. That's 9 why we also acknowledged later on, it is not only caused 10 by opening early. And basically agreed in the 11 mediation. 12 CHAIR OF THE INQUIRY: Thank you. 13 A. You're welcome, my Lord. 14 MR MACKENZIE: With reference again to the first bullet 15 point, traffic running on unfinished road/rail joint, in 16 what way was the road/rail joint unfinished? Was that 17 just a reference to the lack of filler you have 18 mentioned or was there any other way in which that joint 19 was unfinished? 20 A. No, it's referring to what I mentioned earlier. When 21 you -- when you surface the asphalt in first instance, 22 you surface it up to the rail. And then you basically 23 cut out the section where the joint -- that's the other 24 picture with the cracks that you have seen, there was 25 asphalt and also on the pictures. 54 1 So then you cut basically the line along the rails 2 which you then fill with this joint filler, and because 3 the asphalt is not homogeneous enough to really resist 4 the loads which come to it, and that causes cracking. 5 Q. The last question on this point. You've mentioned the 6 concrete shoulder or replacing the asphalt coverage 7 layer with a concrete coverage layer. Can you remember, 8 did the original SDS design specify a concrete coverage 9 layer or concrete shoulders? 10 A. No, as I said, the original design says only coverage, 11 and it is assumed to be -- from what we have seen, to be 12 asphalt. There was the original SDS design, really 13 concrete was proposed, so it was also foreseen as 14 asphalt as it's normally usually used on tram system in 15 Europe. 16 Q. Thank you, Mr Foerder. It might be worth at this stage 17 just checking we understand how the track more generally 18 is laid and the different components that make it up. 19 Go back to your statement to the Inquiry, please, at 20 page 72. It's page 22 of that one. 21 Thank you. 22 In paragraph 72, about halfway through there, we 23 see: 24 "The "utility free zone" was understood to be the 25 width required to install the tram infrastructure 55 1 (trackform, OLEs, ducting, drainage, et cetera) to 2 a depth of 1.2 metres below finished road level." 3 Then the next paragraph over the page, please, 4 paragraph 73, you say: 5 "The BCUK works involved initially excavating to 6 a depth of approximately 1.2 metres below existing 7 ground levels and ensuring the ground conditions at this 8 level met the design requirements. This meant that on 9 occasion ground improvement works were required. This 10 entailed deeper excavations (a further 0.3 metres to 11 0.6 metres) and subsequent reinstatement to formation 12 level with imported granular materials. The width of 13 the excavation differed between on and off-street for 14 various reasons, including traffic management 15 requirements. However, the minimum width would be of 16 the order of 8.0 metres. Following this, the ducting 17 and drainage were installed and the initial track 18 improvement layer constructed. Once the track 19 improvement layer was in place, Siemens would place the 20 sleepers, rails and fixings prior to the track slab 21 works being carried out by BCUK. Following this, the 22 final adjustments to the rails were carried out by 23 Siemens to allow the coverage layer and road pavement 24 tie-in works (where applicable) to be carried out by 25 BCUK. The joint sealant works would then be carried out 56 1 by Siemens to complete this element of the works." 2 Could we perhaps go back to the presentation we 3 looked at, please, earlier. The one dated 4 2 December 2010. Do you see a photograph at page 6? 5 In the photograph in the left-hand side of the page, 6 is what we see there the formation improvement layer? 7 A. The left one, you say? 8 Q. Yes? 9 A. Yes, that is. 10 Q. And do we see on top of -- on the formation improvement 11 layer is the slab of reinforced concrete; is that 12 correct? 13 If we perhaps go -- I think the previous page in 14 this slide, we see again there the formation improvement 15 layer at the bottom. As I understand it, that's the 16 slab of reinforced concrete; is that correct? 17 A. Sorry, which -- 18 CHAIR OF THE INQUIRY: I think the formation improvement 19 level is the impacted granular -- 20 A. No, the formation improvement layer is also in concrete 21 already. These are the 25 centimetres which you saw on 22 the left picture below the rails. 23 MR MACKENZIE: Yes. 24 A. Then Siemens came in to lay and install the rails, and 25 then on the right picture you could see the track 57 1 concrete layer, which basically encases the track into 2 concrete. That was the right picture on the previous 3 slide. 4 Q. So if we go to page 6 again, so I think in short we can 5 see the formation improvement layer which is the slab of 6 reinforced concrete, and on top of that we see -- would 7 it be correct to call them sleepers? 8 A. Sleepers, yes. 9 Q. Do the sleepers comprise two concrete blocks joined by 10 metal? 11 A. Yes, that's correct. 12 Q. If we go back to the diagram on the previous page, 13 please, do we see -- the sleepers rest upon the 14 formation improvement layer on base plates; is that 15 correct? 16 A. Yes, I think that's correct. 17 Q. Do we also see in the diagram, just underneath the word 18 "base plates", we see the word "adjustment bolts". Is 19 that correct as well? 20 A. Yes. 21 Q. Go back to the photograph on page 6, please. Do we see 22 the sleepers appear to be sitting on top of a metal 23 strip that runs the whole length of the formation 24 improvement layer; is that correct? 25 A. Yes, I think that metal strip has a different purpose. 58 1 But I can't recall. I think they are sitting on the 2 bolts which you have seen on the schematic one before. 3 So they are sitting not directly on the concrete. They 4 are above, holding a distance between the formation 5 level and the sleepers, and the rails are then sitting 6 later on top of these sleepers. 7 Q. I understand. So if we go back to the diagram at 8 page 5, please, am I right in thinking that the 9 formation improvement layer, that's constructed by 10 Bilfinger? 11 A. Yes, the formation improvement layer was constructed by 12 Bilfinger, yes. 13 Q. Then Siemens come along and lay the sleepers; is that 14 correct? 15 A. Yes, they install these base plates and bolts and then 16 the sleepers, yes, and then afterwards the rails. 17 Q. After Siemens have put the sleepers in place, Bilfinger 18 then pour the track concrete layer; is that correct? 19 A. Correct, yes. 20 Q. So if we go back to the photographs on page 6, do we see 21 the bottom right-hand corner, is that what's happening 22 there, is that the concrete being poured for the track 23 concrete layer? 24 A. That's right, yes. 25 Q. Then back to the diagram on page 5, the coverage layer, 59 1 which was initially asphalt, is that undertaken by 2 Bilfinger or Siemens? 3 A. Bilfinger. The asphalt was coming from us, and then 4 after the asphalt was completed, Siemens came back to 5 see the joint filling beside the rails and the asphalt. 6 Q. Just out of interest, the adjustment bolts, is 7 adjustment done before the concrete has fully set in the 8 track concrete layer? Or is adjustment done after the 9 concrete has fully set in the track concrete layer? 10 It's a point of detail. It may be you don't know, 11 Mr Foerder? 12 A. I'm -- difficult to answer for me, I think. This is to 13 hold or to place the sleeper on the rail to almost the 14 final -- final level. I think you are able to adjust 15 through small elements below the rail and beside the 16 rail which you can see in the sketch only slightly. So 17 you almost have to adjust it in a way that this is 18 a final horizontal elevation of the rail at the end of 19 the day, because the rail gets installed prior to 20 pouring the track concrete layer. 21 Q. Thank you. 22 Just complete this piece by going back to your 23 supplementary statement. This is TRI00000183. Page 3, 24 please. 25 I think we've covered some of these matters, but 60 1 just for completeness, in paragraph 3.1 you explain: 2 "As part of the Infraco Proposals put forward with 3 the bid, BBS proposed the Rheda Trackform as the 4 proposal for the trackform design. The Rheda trackform 5 required a formation beneath it capable of achieving 6 120 MPa for the life of the trackform. How this was to 7 be achieved was not part of the Infraco trackform design 8 proposal." 9 Then paragraph 3.4 you explain: 10 "Having selected the Rheda Trackform (as part of the 11 Infraco proposals), there was a misalignment within the 12 overall design and the process to address this was 13 through the Development Workshop Process as outlined in 14 the Infraco Contract. When the Development Workshop for 15 the trackform was held, it identified a misalignment in 16 that the Rheda trackform required a trackform 17 improvement layer capable of providing continuous 18 support of 120 MPa throughout the on-street sections of 19 the track for the lifespan of the trackform. Different 20 options ... were explored with SDS, but ultimately, the 21 only solution that SDS would accept for the on-street 22 works was the reinforced concrete trackform improvement 23 layer. This was the 250mm thick reinforced concrete 24 slab to be constructed beneath the Rheda trackform 25 layer." 61 1 Paragraph 3.5: 2 "The misalignment was as a result of the initial SDS 3 design being based on a different trackform that did not 4 require a formation layer to provide a support of 5 120 MPa." 6 3.6: 7 "Any SDS design that was required to be changed as 8 a result of the identified misalignments was a Mandatory 9 tie Change. The need for this reinforced concrete 10 trackform improvement layer was a Mandatory tie Change 11 (a Notified Departure), and Infraco were entitled to the 12 additional cost of this (design and construction 13 costs)." 14 Then paragraph 3.7, you say: 15 "In addition, construction of the trackform 16 improvement layer required ground improvements through 17 much of the on-street sections of the Infraco works due 18 to the poor ground conditions beneath. Those ground 19 improvements required increased depth of construction 20 which would take longer to construct, inevitably leading 21 to an increase in construction costs." 22 Now, to pause there, the question of ground 23 improvements required below the trackform improvement 24 layer, were these ground improvements below the 25 trackform improvement layer largely required in 62 1 Princes Street, or were they also required on the other 2 stretches completed after Mar Hall, so from Haymarket to 3 the west end of Princes Street, and then separately from 4 the east end of Princes Street down to York Place? 5 A. I think in general they were also required on other 6 stretches, not just on Princes Street. As I explained 7 earlier, you had to test the current conditions to 8 identify if the ground conditions have been accepted -- 9 to acceptable level, otherwise further deeper excavation 10 and refill with granulated material was required. 11 So I can't tell you exactly in which stretch was 12 done. This should be available through QRA records to 13 identify this. So can't really tell. But definitely 14 was on other stretches, as well as on the off-street. 15 It was not just on-street issues, where you had found 16 bad ground conditions and also then had to remedy this 17 by putting granular filling in. 18 Q. Can I also clarify one final matter in this, please. 19 Over the page at page 4, in paragraph 3.9, you say: 20 "BBS were paid additional sums over and above the 21 Contract Price to account for the design change required 22 for the trackform improvement layer. Therefore, there 23 were additional costs borne by tie to install the Rheda 24 trackform with the trackform improvement layer. 25 However, these were anticipated by and allowed for 63 1 within the Infraco Contract and there was no delay or 2 costs for any rework or remedial works in connection 3 with the trackform improvement layer." 4 When you say that the trackform improvement layer 5 didn't -- were allowed for within the Infraco contract, 6 is that simply a reference to the Notified Departure 7 mechanism? 8 A. Yes. 9 Q. I understand. 10 My Lord, that may be a suitable place to pause. 11 A. We normally have a break in the morning for the benefit 12 of the shorthand writers. So we'll resume again at 13 11.25. You will probably get a cup of tea or coffee if 14 you want. We will resume again at 11.25. 15 (11.08 am) 16 (A short break) 17 (11.28 am) 18 CHAIR OF THE INQUIRY: You're still under oath, Mr Foerder. 19 MR MACKENZIE: Thank you, my Lord. 20 I would like to move on, please, to the question of 21 design. If we do that, please, with reference to 22 starting the Infraco contract, CEC00036952. 23 So this is the Infraco contract. If we go, please, 24 to page 33, to look at what it says about the SDS 25 novation. 64 1 We can see in clause 11, we can blow up, please, 2 clause 11 concerns the novation of the SDS Agreement to 3 the Infraco. And page 34, please. In paragraph 11.4, 4 clause 11.4 states: 5 "The Infraco shall carry out all required management 6 activities in order to manage the performance of the SDS 7 services and, subject to any express limitations or 8 rights in relation to the performance of the SDS 9 Services in this Agreement, the Infraco shall be wholly 10 liable for the performance of the SDS Services." 11 So I think Mr Foerder, in short, as a result of the 12 SDS novation, the consortium were to become liable for 13 the performance of the SDS services; is that correct? 14 A. That's right, yes. 15 Q. Did that involve the consortium playing a role in 16 managing design after that point? 17 A. Yes, based on the contract, yes. 18 Q. We should also note, I think, in clause 11.5 states: 19 "The Infraco shall not amend the SDS Agreement 20 (including the SDS Services) without the prior written 21 approval of tie ..." 22 Put that to one side. 23 Now, you've covered this in some detail in your 24 various statements, but are you able to give a summary 25 of the main reasons why it took so long to finish design 65 1 after the award of the contract? 2 A. Yes, difficult to summarise that in short. But yes, we 3 were responsible to manage the SDS design, but based of 4 course on the contract conditions, which have been 5 outlined in Schedule Part 4 to the Base Case Assumptions 6 which were there. So the basis of the contract was 7 actually that the design should have been completed at 8 contract start in May 2008, which was unfortunately not 9 the case. That was the reason why our bid was based on 10 the so-called BDDI drawings, Base Date Design 11 Information as of November 2007. 12 To explain why it took so long to finish the design, 13 maybe tie could explain it much better than me, because 14 they should have had the obligation to finish it already 15 in May 2008 and they were not able to do it. 16 What we encountered is from what we have priced, 17 which was on a very preliminary design, that this design 18 have been developed further into massive changes what 19 have been priced, and due to the nature of the contract, 20 we had to go through an immense number of INTCs which 21 were informing tie about the changes which had to be 22 then regulated through Notified Departures which took an 23 immense time and was in very often cases not 24 acknowledged by tie. It had a lot of problems to get 25 these Notified Departures not only for the construction 66 1 element, but also for the design element, agreed. 2 That was one issue. The other issue was that tie 3 still had the responsible to obtain the third party 4 approvals. That was with them, which were even to 5 mediation not in place in large extent. In addition, 6 they had the responsibility to provide the planning and 7 technical informatives which were the basis for the 8 design, which were lack even until mediation. They had 9 to resolve them only afterwards. 10 Then we had the issue of the so-called misalignment 11 between the Infraco proposals and the original SDS 12 design, due to the fact that our price was based on the 13 Infraco proposal which were different from the SDS 14 design. We had to go through, called misalignment 15 identification, and there were kind of development 16 workshops which had explored and identified these 17 misalignments, and you had to again go through the 18 Notified Departure procedure to notify tie about these. 19 You had to provide a design estimate for these 20 modifications of the design which you need to get 21 approved in very -- in most of the cases we have not 22 received these approvals. So that's why SDS could not 23 really progress on the completion of the design in that 24 element. 25 Q. Thank you. 67 1 A. Just in short. I think it's much more broad and very 2 detailed described in my witness statement. 3 Q. Yes. I think just for the transcript, I think in your 4 voluntary statement between pages 50 and 62 you set out 5 the reasons for design delay, and we'll take that as 6 read. 7 Also, in your main statement, we can go to that, 8 please, you provide a short summary there at page 92. 9 In paragraph 279, you say, five lines down: 10 "The design had not been completed pre-contract and 11 post-contract we had all the problems and disagreements 12 with TIE about things which affected the design, such 13 as: outstanding utility works which affected design; 14 disagreement about who paid for design changes ..." 15 Now, to pause there, what was the issue there about 16 disagreement relating to who paid for design changes 17 holding up design? 18 A. As I explained, through Schedule Part 4, we had clearly, 19 due to the Base Date Assumptions, identified what was 20 part of our contract price and whatnot, and design 21 changes, due to misalignments, or due to changes 22 occurred through third party approvals, or even through 23 utilities, were not part of what we had to pay. So we 24 had to go through the Notified Departure mechanism to 25 get first tie notified about them, then to submit 68 1 a design estimate. This, you would have to agree and 2 tie should have issued a tie change order just for the 3 design, and in much cases this doesn't happen. So we 4 couldn't agree it, and that stopped the design actually, 5 because the designer was not progressing because he 6 wouldn't receive money for the works. 7 Q. So is it correct to say that the underlying dispute 8 between tie and the consortium was one of the factors or 9 reasons for design being delayed? 10 A. Yes. Definitely. 11 Q. Would you agree it was one of the main reasons for 12 design being delayed? 13 A. Yes, I think it was one of the main reasons why design 14 was delayed, because you can assume, if you have to go 15 on commercial risk by producing design and progressing 16 it without payment, this is not a high motivation to get 17 things done. 18 So -- and this -- that is something which continued, 19 happening continuously, and therefore it has affected 20 the design completion, definitely. One of the main 21 reasons. 22 Q. Thank you. Just to complete the paragraph in your 23 statement, other factors you list are: 24 "outstanding third party approvals and consents; CEC 25 involvement and interference and ..." 69 1 What did you mean by that, CEC involvement and 2 interference? 3 A. CEC played a role in the design approval process. We 4 had to submit our design through CEC approval authority, 5 and we have received an immense numbers of comments 6 through the design, goes into hundreds for the different 7 design elements, which were not always, I would say, 8 helpful or adequate: so that have affected as well 9 design completion. 10 In addition, there were other requests of CEC where 11 they have -- have never finalised design approaches when 12 it comes to, for example, Picardy Place, et cetera, 13 which haven't really helped finish off design, and they 14 had also other approaches in regards to improvement of 15 the inner city, which were very costly on and off-street 16 on certain structures, which were not really helpful in 17 progressing and finalising the design. 18 Q. Thank you. You also then, to finish off this, you refer 19 to: 20 "... and a very cumbersome design approval process." 21 Is that a reference to tie or the Council or both? 22 A. Both. 23 Q. Thank you. 24 I would like now, please, to look at some of these 25 reasons in a little more detail. 70 1 The question of the misalignment between the SDS 2 design and the Employer's Requirements, and also the SDS 3 design and the civils proposals. I think we've heard 4 evidence that these misalignments were to be discussed 5 and agreed in workshops after contract award. Were you 6 involved in any of these workshops? 7 A. No. Not really. That was more by the design team who 8 were participating in this from the consortium side. So 9 I was not really detailed involved in these discussions. 10 Q. Now, we've heard evidence, I think, that it had 11 originally been intended that these workshops would take 12 place quite soon after contract award in May 2008, but 13 in fact they didn't take place, I think, until perhaps 14 the very end of 2008 and really throughout 2009. 15 Do you know why there appears to have been a delay 16 in these workshops taking place? 17 A. No, I don't know. I wasn't -- I wasn't there. I also 18 don't know when they actually started. I can't answer 19 that. 20 Q. Thank you. 21 If we go to a document, it might help. It's 22 BFB00095823. 23 If we look at the top, please, we'll see it's an 24 email from Jason Chandler, sent 8 March 2011. So 25 I think it's at the time of Mar Hall. It's sent to 71 1 Kevin Russell and to yourself. I think in short, 2 Mr Chandler is responding to requests for various 3 information. 4 Go over the page, please, to page 2. About halfway 5 down we will see a reference to item 5. Do we see that? 6 "This is a schedule of the Changes that have arisen 7 as a result of the Misalignment Workshops post 8 Novation." 9 If we go to that schedule, please, it is 10 BFB00095824. Try and blow that up, please. 11 Thank you. We can see it's headed "EDINBURGH TRAM 12 NETWORK - MISALIGNMENT WORKSHOP CHANGES - MANDATORY TIE 13 CHANGES". We can see in the column five or six in, we 14 see a reference to "From BBS Change Notification" at the 15 top, and then a date. Do you see that column? 16 A. Yes, I see the column. 17 Q. It's quite hard to read. Under the date, I think the 18 dates are from January 2009 at the top. As we go down, 19 again, January 2009, April 2009, there's then 20 a reference to September 2009. And even at the very 21 bottom, into 2010. I think we see that further down, 22 January and April, even, 2010. 23 Is it your position you can't help us with -- as to 24 why these workshops appear to have taken place at quite 25 a late stage? 72 1 A. No, as I said earlier, I'm not even sure that this is 2 a comprehensive table including all misalignments. They 3 might be only the ones identified here which haven't 4 been agreed. I don't know, honestly. But from my 5 recollection, I think there were already development 6 workshops in 2008 happening, but I don't know actually 7 when they started and if they had not started directly 8 after our contract award, I can't answer this. I wasn't 9 there. 10 Q. Thank you. Now, you've mentioned in your statement, 11 I think you mentioned today, that in the majority of 12 cases tie did not issue a Change Order following the 13 workshops; is that correct? 14 A. In general that was, yes, their approach on it. Not 15 completely, some, of course, they have acknowledged and 16 also issued, but the majority they have refused to issue 17 tie changes. 18 Q. So they accepted some of these changes but not others? 19 A. Yes. That's right. 20 Q. Finally, on the question of misalignment, in your 21 voluntary statement, pages 50 and 51, you explain that 22 the CAF tram was bigger than the tram on which the SDS 23 design was based, with the result there was a larger 24 dynamic kinematic envelope, and the change in the DKE 25 impacted the tram stop, roads and OLE design. 73 1 So just to be quite clear, is it the case that at 2 contract award there was a misalignment between the size 3 of the tram and other aspects of the tramline that were 4 required, tram stop, roads and OLE design? 5 A. That's right, yes. The CAF tram was bigger than the one 6 which was originally anticipated in the SDS design. So 7 there was a misalignment which had to be sorted. 8 Q. To a layperson, that seems a fairly fundamental matter 9 for there to be a misalignment on before awarding the 10 contract. 11 A. That's right, yes. That had quite an impact on all 12 these issues you mentioned earlier, tram stops, OLEs, 13 other things, because you need more space to make 14 available for the future tram and the DKE, which 15 guarantees basically that there's no conflict. 16 Q. Moving on to another reason for delay in design, you 17 mentioned third party agreements, and I think in 18 particular the question of Picardy Place. Are there any 19 other areas, for example Forth Ports, did that continue 20 to be a problem? 21 A. It was throughout the line. As -- I just mentioned 22 Picardy Place because it was one of these absolute 23 outstanding, remarkable issues which couldn't be 24 resolved. There was Forth Ports. There was the 25 airport. There was Murrayfield, the Rugby Union, this 74 1 was Haymarket. This was throughout the line, there was 2 missing third party approvals about what needs to be 3 constructed. 4 Q. Thank you. A separate reason, you mentioned changes to 5 design caused by undiverted utilities. You give an 6 example in your main statement, if we can go, please, to 7 page 24. This concerns the South Gyle access bridge. 8 In paragraph 77 at the bottom of the page, you say: 9 "In various areas, the design could either not be 10 completed or constructed due to the incomplete MUDFA 11 Works. For example, at the location of South Gyle 12 Access Bridge, tie had not diverted an existing sewer." 13 Over the page, to cut the story short, at the end of 14 the paragraph, on the top of the page, you say, second 15 last sentence: 16 "The sewer was finally diverted by tie in late 17 2010." 18 So was that essentially an example of an area of the 19 track where work couldn't be undertaken because design 20 couldn't be completed for the reason you've set out? 21 A. Yes, here even different. The IFC, which is the issued 22 for construction design, was available on contract award 23 in May 2008, and a conflict have been identified with 24 the sewer which was even up to mediation or just before 25 mediation in 2010/2011 resolved. This is two years 75 1 after tie was aware that there is an issue. 2 So here was not the reason missing design. Here was 3 just that the conflict wasn't removed, and either the 4 design altered or the existing utilities were put into 5 place where the design could perform. 6 Q. Now, in a separate reason you mention in your statement 7 where, what you say is tie's mismanagement of the design 8 approval process. In your voluntary statement at 9 page 60, you say that between contract award and 10 March 2011, there were over 300 design changes, some by 11 the consortium, but the majority were raised due to the 12 Council new third party agreements or by tie. You say 13 this demonstrates a lack of control of the overall 14 project by tie and their inability to manage the Council 15 and other third parties. 16 Is there anything you wish to add to explain that, 17 or is that fairly self-explanatory in your statement? 18 A. I think it's self-explanatory. It brings the point 19 quite clear open which we faced there. 20 Q. Now, a separate point you raised in your statements is 21 the question of betterment and preferential engineering 22 by the Council. You referred to, by way of example, new 23 road pavements, high specification OLE poles, street 24 lighting columns, et cetera. How did these factors 25 cause delay to design? 76 1 A. Because they were altering the original design, which 2 were priced on the Infraco contract. So you had to go 3 through these design changes to get these issues of the 4 Council incorporated into the design, and this of course 5 takes time, and the change mechanism came into place 6 again. So it's not helpful to finish the design if 7 things get altered in that way. 8 Q. On a separate point, what changes did the consortium 9 instruct to the design and why? 10 A. Almost no -- none. The only -- the only consortium 11 changes were -- okay, first of all, a product of the 12 misalignment between the Infraco proposals, but they 13 were not directly instructed. Those were just due to 14 the circumstance that we have priced the Infraco 15 proposals. 16 I can't really recall any -- there definitely were 17 a few where we had out of our approach maybe the need to 18 change slight -- design, but the majority were basically 19 arising through the issues we explained earlier. 20 Q. I would like to put to you, please, a suggestion made by 21 Tony Glazebrook, who was employed by tie, with 22 responsibilities for design. In his statement to the 23 Inquiry he said that: 24 "Infraco changed many designs apparently to suit 25 their own design and risk agenda. This resulted in 77 1 further cost and time escalation. Finished design was 2 sometimes rejected by the Infraco themselves. They 3 appeared to distrust the existing SDS design." 4 Do you have any comments on that suggestion? 5 A. I disagree with the statement. I think it's not right, 6 and to make a statement is fine, then he could support 7 this with clear documentation where we have massively 8 changed the design. I don't think that have taken place. 9 Of course you have issues where you need to alter, but 10 I think the main driver of design changes was due to the 11 issues explained earlier and not what Infraco has 12 instructed. 13 Q. On another separate, but related matter, what was your 14 view in general on the performance of the SDS providers? 15 That's both Parsons Brinckerhoff and Halcrow. 16 A. As usual, in executing such a contract, not everything 17 is perfect. I think considering the circumstances in 18 which the SDS been already prior to novation facing the 19 difficulties and then after novation with all these 20 changes and circumstances, I think they have performed 21 quite okay. I would not call it a world class product, 22 but I think they did what they could do within their 23 remit, and they have delivered quite a reasonable -- 24 what was possible to deliver. 25 Q. Were there any aspects of the design in particular you 78 1 considered fell below the world class product standard? 2 A. Of course there were issues where they had also errors 3 and omissions which is normal in such a contract. 4 Nothing, as I said earlier, it was not always perfect. 5 Also they knew mistakes that had been identified from 6 our side and needed to be corrected. But that is 7 normal. If everything would run without error at all in 8 a five years' contract, I think then we would live in 9 perfect world, which you normally not have on 10 a construction project. 11 Q. Now, we've heard evidence that the design was being 12 worked on by different design teams in different 13 offices. Did that cause a problem, in your opinion at 14 all, or did that take place in other projects you've 15 worked on? 16 A. That's quite normal. Normally -- depending on what kind 17 of designer you have, if you work internationally, it 18 could be even that that works are done in different 19 countries. So's not even different offices. That is 20 nowadays, with digitisation of the world, was no problem 21 anymore. So I think that hasn't caused any problem if 22 they're not sitting all in the same office. 23 Q. In relation to Halcrow, at page 372 of your statement, 24 you said: we had some concerns in relation to the 25 performance of Halcrow. Parts of the design were taken 79 1 back from Halcrow to Parsons Brinckerhoff. 2 Can you explain that, please? So sorry. It's at 3 page 72 of your main statement, in paragraph 215. 4 Can you explain what your concerns were as to the 5 performance of Halcrow and separately can you explain 6 which parts of the design package were re-allocated to 7 Parsons? 8 A. If I recall correctly, I believe Halcrow was in charge 9 for the roads design, or within SDS. And they had -- 10 our concerns were that -- there were two issues. One 11 were that they, from our side, have been also in certain 12 submissions late, but in general we have seen that 13 Halcrow have received enormous numbers of comments to 14 the design submitted for approval, they were in hundreds 15 sometimes, or a few hundreds comments on a design 16 package. So that was -- some of these were definitely 17 not caused by Halcrow. So the number of -- there were 18 two issues. One was that the immense number of comments 19 they have received from CEC, tie on their designs, and 20 by going and reviewing through, we have also identified 21 that some of these comments which were on the minor and 22 could have been avoided, when finally resubmitting the 23 design for final closeout, they received again a huge 24 number of comments and even new comments which haven't 25 helped to finish the design; because if you go through 80 1 a process, actually, also the client side need to ensure 2 that they provide and forward all the comments, but if 3 you then get 40, 50 new comments to what have been 4 reviewed before, I think it's unreasonable approach, and 5 haven't helped. 6 So there was a general concern, both one of the 7 performance of Halcrow because they had more errors and 8 omissions within theirs caused by themselves than 9 Parsons, but on the other hand I think the majority was 10 also caused by tie and CEC. 11 Q. Can you remember what aspects of design were taken back 12 by Parsons? 13 A. I think that was at the end, the remainder of the roads 14 design which was done by Halcrow from the beginning. If 15 I remember correctly, but I'm not 100 per cent sure, 16 I think it wasn't to 100 per cent completed by Parsons 17 under the SDS. So I think they had made an internal 18 arrangement that they took over at the end to complete 19 the design of Halcrow. 20 Q. I would like to go to another document, please. It's 21 CEC00328711. It's the email at the bottom of the page, 22 please, from Baltazar Ochoa. If you go over the top of 23 the page, we see his title, please. We can blow up at 24 the top, I think we see Mr Ochoa is Bilfinger Berger's 25 change manager. What did he do as change manager? 81 1 A. He was part of the contract team, which was headed by 2 the contract manager Kevin Russell, and Baltazar was one 3 of the employees within the change team, which was 4 a pretty large team due to the nature of the changes 5 occurring. 6 Q. So was he involved in Notified Departures? 7 A. Yes. The whole change team was. 8 Q. Go back to page 1, please. We can read the text. We 9 see it's an email from Mr Ochoa dated 9 December 2009 to 10 yourself and Kevin Russell and Colin Neill, and it says: 11 "Please see attached legal opinion regarding MoU, 12 now agreement. I would like to discuss this issue at 13 your earliest convenience, since SDS is getting 14 nervous." 15 Can you remember why SDS were getting nervous? 16 A. No. 17 Q. Can you remember what this email was about? 18 A. Yes, I guess. I think this was a MoU which -- it could 19 be a MoU which we made with SDS to progress the design, 20 because out of outstanding approvals from tie side, so 21 we attempted SDS to progress the works, take the 22 commercial risk away from them, and guarantee payments 23 through our pocket, basically, which put ourselves under 24 commercial risk, that enabled them to progress and 25 complete the design. That could be this MoU, I think we 82 1 have done such an agreement with them to unlock the 2 situation because tie was refusing to accept the design 3 changes. 4 Q. So which party had suggested this MoU or agreement? 5 A. I think that was from our side. 6 Q. And -- 7 A. Because we couldn't get approvals on the Notified 8 Departures from tie, and we have seen that nothing could 9 progress. SDS was not willing to put more commercial 10 risk to themselves. So we decided that we take that 11 burden, to enable them to progress the design, and get 12 cost reimbursement through the consortium. 13 Q. So is this back to the issue we discussed earlier, that 14 because of the underlying dispute between the consortium 15 and tie, design wasn't getting progressed because of 16 this issue as to who was to pay for design? 17 A. That's right. 18 Q. I understand. 19 If we go over the page, please, to page 2, look at 20 the bottom -- the second half of the page. We can see 21 in quite small text an email from Suzanne Moir of 22 Pinsent Masons to Mr Ochoa, dated 9 December 2009. We 23 can see what's said underneath that: 24 "I have managed to look at the SDS MoU this morning. 25 I understand the purpose of the MoU is to get SDS 83 1 agreement to an acceleration of the design programme, 2 which they will sign up to in exchange for the 3 additional sums payable as set out in Appendix 3 ... 4 This is required because Infraco believe SDS may have 5 a successful defence in relation to any claim under the 6 SDS Agreement for late delivery of the design - as 7 a result of BB/Siemens failure to provide design 8 information, carry out the CIDR et cetera in time and in 9 accordance with the current design programme." 10 To pause there, do you remember what CIDR stands 11 for? 12 A. No, I was also looking at it, no. No, I don't know what 13 that is. 14 Q. I'm sure we can find that out from another source. 15 But also in that sentence, a reference to: 16 "... Infraco believe SDS may have a successful 17 defence in relation to any claim under the SDS Agreement 18 for late delivery of the design, as a result of 19 BB/Siemens failure to provide design information ..." 20 Had there been a failure by BBS and Siemens to 21 provide design information to SDS? 22 A. I think it was late 2009, prior to the adjudication on 23 the contractual background, and of course although our 24 interpretation was that we are right, which has been 25 proven through the adjudication afterwards, of course 84 1 there was a risk to that time in late 2009, it was 2 definitely not confirmed through these adjudications. 3 In that situation, of course, there was a risk to 4 Infraco that we might be blamed at the end of the day. 5 I think that is what is described here, in the email; 6 because we had no reassurance to adjudicated decisions 7 on these fundamental issues on the contract. 8 And therefore, there was a remaining risk at the 9 time to the consortium that this could have been ruled 10 differently. 11 Q. So was it the position that the consortium were 12 concerned that if the adjudications went against them on 13 the interpretation of the contract, the consortium might 14 be in a position where they received a valid instruction 15 to commence or continue works, but wouldn't be in 16 a position to do that because of incomplete design? 17 A. Of course that was a possibility, and because without 18 these -- we were convinced we are right. Otherwise we 19 had not progressed in that way. But since the 20 adjudication decision came only afterwards, there was of 21 course a minimal risk and we tried to mitigate this, 22 first of all, by this agreement we made with SDS, and 23 also, as many other projects, to unlock the situation, 24 as I think we've been quite correct in a lot of 25 approaches in this locked-up situation, to get things 85 1 progressed. And that was a way to get the design 2 progressed by SDS with commitment from our side to 3 reimburse the cost. 4 Q. Just reading on in the email, it states: 5 "This could result in Infraco being exposed under 6 the Infraco Contract if as a result of the OSSA ..." 7 That must be the on-street Supplemental Agreement; 8 is that correct? It's about halfway down the email in 9 the right-hand side. Do you see the reference to the 10 OSSA in, I think it's six lines down from the top. The 11 very right-hand side? 12 A. Yes, I see it. Sorry, I'm just reading it. Sorry. 13 Q. I'm so sorry. But I think the reference to the OSSA 14 must be a reference to a possible on-street 15 Supplementary Agreement? 16 A. That's right. The OSSA was the abbreviation for the 17 on-street Supplementary Agreement, yes. 18 Q. Which was discussed but never agreed? 19 A. It was discussed. It was very -- it was a joint 20 initiative for both parties to find a way forward. It 21 was discussed. We were submitting final proposal and 22 then it was rejected on grounds which are questionable. 23 Q. I'll just read that sentence again, if I may: 24 "This could result in Infraco being exposed under 25 the Infraco Contract if as a result of the OSSA or 86 1 success in the Adjudications, tie instructs or Infraco 2 become obliged to proceed with the works, - for which 3 there is no design at this time as a result of Infraco 4 failures as set out above." 5 Just to pause there, do you accept that there were 6 Infraco failures in relation to failing to provide 7 design information? 8 A. No. Not really. I think what -- what the main purpose 9 was here that of course if an OSSA could have been 10 agreed, which would have enabled us to work on the 11 on-street in early 2010, we have seen that the design 12 wasn't completed, due to the issues I explained earlier, 13 the non-approval of these Notified Departures, which tie 14 didn't approve; so what we tried here is to mitigate the 15 situation to get the design progressed, that in case an 16 agreement would be made or other instruction would come 17 in that the works could progress on a completed design. 18 Q. Reading on: 19 "However, Infraco also believes that SDS is culpable 20 for some of the delay ..." 21 Now, to pause there, did you consider at the time 22 that SDS was culpable for some of the delay? 23 A. Yes, of course. As I explained earlier, none of the 24 parties were perfect, and this counts also for SDS. 25 Even for Infraco, but as well as for tie and CEC. So 87 1 I would dare to say we were perfect and we have done 2 everything correctly, but it was not really the dominant 3 factor here, in the whole situation which we faced. Of 4 course there was also some culpability of SDS which have 5 been addressed, and we have also done deductions for 6 monies which they were due, due to non-performing 7 correctly were then deducted. Which was quite normal. 8 Q. What matters do you consider, looking back, that you 9 think the consortium could have done better in relation 10 to the design process? 11 A. I think it would be wrong to say we -- we have done 12 everything perfect. There are definitely elements which 13 could have been done better and approved. It's 14 difficult to identify them here, but once more, I think 15 what I tried to express earlier, the dominant factor 16 here was not the consortium delaying anything or haven't 17 done perfect. 18 The dominant effect on the design progression was 19 the immense number of changes not agreed, the immense 20 number of identified misalignments, the outstanding 21 approvals, as we all mentioned. So that was actually 22 the factor which doesn't actually enable the designer to 23 complete in an early stage. 24 Q. Just finishing off this sentence, I'll start again: 25 "However, Infraco also believes that SDS is culpable 88 1 for some of the delay, - but intend to deal with this 2 issue 'after the fact' given the potential exposure as 3 a result of the design being incomplete and the need to 4 have SDS 'on side' to assist with future ND claims." 5 The reference to the intention to deal with this 6 issue, that's SDS's culpability for delay, after the 7 fact, what's that a reference to? 8 A. I could only guess. I think it was to that time not to 9 confront with SDS with deductions, because the MoU -- 10 the purpose of the MoU was to get them motivated to 11 progress the design and not scare them with deductions. 12 So we decided to bring these issues later on. I think 13 that's the phrase we used. 14 Q. Lastly, the reference to the need to have SDS on side to 15 assist with future ND claims, what was that a reference 16 to? 17 A. I think that refers to Notified Departures. As you 18 know, SDS was previously working for tie, where we had 19 no knowledge of what was discussed, and what was the 20 purpose of -- the basic design was progressing; to 21 enable us to identify Notified Departures properly, we 22 needed the assistance of SDS, because they actually 23 identified what is different and why the differences 24 occurred between what was originally provided and what 25 was finally coming out. 89 1 So that was the reason where they gave assistance. 2 Also, with the design estimates and identifying what was 3 the purpose of the change, because it was not just 4 an estimate. You needed also a description why and what 5 have changed, and there we needed the assistance of SDS. 6 Q. Thank you. Go over the page at page 3 of this email, 7 please, to read on. Under the second bullet point at 8 the top, we see under "Siemens involvement", the 9 comment: 10 "I see from the comments Siemens do not want to be 11 a party to the MoU." 12 To pause there, can you remember why Siemens didn't 13 want to be a party to this agreement? 14 A. I think that was the nature of the issues outstanding. 15 The majority of these issues were concerned through the 16 civil works and not really to Siemens' scope, and that's 17 why they were hesitant, partying this agreement. So it 18 was an initiative from Bilfinger's side because the 19 majority of these issues were related to civil works 20 which would have been also the ones which would be 21 progressed first before the Siemens work would come into 22 play. 23 Q. Then reading on, we see a reference in the next bullet 24 point to clause 11.5 of the Infraco contract which we 25 looked at earlier. And the email states: 90 1 "This clause requires tie's written consent to any 2 amendment of the SDS Agreement. However, a new 3 agreement which does not seek to amend the original 4 agreement does not require tie's consent." 5 Then after the two sub-bullet points, the paragraph 6 picks up: 7 "The attached mark-up proceeds on this basis - and 8 characterises the agreement as being an agreement for 9 additional resource in order to allow BBUK to satisfy 10 its obligation to mitigate under the main contract. It 11 is a bit of stretch - and we couldn't guarantee that an 12 adjudicator would not take the view that it is in 13 reality an amendment to the SDS Agreement, but it would 14 at least give you an argument on the issue." 15 What was the position? Was this in reality an 16 amendment to the SDS Agreement? 17 A. It wasn't clear. It was the legal advice from our 18 colleagues from Pinsent Masons on the contract, and the 19 nature. 20 We anyhow have decided to execute this agreement 21 because we wanted to unlock the situation, and even with 22 these concerns, taking the risk here by finding 23 a mechanism to mitigate the situation. 24 Q. Now, I think it's the case that tie asked to see a copy 25 of the agreement and weren't provided with a copy. Is 91 1 that correct? 2 A. That came later, I believe. I think they were by 3 default copied in to email chain, because this was the 4 coincidence that the -- was it the Colin surname? Given 5 name? Which was -- so by error, they have -- they had 6 inside that we are working or negotiating such an 7 agreement. They have confirmed that they have deleted 8 it from their database, which was not true, and I think 9 we got in a later stage -- was it a termination or 10 under-performance notice, with a request to providing 11 this agreement, if I recall correctly. 12 Q. It's correct to say that tie weren't provided with 13 a copy of the agreement? 14 A. Pardon me? 15 Q. Is it correct to say that tie were not provided with 16 a copy of the agreement? 17 A. To that time, no, they haven't got a copy of this 18 agreement. Later, yes. 19 Q. So your position is they were provided with a copy of 20 the agreement later? 21 A. I think we had to provide -- we have provided later 22 a copy. I'm not 100 per cent sure, but I think that was 23 one of these termination notices or underperforming 24 notices which we received. I can't recall really, but 25 there was something on that topic and I think in the 92 1 occurrence of that letter, we have then provided that 2 agreement. But I'm not 100 per cent sure. Sorry, can't 3 recall. 4 Q. I may be corrected, but I think we have heard evidence 5 from the tie witnesses that they were never provided 6 with a copy of the agreement. 7 A. You might be right. As I said, I'm not 100 per cent 8 sure. It's quite a stretch away, I think we talk here, 9 that is almost six years ago. So I'm not 100 per cent 10 sure. You might be right that they have never got it, 11 but ... 12 Q. Is there any reason why the consortium would not have 13 given tie a copy of the agreement? 14 A. First of all, there -- to us there was no need to 15 provide them, because we believed we are entitled to 16 make such an agreement with SDS. The reason why we 17 haven't provided them or informed them officially to 18 that time was that we have been in a very difficult 19 situation with them, as you are aware, contractually in 20 a lot of issues. There was this contract clause, as we 21 have seen here, that you need prior to execute any 22 amendment to the agreement, the written approval of tie. 23 We wanted to avoid this because we were not expecting to 24 get this. As we have seen failure on their side 25 throughout in issuing these changes, so we have decided 93 1 for ourselves to take the commercial risk, to mitigate 2 the whole situation, to get design progressed. 3 Q. Was there any concern within the consortium that if 4 a copy of the agreement had been provided to tie, that 5 that might be seen as an acknowledgement on behalf of 6 the consortium that the consortium and/or SDS were 7 responsible for some of the design delay? 8 A. No, I don't think so. I think it -- as I said, the 9 reason entering into this agreement was really to 10 mitigate the situation and get design progress, which 11 was hold up by the non-issuing of tie Change Orders. 12 Q. Could I also please clarify one matter. Page 53 of your 13 main statement. 14 In paragraph 162, we should perhaps start on the 15 previous page, please, page 52. At the bottom, 16 paragraph 162: 17 "At a subsequent tie/BSC meeting on 21 June 2010, it 18 was noted in the minutes that Kevin Russell advised that 19 there was one additional agreement in place between BSC 20 and the SDS Provider. Its purpose was to unlock the 21 design change issue which was held up by tie. This is 22 reference to the agreement I refer to in the preceding 23 paragraph. The agreement incentivised PB to speed up 24 the completion of the design, and reduced the risk of 25 having a claim against us." 94 1 A few lines down, a sentence: 2 "This was referred to as incentivisation - finishing 3 off design without tie's knowledge." 4 It's that part, finishing off design without tie's 5 knowledge. What did you mean by that? 6 A. First of all, it was, as I said, the confirmation that 7 an agreement was existing, was -- was clear because they 8 have received this email. So they were aware about it. 9 So we have clearly acknowledged that we have made an 10 agreement. That is what this paragraph on the top 11 refers to. 12 And as I said earlier, these adjudication decisions 13 were not yet in place, and we had the feeling that tie 14 had a clear strategy in saying -- nailing us down, 15 I would call it, and there was a purpose why they 16 haven't issued these tie changes which were under the 17 contract the clear obligation to be issued to progress 18 the design. 19 So I think they had a strategy to use the 20 non-issuing of tie change orders to put the default 21 position on us, and that is why we have progressed the 22 design without their knowledge. 23 Just to mitigate the situation, and ensure that 24 design was available when it was needed. 25 Q. So do we have a situation where a design was being 95 1 developed and completed by SDS without tie being told 2 that was happening? 3 A. We were managing SDS, not tie, under the contract. 4 I misunderstand your question. 5 Q. Yes. I'm just trying to clarify this question of 6 finishing off design without tie's knowledge. From what 7 you've said, it seems to be as a matter of fact that 8 design was being undertaken and finished off without 9 tie's knowledge. Is that correct? 10 A. Okay, tie were assuming that the design was not 11 progressing, because they were not issuing the tie 12 Change Orders which were required under the contract, 13 which happened for a long time, because SDS didn't want 14 to go further into commercial risk. So it was obvious 15 that the design was not progressing. 16 So that is meant without the tie knowledge. With 17 this agreement which we made, we basically incentivised 18 SDS to progress with the design and complete it, and to 19 submit it for final approval. So I think that's the 20 factual circumstance around this issue. 21 Q. But was it the case that design was being undertaken or 22 finished off without tie's knowledge? 23 A. What do you want? I don't get your point, Mr Mackenzie. 24 What is without tie's knowledge? 25 Q. It's simply the wording in your statement. Do you see 96 1 in your statement about six lines down, possibly seven, 2 the sentence begins on the right-hand side: 3 "This was referred to as incentivisation, - finishing 4 off design without tie's knowledge." 5 Do you see that? 6 A. Yes. As I said earlier, tie were under the assumptions 7 that the design is not progressing due to the 8 outstanding issuing of tie Change Orders. That was the 9 normal circumstance. We were not progressing the design 10 because we were not -- the designer would not get paid 11 by tie, which was part of the contract. 12 So tie assumed the design is not progressing because 13 they were not paying for it. With this agreement we 14 basically enabled the SDS provider to complete the 15 design and progress it, and of course that is the 16 meaning of "without tie knowledge" because we made the 17 agreement with SDS to progress the design. Therefore we 18 assumed tie didn't know it, but of course, as they were 19 well aware about this agreement, they had to know that 20 the design was progressing. 21 CHAIR OF THE INQUIRY: When the design was completed by SDS, 22 would tie become aware of that, finally submitted for 23 final approval? 24 A. Yes. Latest, my Lord, when the design was submitted, 25 then the latest they have seen that the design was 97 1 there. 2 MR MACKENZIE: Finally on this point, was it the case that 3 tie assumed that design was not progressing because of 4 the Notified Departures, but the reality was design was 5 progressing in the background because of this agreement? 6 A. Yes. Yes. 7 Q. Without tie knowing that? 8 A. To a later stage they have known. Not in the beginning, 9 because, as I said, they were not from the beginning 10 aware that we have made such an agreement. 11 Q. Was that a deliberate tactic or strategy on the part of 12 the consortium not to tell tie that design was in fact 13 progressing in the background? 14 A. Mr Mackenzie, I believe you have read quite a lot about 15 this contract and what happened. I think we've been -- 16 over my 30 years of profession, I have never experienced 17 such a client. I have seen good clients and bad 18 clients. tie was on the top on the negative scale. 19 Completely unreasonable, unprofessional, and not acting 20 as a reasonable client. 21 And they had a strategy right from the beginning, 22 even before signing the contract, to exercise the 23 contract and turn us down. I have seen afterwards 24 documents which I was not aware before, where they 25 clearly documented their strategy, and the way they 98 1 behaved was -- was for me something which I hope not to 2 experience again in my professional life. 3 And of course, we also had to defend ourselves and 4 we had to find a way forward how to mitigate things, and 5 not put further risk to our companies, and that's what 6 we have done here. Nothing else. 7 Q. I understand all of that. I'm simply trying to 8 establish the facts. And my question was: was it 9 a deliberate tactic or strategy on the part of the 10 consortium not to tell tie that design was in fact 11 progressing in the background? 12 A. I wouldn't call it a deliberate strategy or whatever. 13 It was to mitigate the situation to reduce the risk to 14 the consortium. 15 Q. So the consortium's position they adopted in that regard 16 was against the background of the contractual dispute; 17 is that fair to say? 18 A. Can you repeat that, please? 19 Q. Yes. So the position the consortium adopted in entering 20 into this agreement and progressing the design in the 21 background, that was really a response to or has to be 22 seen in the wider context of the contractual dispute 23 with tie? 24 A. Yes, that's correct. 25 Q. I will give the reference in passing without going to it 99 1 for the transcript. The draft agreement referred to in 2 the email is CEC00328712. We have also a signed copy of 3 the agreement, it is BFB00112154. 4 I would like to move on, please, to the question of 5 value engineering. 6 CHAIR OF THE INQUIRY: Before doing that, you've made 7 a number of criticisms of tie, and one of the criticisms 8 was in relation to tie's management of the approval 9 process and tie's inability to manage the Council. 10 I just wondered what you meant by that. How do you 11 expect tie to manage the Council? 12 A. Okay, maybe the words "tie to manage the Council" are 13 maybe not the right ones, but there were many 14 occurrences where there were -- a role which tie had to 15 play as an interface between Council, third parties et 16 cetera, which for my opinion, or our opinion, they 17 haven't really properly fulfilled, which have caused 18 delays which were unreasonable to great extent, the way 19 they were coming forward. There could have been much 20 more done from their side to reduce the impacts and the 21 changes in open discussions in meetings with the Council 22 to get this number relatively down, which actually 23 happened after mediation, with the new governance 24 structure in place after mediation, the impacts through 25 that were absolute minimal. They still all occurred -- 100 1 when we signed the mediation and when we started 2 working, we had the same issue there, and most of these 3 were sorted in a smooth way without affecting programme 4 costs. 5 CHAIR OF THE INQUIRY: In a similar vein you mentioned -- 6 you were asked about betterment and preferential 7 engineering, and you gave examples of the high spec OLE 8 poles and high spec of pavement, and what have you. 9 Were these requirements of the Council planning, as 10 a planning authority? 11 A. Yes, my Lord, I think that came from Council planning, 12 which was -- it's nice to have, but it costs a lot of 13 money, knowing the budget problems which tie or the 14 Council had, sometimes you need to put your limits in 15 a different order to make these things happen. They 16 haven't helped because it have held up the design 17 because these were all additional requests which came 18 in. 19 CHAIR OF THE INQUIRY: Had you ever worked in 20 a World Heritage site, apart from Edinburgh? 21 A. Myself? 22 CHAIR OF THE INQUIRY: Yes. 23 A. Yes. Of course, on other projects. On -- we had 24 similar occurrences -- maybe not of the same nature, but 25 on other projects, similar. 101 1 CHAIR OF THE INQUIRY: So is your experience from that other 2 project that planning requirements might be a bit 3 stricter in a World Heritage site than in a site which 4 isn't? 5 A. Yes, there are. I think we -- it was pretty much -- we 6 or everybody was pretty much aware that there were 7 budget concerns right from the beginning on the project. 8 And of course, as I said, it's nice to have a high 9 product when things does allow for. So I think you need 10 to find the right balance, and we haven't seen at all 11 that there was any balance. It was partly ridiculous, 12 what was requested, and as -- what I meant earlier, 13 manage CEC or tie manage CEC have been proven, actually, 14 after the mediation, that with this new governance 15 structure in place, that it worked. There were exchange 16 and there were clear discussions and this was kept to 17 a minimum to allow works to progress in an efficient 18 way. 19 CHAIR OF THE INQUIRY: Do you have any other suggestions as 20 to how these conflicts might have been avoided? You've 21 mentioned co-operation and discussion, but if, for 22 instance, the higher specification OLE poles had come in 23 at the very beginning, would that be something that 24 might have improved the situation? 25 A. Of course. As earlier you were aware about them, it's 102 1 easier to consider and to incorporate in design, 2 et cetera. Things -- certain things came very late. So 3 of course it would help if information about these 4 requirements come to an early stage. 5 CHAIR OF THE INQUIRY: Yes. Thank you. 6 MR MACKENZIE: Thank you. 7 On the question of value engineering savings, can 8 you recollect to what extent, if at all, the redesign or 9 changes to design were required in an attempt to achieve 10 value engineering savings? 11 A. Okay, the contract included passages with value 12 engineering which -- which were outlined within the 13 contract, if I recall correctly. 14 The problem was here also that most of these value 15 engineerings would have been instruct -- would have to 16 be instructed right early in the contract, since from 17 May 2008, which didn't happen, which for when I arrived 18 in March 2009, not all, but a great number of these 19 value engineering identified were not be able to realise 20 any more. It was the brief I got when I came actually 21 to the project. 22 Q. So does that mean that the time you arrived, it was 23 almost too late to achieve these savings? 24 A. Yes, not for all. For some of these, yes. Some were 25 then still progressed, even to my times. And we tried 103 1 to -- to achieve whatever was able to achieve, with 2 the -- with the interference through third parties, 3 et cetera, requesting even complete different structures 4 and outlines, many of these were not realised. 5 Q. Yes. On the question of interference, if we go, please, 6 to page 64 of your main statement, in paragraph 192, we 7 see there you say: 8 "We did what we could to review these. A lot of the 9 best value considerations were subject to major 10 interference by tie and CEC. Requirements from CEC or 11 a particular third party did not always align with the 12 best value for the Project." 13 Are you able to give any examples in relation, 14 perhaps, to any particular areas of the works, or is 15 that just a general comment? 16 A. No, I think it's a general comment. I hardly recall 17 the -- there were quite a number of value engineerings 18 identified in this Schedule Part 4 of the contract. 19 I recall one, I think, was, if I'm not completely 20 wrong, was Roseburn viaduct, but I don't get the details 21 together anymore. So -- but there were, through the 22 requirements of third parties, in a lot of instances, it 23 was not possible to realise the identified value 24 engineering. 25 Q. I think we have heard evidence from other witnesses that 104 1 as a matter of fact, very little of the value 2 engineering sums set out in the contract were achieved; 3 is that something you have any knowledge of? 4 A. Yes, that's what I tried to say earlier. Yes, as 5 I said, very little of these identified value 6 engineerings could be materialised, yes. 7 Q. I would like to go on to another matter, the question of 8 the utilities. We have touched upon this a little 9 already. Are you able to give just a short overview or 10 summary of the main difficulties caused to the 11 consortium by diverted utilities? 12 A. Yes, I can try to do this. 13 The contract specifies basically that the MUDFA work 14 should have been completed prior to contract signage. 15 Shortly in advance of the contract or just after, 16 I think there were identification to finish end of 2008, 17 which was also not true reflection. This information 18 was provided by tie. 19 We had then instantly requested information updates 20 about the MUDFA works, which they have refused for 21 a long time to provide us. I think the first time 22 I recall was that we got then something in 2009, which 23 was the MUDFA 8 programme, which showed a tremendous 24 delay of the utility works, and so -- and that 25 continued, basically. Afterwards we got only few 105 1 information about the actual states. We got site maps, 2 identifying. We never got really as built information 3 of what had been relocated or not. 4 So we had a very uncomplete picture which tie 5 were -- purpose most probably was not willing to share 6 with us, I would say, because it was the dominant delay 7 on the project. It has clearly identified that the 8 project is delayed due to this. And therefore they were 9 not very keen to provide us with this information. 10 Later on we got then a bit more, and we had tried to 11 incorporate this into the programmes to identify the 12 effect which it had, because the main condition is that 13 the contract was on the basis that all utility works are 14 completed. So that we would have free access to get in 15 there, without having to deal with utility relocations, 16 and this was unfortunately not the case. 17 As you may have heard, when we went into mediation, 18 we had also within our opening presentation a video just 19 for the Haymarket-Shandwick stretch which identified 20 more than 200, 200 clashes just on this stretch, just on 21 this stretch. And after mediation tie acknowledged that 22 there were still in 2011, where the contract was 23 basically almost completed, the original contract 24 period, I think we were month 34 out of 38. So four 25 months for the original completion of the contract 106 1 period. There were more than 700 clashes remaining, 2 which we had to deal with during the execution after the 3 mediation. 4 Q. Thank you. Now, you have mentioned that tie failed to 5 provide the consortium with regular MUDFA programmes to 6 allow you to plan your works. You also, I think, 7 referred to tie intimating revision 8 of the MUDFA 8 programme. I'll give the reference without going to it. 9 That was a letter by Mr Bell dated 30 April 2009. It's 10 CEC00322635. I think under that programme, it 11 anticipated project wide completion of the MUDFA works by 12 December 2009. 13 Is that correct? 14 A. Yes, I recall that, yes. 15 Q. I think in your voluntary statement at page 44, you said 16 that was the first time that tie had formally 17 communicated anticipated completion dates for the MUDFA 18 works across the project; is that correct? 19 A. That's correct, yes. 20 Q. You also, I think, said that that resulted in the 21 consortium intimating an INTC in relation to the change 22 in the MUDFA programme number 429. I think that was for 23 GBP4.3 million; is that correct? 24 A. Yes, I believe so, yes. 25 Q. To continue this line, if we can go, please, to page 100 107 1 of your main statement, page 31, paragraph 100, we can 2 see paragraph 100, you say: 3 "In February 2010 - and at our insistence - tie 4 started to provide, on a monthly basis, access maps 5 showing where Infraco had access to areas of the 6 site ... However, even this information was misleading 7 and differed from other information we received. By 8 doing a cross-check against other documents, letters, 9 Change Orders, et cetera, we prepared another INTC 10 (number 536). This was submitted in January 2010. We 11 followed that up with a further Estimate, which this 12 time included costs of circa GBP40 million plus 13 4 million euros on 17 September 2010." 14 Are you able to explain why was there such a big 15 difference between the previous INTC in relation to 16 MUDFA revision 8 and the later one, which was for 17 GBP40 million plus? 18 A. Can you just recall or show me what the first one was? 19 Q. Yes. We'll come to the INTC, the relevant change 20 register, shortly, but I think the first one was 21 number 429, I think was intimated in July 2009 for 22 GBP4.3 million. So that was the one, I think, that had 23 been triggered by the consortium being sent MUDFA 24 revision 8. What you have explained in paragraph 100 of 25 your statement is that there was then a -- in 2010, 108 1 there was another INTC number 536, the estimate of which 2 was for about GBP40 million plus 4 million euros. 3 A. Hard to recall what -- the time difference from 4 July 2009 to September 2010, from -- 15 months ongoing 5 MUDFA delay. So I only guess that the delay identified 6 in 2009 was by 15 months almost shorter, or not 7 15 months, but due to this slippage or this period from 8 these two dates, I assume that the delay of the works 9 have been increased drastically compared from July 2009 10 to September 2010, which explains most likely the raise 11 of the sums. 12 Q. Thank you. 13 Could we go then, please, to page 25 of your 14 statement, on a separate but related point. In 15 paragraph 78, this relates to the as-built MUDFA 16 drawings. About halfway down this paragraph, you say: 17 "We subsequently requested the MUDFA as-builts from 18 tie. When these were not issued, we formally requested 19 the as-builts in August 2009." 20 Three lines up from the bottom, you say: 21 "tie responded in March 2010, some seven months 22 later, providing only a small percentage of as-builts 23 with limited and inaccurate information contained 24 therein." 25 So clearly what you are describing there is a delay 109 1 in providing the as-built MUDFA drawings, and when they 2 were provided, they were incomplete; is that correct? 3 A. That's correct, yes. 4 Q. Now, it may be self-evident, but what difference did 5 that cause the consortium? 6 A. Because we needed for our planning of the works, but 7 also for the design, if there were alterations required, 8 this as-built information, which were -- the contract 9 also required to provide us. They have never done this, 10 or only to a very small extent, which didn't help, and 11 we believe afterwards now there was a purpose by not 12 providing this. This would have been reasonable to 13 provide because you needed for the execution of the 14 works in regards to health and safety concerns because 15 you need to know where the utilities are. Otherwise you 16 may risk life or damage to public or to the persons 17 working on site if you don't know what you expect down 18 there, and therefore it is requirement under the 19 contract to provide these things. We have never 20 received this information. 21 Q. Thank you. Moving on, in your voluntary statement at 22 page 42, you say the utility diversions were finally 23 completed in late 2013. So that's about, I think, 24 a five-year delay. At the time of contract award, it 25 was anticipated it would be complete by the end of 2008. 110 1 In fact it was the end of 2013. 2 Have you experienced in any other project you have 3 been involved in, such a significant delay in dealing 4 with the utility diversions? 5 A. No, not at all, and I was even personally present in 6 other contracts, similar nature, where you had to deal 7 with an extent similar to what we have seen here in 8 Edinburgh. This identifies also that there was a huge 9 proportion of mismanagement in the MUDFA works because 10 this is not normal. Absolutely not normal, and out of 11 what you normally experience on other European projects. 12 Q. Could I also please go to your voluntary statement, 13 TRI00000118. In paragraph 10.27, which we should find 14 on page 55, sorry, if we go to two pages, please, to 15 page 57. Yes, in 10.27, in relation to Scottish Water, 16 in the third last -- second last sentence, you say: 17 "Scottish Water was the most difficult third party 18 to deal with. It had been reported to me that at times 19 it felt more like a Scottish Water Asset Improvement 20 Project with the potential of a tram at the end of it 21 rather than a tram project." 22 Again, it may be self-evident, but what did you mean 23 by that? 24 A. I think that's relatively clear reflection what our 25 impression was, how Scottish Water was acting here on 111 1 the project. And we only got this under control after 2 mediation with the new governance structure, and quite 3 strict involvement of CEC, and in weekly meetings with 4 the presence of high level of Scottish Water. So this 5 was even a big issue after mediation, but it got under 6 control. 7 Q. Thank you. I would like to move on to a different 8 issue, please, the question of programme difficulties. 9 Now, we've heard evidence, of course, that there was 10 a known misalignment to contract close between the SDS 11 programme version 26 and the construction programme 12 which was to result in a Notified Departure. 13 Could I check, please, under Schedule 4, the Pricing 14 Assumptions. It's USB00000032. This is Schedule Part 4 15 of the Infraco contract. 16 If we go to page 6, please, we see, please, Pricing 17 Assumption 4. This provides: 18 "That the Design Delivery Programme as defined in 19 the SDS Agreement is the same as the programme set out 20 in Schedule Part 15." 21 That was, I think, the Pricing Assumption triggered 22 immediately following contract close, and Notified 23 Departure was sent in relation to the SDS version 26 24 mismatch. 25 I think I'm also right in saying we've heard 112 1 evidence that I think in December 2008 agreement was 2 reached in relation to an extension of time for seven 3 weeks, and prolongation costs of about GBP3.5 million. 4 Does that accord with your recollection? 5 A. I think it's not 100 per cent correct. I think it took 6 another eight months to get the costs agreed. I think 7 in December 2008 only the time element was agreed, which 8 took from May to December, where both parties have 9 acknowledged that there was a misalignment, which 10 already identified in what situation we've been, because 11 it should have been basically agreed to -- right after 12 contract signage, and then from December 2008 to where 13 I wasn't even involved to August 2009, I believe, it 14 took to get cost agreed. 15 So we basically were 14 months -- we needed 14 16 months to get a change agreed which was known when the 17 contract was signed, which was completely ridiculous 18 from our opinion. 19 Q. I think there was also a revision to the Construction 20 Programme agreed, revision 1; is that correct? 21 A. Yes, I believe so. Yes. 22 Q. Is it correct to say that that revision 1 was based on 23 SDS Programme version 31 which was the version of the 24 design programme at contract close? 25 A. Yes, I think that were the 7.3 weeks extension which 113 1 then reflected from revision 0, revision 1, which was 2 then the contractual programme. 3 Q. I think you've also said in your statement that 4 Construction Programme revision 1 was the only revised 5 construction programme that was formally agreed? 6 A. Yes. There were attempts afterwards to get programme 7 agreed identifying the other impacts discussed earlier. 8 MUDFA, design delays, et cetera which we were never able 9 to agree with them. 10 Q. Could I ask a point of detail. Pricing Assumption 4, 11 we're looking at on screen. So we know the first 12 Notified Departure was in relation to SDS version 26. 13 What happened when there were further slippages to the 14 SDS design programme? We've heard about the versions 15 going up to way beyond 26. Did that trigger further 16 Notified Departures under this Pricing Assumption or did 17 design delay result in other Pricing Assumptions being 18 triggered? 19 A. I believe -- I believe it was a combination of both. So 20 what we had tried with the submission of other 21 programmes afterwards was to identify a combination of 22 the delays which occurred, which was partly design, 23 which was MUDFA, which was other issues. 24 So I think we had -- we had issues, issued other 25 programmes, revision 2, and if I recall correctly, 114 1 revision 3, with more information than later on, which 2 identified the combination of both. 3 Q. Again, it's a point of detail. But can you recall 4 whether the consortium issued any further Notified 5 Departures for system-wide design delay, or did they 6 instead issue Notified Departures in relation to 7 particular design items being late? 8 A. I think you cannot isolate it on just one design 9 occurrence, or delay on one simple or single design 10 delay, because this is much more complex, and I think -- 11 I think this is very sophisticated exercise to 12 incorporate all this delay which occurred on this 13 project into a programme which take consideration of the 14 circumstances which happened. 15 So I think you cannot nail it down to one single 16 delay. It was -- it was an ongoing thing and was also 17 very difficult to identify due to the absence of the tie 18 changes, because without having a change, you don't know 19 actually when you can execute the works and which impact 20 it have. 21 So it was -- it was a very complex and sophisticated 22 exercise to take assumptions partly, to realise or to 23 analyse the total delay of the project, because you have 24 no sound background, only what was available as we have 25 seen. MUDFA was consequently delaying further, and you 115 1 had always to base it on the best information available. 2 So you can't really -- if you refer now to design, to 3 say this bridge have delayed the project by X weeks. 4 You can't do this. This is much more completion. 5 Q. Thank you. On a similar theme, go back to your main 6 statement, please, at page 32. In paragraph 101, you 7 say: 8 "Even at this stage ..." 9 So this is in the second half of 2010: 10 "Even at this stage we were reporting delay against 11 Infraco Programme Revision 1 as tie steadfastly refused 12 to acknowledge the delay we were reporting and had not 13 agreed an updated Programme. We were reporting against 14 a very out of date Programme. Again, tie refused to 15 accept our Estimate and raised many of the points they 16 had raised in MUDFA 1. It is worth putting some of this 17 into context. By the time we went to Mediation in 18 March 2011, we were 34 months into the original 38 month 19 Infraco Contract period. Even at that stage tie could 20 not provide any certainty as to the sequence and timing 21 for completion of all the MUDFA Works. This had 22 a massive effect on our ability to progress the works. 23 By refusing to even acknowledge the effect this was 24 having, and continually stating that we could mitigate 25 any delay, tie were simply exacerbating an already very 116 1 difficult situation." 2 Now, I think you also make reference somewhere to 3 the consortium starting to record progress against 4 Programme revision 3A, even though that was not agreed. 5 Can you explain that, please? 6 A. Yes, okay. You can see this from the statement. 7 Contractually we are -- we were obliged to report 8 against the agreed contract programme, this was 9 revision 1. In March 2011 the contract was almost 10 completed from a time consideration, and we had to 11 report contractually against this revision 1 programme 12 which of course brought completely unrealistic end 13 dates. 14 So -- because it was still not moved. So it was 15 basically confirming, we finish in four months, out of 16 the circumstances, and issues you have heard earlier, it 17 was completely unrealistic. 18 There was a time when we started parallel to 19 reporting against the contractual programme about a more 20 realistic programme which was a basis of what we had 21 submitted and tried to agree with tie. I think it 22 started with revision 2. 3, 3A, I don't know exactly 23 about the names of these programmes, but we had 24 basically with more information available constantly 25 updated the programme. We had also joint initiative 117 1 through the schedulers of tie and ourselves to analyse 2 this, and to agree on a programme, but when it came at 3 the end, to agreeing something, they have rejected it. 4 They have constantly rejected. They have not 5 acknowledged the delay. I think they had problems to 6 report this back to the Council because it then would 7 have been obvious. Later on it became obvious, but in 8 the early stage, I think they had hoped to get away with 9 it, and somehow -- I don't know. As I said earlier, 10 a completely unprofessional approach from the client 11 side. 12 Q. Had you experienced these programming difficulties in 13 any other projects you'd been involved in? 14 A. Yes, of course. Some, but not in this extent. Client 15 is always interested in general to keep the contractual 16 programme. Here it was so massive. This kind of 17 experience I had never on other projects. 18 Q. Just before I finish the issue of programming, I'll 19 refer without going to it, there is a letter from 20 yourself to Mr Bell, dated 1 March 2010, which sets out 21 the consortium's position on the programming 22 difficulties. That's CEC00578330. So that's just there 23 to go in the transcript at the relevant part. 24 I would like to move on, please, to another matter, 25 Mr Foerder. You say in your statement that where works 118 1 were not held up by tie's refusal to accept the 2 consortium's interpretation of the contract, you did 3 proceed with them. 4 Are you able to give even just a general overview of 5 the on-street works and the off-street works which had 6 been carried out before Mar Hall? 7 A. I will try. Difficult from recollection. 8 As I said earlier, we always tried to unlock the 9 situation and do what is or was possible. Although we 10 were not able to agree on on-street agreement, we were 11 working after Princes Street on the on-street, I think, 12 on Lindsay Road retaining wall, Victoria Bridge and 13 Tower Place Bridge. 14 So works were executed here on a goodwill basis, 15 because we tried to -- we were not completely hindered 16 by the presence of utilities or other circumstances, to 17 do even without a tie Change Order in place, to execute 18 these works. 19 I think then we had on Haymarket viaduct works 20 starting and executing prior to mediation. Continuing 21 on the off-street, we worked on the guided busway. We 22 worked on Edinburgh Park Bridge. 23 We worked on depot access bridge, on the depot, on 24 section 7. Everywhere where it was possible to execute 25 works which were not tremendously impacted by the 119 1 outstanding issues of the contractual nature, apart from 2 the MUDFA, we tried to execute. Roughly. So maybe not 3 a complete picture, but in general I think that meets 4 it. 5 Q. In relation to the on-street works before Mar Hall, can 6 you recollect whether the consortium carried out any 7 works on-street in the stretch from Haymarket to west 8 Princes Street? 9 A. On Haymarket viaduct, yes. I believe due to the 10 presence of MUDFA and the issues arising out of this, if 11 there was anything in that stretch, then was only 12 preparatory works, but not real works, if I recall 13 correctly. 14 Q. Really the same question in relation to the on-street 15 stretch from the east end of Princes Street down to 16 York Place. Were any works carried out by the 17 consortium in that stretch before Mar Hall? 18 A. No, I think similar not. Only minor things. Nothing 19 recurs out of the presence of MUDFA. 20 Q. In relation to the off-street section before Mar Hall, 21 you described, I think, work being carried out to 22 certain structures; is that correct? 23 A. Yes. 24 Q. Can you recollect, was any track laid in the off-street 25 section before Mar Hall? 120 1 A. Yes. I think on the guided busway, Siemens laid the 2 track before mediation. 3 Q. Thank you. 4 Now, we know there were various attempts at 5 settlement or new agreements in 2009 and 2010. That's 6 set out in your statement. So I'll take that as read. 7 Similarly, on the question of adjudications, we know 8 there were various adjudication decisions in late 2009 9 and during 2010. You provided the helpful appendix with 10 your commentary on that. So we'll take all that as 11 read. 12 We're finally coming to a letter in September 2010 13 where the consortium say they're no longer prepared to 14 undertake goodwill works. 15 That may be a suitable moment to break for lunch? 16 CHAIR OF THE INQUIRY: We will have a break for lunch. 17 Before breaking for lunch, I should just announce that 18 the principal letter from Mr Walker is in the possession 19 of the Inquiry. And if anyone wants to see that 20 principal letter, they should contact either 21 Mr McNicoll, the solicitor to the Inquiry, or his 22 deputy, Mr Duffy. 23 As the letter will not leave the offices, we'll make 24 arrangements for people to examine it in the office. 25 We'll adjourn now until 2.05 for lunch. 121 1 (1.02 pm) 2 (The short adjournment) 3 (2.06 pm) 4 CHAIR OF THE INQUIRY: Good afternoon. You're still under 5 oath. 6 MR MACKENZIE: Thank you, my Lord. 7 Could we look, please, at document TIE00409574. 8 We can see this is a letter dated 29 September 2010. 9 Scroll down towards the bottom. We see it was sent by 10 yourself, Mr Foerder, on behalf of the consortium, to 11 tie, and we can see the sub-heading is "Cessation of all 12 'goodwill' Works", and you say: 13 "We refer to our letter dated 22 September 2010 in 14 which we advised that we would write to you separately 15 in regard to Infraco's position on works which we are 16 not obliged to carry out under the Infraco Contract." 17 You go on: 18 "As you are aware, we have been carrying out certain 19 works which are the subject of INTCs on a goodwill basis 20 and without prejudice to our contractual rights. This 21 was on the understanding that tie would proceed to agree 22 Estimates and issue tie Change Orders in respect of the 23 work in question." 24 Then: 25 "Accordingly, we advise that forthwith we will cease 122 1 works associated with the list of INTCs enclosed with 2 this letter in respect of which no tie Change Order or 3 agreed Estimate exists." 4 Now, why was this letter sent? 5 A. I think it's self-explanatory, but just to give you the 6 reasons behind the letter, we have -- although have 7 absence of Change Orders issued by tie continued on 8 works, so-called on goodwill works, to proceed with some 9 of these works, I think there were almost 100 -- close 10 to 100 INTCs which haven't been issued by tie. 11 As I explained earlier, they had the kind of 12 campaign running in 2010 which consisted first of all 13 not paying us anymore. I think we had payments missing 14 from early 2010 on several issues, subjects, which 15 basically have put both companies under commercial risk. 16 So we were both heavily cash negative on the project. 17 So we have come to this point and all these other 18 initiatives which tie have taken in 2010 not agreeing 19 anything and to escalate the situation further, that we 20 have reached a point where we had to protect our 21 companies and we had decided to cease all the works 22 which meant -- which is the basis of this letter, which 23 meant basically that we have stopped working on the 24 project. We had demobilised our subcontractors. We had 25 made redundant almost 50 per cent of our employees from 123 1 early October onwards. 2 Q. If we just read on over the page, page 2, we'll see the 3 list of INTCs. We can see that for ourselves on the 4 next page as well, please. 5 Finally the next page. These are all the matters on 6 which the consortium say they're not going to carry out 7 any more work; is that correct? 8 A. That's correct. 9 Q. Thank you. 10 Now, also around this time we've heard evidence 11 about tie sending Remediable Termination Notices and we 12 have your statement on them. There's only one point of 13 clarification, please, in your main statement at 14 page 62, in paragraph 186, you explain in the third last 15 line on the page: 16 "If any of the Remediable Termination Notices had 17 been proceeded with then this would have led to the 18 termination of the Infraco Contract. I would not say 19 all of the Notices were without foundation. However, 20 any issues were very minor and would not normally lead 21 to the situation we arrived at in this instance." 22 Just by way of clarification, when you say "I would 23 not say all of the Notices were without foundation", 24 were there any matters in which you accepted that there 25 was some foundation? 124 1 A. I think there was -- I don't know how many, and I can't 2 recall how many they have sent, but it was quite 3 a number of Remediable Termination Notices or 4 Underperforming Warning Notices which were sent. 5 Some of them were absolutely without any substance. 6 This was just part of their campaign which they did 7 during that year. Sorry. 8 Others had most likely some grounds which we had 9 seriously treated and responded to, and, as I described, 10 and as the contract clearly indicates, of course these 11 Notices could have led to a contract termination if tie 12 wanted to go this way, which they didn't. But that was 13 possible. Therefore we took -- some of these were 14 serious. One I think was also if I recall correctly, 15 the defects on Princes Street, where you always have the 16 challenge to prove if it's to your account or if it's 17 others. 18 So therefore we had treated them quite seriously. 19 Q. I would like to move on, please, to the consortium 20 change register to make sure we understand that 21 properly. 22 I think we should find that in document BFB00003297. 23 We can see this is a consortium period report to 24 21 May 2011. If we can go, please, to page 69. We can 25 turn that around, please. 125 1 If we could blow up the very top left-hand corner to 2 see the title. So this is the Infraco Change Register. 3 Is this something which was kept up to date and 4 issued with each of the monthly period reports? 5 A. Yes, it was. 6 Q. What does this contain? It obviously contains all INTCs 7 which have been issued by the consortium; does it also 8 include all tie Notices of Change? 9 A. Yes, you see the second column, or the INTC's running 10 numbering. The TNC is tie Notice of Change, second 11 column, and the TCO is tie Change Order, and then it 12 continues like that. 13 Q. I see. I think in my copy, the text isn't big enough, 14 but I quite see that now. It's INTC, the column is TNC, 15 and then as you say, TCO, thank you. 16 So essentially this register lists all the changes 17 in the project? 18 A. Yes. 19 Q. Then please go to the last page, to look at the key. 20 Page 91. Again if we could turn that round, please, and 21 blow up the bottom left-hand bit of the document. Thank 22 you. 23 We can see the very bottom left-hand corner, the 24 colour coding. Green is "withdrawn/superseded/no cost"; 25 is that correct? 126 1 A. Yes, I think that was to make it more readable, because 2 you could see 93 pages consisting out of 875 Notified 3 Changes. So it was difficult to track. That's why we 4 have used here the coloured system to identify things 5 which have been either withdrawn or superseded or 6 identify the other categories. 7 Q. Thank you. Pink is "delay only" and yellow is "change 8 order issued"? 9 A. Correct. 10 Q. We can see that, and read for ourselves, the notes, 11 including the type, and then the change type. We can 12 see that for ourselves. 13 If we then please zoom back out and then look at the 14 bottom right-hand corner to see the total. It's the 15 very bottom right-hand figure. I think we see a total 16 of GBP145,656,806. So that's the total of all of the 17 changes. 18 Could I ask, if there were changes where estimates 19 weren't available, they hadn't been produced, and 20 presumably they -- those changes wouldn't be included in 21 that total? 22 A. That's correct. The 145.6 million only includes the 23 estimates which have been submitted. You see a lot of 24 blanks there for estimates which haven't been provided 25 to that date of time. 127 1 Q. Where changes have resulted in estimates which have been 2 agreed, and indeed paid, would they be included within 3 that figure or not included? 4 A. They would have been agreed, but I'm pretty sure there 5 is a column which identifies what have been agreed and 6 paid. We would have to look at the top of this page to 7 see the -- the explanation there, because normally 8 identify the tie Change Orders. 9 Q. Yes. Perhaps if we could blow up the purpley 10 mauve-coloured box at the top. We will see the 11 headings. 12 We see "Value of estimate submission". What shall 13 we, just on the face of it, see? 14 A. I'm not sure that you can see it there. It might be in 15 the light blue, because this is -- only identifies the 16 split of the -- okay. There it says: principle of 17 Change Order with tie, agreed, not agreed, no decision. 18 Can we scroll down? Maybe the bottom there. Is 19 there a number in? Okay. Now, sorry. It shows only 20 how many have been agreed. So out of these 700 21 something, 357. So less than half have been agreed. So 22 there's no column which identifies the number which have 23 been agreed with tie. 24 Q. Okay. So going back to the total, if we may, please, 25 just over 145 million at the bottom right-hand corner, 128 1 if we could blow up the very figure in the bottom 2 right-hand corner, please, does that figure of just over 3 145 million include changes which have been agreed and 4 paid? 5 A. Yes. Paid, I don't know. Minimum agreed because some 6 of the agreed changes have still not been paid. 7 Q. I see. But certainly it would have included changes 8 which had been agreed? 9 A. Yes. 10 Q. Thank you. I won't dwell too much longer on this 11 document, but just let me go to one or two examples. 12 Some of the larger items. 13 Page 71, please. About halfway down, it's a white 14 column for INTC 54. If we could blow that up, please, 15 thank you. 16 Can we see that relates to St Andrew Square public 17 realm works as CEC specification, et cetera. 18 If we scroll -- we see the date is 24 June 2008. So 19 it pre-dates your time on the project. 20 A. Mm-hm. 21 Q. If we scroll to the right, and look at the total in the 22 very right-hand, we will see the sum of GBP11.4 million. 23 So in short, this seems to relate to a change in 24 relation to St Andrew Square public realm works. 25 Can you remember what that was for? 129 1 A. This was the issue which we discussed earlier, where CEC 2 tried to upgrade the final design to a higher standard 3 on St Andrew Square, which was different finishing on 4 walkways, et cetera. So there were a number of issues 5 which they have introduced here which amounts to a -- it 6 was introduced early stage, in May, right after the 7 contract, but it amounted to 11.5 million almost. 8 Q. So that's an example of that. 9 I won't go to them, but throughout the register are 10 various references to design changes from BDDI to IFC. 11 We can see many examples of that. 12 Back to the two MUDFA changes we touched upon 13 earlier, go, please, to page 84. INTC 429. Two-thirds 14 of the way down, the pink line there, 429, you see 429 15 is "issue of MUDFA programme revision 8". We see the 16 date, 8 July 2009. 17 A. Yes. 18 Q. Then we go to the far right-hand side to see the total. 19 So this one is just over GBP4.3 million. Could I also 20 then please go to the other MUDFA INTC, the bigger one. 21 We'll find that at page 87. It's INTC 536, which is 22 halfway down. Thank you. 23 Do you see 536, "Incomplete utility works", dated 24 January 2010. Go to the far right-hand column. We'll 25 see this is the bigger of the two. Do you see the total 130 1 there of GBP42.759 million? And we had touched upon 2 this earlier today. I just wondered if you were able to 3 explain, were these two INTCs for the same things or 4 different things or what? 5 A. No, I think they were for different things because 6 otherwise the first one would have been withdrawn. So 7 as I tried to explain earlier, there's quite a time gap 8 between both of these notifications or identifying of 9 these INTCs, and I believe from recollection that the 10 second one had then encountered -- which was based on an 11 updated MUDFA programme which extended to programme 12 quite a bit, which had then encountered this higher 13 amount there in difference to the smaller earlier one. 14 But as I say, I would have to look at the detailed 15 estimate, is quite some time ago, but that was my guess 16 recollection of the situation. 17 Q. We can separately, perhaps, track down the INTCs and see 18 what they say. 19 CHAIR OF THE INQUIRY: Did that relate to Scottish Water? 20 If you go back to the left of that entry -- 21 A. No, the -- sorry, my Lord, are you referring to the SW? 22 CHAIR OF THE INQUIRY: SW. 23 A. No, that quotes for system-wide, because that had an 24 impact throughout the line, so that we used then SW, 25 otherwise we identified the sections. 131 1 CHAIR OF THE INQUIRY: Thank you. 2 A. You're welcome. 3 CHAIR OF THE INQUIRY: Can I ask also about the public realm 4 works at St Andrew Square which came to about 5 GBP11.5 million. 6 Would that normally be part of the tram project or 7 the tramline if you were improving the pavements, say, 8 at St Andrew Square? Would that normally be part of 9 these works? 10 A. No, I think generally not, and there was also, from what 11 we have found out, a conflict within tie because there 12 were different groups dealing with that, and so this 13 could -- should have come out of also complete different 14 budget because this was an upgrade on the -- on the CEC 15 side for this public realm work and should have been -- 16 come out of a bit different budget areas. 17 CHAIR OF THE INQUIRY: Normally one might expect the 18 improvements to pavements to come out of a Council 19 budget. 20 A. Correct. I would agree. 21 CHAIR OF THE INQUIRY: By putting it into the tram budget, 22 that's inflating the cost of the tram. 23 A. Yes, that's correct. We had more of these issues where 24 there was a bit of mix-up which you normally would 25 separate, but it didn't happen. So it was all going 132 1 into the tram budget. 2 MR MACKENZIE: Thank you. 3 The last category of items, Mr Foerder, in this 4 change register are figures in red. By way of example, 5 can we go to page 77, please. If we can turn it round 6 and go, please, to item 199. We see this item by way of 7 example relates to IFC drawing changes at 8 Balgreen Bridge, November 2008. 9 If we go to the far right, please. We see figures 10 in red, and the total in red, and in brackets, is just 11 over 198,000. 12 Does that mean this is a saving as a result of 13 a change? 14 A. You are right, yes. It's a saving. It's negative 15 amount. So it was a saving. 16 Q. So that is an example of a change which has resulted in 17 a saving? 18 A. Correct, yes. 19 Q. Now, I won't go to all of them. I'll just list them for 20 the transcript. The other savings I noted were items 21 230, 261, 263, 404 and 629. By my calculations these 22 total savings come to just over GBP525,000. So on the 23 face of it, it looks like any savings as a result of 24 changes were very minimal. Does that accord with your 25 general recollection? 133 1 A. Yes, if -- because I haven't reviewed now this register 2 anymore, but yes, this is correct. But we had -- this 3 drawing changes, this most likely also BDDI to IFC 4 issue, and if the changes occurred in a way that there 5 were savings, of course we had to do estimate as well 6 and identify this. 7 Q. Now, if any value engineering resulted in savings, would 8 those savings be shown just by those figures in red in 9 the change register or might they be found elsewhere? 10 A. I'm -- no, I don't think they are on that change 11 register, because the -- I think for the value 12 engineering there were no INTCs issues. There was -- 13 there was a different procedure. But I'm not sure 14 anymore. I can't answer this correctly. I don't know. 15 I can't recall. 16 Q. I understand. We can put that document to one side. 17 I would like to go on to a different topic. 18 In relation to design delay, we've heard evidence 19 from other witnesses that, subject to an initial 20 financial ceiling, the consortium could recover from SDS 21 in relation to SDS delay, but above that ceiling the 22 consortium could recover from tie for SDS delay. 23 Do you have any recollection of that? 24 A. No. Not at all. 25 Q. On a different matter, in relation to the dominant -- 134 1 standing back and looking at the dominant cause of delay 2 in the project, I think you say in your statement that 3 the issue of unresolved utilities was the main or the 4 dominant cause of delay; is that correct? 5 A. That's right, yes. 6 Q. Now, I should put to you that we have heard evidence 7 that a company called Acutus were instructed by tie to 8 investigate delay, and I think in 2010 Acutus produced 9 reports for tie which I think essentially agreed with 10 your position that utility delay was likely to be the 11 dominant cause of delay in 2010. 12 However, by March 2011, as I understand it, in 13 a draft report, Acutus had concluded that design and not 14 utilities had become the dominant cause of delay. 15 Do you have any comments on that suggestion? 16 A. No, because I'm not aware of the details of this report, 17 and can only wonder if they came first to one conclusion 18 and changed later. But I can't comment on that. 19 Q. But is it your position that even as at March 2011, 20 utilities remained the dominant cause of delay in the 21 project? 22 A. Yes, definitely. As we -- I also expressed earlier, 23 there was still a huge amount of utilities unresolved 24 even after mediation. We had more than 700 clashes 25 which we had to deal with after mediation, to work 135 1 through, which was only possible then in the change of 2 attitude and approach to resolve these conflicts. 3 Q. I would like to move on to Mar Hall. 4 CHAIR OF THE INQUIRY: Before that, you say you had 700 5 clashes. Was that in the section that you were 6 constructing between the airport and York Place, or is 7 that in the whole line? 8 A. They were mainly in the on-street part. There were 9 a few in the off-street, because most have been to that 10 time, mediation-wise, to that time of the mediation, 11 resolved. There were still a few on the off-street, but 12 the majority of the 700 were on the on-street, from 13 Haymarket towards York Place. 14 CHAIR OF THE INQUIRY: What about the section that wasn't 15 discussed at the mediation from York Place to Newhaven? 16 Do you know anything about the utilities in that 17 section? 18 A. Yes, there were even more. We know that Leith Walk have 19 never been completed. There were still issues on 20 Constitution Road and also further along. 21 CHAIR OF THE INQUIRY: Sorry, can you just slow down 22 a little. You say you know that Leith Walk was never 23 completed, and what else did you say? 24 A. Leith Walk was never 100 per cent completed. So there 25 were remaining issues there. Then continuing from there 136 1 into Constitution Street, there were issues, and then 2 along the line to Newhaven, towards Lindsay Road 3 retaining wall. So we were aware that there were still 4 utility issues on that stretch as well. 5 CHAIR OF THE INQUIRY: That's still the position, is it? 6 A. It's still the position and it's to be resolved if the 7 extension goes ahead, yes. 8 CHAIR OF THE INQUIRY: Do you have any idea how many 9 conflicts there are in that section between York Place 10 and Newhaven, roughly? I mean, I'm not asking for 11 a precise figure, but do you have some indication of the 12 scale? 13 A. No. We are not talking about only a few. I think we 14 talk about hundreds. But I can't tell you exactly 15 because we were not obtaining this information in full. 16 CHAIR OF THE INQUIRY: Thank you. 17 MR MACKENZIE: Thank you. 18 Moving on to the Mar Hall mediation in March 2011, 19 can you explain, please, your involvement and what 20 happened? 21 A. Yes. Okay. The mediation actually came as a surprise. 22 When we stopped all the works in October 2010 with all 23 these other circumstances around, we actually had also 24 anticipated that maybe a contract termination will take 25 place. So then I can't really recall how it came, but 137 1 in late 2010 we got indication that the Council would be 2 interested in a mediation to find a way forward. 3 We had then, in early 2011, prepared our mediation 4 dossier, basically, which consisted out of what we 5 believed would be fundable by the Council. So-called 6 Project Phoenix was for the base -- the basis of this 7 was the previous joint initiative between tie and 8 ourselves. We had to work out proposals for 9 Project Carlisle and Carlisle 1, which were an attempt 10 to unlock the situation and find a way forward which 11 were rejected by tie or -- yes, were rejected. We 12 couldn't find really an agreement on these, and we have 13 used that Project Carlisle 1 document to develop the 14 so-called Project Phoenix project which included works 15 from the airport to Haymarket, which we believed would 16 be fundable to the Council, with more or less pretty 17 confirmed price; with some Pricing Assumption quite 18 reduced from what we had before on the contract, and 19 even further reduced from what we had forwarded in 20 Carlisle submissions, to create a document which may can 21 identify a way forward. 22 In addition to this, we had prepared our mediation 23 statement on all these topics which -- which were to be 24 addressed in the mediation, and -- so we were preparing 25 ourselves the whole team of Infraco, and then we entered 138 1 in early March into this mediation. 2 Q. What happened at the actual mediation at Mar Hall, and 3 what was your involvement? 4 A. Okay, I was leading the Infraco team, as the Project 5 Director. We were accompanied by our Managing Directors 6 from Germany, although from Siemens' side and from 7 Bilfinger's side, Dr Keysberg from Bilfinger and 8 Dr Schneppendahl from Siemens were there. So they were 9 the next level superiors which were present at the 10 mediation. 11 The mediation started with opening statements, for 12 the first time when I met Sue Bruce who was giving the 13 opening statement of tie, which was then followed by the 14 opening statement of the Infraco, which was given by 15 Richard Walker. 16 Q. Now, I think we have heard evidence that there were 17 meetings between the principals for each side which led 18 to the agreement at Mar Hall. Were you involved with 19 those meetings between principals? 20 A. Partly. There were meetings just with the principals, 21 three of them, or four, I don't know who else was there, 22 but it was definitely Dr Schneppendahl, Dr Keysberg, 23 Sue Bruce. There might be someone from -- Vic Emery was 24 also there. It could be that he was involved. 25 So they had their own level meetings, and some of 139 1 these were joined then by a wider group, including 2 myself. Alfred Brandenburger from Siemens, et cetera. 3 So it was -- and the three, four days in Mar Hall, there 4 were separate workshops on different subjects to explore 5 way forwards on the differences which were identified 6 during the contract. 7 Q. Yes. If we can go please to the agreement, it's 8 document CEC02084685. We can see the top, if we blow up 9 the heading, this is the agreed key points of principle. 10 If we can scroll to the very bottom, please, I think 11 we'll see the signatures of the principals for the 12 various parties. For example, I think Dr Keysberg. We 13 can see his signature there, along with Sue Bruce, 14 et cetera. Do you see that? 15 We've heard evidence, I think, that this agreement, 16 these key points of principle, were agreed within the 17 first, I think, two or three days of Mar Hall, is that 18 correct? 19 A. I think it was three days. I think the mediation 20 started on Tuesday and this Head of Terms were signed on 21 the Thursday. 22 Q. Thank you. Over the page, we'll see then a more 23 detailed document. We can see it's headed "HEADS OF 24 TERMS FOLLOWING MEDIATION". I think we've heard 25 evidence that this was then drafted over the following 140 1 few days. 2 If we go to the very last page, page 6, please, 3 I think we'll see your signature at the top, Mr Foerder; 4 is that correct? 5 A. Yes, that's correct. I think we -- after the slim 6 version of the Head of Terms were done on Thursday, 7 I think some of the principals had to leave back to 8 Germany. I think Dr Schneppendahl and Dr Keysberg left. 9 I think we moved to another hotel nearby, and continued 10 on Friday to develop this more detailed document which 11 was then finally signed in the lawyers' office of tie, 12 I believe, in Glasgow. 13 Q. Go back to page 1, please, to look at the sums agreed. 14 We will see in paragraphs 1 and 2, you can blow them up, 15 please, paragraph 1, we see for the off-street section, 16 a price agreed of 362.5 million, and paragraph 2, we see 17 the target price for the on-street section of 18 GBP39 million. 19 Just to pause there, I think these sums relate to 20 Bilfinger and Siemens. They don't include the cost of 21 CAF for the tram itself; is that correct? 22 A. That's correct, because, as you see also on the top at 23 1(a), CAF was re-novated back to tie or later the 24 Council. So they were taken out of the consortium bank. 25 So the price includes basically the -- the Siemens, 141 1 Bilfinger and SDS component. 2 Q. Now, the figures we see there, the 362.5 million and the 3 target price of 39 million, can you remember, were these 4 figures agreed at meetings at which you were present or 5 were these figures agreed at meetings between the 6 principals where you were not present? 7 A. I was involved, but I think the agreement on the final 8 figure were, as I recollect, done between the 9 principals. The basis of the figures were the previous 10 mentioned Project Phoenix, which have been developed 11 from this Carlisle which was a joint initiative between 12 us and tie, which was also reviewed by tie and externals 13 in regards to the price finding, and that was the basis 14 on which we went into the mediation. I think we had 15 a price from close to 450 million which included also 16 CAF's component which you would have to deduct here, and 17 then it was a negotiated price. 18 So -- and some of the exclusions which we had 19 identified have been taken on board by us. Others were 20 remaining. And for the on-street it was just the target 21 price up to St Andrew Square to that time. 22 Q. If we can go, please, to another document, SIE -- 23 CHAIR OF THE INQUIRY: Before that, the on-street cost of 24 39 million excludes utilities. So what was to happen if 25 you came across utilities? 142 1 A. We agreed that with this new approach here to also have 2 a modified change mechanism, to find a way forward due 3 to the presence of utility on the on-street, to find 4 a way forward, to work around these, without being 5 stopped and submitting an estimate. So find -- 6 basically, rebuild the trust and the relationship 7 between the parties and find a way forward that would 8 work out. So it was to that time hard to believe, 9 honestly, at the end it proved it worked, and therefore 10 it's excluding utilities because we were aware about all 11 these earlier mentioned clashes which were still 12 existing. 13 CHAIR OF THE INQUIRY: Were you going to divert the 14 utilities or were you going to -- 15 A. No, it was left with tie or the Council then, because 16 tie basically was pulled out of the mediation and the 17 Council took over charge of the works there, and the 18 co-ordination, and they employed a new MUDFA utility 19 contractor, I think, called McNicholas, if I remember 20 correct, and they were working in parallel, in 21 co-ordination with us. So it was basically 22 a partnership collaboration approach to resolve these 23 issues parallel without losing too much time and 24 incurring too much cost. 25 CHAIR OF THE INQUIRY: So the utilities were diverted by 143 1 this other company? 2 A. Correct, under the remit of the Council. 3 MR MACKENZIE: Thank you. 4 Another document, please, SIE00000184. Blow up the 5 various boxes, please, if we may. 6 We see your signature there, Mr Foerder, at the 7 bottom; is that correct? 8 A. Yes, this is my and Alfred's signature. 9 Q. Blow up the boxes. Thank you. 10 This is headed "Infraco Contract Value", and I think 11 it's an analysis of the sums agreed at Mar Hall. We can 12 see under the airport to Haymarket box, we can see the 13 reference to original submission. Is that the Project 14 Phoenix submission you mentioned? 15 A. Yes. As I said, we had a total of 449 including the CAF 16 figure submitted. If you need access, you come here to 17 384, which was part of the Phoenix submission of 18 Bilfinger, Siemens and SDS, which have been then 19 negotiated during the mediation to a final number of 20 362.5, and identifies basically the discounts the 21 parties have given. 22 I was involved with these discussions, but I think 23 the final number were reached through the principals, if 24 I recall correctly. 25 Q. Yes. So if we look under the column heading, "Original 144 1 Submission" for Bilfinger Berger of just GBP231,837,822, 2 that comes from Project Phoenix proposal? 3 A. That's correct. All the numbers in that column come 4 from the Phoenix Proposal. 5 Q. Thank you. We then see at Mar Hall, Bilfinger have 6 accepted a discount of GBP10 million from that figure to 7 arrive at a figure for the off-street works price of 8 GBP221,837,822; is that correct? 9 A. That's correct, yes. 10 Q. And similarly, Siemens, we can see, have accepted 11 a discount of GBP11 million from their Project Phoenix 12 proposal, and SDS a much smaller discount of GBP360,336. 13 But we can then, I think, see how the off-street works 14 price agreed at Mar Hall of GBP362.5 million has been 15 arrived at; is that correct? 16 A. That's correct, yes. 17 Q. Thank you. 18 By my calculations, Bilfinger Berger's deductions -- 19 MS CALLICOTT: Mr Mackenzie, may I just interrupt? I do 20 apologise for the interruption, but the document you are 21 looking at right now was subject to a restriction order 22 and it's not the redacted version you are looking at. 23 MR MACKENZIE: I see. Thank you for that. Am I right in 24 thinking the figures we're looking at on the screen have 25 not been redacted? 145 1 MS CALLICOTT: That's correct, it's just the final column. 2 MR MACKENZIE: Thank you. What we will do, I'll restrict my 3 questioning to the figures on the screen which are 4 unredacted and we will make sure, when the Inquiry 5 releases the document with the transcript this evening, 6 that the redacted version is released. So thank you for 7 that. 8 CHAIR OF THE INQUIRY: Could I just be quite clear, the 9 redaction relates to -- does it relate to any of the 10 columns that we're looking at just now? 11 MS CALLICOTT: Not the columns we are looking at just now, 12 no, just the final one. 13 MR MACKENZIE: Perhaps I can say from my copy, the final 14 copy has a heading, "Maintenance Price". I wonder if 15 that's the column that has redacted figures? Nodding 16 the head, yes. Thank you. So we can make sure, 17 my Lord, that the redacted version is released later on. 18 So, Mr Foerder, yes, the question of the Bilfinger 19 Berger reduction of GBP10 million for Project Phoenix 20 price by my calculations, it appears as though Bilfinger 21 achieved about 95 per cent of the sum that they were 22 seeking in the Project Phoenix proposal, and Siemens 23 obtained about 92 per cent of the sum they were seeking 24 in Project Phoenix. 25 So just on the face of these figures, it looks as 146 1 though both Bilfinger Berger and Siemens got almost all 2 of what they wanted. Would that be a fair way to put 3 it? 4 A. As I said, these numbers have arrived from Project 5 Phoenix, which was a continuation of Project Carlisle, 6 which were a joint initiative with tie and other 7 parties. It was heavily reviewed over a period of ten 8 months, and of course we had tried to reflect here 9 a fair and reasonable price, both parties. So it was 10 not that this was a number which was just skipped 11 together. So it was reality. So we had not really much 12 to lower. 13 But in the sake of finding an agreement in the 14 mediation, we had offered here a discount to reach an 15 agreement. 16 Q. What were your views on the sums agreed? 17 A. I would have preferred the original amount would have 18 been agreed, to be honest, but as I tried to point out, 19 if you go into mediation, you need also to give in to 20 also for the other party to identify a way forward, and 21 it was an acceptable agreement for both, for the Council 22 and for Infraco, to identify a way forward to complete 23 to a certain extent this project, and I think that was 24 the whole purpose of going into the mediation, because 25 we had been almost three years in contract, which was -- 147 1 which was honestly or personally for myself not a nice 2 time. It was very, very hard. It was very, very 3 contractual, and it was for the first time since 4 I arrived Edinburgh, to see a way -- to find a solution 5 to really deliver the project here for which we came 6 here. 7 Q. I would also now, please, like to compare some of these 8 final figures with the original contract sum. 9 The best way to do that is start with Schedule 4, 10 which is USB00000032. 11 This is Schedule Part 4 to the Infraco contract. Go 12 to page 4, please. Can we blow up the box, please, in 13 the top half. 14 So we see the construction works price at the top, 15 and then at the bottom, the total of capital expenditure 16 of GBP304,444,301. 17 Now, what I have done, Mr Foerder, to try and 18 compare these prices with the Mar Hall and settlement 19 prices, is to strip out the CAF element. So I have 20 taken out the tram supply price of GBP55,781,634 and, 21 rightly or wrongly, I have also taken out the tram 22 maintenance mobilisation price of GBP2,275,806. 23 By doing that, I'm left with a figure of 24 GBP246,387,203 as approximately representing the 25 Bilfinger Berger and Siemens price at contract award. 148 1 Now, I'm not asking you to undertake these 2 calculations while giving evidence there, but just take 3 it from me that's the figure I'm using, roughly 4 246 million. 5 If we then compare that with the sums agreed at 6 Mar Hall, we have the off-street price we've seen for 7 362.5 million. By the time of this Settlement 8 Agreement, the on-road target price had increased to 9 47.3 million. So what I have done essentially is added 10 the 362.5 million for the off-street, plus the on-road 11 target price of 47.3 in the Settlement Agreement, to 12 arrive at the total of GBP410 million. 13 So in short, on my calculations, I get a difference 14 between the Bilfinger Berger Siemens price at financial 15 close of 246.3 million, and the Settlement Agreement 16 price of 410 million, of an increase of about 17 GBP163 million. 18 Just on the hypothesis that's correct, are you able 19 to say even very generally to what extent that price 20 increase of GBP163 million was due to claims for delay 21 and prolongation and extensions of time? 22 A. Part of it, yes. We have been -- previously looked at 23 the change register. I think you recall the number on 24 that, which was 145 million for not all changes, just 25 for the one which were priced. So if you just add the 149 1 145 to your figure of 246, then you're not very far away 2 from the figure you have estimated. 3 So -- and there were of course additional changes 4 coming up. Also post mediation, I think we had even 5 post mediation another 300 changes which we had to deal 6 with, due to the presence of utilities and other things. 7 Q. If that's right, then it would appear that the 8 consortium had held out for essentially the full value 9 of all of the changes of the items in the change 10 register? 11 A. I think you -- of course, these -- can you repeat your 12 question once more? 13 Q. Yes. What it is, Mr Foerder, I'm just trying to work 14 out why there was a difference between the contract 15 price for Bilfinger and Siemens of approximately 16 246 million and the Mar Hall and settlement price of 17 410. So there's a gap of very roughly -- an increase, 18 rather, of about GBP163 million. I'm just initially 19 wondering how much of that extra 163 is due to delay, 20 essentially, the consortium claiming for delay caused to 21 them. 22 A. After mediation we agreed a new programme, which 23 identified a completion date of July 2014. And of 24 course you can imagine that if you have to work from an 25 original contract date which was in 2011, another three 150 1 years, to get the contract completed, that also 2 extension costs were included, or prolongation costs 3 were included in the sum finally. 4 I can't in detail answer you exactly how much that 5 was, but the base was basically what we have provided in 6 Project Phoenix, and so I think overall, to give you 7 clear answer how much prolongation or extension costs 8 are in there, I'm not able to do this, sorry. 9 Q. Another thing I would like to look at is the question of 10 the cost per kilometre of the work. 11 Now, sticking again with the figure of about 12 246 million at contract close for Bilfinger and Siemens, 13 that was for 18.5 kilometres of track. So by my 14 calculations, that works out at about GBP13 million per 15 kilometre of track. 16 Looking then at the final cost, if we can go, 17 please, to a different document, WED00000101. If we go, 18 please, to page 3 of this document, we can see this is 19 the final account to the Bilfinger Siemens consortium of 20 GBP427,206,309.52. 21 Now, this was for a shorter length of track for 22 14 kilometres, which by my calculations are about 23 GBP30 million per kilometre. So in short, it appears 24 that at contract close, the Bilfinger Siemens price was 25 about GBP13 million per kilometre, but the final cost 151 1 was about GBP30 million per kilometre. 2 So it looks as though the price to Bilfinger Berger 3 Siemens has more than doubled. 4 Do you have any comments on that suggestion? 5 A. No, I don't put your calculations in question. I think 6 you are able to do this. This is probably the correct 7 figures, but I think what you need to consider here is 8 that what we have priced on the original Infraco 9 contract was not close to what needs to be constructed, 10 because that was the nature of the contract. It was 11 Schedule Part 4 and all the Pricing Assumptions. Our 12 price was, I think, maximum to 50, 60 per cent the right 13 price when we were pricing. 14 That was the reason why we couldn't give the final 15 fixed and firm price without -- without any exclusions, 16 because we were aware about that it will drastically 17 change. The design wasn't there. The utilities were 18 delayed, and it was the main reasons why such price have 19 been defined to that time on the basis what was able -- 20 what we were able to price, and that explains it 21 actually. 22 So we had knowledge already. Otherwise this 23 contract document would have never been produced and 24 signed, because we were not allowed within our companies 25 to go for unquantifiable risk, and that was the reason 152 1 Schedule Part 4 was actually introduced. 2 Q. Just standing back from everything, given your wide 3 experience in the construction industry, including on 4 light rail projects, do you have a view as to what ought 5 to be approximately an average price per kilometre for 6 a light rail project such as this? 7 A. I haven't made that calculation. So no, I can't answer 8 that question correctly. I haven't made any comparison 9 calculation for that. 10 Q. Do you think it would be closer to GBP13 million per 11 kilometre than closer to the GBP30 million per 12 kilometre? 13 A. As I said, difficult to say, but I think it's also not 14 easy to compare, because you have to -- not every city 15 is like each other. So there are differences. 16 Edinburgh is a pretty special city, as we are all aware. 17 It's an old city, with a lot of historic circumstances 18 which had to be considered and utilities which were 19 unknown. So it's different. You cannot just make such 20 a simple comparison. 21 If you built a light rail in Dubai, most probably on 22 the desert, you wouldn't get a proper comparison figure 23 to what you have here experienced. But I think it's not 24 easy to compare. 25 Q. We've also finally on this point heard evidence from 153 1 others that the Edinburgh tram system apparently is the 2 most expensive tram system in the world in terms of cost 3 per kilometres. Do you have any views on that? 4 A. Could be true. I don't know. I haven't read it, but as 5 identified earlier, there was quite an amount of 6 mismanagement here which could have saved quite a bit of 7 money if it would have been addressed properly earlier, 8 which have also taken to such a final substantial 9 number. 10 Q. Do you have any views as to approximately how much might 11 have been saved if the disputes had been avoided? 12 A. Quite a lot, I believe. I'm not sure I said that 13 earlier. I think this project or this contract should 14 not have been signed to the time it was signed. I think 15 it would have been better either to postpone the 16 signature on this contract or minimum postpone the start 17 of the contract to ensure that the condition at the 18 start would have been far more controllable, which they 19 haven't been. So I think you could have saved quite 20 some money, and even when we entered into the contract, 21 what I have never understood is that there was no 22 recognition and no acknowledgment at all, even after 23 adjudication, and the escalation was continuing, over 24 such a time. I think it is not normal that almost the 25 complete contract period was expired, and very little 154 1 was delivered due to this contractual difficulties which 2 we had. 3 Q. I should put one final document to you on the question 4 of costs -- 5 CHAIR OF THE INQUIRY: Before you do that, I see this final 6 price that is 427 million plus is exclusive of VAT. Can 7 you recall if the contract price was also exclusive of 8 VAT? I'm just trying to work out if we're going to do 9 a comparison. 10 A. I would believe so. I think the comparison Mr Mackenzie 11 made was also without VAT. 12 MR MACKENZIE: Thank you. 13 One final document I should put to you on the 14 question of price. It's CEC02083979. You may not have 15 seen this report before, Mr Foerder. It's headed at the 16 top, "CITY OF EDINBURGH COUNCIL Post Settlement 17 Agreement Budget - Budget Report 19 August 2011". This 18 has been instructed by the Council. At the very bottom 19 right-hand corner, please, we see the authors are 20 Faithful+Gould. I would like to go to page 5, please. 21 Under paragraph 2.7, on-street works, I'll just give you 22 two minutes to read to yourself what's said there, but 23 in short you'll see the suggestion there that the civil 24 works are grossly inflated, and it's just to ask you for 25 your comments, if any, on what's said there. (Pause) 155 1 A. Okay. I don't know Faithful+Gould. I'm not aware 2 about -- that they had such a report; which, if 3 I understand correct, was given to the Council? 4 Q. Yes, it was instructed by the Council. 5 A. Okay. And this was in September 2011, after mediation, 6 I think; is that correct? 7 Q. Yes. It's dated August 2011. So after the Mar Hall 8 mediation, but before the final Settlement Agreement in 9 September of 2011? 10 A. Okay. Okay. We had no knowledge about the report. 11 I don't agree with what is stated here. I would believe 12 that the Council also didn't agree with it. Otherwise 13 they would not have signed a Settlement Agreement which 14 was after that report on 15 September, I believe, to 15 recall. 16 I don't know how they have come up with these 17 points. I don't think that Siemens hold the golden key, 18 due to the materials. I think what have been agreed in 19 Mar Hall and was then bottomed out over the summer in 20 2011 to end up in the Settlement Agreement was a fair 21 and reasonable contract which at the end proved that we 22 were able to deliver to the City of Edinburgh the tram 23 in minimum up to York Place. 24 Q. Finally, over the page, please. Page 6, please. Blow 25 up paragraph 2.8. We see it says: 156 1 "Due to the circumstances and contractual agreement 2 presently in place for this project it is almost 3 impossible to change contractors. The grossly inflated 4 prices from INFRACO for the on street works indicate 5 that it would be almost more cost effective to carry out 6 this section of works on a cost plus basis." 7 Do you have any comments on what's said there? 8 A. Nonsense. Completely nonsense. First of all, there was 9 always a possibility to change subcontractors. We had 10 after Mar Hall and also reaching the Settlement 11 Agreement an approach of partnership and open 12 collaboration. We have rebuilt trust between the 13 parties. We had an open book policy with the Council on 14 all our subcontracts. So we had insights because, as 15 I reported earlier, we had demobilised all of our 16 subcontractors and had to get them back on board, and 17 mainly for the on-street, because this was on an open 18 book transparent approach, the Council had full insight 19 and was even present in the negotiations with the 20 subcontractor to arrive at their prices. 21 So I think the statement is completely wrong. 22 Q. Thank you. 23 A. Misleading. 24 Q. Can I put to you, please, the last sentence in the 25 paragraph states: 157 1 "This should be considered ..." 2 I think that's a reference to working on a cost plus 3 basis: 4 "... and would also nullify any costs that INFRACO 5 have built into their costs for carrying out the 6 remedial works on Princes Street, which is possibly part 7 of the issue why their costs are grossly inflated." 8 So just to be quite clear, had Infraco built into 9 their costs agreed at Mar Hall the costs of the remedial 10 works for Princes Street? 11 A. No, not at all. And this costs were taken by Infraco to 12 execute the remedial works, which can be also very 13 clearly demonstrated, because we had monthly payment 14 applications for the on-street works which were reviewed 15 by Turner & Townsend and by the Council to accept, and 16 it's absolutely impossible to include in these payment 17 applications the works which have been executed as 18 remedial works on Princes Street. 19 So not at all. That was taken on the account of the 20 Infraco consortium. 21 MR MACKENZIE: My Lord, that may be a suitable place to 22 pause. 23 CHAIR OF THE INQUIRY: Yes. We'll adjourn for 15 minutes. 24 We'll resume again at 3.25. 25 (3.08 pm) 158 1 (A short break) 2 (3.28 pm) 3 CHAIR OF THE INQUIRY: You are still under oath, Mr Foerder. 4 MR MACKENZIE: Thank you. 5 I would like to move on, please, to the question of 6 Minute of Variation 4, which was signed, I think, on 7 20 May 2011. If I start, please, at your main 8 statement, at page 90. 9 We see in paragraph 272 you say: 10 "There appears to have been a misunderstanding as to 11 what the payment of GBP49 million related to. This was 12 not really a remobilisation payment, even if it was 13 quoted as such. This was actually a payment of the 14 settlement sum which was agreed at Mediation to bring us 15 back to a so-called cash neutral position." 16 So in your own words, Mr Foerder, what did the sum 17 of GBP49 million in the Minute of Variation 4 relate to? 18 A. I think the 49 million included two parts. As stated in 19 my witness statement, we were heavily cash negative, 20 because due to the absence of payments from tie over 21 almost the year. The 49 million consisted of 24 million 22 paid under the phrase "mobilisation payment", which was 23 actually outstanding preliminaries, which was also an 24 adjudication which was proceeding which was just decided 25 prior to mediation. So that this money were actually -- 159 1 should have been paid to us, and 25 million was for 2 materials of Siemens which were in Broxburn, in their 3 stockyard, delivered and not paid by tie to that time, 4 so Siemens had enormous expenses there, and that was 5 part of the agreement in the mediation and part of the 6 total overall sum of 362.5, that this 49 million will be 7 paid upfront, or in the beginning of restarting works. 8 Q. So did the consortium consider that these sums were 9 already due under the original Infraco contract? 10 A. Yes. 11 Q. So it's not a question of Minute of Variation 4 creating 12 the obligation to pay these sums. You would say the 13 obligation is already there to pay, and all Minute of 14 Variation 4 may have done is to regulate the mechanisms 15 of what is to be paid when? 16 A. That is correct. 17 Q. Can we go to a different document, please, CEC02083973. 18 We can see this is a report on progress since completion 19 of Heads of Terms to 8 April 2011. I think it was 20 prepared, if we scroll down, by both Colin Smith, and 21 it's been reviewed by yourself and Mr Brandenburger. 22 If we could then please go to page 118. 23 Now, the issue in short here, Mr Foerder, is the 24 closing out of technical approval matters. So if we can 25 blow up the top of the page, please, we see it's an 160 1 email from Andy Conway, dated 5 April 2011, subject, 2 "Tram-CEC Approvals". 3 This is an update. If you look at the bottom, 4 please, the table, rather, we can see in the second 5 column headed, "Open Technical Approval Comments", and 6 how there are 2,782 at 24 March 2011. There's then 7 a fairly dramatic fall to 85 open comments as at 8 5 April 2011. 9 Do you have any views on why these matters were able 10 to be resolved so quickly? 11 A. As I tried to explain earlier, there was a complete 12 change in governance. 13 And these are technical and -- the technical 14 approval comments to be closed out which laid with CEC, 15 basically, was -- what changed after mediation was, as 16 I said, we had a far more open transfer and collaborated 17 partnership approach on these issues. We had made space 18 in our office for the CEC guys. So they were sitting 19 together with our designer and ourselves in our offices. 20 We had regular weekly meetings on all these issues, and 21 so it was a joint initiative to get these all resolved. 22 The numbers are quite dramatic, as you can see. There 23 was still a lot outstanding when we came out of the 24 mediation, but all these needed to be resolved to 25 execute the works, and it has proven to work out quite 161 1 well. 2 So I think it was far more open approach and 3 solution-orientated approach also from the CEC guys 4 dealing with these comments. 5 Q. Now, we discussed earlier today the question of the 6 agreement between Bilfinger and SDS which led to SDS 7 progressing design essentially without tie's knowledge. 8 To what extent, if at all, was any of that design 9 able to be used to close out these matters? 10 A. Okay, the design was progressed until we stopped in 11 October 2010. Then it actually slowed down because from 12 October 2010 to the mediation, not much happened really, 13 apart from the preparation for the mediation. And of 14 course it helped to speed up because it had reached in 15 October 2010 already, not a completed status, but it was 16 far more progressed than it would have been without 17 exercising the issue we described -- I described 18 earlier. 19 Q. I would like to put to you, please, something suggested 20 by another witness for your comments. Damian Sharp of 21 tie, who had responsibilities for design, he has told 22 the Inquiry that in his opinion the known resolution of 23 outstanding technical consents, issues and design was 24 a deliberate tactic on the part of the consortium, and 25 that after Mar Hall the consortium essentially then were 162 1 able to close out all of these matters fairly speedily. 2 Do you have any views on that suggestion? 3 A. I'm wondering because Damian was working for tie, 4 I believe. So these -- these technical approval 5 comments were -- were partly from tie and partly from 6 CEC. So I don't understand how we can -- how we should 7 have made them up or conclude them earlier. 8 I think it was a complete different spirit, as 9 I said, solution orientated. There was a willingness 10 from -- from the Council side, because tie was taken 11 beside to get these things resolved in an ordinary way, 12 which allowed construction. 13 So I don't know how Damian have came to this 14 statement. I don't agree with him. 15 CHAIR OF THE INQUIRY: Did you attach any significance to 16 the fact that before mediation you were dealing with 17 tie, with whom you had contracted, whereas after 18 mediation you were dealing with the City of Edinburgh 19 Council, which was the Planning Authority, the Transport 20 Authority. Do you think that made a difference? 21 A. Yes, it did make a difference, also that they were 22 sitting in our office. So we were basically on 23 a day-to-day contact with them, exploring and 24 identifying their comments and finding solutions. 25 Before they were more as a third party sitting back 163 1 and tie was in between, and they delivered the comments. 2 So we had not this direct contact as we had later on, 3 after mediation. So it was definitely a positive turn 4 by having them directly in the office together with the 5 designer. So they were basically sitting door to door. 6 They could clearly identify what their concerns were. 7 Very often there were also comments which weren't 8 comments, it was just out of misunderstanding or -- so 9 it was -- it made life much easier when they've been in 10 the office and having the right approach to it. 11 CHAIR OF THE INQUIRY: I can understand that, but I just 12 wondered to what extent it was realistic to expect the 13 Council to share an office with you at a time when you 14 were in a contract with tie. 15 A. Okay, the set-up, my Lord, before mediation was 16 definitely differently. The -- why a proper exchange 17 haven't been held earlier, I can't answer. I can only 18 guess. Factors that the arrangements made after 19 mediation by having them then close by, and taking all 20 the responsibility to sort these things out, driven by 21 the new governance have helped to resolve these issues. 22 CHAIR OF THE INQUIRY: Yes. 23 MR MACKENZIE: Thank you. 24 Just to finish on this point, Mr Foerder. I think 25 Mr Sharp's evidence was to the effect that he felt at 164 1 this period as if SDS already had design solutions to 2 many of these matters, which enabled the matters to be 3 closed out quickly. And that on one view may be 4 considered consistent with your evidence that after the 5 agreement between Bilfinger and SDS, SDS progressed 6 design essentially without tie knowing. 7 A. Yes, I think that's correct, because that was the whole 8 purpose of the agreement with SDS, to get the design to 9 such an extent progressed that we have something which 10 in case we finding a way forward, enables us to 11 construct. So of course it helped, and have progressed 12 in a way which helped on also to resolve these issues. 13 So I think that's correct, yes. 14 Q. Do you know when design was being progressed in this 15 manner, when it was completed, was it submitted or sent 16 to the Council for any approvals and consents or did the 17 consortium and SDS hold off doing that final step? 18 A. I can't recall, but -- I can't recall. I'm not sure 19 that we hold it off. I think what was progressed was -- 20 was also submitted, but I cannot guarantee further. 21 I can't really recall. 22 Q. Thank you. 23 Now, looking then, we know the Settlement Agreement 24 was signed -- 25 A. Sorry. I think -- excuse me. I think it was, because 165 1 as we entered into these -- into these discussions about 2 Project Carlisle, Carlisle 1, and then also Phoenix came 3 out of it, drawings which have identified the basis for 4 this price were basically the progressed drawings, and 5 tie were aware about these. So I think, yes, we have 6 submitted that. 7 Q. Thank you. We know the Settlement Agreement was signed 8 in September 2011. I won't ask you about that. 9 Moving on to the changes after the settlement in 10 terms of how things did appear to work reasonably well, 11 you've mentioned that already. And you also fully cover 12 that in your statement, so I'm not going to ask about 13 that, other than one matter. 14 If we can go to your main statement at page 104, in 15 paragraph 305 at the top, you say: 16 "Colin Smith was the independent certifier at this 17 time and he was assisted by Turner & Townsend. Colin 18 had a role within CEC, although I cannot recall the 19 title. Colin was basically the person from CEC whose 20 responsibility was to deliver and ensure others were 21 also delivering. That was the biggest difference from 22 what had occurred in the past. Previously it was 23 completely uncoordinated. You had the feeling that tie 24 were not working closely with CEC or other authorities. 25 This was the biggest change between pre and post- 166 1 Mediation." 2 Now, we've separately heard evidence that 3 Colin Smith was the senior responsible owner for the 4 project. Were you aware of that? 5 A. Yes. 6 Q. I think as senior responsible owner he was responsible 7 for ensuring that the project was delivered on time and 8 on budget. Could I ask, before Mar Hall were you aware 9 who was the senior responsible owner for the project? 10 A. No, I think this title or this introduction haven't been 11 given to us. I think my direct counterpart was 12 Steven Bell as the Project Director of tie. The senior 13 owner wasn't used to that time, or I was not aware that 14 there was a senior owner. 15 Q. Now, on the question of Colin Smith being the 16 independent certifier, I think he was also an adviser to 17 the Council. So strictly speaking, on the face of it, 18 he wouldn't appear to be independent. 19 Why did the consortium nonetheless agree to Mr Smith 20 being the independent certifier? 21 A. Okay, he came into the picture during the mediation. 22 I think he was introduced by Sue Bruce, and he was 23 present at the mediation as well. It was -- we didn't 24 know both. It was introduced through the Council to 25 establish this role as an independent certifier. 167 1 I think we have made a similar approach already in 2 earlier stages, because we couldn't get any agreement 3 with the colleagues of tie on any of these estimate and 4 we had once made an approach to use some independent QS 5 to value and to assess our estimates to get any progress 6 on these. 7 So this idea was earlier there, and then after 8 mediation, it came up again, and Colin was proposed in 9 this role and the consortium accepted him in that role. 10 Although he was also advising the Council, I think he 11 had both of these roles. 12 Q. Now, on a separate matter, we know that many of the 13 problems that arose before Mar Hall appear to have been 14 because of the change mechanism and the difference 15 between the parties and whether there required to be an 16 agreed estimate before the works could start. 17 What happened after Mar Hall? What changes were 18 made to the change mechanism to enable things to work 19 smoothly? 20 A. So the -- the approach was a different one. I think the 21 change mechanism was amended. Already in MoV4, and then 22 further in MoV5. So this was a simplified change 23 mechanism. 24 It was took away that we are not allowed to work 25 without having an estimate agreed. So we could go ahead 168 1 and we had rebuilt trust to the new owners, as I said, 2 the involvement of CEC, that we will get -- be fairly 3 treated and get reimbursement for the works even if 4 there were changes. So we executed these works without 5 having agreement. There was a mechanism in place that 6 in case the difference between what have been proposed 7 from our side and been assessed by CEC in regards to 8 time and money, if that reaches a certain amount, then 9 there was an escalation procedure established that this 10 would be raised to so-called joint project forum, where 11 the principals were meeting in a certain interval, in 12 case we reached these limits, to get into resolution 13 there. 14 Q. I can see in a situation after Mar Hall, where there is 15 agreement that there has been a change but parties 16 aren't agreed on how much the quantification of the 17 change, where work can start and can continue, where 18 there is a mechanism to agree the amount of the change, 19 I can understand that. But what about the situation 20 where parties disagree whether a change has occurred at 21 all? Was there a mechanism to allow work to proceed in 22 that event, pending the resolution of whether there had 23 been a change or not? 24 A. The works were progressing. I think we could only stop 25 if certain limits have been reached value-wise and 169 1 time-wise, and disagreement still exists and then there 2 was an escalation route through the joint forum, where 3 things could be resolved. So we never ended in the 4 situation that we couldn't find an agreement after 5 mediation. Even though there were, of course, issues 6 which were not in first instance agreed. 7 Q. Thank you. Moving on to a separate matter, we've 8 touched upon earlier the question of the completion of 9 the utility works after Mar Hall. You've explained that 10 that was not done by the consortium. It was done by 11 a new utilities contractor. I think you say in your 12 statement, it was McNicholas under the supervision of 13 Turner & Townsend and the Council; is that correct? 14 A. That's correct. 15 Q. I think we've also heard a reference to further 16 utilities investigations having been carried out, ie 17 ground penetrating radar of the whole of the standing 18 on-street section. Was that something undertaken by the 19 consortium or was that done by somebody else? 20 A. I know that this investigation have taken place. I'm 21 not sure if that was done by the consortium or by 22 McNicholas. It was in an attempt to identify clashes as 23 early as possible, which was helpful if the information 24 was there, because sometimes redesign was required or 25 other means to overcome these problems. 170 1 Q. I think you also say in your statement that the -- after 2 Mar Hall, the utilities were relocated in parallel with 3 the consortium works or just in advance. You also say 4 the utilities contractor would excavate down to 5 formation level and resolve the utility conflicts before 6 BBS came on site. Does that mean in short the road was 7 only dug up once? 8 A. Yes, correct. So it was very -- a lot of parallel in 9 working, where either McNicholas went just ahead of us 10 or even parallel, within the work site, to get the thing 11 sorted which allowed then progressively works followed 12 up from our scope of work. 13 Q. Now, why was that different to what had happened in 14 Leith Walk? I appreciate you weren't there in the Leith 15 Walk works, but we did hear evidence that the consortium 16 essentially tried to work either in parallel or around 17 the same time as the MUDFA contractor, but that didn't 18 work. So why did that not work in Leith Walk but it 19 appears to have worked after Mar Hall? 20 A. I believe the approach was still different. In -- in 21 Leith Walk, tie or the MUDFA contractor was still 22 working and haven't -- I think we even relocated 23 utilities on -- on footway areas where they haven't been 24 touched by the MUDFA contractor. 25 I think that why it haven't worked is hard to say. 171 1 It was -- it was not only the utility contractor. Some 2 of these works were of course executed by 3 Scottish Water, by BT themselves, if it comes on later 4 to installing of cables or relocating Scottish Water or 5 Scottish gas pipes; and as I described earlier, there 6 was a complete different approach and attitude after 7 mediation also, most probably forced by CEC on to these 8 public authorities, to approach the resolution of these 9 things speedy, in an efficient and economical way, which 10 definitely was not the case prior to mediation. 11 Q. Thank you. I would like to move on again to a separate 12 matter, the question of the on-street works that were 13 completed after Mar Hall. It's possibly best doing the 14 reference to the diagram we have looked at before, 15 TRI00000183. This is your supplementary statement on 16 the trackform. 17 It should come up on the screen. If we go to 18 page 7, please, this is the diagram we looked at 19 earlier. 20 If we could blow up the main bit of the diagram, 21 please, so we can see the writing. Thank you. 22 Now, with this diagram in front of us, I apologise 23 if I repeat anything I've said before, but the 24 Princes Street works which were carried out before 25 Mar Hall, as I understand it, this diagram shows what 172 1 was done on Princes Street; is that correct? 2 A. No, I think that diagram shows what the Infraco proposal 3 was. I think the other slide with the detailed asphalt 4 layer shows what was done on Princes Street, and the 5 third one was the remedial works. So this is the radar 6 trackform Infraco proposal sketch. 7 Q. The formation improvement layer we see in the diagram, 8 the reinforced concrete slab, was that laid on 9 Princes Street? 10 A. Yes. 11 Q. Was there then a track concrete layer, as we've seen, 12 and then a coverage layer on Princes Street? 13 A. Yes, that's correct. 14 Q. So to that extent, what is shown on the diagram shows 15 what was done on Princes Street? 16 A. Yes, it's a simplified sketch of the real trackform. 17 Q. In addition, on Princes Street, underneath the formation 18 improvement layer, I think you've discussed there were 19 also some ground improvements required? 20 A. Correct. 21 Q. So that's Princes Street. 22 In relation to the on-street works after Mar Hall, 23 so from Haymarket to the west end of Princes Street, and 24 also the east end of Princes Street down to York Place, 25 again, was what we see on the diagram done on these 173 1 other on-street sections? 2 A. Yes, as I said earlier, the same. Same execution 3 method. 4 Q. I see. In terms of the ground improvement works, are 5 you able to say whether in the on-street sections 6 undertaken after Mar Hall, any less ground improvement 7 works were required than were required under 8 Princes Street? 9 A. I can't say if it was less. There was also ground 10 improvement works required, as I said, we had always to 11 go through a kind of testing regime to prove that the 12 grounds which we met there complied. 13 If not, then ground improvement have been executed, 14 but I can't tell you exactly the magnitude, if this was 15 more or less than on Princes Street. I know that there 16 were better areas and worse areas, but the magnitude, 17 I can't tell you. 18 Q. Are you able to say in general whether the ground 19 conditions in Princes Street were better, worse or about 20 the same as the ground conditions in the other on-street 21 sections? 22 A. No, as I said, otherwise I could give you a key answer 23 already earlier. 24 I think throughout the on-street, it was very 25 similar. There were stretches which were on better 174 1 conditions, others which were worse. Which needed to be 2 justified by testing regime. 3 Q. We've also heard evidence that in relation to the 4 on-street works after Mar Hall, value engineering was 5 undertaken and in fact there was a loosening or 6 a lowering of the Employer's Requirements. Do you have 7 any recollection of these matters? 8 A. Yes, we discussed that earlier. That was the road 9 reconstruction basically, which after mediation came 10 closer to what was part of the Infraco proposals from 11 the contract, because we had proposed only planing off 12 of the surface and reinstalling of wearing course, 13 whereby the design was asking for full depth 14 reconstruction of the road; and when the conditions were 15 obvious on the other on-street sections after mediation, 16 there was a judgement call, and there was driven by CEC 17 basically to lower the standard so it was not always 18 a full depth reconstruction. It was not just a wearing 19 course. So there was -- there was more road 20 construction on this, but it was the slimmed version 21 from -- compared to what we have done on Princes Street. 22 Q. When you refer to the design asking for full depth 23 reconstruction of the road, are you referring to works 24 taking place underneath the formation improvement layer 25 we see on screen? 175 1 A. No. This is left and right on the road surface. The 2 full depth reconstruction only consists of the road 3 reinstallation. What have been done here under the 4 formation level or formation improvement layer under the 5 track slab was what we mentioned earlier. 6 If there was bad ground conditions, then we had to 7 improve it. Due to testing regime, it was identified 8 and then granule fill came in to have a proper base 9 where the formation improvement layer could stand on. 10 Q. I think I understand. 11 CHAIR OF THE INQUIRY: Was it in fact a lower specification 12 for the road pavement that you were recommending? 13 A. Pardon me? 14 CHAIR OF THE INQUIRY: Was it a lower specification for the 15 road pavement that you were advocating as opposed to 16 what the Council wanted? 17 A. The -- I wouldn't say a lower specification of the road 18 pavement. I think the wearing course was actually 19 exactly the same as the original proposal, which went 20 into the other on-street section, but we haven't 21 excavated to the same depth on the road areas and -- 22 than we have done on Princes Street, due to -- it has 23 been justified through inspections on site that the 24 conditions were actually okay, and there was no need to 25 dig up more, and therefore you had only two or three 176 1 layers of asphalt instead of having this heavy deep 2 excavation. 3 CHAIR OF THE INQUIRY: Did you advocate that as part of the 4 Mar Hall mediation, that money could be saved by doing 5 that? 6 A. No, I think that came off. There was no intent or even 7 indication during Mar Hall, and what was the outcome 8 there, that was when the work then started on the 9 remaining on-street section, it was through -- through 10 an approach by CEC to look at this and they came up with 11 the proposal to save time and money here. 12 CHAIR OF THE INQUIRY: If it had been advocated at Mar Hall, 13 would that have resulted in a lower settlement price? 14 A. I'm not sure, because what we have indicated for the 15 on-street was only a target price, best guess, on our 16 assumptions. So it was not really based on a final and 17 firm estimate. It was from the experience we had. 18 And this -- the target price which you never -- 19 which is a guidance which is never the final true 20 figure. 21 CHAIR OF THE INQUIRY: What happened to the savings then 22 on -- as a result of the value engineering? Did that 23 all go to Edinburgh or was it shared? 24 A. As I said, we had also for the on-street, we had monthly 25 application for the actual physical work which were 177 1 executed and work which were not executed, like here for 2 the road reconstruction, we are not invoiced. Only on 3 physical executed works. So we had very detailed 4 monthly invoice procedures where we had to identify what 5 would have been really done. 6 CHAIR OF THE INQUIRY: Are you saying then that the entire 7 benefit of that alteration in a specification accrued to 8 the City of Edinburgh? 9 A. Correct, yes. 10 CHAIR OF THE INQUIRY: Thank you. I'll just ask one other 11 matter. 12 You have explained the position about the utilities 13 along the route from York Place to Newhaven. Do you 14 know what the extent of the design of the entire route 15 is? Is it completed? 16 A. No. It is not completed because part of the 17 agreement -- no, wait a second. (Pause) 18 I'm not sure, sorry. It's quite some time ago. 19 I can't give you an honest -- a correct answer. 20 I can't recall it. If the design stopped for the 21 remaining on-street after Mar Hall or SDS were 22 progressing it to certain level. I'm absolutely not 23 sure at the moment. So I would have to read. I don't 24 want to give you a wrong answer here. 25 CHAIR OF THE INQUIRY: Thank you. 178 1 MR MACKENZIE: If we perhaps now go back to CEC02084685, 2 these are the Heads of Terms at Mar Hall. 3 Go to page 3, please. Go to paragraph 5.2. You see 4 this states: 5 "The Infraco shall complete the integrated Design 6 from Airport to Newhaven (Phase 1A) to meet the 7 Employer's Requirements." 8 That seems to have been the intention at Mar Hall, 9 that that would happen, but is it your position you 10 simply can't recall as a matter of fact if that happened 11 or not? 12 A. You help me, so I think if this is part of the 13 agreement, then we have done it. But I couldn't recall 14 it when Dr -- Lord Hardie asked me. So yes. I think it 15 was specified there, and then I'm pretty sure we have 16 finished the design as stated under 5.2. 17 Q. Although presumably if the extension goes ahead, and if 18 the extension is based on different Employer's 19 Requirements, then any existing design may have to be 20 revisited as well, presumably? 21 A. Yes, I think so. 22 Q. Another document, please. WED00000101. We looked at 23 this final account before. Just two or three queries 24 I have in regard to this document. 25 As we saw at page 3, please, we've seen that before, 179 1 the final sum. 2 Page 4, please. Could we blow up the box, please. 3 We can see in the bottom right-hand corner, the final 4 sum of 427 million and a little bit more. 5 We see: item 1, contract sum; 2, adjustments to 6 contract sum; 3, Clause 80 change, refer to attached 7 Schedule; and 4, Schedule 45 change, refer to attached 8 Schedule. 9 There are simply three sums I would like to go to in 10 the schedule. 11 The first one, please, is page 5. 12 Item 429 is roughly ten lines from the bottom, 13 I think. Can you see 529? We can see a reference to: 14 "System Wide - Delay in signing - impact on 15 commencement and completion - costs incurred at front 16 end of programme." 17 We see the figure there of just over GBP4.5 million. 18 Can you remember what that change was for? 19 A. No, sorry. I can't recall. 20 Q. We had seen, I think, in the Mar Hall Heads of Terms, 21 paragraph 8.4 stated that agreements were to be entered 22 into by 1 July 2011, whereas in fact the Settlement 23 Agreement was not entered into until September 2011. 24 I just wondered whether this change relates to that 25 delay, but it may be you simply can't help us with that. 180 1 A. No, I would have to read the documents. I can't recall 2 it. There was a delay, yes, like you stated correctly, 3 but if this -- this is referring to that one now, 4 I can't tell you. 5 Q. Thank you. 6 The last item, please, at page 8. The very first 7 item at the top of the page, 620, we see: 8 "Cost Engineering in respect of the Programme (22 9 week saving)." 10 GBP6.459 million. 11 Can you remember what that was for? 12 A. Not in full detail, but as far as I recollect, I think 13 what it was was that we were impacted because in theory, 14 although we had a change mechanism, of course, we were 15 affected by certain -- by certain circumstances on our 16 works, and instead of agreeing new extension to 17 a programme, I think we had a time bank, something like 18 this, to agree on savings on time which we had to -- 19 which we'd accomplished. Something like this. But 20 I think it would be wrong to go -- I would have to read 21 really, and it's not really in my memory anymore, what 22 was the detail of that cost engineering in respect of 23 the programme. 24 Q. The final thing I would like to do, please, is put to 25 you for your comment certain criticisms of the 181 1 consortium by tie. 2 Now, the first criticism is that tie say there was 3 a delay in mobilising and appointing subcontractors 4 after contract close, and instead the consortium focused 5 on building up a claims team. Do you have any comments 6 on that suggestion? 7 A. Yes, okay, I have heard that earlier, but I think this 8 is a wrong comment. I think what tie is referring to is 9 that we haven't executed subcontracts in final finished 10 form because we were not able to do this. You may 11 understand, if you're not even have a valid programme, 12 a valid scope, it is hard to form the basis of 13 a subcontract. 14 So all our subcontractors, or most of these, were 15 already during the tender stage somehow involved, and 16 were on standby. So what we did after signing the 17 contract, we had them, a lot of letters of intent, and 18 wherever work was possible to be executed, they were 19 there. So I can't see how we have slowed down or not 20 mobilised in time, because whatever was able to enter 21 into the work sites, our subcontractors were there. 22 So I didn't agree with this statement. I think the 23 basis was most likely that we couldn't provide tie with 24 signed executed subcontracts because we were not able to 25 do so. 182 1 Q. Another allegation made is that the consortium failed to 2 mitigate delays. For example, if utilities were 3 encountered on street, the consortium could have worked 4 on the off-street section. What is your comment to 5 this? 6 A. This is for me also wrong statement. I think what tie 7 mixed up was mitigation, what tie was expecting from us 8 was not mitigation. It was acceleration. And 9 acceleration should have been paid under the contract. 10 If we have to change the works or the sequences in a way 11 that additional cost is incurred, then it has nothing to 12 do any more with mitigation. I think they had 13 a complete misunderstanding or mis-concept of this 14 terminology. 15 On the other hand, as I said earlier, we had 16 subcontractors on letter of intents, but for certain 17 sections, and of course this doesn't give you a great 18 deal of flexibility. If a subcontractor who was 19 designed for an on-street part, due to the presence of 20 utility, to move from suddenly to the off-street, 21 because on the off-street we had other subcontractors. 22 So this is maybe easy in the imagination, but it's not 23 easy to really execute. 24 Where we were able, we have done this, as you may 25 aware, on Princes Street, there were, in the beginning, 183 1 there were two contractors work, in Crummock and 2 Mackenzie, if I recall correctly. Also Crummocks were 3 later working on the off-street, where we tried to 4 establish such a system, but it was not always possible. 5 Q. Does using letters of intent give the consortium greater 6 flexibility in entering into subcontracts? 7 A. Yes, that's correct, because we had not the basis to 8 form a subcontractor to the time when we should have 9 done it, because neither the programme nor the scope was 10 available. It was also for all our subcontractors 11 a fluid situation of receiving changes on a day to day 12 business, and that doesn't bring a subcontractor into 13 the position to enter into a subcontract. 14 That's why we left them as long -- to that time on 15 letter of intents, which identified their clear 16 commitment to work and to mobilise whenever possible on 17 a clear agreed prices and gave us the flexibility, 18 because we couldn't really give them the work sites as 19 they were foreseen under the contract. 20 Q. Is it correct to say that under a letter of content -- 21 sorry, intent -- 22 A. Intent. 23 Q. -- the consortium doesn't have a contractual obligation 24 to the subcontractor? 25 A. We have. The letter of intent was the mechanism to have 184 1 a clear contractual mechanism with the subcontractor, 2 but it's not the same as a full and final signed 3 subcontract. 4 Q. I just wonder, if the consortium had entered into 5 subcontracts shortly after contract close, and were 6 then, for the reasons you have discussed, unable to 7 instruct the subcontractor to undertake the works, would 8 the subcontractor then have a claim against the 9 consortium which in -- the consortium then would 10 essentially pass on to tie? 11 A. Correct. That would have even increased the cost to tie 12 or CEC. If we would have entered into subcontracts 13 because they would have been able to claim with a letter 14 of intent, we basically tried to mitigate this 15 situation. 16 Q. Go now to document, please, CEC00574090. This is 17 a letter from Mr Bell at tie, dated 19 February 2010. 18 We can see in the introductory paragraph a reference to 19 tie audit programme, et cetera. In relation to tie 20 changes and Notified Departures. 21 Mr Bell then sets out a number of preliminary 22 findings of that audit. 23 There are various matters set out, and I think in 24 short one complaint or allegation is that there was 25 a delay on the part of the consortium in submitting 185 1 estimates. Do you accept there was a delay, and if so, 2 why? 3 A. No, I wouldn't accept it because I tried to explain 4 earlier that, first of all, there were different avenues 5 to provide an estimate. If it was design related, then 6 you would have to get first the design estimate 7 submitted, get this agreed, then the design would be 8 progressed and finalised after design to get 9 a construction estimate in. 10 Due to the number of INTCs addressed, we had very 11 often, and it was part of the contract, asked for 12 extension to provide an estimate, because it was so 13 complex and so many. Our change team have been five 14 times larger than what was originally anticipated to 15 deal with all these estimates and INTCs. So I wouldn't 16 agree that was by purpose delayed. 17 That was a time in 2010, I think it refers to audit 18 here, when tie started within their strategy to nail us 19 down to issue audit notices almost on a weekly basis for 20 all kind of -- sorry, nonsense. Not only for these. 21 They were absolutely not aligned with the contract. 22 On top of this, we received hundreds of letters, 23 I think I remember one day I received on one day even 24 100 letters, which needed to be responded also, which 25 got a lot of involvement of the change team. So -- but 186 1 they tried here, with the whole approach they have 2 taken, was to disturb our ordinary working and when you 3 have to deal with this, of course, we have then also not 4 always complied with all -- all contractual timeframes 5 and have asked for extension, because we were not able 6 to deal with the fleet of issues they have issued 7 against us. 8 Q. Another allegation by tie is that estimates were often 9 lacking in specification. Do you have any comments on 10 that suggestion? 11 A. Lack of specification? 12 Q. Yes. Didn't contain enough detail so tie could 13 understand how the estimate had been arrived at. 14 A. No. I cannot comment on that, but -- because I was not 15 in all estimates of course detailed involved. In the 16 ones I have seen, and which I have also reviewed in 17 detail, I'm pretty sure they were clearly addressed and 18 it was clear from where the estimate -- the basis of the 19 estimate came from. 20 Q. It's also alleged by tie that the consortium estimates 21 were in general excessive and as shown, as indicated by 22 the fact, for example, in this letter it's said that in 23 the bullet point that's indented: 24 "Current analysis of issued tie Change Orders shows 25 an average agreed value [of approximately] 60 per cent 187 1 of the original estimate submission." 2 Do you have any comment on that submission? Was it 3 true as a matter of fact that the average agreed value 4 was about 60 per cent of the original estimate 5 submission? 6 A. I can't recall what the actual percentage was, but 7 I think this is similar to other issues tie have raised 8 up where they try to reflect untrue information; as 9 I recall, for example, the adjudication on Russell Road 10 retaining wall, where they said we went into the 11 adjudication with 4.5 million and we got only 1.4, and 12 they have won this adjudication. This was a complete 13 untrue reflection what actually happened, because when 14 we went into Russell Road, it was 1.8, and we got 15 a ruling in our favour of 1.4. And it was always tie's 16 strategy not only within the contractual letters, 17 although in the publicity too, to frame a picture which 18 was not really reflecting the truth. 19 Q. Do you know as a matter of fact whether estimates were 20 on average agreed at levels which were significantly 21 reduced from the original estimate? 22 A. No, I'm not aware. 23 Q. Is that not a matter within your knowledge or something 24 you can't remember or what? 25 A. No, it's something I'm not aware. It's first of all 188 1 quite some time ago. And there most probably were 2 issues where sums were reduced, but to make now an 3 assessment or a statement from my side in which range 4 were, I can't do it. But what we did as far as I'm 5 concerned is that we provided estimates which were on 6 a reasonable and real basis, and that was the approach 7 we have taken. 8 Q. A final document, please, on the same point. It's 9 TIE00086026. 10 Now, I think it's again a tie document. It's 11 a presentation to the Tram Project Board on 11 May 2011. 12 Go to page 11, please. Blow up the box, please. We see 13 "Change register update", and at the bottom we see 14 "Value of agreed changes", 24.227 million, original 15 submission GBP46.563 million. 16 So on the face of it, if these figures are correct, 17 it looks as though changes have been agreed at about 18 half the level in the original submission. Do you know 19 whether that's correct or not? 20 A. No, I don't. And I can't judge it. I have never seen 21 it before. I wouldn't know why tie have still been 22 producing this report after they were taken basically 23 away after mediation. I don't know. They have their 24 own motivations, probably, to reflect these numbers. 25 Q. On the hypothesis that these figures are correct, would 189 1 you agree that they suggest that estimates were 2 routinely excessive? 3 A. No, I didn't agree. 4 Q. Even if these figures are correct? 5 A. As I said, I don't know if they are correct. I have 6 seen this today for the first time. I can't give you an 7 answer because -- 8 CHAIR OF THE INQUIRY: I think you are being asked 9 a hypothetical question, Mr Foerder. If the figures are 10 correct, what is your position about the percentage that 11 was actually awarded on that assumption? 12 A. If the -- so yes, if the figures are correct, and it's 13 in a range which is highly overestimated, yes, I would 14 agree to this, but I can't answer if these numbers are 15 correct and it is a true reflection of what the status 16 was. I remember that we have different figures, but -- 17 okay. 18 MR MACKENZIE: From other projects you've worked on, and 19 estimates have been submitted for changes, is there an 20 average figure at which overall changes are agreed or is 21 it not possible to say that? 22 A. No, it's difficult to say. No, I can't give you here 23 a percentage or number. But it's in the nature and -- 24 that you have higher estimates because normally these 25 are basis of discussions. They are sometimes 190 1 interpretation differences. At the end you very often 2 negotiate estimates and so it's in the nature that the 3 number is not exactly what the final outcome is. 4 I would agree that 48 per cent reduction there is quite 5 high. 6 MR MACKENZIE: Thank you. I have no further questions. 7 CHAIR OF THE INQUIRY: Ms Forster? 8 MS FORSTER: I have no further questions either. 9 CHAIR OF THE INQUIRY: Mr Fairley? 10 MR FAIRLEY: If I may, my Lord, I'll endeavour to finish by 11 4.30. 12 CHAIR OF THE INQUIRY: Yes. 13 Examination by MR FAIRLEY 14 MR FAIRLEY: Mr Foerder, very briefly, I want to take you 15 back to your involvement in the Princes Street 16 Agreement, please. I think you said you became the 17 Project Director for Bilfingers on the Edinburgh Tram 18 Project at the start of March 2009. That's right, isn't 19 it? 20 A. I became the Project Director for the consortium, yes. 21 Q. By that stage others within the consortium or perhaps 22 even within Bilfingers had intimated to tie that work 23 would not start on Princes Street as had been 24 anticipated; is that right? 25 A. Yes, that we have seen through the correspondence or 191 1 email correspondence which was displayed earlier. 2 Q. Mr Sheehan's email of 18 February 2009? 3 A. Yes. 4 Q. Could we look at that again, please. The reference is 5 CEC00867153. Is it possible to have the whole of 6 Mr Sheehan's email on the screen at once? That's 7 pages 1 and 2. 8 Now, Mr Foerder, we can read this document for 9 ourselves, but in short, is it right to say that there 10 is no mention anywhere in Mr Sheehan's email of either 11 utilities, the issue of utilities, or of the 12 abbreviation MUDFA, which was a shorthand way of 13 referring to utilities? 14 A. It's correct that this is not stated. But what is 15 stated here is that the agreement provides for an 16 exclusive licence to the Infraco to enter and remain up 17 in the designated working areas. This is a reference 18 made in regards to the presence of utilities because we 19 were not able to get this work area completely handed 20 over due to the presence of MUDFA. 21 Q. The only issue which is specifically mentioned in 22 relation to the exclusive licence is the bus route. 23 Would you agree with me? 24 A. Stated, yes. 25 Q. That's mentioned in the penultimate paragraph on page 1, 192 1 and also in the first paragraph on page 2; do you see 2 that? 3 A. Yes. 4 Q. So the bus lane is mentioned twice, but utilities are 5 not expressly referred to at all. 6 A. That's right. 7 Q. Does that not strike you as strange? 8 A. No. 9 Q. Why not? 10 A. First of all, I wasn't there to the time when this email 11 were circulated. I may have made them aware about it, 12 to be more clear here. But that was before my time. So 13 I had little influence on it, but by reading it, for me 14 it was clear it was not just the bus lane. It was also 15 all the other circumstances around. 16 Q. How important was the issue of the bus lane to the 17 question of whether or not Bilfingers were prepared to 18 work on Princes Street? 19 A. As I explained earlier, it's the principle. We were 20 going through a time of nine months in the contract or 21 even more, ten months, where tie haven't executed the 22 contract as it was foreseen. They haven't issued the 23 tie changes. They were instructing whatever they wanted 24 to instruct without forming contractual basis for it. 25 Bus lane was another example of it. 193 1 Q. In the briefing -- 2 CHAIR OF THE INQUIRY: I think the question was: how 3 important was the issue of the bus lane to the question 4 of whether or not Bilfinger were prepared to work on 5 Princes Street? 6 A. The bus lane was important because it have changed the 7 condition completely. As I explained earlier, the 8 access condition have been changed through the presence 9 of this bus lane, which was a change. 10 MR FAIRLEY: Were you under the impression from information 11 given to you by others within Bilfinger that tie had not 12 issued a change order in relation to the maintenance of 13 a bus lane? 14 A. Yes. There was no change issued. 15 Q. Were you not told about Change Order number 21, dated 13 16 February 2009, with reference INFCORR758? 17 A. No, I think we don't have got agreed Change Order from 18 tie. That was my understanding. 19 Q. Were you not made aware that by the time this email was 20 written by Mr Sheehan, on 18 February, the only issue 21 between the parties so far as the bus lane was concerned 22 was whether Bilfingers would be paid GBP8,001.96 for 23 additional work or GBP6,546.55 for additional work. 24 Were you not aware of that? 25 A. I was aware that the numbers were on minor grounds, yes. 194 1 Q. So you were aware that so far as the bus lane was 2 concerned, the only dispute by this stage between 3 Bilfingers and tie was about money, and the amount of 4 money was GBP1,455. Were you aware of that? 5 A. Yes. As I said earlier, it was the principle, because 6 it was a continuation from the start of the contract 7 that tie was not respecting the contract. For what you 8 sign a contract if you don't respect what is written 9 down there? So I think that we had reached here 10 a limit, that was the minimum, the way I was briefed, 11 which made the situation for us to -- to try to get here 12 an agreement prior to continue the same, because this 13 numbers which you mentioned are, of course, negligible. 14 They are not really of excessive amounts. But it was 15 the principle, and the monies which haven't been paid 16 before, and if this could have continued, then we would 17 have been under enormous commercial risk. 18 MR FAIRLEY: Thank you, Mr Foerder. I have no further 19 questions for you. 20 CHAIR OF THE INQUIRY: I don't think there are any other 21 questions, Mr Foerder. Thank you very much for your 22 attendance. You're still under your citation. So it 23 would be possible to recall you if circumstances 24 changed. Hopefully that won't be necessary. Thank you 25 very much. 195 1 A. Thank you. 2 (The witness withdrew) 3 CHAIR OF THE INQUIRY: We will adjourn until tomorrow at 4 9.30. 5 (4.30 pm) 6 (The hearing adjourned until Wednesday, 6 December 2017 at 7 9.30 am) 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 196 1 INDEX 2 PAGE 3 MR MARTIN FOERDER (sworn) ............................1 4 5 Examination by MR MACKENZIE ...................1 6 7 Examination by MR FAIRLEY ...................191 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 197