1 Tuesday, 31 October 2017 2 (9.30 am) 13 CHAIR OF THE INQUIRY: Thank you. Mr Lake? 14 MR LAKE: My Lord, the witness today is Graeme Bissett. 15 CHAIR OF THE INQUIRY: You are going to be asked some 16 questions initially at least by Mr Lake, counsel to the 17 Inquiry. 18 If you listen to the question and answer it as 19 directly as you can, and if you speak into the 20 microphones at a measured pace, so that the shorthand 21 writers can keep up with you. 22 MR GRAEME BISSETT (sworn) 23 Examination by MR LAKE 24 MR LAKE: Mr Bissett, could you state your full name, 25 please. 2 1 A. My full name is Graeme Bissett. 2 Q. The Inquiry has details of your address. What is your 3 present occupation? 4 A. I work with a portfolio of organisations as 5 a Non-Executive Director mainly. 6 Q. I would like you to look at a document, please. It will 7 be shown on the screen. You should also have a hard 8 copy in front of you. The document reference is 9 TRI00000025_C. 10 I see that's appeared to the screen hopefully to 11 your right? 12 A. Indeed, yes. 13 Q. Both that and the paper copy in front of you are copies 14 of the statement prepared by you for the purposes of 15 this Inquiry? 16 A. It is, yes. 17 Q. I think on the last page of that statement, you will see 18 you have signed it? 19 A. Indeed, yes. 20 Q. Now, you brought to the attention of the Inquiry that 21 there are corrections you seek to make to this 22 statement; is that correct? 23 A. That's correct. 24 Q. I think the first one concerns the close report? 25 A. Yes. 3 1 Q. What is the correction that you seek to make there? 2 A. There's a section of the suite of documents that were 3 issued as part of the close report called the Infraco 4 Contract Suite document, which I think at one place in 5 my statement, I refer to as DLA's report. 6 And the point I made in the email last night was 7 that looking back, I think that document was originally 8 prepared by people in tie. It was then reviewed and 9 amended by DLA, and it came to the other as a kind of 10 joint effort. So it wouldn't be accurate to say it was 11 strictly DLA's report. 12 Q. We should understand that as being a joint effort to 13 produce the Infraco Contract Suite report. 14 A. I'm sorry, it was a joint effort to produce a document, 15 yes. 16 Q. I'll come back to ask you a few questions about that 17 a little bit later in your evidence. We will leave that 18 for the moment. 19 I think the other thing you wanted to bring to our 20 attention was with whom you had discussions when you 21 first joined tie in 2003? 22 A. Yes, again on reflection, I'm quite sure I had a chat 23 with at least one, possibly two of the independent 24 Non-Executive Directors at that time, as well as the 25 councillors, the Chief Executive and the chairman. 4 1 Q. Thank you very much for that. 2 I want to go back to that time, looking back to 3 2003. You note in your statement that your initial role 4 was a financial one when you joined tie. I think it's 5 fair to say it developed from that? 6 A. It did. 7 Q. Ultimately Stewart McGarrity came in as the Finance 8 Director? 9 A. Yes. That, I think, was early 2005. 10 Q. So you have a background in financial matters and in 11 dealing with organisations of corporate entities. 12 A. I do, yes. 13 Q. So how did your role develop? What did it become within 14 tie? 15 A. Well, initially, the role was focused around the 16 business cases, primarily the financial aspects of the 17 business cases for the range of projects which tie was 18 involved with. As you will know, there was more than 19 the tram project at that time. Congestion charging 20 scheme was another very big piece of work, and there 21 were a number of smaller schemes, I think, around at 22 that time as well. So they were always primarily 23 focused on the business cases; also the business plan 24 for tie Ltd because that was a requirement of the 25 Council that tie the company produced an annual business 5 1 plan, and I think over that period also we began to look 2 at the governance models for the tram project, but also 3 for one or two of the other projects as well. 4 Q. Just understanding then what were in a sense your 5 outputs, you were involved in the financial sections, in 6 particular, the business cases. We have heard that 7 there was a Draft Final Business Case and a Final 8 Business Case. Were you involved in both of those -- 9 A. Yes. 10 Q. -- for the trams, I should say? 11 A. That's correct. That was slightly later. That was 2006 12 and then 2007, I think, so in the earlier period the 13 role was to oversee the compilation of the full Business 14 Case documents which at that stage were primarily for 15 Parliamentary Bill purposes. 16 But after that point, once Stewart McGarrity 17 arrived, and he was a full-time Finance Director, he 18 took over all responsibility for the business cases, 19 which led to the DFBC and the FBC, and my role would 20 have been to primarily to comment, to read them, review 21 them, critique them, raise questions and that sort of 22 thing, but not for the compilation. 23 Q. I want to go to a different matter now, just looking at 24 the legal advice that was available to tie. 25 I think you were aware that DLA had been appointed 6 1 solicitors to tie? 2 A. Yes. 3 Q. Now, they were stood down in 2007. Were you aware of 4 that? 5 A. Yes. I was, although -- and I saw that in the evidence. 6 I cannot recall being involved in the decision to stand 7 them down, but it became evident that they were, and it 8 wasn't something I felt was correct actually. 9 Q. What did you think the negative consequences were of 10 standing them down, if you didn't think it was correct? 11 A. Well, in a project of this scale, I think the driver was 12 from memory to do with trying to save cost, but my view 13 was that on a project of this scale and complexity, that 14 tie and the Council needed full-scale legal support from 15 a properly qualified firm with all the right resources, 16 and to try to do that in-house would be inefficient and 17 possibly quite dangerous actually. 18 Q. Were you involved in any discussions about that at the 19 time? Did anyone seek your view? 20 A. Not at the time they were stood down, but once it became 21 apparent that happened, I'm pretty sure I raised it with 22 people to offer a contrary view. 23 Q. Who did you raise it with? 24 A. At that time it would have been the -- this was with 25 2007, I think, so it would have been certainly 7 1 Willie Gallagher, who was the Executive Chairman by that 2 time, probably others in the management team. 3 Q. What response did you get to that? 4 A. I think the realisation was that there hadn't been the 5 right move and DLA were re-appointed. 6 Q. Can you remember when in 2007 you raised it? How long 7 had DLA been away by the time you raised it? 8 A. Probably a month or so. I don't recall that at that 9 time I was working particularly closely with DLA. So it 10 wasn't as if I suddenly misstated a week to week 11 contact, but it became apparent after maybe a month. So 12 the it would be over the summer, probably, of 2007. 13 Q. Do you know who was providing legal advice during the 14 period that DLA weren't retained? 15 A. I think tie recruited a couple of people, and one of 16 them -- I'm afraid I can't recall the names, but one was 17 a lady and I think there was a more junior lawyer 18 working with her. 19 Q. When they came back, when DLA came back, were you 20 involved in the decision for them to come back? 21 A. Well, having stated the point that I thought it was 22 wrong that they be taken off the case, so that would be 23 the consequence of that discussion. 24 Q. We've heard evidence from Mr Fitchie, the partner within 25 DLA, that when he came back, it was on secondment to 8 1 tie. Were you involved in the decision as to the basis 2 on which he would be taken back? 3 A. No, I wasn't, and again, in trying to recall the 4 events -- but I do recall Willie Gallagher saying to me 5 that that was a possibility at some stage, although I'm 6 afraid I couldn't put a date to that conversation, but 7 it wasn't -- I don't recall that it was a firm proposal, 8 and I would have to say that from at that point on, 9 Andrew Fitchie and DLA operated as I would expect a lead 10 partner in a full-scale legal advisory firm to operate, 11 without any apparent difference because of a different 12 role. 13 So day-to-day, for the period after that, it didn't 14 register with me that it was a different role at all. 15 Q. Different from ...? 16 A. Different from, if you like, a partner in the firm 17 leading the firm's activities, not on a secondment basis 18 to the client. 19 Q. I take it in the experience of businesses you describe 20 in your CV, that you have experience of working with 21 solicitors as advisers on commercial projects? 22 A. Yes, pretty extensively, yes. 23 Q. Did you consider there was any difference between the 24 way Mr Fitchie was retained by tie and your experience 25 of other solicitors in other projects? 9 1 A. No, I saw no difference in the way Andrew and DLA 2 operated from what I would have expected from that 3 relationship. 4 Q. To what extent was Mr Fitchie or DLA generally also 5 providing advice to the Council? 6 A. Yes, the door was open to those conversations, and I'm 7 pretty sure there was quite extensive contact between 8 the two. 9 I think the original contract was between tie and 10 DLA, you know, there was a contract for legal advisory 11 services. Quite what the legal connection with the 12 Council was, I'm afraid I couldn't really comment, but 13 there was a discussion later on about creating a duty of 14 care between the two. 15 But in practical terms, Andrew Fitchie, as the lead 16 partner, had, in my view, a lot of contact with the 17 Council, particularly the Council's legal team, but was 18 in meetings with other senior members of the Council as 19 well. 20 Q. Did you or to your knowledge other people within tie 21 specifically instruct him to have contact with the 22 Council on certain matters, or was it just left to the 23 Council to make requests? 24 A. I don't recall any specific instruction to go and do 25 something. But I think the way that we were operating 10 1 was -- in my mind certainly there was complete alignment 2 between what the Council needed and what tie needed in 3 terms of legal advice. It might have been primarily 4 provided to people in tie, but the end objectives were 5 exactly the same. And I don't recall -- there was 6 certainly no barriers to those conversations. 7 I encouraged that kind of open door between the 8 Council's legal people and particularly Andrew Fitchie 9 and possibly colleagues at DLA. 10 Q. If I could just ask you to look at your statement on 11 page 24, please. I'm interested in looking at 12 paragraph 62, which is the upper one on the upper half 13 of the page. Reading five lines down, the sentence 14 begins at the left-hand margin: 15 "Prior to the new Administration coming in, it was 16 quite difficult to know what the funding package looked 17 like." 18 Do you see that? 19 A. Yes, I do. 20 Q. It was proposed obviously that tie enter into contracts 21 which, as we know, ultimately had a value in excess of 22 GBP500 million. And that tie had no assets of its own? 23 A. Indeed, yes. 24 Q. It also had no guaranteed income stream to enable it to 25 fund borrowing? 11 1 A. That's correct. 2 Q. What had to be in place before tie would be able to 3 enter into contracts with that sort of sum of money? 4 A. There had to be certainty about the sources of the 5 funding to meet the capital cost and other costs that 6 were anticipated in the contract. 7 This was back in 2006, so it was prior to -- 8 2006/2007, prior to the formal procurement decisions and 9 then financial close. 10 But the concern I had at the time was there wasn't 11 certainty as to the commitment of the funding, 12 particularly the Scottish Executive as it was then, 13 grant, in the sense that, while 375 million had been 14 voted, there was an expectation that it would be 15 indexed. Now, you could argue at the margin about how 16 much the indexation would result in that number moving 17 by, but in round sums, it was expected to move to about 18 500 million. It just seemed to take an awful long time 19 to get people to agree that that sum would be indexed, 20 and the importance of that was not just that it could 21 lead to a firm funding proposal, but also with -- 22 upwards of 100 million of a variation, the scope of the 23 project was clearly at play as well. 24 As I say, it just took a while to get some degree of 25 clarity and certainty on that. 12 1 Q. Without clarity and certainty on that, what effect would 2 that have on dealings with contractors or consortia? 3 A. I think it would have been very difficult for tie and 4 the Council to say credibly that this project would 5 happen unless there was clear evidence that the funding 6 would be in place. So the level of uncertainty in the 7 contractor mind that that would create could have any 8 number of different consequences. 9 Q. Could I ask you to look at a document, please. It will 10 be shown on screen. It's got reference TIE00090098. 11 A. Yes, I have that. 12 Q. This is an email at the top of the screen, from 13 Stewart McGarrity, on 5 December, to you and others 14 within tie. It's dealing with -- the subject matter is 15 Councillor Allan Jackson's questions. Do you see that? 16 A. I do, yes. 17 Q. What Stewart McGarrity said: 18 "See below my own notes re the questions asked by 19 Allan Jackson which will no doubt be mirrored in other 20 responses sought. I have not been able to consult on 21 these with Andie/Geoff, but I'm sure they would concur." 22 I would ask you to look at the question on the lower 23 part of the screen, number 3. 24 What Mr McGarrity says in response to the question: 25 "If the project goes over budget, who pays? 13 1 "Great question, and despite my best efforts, TS and 2 CEC have steadfastly refused to agree on this issue over 3 the past 9 months." 4 Was that a matter you were involved with? 5 A. I think it's the same issue as I described earlier in 6 discussions with primarily Transport Scotland to arrive 7 at certainty on their funding, but also with the Council 8 and the source of their money. 9 Q. This seems to be dealing particularly with the matter of 10 what are described as if the project goes over budget, 11 who is going to pick that up. 12 Was that a separate discussion that had to be had 13 with Transport Scotland and the city? 14 A. Yes, I think it was, although obviously directly related 15 because if two parties were committing funds, there 16 would need to be an additional discussion about what 17 happens in the event that there was an overrun, and it 18 was part of the same discussion. 19 Q. I just want to look a bit as to the position of the 20 Scottish Ministers, Transport Scotland; as to whether or 21 not there would be additional funding available if there 22 were overrun -- if the costs did overrun. 23 In that regard, could you look, please, with me at 24 another document. It is reference CEC01875336. We can 25 see a cover page here of the document indicating that it 14 1 is the Interim Outline Business Case dated May 2005, a 2 draft for discussion. 30 May 2005. 3 A. I do, yes. 4 Q. Were you involved in the preparation of this document? 5 A. I think at that stage Stewart McGarrity was leading in 6 the overall direction of it, but I would have seen it 7 and commented on it, I'm sure. 8 Q. I just want to take to you one particular passage in it. 9 If we could look at page 125 of this, please. If we 10 could enlarge the heading 8.3.4 and the text underneath 11 it. The heading is "Key Funding Assumptions", and 12 underneath that, the sub-heading, "SE Grant", Scottish 13 Executive grant. It says there: 14 "The financial model assumes that the grant from 15 Scottish Executive is capped at GBP375 million to be 16 paid either upfront as a capital grant, as LPFS during 17 operations, or as a combination of both. Under project 18 configurations "Tram Line 1 only" and "Tram Line 2 only", as 19 total capital expenditures are lower than 20 GBP375 million, we are assuming that the total available 21 grant is capped at the total nominal capital 22 expenditures in each of these scenarios." 23 Now, we see there references to the grant monies 24 from the Executive being capped. 25 A. Mm-hm. 15 1 Q. How did that accord with your understanding of the 2 position at that time? 3 A. That is not -- it doesn't tie up with my recollection. 4 I think what that might have been doing was matching an 5 unindexed grant with nominal capital expenditure which 6 I would take to mean at -- prices at that time, rather 7 than allowing for inflation on the other side of the 8 balance sheet. 9 But beyond that, I'm afraid I couldn't really 10 comment. Perhaps other than to say one thing, which was 11 for a long period, the position, as I recall it, that 12 Transport Scotland took was that the grant would not be 13 indexed, and part of the debate was about negotiating 14 the indexation that was appropriate. 15 Q. There's two things there. I would like to split them 16 out. The first one is the indexation issue. When the 17 Scottish Executive first announced their funding, we see 18 here it's GBP375 million, and there was going to be 19 a question about whether or not that would be indexed to 20 deal with construction cost inflation. 21 A. Yes. 22 Q. I think you say in your statement it took a long time, 23 in your view an unreasonably long time to get agreement 24 from the Executive, the Government as it became, that 25 they were willing to index that? 16 1 A. Yes, it did. 2 Q. But ultimately it was clear they were going to index it, 3 and it brought the Scottish Government contribution to 4 GBP500 million? 5 A. Yes. That was September, I think, 2007. It was 6 a statement by John Swinney which was that 500 million 7 was all that the Scottish Government, the new Scottish 8 Government would contribute. 9 Q. He made that statement in 2007? 10 A. Yes. 11 Q. If I could ask you to look at another document, please. 12 It's document TRS00002128. This is not a document 13 you'll have seen before, Mr Bissett, but what I want to 14 do is just identify what it is -- identify something it 15 says, and then get your comments on that as to how it 16 relates to the position as you understood it at the 17 time. 18 What we can see is this is advice issued to Scottish 19 Ministers, the Minister for Transport in particular, and 20 it's got a date on it of 3 February 2006. Do you see 21 that at the top right-hand side? 22 A. I do, yes. 23 Q. If we could look at page 2 of this, we can see there's 24 a heading about a third of the way down the page, 25 "Expectations of and conditions on CEC". Do you see 17 1 that? 2 A. I do, yes. 3 Q. If we could enlarge paragraph 10 underneath that, 10 and 4 11, it's perhaps -- the first paragraph there, 10, deals 5 with requiring Council and tie to produce robust risk 6 management proposals that build on best practice 7 elsewhere. But then paragraph 11 notes: 8 "We have made it clear to City of Edinburgh Council 9 and Tie that the Executive commitment is capped and any 10 future shortfall would be for CEC and Tie to deal with." 11 Now, dealing not so much with the issue of 12 indexation, leaving that to one side, but the issue of 13 capping, whether or not there would be any funding 14 available for cost overruns, this document appears -- 15 gives the impression there will not be any -- the 16 Government will not fund cost overruns? 17 A. That's what that says, yes. 18 Q. Now, how did that fit with the position as you 19 understood it in 2006; what messages were you getting 20 from the Government as to whether or not they would fund 21 overruns? 22 A. I don't recall hearing a categoric statement of that 23 type in the discussions we had from the Government side, 24 from the Transport Scotland people. 25 My recollection is that both parties, namely 18 1 Transport Scotland and the Council, were still, if you 2 like, jockeying for position as to who would put what 3 sum of money in, and it was the quantum that was really 4 the focus of those discussions rather than the capping 5 element. 6 Q. At this time, as I think you have said, even the 7 indexation wasn't settled? 8 A. It wasn't, no. 9 Q. So before you had to consider what additional cost might 10 be met, it was almost meeting the basic cost, the 11 anticipated costs? 12 A. That's exactly right. 13 Q. Would it be fair to say that the position of the Council 14 and tie was perhaps inevitably that they would like to 15 have the assurance that more money would be available if 16 it was required? 17 A. Yes. I think -- I mean, that's obviously entirely 18 logical. I just wouldn't like to give the impression 19 that that, from my memory anyway, was a key part of the 20 discussions at that point. It was much more about the 21 quantum. 22 Q. The quantum as in the sense of fixing the basic grant? 23 A. Yes. 24 Q. How much indexation would be permitted? 25 A. Indeed, yes. 19 1 Q. Had there been any -- I turn the question round and put 2 it the other way. As at 2006, or even 2007, prior to 3 the election, had there been any indication given by 4 Scottish Ministers that they would be willing to fund 5 cost overruns? 6 A. I don't recall any, no. 7 Q. I just want to look to a couple of documents arising in 8 the Tram Project Board to see how this question of cost 9 overruns was to be addressed. 10 Could we look, please, at document CEC01360998. 11 CHAIR OF THE INQUIRY: Mr Lake, before you do that, that 12 last document also dealt with indexation. Do you want 13 to ask -- I think the purpose of the report was to give 14 advice about indexation. 15 MR LAKE: It was. I should have taken that also. 16 If we could go back to the first page of that 17 document, setting out what the purpose of this is in 18 paragraph 1, if you look at the heading and paragraph 1 19 beneath it. We can see the purpose was: 20 "To recommend that you accept the phased approach to 21 the construction of Edinburgh Trams agreed by City of 22 Edinburgh Council on 26 January and that you agree in 23 principle to indexation of the GBP375 million previously 24 committed Executive funding in line with general 25 construction cost inflation." 20 1 A. I see that, yes. 2 Q. Was this as a result of the sort of lobbying that had 3 been carried out by tie to get this indexation? 4 A. It may have been, or potentially it may have been what 5 was anticipated on the Government side all along. 6 I don't really know, but certainly that was the focus of 7 a lot of the dialogue with Transport Scotland up until 8 that point. 9 Q. If we look at the fourth page of this document, look at 10 the two recommendations at the top of the page, the 11 first one is a recommendation that the Minister welcome 12 Council's decision, and the first phase, proposal of 13 Leith to Edinburgh Airport, should be accepted in 14 principle, subject to delivery of a robust Business Case 15 which will become more substantial as the project data 16 develops over the course of spring and summer. The 17 second is: 18 "I also recommend at that we proceed with the 19 indexation of the committed GBP375 million to allow the 20 construction of the optimum first phase proposal." 21 A. I see that, yes. 22 Q. So we have here -- this is -- we can see the advice to 23 Ministers contemplates that the indexation is to be 24 given, but nonetheless we saw the reference in 25 paragraph 11 that that commitment, once indexed, was 21 1 capped? 2 A. Indeed. 3 Q. I would like then to look at a Tram Project Board 4 minute, if I could, please. It's the one with reference 5 CEC01360998. 6 We can see here minutes of a Tram Project Board 7 meeting. I take it these were things that you would be 8 familiar with while you were with tie? 9 A. Yes. I attended those meetings, yes. 10 Q. If we could look at page 32 of this, please. Do you 11 recognise what this is? 12 A. I think the papers typically contain the risk register 13 or, as it's called here, a Risk Status Summary. So that 14 would be my recollection. 15 Q. If we could look forward two pages to page 34. In 16 particular, please, at risk 269. We can see that the 17 risk is described as: 18 "Agreement on financial over-run risks sharing has 19 not been reached between CEC and TS due to doubts over 20 costs staying in budget." 21 That's described as a: 22 "Potential showstopper to project if agreement is 23 not reached." 24 The treatment strategy is: 25 "Hold discussions with CEC & TS to ensure adequate 22 1 release of funds at appropriate periods of time. 2 Understand commitments by Transport Scotland and the 3 Council. Facilitate agreement." 4 Although you are not named as a risk owner there, 5 were you involved in addressing this issue? 6 A. Yes. I think the dialogue with Transport Scotland and 7 with the Council continued throughout 2006. Sorry, 8 I have forgotten the date of this document. 9 Q. I didn't give you the date at the start. This was the 10 Tram Project Board meeting of January 2007. 11 A. 2007, yes. That would fit my recollection. I think 12 there was a long period where we still didn't have 13 absolute clarity about the indexation or therefore any 14 overrun responsibility. (Pause) 15 CHAIR OF THE INQUIRY: I should have told you, every Tuesday 16 we have the test. 17 MR LAKE: It's apparent from here that the agreement as to 18 overrun is still not in place. 19 A. That's correct, yes. 20 Q. It was obviously viewed as being quite a serious matter 21 in that it was described as a potential showstopper? 22 A. Yes. 23 Q. We know of course that the show ultimately went on. But 24 there was never any agreement on overrun in place; is 25 that correct? 23 1 A. Well, not until John Swinney made his announcement, 2 which brought admirable clarity to the whole situation, 3 because that was the clear statement that the Government 4 would provide 500 million, and I think the phrase was 5 "not a penny more"; and therefore it was quite clear to 6 the Council that if there was a overrun, that the 7 overrun would need to be to their account. 8 Q. If we look at the Tram Project Board papers for the next 9 month, please, February. They are reference 10 CEC00689788. 11 We can see this is the cover sheet for the papers 12 for the meeting that was due to take place on 13 20 February 2007. I think we can see that you're one of 14 the people to whom these were distributed? 15 A. Yes, indeed. 16 Q. If we could look to page 5 of this, please. We can see 17 here that we're looking at the minutes of the meeting 18 that took place on 23 January 2007. 19 A. Yes. 20 Q. If we look over the page to page 6, to the lower part of 21 the page, we can see some discussion about risk. 269, 22 we've just been looking at. 23 "It was noted that the Summary Risk paper 24 incorrectly recommended the risk to be closed. This was 25 an oversight following the DPD and has already been 24 1 processed in the Risk register. The actions and 2 resolutions of the board discussion on funding is noted 3 at point 4 below." 4 If we look then at 4 below, paragraph 4.1, we can 5 see that: 6 "GB [which I believe is you] outlined the different 7 elements of the funding issue which must inform the 8 discussion." 9 There's the grant, and then the second one, the 10 TS/CEC agreement for fundings of any overruns. 11 Just stopping there, is that what we've been looking 12 at? It's trying to get agreement as to what would 13 happen if there was a cost overrun? 14 A. Yes, it is. 15 Q. Because as of then, there was nothing in place? 16 A. Not to my knowledge, no. 17 Q. Once again, I ask, had there been any indication at that 18 stage from the Scottish Ministers, the 19 Scottish Executive then, that additional funding would 20 be available? 21 A. No, none that I recall. There was no indication of 22 that, but equally, I would say that there were no 23 absolute statements to the contrary either. 24 Q. So the matter was open? 25 A. Indeed. 25 1 Q. Then if we go to the March minutes, that's reference 2 TRS00004079. 3 We can see here this is the papers for the meeting 4 on 20 March for the Tram Project Board, and once again, 5 you were amongst the people to whom they were 6 distributed? 7 A. Indeed, yes. 8 Q. If we go to page 6 of this, again, we come to the 9 minutes of the previous meeting, this time 20 February. 10 If we look at item 1.7, we can see that the agreement 11 for funding cost overrun is something that was still 12 outstanding at that stage? 13 A. That's correct, yes. 14 Q. I think it's fair to say that in fact there never was 15 any agreement in place right up to the Scottish General 16 Election, when, as you say, Mr Swinney made the 17 announcement there would be no funding for an overrun, 18 which essentially brought the matter to a close there? 19 A. It did, although I think the statement was some months 20 after the election. 21 Q. It was after the debate that had taken place on 22 Parliament as to the future of the tram project? 23 A. That would be my recollection, yes. 24 Q. I would like to look at something in these minutes, 25 the paper that you prepared. If we look at page 72. 26 1 You can see it's a paper to the Tram Project Board, and 2 the subject is "Notes on funding arrangements between CEC 3 and TS - papers included – TPB [Tram Project Board] meeting, 4 20 March 2007. It's noted towards the foot of the page 5 that you're the person that prepared it. 6 A. Indeed, yes. 7 Q. You note that there are two papers on funding 8 arrangements included in the TPB papers for the meeting 9 on 20 March, both of which follow up matters raised in 10 the last two meetings. And in the two paragraphs, you 11 give a brief outline of what each of these two papers is 12 concerned with; is that correct? 13 A. Yes, that's correct, yes. 14 Q. In paragraph 2, you say: 15 "The first paper was prepared by tie to set out the 16 backdrop to the planned discussions between the Council 17 and Transport Scotland on the funding arrangements for 18 the project. It describes the reasons why the funding 19 agreement is needed, a suggested outline for that 20 agreement and an overview of the issues which require to 21 be addressed. This paper is in the subject of a meeting 22 between the Council and Transport Scotland scheduled for 23 19 March 2007, which tie is facilitating. A verbal 24 report on the outcome of the meeting will be provided to 25 the TPB [Tram Project Board] on 20 March 2007." 27 1 A. I see that. 2 Q. That was one of the issues that was outstanding. Was 3 that not just the overrun, but the entirety of the 4 funding agreement to be in place in Transport Scotland? 5 A. I think at that stage, it was the entirety of the 6 package, yes. 7 Q. The second, just for completeness, we see the second 8 paragraph, what you note is a different issue, which is 9 dealing with the Council's contribution of GBP45 million 10 towards the project costs? 11 A. It is. 12 Q. As they appear in the paper, if we go to the next page, 13 they appear in reverse order. What we see there in the 14 first paper, is the one that deals with the Council's -- 15 its contributions to the costs? 16 A. Indeed, yes. 17 Q. If we can jump forward to page 80, is this the paper 18 that deals with the key issues that arise between the 19 Council and Transport Scotland? 20 A. It appears to be, yes. 21 Q. If we just orientate ourselves. If we could look at 22 paragraph 1.4 towards the foot of the page. We see 1.4 23 is: 24 "Financial close for the principal contracts is 25 currently scheduled for October 2007, when tie will 28 1 contract with the preferred bidders for infrastructure 2 (Infraco)and vehicles (Tramco). The business case capital cost 3 is GBP351 million. In order to enter into these 4 contracts, tie will require to have legally binding 5 sources of the funding to fulfil its obligations and 6 there will require to be documents in place between TS, 7 CEC and tie to govern the funding." 8 A. I see that. 9 Q. Is this the point that as tie is a shell company, it's 10 really not in a position to enter into any contract 11 until it's sure it has the funding available to it? 12 A. Yes. That's exactly right. 13 Q. It then goes on, if we could look at paragraph 1.5, and 14 the subparagraph beneath it. It notes: 15 "There are several key differences between the 16 funding arrangements required to support financial close 17 and those currently in operation. 18 First, with the exception of a limited comfort 19 letter to Alfred McAlpine supporting tie's covenant, 20 the contracts are written exclusively between tie and 21 the third parties. This will not be adequate for the 22 Infraco/Tramco contracts, which will require specific and 23 detailed underwriting by tie's funders as a condition of 24 entering into the contract with tie." 25 Again, that's the same point, that people don't want 29 1 to contract with tie until they know there are firm 2 funding arrangements in place to ensure it can pay? 3 A. Indeed, I mean, I think it's in two directions. tie Ltd 4 had to be sure of its own position, but the parties with 5 whom tie was contracting would want to know that 6 certainty existed as well. 7 Q. Presumably as part of the Directors' duties, they would 8 need to be sure there was funding available before they 9 entered into contracts? 10 A. I believe that's the case, yes. 11 Q. Could we look over the page to paragraph 1.8 and its 12 subparagraphs. 13 I just want to identify what are described here as 14 the funding streams. It says: 15 "There are therefore three distinct prospective 16 funding streams. Funds from TS to CEC and on to tie to 17 finance the Infraco and Tramco contracts (including SDS 18 after novation)." 19 That's what's called construction and vehicles 20 costs. The second: 21 "Funds from TS to CEC and on to tie for tie's 22 internal costs, design (SDS) until financial close, 23 utility diversion (including MUDFA), advance works 24 (including OCIP, spoil, GI) and other implementation 25 expenditure (together "tie direct costs"). Funds from 30 1 TS to CEC for land acquisition ("land costs")." 2 A. I see that. 3 Q. Was there any particular reason why these are viewed as 4 three distinct funding streams, when it is more to do 5 with the use that would be made of them, rather than the 6 source of them? 7 A. Possibly only for clarification as to what the funding 8 was -- was going to do, but the third one obviously is 9 different, because those funds would stay with the 10 Council rather than flowing to tie. 11 And possibly the differentiation between 1.8.1 and 12 1.8.2 is that the activities under 1.8.2 were underway, 13 I think, at that time. So those funds were flowing, 14 whereas the Infraco and Tramco contracts clearly were 15 still to be let. 16 Q. Could we go now to page 84 of the document. If you 17 could enlarge the upper half of the page. 18 5.1: 19 "There are a number of contingencies which will 20 require to be addressed." 21 (a) deals with project aborts. (b) interim 22 viability tests. If you look at (c), it deals with cost 23 overrun. It says: 24 "... in any of the three funding streams, but 25 especially in construction and vehicles. Although the 31 1 outline funding structure requires 100% of the 2 funding for construction & vehicles to be grant awarded, 3 it is anticipated that [Transport Scotland] TS will require 4 issues like cause of overrun to be reflected (eg scope 5 creep) with potentially different proportions of TS/CEC 6 contribution applying to different outcomes." 7 Now, just that bit at the end there, it might be 8 said that that suggests that there was a commitment or 9 an understanding that Transport Scotland would 10 contribute to cost overrun beyond the indexed grant. 11 Was that what you had in mind when you were writing 12 this? 13 A. Partly, but I think the main point that I was trying to 14 get over was that if the cause of the overrun was, for 15 example, that the Council took a decision to develop 16 some aspect of the project which went beyond the agreed 17 scope, that the funding for that would come from the 18 Council rather than being part of Transport Scotland's 19 grant. I think that's the main point that that's trying 20 to bring out there. 21 Q. But even if it wasn't something that was caused by the 22 Council, in thinking that Transport Scotland might 23 contribute, was that simply an aspiration that you and 24 tie had, or was that something that you had been given 25 any form of nod by the Ministers that they would be 32 1 willing to do so? 2 A. No. I don't recall any form of nod at all. I mean, 3 I think we were still in a kind of negotiation here. 4 That was the extent of it. 5 Q. I would like to go then to look at the following page, 6 page 85, and section 7 within that, if we could enlarge 7 that. 8 This is just drawing together. We have been looking 9 at the funding of the whole of the contract. What you 10 say here -- it's probably easiest if I read through all 11 three paragraphs and then ask you the question: 12 "There are two extreme views of these arrangements. 13 At one end, it would be possible to adopt a completely 14 arms-length approach whereby [Transport Scotland] TS, CEC 15 and tie act in the manner of client and bankers. At the 16 other, the do-minimum approach would be to address only 17 those aspects which enable the third party contractors 18 to be comfortable that tie and TEL would meet their 19 obligations. 20 A fully arms-length approach would deny the 21 advantages of the family relationship between TS, CEC 22 and tie and care will need to be taken that this is not 23 overlooked. However, a do-minimum approach is dangerous 24 as it would be reliant on the funding parties dealing 25 equitably and expediently with funding requirements as 33 1 the project proceeds, without causing disruption and 2 incremental cost. 3 tie recommends that the approach taken is geared 4 towards an arms-length model to ensure rigour and 5 reduce avoidable risk to third parties. As the dialogue 6 progresses, reality checks should be built in to ensure 7 that the benefit of the relationships between TS, CEC 8 and tie are realised in a risk-controlled manner." 9 That was setting out your views at the time? 10 A. It was, yes. 11 Q. I just want to clarify some of the points you state 12 here. Just going to the paragraph 7.2 and what you 13 describe as the do-minimum approach, if we start there. 14 Is that essentially suggesting that matters of 15 funding would be dealt with on an ad hoc basis 16 throughout the contract as they arose? 17 A. I wouldn't put it as strongly as that. I think what 18 I had in mind there was that there may be a set of terms 19 that would be adequate for the contractors, from the 20 contractor's perspective to be comfortable that the 21 funding would be available. 22 But beyond that minimum level documentation aimed 23 specifically at the contractor, that the parties didn't 24 get involved in extensive formal documentation. 25 Now, there's not much distance between that and ad 34 1 hoc, I would accept, and I think that's why I felt that 2 wasn't necessarily the right approach. But it could 3 have had, for example, heads of terms between the bodies 4 that weren't binding, the bodies on the public sector 5 side, that may have been adequate to get the public 6 sector bodies comfortable as long as that core 7 documentation was adequate for the contractors' side. 8 Q. When you say the parties would have to deal equitably 9 and expediently with funding requirements, this seems to 10 presuppose not everything would be nailed down. There 11 would be a lot of trust that matters would just be dealt 12 with as and when they arose? 13 A. Yes, that was one possible approach, but not one that 14 I favoured, I don't think. 15 Q. The other one is described variously as client and 16 bankers or fully arm's length approach. What did you 17 envisage there? A sort of full financing agreement? 18 A. Yes, and those potentially would be very extensive if 19 you adopted a strictly banker type of model. Clearly 20 that would do the job legally, but there would be quite 21 a lot of work involved in that, with no doubt different 22 lawyers acting for all three parties. 23 Q. You have experience, or you had experience at that time 24 of facility agreements being put in place by large 25 companies with banks -- 35 1 A. Yes. 2 Q. -- for their needs. 3 These sometimes would be for sums not even as much 4 as GBP500 million? 5 A. Indeed, yes. 6 Q. But there -- is it fair to say they're really quite 7 large and complex agreements, sometimes running to well 8 over 100 pages? 9 A. Yes, indeed. 10 Q. Is that what you were considering with the sort of 11 client and banker approach? 12 A. Yes, that would be the way that would work, if people 13 adopted that very rigorous approach. 14 Q. Now, your conclusion at 7.3 here, you tended towards -- 15 you recommend that the approach should be geared towards 16 an arm's length model. That's the heavily documented 17 model. 18 A. It is, yes. 19 Q. Now, are you aware how matters progressed ultimately 20 with Transport Scotland? 21 A. Yes -- sorry. I think -- well, I know that a grant 22 award letter was ultimately signed, which would have 23 been a legally binding document between the Council and 24 Transport Scotland as agent for the Scottish Government. 25 So that effectively was the facility letter covering 36 1 the GBP500 million grant award. 2 The other piece of the package is obviously the 3 Council's funding, and I can't recall how that was 4 ultimately documented, but I think it was a condition 5 built into the grant award letter that the Council would 6 provide that level of funding. 7 It may also have been ultimately in the form of 8 pro rata. So 500 to 45 as the project proceeded. But 9 I think the documentation that was finally settled on 10 was a binding grant award letter, rather than an 11 extensive equivalent to a bank facility agreement. 12 Q. So ultimately it tended rather more towards the -- not 13 the fully arm's length or client and banker approach, 14 the one that's more described as the -- I'm trying to 15 think -- do-minimum sounds a bit prejudicial, but the 16 more informal aspect? 17 A. I think having a formal grant award letter, which was 18 legally binding, is quite a significant piece of the 19 legal architecture which would be different from 20 non-binding Heads of Terms or similar. 21 Q. But nothing like the sort of hundred pages of facility 22 agreement? 23 A. No. And I didn't believe that that's what was needed. 24 It was more to say: can we please be clear and 25 definitive here, and therefore not ad hoc, but try to 37 1 avoid all the cost that would be involved in 2 a completely third party approach to the arrangements. 3 Q. I want to turn from that to the question of governance 4 that you've already referred to. 5 We have evidence that tie was established in 2002 6 and your statement indicates that you joined in 2003? 7 A. I did. 8 Q. What I would like to do is start by looking at 9 a development taking place in July 2005 by looking at 10 the tie Board minutes or papers. 11 Could we look, please, at document TRS00008524. We 12 can see we have a cover sheet, which indicates we're 13 looking at papers for the tie Board meeting on 14 25 July 2005. 15 A. Yes. 16 Q. If we go forward to look at page 14 of this, please. 17 There's a section here on the tie Board meeting. 18 I should ask, first of all, are these papers that 19 you would have been given at the time in 2005? 20 A. Yes, I have had access to the board papers and meetings. 21 Q. Firstly, we are looking at a section that's entitled 22 Chief Executive's Report. If we go to the foot of the 23 page first of all. 24 This page. Heading, "Project governance". It notes 25 that: 38 1 "Significant work has been ongoing to refine project 2 governance and recommendations have been drafted in 3 consultation with external stakeholders." 4 If we go over the page and see what's said. The 5 upper half of the page, it says: 6 "The core governance processes are anticipated to be 7 similar in each project: A Tram Project Board and EARL 8 Project Board are proposed, which will assume principal 9 responsibility for each project. tie limited will delegate 10 its powers to each of the Project Boards, reserving its 11 powers in relation to a limited number of fundamental 12 project parameters, including material change to cost, 13 programme and scope. The Project Board will not have 14 legal directive power and will need to develop quickly 15 a common purpose amongst its members. The creation and 16 maintenance of consensus throughout the process will be 17 difficult and it is the primary responsibility of the 18 Project Board Chairman, who will also be the formal 19 interface with tie's Board." 20 If I just pause there, were you involved in this 21 decision to establish Project Boards for both the tram 22 and the EARL project? 23 A. Yes, I believe I was. 24 Q. As you have already indicated, tie had a number of 25 projects on at that time? 39 1 A. It did. 2 Q. Even these two noted, the tram and EARL, were both very 3 substantial projects? 4 A. They were. 5 Q. So rather than have them all coming to the company 6 board, was the idea to split up and have a dedicated 7 board for each one? 8 A. Indeed, yes. 9 Q. If I could ask, what was the purpose or what function 10 was to be discharged by these project boards? 11 A. To be the primary oversight and challenge body for each 12 of the two projects. The difficulty, as you already 13 see, is trying to marry up that approach with tie Ltd's 14 responsibilities, because it was still legally 15 responsible, and to try to avoid duplication of 16 governance effort in terms of reporting and meetings, 17 et cetera. 18 But the objective was to establish a body, the 19 Project Board in the case of the tram project, which 20 would be the primary governance and oversight body for 21 the project. 22 Q. These two boards, were they seen as being effectively 23 part of tie or within tie? 24 A. No. I think the idea was that they would be populated 25 by parties, for example taking the Tram Project Board, 40 1 representatives from the Council certainly, I'm pretty 2 sure at this time also from Transport Scotland, and that 3 the Board would have its own remit, and operate as 4 a governance body in its own right. 5 But tie would still retain the ultimate 6 responsibility for the activities of the Board. 7 Q. I want to come to look at the agreement a little bit in 8 a moment, but if we could look on to page 19, to stay 9 with this document for the moment. We can see the upper 10 half of the page, it's headed "tie Project Governance". 11 It's said: 12 "We are now moving into a phase where the magnitude 13 and frequency of decisions on tie's major projects 14 require additional board level focus." 15 That's simply matters were moving forward in 2005? 16 A. Indeed, yes. 17 Q. If you look at the lower half of the page, under the 18 heading, "Tram": 19 "Emerging from recent dialogue, there was emerging 20 consensus that the governance structure for tram should 21 incorporate: Creation of a Tram Project Board as the 22 principal decision-making body, with delegation to do so 23 by tie limited and (subsequently) TEL." 24 Under the various numbered points: 25 "There must be migration of tie Board project 41 1 responsibility to TEL at the appropriate time in 2 a seamless, controlled way and avoiding overlap." 3 A. Yes. 4 Q. Just dealing with a couple of things arising out of 5 that, we see that the Project Board there is to be the 6 principal decision-making body. Is that in a sense 7 usurping tie, transferring tie's decision-making power 8 to this new body? 9 A. Yes, I think in a delegated structure. So the remit or 10 possibly elsewhere would dictate what level the 11 transport -- the Tram Project Board could affect 12 decisions. 13 Q. We saw the head of this page, it's noted that magnitude 14 and frequency of decision, the requirement for that was 15 stepping up at this time? 16 A. Indeed, yes. 17 Q. Why does that require passing the decisions to a body 18 that's not within tie, slightly external? 19 A. I think the logic was that the Project Board would have 20 all of the main parties around the table. Membership 21 would be inclusive of all of the main stakeholders and 22 therefore there would be more of a common purpose, 23 whereas at the tie Board meetings, senior directors from 24 the Council and from Transport Scotland were essentially 25 guests or observers at the tie Ltd Board meeting. 42 1 And the thinking, I believe, was there needed to be 2 more of a formality to their involvement, so that all of 3 the stakeholders were firmly involved in the governance, 4 rather than only tie Ltd. 5 Q. If you move away from the tie Board model, where the -- 6 these external bodies are observers to the Tram Project 7 Board, where their members, essentially these 8 stakeholders are being given a vote or a stronger say in 9 how the project is managed and delivered? 10 A. That would be the case, yes. 11 Q. But looking at who those stakeholders might be, they 12 might have reference to the Council and 13 Transport Scotland as a bare minimum. Why was it 14 appropriate that they should be taking the vote in 15 relation to delivery of the tram, as opposed to simply 16 tie, that had been established by the Council for the 17 purpose? 18 A. I think because the project was moving on, and tie's 19 primary purpose had been to get the project, indeed 20 a range of projects, through the development stage to 21 ready for procurement. But when the project moved into 22 serious procurement, which at the end of the process 23 would involve commitments by both the Council and 24 Transport Scotland, that seemed to me at the time, and 25 I think it was a view that was shared, that those 43 1 responsibilities needed to be reflected in the 2 governance structure as opposed to all of those 3 responsibilities being restricted to the tie Ltd Board. 4 Q. I want to put to you another possibility of how 5 a Project Board might work. It pulls together 6 representatives from the funding body, the sponsoring 7 body, the end user. But the purpose of those people 8 coming together is not that they take a decision about 9 the project. It's that each of them has the power to 10 take decisions to bind their nominating body, to smooth 11 the path of the tram. Was there any consideration about 12 that being the model for a tram project? 13 A. I think it was hoped that would be achieved through this 14 model. So, for example, if we picked on 15 Transport Scotland, if they were fully part of the 16 governance of the project being the main funder by 17 a considerable distance, they would have the opportunity 18 at the Tram Project Board meetings to offer their views 19 on areas that they weren't happy with, if those arose, 20 and if things were in good shape, that was the conduit 21 to Transport Scotland as an organisation to approve 22 whatever the issue was that was on the table. 23 So I think it is a very valid observation that 24 that's an important part of the governance structure, 25 and I think the objective was that this would achieve 44 1 that as well. 2 Q. Was that, do you know, ever formalised? Not taking 3 decisions to bind the project, but taking decisions to 4 bind the people who nominated them? 5 A. No, I don't think so. I think it was more an 6 understanding that those parties were members of the 7 Board, and would only be supporting decisions at the 8 Tram Project Board if they knew that those decisions 9 were in the interests of their organisations. 10 Q. I want to go on to look at how the Project Board 11 developed then. Look from this to the August -- before 12 I do so, one more thing. The last sentence on the page, 13 talking about migration of responsibility to TEL. This 14 is in 2005. What was the consideration at that time as 15 to migration of responsibility to TEL? Why was that 16 going to be done and when would it be done? 17 A. Well, TEL was set up to provide the overarching 18 governance in due course, and the primary purpose there 19 was to do with the integration of bus and tram services 20 in a single economic entity. Structure, I think was the 21 phrase that was used. 22 But at this time, I think in 2005, TEL was in 23 existence, but didn't have a populated management team. 24 In other words, the work on integration hadn't really 25 commenced with any significance at that stage. 45 1 But if you moved forward in time, it would be 2 logical that TEL would take overall responsibility as 3 the legal entity, again, 100 per cent owned by the 4 Council, and therefore directed by the Council, and that 5 tie would merge into that structure alongside 6 Lothian Buses, alongside what became Edinburgh Trams 7 Limited. But I think at this stage that was considered 8 to be some years into the future. 9 Q. We will come back to that as it arises in the 10 documentation. 11 If we could look then, please, at the August papers. 12 The document reference is TRS00008528. 13 We have got the cover sheet here for the papers for 14 the tie Board meeting on 22 August 2005. If you can 15 jump forward to page 25. We see we've got a finance 16 review there. The particular passage I'm interested in 17 is over the page. Under the heading "Governance", in 18 the second half of the page, it's noted: 19 "The project governance structures and processes for 20 each of tram and EARL have been the subject of 21 considerable debate and assessment in recent weeks. 22 A report was provided to the July Board and approved. 23 Appendix 2 to this Review is a draft remit for the 24 Tram Project Board together with suggested Delegated 25 Authority Rules governing the relationships between the 46 1 tie Board and the [Tram Project Board] TPD and between the 2 [Tram Project Board] TPB and the Project Director." 3 Were you involved in preparation of this remit and 4 this paper? 5 A. I believe so, yes. 6 Q. If we could look, please, at the remit that's in 7 Appendix 2. It starts on page 50. 8 If we look at the upper half of the page. Under the 9 question, "What is the Tram Project Board", it says: 10 "The Tram Project Board is a body consisting of the 11 key stakeholders who have influence in facilitating the 12 development and delivery of the Tram Project. These key 13 stakeholders include tie, CEC, SE, TEL, Lothian Buses, 14 and Transdev. The Board will also include 15 a representative from PUK. The TPB exists to 'champion' 16 the best interests of the Tram project." 17 I just want to pause there to consider the roles 18 that are identified there. 19 The first one is that the people will have influence 20 in facilitating the development and delivery of the tram 21 project. It's really that that gave rise to my earlier 22 question. That gives the impression that these are 23 people drawn together not so much for the decision that 24 they might make about the tram project, but the fact 25 that they can facilitate it by dealing with other bodies 47 1 all around? 2 A. Yes, I see that, and I think it was essentially both 3 functions. It was oversight of the project, but also to 4 enhance the communication and the facilitation, if 5 that's the right word, with those other bodies. 6 Q. So, for example, smoothing the path of the Council, 7 smoothing the path of the Ministers? 8 A. I think perhaps more that it was a forum whereby senior 9 people in those organisations could be very fully 10 informed as to the stage that the project was reaching, 11 and any difficulties, and the actions that would flow 12 from that obviously depend on both the stage of the 13 project and also any issues that were arising. 14 Q. The last sentence that I noted there, that the Tram 15 Project Board exists to champion the best interests of 16 the tram project. "Champion" has been put in inverted 17 commas. What was meant by that? Was that a promotional 18 task? 19 A. It has that flavour -- I'm not sure that, when I look at 20 it cold now, that sits very easily with the role 21 I understood the Board to have, which was much more 22 towards stakeholder involvement and governance, rather 23 than promotion. But if the objective of all parties was 24 to produce a tram system within the cost and scope that 25 was understood at the time, then providing a degree of 48 1 championing would probably have fitted with that. 2 I would say it was a secondary consideration. 3 Q. You can see that if the delivery body is also 4 a promoter, it slightly blurs the line as to what they 5 are doing. Are they delivering it or are they 6 advocating it? 7 A. Yes, I agree with that. I think formally the promoter 8 was the Council. So there is that element there. tie 9 was the delivery mechanism, but I think what that 10 statement is getting at is all parties have 11 a responsibility to be supportive of the project, but, 12 as I say, I do think that was secondary to the oversight 13 dimension. 14 Q. If we could scroll down the page a bit, so we can look 15 at the membership table. 16 Without me reading through them all, why were these 17 particular people or these particular posts, 18 organisations to be represented on the Tram Project 19 Board? What would each of them bring? 20 A. I think all of the main participating stakeholders are 21 represented there with a couple of advisers. 22 So would you like me to run down them? 23 Q. Perhaps that's the easiest way. 24 A. The Chairman, Gavin Gemmill, was a Non-Executive 25 Director of tie Ltd at that time, a very experienced 49 1 businessman. So the logic there would be to provide 2 good chairmanship of the body. Michael Howell was the 3 tram -- sorry, the tie CEO. The Tram Project Director, 4 I forget who that was at that time. Probably 5 Ian Kendall was there because he was its pivotal person 6 on the delivery side of the project. 7 CEC senior representative for the reasons we have 8 discussed, and likewise -- I'm afraid I can't recall 9 what PTMIT stands for but it looks like a senior person 10 from within the Department that was a precursor to 11 Transport Scotland. 12 The TEL CEO designate was the chap who was the CEO 13 of Lothian Buses. So we were bringing Lothian Buses 14 into the frame. Transdev were the early operator 15 involvement on the tram side, PUK were advisers to tie 16 on a range of projects, and then a group of 17 non-executives. 18 So I suppose to try to bring all the stakeholder 19 bodies around the table with additional non-executive 20 and advisory firepower as well. 21 Q. Why was TEL given quite the extensive role it did with 22 its Chief Executive officer designate and its 23 Non-Executive Directors on the Tram Project Board? 24 A. I can't quite remember at that stage who the TEL 25 Non-Executive Directors were, but I think as a general 50 1 proposition, this was looking ahead to the very 2 important issue of integration of buses and tram into 3 a single integrated system for the city. So it seemed 4 appropriate that those parties were involved at an early 5 stage. 6 Q. I can see integration would be important. It's curious 7 to know why the TEL non-executives appear but not the 8 tie non-executives? 9 A. I would like to know who they were actually. That might 10 help the discussion. 11 Q. Underneath the table we see it's noted: 12 "In due course the Chairperson would be either the 13 Chair of TEL or a [Non-Executive Director] NXD of TEL, 14 probably to be crystallised when TEL takes on formal 15 project responsibility from tie (see below)." 16 This is what you were saying, it being envisaged 17 that at some time there would be a transfer over to 18 TEL -- 19 A. Yes. 20 Q. -- as it moved towards procurement. 21 If we go to the following page, just developing that 22 point, if we look at the lower half of the page, we can 23 see paragraph 5.1: 24 "The intent is that the [Tram Project Board] TPB will take 25 over most of the authority vested in tie Limited through 51 1 approved delegated authorities, whilst retaining 2 ultimate overall control of the project and retaining 3 the ability to restructure or disband the [Tram Project 4 Board] TPB. The delegated authorities are described in the 5 attached document, while a companion schedule sets out 6 the precise delegated limits. 7 These arrangements will change when the tie Board 8 hands over formal responsibility to the TEL Board, who 9 will inherit the responsibilities set out in the 10 delegations. At that point, the tie Board's 11 responsibilities will be focused on delivery under 12 contract to TEL." 13 It refers to that being delivered below. We will 14 look at that in a moment. 15 This once again seems to be putting in something 16 very interim, setting an up a Project Board for tie, 17 when it's already being envisaged that matters are going 18 to transmit to TEL? 19 A. I think that's a fair comment. It was an iteration on 20 the model, rather than the end point. 21 Q. tie had been established by the Council to deliver many 22 transport projects, but one of them I think specifically 23 in mind, even at the outset, was the tram project? 24 A. It was. 25 Q. Why was it that so soon after the tram project really 52 1 getting under way, with the Bills passing through 2 Parliament, it was being considered that it would be 3 another company, other than tie, that would be taking 4 this forward? 5 A. I think the difference is that TEL was established to 6 provide the forward looking integration and oversight of 7 the project, but tie still had the enormous 8 responsibility of delivering. So tie would be the 9 delivery body and therefore arguably the most critical 10 part of the entire structure. 11 But the TEL structure was to provide the integration 12 that was needed to produce a system that worked 13 effectively once revenue service was in place. 14 Q. But as matters stood, when this was being looked at in 15 2005, when the -- before we could get to any questions 16 of integration, was the actually building it. Why was 17 it being contemplated that even the building would be 18 taken away from tie? 19 A. I don't think that is what's contemplated actually. 20 I think the -- the tie responsibility was intended to 21 remain delivery of the project. And the TEL structure 22 is the umbrella, if you like, which would bring together 23 bus and tram looking ahead to revenue service. 24 Q. It's just in that second paragraph I read there, it 25 refers to the tie Board handing over formal 53 1 responsibility to the TEL Board. That seems to 2 contemplate that they were also -- the TEL Board would 3 take over the Tram Project Board as well? 4 A. Yes. I think that's right, but it's -- I have forgotten 5 the right phrase. The handing over of formal 6 responsibility to the TEL Board, I think, was aimed at 7 the responsibilities to do with governance, not delivery 8 of the project. So tie's responsibilities for delivery 9 would remain. 10 CHAIR OF THE INQUIRY: Does that not appear from the last 11 sentence in that paragraph? 12 A. I think what that's -- trying to say, my Lord, yes. 13 MR LAKE: Was there any reason, if that was to be done, why 14 it wasn't being addressed then in 2005, that it was 15 being left for the future? 16 A. I think it would have been -- I don't have a specific 17 recall of that point, but I think it would have been to 18 do with the fact that TEL was not at that stage a fully 19 fledged and populated organisation. It was a corporate 20 entity with a board. The CEO was the Lothian Buses CEO, 21 which itself was fine, but that was different from 22 having a team which would be geared up to do the 23 integration planning initially and then implementation. 24 Q. Tie by this time had quite a number of employees? 25 A. Indeed, yes. 54 1 Q. What was the position in TEL? Did it have employees? 2 Was it -- 3 A. I don't think it had any at this stage or it may 4 possibly have had one who was a senior transport 5 planning individual, but it wasn't a fully fledged 6 management team at that stage, I don't believe. 7 Q. Could we look over the page, please, to page 52 of the 8 papers. Under the heading, "Tram Project Board", we can 9 see the first paragraph notes once again that the 10 members would champion the best interests. 11 And number 2 says: 12 "Members of the Project Board are expected to 13 identify any potential hurdles to the project from their 14 organisation's perspective. They are then responsible 15 for trying to resolve this within their own 16 organisation." 17 That's what I have described as the smoothing the 18 path function? 19 A. Yes, it's a fair description. 20 Q. But if we look then at items 3, 4, 5 and 6, we can see 21 in each case the decision is taken -- 3, 4 and 5, the 22 Project Board function is to make recommendations to the 23 tie Board. 24 A. On governance arrangements, yes. 25 Q. On governance arrangements, ongoing project management 55 1 arrangements and major changes to scope, cost and 2 programme. Even in relation to project management, it 3 sounds like although the Project Board consider it, they 4 would make recommendations to the tie Board and the 5 tie Board would actually implement it? 6 A. Yes. 7 Q. Was that not creating an additional layer of 8 administration: one board has to do it and make 9 a recommendation to another board to actually deal with 10 it? 11 A. Yes, and I think one of the issues that ran throughout 12 the governance arrangements was an element of 13 duplication. So I wouldn't disagree with that 14 statement. 15 I think what helped was that -- again, I would need 16 to check the minutes and the attendance at the meetings, 17 but I think most members of the tie Board attended the 18 Tram Project Board meetings. So it wasn't two arms, if 19 you like, completely divorced from each other. There 20 was commonality at least in terms of attendance, which 21 meant that where there was a need for those sort of 22 discussions, they could be quite efficient, even though 23 there were two different elements in the decision-making 24 which I agree, you're right to point to as being 25 duplication. 56 1 Q. This question of attendance, you say the tie Directors 2 would attend the Tram Project Board meetings. They 3 weren't members of the Tram Project Board, but they 4 would be present at those meetings? 5 A. I think that was the status at that time, yes. 6 Q. But as matters developed, there was quite a lot of 7 overlap between the personnel within TEL, within tie, 8 and the Tram Project Board? 9 A. There was. 10 Q. Did that not simply feed the idea that there was 11 duplication of effort, that the same people have to 12 consider matters wearing two or three hats? 13 A. Yes, there was. I don't think there's any -- there's no 14 doubt that there were elements of the structure that 15 were not particularly elegant or easy, but I think the 16 reason it worked, despite that, is that the Tram Project 17 Board model over a period of years was quite consistent, 18 and the attendees and membership were reasonably 19 consistent, and also because those parties who were 20 Board members of TEL or tie also attended the Tram 21 Project Board meetings. 22 So while we had the legal entities overtly 23 overlapping with the Tram Project Board, and those legal 24 entities had their own statutory responsibilities to 25 take care of, the amount of real duplication in 57 1 reporting and in decision-making in relation to the 2 project was actually fairly minimal because the Tram 3 Project Board was the focal point for those discussions. 4 Q. If you could look at page 54 within the papers. Could 5 we look at heading 8 to the bottom of the page. You've 6 noted there that: 7 "[The Tram Project Board] TPB is not a legal entity, but 8 has powers delegated to it by the tie Board, which in 9 turn is legally empowered under the Operating Agreement 10 with CEC." 11 Now, the fact the Tram Project Board is not a legal 12 entity, does that tie with the point we have just been 13 looking at, that the decisions actually had to be taken 14 by the tie Board if they were going to have legal 15 effect? 16 A. I think that would be right, yes. 17 Q. Again, is that part of the difficulty? If you're going 18 to introduce a different tier of project management, in 19 this case a Project Board, you have a difficulty if it 20 doesn't have legal personality? 21 A. I would say that's right, yes. 22 Q. And the lowest paragraph -- final paragraph on the page: 23 "[The Tram Project Board] TPB is a critical element of the 24 project governance process. It is necessary and 25 reasonable to assume that members will act in the 58 1 interests of the project, unless there is an important 2 conflict with the interests of their respective 3 organisations." 4 This seems to allude to the fact that there could be 5 differences of interest between the project and the 6 institution which has sent the person to the Project 7 Board? 8 A. That -- that's the issue that underpins that statement, 9 yes. 10 Q. Now, you said when there's potential conflict of 11 interest arises, it's assumed that the people will vote 12 in the interests of the project? 13 A. I think the -- I put it slightly different way. I think 14 what that's getting at is the bias would be in favour of 15 the project, but if there was a conflict, it needed to 16 be dealt with. 17 So it wasn't avoiding dealing with the conflict, but 18 it was saying the presumption is that the project is the 19 most important element of the structure and that should 20 have priority. 21 But if there is a conflict, the point here was that 22 they need to be addressed formally and properly. 23 Q. If anyone is a director of a company for an employee of 24 an organisation, they owe a duty, a legal duty to that 25 organisation to act in its best interests? 59 1 A. They do, yes. 2 Q. Whereas in relation to the Tram Project Board, it has no 3 legal existence as such. So all the people make it up 4 don't really owe any duty? 5 A. Not -- 6 Q. Legal duty to that body? 7 A. That's correct, yes. 8 Q. Is that not a problem? 9 A. Well, the -- if the tie Ltd -- just picking on tie, if 10 the tie Ltd Board delegated a decision to the Tram 11 Project Board, then that entity, the Project Board would 12 be able to action that decision. But I think the 13 relationship is kept slightly more loose than that, and 14 therefore the common attendance and discussion by the 15 same people around the table, in my recollection, 16 avoided any conflicts between really any of the 17 stakeholders and what the Tram Project Board was 18 promoting. 19 Q. If you look at the next -- go on a couple of months, 20 looking at how matters developed. If we look at the 21 October papers. The reference is TRS00008535. 22 You will see we're looking at papers for the 23 tie Board meeting of 24 October 2005. Could we look at 24 page 30, please. Could we enlarge the upper half of it. 25 Do you recognise this as something that you prepared? 60 1 A. I believe so, yes. 2 Q. Do you have a distinctive typeface for the work you 3 prepare? 4 A. Indeed. 5 Q. If we look at the second paragraph here: 6 "The essence of these structures is that the 7 tie Board retains overall responsibility for the quality 8 of tie's service delivery and for fundamental matters 9 affecting the project but has delegated its authority 10 for managing the projects to a Project Board which is 11 intended to be the primary decision-making forum. In 12 turn, the Project Board delegates specific levels of its 13 authority to the Project Director who is responsible for 14 delivery." 15 That's dealing with three levels of delegation, from 16 tie to the Project Board, to the Project Director? 17 A. Yes. 18 Q. But of course we can extend it up the way that we've got 19 the Council to tie above it? 20 A. Indeed, yes. 21 Q. We've now got four levels of delegation set up. Did you 22 consider that that was an attractive way to manage 23 matters? 24 A. I think the overriding factor was the benefit that would 25 flow from the Tram Project Board structure, which is not 61 1 to deny that it wasn't something that fitted together in 2 all respects particularly easily. But the greater good, 3 if you like, was to be served by establishing the Tram 4 Project Board, and in terms of the numbers of layers, 5 the Council clearly were the top level in any hierarchy 6 of decision-making. The Tram Project Board was the 7 oversight body for the project and the Tram Project 8 Director, I would expect ordinarily to have delegated 9 authority to get on with delivery, but obviously subject 10 to limitations on his delegated authority. 11 So the piece that in the middle of that, which is 12 less than efficient, is the combination of tie Ltd and 13 the Tram Project Board, which I accept, if there was 14 a different way of doing it, if you could, for example, 15 have eliminated tie Ltd as an entity, that would be 16 a more streamlined structure. But at this stage the -- 17 it wasn't possible to eliminate the company for a couple 18 of reasons. One was that tie was a contractor with -- 19 try and get my timing right, but possibly SDS, maybe 20 utilities, certainly Transdev and others. 21 Secondly, the Board of tie had responsibility for 22 projects beyond the tram. So it wasn't as simple as 23 saying you could get rid of tie Ltd as an entity and 24 simply concentrate on the Tram Project Board. 25 So it was not's absolutely clean, I accept that. 62 1 But it was felt this structure had a better balance than 2 one that didn't have the Tram Project Board. 3 Q. From what you are saying there, it seems to me that part 4 of the problem is simply trying to have one company that 5 would deal with many different projects? 6 A. That was certainly one of the challenges, yes. 7 Q. So if I'm understanding you correctly, you are saying 8 from a governance and management point of view, it would 9 have been preferable to have one company, one project, 10 for a project of this size? 11 A. I think, as the project moved ahead, I would agree with 12 that. I think in the earlier period up to 2005/2006, 13 the concept of tie as an entity which looked after 14 a number of projects to a specific stage, development 15 through parliamentary process, for example, that that 16 was a good model. 17 I think the governance within tie over that range of 18 projects was well executed in my view, but once the tram 19 project moved into a more intense period through 20 procurement and obviously into construction, I think 21 there was overlap between the legal entity and the 22 Project Board. There's no question about that. 23 I think probably if a way could have been found to 24 make that more streamlined, that would have been useful. 25 If you go all the way to the end of the period in 63 1 which I was involved, that is exactly what was under 2 construction around that time, around 2009/2010. 3 Q. Winding tie out? 4 A. Or -- yes, I think that was the mechanism, yes. 5 CHAIR OF THE INQUIRY: If you'd had a company exclusively 6 dealing with the tram project, part of the philosophy 7 was that the road charging would be used to fund 8 projects such as the tram project. So would you then 9 have a separate company for receiving or collecting 10 revenues from road charging and then distributing it to 11 various companies with different projects? 12 A. I think the -- the model that would have been 13 operational was that the road charging funding would 14 have gone to the Council in the first instance, because 15 they were the body who would be the statutory owner, if 16 that's the right word, for the congestion charging 17 scheme. 18 And that funding would flow to tie if the Council 19 decided that funding should flow to tie for the purpose 20 of developing other transport project. For example, 21 tramline 3. 22 CHAIR OF THE INQUIRY: I may be wrong, but the impression 23 I had from something I read was that the then 24 Scottish Executive didn't want the money to go to the 25 Council. It was not to become part of their income 64 1 stream but it was somehow to be used, ring-fenced for 2 transport projects which were different from the 3 transport commitments of Edinburgh. So it wouldn't go 4 towards repairing the roads. It would go to a specific 5 project. 6 A. I wasn't aware of that dimension, but I think it could 7 probably still have been achieved if there was proper 8 accountability for the funding flowing to the Council 9 and then what happened to that funding. 10 If, for example, 100 per cent of the congestion 11 charging proceeds flowed to tie, and that was the 12 funding for tramline 3, which was the main connection, I 13 think, in the early period, that would have been, 14 I would have thought, quite easily auditable by the 15 Government and wouldn't require another company to be 16 established in the chain. 17 CHAIR OF THE INQUIRY: Thank you. 18 MR LAKE: If you were using a single company, it would 19 obviously still be thought desirable to have the 20 stakeholder input. Now, that could be achieved perhaps 21 co-opting people on to the Board or Board committees 22 that would enable them to have a vote without having to 23 go to the need of setting up something by way of 24 a Project Board. 25 A. Yes, it could have been, yes. 65 1 Q. It's something even back in 2005 could have been done 2 within tie, to set up a board sub-committee and co-opt 3 people on to that? 4 A. Yes, indeed. 5 Q. Was any consideration given to that? 6 A. I don't recall that. It's a valid observation 7 obviously, but sorry, I don't recall any discussion of 8 that model. 9 Q. If we go on to the -- consider the emergence of TEL. If 10 you could look at the November papers, please, reference 11 TRS00002067. Rather than papers, these are actually 12 minutes of the tie Board meeting that took place on 13 22 November 2005. 14 Do you see that? 15 A. I do, yes. 16 Q. Once again, you see you are noted as having been in 17 attendance at that meeting? 18 A. Indeed. 19 Q. If we look to page 2 of this, we can see that 20 Ian Kendall asks the Tram Project Board to note the 21 TEL Board following on from the Tram Project Board on 22 22 November at 11 am will be considering the way in 23 which the TEL and tie Board and the Tram Project Board 24 will work together: 25 "Suggested that TEL will hold the mantle of control 66 1 and ownership post financial close although other 2 options are being explored. This proposal will be 3 issued to the [Tram Project Board] TPB as soon as it has been 4 through the formal process." 5 Now, did it not seem a bit strange that we have the 6 Tram Project Board established and the TEL and tie 7 Boards in existence, and only then is it being 8 considered how they are going to work together? 9 A. I think that would be strange. It's not the way 10 I recall events at the time. I think people were quite 11 clear about the roles of the individual entities. 12 Q. This is talking about the TEL taking over from financial 13 close on tram projects. So it would be the one 14 responsible at the time of actual construction? 15 A. Yes. That's where that proposal would lead to, yes. 16 Q. Do you recall the reasons for that proposal? 17 A. I don't specifically, although the same issue as we've 18 discussed earlier in terms of a degree of duplication 19 was discussed within tie, and from the Project 20 Director's perspective, and quite rightly, he's 21 questioning whether there's ways of streamlining the 22 governance because he, I suppose or he and his team are 23 in the middle of that process and probably felt the 24 extent of duplication more than other parties would 25 have. 67 1 So I think that's probably what was driving Ian. 2 He's really saying: can we be clear about which board it 3 is and how they're going to work together, and I suppose 4 implicitly streamline the process. 5 Q. We will come to it as we look through, but it seems to 6 be a matter which arose at meeting after meeting, the 7 question of governance and relationship between the 8 various bodies. Was it something that was contested or 9 gave rise to a lot of controversy at the time? 10 A. No, I don't recall these being matters that were 11 contested. I think they were pretty thoroughly 12 discussed and debated as to what the best approach was, 13 but I don't recall any particular difficulty or any heat 14 around the debate. 15 Q. Could we go on please to look at another document? 16 CHAIR OF THE INQUIRY: I wonder, would this be a point? 17 MR LAKE: Yes, my Lord. 18 CHAIR OF THE INQUIRY: We will have a break for 15 minutes 19 to allow the shorthand writers to have a break. We will 20 resume again at 11.20. 21 (11.04 am) 22 (A short break) 23 (11.20 am) 24 CHAIR OF THE INQUIRY: You're still under oath, Mr Bissett. 25 A. Understood, thank you. 68 1 MR LAKE: Thank you, my Lord. Could we look at the document 2 TRS00002605. 3 We will come back to it. 4 If we go then to document TIE00090588. We can see 5 that these are the minutes -- although it's headed 6 "tie Limited", it's then headed "Minutes of the Edinburgh 7 Tram Project Board - meeting no 4", for 8 23 January 2006; do you see that? 9 A. I see that. 10 Q. If we look at the second page of this, under the Tram 11 Project Director's report, go to TEL and TPB project 12 governance. We see it's noted: 13 "With the merger of TEL Board and TPB it is vital 14 to establish Project Governance. IK [Ian Kendall] and 15 GB [you] working with DM to establish this." 16 Is DM David Mackay? 17 A. David Mackay, I would think, yes. 18 Q. "Vital that there is clear governance to allow for 19 decisions to be made. TPB all in agreement this." 20 This is taking a step forward and talking about 21 merging the TEL Board and the Tram Project Board. Why 22 was that being proposed? 23 A. I don't recall, I'm afraid. I think -- it doesn't 24 answer your question directly, but where it got to was 25 that the Tram Project Board became a formal 69 1 sub-committee of TEL, but the concept of merging the 2 two, I'm afraid, I don't really recall at all. 3 Q. If we go on then, please. Go to TRS00002175. We can 4 see a paper here headed "PROPOSED GOVERNANCE STRUCTURE". 5 It's dated February 2006. Do you recall having prepared 6 this? 7 A. I do, yes. 8 Q. Do you remember why it was produced at this time? Why 9 governance was being considered? 10 A. Perhaps I will be able to answer when I see the content, 11 but it may be a response to the sort of issues that we 12 were speaking about earlier. 13 Q. We can see looking under the heading, "Background": 14 "The background is well known to recipients of this 15 paper. Compared to the November 2005 proposal, this 16 paper proposes a structure which fully incorporates TEL 17 and streamlines meetings and the contractual structure." 18 Just reading that alongside what we saw a minute ago 19 about the idea of merging the Tram Project Board and 20 TEL, was there a driver in some sense to achieve that? 21 A. It may have been, although I'm still struggling to 22 remember the proposal to merge them, I'm afraid. 23 Q. If you go over the page, please, page 2, actually out of 24 fairness, can we look back at the previous page. The 25 very foot of the page. It notes: 70 1 "This paper summarises a proposed structure for 2 discussion at the 20 February 2006 TEL Board. There is 3 a critical need to codify the relationships quickly." 4 I don't know if that provides you with any 5 assistance? 6 A. Not really, sorry. 7 Q. Can we look over the page and see what the proposal is. 8 If we enlarge the upper half of the page. It says: 9 "The proposed structure has the following key 10 features: 11 1. TEL is instructed by CEC to take responsibility 12 for delivering a fully-integrated system, including 13 arrangements with tie as the party responsible for 14 delivery of the tram system. TEL's responsibilities 15 include acting for CEC in wider transport planning 16 matters to optimise the value of the integrated system. 17 These arrangements are set out in a high-level 18 'operating protocol' between CEC and TEL." 19 Now, this seems to have TEL going considerably 20 further than integration and actually contracting or 21 agreeing with the Council that they will also deliver 22 the tram system, perhaps using tie. 23 A. Yes, I think the idea was that TEL would be the umbrella 24 organisation owned directly by the Council, and that tie 25 would be responsible or accountable rather to TEL for 71 1 delivery of the trams. 2 Q. What would the advantage be of that to the Council? 3 A. I think it's probably another step along the way to 4 eliminate the duplication that was created by the 5 overlap between the Project Board on the one hand and 6 TEL and tie Boards on the other. I don't think there 7 was any -- any other advantage that I can think of to 8 the Council. 9 Q. Look at paragraph number 2, it states: 10 "tie's formal contract (Operating Agreement) with 11 CEC is amended to direct to provide its tram project 12 services to TEL on behalf of CEC." 13 That's really the counterpart to what we've seen in 14 the first paragraph that tie now contracts with TEL? 15 A. It is, yes. 16 Q. Further down, four lines from the end of that paragraph: 17 "The tie Board's responsibility is to ensure that 18 tie delivers this service to TEL. tie will be the 19 contractual counter-party for all contracts through to 20 commencement of operations, at which time the Tramco and 21 Infraco contracts will be novated to TEL." 22 A. I see that. Of course that wasn't what happened in due 23 course, but that was the proposal here, yes. 24 Q. So this was going to be a restructuring which put TEL 25 into the overall hierarchy, one might say above tie. 72 1 A. Indeed, yes. 2 Q. If we look at the next paragraph, number 3, if we scroll 3 down so we can see the context, it says: 4 "The operations of the Tram Project Board are merged 5 with the TEL Board. TEL Board meetings generally 6 comprise the following principal strands." 7 It goes on to set out what they are. This is once 8 again this idea of merging the Tram Project Board on the 9 one hand and TEL on the other, we saw in the previous 10 minute? 11 A. It is, yes. 12 Q. This is talking about merging the Tram Project Board 13 with the company which is further up the hierarchy than 14 tie. So this is essentially moving the Tram Project 15 Board from being a body to which tie delegates its 16 power, to being one which now contracts with tie for 17 delivery? 18 A. That's what that would produce, yes. 19 Q. That seems to be a complete reversal of the role of the 20 Tram Project Board? 21 A. I think what the merger point is getting at was to take 22 out one of the levels of governance. If you accept that 23 for the moment, the TEL Board, with that change made, 24 would become the overarching governance body for the 25 tram project, as well as having other responsibilities. 73 1 Q. So -- 2 A. I agree, it is a material change, yes. And I do think 3 what lay behind this was to try to respond to the 4 concern about duplication. 5 Q. This would presumably have, if the TEL Board and the 6 Tram Project Board are merged, all the functions 7 previously exercised by the Project Board would now be 8 done by the merged entity? 9 A. That would be the proposal, I think, yes. 10 Q. If you go over the page, in the upper half: 11 "The full continuing commitment of all parties to 12 the TEL decision-making process is needed, as was the 13 case with the [Tram Project Board] TPB. However, the formal 14 decision-making involves only the directors of TEL; 15 other parties are technically in attendance only." 16 Now, a number of aspects about this. In terms of 17 who actually takes the decisions, this notes that only 18 the Directors of TEL will take the decision. So we seem 19 to have gone away from the idea of expanding the Tram 20 Project Board to take in stakeholders, to contracting 21 just to being the Directors of TEL. 22 A. Yes. 23 Q. Which would seem to undermine the rationale for the Tram 24 Project Board in the first place? 25 A. Yes, it's definitely different. Could you just remind 74 1 me what date was -- 2 Q. This was February 2006. That's the date it had at the 3 top of the first page. 4 A. Yes. I'm trying to remember what the rationale was 5 behind that, but I'm afraid I can't. 6 Q. We've still got four levels in the hierarchy. We have 7 Council -- you used to have Council, tie, Tram Project 8 Board, Director? 9 A. Yes. 10 Q. Now it's going to be Council, Tram Project Board/TEL, 11 tie, Project Director? 12 A. Yes. 13 Q. So really all that's happened is that in essence, the 14 Tram Project Board have been taken out of the picture 15 and TEL put in their place over tie? 16 A. That -- that's where that would lead, yes. 17 Q. I'm just struggling to understand what advantages could 18 flow from that? 19 A. I'm afraid I am as well. I have read that document 20 fully. 21 I think part of the driver was that TEL was emerging 22 as the pivotal legal entity from the Council's point of 23 view in terms of the -- the overarching responsibility 24 for delivering and then operating or developing and then 25 operating the integrated system. 75 1 So it may have been partly a response to the 2 duplication issue and partly a response to TEL appearing 3 or emerging as a more substantive entity. 4 Q. If we look at the paragraph there that's beneath the 5 bullet point paragraphs, it is that: 6 "The logic of this is that TEL has effectively 7 stepped into tie's shoes for the tram project. When the 8 TEL Board and the [Tram Project Board] TPB are merged, there 9 is no subsidiary level of authority between TEL and the 10 Tram Project Director. These rules should continue to 11 include all forms of change control, including those 12 requiring input from CEC." 13 Now, reading that, it almost seems to take tie out 14 of the picture altogether? 15 A. It does. Where that would have left the Tram Project 16 Director and his team, I think behind that would still 17 be employees of tie. But in terms of tie's role as an 18 entity in the delivery of the project, I agree with your 19 comments. 20 Q. Again, I appreciate this is a long time ago, but was 21 there a rationale that you can recall for that? 22 A. The only thing I can think of is -- sorry, I'm repeating 23 myself again. It's the effort to avoid duplication 24 which there would be if you had two legal entities, Tram 25 Project Director, Tram Project Board and the Council. 76 1 So it kind of addresses part of that, although not all 2 of it. 3 Q. If we go on to see, that was a draft, how matters 4 developed. If we can go on to document TRS00000330. 5 Here we see again a heading, "PROPOSED GOVERNANCE 6 STRUCTURE", this time March 2006. 7 Again, it looks like a document that you prepared; 8 is that not correct? 9 A. Looks like it, yes. 10 Q. If we look to the foot of the page to get the context, 11 it notes: 12 "This paper was originally submitted to the 13 TEL Board on 20 February 2006 and, with certain 14 amendments, was presented to the tie Board on 15 27 February 2006. Its content was approved in principle 16 by both Boards with representatives of key stakeholders 17 in attendance, subject to formal review of 18 documentation." 19 So is this really a development of what we just saw 20 in the last paper? 21 A. It certainly looks like it, yes. 22 Q. If we go on to the following page, we can see in terms 23 of the proposed structure, the first paragraph, it's 24 very much the same, but the second paragraph is 25 different in terms of saying that: 77 1 "tie's formal contract (Operating Agreement) with 2 CEC regulates the relationship. A letter from CEC to 3 tie directs tie to deliver the tram project under the 4 new TEL governance structure on behalf of CEC. The 5 documentation of these services is embedded in the 6 project programmes; no additional tie/TEL operating 7 agreement or protocol is needed. Tie is CEC's 'in-house 8 provider' of these services and continues to execute 9 design, procurement, funding and delivery of the tram 10 system (collectively 'tram delivery'). tie Board's 11 responsibility is to ensure that tie fulfils the 12 requirements of CEC in delivering the project. tie will 13 be the contractual counter-party for all contracts 14 through to commencement of operations, at which time the 15 Infraco contract will be novated to TEL." 16 Now, in terms of what's changed here, is the idea to 17 be therefore that tie is still the one providing 18 services and providing them to TEL. It's just how that 19 is instructed and set up? 20 A. I think that's right. It preserves the legal entity 21 role of tie Ltd relative to the previous paper, and 22 I think it's also saying that the contracts with the 23 third parties will be -- will continue to be with tie, 24 rather than being at financial close novated to TEL, 25 which again would be consistent with tie Ltd as a legal 78 1 entity continuing to have a substantive role. 2 Q. If you look at paragraph 3, it now notes: 3 "The operations of the Tram Project Board have been 4 merged with the TEL Board." 5 So that looks like that actually now has been 6 carried out and the Project Board and has been rolled 7 into TEL? 8 A. That's what it says, yes. 9 Q. Do you recall that happening? 10 A. I think what we had -- as I said earlier, I couldn't 11 recall the concept of a merger, but I think what we had 12 was the TEL Board, with its own directors, but the 13 attendees who were previously attendees at the -- or 14 indeed members of the Tram Project Board attended the 15 TEL Board. So there was only one meeting with common 16 attendees, rather than two under the previous structure. 17 Q. We take that forward then. I would like then to look at 18 a slightly different document for a moment, developed by 19 OGC. 20 Could you look, please, at CEC01793454. 21 Are you aware of the Office for Government Commerce, 22 the OGC? 23 A. I am, yes. 24 Q. Did you have dealings with them on behalf of tie? 25 A. Yes, I believe I met them when they were conducting the 79 1 review. 2 Q. You can see this is headed "tie Project Readiness 3 Review, Date of issue to tie Chief Executive 4 25 May 2006". This is an OGC review? 5 A. Indeed. 6 Q. Have you seen this before? 7 A. Yes, I'm sure I saw it at the time, yes. 8 Q. If we can look, please, firstly at page 6. Could we 9 look at the following page, please. 10 Could we look at page 7. Yes. 11 If we look at the lower half of the page there, we 12 can see a heading, 3.2, "Project Management, structure 13 and resources". That just provides some context. If we 14 go over the page. Could we go back to the previous 15 page, page 7. 16 If we look halfway down the page, we can see there's 17 a paragraph beginning "in order": 18 "In order for the governance of the tram project to 19 most closely reflect best practice and to be fully 20 effective, we recommend that a project board is set up 21 as a matter of urgency and that there is clarity as to 22 the identity of the SRO for the project. Good practice 23 suggests this board is a small group comprising the 24 decision makers in respect of scope and funding and 25 delivery. 80 1 The terms of reference of the project board should 2 be developed as soon as possible and we recommend that 3 the project board is the only forum through which key 4 decisions in respect of the scope of the project are 5 determined. 6 We also recommend that the operation of tie and its 7 board is reviewed to ensure it remains fit for purpose 8 as a high quality delivery organisation." 9 Now, this is recommending in May 2006 the 10 establishment of a Project Board. We've seen, according 11 to the tie minutes and other papers, that there had been 12 a Project Board in existence for some time? 13 A. Yes. 14 Q. Are you able to explain why it is that OGC seem not to 15 appreciate that there was a Project Board in existence? 16 A. No, I can't. But I do recall at the time, they made 17 a number of what I regarded as important points about 18 the governance model at that time, and I'm thinking that 19 maybe that is after the period that we just looked at 20 where there was the apparent merger of the TEL Board and 21 Project Board. So they may not have known that there 22 was a Project Board structure previously, but what they 23 looked at was something that didn't appear to have it. 24 If I could make one more general comment, I think 25 I was aware and others were aware at that time that the 81 1 governance was to a degree needing to be firmed up. 2 There were one or two moving parts that weren't ideal, 3 but the core of the governance model was working 4 reasonably well in terms of the core group of people who 5 were actually overseeing the project. But there wasn't 6 any doubt that we needed to get the formalities into 7 clearer shape, and I think the OGC report, if I recall 8 correctly, actually galvanised that process. 9 Q. If we look at something that may follow on from that, 10 please. I think this is something else you prepared. 11 It's document CEC01803822. 12 Again, perhaps you can tell from recognising it, or 13 the typeface, that that's a paper that you prepared? 14 A. Yes. Looks like it, yes. 15 Q. The heading is "TRAM PROJECT GOVERNANCE - COMPLETING THE 16 PICTURE". You can take it from me that was a paper 17 prepared for the TEL meetings on 19 June 2006. 18 If you scroll down the page a little bit, it notes: 19 "The fulcrum of the current governance structure is 20 the TEL Board acting as the Project Board. Attendance 21 includes senior parties from the key stakeholders, 22 including CEC and TS. The Tram Project Director has 23 delegated authority from the TEL Board to execute and in 24 turn delegates on day to day matters to his tram project 25 team. The tie Board's responsibilities are to apply 82 1 quality assurance to the execution by the TPD and his 2 team; to make formal funding requests to TS and be 3 accountable for expenditure; and to enter into 4 contractual arrangements necessary to execute project 5 delivery." 6 Now, in that paragraph it appears to be plain that 7 TEL now has a very broad role and tie a very minor one? 8 A. Minor in the sense of definition, but it still 9 incorporated delivery of the project. 10 Q. It's entering into the contracts, employing personnel 11 needed to carry it out, but the decision-making body or 12 the fulcrum is now the TEL Board acting as the Tram 13 Project Board? 14 A. Yes, that's right. 15 Q. If we look to the bottom of page, you noted issues with 16 the current structure. You say: 17 "There is inadequate demarcation between the 18 TEL Board acting in its statutory stewardship role and 19 the TEL Board as Tram Project Board; attendance at these 20 distinct sessions are unclear. There is a need to 21 identify the Senior Responsible Officer for the 22 project." 23 Now, we had already seen there was intention to 24 merge the TEL Board and the Tram Project Board. Here 25 you seem to be saying that they do have distinct 83 1 sessions but you considered they needed to be more 2 clearly demarcated? 3 A. That's what that says, and that would chime with my 4 recollection of that period. 5 Q. Why did they need to be more clearly demarcated? 6 A. I think it's because we'd attempted to take out one 7 level by merging the TEL Board and the Tram Project 8 Board, but the TEL Board still had responsibilities 9 distinct from delivery of the tram infrastructure, if 10 you like, in other words the wider responsibility to 11 develop the integrated system. 12 The Project Board prior to that had been pretty 13 closely focused on delivery, well, in various different 14 components, but delivering the tram infrastructure, 15 rather than that wider integration and responsibility. 16 So I think that's probably what was behind that. 17 Q. On one view it might be said this is re-emergence of 18 exactly what happened in tie. It was recognised there 19 needed to be a decision-making entity with focus 20 entirely on the delivery of the trams. 21 A. Yes. 22 Q. Rather than -- it used to be tie had a wider 23 responsibility, now it's TEL had that wider 24 responsibility. 25 So having stripped out one layer, this is it being 84 1 introduced once again? 2 A. Yes, I think that's a fair comment, yes. 3 Q. Can we look over the page, please. If we look at the 4 first bullet point, you talk about this is one of the 5 issues needing attention: 6 "Delineation between Project Approval Level 7 (TEL/CEC/TS) and Project Execution Level (Tram Project 8 Board, to which all execution workstreams report)." 9 Where would tie fit into those two -- which side of 10 the line would tie fall? 11 A. tie would be the delivery agent reporting to the Tram 12 Project Board. 13 Q. So it's very much part of the execution level? 14 A. Yes. 15 Q. In terms of project approval level, we've now got three 16 identified bodies, and Transport Scotland and the 17 Council are obvious. But what does TEL add by being 18 another layer of project approval? 19 A. You could argue that the Council could handle all of 20 that itself, but I think the objective was to give TEL 21 increasing substance, looking ahead to its role as the 22 overarching transport body underneath the Council, 23 obviously, in the future. 24 So I don't think it was necessarily to give it any 25 particular role at this stage. It was more looking 85 1 forward. 2 Q. We talked about project -- I'll go on and read the third 3 bullet point, first of all: 4 "The role of the TEL Board becomes focused on key 5 issues relating to programme, scope and cost of 6 a fundamental nature. It will make recommendations to 7 CEC on key aspects of the project including business 8 plan and business case approval, contractual commitment 9 and matters which have a political dimension." 10 If I just pause there, that's -- all that's said 11 there is consistent with TEL falling on the project 12 approval side of the line identified at the top of the 13 page here? 14 A. I believe so, yes. 15 Q. What it seems to be saying, that the body now advising 16 the Council on matters such as Business Case and so on 17 and so forth is TEL, not tie? 18 A. Yes. 19 Q. So that's quite a significant responsibility taken away 20 from tie and given to TEL? 21 A. I think what we'll find if we move forward is that that 22 was still embedded in the responsibilities further down 23 the tree. 24 Q. I am not sure I understand -- 25 A. For example, for preparation and delivery of -- this is 86 1 2006, I think, isn't it? 2 Q. It is, yes? 3 A. So delivery of the Business Cases would still have been 4 the responsibility of the tram project team, obviously 5 in dialogue with stakeholders. But having approved it 6 at that level, it would move through the hierarchy to 7 the Tram Project Board and ultimately TEL to give its 8 seal of approval if it thought appropriate to the 9 Council. 10 Q. What I was coming to is: what is the hierarchy of 11 decisions to get approvals? I think we have established 12 that TEL had few or no employees at this time? 13 A. It had a fully populated board, I think. 14 Q. A board. 15 A. With one or possibly two employees by this stage. But 16 it wasn't in the sense of an operating company, the 17 operating company or group of people was still the tie 18 group. 19 Q. But if as here it's noted that tie will make 20 recommendations to the Council -- sorry, TEL will make 21 representations to the Council on key aspects including 22 Business Case approval and contractual commitments, it's 23 going to need people to provide information to the board 24 to make that recommendation and it's going to be 25 dependent on tie? 87 1 A. Yes. 2 Q. To provide the -- do the legwork? 3 A. That would be the hierarchy, yes. 4 Q. So tie has to put together the legwork and pass it to 5 TEL to take a decision? 6 A. Yes. 7 Q. And TEL's decision is what recommendation to make to the 8 Council? 9 A. That would be correct, yes. 10 Q. Again, I'm struggling to see what the advantage is here 11 of putting the additional level in, so it has to zigzag 12 through TEL to get on to the Council? 13 A. Yes, and I think, as I have said a couple of times, that 14 the layers were duplicative to a degree. The point of 15 tie was to deliver the project, and as I mentioned 16 earlier, the idea that tie as an entity could be 17 disbanded was difficult for the reasons that 18 I explained. 19 The role of TEL was different and was forward 20 looking, so one wouldn't immediately look to remove TEL 21 as an entity, having established it as that umbrella 22 organisation. 23 So I think the logic of that was we understand there 24 is duplication in this process, but if we operate it 25 sensibly, the effect of that can be minimised. 88 1 Q. If we look at the next bullet point down, you note 2 there: 3 "To reinforce the distinction ..." 4 I think that's the distinction between the Project 5 Board and TEL, you say: 6 "The Project Board will revert to the title "Tram 7 Project Board" (TPB), chaired by David Mackay. The TPB 8 will be constituted as formal committee of the TEL Board 9 to enable the TEL Board to delegate authority. Members 10 of the TPB would be the key senior representatives of 11 the primary organisations in the project - TEL, Tie, CEC 12 and TS; management, Transdev and other advisers will 13 attend as required." 14 A. Yes. 15 Q. So this preserves quite a stark split between the 16 TEL Board on the one hand and the Tram Project Board, 17 which will be a committee of the TEL Board? 18 A. Yes. 19 Q. Various other people can attend that Board Committee, 20 presumably by co-option? 21 A. Indeed, and I think the point was to -- the important 22 point there, I think, is that the Tram Project Board 23 became or would become a formal sub-committee of TEL, 24 which avoided it being an entity that didn't really have 25 codification around it. I think that was probably the 89 1 important point. 2 Q. It gave it a legal standing? 3 A. Yes, and clear reporting route upstairs initially to 4 TEL, but really also to the Council beyond TEL. 5 Q. But the Tram Project Board, as we've seen from its 6 earlier incarnations, was responsible for taking 7 decisions as to the delivery of the tram infrastructure? 8 A. That's correct, yes. 9 Q. So the route would be that the Tram Project Board as 10 a sub-committee of TEL took a decision, which was 11 essentially remitted up to TEL, and then TEL in effect 12 would be instructing tie how to implement the various 13 contracts it had with the providers? 14 A. Yes. 15 Q. It seems quite indirect to have a sub-committee of the 16 TEL Board giving instructions that fall away to tie, to 17 how it deals with its contractors? 18 A. I think one of the issues here is that it worked a lot 19 better in practice than it appears on paper. The reason 20 for that, as I think I said earlier, is the consistency 21 of membership by senior people of the Tram Project 22 Boards. So, for example, the Tram Project Board meeting 23 to address the tram project would be, give or take two 24 or three hours, possibly longer than that at some 25 points, whereas the TEL Board, which had the same 90 1 people, had been represented as attendees on Tram 2 Project Board meetings to avoid having two meetings 3 about the same topics. 4 So the TEL Board meeting was actually a fairly 5 limited affair. They had statutory legal 6 responsibilities, obviously, but they didn't have to 7 revisit the entire conversation about the tram project. 8 So in practical terms, it wasn't as duplicative as 9 it may appear on paper. 10 Q. Where you've got people sitting on a number of different 11 entities, a board sub-committee, a board of one company, 12 a board of another company, is there not a danger that 13 there's no real focus in what capacity they are taking 14 their decisions? 15 A. That could be a danger, but I don't recall it being an 16 issue here. I think people were quite clear that the 17 project was the main event, and they had to be cognisant 18 of their legal entity responsibilities, but I don't 19 recall any occasions where there was any serious 20 conflict really between the two, and therefore there 21 weren't many discussions along those lines. 22 Q. What about blurring the -- there is a question of who 23 has responsibility for decisions. If you've got all 24 these different companies involved, and the path we are 25 seeing of instructions or advice being transmitted from 91 1 one company to another, it is not really clear who is 2 providing the advice to the Council. 3 A. No, I wouldn't agree with that. I can see the point you 4 are making, but I think the Council interfaced with the 5 TEL Board through its Chairman, David Mackay, 6 extensively, and that was one of the primary 7 communication channels. 8 If we then follow the logic that the Tram Project 9 Board is a sub-committee of TEL, then there's clearly 10 a hierarchy there. I'm sure there's formal delegated 11 authority and then down to the Tram Project Director, 12 which was the tie Ltd level. 13 So I think in practice the responsibilities and 14 accountabilities up through the hierarchy were actually 15 quite clear, and also I would say bear in mind that 16 there was a relatively small number of people involved 17 in the kind of key decision-making roles for all of the 18 entities. So it wasn't as if there were, you know, 20 19 different people with very different responsibilities 20 who each had to make or have a role in decision-making. 21 It was a smaller number than that which made 22 communication quite efficient in practice. 23 Q. For example, do you think people within the Council, 24 either Council officers or Council lawyers, would have 25 understood that it was TEL who was responsible for 92 1 providing an integrated tram scheme to the Council, and 2 that TEL were relying on tie to do that? 3 A. I'm sure they would have, because that was pretty clear 4 in papers like this and other discussions that took 5 place. That was the point of creating TEL in the first 6 place. 7 Q. Could you look, please, lower down this page we have on 8 screen at the moment. The final bullet point on the 9 page is: 10 "Execution workstreams will be categorised (largely 11 as at present) as either "Business Planning, Integration 12 and Commercials" ("BPIC" - sorry, yet more acronyms), or 13 "Design, Procurement and Delivery" ("DPD"). The BPIC 14 programme is under the direction of TEL management led 15 by Bill Campbell. The DPD programme is under the 16 direction of the Tram Project Director Andie Harper." 17 So this is one of the workstreams that is to be 18 dealt by the Project Board but is working under the 19 direction of the Tram Project Director? 20 A. Yes. 21 Q. So the Tram Project Board as a sub-committee of TEL 22 would take a decision which it would have to communicate 23 to the Project Director who is being employed by another 24 entity? 25 A. tie in this case, yes. 93 1 Q. If we look over the page, the upper paragraph is: 2 "The two current sub-committees will be reconfigured 3 to cover each of the two programmes of workstreams. 4 The BPIC sub-committee will be chaired by David Mackay 5 and the DPD sub-committee will be chaired by 6 Willie Gallagher." 7 Willie Gallagher was the Executive Chairman of tie. 8 So we have got a situation where the sub-committee of 9 the TEL Board advising TEL to advise tie is actually 10 being chaired by the Executive Chairman of tie? 11 A. Yes. 12 Q. It all becomes quite confusing, does it not? 13 A. Well, I think if you look at the role of the 14 sub-committee as defined, and again I'm sure there's 15 a remit for both sub-committees, the question was: who 16 was the best person to chair each of the two 17 sub-committees on behalf of TEL? So the alignment with 18 tie was why Willie Gallagher was appointed the chairman 19 of that sub-committee. 20 Q. Because the sub-committee, it would deal with the 21 design, procurement and delivery programme, which is 22 under the direction of the Tram Project Director who was 23 of course a tie employee? 24 A. That's correct, yes. 25 Q. But it is nonetheless quite a circle that we've got the 94 1 heavy tie involvement in the sub-committee of the Tram 2 Project Board, which reports to TEL, which advises tie, 3 which in turn has to issue instructions to employees? 4 A. No, I don't think that -- I don't quite see the 5 circularity. I think the -- if we take the design, 6 procurement and delivery leg of the project and leave 7 the BPIC still inside for the moment, that was where 8 tie's delivery responsibility lay. So through the Tram 9 Project Director delivering the project was the primary 10 responsibility. The DPD committee was overseeing that 11 delivery. And it was logical to me at the time, and it 12 still looks logical, that you would align the chair of 13 tie with the Tram Project Director who was a tie 14 employee with the full tie team working for him. 15 So I think that was the logic, and the circularity 16 in terms of TEL advising tie, I think on paper I can see 17 the point you are making, but in reality it was quite 18 hierarchical, and it was a relatively small group of 19 people meeting relatively frequently to thrash out 20 issues and deal with whatever problems there may have 21 been. 22 Q. If you look down the page to the paragraph under the 23 bullet points, you note: 24 "If approved, this paper and appendices provide the 25 remit for the Project Board and its sub-committees. 95 1 Attendees at the Project Board meetings who are not 2 directors have no formal decision-making authority or 3 responsibility." 4 Just stopping there, when you say "are not 5 directors", that presumably would be directors of TEL 6 because it's a sub-committee of that company? 7 A. I believe that's what it is getting at, yes. 8 Q. So essentially we've come full circle. Although the 9 Project Board was set up originally particularly to give 10 other stakeholders a voice or a vote, this takes the 11 vote away under this new structure? 12 A. It does, because the TPB at this point, if this is 13 followed as a formal sub-committee, but again, I think 14 in practice those attendees, for example the senior 15 Council directors, in practice it was quite clear that 16 the TPB and TEL would not be taking decisions that were 17 disagreed with by the senior Council officers. 18 So it was much more of a collective view than it 19 might appear strictly based on those legal 20 responsibilities. 21 Q. Okay. If we could just look at the paragraph after 22 that, you note that: 23 "A future development could be the detachment of the 24 Project Board from TEL into an independent form." 25 We have seen obviously the Project Board was merged 96 1 into TEL, then it had to be demarcated to sub-committee, 2 and now it's talking about re-establishing it now as 3 a wholly independent body? 4 A. Yes. 5 Q. Why? 6 A. Well, I think at that time there was a recognition that 7 we had not alighted on the best structure for the 8 future. And keeping options open was probably the right 9 thing to do. 10 Q. Just to follow that particular bit forward to its 11 conclusion, could we look at document CEC01794941. 12 The first page of this, if it comes up, is just 13 a blank. If we can go to the second page. 14 We can see from the heading this was a minute of 15 meeting of the Board of Directors of TEL of 16 21 August 2006. 17 A. Yes, indeed. 18 Q. If we look at the second page -- the next page of this, 19 the third page of the document, foot of the screen, you 20 can see the GB, that's you: 21 "... gave a verbal update on the current status, 22 confirming that progress had been made with both 23 Transport Scotland and CEC agreeing to a revised 24 governance structure. In principle, a new Board would be 25 created - Tram Project Board, which would sit prior to 97 1 the TEL Board. This would be a free standing Board; not 2 a sub-committee of TEL. Final details of the revised 3 structure would be issued prior to the next TEL Board 4 meeting." 5 We can see that it seems to have moved on, and it's 6 now proposed that there would be a -- now proposed that 7 this freestanding Tram Project Board would be 8 established? 9 A. That is what that's proposing, yes. I go back to the 10 point I made earlier. It's quite clear, and it does 11 resonate with me from recollection at that time, that 12 over the course of 2006 we didn't have the project, 13 didn't have a settled governance structure, and clearly 14 that's open to criticism. I just say again that I think 15 the main players were operating practically in 16 a sensible way to make the project work properly. And 17 certainly those roles were taken seriously, as were the 18 interests of the main stakeholders. 19 But in terms of the detail of the actual structure, 20 I agree, it's -- it was a period where it was quite 21 evolutionary. 22 Q. There seems to be quite a lot of flux from month to 23 month? 24 A. Yes. 25 Q. This was a stage where, as you have already indicated, 98 1 contracts were starting to be let for the delivery of 2 the tram project? 3 A. I think -- no, the procurement didn't -- it may have 4 kicked off at this stage, but it was a year away from 5 this time. 6 Q. The design contract was let? 7 A. The design had been let in 2005. 8 Q. At this stage the process had started in terms of 9 getting bids for the actual infrastructure works and the 10 tram delivery vehicle -- the tram vehicle. 11 A. I think that's right. I couldn't swear to the tender 12 date. 13 Q. Would you have expected these issues of governance to 14 have been settled prior to getting to that stage? 15 A. I think it would have been helpful. The other thing 16 that is perhaps relevant is that the composition of the 17 tie Board changed quite significantly during 2006 also, 18 and I think there was an element of a number of new 19 people coming to the project at board level and 20 examining different ways of operating our governance 21 model. 22 Q. Just taking things forward to how they became settled, 23 a little bit more settled, could we look at document 24 CEC01355258. 25 This is a pack of papers for the Tram Project Board 99 1 Meeting Number 2 on Monday, 23 October. If we go to 2 page 4. I think we can see here minutes of the meeting 3 of what is described as meeting number 1 of the Tram 4 Project Board which took place in September 2006. 5 A. Yes. 6 Q. By this time we seem to have something settled that is 7 the Tram Project Board which is now holding its first 8 meeting under its new guise? 9 A. Indeed, yes. 10 Q. If we look at page 5, the following page, and look at 11 paragraph 06.07, under the heading "Corporate 12 governance", you can see: 13 "GB tabled the final governance paper and confirmed 14 that, subject to CEC agreeing on their reserved powers, 15 the TEL Board approved the structure recommended." 16 Do you see that? 17 A. I see that, yes. 18 Q. If we look at another document, which is reference 19 CEC01758865. Just trying to establish now what it was 20 had been approved. We can see here a document sent to 21 the tie Board, with the subject project governance and 22 the date of August 2006. 23 Do you see that? 24 A. Yes, sorry, yes, indeed. 25 Q. If we look at the italicised text, it says: 100 1 "This paper combines the principles and structure 2 which were set out in papers to the TEL Boards on 19 3 June 2006 and 24 July 2006 and the results of further 4 discussions. The paper is intended to be a complete 5 picture of the agreed structure to take the project 6 through to financial close." 7 A. I see that. 8 Q. Were you involved in preparing this paper in its various 9 incarnations? 10 A. I believe I would have been, yes. 11 Q. If we scroll down a little and look at the paragraph 12 under the bullet points, it says: 13 "This paper establishes a practical approach to 14 project governance through to Financial Close. It is 15 anticipated that a revised structure will be required to 16 execute the construction phase of the project." 17 Why would a different structure be required for 18 construction? 19 A. I can't quite remember what structure is in here, but it 20 was probably to do with the fact that by then, there 21 would be full-scale contractual engagement with the 22 consortium that would need to be managed, and also that 23 the Council would be a contractual participant through 24 a parent company guarantee of some description, probably 25 not defined at this stage. 101 1 It was a different world between procurement, where 2 you have certain activities going on, and actually 3 managing a large scale construction contract. 4 Q. We can see in the following paragraph a statement we 5 have seen before: 6 "The fulcrum of the previous governance structure 7 was the TEL Board acting as the Project Board. 8 Attendance included senior parties from the key 9 stakeholders, including CEC and TS. The Tram Project 10 Director had delegated authority from the TEL Board to 11 execute and in turn delegated on day to day matters to 12 his tram project team." 13 That's what has been in place up to that time? 14 A. Yes. 15 Q. Beneath that we can see what is to be the agreed 16 structure from August 2006 onward, and the four key 17 bodies are to be TEL Board, Tram Project Board, which is 18 it's noted is now an independent body with authority 19 delegated to it, and two Tram Project Board 20 sub-committees. 21 A. I see that, yes. 22 Q. Now, obviously tie is no longer there regarded as one of 23 the four key bodies. Is that part of the continuing 24 focus on TEL as being the delivery entity rather than 25 tie? 102 1 A. TEL had overarching responsibility, but I think the 2 reality -- the substance of it was that tie Ltd still 3 employed the people who -- including the Tram Project 4 Director who were required to deliver the project and 5 which would be the contracting partner with the partners 6 from the consortium in due course. 7 So it's probably the case that there should be a 8 fourth bullet in that table which is tie Ltd, or in 9 a different way to describe it, the Tram Project 10 Director and the delivery team, but they were employees 11 of tie Ltd. So it's in that sense the same thing. 12 Q. If we go over the -- perhaps it's easiest if we first 13 look over the page to page 2, the heading "TEL Board" at 14 the top of the page. It says: 15 "The role of the TEL Board is focused on its 16 statutory stewardship role and on its overall 17 responsibility to deliver an integrated tram and bus 18 network for Edinburgh, on behalf of CEC. It will make 19 the formal recommendations to CEC on key aspects of the 20 project including business plan and business case 21 approval, contractual commitment and matters which have 22 a political dimension. Attendance will be restricted to 23 Directors. The TEL Board will also address any matters 24 outwith the direct arena of Integrated Bus and Tram 25 systems and any statutory TEL considerations." 103 1 If TEL are to be the body which has the 2 responsibility for making recommendations to CEC and 3 giving advice to CEC, including business cases, why were 4 they not the body that employed the people? 5 A. I think simply for practical reasons, to avoid moving 6 all of the people from -- you mean from tie Ltd? 7 Q. Yes. 8 A. -- to TEL. And also bearing in mind that tie Ltd did 9 have perhaps three substantive contracts, being 10 utilities, design and the early operator, the Transdev 11 Agreement; and I'm not sure, but I guess you could 12 check, I'm not sure that there were straightforward 13 novation clauses in those contracts which meant that 14 transferring the contracts would have been potentially 15 quite difficult. 16 So that was why tie Ltd as an entity was retained. 17 I think it was more of a practical issue rather than 18 anything to do with the conceptual nature of the 19 structure. 20 Q. But if I turn the question then the other way round, if 21 tie are the people who have the contracts and therefore 22 have the people, does it not make sense that it had the 23 direct responsibility for being the adviser to the 24 Council? 25 A. That's a perfectly sensible proposition. I think the 104 1 dimension that that doesn't pick up is that TEL was 2 established looking to the future to deal with system or 3 the integration of the services, and having established 4 TEL in that -- in that overarching role and looking 5 forward, that would have taken TEL out of the picture, 6 which wouldn't have seemed too sensible, having just 7 created the vehicle for that purpose. 8 Q. But if TEL's responsibility is one of integration, is 9 that something that would not more cut in once the 10 infrastructure was in place and tram operations were 11 starting? 12 A. It's certainly much more tangible at that time, but my 13 recollection is that there was a lot of planning had to 14 be done, including to a degree the design of the system, 15 but the work to plan the integrated services was ongoing 16 pretty well from this time, I think. 17 Q. If we look under the heading "Tram Project Board", we 18 can see what is set out in the agreed paper is: 19 "The [Tram Project Board] TPB is established as an 20 independent body with full delegated authority from CEC 21 (through TEL) and TS to execute the project in line with 22 the remit set out in Appendix 3. In summary, [the Tram 23 Project Board] TPB has full delegated authority to take the 24 actions needed to deliver the project to the agreed 25 standards of cost, programme and quality." 105 1 Now, what is described there in terms of being 2 delivery, execution or delivery of the project, is 3 what -- is the function that tie had at the outset? 4 A. It is, except that there still has to be a body to 5 actually do the work, and that, I think, was the Tram 6 Project Director and his team or, if you like, tie. 7 So that entity would sit beneath the TPB doing the 8 actual delivering. 9 Q. Why have TPB and a different entity doing the 10 delivering? 11 A. I don't think they are doing the delivering. What 12 they've had is delegated authority to ensure that 13 delivery happens, overseeing in the hierarchy the 14 delivery by tie Ltd. 15 Q. If you go to the following page of this, page 3, and we 16 enlarge the heading "the tie Board" and the text 17 underneath it, we will see that it identifies: 18 "In addition to the four primary bodies, the 19 tie Board retains a specific role, in line with its 20 previous responsibilities. These are 1) to apply 21 quality assurance to the execution by the Tram Project 22 Director and his team; 2) to make formal funding 23 requests to [Transport Scotland] TS and be accountable for 24 expenditure; 3) to enter into contractual arrangements 25 necessary to execute project delivery. It is 106 1 anticipated that the tie Board will place reliance on 2 the governance processes executed by the [Tram Project 3 Board] TPB in assessing the work required to execute their 4 own responsibilities under 2 and 3." 5 The responsibilities by now of tie are really quite 6 narrowly drawn? 7 A. Although it's still a major task. That was the delivery 8 of the project. Of the infrastructure. 9 Q. It has no advisory role at all? 10 A. Not formally, no. But I do go back again to the fact 11 that the communications within the group of senior 12 people who were involved in these bodies was actually 13 very consistent and frequent, and so you can say 14 formally there was no advisory role, and that's clearly 15 what's in the documents, but in practice discussions 16 were a lot more fluid than that. 17 Q. Is there not a difficulty that arises though, where you 18 have the formal -- hierarchies and systems in place 19 don't match the practice? 20 A. There would be, but I wouldn't say that was the case. 21 I think what I was trying to describe there was that 22 there was more to it than people sticking rigidly to 23 a formal structure, which in my experience is actually 24 quite useful. The informal communications are very 25 often very important in project delivery and other 107 1 activities. 2 Q. But looking at matters here in June 2006, the Draft 3 Final Business Case is handed over to the Council in 4 November 2006. So this was at quite a late stage, 5 saying that will be the responsibility of TEL, rather 6 than tie. 7 A. It is, but I think the parties, the individuals 8 involved, and had been involved for quite some time. It 9 wasn't as if there was a new group who were handed new 10 responsibilities. I think it was much more evolutionary 11 than that. 12 Q. Who was actually taking the decision and actually making 13 the recommendation? That would presumably come from 14 within tie, albeit it is said to be rebadged as it 15 passed through TEL? 16 A. I think the hierarchy would work that tie would make the 17 proposals through the Tram Project Director to the Tram 18 Project Board, which is where the main discussions on 19 any issues took place. And the Tram Project Board 20 formally reports up to TEL and to the Council. That 21 would be the hierarchy there, I think. The decisions 22 were ultimately either at the Tram Project Board or TEL 23 level, or for the fundamental decisions, those were 24 retained by the Council. 25 Q. That was September 2006 when this paper was approved. 108 1 What I want to do is jump forward a whole year to 2 September 2007, and look at the document USB00000006. 3 This is a cover page for the papers for the meeting that 4 took place in September 2007 of the Tram Project Board. 5 Again, we can see it was distributed to you. 6 A. Yes. 7 Q. Could we look, please, at page 32 in this. We can see 8 a paper here headed "tie Board, Tram Project Board, 9 TEL Board, CEC", and the subject is "Project 10 Governance". I take it all four of those bodies were 11 taking an interest in what the governance would be going 12 forward? 13 A. They were indeed, yes. 14 Q. It's a draft dated September 2007, was this something 15 that you prepared? 16 A. I believe so, yes. 17 Q. If we read under the bullet points, it says: 18 "This paper develops the governance structure from 19 that agreed one year ago. The new structure addresses 20 two phases of the project, being the period to Financial 21 Close (January 2008) and the period of construction. 22 This paper is intended to be a complete picture of the 23 agreed structure for these periods. The fulcrum of the 24 existing governance structure is the Tram Project Board 25 and this key aspect is sustained. Formally, the [Tram 109 1 Project Board] TPB reports through its Chairman to the 2 TEL Board and exercises powers delegated to it by the 3 Council through TEL." 4 Had that in your view been working up to then? 5 A. I believe so, yes. 6 Q. If you look over to the following page, "Changes in the 7 current governance structure", in the lower half of the 8 page, you say there: 9 "The period to Financial Close will see the 10 controlled evolution of these changes so that the model 11 is fit for purpose prior to commencement of 12 construction. The specific changes which have been 13 implemented or are being implemented to take the project 14 through to Financial Close are as follows ..." 15 The first one is just noting that Transport Scotland 16 have withdrawn and how they will exercise their 17 oversight? 18 A. That's correct, yes. 19 Q. The second is to note that the Council have established 20 a Tram sub-Committee, and the purpose of that committee 21 is to review and oversee decisions with respect to the 22 project. 23 A. That's correct, yes. 24 Q. Then note that: 25 "[The Council] CEC are revising the Operating Agreements 110 1 between the Council and respectively tie Limited and TEL so 2 that ... reflect the roles and responsibilities of all 3 parties ..." 4 Were you involved in the negotiation of the 5 Operating Agreement? 6 A. I was, yes. 7 Q. Was that straightforward? 8 A. No, it wasn't. They are not particularly lengthy 9 documents, but nonetheless very important, partly 10 because they codify the Council's arrangements or 11 requirements, which is obviously entirely proper, but 12 also because they create responsibilities on the boards 13 of the two companies for which individual directors were 14 responsible, and so marrying up the individual 15 responsibilities of the directors with the Council's 16 interest was actually quite difficult and took some 17 time. 18 Q. So is it fair to say that there were differing views as 19 to how matters should be done and differing views of the 20 respective interests of the parties? 21 A. Yes, I don't think there was any fundamental divergence 22 of objective between the Council and the two boards. 23 The objective was to deliver the tram project, and all 24 that goes with that. There was no debate around that. 25 I think from memory that one of the reasons that it 111 1 took quite a while was that the drafts of the original 2 agreement, and I think it was the tie Agreement that was 3 negotiated mostly, and then TEL sort of fitted around 4 the same terms, as opposed to two running in parallel, 5 because a lot of the content was very similar. But the 6 original draft which I'm quite confident came from the 7 Council was a very arm's length relationship. It was as 8 if there was no ownership between the Council and the 9 subsidiary company, tie Ltd, which created a lot of 10 layers of responsibility and requirements that from my 11 point of view and more importantly, the directors of tie 12 at the time, felt were inappropriate. 13 Q. While you say that the ultimate objective was the same 14 in that both parties wished to bring about the delivery 15 of a tram system, there was only one party, the Council, 16 that were bearing the financial responsibility, the 17 burden of that? 18 A. That's correct, yes. 19 Q. Obviously the Council have a wide number of demands on 20 their finances to take care of, whereas tie only had one 21 thing? 22 A. Indeed. 23 Q. Returning to these bullet points there, the final one 24 noted that: 25 "The [Tram Project Board] TPB recently authorised the 112 1 creation of two sub-committees covering utility 2 diversion ("the MUDFA Committee") and legal and approval 3 matters ("the Legal Affairs Committee)." 4 I think that -- we can see over the page, we have 5 passed the bullet points. So that's the last of the 6 changes noted to the current governance structure. 7 They seem quite minor changes? 8 A. Yes. I think almost the very first point on the 9 previous page was the major change, namely 10 Transport Scotland removing themselves from the 11 governance structure. The rest I think you would fairly 12 say was -- it was partly tidying up the committee 13 structure, but also worth remembering that the legal 14 relationships between tie and TEL and the Council had to 15 pass the test of the contracting consortium who, quite 16 rightly, needed to see that the companies they were 17 contracting with had appropriate delegated authority for 18 their contractual responsibilities. 19 So the involvement or the impending involvement of 20 what turned out to be BBS as a contracting partner, 21 their interest in these arrangements was another 22 dimension that had to be taken very seriously into 23 account. 24 Q. Could we look over the page, please. Just stay on that 25 page we're at. 113 1 The roles of TEL and tie Boards, we see it's now, 2 the second paragraph on the screen: 3 "For the foreseeable future, tie will have only one 4 major project, the tram. It will maintain roles with 5 certain smaller projects and will require to comply with 6 normal statutory responsibilities as a limited company, 7 including formal compliance with its Operating 8 Agreement. 9 The tie Board presently comprises a group of 10 Elected Members and a group of independent non-executive 11 directors under the Executive Chairman. The TEL Board 12 presently comprises Elected Members and Council 13 officials under the non-executive Chairman. 14 It is proposed that the composition of these two 15 Boards be amended to: Ensure the TEL Board has the 16 composition necessary to be the active arm of the 17 Council in oversight of project delivery and preparation 18 for integrated operations; and avoid duplication of 19 resource and reporting by limiting the tie Board's 20 responsibilities to those necessary to manage its 21 project responsibilities, comply with statute and with 22 its Operating Agreement. 23 In overall terms therefore the Elected Members of 24 the tie Board and its independent [non-executive 25 directors] NXDs will join (if not already members) the 114 1 TEL Board or the Tram Project Board, restricting the 2 tie Board to its Executive Chairman and a senior Council 3 official." 4 Is this in a sense simply moving all the elected 5 members into the body that's actually going to be taking 6 the most executive effective decisions in relation to 7 the tram project? 8 A. Yes, I think that's fair summary. 9 Q. Presumably for the last year, if the elected members 10 have been sitting on tie, they have been dealing largely 11 with routine matters, because everything had been 12 migrated to TEL? 13 A. Well, dealing with delivery of the project as it evolved 14 over that period. 15 I think also though, and the minutes will confirm if 16 this is correct, that the elected members attended the 17 Tram Project Board meetings over that period. 18 Q. Go over the page and look at the heading, "TPB and its 19 sub-Committees". We see here: 20 "The TPB maintains its role as the pivotal oversight 21 body in the governance structure. The TPB is 22 established as a formal sub-Committee of TEL with full 23 delegated authority through its Operating Agreement to 24 execute the project in line with the proposed remit set 25 out in Appendix 4." 115 1 So it's very much once again viewing it as being 2 a sub-Committee of the Board to give it standing, rather 3 than being the independent body it once was? 4 A. Yes. 5 Q. It's referred there as performing an oversight function. 6 We earlier saw reference to the Council's sub-committee 7 having oversight function. 8 We've now got tie actually entering into the 9 contracts for delivery with direction from Tram Project 10 Board and oversight by both TEL and the Council 11 committee. Is it your view that there might be a number 12 of different layers, too many layers building up of 13 oversight above tie here? 14 A. I mentioned earlier a couple of times that there was 15 a degree of duplication in the structure beneath or with 16 TEL and downwards in the hierarchy. But it didn't 17 strike me as anything other than sensible that the 18 Council would have its own internal committee structure 19 or oversight and governance structure to support their 20 own decision-making. 21 I should say, I had no real visibility or insight 22 into how that worked, and nor should I have. That was 23 entirely for the Council. 24 Q. If we then go to another document. It's CEC01357124. 25 We are now looking at the Tram Project Board papers 116 1 for the meeting on 31 October 2007. Once again you're 2 amongst the list of people to whom these were 3 distributed? 4 A. Yes. 5 Q. If we look at page 6 of these, we should probably start 6 at page 5 to identify where we are. 7 This is looking at the minutes of the Tram Project 8 Board of 26 September 2007 which is the papers we were 9 just looking at. 10 If we look at the following page, item 3.9, we can 11 see essentially confirmation of approval of the various 12 arrangements that the Tram Project Board would be 13 a formal sub-committee of the TEL Board. The Tram 14 Project Board sub-committees would evolve as proposed in 15 the governance paper, and the TEL Board remain as it is. 16 Finally, the tie Board would continue as is. That's 17 accepting the recommendations you put forward? 18 A. I see that, yes. 19 Q. If we then go to page 10, we have got here a set of 20 minutes which are the tie Board, Tram Project Board and 21 Legal Affairs Committee, sitting together. We start to 22 see around about this time a number of meetings where 23 essentially two different bodies start meeting together. 24 Here we have the Tram Project Board, the sub-committee 25 of TEL, sitting together with the Board of tie? 117 1 A. Yes. 2 Q. Why was that done? 3 A. I think it was to avoid the need for two meetings where 4 one would do. 5 Q. Is this not part of the problem, that the structure had 6 been set up, tended to generate two meetings where one 7 would have been better? 8 A. That would have been the logical extension of having or 9 retaining the legal entities and establishing a Project 10 Board now as a sub-committee, but nonetheless a separate 11 body. 12 Q. If we go to page 12 of this document, item 5.1: 13 "The boards noted the update on governance presented 14 by [Jim McEwan] JMcE. It was agreed to postpone the discussion 15 on governance to a future date." 16 Does that ring any bells? 17 A. It doesn't. Sorry. 18 Q. If you jump forward one further page to page 13 -- 19 CHAIR OF THE INQUIRY: Did you want to add ... 20 A. Sorry? 21 CHAIR OF THE INQUIRY: Did you want to add something? 22 A. No. Fine, my Lord, thank you. 23 MR LAKE: That was looking at the minutes of 15 October. If 24 we look here to the Executive Summary of the Project 25 Director's Report, under the heading 1.2.2, he seems to 118 1 be giving a different story: 2 "A paper on the governance structure for the 3 construction period was presented and discussed at the 4 [Tram Project Board] TPB of the 26th September. A slightly 5 revised version was agreed at the [Tram Project Board] TPB on 6 15th October." 7 Do you know -- I am just puzzled as to what was 8 going on here, where the committee are saying they 9 postponed it, and someone else is saying it was agreed? 10 A. I'm sorry, I can't help you. 11 Q. Okay. Jump forward again then in time to January 2008, 12 and look at document CEC01015023. 13 These are the papers for 23 January, and it seems to 14 be noting that once again, there was going to be a joint 15 meeting, and it was going to be the Tram Project Board, 16 the tie Board and the TEL Board, all being merged into 17 one? 18 A. Yes. 19 Q. Is that indicative once again, it was to avoid 20 duplication, which otherwise -- the same issues would 21 have had to be considered three times? 22 A. That's exactly it, yes. 23 Q. If we look at page 10 of this, under the heading, 24 "Governance", we can see: 25 "The detailed governance structure for the tram project 119 1 during the construction phase, including committee 2 structures and relationship with CEC, was approved by 3 the [Tram Project Board] TPB and CEC during the period." 4 So it had got there by January 2008 that the 5 governance was in place for the construction? 6 A. It looks like it, yes. 7 Q. Were you surprised how long it took to get these 8 governance structures agreed and in place? 9 A. Yes. I think the only simple answer is yes, qualified 10 slightly by the fact that it's quite clearly a major 11 project for the stakeholder. So they had to do their 12 own thing in terms of their own internal governance, and 13 by that I mean the Council and Transport Scotland 14 particularly. 15 But it did take a long time to get to a settled 16 structure and I think the -- one important thing is that 17 despite that being an evolutionary process, the 18 practical interrogation and oversight of the project did 19 continue, in my view, quite effectively. 20 Q. Presumably there were people sitting at desks who were 21 actually carrying out the work of administering the 22 project and scrutinising it? 23 A. Yes, yes, mostly around the TPB structure. 24 Q. The difficulty was in practice? 25 A. Sorry? 120 1 Q. What hierarchy or structure was to be superimposed on 2 that work that was actually being carried out? 3 A. The TPB was the consistent element in the process over 4 quite lengthy period, and the attendance at the TPB 5 meetings was reasonably consistent as well over that 6 period. So in my view that was the pivotal piece in the 7 governance that made it work, even if the formal 8 structures were evolving quite significantly over 9 a lengthy period. 10 Q. But in terms of the practical aspect of people at desks 11 doing the work, they would all have been employees of 12 tie? 13 A. Yes, sorry, I have misunderstood your question. They 14 would be underneath the Tram Project Director. That 15 would be the operational management level there. 16 Q. If we look further on in this set of papers to see the 17 governance finally put in place, if you go to page 70. 18 If we look at the text under the heading with the 19 number 1 on it, we can see: 20 "The recipients of this paper approved a governance 21 and project management model for the period to Financial 22 Close prior to the Council's meeting on 25 October 2007. 23 The purpose of this paper is to present the proposed 24 model for the period from Financial Close to operational 25 commencement planned for Q1 2011. The proposed model 121 1 was very similar to the outline presented in October, 2 but this paper is drafted to be independent of previous 3 submissions." 4 This is really intending to indicate how matters 5 would be taken forward into the construction phase? 6 A. Yes. 7 Q. If you look at page 73, under the heading "CEC", we can 8 see once again reference to the Tram sub-Committee, 9 which is there to review and oversee decisions with 10 respect to the project. So that essentially remains the 11 same. 12 A. Indeed, yes. 13 Q. If we look to the bottom of page, under the heading 14 "TEL", we can see: 15 "The TEL Board is focused on its overall 16 responsibility to plan an integrated tram and bus 17 network for Edinburgh, on behalf of CEC. The Board is 18 responsible for compliance with its Operating Agreement 19 and it will also address any matters outwith the direct 20 arena of Integrated Bus and Tram systems and any 21 statutory TEL considerations. 22 The TEL Board comprises an independent 23 non-executive Chairman, independent non-executive 24 directors, Elected Members and Executive management. 25 There is appropriate common membership across the TEL, 122 1 tie and LB Boards to ensure consistency of approach." 2 Now, the suggestion here, we see it most directly 3 said that there should be common membership across these 4 three entities. If it's going to be common membership, 5 does that not really raise a question why, once again, 6 why does there have to be three bodies when they've got 7 the same membership? 8 A. Yes, and I think the answer, I'm afraid, is what I said 9 earlier, that the existence of TEL had a particular 10 purpose. tie was a substantive organisation in the 11 sense of its employment and contractual 12 responsibilities, and therefore if you were looking to 13 rationalise this structure, that would have been quite 14 a difficult process. 15 And Lothian Buses clearly had to be separate because 16 I think under the Transport Act it needs to be 17 a separate board, independent in the legal sense of the 18 Council. 19 So all three boards had to continue on those 20 grounds. 21 Q. We have just seen from the heading on these minutes or 22 this pack of papers, we have got the same members to 23 various boards, various entities, having a meeting at 24 the same time. To what extent really are there three 25 separate entities, or are they not all collapsed into 123 1 one in practice? 2 A. I think from the point of view of the legal entities, 3 they remained entirely substantive in their own 4 individual rights. In terms of how the project was 5 being delivered, that process of bringing the members of 6 the boards together in one meeting was for efficiency 7 and avoidance of duplication, and I don't think that 8 took away from the statutory responsibilities of anyone 9 who was on any of the three boards. 10 So it was about efficiency in terms of the 11 governance of the tram project without diluting the 12 statutory responsibilities. 13 Q. You've emphasised already that the work was actually 14 going on, on the ground while all these matters were 15 being settled? 16 A. It was, yes. 17 Q. Does it come -- could it be said really that whatever 18 these governance structures were was in a sense slightly 19 immaterial, because they had the same people meeting 20 wearing various hats, taking the decisions, and the same 21 people actually carrying out the work? 22 A. Well, the people carrying out the work within tie, which 23 in terms of the Project Director and his team, I'd put 24 into a slightly separate category from being concerned 25 about the governance structure, and I think what we were 124 1 trying to achieve was we didn't have any more meetings 2 than were necessary, but the individuals who were on the 3 individual boards were nonetheless aware of their 4 individual board responsibilities, and not all of that 5 would overlap. They had to deal with their own 6 statutory responsibilities in parallel with the primary 7 job of work, which was to deliver the tram. 8 Q. If you look down this page that we have on screen a bit 9 further, we can see under the heading "Tram Project 10 Board and its sub-Committees", nothing has really 11 changed there. It is still the pivotal oversight body 12 and its responsibilities still include executing the 13 project in line with the proposed remit? 14 A. Yes. 15 Q. Over the page to tie. Look at the upper half of the 16 page. We can see: 17 "tie's role is to deliver the tram network fit for 18 operational purpose, on time and budget." 19 So tie is the one actually doing the delivery of the 20 tram network, but we've already seen that the Tram 21 Project Board is the one described as being the one 22 executing the project. 23 A. It may be that that wording should say "oversight of 24 execution", because I don't think the Tram Project Board 25 was executing in an executive way. 125 1 Q. Looking at the second paragraph here: 2 "The tie Board presently comprises a group of 3 independent non-executive directors and Elected Members 4 under the Executive Chairman. The elected members will 5 be the same on each of the TEL and tie boards to ensure 6 consistency of view across delivery of the system and 7 operations." 8 If one body, one entity is to have oversight of 9 another, is it not better that there are differences 10 within the boards? Is there not a danger that there's 11 not effective oversight if the same people keep sitting 12 on all the boards? 13 A. No, I don't think so. I think the Tram Project Board, 14 for example, had parties who were not on the tie Board. 15 They may have been in the same meeting, but the 16 responsibility was to oversee tie's delivery, and 17 I think there were enough in a sensible sense that -- 18 enough people that you wouldn't have had an ability of 19 people in one arm of the governance able to unduly 20 influence those in another part. 21 So I don't think that was a real issue in practice. 22 Q. We can see, if we look, the next paragraph begins: 23 "In its role on the tram project, tie provides 24 services to the Tram Project Board." 25 That's essentially providing services to TEL? 126 1 A. Yes. 2 Q. Just for completeness, if we scroll down the page, we 3 can see a summary position. If we look under TEL, we 4 can see the first bullet point includes oversight of the 5 delivery of the tram infrastructure executed through its 6 sub-committee, the Tram Project Board. 7 A. Yes. 8 Q. And over the page, under the heading "Tram Project 9 Board", it includes oversight of the delivery of the 10 tram infrastructure, conducted directly or through 11 scrutiny by sub-committees of the Tram Project Board. 12 A. Yes. 13 Q. So again, various levels of oversight, TEL have 14 oversight of delivery through its sub-committee, the 15 Tram Project Board, and the Tram Project Board are 16 having oversight of the delivery through its 17 sub-committees, cascading down? 18 A. Yes. 19 Q. Once again, there seemed to be a lot of layers being put 20 into place here for implementation of the project? 21 A. I don't think it's unusual to have a sub-committee 22 structure when there are different work streams. The 23 purpose of those sub-committees was to provide more 24 detailed scrutiny than the board itself could conduct. 25 I think that structure, I feel, made sense at the time. 127 1 Q. Under the heading "Practical operation", you do 2 recognise that there is inevitable duplication between 3 the various scrutinies? 4 A. Yes. Yes, there is. 5 Q. Could I then turn to the Operating Agreement between tie 6 and the Council. Let's go to reference CEC00779488. 7 Could we go back, please, to the previous document, 8 CEC01015023. What I'm trying to do is find if there is 9 a copy within this of the agreement. 10 Could we look, please, at page 82. It's 82 in mine. 11 If we look at page 83. This is the agreement between 12 the City of Edinburgh Council and tie Limited. I think 13 you said you had a hand in drafting this? 14 A. I think the original was a draft from the Council which 15 we then discussed with the Council's legal people. 16 Q. Could we look at page 85. Could we look under the 17 heading, "tie's Obligations": 18 "tie hereby agree to provide the Services to the 19 Council throughout the duration of this Agreement in 20 order to assist in, carry out, promote, manage and 21 administer the project." 22 We can go into the definition of services if it 23 would help, but the real question is: despite everything 24 we've seen about tie providing services to TEL, the 25 agreement as ultimately entered into had tie providing 128 1 services directly to the Council. Why was that? Why 2 ignore what had been put in place? 3 A. I think the understanding was that the Council was 4 satisfied with the TEL governance structure, but wanted 5 the Agreement to be directly between themselves, the 6 Council and tie Ltd. So in practical terms the 7 governance model was as we saw previously, but they were 8 keen that this was an agreement between the two -- 9 between the parent and the subsidiary. 10 Q. I would like to turn now to a different matter, going 11 back to the decisions that were taken within tie to 12 proceed with the contract. 13 If you could look, please, at the Final Business 14 Case, it's document CEC01394534. 15 I think you said you were involved in preparing the 16 Draft Final Business Case, or had a hand in it. 17 A. Reviewing, probably, rather than preparing it. 18 Q. Can we look at that, please. It's reference 19 CEC01821403. 20 We can see the cover page for the Draft Final 21 Business Case. 22 Can we look at page 85, please. 23 I'm interested in paragraph 7.53. Under the 24 heading, "Activities under the SDS contract", it's noted 25 that: 129 1 "It is expected that the overall design work to 2 Detailed Design will be 100% complete when the 3 Infraco contract is signed. However by identifying key 4 risk areas and prioritising SDS activities, tie is 5 seeking to complete key elements of the Detailed Design 6 prior to selecting the successful Infraco bidder in 7 summer 2007. This will enable Infraco bidders to firm 8 up their bids, based on the emerging Detailed Design, 9 and thereby reduce the scope and design risk allowances 10 that they would otherwise include." 11 Now, this aspect of procurement and the strategy of 12 having the design complete, was this something that you 13 were involved with? 14 A. I was aware that was part of the strategy. I don't 15 think I had a role in the design of the strategy back in 16 the early period, but I was aware of it at that time. 17 Q. Were you aware of importance being attached to the idea 18 of having the detailed design 100 per cent complete when 19 the contract was signed? 20 A. Well, that was the logic of having the early design 21 work, so that the interface or overlap, rather, wouldn't 22 be an issue. 23 Q. You will be aware that throughout 2007 there were 24 difficulties in getting design, detailed design 25 completed? 130 1 A. It was quite a regular feature of the various meetings, 2 yes. 3 Q. So by the end of 2007, when it came to the stage of 4 getting best and final offers from the Infraco bidders, 5 it was nothing like 100 per cent complete? 6 A. That was my understanding, yes. 7 Q. It was still nothing like 100 per cent complete when it 8 was hoped to put in the Final Business Case and get 9 financial close in December 2007? 10 A. That would be the case, I think, yes. 11 Q. Now, do you recall discussions at that time of the 12 extent to which this represented a departure from the 13 procurement strategy, board discussions? 14 A. I don't remember specific discussions, but the -- my 15 recollection is that it was a constant feature of those 16 discussions, of those meetings. So while I can't say on 17 Day X or Y that the matter was discussed, there is no 18 question that it was a problem that was dealt with at 19 those meetings quite regularly. 20 Q. Were the discussions that recognised quite directly that 21 this was -- to proceed to contract award at that stage 22 would reflect an abandonment of one of these procurement 23 strategies? 24 A. I don't recall discussion of that type. My 25 recollection, bearing in mind that I wasn't involved in 131 1 the design process and nor should I have been, it was 2 that mechanisms were being put in place to deal with the 3 fact that it wasn't ready, rather than that it was 4 a departure from what had gone before, what had been 5 planned before. I think that was understood. 6 So the question then became: could that problem be 7 contained by taking certain steps which certainly found 8 their way into management plans, I think they were 9 described as, at the time of close. 10 Q. That's looking at the design situation. I think another 11 plank of the strategy for procurement was that the MUDFA 12 works should be largely complete before the Infraco 13 works commenced. 14 A. That was the objective, yes. 15 Q. Once again, what was your awareness of the position of 16 the progress in MUDFA works at this time? 17 A. I think rather similar to design, that it was behind 18 schedule. It was a regular matter for discussion at the 19 various board meetings. I can't quite remember the 20 chronology as to, you know, where it was at the time of 21 the business cases or the financial close, but I do -- 22 I think I recall that the programme had to be revised, 23 at least once, and there was a revised baseline 24 therefore from which people were working. But again, it 25 was a matter that was discussed quite regularly at those 132 1 meetings. 2 Q. In that these were two planks of the procurement 3 strategy referred to in the Draft Final Business Case, 4 was consideration given to not proceeding to financial 5 close in December 2007? 6 A. I don't recall any specific discussions, but I find it 7 hard to look back and say that, you know, that -- if you 8 don't mind, rather obvious possible course of action 9 wasn't debated. 10 But I cannot recall specific discussions of that 11 type. I think the -- the approach that was being taken 12 is it was: we've got a problem here, we've got 13 a challenge here, how can we find a way through it? 14 Rather than, if you like, to push the whole programme 15 forward, because obviously that cost -- that added to 16 the cost. 17 Q. Can you remember anyone arguing or advising that the 18 financial close shouldn't be achieved, that you 19 shouldn't report to the Council and get the final go 20 ahead until the design was further developed? 21 A. No, I don't. I think it was. My strong recollection is 22 that the focus of the discussions was around managing 23 the issues, rather than changing the timescale for 24 programme. 25 Q. Specifically, I should ask you: do you recall 133 1 Andrew Fitchie of DLA advising that it would be 2 a mistake to proceed to close and awarding the contract 3 at that stage? 4 A. No, I don't. 5 Q. Did you have dealings with him at that stage? 6 A. I had dealings with him on a number of fronts over an 7 extended period. So I would expect at that stage, yes. 8 Q. Was there pressure to achieve financial close at that 9 time from the Council, Transport Scotland, the 10 Government, anybody else? 11 A. I don't think there was any pressure in the sense of 12 external influences being brought to bear. It was more 13 the collective view that the longer that process went 14 on, the more likely it was that the cost would rise, and 15 there was the external perception issue as well, 16 obviously, which I suppose is an external influence, but 17 I don't recall, for example, any of the stakeholders 18 saying: for this reason, we must close on Day X. It was 19 much more about trying to find a way of controlling and 20 managing the issues and getting to a legitimate landing 21 point for financial close. 22 MR LAKE: My Lord, I'm going to move on to another matter 23 now. 24 CHAIR OF THE INQUIRY: We will adjourn for lunch and resume 25 again at 2 o'clock. 134 1 A. Thank you. 2 (1.00 pm) 3 (The short adjournment) 4 (2.00 pm) 5 CHAIR OF THE INQUIRY: You're still under oath, Mr Bissett. 6 A. Understood. 7 MR LAKE: Mr Bissett, before lunch I was just asking you 8 about the decision to proceed and whether there was any 9 pressures. 10 I think a couple of things to raise. 11 By the time we got to the end of 2007, obviously the 12 Scottish General Election had taken place and the 13 minister had said GBP500 million and not a penny more. 14 You were aware of obviously that? 15 A. Yes. 16 Q. It had also been the case that the Scottish Government 17 as composed of the Scottish National Party had had it in 18 their manifesto that the tram project would be 19 cancelled, but the Parliament had said nonetheless it 20 should proceed? 21 A. I recall that, yes. 22 Q. Was there a concern that any delay beyond 2007 could 23 imperil the funding? 24 A. I don't recall that being front of mind at any stage. 25 I think the commitment in September by John Swinney was 135 1 seen to be pretty clear cut. 2 Q. I think by this time, that is December 2007, you had 3 already removed to a preferred bidder status? 4 A. Yes, I believe that's the case, yes. 5 Q. Was there any pressure on the part of the contractor, 6 one remaining contractor, to get matters dealt with in 7 late 2007? 8 A. Bearing in mind that I wasn't involved in negotiations 9 with the contractor, and therefore I had no direct 10 contact with them, I don't recall any reports back 11 saying that there was pressure coming from that quarter. 12 Q. I want to turn to the question of the contract and the 13 negotiation of the contract. What was your involvement 14 in that? 15 A. Really no involvement at all. The commercial team in 16 tie, along with DLA, were the people who handled all of 17 those negotiations. 18 Q. I want to ask you about a couple of meetings -- emails 19 that arose in the context of negotiation of Part 4 of 20 the Schedule. The pricing part. 21 Now, were you aware of that or did you come to be 22 aware of it? 23 A. Came to be aware of it, I think maybe February/March 24 time in 2008. 25 Q. Can you look, please, at a document. It's CEC01465933. 136 1 We have got an email chain here. What I would like 2 to do is start by looking at the lower half of this 3 first page which is an email from Andrew Fitchie of DLA. 4 It was sent to Jim McEwan and Steve Bell, although it 5 was copied to you in relation to Schedule 4, Schedule 6 Part 4. 7 A. Indeed, yes. 8 Q. I don't think you'd had any involvement with this 9 Schedule prior to this time; is that correct? 10 A. No involvement, but I think it first surfaced certainly 11 to my knowledge, maybe -- I'm sure it was February 12 rather than March. 13 Q. When you first heard about it? 14 A. But I didn't have any direct involvement with its 15 preparation, if that was your question. 16 Q. Sorry, I spoke over you there. You said you were sure 17 it was in February rather than March; then what did you 18 say about direct involvement? 19 A. I think what I said was that I hadn't had any direct 20 involvement in the Schedule, in preparing it or 21 negotiating it. 22 Q. Why was it that you were in receipt of this? Do you 23 know, was it discussed with you why this was being sent 24 to you in March? 25 A. Not really, but Andrew Fitchie generally copied a number 137 1 of people in to emails that he obviously regarded as 2 important to make sure that information was widely 3 disseminated. So that was probably why I was on the 4 list there. 5 Q. We should perhaps, before looking at Mr Fitchie's email, 6 look at the next page of this to see to what he is 7 responding. 8 If we look towards the upper half of the page there, 9 there's an email from Jim McEwan within tie to 10 Andrew Fitchie, asking for response on this, please: 11 "… what Ian is saying is factually correct albeit that 12 we are working to minimise the impact and variance 13 between critical path items." 14 A. Yes. 15 Q. When he says what Ian is saying, if we look at the email 16 immediately below that on the screen, it is from 17 Ian Laing of Pinsent Masons, where he's seeking 18 confirmation that the position on Notified Departure in 19 relation to the Design Delivery Programme is understood 20 and agreed by tie. 21 Did you understand what the problem or the issue was 22 when you got these emails? 23 A. I cannot honestly say that I understood the detail, but 24 if I recall correctly, the drift of it was that the 25 design programme had moved on, and the consequence of 138 1 that was that if design programme X was in the contract, 2 and it was known that the programme had moved on, then 3 clearly that would need to be accommodated in some way, 4 whether that was in the negotiations of the contract or 5 after the contract was signed. 6 If I recall correctly beyond that point, the views 7 that were expressed were that the process to move from 8 one version to the next was understood by people in tie 9 and accommodated in the sense of the costings and 10 programme and risk provisions. 11 Q. Do you understand that in terms of Schedule Part 4 as it 12 had been negotiated, a change to the Design Delivery 13 Programme would be what was termed a Notified Departure, 14 or mandatory tie change, and would generate an 15 entitlement on the part of the consortium to more money? 16 A. I may not have understood that fully at that stage, but 17 certainly before close that was understood, I think. 18 Q. So you did understand that before close? 19 A. Before close, yes. 20 Q. We see what the advice was, looking back to the previous 21 page, the first paragraph of Andrew Fitchie's advice. 22 He suggests that: 23 "If the situation is that at this point SDS is 24 unable to produce a design delivery programme which is 25 reliable and static at V26 - and that is indeed the 139 1 situation that SDS have articulated - and that this 2 programme will need to be varied immediately 3 post contract award, tie needs to endeavour to negotiate 4 with BBS now the specifics of what is or is not to be 5 permitted as a variation to the Infraco Contract and its 6 master construction programme, otherwise the Notified 7 Departure mechanism is too blunt and will permit BBS to 8 include everything that they estimate is going to affect 9 them to be priced and to be granted relief. That 10 Estimate is bound to be all encompassing and 11 conservative." 12 Did you take any immediate reaction when you saw 13 that email come to you from Andrew Fitchie, or did you 14 leave it to others? 15 A. No, I didn't. That clearly was within the remit of the 16 negotiating team with Andrew's advice. So I don't think 17 I would have taken any action on that basis. 18 Q. You then get Geoff Gilbert's reply to that, which has 19 also been copied to you, if you look at the top of the 20 screen, also on 31 March. He's addressed it to 21 Jim McEwan, and says: 22 "Jim, my view is that we need to: a) confirm the 23 agreements made with SDS on how the differences between 24 V26 and V28 will be dealt with eg where and how they 25 have agreed to pull back those dates. b) identify the 140 1 impact of these mitigations and any unmitigated changes 2 from V26 on the BBS critical path. This presumably 3 shows that their critical path is unaffected. Then 4 agree this position with BBS. c) include the agreed 5 SDS mitigations in the Programme Schedule. 6 This is I think the best that we can do to pin BBS 7 and SDS down on this issue." 8 Did you have any discussions regarding that or do 9 anything in response to that? 10 A. I don't recall any, no. 11 Q. Did you have any involvement in the drafting of Part 4 12 of the Schedule in response to this? 13 A. No, none. 14 Q. I think you say in your statement that you did have an 15 involvement in the close report, the documentation that 16 was to be submitted? 17 A. Yes, I did. 18 Q. Could you look, please, with me at a document 19 TIE00020436. 20 You can see this is an email dated 15 January 2008 21 from you to various of your colleagues within tie. 22 A. Yes. That's correct. 23 Q. We note that: 24 "For those who have the task of drafting sections 25 for the Close Report, here are a few thoughts which 141 1 might help the process. The comments below are 2 necessarily general and I'd ask you to apply them in 3 common sense terms to your areas of responsibility." 4 Then: 5 "The purpose of the Report is to provide 6 a comprehensive view of all important aspects of the 7 work done to support Financial Close. The recipients 8 will be the Tram Project Board, TEL Board, tie Board and 9 CEC officials (for use, as they wish, to support their 10 own internal reporting). The drafting can assume prior 11 knowledge of the subject matter to a reasonable 12 degree - as a benchmark consider what would be known to 13 members of the Boards who have regularly attended Board 14 meetings over the last year or so. The underlying 15 principles, objectives and history do not need to be 16 spelled out in great detail. Brevity is our friend and 17 guide here. 18 The focus is on the final/current position, but it 19 is important that material changes from the position 20 reached as of 20 December 2007 are explained and 21 justified." 22 In terms of the recipients of this paper, it was 23 obviously widely disseminated, going to the Tram Project 24 Board, tie, TEL and the Council? 25 A. Yes. 142 1 Q. What use was it seen that the Tram Project Board would 2 be making of this paper? 3 A. I think in terms of the governance hierarchy, they would 4 be almost the first port of call. That was the pivotal 5 part of the governance model. So as iterations of the 6 report emerged, they would go to the Tram Project Board 7 initially to gather views and have questions raised and 8 issues addressed. 9 Q. Is that the Tram Project Board would have a hand in 10 finalising the terms of these documents making up the 11 report? 12 A. In the sense that they may -- members of the TPB may ask 13 questions which resulted in amendments being made to the 14 report to accommodate the questions they asked. 15 Q. It's just that if the purpose of the report as noted 16 here is to provide a comprehensive view of all important 17 aspects, I was wondering why the Tram Project Board of 18 all bodies has to be provided with the report on the 19 important aspects? 20 A. Well, I think it was just as I say, they were -- the 21 Board was the pivotal element in the governance model. 22 So it seemed logical that they would see the documents 23 as they were produced. 24 Q. The TEL Board would presumably need to see it in order 25 to make a decision that they wished to proceed? 143 1 A. Indeed, and recommend, I think, to the Council that that 2 was the right course of action. 3 Q. And the tie Board also, would have a responsibility to 4 consider it and recommend whether or not to proceed? 5 A. Indeed, yes. 6 Q. You will be aware that there was a resolution at the end 7 of January that a sub-committee would be formed, 8 consisting of Willie Gallagher, Neil Renilson and David 9 Mackay, which would be responsible for making the 10 representations ultimately to proceed with the 11 contracts? 12 A. I think that's correct, yes. 13 Q. What reliance did the Council place on these documents? 14 A. Well, the objective was to provide the Council with 15 a comprehensive and coherent set of documents to allow 16 them to assess whether to proceed in their own right, 17 whether or not there was a recommendation from TEL, tie 18 and the TPB. 19 Q. So it was a sort of second string; in addition to the 20 report that would come from TEL and/or tie, they would 21 have this set of close documentation coming to them? 22 A. Yes, and quite deliberately, to make sure that the same 23 documentation was available to all of the key parties. 24 Q. It might be said that the Council didn't really need 25 these close reports because they had been involved in 144 1 the contract throughout. What would your response be to 2 that? 3 A. I wouldn't agree with that in the sense that -- I mean, 4 it's a judgement call, but my feeling was there was -- it 5 was good discipline to bring all these strands together 6 in one set of coherent documents. Because it was 7 a complex process, and there had been a number of twists 8 and turns. You could, if you were the Council, take the 9 view that if TEL had concluded it was the right thing to 10 do, then they may have relied on that recommendation. 11 But despite the -- and you're right, despite the 12 close involvement of -- the Council's lawyers had with 13 the legal process, it still felt like the right thing to 14 do to provide them with the documents as well. 15 Q. But on any view, you expected and anticipated that they 16 would rely on it to help inform their decision-making? 17 A. Their own decision, yes. 18 CHAIR OF THE INQUIRY: You said that you -- that the Council 19 should be allowed to assess whether to proceed in their 20 own right. So did you then see the Council as being 21 separate from the other organisations such as tie, TEL 22 and what have you? 23 A. Yes, I think -- I mean, they are obviously legally a 24 separate entity, had their own separate governance and 25 decision-making processes to adhere to. 145 1 CHAIR OF THE INQUIRY: So in that respect would you have 2 expected them to have undertaken their own 3 investigations to some extent before authorising the 4 signature of the contract? 5 A. Yes, and I think the level of involvement was such that 6 they had -- Council officials had access to all of the 7 information that was being compiled in these reports as 8 it was developed. So in that sense that would be the 9 process that I understood they would have undergone. 10 MR LAKE: Could we look at an email from you with reference 11 CEC01338846. 12 This is an email from you. It's dated 12 May. It's 13 addressed to principally people within the Council, 14 Council officers, but copied to Andrew Fitchie and 15 various of your colleagues within tie and TEL? 16 A. Indeed, yes. 17 Q. Whereas the previous one was dated 15 January, which 18 might be seen as the start of the close process, this is 19 12 May, which I think was the day before contract 20 signature? 21 A. I think that's correct, yes. 22 Q. So this is the very end of the process, the final 23 versions? 24 A. Yes. 25 Q. What had your involvement been in drafting the various 146 1 documents which we can see as attachments here which 2 made up the close reports? 3 A. Mostly compiling reports or sections of the report from 4 others in the team who were the subject matter experts, 5 particularly the team who were negotiating the contract, 6 which is where the heart really of these documents lay. 7 There were a number of issues debated over the 8 period which I can't recall specifics, but I'm sure 9 there would have been -- I would have been involved in 10 those discussions. But it was more of a co-ordination 11 role to make sure that we brought together all of the 12 information that I believed the various governance 13 bodies and the Council were looking for. 14 Q. But you did contribute to the drafting or redrafting of 15 these documents to get them into their final form? 16 A. Yes. In, I would say, limited ways, where it was more 17 a clarification, or if something didn't make sense to 18 me, and it wasn't, for example, a technical or legal 19 issue, where we simply rely on the experts, but in that 20 case I would draft a change. But I would expect in 21 every one of those situations, the various iterations 22 would go back to original authors in a tracked change 23 format, so that they could see exactly what had been 24 adapted, and form their own view on whether it was 25 accurate or not. 147 1 Q. In addition to these documents you can see as the 2 attachments here, I think there was also a letter and 3 risk matrix to be provided by DLA? 4 A. Yes. 5 Q. Now, you had a hand in revising that as well? 6 A. Yes. The objective, I think, in -- for both DLA and tie 7 was to produce a coherent set of documents for the 8 governance bodies and the Council who would, I think, 9 quite rightly expect that if there was a difference of 10 view between tie and DLA, that we'd taken steps to 11 resolve it. 12 If there wasn't a resolution, then it could have 13 been reported. There's two different views on the 14 issue, although I don't recall any situations of that 15 type. So the revisals of the respective reports were 16 intended to make the two sets of documents 17 complementary, and I think it's -- well, I know it's 18 also fair to say that Andrew made a number of valuable 19 amendments to the -- tie's side of the documents as 20 well. So it worked quite well. 21 Q. He redrafted things that had been prepared within tie? 22 A. Yes. He reviewed and commented and revised as necessary 23 from a legal point of view. 24 Q. In addition to that, there was a report prepared to go 25 to the councillors, and again you had a hand in 148 1 suggested redrafts of that? 2 A. Yes. I think from time to time, Council officials asked 3 that either myself or others in tie would review and 4 comment on their draft reports, and the objective 5 generally was to make sure this, the report, reflected 6 what tie knew and wasn't at odds with tie's views, so 7 that what the guys were reporting to either senior 8 directors in the Council or elected members was 9 consistent all the way up and down the line. 10 Q. I would like to look at some of the attachments to this 11 email. 12 The first one I would like to look at is reference 13 CEC01338847. 14 You can see from the heading, this is described as 15 "FINANCIAL CLOSE PROCESS AND RECORD OF RECENT EVENTS"? 16 A. Yes, I do. 17 Q. What was your involvement in this report? 18 A. I think I probably drafted that document. 19 Q. If we can look at the paragraphs to the foot of the 20 screen at the moment: 21 "As was noted in the recent Council Report, 22 underlying costs have been subject to the firming up of 23 provisional prices to fixed sums, currency fluctuations 24 and the crystallisation of the risk transfer to the 25 private sector as described in project's Final Business 149 1 Case." 2 Just pausing there, what did you mean by "the 3 crystallisation of the risk transfer to the private 4 sector"? 5 A. I think it was to do with the fact that a number of the 6 elements that had been in the risk provision in the 7 earlier documents had been negotiated, and therefore 8 crystallised into prices within the capital cost as 9 opposed to remaining in the risk provision. 10 Q. You weren't involved in the contract negotiation. From 11 whom were you getting the information underlying these 12 statements? 13 A. It would be directly from the tie commercial team led by 14 Steven Bell and others like Dennis Murray, 15 Stewart McGarrity and other guys. 16 Q. So can you recall what they had said to you about risk 17 transfer and what had been achieved? 18 A. Not specifically, I'm afraid, but the general drift of 19 the conversations over a quite intensive two-month 20 period was just as I mentioned, that issues had been 21 firmed up, recognised as firm costs as opposed to 22 provisions or contingencies, and therefore the risk 23 transfer within the capital budget had moved. 24 Q. I would then like to look at a different document. This 25 one is referenced -- it's another attachment to your 150 1 email. CEC01338851. This is headed "REPORT ON INFRACO 2 CONTRACT SUITE". Is this the document that you said 3 was -- you might have described as a DLA report, but was 4 principally the one -- was the one principally drafted 5 within tie? 6 A. It was, yes. 7 Q. If you look to the foot of this first page, you see 8 there is a paragraph that begins "In broad terms". It 9 says: 10 "In broad terms, the principal pillars of the ETN 11 contract suite in terms of scope and risk transfer have 12 not changed materially since the approval of the Final 13 Business Case in October 2007." 14 A. I see that, yes. 15 Q. "The process of negotiation and quality control has 16 operated effectively to ensure the final contract terms 17 are robust and that where risk allocation has altered, 18 this has been adequately reflected in suitable 19 commercial compromises." 20 Now, once again, did you draft this? 21 A. I don't recall drafting it. It was a document that was 22 initially, I think, embedded in one of the early drafts 23 of the close report under tie's jurisdiction, but where 24 those words came from, I cannot comment. 25 Q. Did you undertake any exercise to verify the statement 151 1 that the principal pillars in terms of scope and risk 2 transfer hadn't changed materially since October 2007? 3 A. I would say no in the sense of any detailed 4 investigation, but it didn't strike me as being out of 5 kilter with the way the conversations had developed 6 within tie over that two-month period or so. 7 Q. By the time you got to contract close, I think you said 8 you knew about Part 4 of the Schedule? 9 A. Yes. 10 Q. You knew about the issue of the design programme? 11 A. Yes. 12 Q. Which meant that any change to the design programme, 13 Design Delivery Programme was going to be at tie's risk? 14 A. I'm not sure I focused on that specifically, but I do 15 recall that there was a provision in the risk provision 16 for that situation. So from my point of view, I suppose 17 I was looking at the aggregate of the capital costs and 18 the risk provision, and the discussions that I can 19 recall in general terms were that those issues were 20 examined very closely by the tie team, including the 21 calculation of the risk provision. 22 Q. This is -- sorry. 23 A. To finish off, I was just going to say that that was the 24 extent of the verification that I think I would have 25 undertaken. 152 1 Q. But this statement is not made in terms of the total 2 cost in terms of the capital cost plus risk provision. 3 It's quite specifically -- in saying that the principal 4 pillars in terms of risk transfer have not changed 5 materially since October. 6 A. Yes. I see that. 7 Q. Now, on any view the risk for the design delivery 8 programme, there had been a risk transfer, and that had 9 transferred to tie? 10 A. Yes, and I think -- I mean, this is one part of this 11 document. I couldn't, top of the head, tell you where 12 it's documented, but I think the detail behind all of 13 that is set out in the suite of close report documents 14 in quite some detail. 15 So -- 16 Q. There's reference, which we will come to, to the fact 17 that there could be a Notified Departure if any of the 18 assumptions turns out not to be correct; is that what 19 you're thinking of? 20 A. Yes. That's probably the main one, but I think there's 21 also a -- well, I don't think, I know there is a section 22 of this document that covered the whole design 23 management process and the steps that had been put in 24 place to control and manage the risks. So that was 25 really what I was thinking about. 153 1 Q. Okay. We will see if we can find that. 2 If we could go though, firstly, to page 4, if you 3 could highlight the heading "Price" and the paragraph 4 underneath it. 5 Do you see the note: 6 "A contract price has been agreed. The detailed 7 contract price and pricing schedules for carrying out 8 the Infraco Works is contained in Schedules to the 9 Infraco Contract. A substantial portion of the Contract 10 Price is agreed on a lump sum fixed price basis. There 11 are certain work elements that cannot be definitively 12 concluded in price and therefore Provisional Sums are 13 included. A number of core pricing and programming 14 assumptions have been agreed as the basis for the 15 Contract Price. If these do not hold, Infraco is 16 entitled to a price and programme variation known as 17 'Notified Departure'." 18 What did you understand at this time as the Notified 19 Departure mechanism? 20 A. If the terms of the contract were different from the 21 practical implementation of the contract, under the 22 definition that this was due to tie or potentially the 23 Council, then that would be a Notified Departure that 24 would give Infraco a right to some sort of price 25 adjustment to be calculated at the time. 154 1 Q. Obviously those Pricing Assumptions came to be very 2 important in terms of the implementation of the works in 3 the period that followed? 4 A. I understand so, yes, based on what emerged in some of 5 the disputes. 6 Q. And they gave rise to very substantial claims for 7 additional money? 8 A. As I understand it, yes. 9 Q. Now, we've seen the statement on the first page that 10 there's been no transfer of risk, and in this paragraph 11 on screen, reference to a lump sum fixed price. Just 12 the mention of the possibility of a Notified Departure. 13 Do you think that gives any indication of the 14 potential scale of changes by way of Notified Departure 15 and what it could mean for contract price? 16 A. It doesn't give any indication of the scale. My 17 recollection is that the known Notified Departure which 18 is the one you referred to earlier in terms of the SDS 19 programme, I think, that there was a quantified element 20 of the risk provision to address that, and aside from 21 that specific, I wasn't aware that there were any other 22 Notified Departures known about as opposed to it was 23 always a possibility if conditions changed in the 24 future. 25 Q. This obviously has a bearing upon the price, which is a 155 1 very important matter in terms of the affordability of 2 the project. 3 A. Indeed, yes. 4 Q. You had had an involvement throughout, and in issues of 5 finance, in relation to the project? 6 A. Yes. 7 Q. Did you consider Part 4 of the Schedule and the Notified 8 Departures to see what factors might influence price? 9 A. Only in a limited way. I can remember reviewing it. 10 I'm afraid I couldn't say exactly when, but the -- 11 I mean, first of all, in general terms, it didn't strike 12 me as unusual that assumptions would be embedded in 13 a contract. That itself is quite normal, albeit my 14 experience was in corporate transactions rather than 15 infrastructure. 16 And the feedback from the team was that these were 17 all negotiated elements where there was only a limited 18 exposure, or at least understood to be limited exposure, 19 and where there was known exposure, there was 20 a provision in the risk contingency provision to 21 accommodate it. 22 Q. One of the Pricing Assumptions concerned whether or not 23 the MUDFA works would be completed at the time the 24 Infraco works were started. Was any enquiry carried out 25 to establish what the state of the MUDFA works was, and 156 1 what the extent of the variance from the Pricing 2 Assumption would be? 3 A. I don't recall any investigation. My recollection is 4 that, having revised the programme, although I couldn't 5 honestly say when that was, the MUDFA programme, that 6 that revised programme at this stage was, so far as 7 I recall, being adhered to, and was reflected in the 8 programme that had been agreed with the Infraco. 9 In terms of a residual risk of delay, again, I think 10 I'm correct in saying that there was provision in the 11 risk contingency for that. 12 Q. But it would be clear, would it not, that at the time 13 the contract was signed, MUDFA works were not going to 14 be complete by the time the Infraco works got under way, 15 and therefore there would be another Notified Departure? 16 A. That wasn't my recollection. I won't say that wasn't 17 the case because I don't know, but my recollection was 18 that the timetable for the MUDFA completion had been 19 integrated into the Infraco programme in a way that 20 didn't create an obvious delay based on that programme 21 being adhered to. 22 Q. What was done to assess the extent to which the 23 assumptions might not hold true, and what liability 24 might flow from that? 25 A. By me only what I have described, which was a high level 157 1 review. Within the team, this was an area that was 2 discussed quite frequently, and my impression was that 3 that had been negotiated in quite some detail and then 4 probably revised, because I think this emerged from the 5 Wiesbaden discussion, and I think there were several 6 discussions beyond that to get to what was the final 7 form. 8 But beyond that, I couldn't add anything useful, I'm 9 afraid. 10 Q. Are you aware who undertook the drafting of this 11 paragraph we're looking at on the screen? 12 A. I'm afraid not. 13 Q. If you could look at another document, please, it's 14 reference -- again, it's an attachment to your email. 15 It's reference CEC01338853. 16 We can see this is headed "EDINBURGH TRAM PROJECT 17 REPORT ON TERMS OF FINANCIAL CLOSE ('CLOSE REPORT')"? 18 A. Yes, I do. 19 Q. Is this drafted by you? 20 A. No, I think this was the compilation of all of the 21 various sections that came together over give or take 22 a two-month period. 23 Q. I want to consider parts of that. Can we look at 24 page 4. If we look at the text under the table, it 25 notes: 158 1 "The increase in Base Costs for Infraco is as 2 a result of a negotiated position on a large number of 3 items including the contractual interfaces between the 4 Infraco, Tramco and SDS contracts and substantially 5 achieving the level of risk transfer to the private 6 sector anticipated by the procurement strategy. It also 7 reflects capital expenditure required on lifecycle 8 related costs including mobilisation of the maintenance 9 teams and acquisition of spare parts. 10 The increase in Base Costs for Infraco of 11 GBP17.8 million approximates closely with the allowance 12 which was made in the FBC for procurement stage risks ie 13 the increase in Base Costs which might have been 14 expected to achieve the level of price certainty and 15 risk transfer which has been achieved." 16 Now, the statements that were made like that, was 17 there any examination made of the contents of them and 18 to verify the basis on which they were made? 19 A. Not that I would have undertaken or was necessarily 20 aware of, but this sort of statement could only come 21 from the commercial team in tie who were negotiating 22 these things. So in that sense they would be the 23 people, I'm sure, that could shed light on it. 24 Q. If you were involved in compiling the reports and you 25 knew that they were going to be submitted to the Council 159 1 and TEL and tie and the Tram Project Board, what steps 2 were put in place to ensure that they were accurate? 3 A. Well, we had a process of review by various parties. 4 Each of the documents was recirculated following change 5 in tracked change form, as I have said, back to the 6 wider group, which included the people who would be 7 drafting these -- these sections. 8 And my recollection is that there was a roundup 9 review of all of the sections by a number of people 10 right at the end of the process, so that there were -- 11 from my point of view, quite an extensive process of 12 statement being drafted, revised, checked, further 13 statements being drafted, et cetera. So that by the 14 time they got to the final version, it had been subject 15 to pretty thorough review and checking by all of the 16 people who were involved. 17 Q. Sometimes if there's a lot of people involved, it's 18 difficult to identify anyone who is taking 19 responsibility for accuracy. Who was responsible for 20 accuracy? 21 A. I think you would have to say that was a team effort. 22 It was team responsibility to get the document into 23 shape because there were a number of strands that had to 24 come together from different parties. 25 So ultimately there's a formal responsibility on the 160 1 Board, but in terms of the practical delivery, it was 2 down to the team doing their individual jobs properly. 3 Q. Could we look over to the next page, please, page 5 of 4 the document. If we could look at the upper half of the 5 page. We see there: 6 "A simple reconciliation of the total Risk Allowance 7 for the project between FBC and Financial Close is ..." 8 It lists the risk allowance in the FBC, and at the 9 bottom, it has the risk allowance at financial close of 10 32 million, and it explains the various adjustments that 11 had been made to get from the 49 million to the 12 32.3 million? 13 A. Yes. 14 Q. The way it's presented here, it looks like it is the 15 product of detailed numerical analysis of risks. 16 A. I agree. That was my understanding as to what had been 17 done. 18 Q. Were you in fact aware that risks had been adjusted 19 manually simply to ensure that the final total came out 20 at something which could be fitted within the sums 21 approved by the Council? 22 A. No. 23 Q. Could we look at an email, please, which is CEC01295328. 24 Look at the lower half of the screen first. You can 25 see this is an email from you to Steven Bell, 161 1 Dennis Murray, Susan Clark, Hamish Sheppard and 2 Mark Hamill, also copied to Stewart McGarrity and 3 Willie Gallagher. It's entitled "Risk contingency"? 4 A. Indeed, yes. 5 Q. It's in fact dated 15 May, by which time the contract 6 had been -- that was the second day on which it was 7 going to be signed. It was signed, I think, on the 14th 8 and 15th? 9 A. My recollection is it had been signed on the 14th. 10 Q. I think it's signed on the 13th and 14th. So this would 11 have been the day after. 12 Is it your recollection that papers continued or 13 information continued to be supplied to the Council 14 after the execution of the contract? 15 A. I'm not -- I don't recall papers being supplied to the 16 Council possibly other than tidying up certain areas, 17 but certainly nothing substantive. 18 Q. If you look at what you say in your email: 19 "After all the twists and turns of the last 20 fortnight, we need to arrive at a final form settled 21 base cost and risk contingency. I think it's important 22 that the baseline is crystal before change orders start 23 to appear from all quarters." 24 You seem to be understanding there that there are 25 going to be change orders coming in from all quarters? 162 1 A. Yes. I think the feeling at that time was that the 2 process to get to financial close had been so fraught 3 that the prospect of further debates with a contractor 4 was a real one. 5 Q. Change Orders would be formal contractual documents 6 implementing essentially requests for more money and 7 more time on the contract? 8 A. That would be -- what that was driving at, yes. 9 Q. So you knew you were about to get hit with those? 10 A. No, I think it was more a general feeling that the 11 relationship was not good. And there was a feeling that 12 the actions taken by BBS in the negotiations indicated 13 a pretty tough commercial approach. 14 So this was about -- I read it quickly, but this was 15 about making sure tie had the baseline absolutely clear 16 in its own mind before there was any debate if it did 17 ensue on any changes. 18 Q. You go on to say: 19 "I suggest a discussion on Monday with Stewart back, 20 commando knife between the teeth. Say 11.30 for an hour 21 if that suits." 22 We see that took place. At the second-last 23 paragraph of the email, you note that: 24 "In both cases there are options as to how the 25 changes to base and risk are reflected, so long as the 163 1 totals in each case return to the totals notified to the 2 Council PSC [Policy and Strategy Committee] on 13 May 3 (480.8 million and GBP31.2 million)." 4 That's you indicating, are you not, that it doesn't 5 matter what we do, just as long as we bring up the final 6 sum correctly? 7 A. Yes. However, I think the underlying point here was 8 that in the last few days, there were further 9 negotiations that affected both the capital cost and the 10 risk provision, and there were a number of judgements in 11 there to arrive at the final figures, which I think from 12 memory were documented in the document we looked at 13 earlier, the record of events document. 14 Q. The recent events document? 15 A. Yes. I may be wrong, but I'm sure it was documented in 16 quite some detail in one of those. 17 And my point here was that we can't be going back to 18 the Council with different numbers because there's no 19 reason why the numbers should be different. So we need 20 to be making sure that the documentation is responsive 21 to the reporting that's in place. 22 But nonetheless, that the detail is properly 23 formulated in advance of any future debate. 24 So I don't read it as we had to come back to 25 specific number. It was because there were pluses and 164 1 minuses in both the risk provision and in the capital 2 cost, and it wouldn't have been doing the Council much 3 use if we'd come up with a different allocation when it 4 was entirely judgmental. 5 Q. I should have taken you perhaps, when looking at the 6 close and recent events, that was the document, go back 7 to it for a moment, CEC01338847. 8 You provide quite a history of this: in essence, 9 what happened was that there was a demand for additional 10 monies made right at the end of April and to the start 11 of May by the consortium, just as you are about to 12 conclude the contracts? 13 A. That's correct, yes. 14 Q. I think this paper narrates how that was dealt with and 15 what negotiations took place. 16 If we look at page 4 of this, and look at the second 17 half of the screen, the lower half, you talk about -- if 18 we scroll up just a little. In conclusion to the 19 negotiations, you note: 20 "… negotiations were conducted on 7, 8 and 9 May and 21 an acceptable conclusion reached." 22 If you read on, we then see the financial 23 amendments, that the contractor was given an 24 incentivisation bonus, tie would underwrite 25 demobilisation costs: 165 1 "... and tie agreed to waive its interest in 2 a residual value for settling uninsured losses." 3 Then further down: 4 "The incentivisation bonus should support programme 5 adherence. In return for the financial amendments, tie 6 has secured a range of improvements to the contract 7 terms and risk profile." 8 Then it sets out the elements of risk that are 9 relevant to the improved position. I don't think it's 10 saying these are the sums saved, but these are the 11 elements relevant to the contract close terms; is that 12 correct? 13 A. Yes, I think those would all be individual components 14 within the risk provision. 15 Q. If we can turn then to the email we were looking at, 16 CEC01295328, and we look at the upper half of it this 17 time, this is an email from Stewart McGarrity to you, 18 Steven Bell, Dennis Murray, Susan Clark, Hamish Sheppard 19 and Mark Hamill. He says: 20 "Following our meeting today ..." 21 Which seems to be the meeting that you refer to in 22 your email: 23 "... the attached wee summary lays out a simple 24 recon of how I think we get from the last reported 25 estimate, GBP508 million, to our final control budget, 166 1 GBP512 million, including the SDS increases." 2 Just to pause, the figure of GBP512 million is the 3 one the Council had approved at the Policy and Strategy 4 Committee on 13 May? 5 A. I believe so, yes. 6 Q. "This is consistent with Graeme's paper in respect of 7 Infraco except that the risk allowance is reduced by 8 GBP1.1 million to fund the SDS increases." 9 It says you had provided a paper with how the 10 Infraco price might be made up. 11 A. Sorry? 12 Q. Had you provided a paper on how the Infraco risk would 13 be made up? 14 A. I think the paper would probably be that record of 15 events, but I do recall there was an exchange of emails 16 which covered the detailed components of the movement 17 from 508 to 512. 18 Q. You see there Stewart McGarrity refers to a wee summary 19 of the reconciliation between the two things. If we 20 could look at document CEC01295329. It's a spreadsheet. 21 We can see in terms of the column headings here, one of 22 them is AFC P1, which would be the anticipated final 23 cost. We can see the total there of a little over 24 GBP508 million? 25 A. Yes. 167 1 Q. Immediately to the right of that, we have a column 2 headed "PCB", which is project control budget, with 3 a total of GBP512 million? 4 A. Yes. 5 Q. Then in terms of the deltas, that's indicating where 6 there are variances between the two figures in order to 7 reach a particular conclusion? 8 A. Yes. I see that. 9 Q. Now, we can see certain increases in the Infraco price 10 of 3.45 million. And an increase in design costs of 11 GBP2.5 million or thereabouts? 12 A. Indeed, yes. 13 Q. Offset against that is a reduction of GBP1.9 million, 14 reduction in the risk allowance? 15 A. Yes. 16 Q. To the right of that, we can see that's been split into 17 GBP800,000 reduction in respect of Infraco and 18 a GBP1.1 million reduction in respect of the SDS? 19 A. Yes. 20 Q. Were you involved in discussion of these figures, the 21 reductions which had been made to the risk allowance? 22 A. I don't recall. We -- we did have discussions on the 23 components of the movement from 508 million to 512 prior 24 to financial close. And that was based on negotiations, 25 I think, led by Steven Bell, with the Infraco people, 168 1 which produced a range of components that were pluses 2 and minuses, and I think some of these reflect those 3 discussions in the last few days before financial close. 4 But I do not think I could comment on how that was 5 finally translated into the detailed baseline 6 information. 7 Q. In the email from Mr McGarrity, the impression is given 8 that this table, the reconciliation that he attaches is 9 the results of the meeting that had taken place that 10 day. 11 A. Yes. I agree that's a logical interpretation, but I'm 12 afraid I just can't recall being involved in the 13 spreadsheet or the detailed allocations. 14 Q. If we go back to that email, it's reference CEC01295328. 15 Look at the upper half. You can see that after the part 16 which I have read, Stewart McGarrity goes on to say: 17 "Mark will adjust the QRA accordingly." 18 What did you understand that was going to involve? 19 A. Well, if the -- some of these elements that had been 20 negotiated at the final knockings changed the risk 21 provision, the QRA assumptions would presumably change 22 also. And that would result in a different QRA in line 23 with the anticipated outcome. 24 Q. QRA is a process or software by which by putting in 25 various risk figures, it provides an output as the name 169 1 suggests, a quantification of the risk? 2 A. I have no knowledge of how the model works, but that was 3 my understanding of the principle of it. 4 Q. What we see here is that there has been a meeting in 5 which you participated, in which essentially it was 6 agreed what the risk figure would be, and then the QRA 7 is going to be adjusted to make it fit that? 8 A. That's one reading. I think the underlying point though 9 was that a number of the elements that had been 10 discussed as part of that final negotiation changed the 11 risk parameters, and it's difficult to know what was in 12 my mind then, but I would be quite confident it was to 13 do with reflecting those different assumptions in the 14 QRA, and then the expectation would be that the 15 provision would be a different number. 16 Q. The Council might have expected that a QRA would be the 17 outcome of a risk analysis, rather than people sitting 18 round deciding what the risk figure should be. And then 19 feeding that back into the QRA? 20 A. Yes, and I think once different assumptions were 21 installed in the model, my understanding would be you 22 would end up with a different outcome in the bottom 23 right-hand corner. And that might be slightly different 24 from the anticipated number, but materially similar to 25 what was anticipated. 170 1 Q. Could you look at another email, please. It's reference 2 CEC01288043. The last email we looked at from 3 Stewart McGarrity was dated 19 May, and said: 4 "Mark will adjust the QRA accordingly." 5 This is from Mark Hamill, who was the risk and 6 assurance manager, as we can see, addressed to various 7 people in tie, but not you; in which we see that one 8 thing, if we look at the second paragraph -- I'll start 9 from the first paragraph: 10 "Please see attached spreadsheet which I have 11 updated following our meeting last week. As agreed Risk 12 ID 343 which allows for delays has been reduced by 13 GBP1.3 million, which means we now have GBP5.187 million 14 against this risk and, accordingly, the overall risk 15 allocation has reduced by GBP1.3 million to 16 GBP26.637 million. 17 "One thing which we all need to be aware of is that 18 it is not possible to reduce the value of one risk in 19 the QRA without affecting all the others. This is 20 because the P80 allocation is driven by the total mean 21 sum. Therefore, in order to get round this problem, 22 I have basically 'pockled' the spreadsheet and hard- 23 entered some values. This solves the problem and helps 24 us get the final result past CEC as I doubt they will 25 notice what I have done." 171 1 Now, were you made aware of this at the time? 2 A. No. 3 Q. This isn't what you were describing, is it? It's not 4 changing the assumptions. It's putting in the result 5 that you want it to get? 6 A. Yes. It looks that way, and the language doesn't look 7 too clever either. 8 Q. Because even if a decision had been made as to what -- 9 an assessment had been made as to what the risk figure 10 should be, by entering it into the QRA spreadsheet, the 11 impression is given that it is the output of QRA? 12 A. Yes, and it becomes self-fulfilling almost, rather than 13 computed number. 14 Q. But even back to the -- meeting that you'd had with 15 Stewart McGarrity, it was always clear that this was not 16 going to be the natural outcome of QRA. It was a result 17 that you had selected and the question was how to make 18 the QRA fit. 19 A. In my mind it was clear from the headline numbers that 20 had been supplied as part of the final negotiation where 21 the pluses and minuses should fall. 22 Now, I don't know how the QRA model works, but my 23 assumption would be that if you revised those 24 assumptions you would -- without hard coding, the model 25 would produce a different number. And the idea was that 172 1 that number should be similar -- one would anticipate 2 that number should be similar to the one that was agreed 3 just prior to financial close. 4 But I suppose in a sense the model would validate 5 the estimated number that had been produced immediately 6 prior to financial close. 7 Q. Well, it says the model isn't doing anything. The model 8 is being overwritten with the correct result? 9 A. Sorry, my comment was that had the model had been simply 10 run as a normal exercise, it would have produced the 11 number that one would expect would be similar to the 12 provision that was arrived at, using the kind of 13 headline numbers prior to financial close. 14 Q. I would like to go back to the close report. It's 15 reference CEC01338853. 16 Now, we will go to page 5 just to see where we left 17 off. We've just been looking at those figures, the 18 analysis of risk allowance in the upper half of the 19 screen. Can we go to page 7 now, please. 20 There's a heading here at the top of the page, 21 "TRAMCO relationship with INFRACO Programme". The first 22 sentence of that notes: 23 "The TRAMCO design ... has been fully interfaced 24 with the Infraco programme." 25 But it goes on to talk about: 173 1 "Programme version V31 will be contained within the 2 SDS Novation Agreement. Any variance between V26 and 3 V31 which has an impact on the BBS programme will be 4 dealt with through the contract change process." 5 Now, that's actually not a matter of Tramco, is it? 6 That's a matter of the SDS design and the Design 7 Delivery Programme? 8 A. That looks to be the case, yes. 9 Q. What this is noting is that while the contract -- the 10 Infraco contract assumes V26 of the Design Delivery 11 Programme applies, in fact it's going to be V31 in terms 12 of the Novation Agreement? 13 A. That's how I would read that, yes. 14 Q. So this is the point that there was going to be an 15 immediate Notified Departure? 16 A. I believe so, yes. 17 Q. If we then look forward through this -- if we go to 18 page 25, we can see the heading of this section at the 19 top of the page is "Risk assessment of in-process and 20 provisional arrangements". If we go down the page to 21 see heading 8.2, it's "price certainty achieved". The 22 second paragraph there is: 23 "The Infraco price of GBP233.5 million comprises 24 GBP227 million of firm costs; less GBP12.9 million of 25 Value Engineering initiatives ... plus GBP19.4 million 174 1 of items which remain provisional at financial close." 2 The provisional items are the ones that would be 3 regarded as subject to change, and the 227 would be the 4 firm costs -- as it says firm prices have been given. 5 A. That would be my reading, yes. 6 Q. Then go over the page. We can see at the top of the 7 page the discussion of the various provisional items, 8 which I think are items where the design wasn't there, 9 and there's been discussion of the Picardy Place 10 junction we see mentioned there, where it simply wasn't 11 known what the Council wanted to have happen? 12 A. That's the case, yes. 13 Q. Then in the heading below it, 8.3, "Infraco price basis 14 and exclusions", it says: 15 "The Infraco price is based upon the Employer's 16 Requirements which have been in turn subject to a 17 thorough quality assurance ... significant areas where 18 post contract alignment of the SDS ... will be required. 19 Crucially, the price includes for normal design 20 development (through to the completion of the consents 21 and approvals process - see below) meaning the 22 evolution of design to construction stage and excluding 23 changes of design principle shape form and outline 24 specification as per the Employer's Requirements. The 25 responsibility for consents and approvals is further 175 1 considered below." 2 Now, it notes that it's crucial that the price 3 includes for normal design development. What enquiries 4 had been carried out to check that that was the case? 5 A. Well, that language, I think, was one of the elements of 6 Schedule Part 4, and it surfaced obviously after 7 financial close in a number of the disputes. But in 8 terms of what that meant, my reading -- and sorry if 9 this isn't the question you asked, but my reading is for 10 normal design development, which would be understood by 11 both parties that was a firm price, but if design 12 development was not normal, then it wouldn't be a firm 13 price, and then there were consents and approvals 14 dimensions over and above. 15 Q. If it was suggested to you that tie management had been 16 advised by Andrew Fitchie that this was not the case, 17 and that the design risk had not been transferred, what 18 would your response be? 19 A. That wasn't my understanding at the time. 20 Q. Had you given advice to you to that effect? 21 A. I don't recall any, no. 22 Q. Do you think it's likely that if it had been different, 23 you would recall it? 24 A. I think I would have recalled it, yes. 25 Q. If we could look, please, at page 28. This is under the 176 1 heading, "QRA and Risk Allowance". We can see the third 2 paragraph says: 3 "The only material change in the Risk Allocation 4 Matrices between Preferred Bidder stage and the position 5 at Financial Close is in respect of the construction 6 programme costs associated with any delay by SDS in 7 delivery of remaining design submissions into the 8 consents and approvals process beyond Financial Close." 9 Once again, we would have to ask, standing the fact 10 that the MUDFA works were late, and there's a Pricing 11 Assumption as to completion of MUDFA works, was it not 12 clear that that was another risk transfer that was going 13 to take place? 14 A. I can only go back to the explanation I gave earlier, 15 which is my understanding was that the programmes had 16 been interfaced based on an up-to-date version of the 17 MUDFA programme such that there wasn't a risk of 18 a material change in the cost of the project. 19 Again, I think there was provision for some degree 20 of slippage in the risk provision. 21 Q. If there was a collective responsibility for these 22 reports going out to the Council, how was the accuracy 23 or otherwise of these statements verified? What checks 24 were made? 25 A. Well, the documents were circulated -- I should say 177 1 there's probably, I don't know, maybe ten or 11 2 iterations of these documents over the period because of 3 the various changes arising from the negotiations. And 4 at each stage that changes were made, they were reviewed 5 or sent back to the team to review and confirm. And 6 again, as I think I mentioned, there was a quality 7 control process managed by Susan Clark, if I recall 8 correctly, asking people to read sections towards the 9 end of the process to make sure that they were happy 10 with them. 11 Q. Could you look at page 33 of this document. You see 12 here this is the appendix to the close report with the 13 heading "SDS - DELIVERY AND CONSENT RISK MANAGEMENT". 14 A. I see that, yes. 15 Q. This section begins: 16 "Negotiations have taken place over a lengthy period 17 of time with the objective of defining a process and set 18 of contractual terms which will enable tie and CEC to 19 manage the risks arising from the overlapping design and 20 construction periods. This problem was not anticipated 21 when the SDS contract was concluded in 2005." 22 I refer to this simply to identify, is this the 23 section of the report which considers the difficulties 24 that have arisen out of late provision of design? 25 A. Yes, or it addresses the management process installed to 178 1 manage that difficulty. 2 Q. We've seen a number of references in these documents to 3 fixed price, the contract being a fixed price one. Can 4 we look at an email from you, please. It is reference 5 CEC01624078. Look at the lower half of the screen. 6 I'm going back in time here to something that was 7 said at 12 October 2007 in an email from you to 8 Willie Gallagher, Matthew Crosse, Geoff Gilbert and 9 Colin McLauchlan. You say: 10 "An area where it might be helpful to have more high 11 level clarity is the extent to which 'fixed price' means 12 'fixed price'. We don't need to rehearse all of the 13 risk transfer issues, but my concern is that the 14 impending lay audience will assume fixed means fixed 15 with no risk. We know the circumstances in which this 16 might not be true and we should have a statement ready 17 which explains fairly what the position is without 18 involving a detailed risk analysis. 19 Any views?" 20 We can see further up that chain the next email is 21 actually another one from you. Did you get a response 22 from any of the people you sent that to? 23 A. I don't recall specific emails, but I'm pretty confident 24 there was further dialogue on what the components were 25 and what fixed price, which is in some respects 179 1 shorthand obviously, what that actually meant in advance 2 of using that sort of language for "a lay audience". 3 Q. Because you make the very good point that a lay audience 4 might have an understanding that fixed price means it 5 simply can't change, but that is not what it means. It 6 can and very often does change. 7 A. Yes, and again, based on experience elsewhere, it's -- 8 I would say it's very rare that you have an absolutely 9 fixed price come hell or high water. There are always 10 components and conditions in contracts that can lead to 11 change. So the point here was to be clear with the 12 reporting what was fixed and what -- you know, if there 13 was an absolutely fixed component, let's spell that out, 14 but also what are the variable pieces. 15 Q. Were you happy that the terms of the close report gave 16 an explanation of fixed price that would be understood 17 by its intended audience? 18 A. I think overall, yes. The two main components that, to 19 my knowledge, could lead or could have led to changes in 20 the price were the -- firstly, the provisional sums, 21 where I think it was set out that there were estimates 22 of these matters which were regarded as good estimates, 23 and secondly, the Pricing Assumptions whereby if the 24 Pricing Assumptions did not hold, and conceivably other 25 assumptions and conditions in the contract, then there 180 1 could have been a change in the price. I think that was 2 reasonably clear in the document. 3 Q. There is undoubtedly reference to Notified Departures 4 and Pricing Assumptions, but do you really think 5 an indication is given of the potential risk that lies 6 there? 7 A. Well, the -- my understanding and my recollection was 8 that those assumptions were regarded as fairly benign, 9 other than one or two where there was a risk contingency 10 booked and that was disclosed. 11 So the question would be: what could go wrong beyond 12 those provisions that had been disclosed and quantified? 13 And my recollection is that the view within tie was that 14 those were assumptions that could hold good, and 15 therefore the risk, the threat of the cost moving 16 materially wasn't significant. 17 Q. Who had formed the view that these were assumptions that 18 could hold good? 19 A. I think a combination of the commercial team who were in 20 negotiation with BBS, and supported by advice from DLA. 21 Q. Perhaps I should have asked you earlier. When you talk 22 about the commercial team involved in negotiation, who 23 made up that team? 24 A. The main people would be Steven Bell, Matthew Crosse, 25 Geoff Gilbert, Dennis Murray and Stewart McGarrity, 181 1 I think, were the main players. 2 MR LAKE: My Lord, I'm going to move on to another document. 3 CHAIR OF THE INQUIRY: Yes. How are we placed for finishing 4 today? 5 MR LAKE: We will finish, I would guess, after another 15 to 6 20 minutes. 7 CHAIR OF THE INQUIRY: We will have another break for 8 15 minutes. We'll resume again at 3.25. 9 A. Thank you, my Lord. 10 (3.09 pm) 11 (A short break) 12 (3.26 pm) 13 CHAIR OF THE INQUIRY: You're still under oath, Mr Bissett. 14 MR LAKE: Thank you, my Lord. 15 Mr Gilbert, can I just return -- if we could just 16 return to a document CEC01338853. It's the close 17 report. 18 CHAIR OF THE INQUIRY: Mr Lake, I think you wrongly called 19 the witness Mr Gilbert. 20 MR LAKE: Did I? Sorry, I was looking at an email with his 21 name on it. I'm sorry. 22 We can see this is a document we looked at a few 23 moments ago. Could we turn to page 5, please. We 24 looked at these risk figures just before the break. We 25 saw that the total was brought out at 32.3. What 182 1 I should have drawn your attention to is underneath it, 2 it notes that: 3 "Subsequent to the position described in the tables 4 above being reached, a further round of negotiations 5 instigated by Bilfinger Berger took place. The detail 6 behind the final position reached has been documented 7 separately for CEC." 8 That separate documentation was the recent events 9 document that we saw -- again, we looked at before the 10 break? 11 A. It was, yes. 12 Q. So the figure of the GBP32.3 million for risk, I think, 13 was for the figure that was used before all those final 14 adjustments? 15 A. It was, yes. 16 Q. Therefore, the adjustments that we saw were made by 17 Mr Hamill following the meeting that took place 18 post-dated the arrival of that figure of 19 GBP32.3 million. 20 A. Yes, that figure of 32.3, I think, may have been amended 21 due to the final negotiations. 22 Q. I think we saw the email from Mr Hamill, if we look at 23 that, CEC01288043. In the first paragraph of that, he 24 has the overall risk coming down to, I think as I read 25 it out, GBP26.67 million, or as he has it, 26,637,000K. 183 1 A. I see that. 2 Q. So that shows that the risk being reduced further than 3 the original GBP32.3 million on any view? 4 A. On the face of it, yes, but I'm afraid I couldn't 5 explain what the difference is. 6 Q. If I can just ask you to look at one more document then. 7 If we look at document USB00000357. This is a report to 8 the Council's Policy and Strategy Committee for 9 a meeting taking place on 13 May 2008 which essentially 10 is on the very cusp of contract signature? 11 A. Indeed. 12 Q. If we look at paragraph 2.4, it notes: 13 "There have also been some further changes to the 14 commercial position of the consortium, following ... 15 previous reports to Council." 16 We see those amplified over the page in 17 paragraph 2.9. We can see towards the end of that 18 paragraph: 19 "These changes increase cost by GBP4 million to 20 GBP512 million, but have corresponding advantages by 21 further transferring risks to the private sector." 22 I think that's what we've seen previously, that the 23 overall budget envelope went up to GBP512 million for 24 the purposes of contract close -- contract signature? 25 A. Yes, it did. 184 1 Q. But in terms of how that was split between the contract 2 cost and the risk allowance, that was a matter being 3 dealt with by tie separately? 4 A. Yes, and I think the detail was in that record of events 5 paper which was obviously available to Council officials 6 also. 7 Q. Thank you. 8 We've already made some reference to the report that 9 was provided by DLA, and I just wanted to ask you 10 a brief question about the final version of that report. 11 If we could look, please, at document reference 12 CEC01033532. 13 We can see this is the letter dated 12 May 2008, 14 addressed to Gill Lindsay at the Council, and 15 Willie Gallagher at tie. 16 A. Yes. 17 Q. If we look, please, at page 2 of this, in paragraph 1.1, 18 halfway through that notes: 19 "No issues have arisen since we last reported which 20 have resulted in any adverse alteration (of consequence) 21 to risk balance." 22 You see that? 23 A. I see that, yes. 24 Q. If we just, for further statement of risk, look over the 25 page to page 3. Under the heading, 5. "RISK". It says: 185 1 "Following on from our letter of 12 March, we would 2 observe that delay caused by SDS design production and 3 CEC consenting process has resulted in BBS requiring 4 contractual protection and a set of assumptions 5 surrounding programme and pricing. 6 ... prepared for the BBS request for an immediate 7 contractual variation to accommodate a new construction 8 programme needed as a consequence of the SDS Consents 9 Programme which will eventuate, as well as for the 10 management of contractual Notified Departures when (and 11 if) any of the programme related pricing assumptions 12 fall." 13 You will see that document? 14 A. I see that, yes. 15 Q. Finally, sticking with the idea of departures, could we 16 go over to page 6, and enlarge the lower half of the 17 page. You can see in relation to paragraph 11.3, it 18 states: 19 "The Pricing Schedule (Infraco Contract Schedule 20 Part 4) has been extensively discussed over the past six 21 weeks and is now settled as to its key assumptions, 22 value engineering items, provisional sums and fixed 23 prices. tie has assessed the likely financial impact of 24 the assumptions not holding true and triggering 25 changes." 186 1 A. I see that. 2 Q. These all together relate to risk, the three passages 3 I referred to? 4 A. That's a fair comment, yes. 5 Q. You acknowledge that you were given an opportunity to 6 comment on this letter and suggest redrafts of it where 7 appropriate. 8 Now, in that you -- these things remain in the 9 letter, were you content with these statements of risk, 10 that they would accurately represent the position to the 11 Council? 12 A. In overall terms, yes. On the basis that I described 13 earlier, and the -- the way, as I think I have 14 mentioned, I looked at it was: what was the risk to the 15 aggregate position of what was by this 16 stage GBP512 million, allowing for what was in the risk 17 provision. 18 So overall these statements by DLA, I regarded as 19 consistent with my own understanding at that time. 20 Q. Did you have discussions with Andrew Fitchie about them? 21 A. Not that I recall on these specific matters. 22 Q. I want to turn now to the CEC report, and you've -- 23 I think you have accepted that you carried out some 24 redrafts of that, made comments upon it. 25 Can we look, please, at document TIE00159052. 187 1 You can see in the lower half of the page is an 2 email from you to Willie Gallagher and others at tie. 3 A. Yes. 4 Q. Headed "The Council Report". You say: 5 "Colleagues, this is Alan's draft of the Council 6 Report for the meeting on 1 May. The changes shown on 7 the document are mine, as not yet discussed with Alan." 8 You ask them to comment upon them? 9 A. Indeed. 10 Q. Could you look at the attachment to this, just to see 11 what comments you were making. It's document reference 12 TIE00159053. 13 We can see this is a document which shows the 14 tracked changes that had been made on it? 15 A. Yes. 16 Q. If you could look at the second page, please, and 17 enlarge paragraph 3.6. Note there that: 18 "The revised costs are based upon the construction 19 programme as advised by tie Ltd with works anticipated 20 to commence in May 2008 and Phase 1a being substantially 21 complete by January 2011. Revenue services are planned 22 to commence in July 2011. tie Ltd continues, through its 23 appointed contractor, to execute the work under the 24 contract for utility diversion along the tram route on 25 behalf of the Council and reports that this work, which 188 1 is part of the authorised works under the statutory 2 authority granted to Council under the Edinburgh Tram 3 Acts, is progressing to programme and budget." 4 A. I see that, yes. 5 Q. Why did you choose to make an express addition to the 6 effect that the works were proceeding to programme and 7 budget, so the councillors would have that in mind? 8 A. To make this report consistent with (a) my understanding 9 of the situation, but also what was in the close report. 10 Where, as I think I mentioned earlier, based on the 11 revised programme for utilities, my understanding was 12 that, based upon that revised programme, things were 13 moving according to programme and budget. So that this 14 was simply to make the two documents consistent and 15 provide that further information to the Council. 16 Q. The original intention or programme for the utilities 17 works is that they would be largely complete by the time 18 the Infraco works were to commence. 19 A. Yes. 20 Q. It was apparent by the time of this report, looking to 21 May 2008, that the utilities works were slipping quite 22 noticeably? 23 A. Yes, and I think the -- the mitigation there was that 24 the utility programme had been integrated with the 25 Infraco programme in such a way that the slippage wasn't 189 1 regarded as a threat to the Infraco programme. 2 Q. This, of course, this particular passage isn't going 3 into the interaction with the Infraco programme. 4 Instead, it just says progressing to programme and 5 budget. That really isn't an accurate representation of 6 the position at that time, is it? 7 A. I think it's -- it's accurate in the sense that the 8 revised programme, as I understood it at the time, was 9 being adhered to. And that other -- additional 10 information I agree is not stated there. That could 11 have been included, but it wasn't. 12 Q. Okay. Can we look at another document, please. It is 13 CEC01349212. 14 CHAIR OF THE INQUIRY: What about budget? You say it's 15 progressing to programme and budget. What was that -- 16 was that the position, that it was still progressing 17 within budget? 18 A. That was my understanding, my Lord. Again, based on 19 whatever the revised budget was that fitted the new 20 programme, the two would be hand in hand, that would be 21 my understanding, yes. 22 CHAIR OF THE INQUIRY: So that's the revised budget in the 23 context of the revised programme. 24 A. Yes, and that budget, by implication, was what was in 25 the 512 million. 190 1 CHAIR OF THE INQUIRY: Thank you. 2 MR LAKE: Can we look, then, please, at CEC01349212. 3 My Lord, I was advised by Mr MacKenzie that he has 4 previously looked at this document, so it has been shown 5 to witnesses, but I am unable at the moment to call it 6 up on the Trial Director software. I wonder if I could 7 request a short adjournment while I get a hard copy 8 printed out, and I will put it on the camera to get it 9 shown. It should take just a couple of minutes to get 10 it. 11 CHAIR OF THE INQUIRY: I will just sit here. 12 (Pause) 13 MR DUNLOP QC: My Lord, it occurs to me that I am going to 14 ask for leave to raise one matter with the witness 15 arising from a question he was asked about half an hour 16 ago. 17 If your Lordship wants to hear me on that, and allow 18 me to proceed, it will only take a couple of minutes, 19 and perhaps we could usefully fill the time. 20 CHAIR OF THE INQUIRY: Yes. 21 MR FAIRLEY: My Lord, if it assists, there is also one 22 matter I would wish to seek leave to clarify with the 23 witness arising out of the close report that he was 24 shown and the risk figures, and the way in which it was 25 put to him, which seems to me to have left, 191 1 notwithstanding Counsel to the Inquiry's revisiting the 2 issue after a break, a bit of confusion, certainly in my 3 mind, that I would like to try and clarify. 4 CHAIR OF THE INQUIRY: We will start with Mr Dunlop. 5 Examination by MR DUNLOP QC 6 MR DUNLOP QC: I'm obliged, my Lord. 7 Just one question or one area. You were asked about 8 design risk, and you indicated to his Lordship that the 9 Schedule -- you had read Schedule Part 4 as meaning that 10 the price included normal design development risk, but 11 anything that wasn't normal would mean it wasn't a firm 12 price? 13 A. That's what I said, I think, yes. 14 Q. You were asked whether Mr Fitchie had told you or had 15 told tie that design risk had not been transferred to 16 the consortium to BBS, and you said he hadn't done that. 17 A. I don't recall it, no. 18 Q. Can I just clarify, you knew that the design in the 19 Pricing Schedule was based on the Base Date Design 20 Information; yes? 21 A. I knew it was based on a baseline set of documents. I'm 22 not sure I could say much more than that. 23 Q. You knew that that was dated back to November 2007? 24 A. I recall that, yes. 25 Q. You knew that by the time financial close came round, 192 1 the design had moved on significantly? 2 A. Yes. 3 Q. So subject to any legal debate on what was meant by 4 normal, in inverted commas, design development, you knew 5 that any alteration in design that wasn't normal, the 6 risk for that lay with tie? 7 A. That is my understanding, yes. 8 Q. Yes. And you knew that from Mr Fitchie? 9 A. I don't think so. I think that was probably based on 10 discussions within the tie team, actually. 11 Q. Do you remember the email of 31 March 2008, Mr Fitchie's 12 email to yourself and others at tie? 13 A. Was that the email that we looked at -- 14 Q. Yes. You looked at it earlier. 15 A. Yes. 16 Q. What he points out there, that the original price is 17 based on SDS version 26; is that right? 18 A. I recall that, yes. 19 Q. And he points out the design has moved on significantly, 20 even by then, and that's in March 2008. 21 You will remember he said that that will permit BBS 22 to include everything that they estimate is going to 23 affect them to be priced and to be granted relief, and 24 he told you that the rest of it, BBS's estimate, was 25 bound to be all encompassing and conservative, didn't 193 1 he? 2 A. That was in the email, yes. 3 Q. So Mr Fitchie was telling you there that the development 4 from version 26 onwards was a tie risk, and that BBS's 5 estimate for that was going to be all encompassing and 6 conservative? 7 A. Well, my -- my limited understanding of that was that if 8 the design progression was "normal", then there would be 9 no difficulty from a tie or Council perspective. But if 10 those changes were not normal, then that would fall into 11 the basket of risks which tie and CEC were exposed to. 12 Q. Yes. On the question of what is normal, Mr Fitchie's 13 email of 31 March is telling you that the change from 14 version 26 is going to lie with tie, isn't he? 15 A. That is not how I read it. 16 Q. "... will permit BBS to include everything that they 17 estimate is going to affect them to be priced and to be 18 granted relief. That estimate is bound to be all 19 encompassing and conservative." 20 A. And rightly or wrongly, my interpretation, it's really 21 based on today's discussion, rather than specific 22 recollection, was that if it was beyond normal 23 development, then that would fall to tie and CEC, but if 24 it wasn't, then that was the basis for that assumption, 25 and therefore it wouldn't fall to tie and CEC. 194 1 Q. Well, Mr Fitchie would hardly have been saying to 2 you: these changes are going to result in an application 3 for relief that's going to be all encompassing and 4 conservative; if he was suggesting it was normal, and 5 therefore not your problem? 6 A. Yes, I think that's a fair interpretation. All I'm 7 saying is that wasn't how I understood it. 8 Q. Okay. You accept that he also indicated in that email 9 that tie had no ability to prevent there being a tie 10 change, other than going to Dispute Resolution 11 Procedure? 12 A. That's what he said, and I take that at face value. 13 Q. Did you accept that he said that Steven and Geoff, 14 Steven Bell and Geoff Gilbert would have a better sense 15 of how factually to restrict the consortium's ability to 16 exploit this? 17 A. That was his advice, yes. 18 Q. Am I right in understanding that that's what happened, 19 that thereafter what tie were doing was, as a technical 20 and commercial matter, looking at what changes might 21 eventuate and saying: how do we mitigate that from 22 a practical point of view? 23 A. Well, that would be the interpretation of Andrew's 24 advice, yes. 25 Q. But am I right in understanding that that's what tie 195 1 then did? 2 A. I'm afraid I can't comment. I don't recall exactly what 3 they did beyond that point. 4 Q. I think Mr Bell told us that's what was then done. Do 5 you have any reason to dispute that? 6 A. No, I don't. 7 Q. Is that then why or would that then be why you were 8 content with the DLA letter of 12 May that we looked at? 9 You will recall my learned friend asking you about 10 paragraph 11.3, where DLA say, and you were content for 11 them to say, tie has assessed the likely financial 12 impact of the assumptions not holding true and 13 triggering changes? 14 A. I think that would be based on the fact that clearly 15 that area, along with others, had been thoroughly 16 examined by tie people and provisions reflected where 17 they were felt to be necessary. 18 Q. Yes. So tie have received Mr Fitchie's advice as to how 19 to tackle this problem at the end of March, and have 20 done what he suggested, and they've looked at it from 21 a technical and commercial basis and said: this is the 22 contingency for risk to cover this eventuality. 23 A. That feels like a good summary, yes. 24 MR DUNLOP QC: Thank you very much. I'm obliged. 25 CHAIR OF THE INQUIRY: Mr Lake, do you want to ... 196 1 MR LAKE: Thank you very much, my Lord. 2 Examination by MR LAKE (continued) 3 MR LAKE: Mr Bissett, I was asking you about an email which 4 had reference CEC01349212. If I can hand up a hard copy 5 and we can put that on the camera, and put that 6 throughout all screens. 7 We can see that this is an email from you. It's 8 dated 22 April 2008, addressed to Gill Lindsay and 9 copied to various others. 10 It says: 11 "Gill, please see comments in email below provided 12 to Alan on the latest draft of the Council Report. This 13 note also responds to your email of this afternoon. 14 In addition to the points below, especially the 15 definition point in 6.1, we feel the language used in 16 3.10 should be re-assessed. There is nothing factually 17 wrong with it. However, the report will be read by the 18 bidders and it seems both disproportionate to expand 19 upon this risk and also financially dangerous to link 20 the specific comments about SDS performance with the 21 statement that there is a specific risk contingency pot 22 available to cover this area. Experience says this 23 could act as an invitation to SDS/BBS to pursue further 24 remuneration for their work beyond the sums which are 25 embedded in their contracts." 197 1 First of all, you see that's what you said to 2 Gill Lindsay? 3 A. I do, yes. 4 Q. What may be appropriate is if we look at your attachment 5 to your email, which consists of the report with 6 comments, and we look at paragraph 3.10. If we hang on 7 to that email for the moment, and I can hand up -- the 8 document now on screen is reference CEC01349213. We are 9 looking at the third page of it, clause 3.10. What it 10 originally said was: 11 "A number of the adjustments to risk allocation are 12 positive, reflected in the reduced QRA. A risk which 13 has been passed on to the Public Sector relates to delay 14 by SDS in gaining approvals. This has been a very 15 difficult point for tie Ltd to negotiate and they have 16 provided for the best deal which they advise us is 17 currently available to themselves and the Council. In 18 essence, BBS will accept the design risk for SDS to 19 a high financial ceiling, whereas the Council and 20 tie Ltd will remain financially liable for delay by SDS 21 in relation to the provision by them of information for 22 a range of consents and approvals. Both tie Ltd and the 23 Council have worked diligently to examine and reduce 24 this risk in practical terms and tie Ltd advise that the 25 new risk contingency contains suitable adjustment for 198 1 this residual risk." 2 That's the thing you say you were unhappy with, if 3 you thought it would be an invitation for them to pursue 4 further remuneration, to essentially access this risk 5 contingency? 6 A. Yes. 7 Q. If we look back at the email for a moment, you went on 8 to say in that: 9 "As an alternative, would the following suffice. 10 "A number of the adjustments to risk allocation are 11 positive, reflected in the reduced QRA. BECAUSE OF THE 12 OVERLAPPING PERIOD OF DESIGN AND CONSTRUCTION A NEW 13 RISK AREA HAS EMERGED WHICH HAS BEEN THE SUBJECT OF 14 EXTENSIVE AND DIFFICULT NEGOTIATION. TIE ADVISE THAT 15 THE OUTCOME IS THE BEST DEAL THAT is currently available 16 to themselves and the Council. Both tie Ltd and the 17 Council have worked AND WILL CONTINUE to work diligently 18 to examine and reduce this risk in practical terms." 19 Now, as drafted in that form, it makes no reference 20 to the transfer of the risk taking place to tie and the 21 Council. 22 A. Not specifically, but I think the phrase "because of the 23 overlapping period", and then "a new risk area" would be 24 basically the same message. But I think the driver 25 behind the change was not to avoid addressing the fact 199 1 that things had changed. It was simply the reference to 2 the contingency pot that could become attractive to 3 either or both of SDS and BBS. 4 Q. It gives no idea really where the liability for that 5 risk is going to fall, in its revised drafting. 6 A. I think that is fair. I'm reading "a new risk area has 7 emerged" as implicitly has emerged for the public 8 sector, but you are correct to say it doesn't 9 specifically say that. 10 Q. There's one more document to look at, please. It's 11 reference CEC -- this should be on the system. 12 CEC01319006. 13 This is headed "MEETING OF THE TIE MANAGEMENT TEAM 14 TO CONFIRM READINESS TO PROCEED WITH COMPLETION OF THE 15 INFRACO CONTRACT SUITE", and the date on it is 16 13 May 2008? 17 A. I see that, yes. 18 Q. I take it from the look of it, this was prepared by you? 19 A. I think it was, yes. 20 Q. We notice the people attending the meeting include 21 Willie Gallagher, Steven Bell, Susan Clark, Jim McEwan, 22 Dennis Murray and you? 23 A. Yes. 24 Q. I assume this minute of meeting would have been prepared 25 in advance in a sense to guide the meeting as to what 200 1 had to be considered? 2 A. I think that was the objective, yes. 3 Q. "The meeting had convened to consider the readiness of 4 the Infraco Contract Suite for completion. All present 5 noted that adequate information had been provided on 6 which to competently proceed." 7 In saying that you all consider that adequate 8 information had been provided, does it follow from that 9 that each person attending was happy with the terms of 10 the close report that was being put forward? 11 A. That was the intention behind the note of record, yes. 12 Q. Did you believe them to be correct at that time? 13 A. Yes, we did. Or yes, I did. 14 Q. Did you have information, adequate information as to 15 whether or not there had been risk transfer since 16 December? 17 A. The -- in short, yes. And as reflected in the final 18 form of these documents. 19 Q. Did you consider you had adequate information about the 20 likelihood of any of the Pricing Assumptions holding 21 true or not holding true? 22 A. Yes, in the sense that the team who had negotiated that 23 schedule were comfortable that those assumptions would 24 hold true with the exceptions where there was a specific 25 provision made. 201 1 MR LAKE: Thank you very much, Mr Bissett, those are my 2 questions. 3 Thank you very much, my Lord. 4 CHAIR OF THE INQUIRY: Mr Fairley, you wanted to raise one 5 matter. 6 MR FAIRLEY: I do, my Lord, question. 7 Examination by MR FAIRLEY 8 MR FAIRLEY: Mr Bissett, could we go back to the close 9 report, which is document CEC01338853. 10 This is the close report you were asked by learned 11 counsel to the Inquiry about, and you have given some 12 evidence about that. In particular you were asked about 13 page 5 of that and a table of figures. Could we go to 14 page 5, please. 15 You were asked there about the risk figures shown at 16 the top of that page, bringing out a risk allowance at 17 financial close of 32.3 million. Do you see that? 18 A. Yes. 19 Q. Now, according to the LiveNote, and the reference for 20 this simply for the record, my Lord, is page 160 of the 21 LiveNote at line 4 and following [draft] you were then 22 asked by Counsel to the Inquiry: 23 "The way it's presented here, it looks like it is 24 the product of detailed numerical analysis of risks." 25 You said you agreed with that proposition. That was 202 1 your understanding, you said. The next question you 2 were asked was: 3 "Were you in fact aware that risks had been adjusted 4 manually simply to ensure that the final total came out 5 at something which could be fitted within the sums 6 approved by the Council?" 7 Now, in fairness to you, I think that question, that 8 latter question that I have quoted there, may not be 9 wholly accurate in terms of learned Counsel's 10 understanding here. 11 Can I ask you to keep in mind the figure of 12 32.3 million, which is shown there in the risk 13 allowance, and can we then look at another document, 14 which is Mr McGarrity's spreadsheet, CEC01295329. 15 Again, you were referred to this document, and we 16 have heard evidence that this was a spreadsheet prepared 17 by Mr McGarrity, the Finance Director of tie. 18 Do you see there in the column AFC P1, which is 19 simply coloured black and white, at row 304 there is 20 a total risk figure shown of GBP32.3 million? 21 A. Yes. 22 Q. Now, that would appear to correspond to the risk figure 23 of 32.3 million that we looked at a moment ago in the 24 close report; is that correct? 25 A. Indeed, yes. 203 1 Q. That total risk figure brings out in combination with 2 the total base cost figure a total for phase 1a at row 3 306 there of 508.017 million; is that right? 4 A. It is, yes. 5 Q. That we saw earlier was the total project cost figure 6 that was referred to in the close report that we looked 7 at a moment ago, the 508 million figure? 8 A. I think that's right, yes. 9 Q. If we go down to the risk allowance analysis before 10 that, do you see at line 321 there is a QRA total there 11 of 27.9 million? 12 A. Yes. 13 Q. I think we see below the total QRA total there, there 14 have been some manual additions to the QRA total, 15 amounting to in round terms 4.4 million? 16 A. Yes. 17 Q. Do you see that? 18 A. I see that. 19 Q. So that then takes us back to the total risk figure of 20 32.3 million; do you see that? 21 A. It does, yes. 22 Q. So insofar as there had been adjustments to the risk 23 allowance to bring out the figure in the close report, 24 those were by addition, it would appear, to the QRA, 25 rather than subtraction from the QRA; am I right about 204 1 that? 2 A. I think if I look at line 316 -- sorry if this is 3 inappropriate, but that looks to me to be an adjustment 4 to the QRA as well as the adjustments to the elements 5 that weren't in the QRA. 6 Q. I'm going to come on to that. I'm interested at the 7 moment in the column marked AFC P1. 8 A. Yes. 9 Q. Do you see the figure at the bottom of AFC P1 is 10 32.3 million? 11 A. Yes. 12 Q. That is the figure we saw in the close report? 13 A. It was, yes. 14 Q. That figure of 32.3 million has been arrived at by 15 taking a QRA total of 27.9 million and adding to it 16 manually two figures of 2 million and one of 409,000? 17 A. That's correct, yes. 18 Q. So the figure that's in the close report is the QRA 19 total plus 4.4 million; am I correct about that? 20 A. That looks correct based on this analysis, yes. 21 Q. Now, as you have correctly noted there, there were then 22 adjustments to the total risk figure, both above and 23 below the QRA line; is that right? 24 A. Yes. 25 Q. There's an adjustment below the QRA line there of 205 1 0.5 million in relation to road reinstatement; do you 2 see that? 3 A. I see that. 4 Q. There's another adjustment above the QRA line of 5 1.3 million for general programme delay? 6 A. Yes. 7 Q. There's also an unspecified risks contingency deduction 8 of a much smaller sum of 1,905,905, bringing out a total 9 adjustment to the risk figure of 1.9 million? 10 A. Yes. 11 Q. We saw reference to that in the email chain between 15 12 and 19 May 2008, after contract close. 13 A. Yes, I think that's right, yes. 14 Q. If we look finally at one other document, please, which 15 is USB00000357, this was the report to Council dated 16 13 May 2008, and you were referred to this again by 17 Counsel to the Inquiry? 18 A. I was, yes. 19 Q. I don't need to take you to it, but if you take it from 20 me that the signature on the end of that document has 21 also been dated in manuscript as 13 May 2008. 22 Can we then go to paragraph 2.9 of this report to 23 the Council. 24 This is the report to Council on 13 May 2008, noting 25 that there had been an increase in the price that the 206 1 consortium were seeking by GBP4 million to 2 GBP512 million, but noting also that there had been 3 a reduction in risk to reflect that increase. 4 A. Yes. 5 Q. The four final lines of 2.9. So the Counsel are being 6 advised that the total contract price, including risk, 7 has gone up to 512 as a result of an addition of 8 4 million by the consortium, but by a reduction in risk; 9 is that right? 10 A. That's correct. 11 Q. If we go back now -- I'm sorry to be jumping between 12 documents, but if we can go back now to Mr McGarrity's 13 schedule, CEC01295329, in the deltas column there at -- 14 if we look at row 306 in the column G which is deltas, 15 we see there an increase of GBP4 million; is that right? 16 A. Correct. Yes. 17 Q. Which, if I have understood this correctly, is 18 a reflection of what we saw in the report to Council 19 dated 13 May 2008, that there had been an increase in 20 the overall price of GBP4 million? 21 A. Yes, there had. 22 Q. That is then being reflected in this schedule in 23 reduction to risk; is that correct? 24 A. That's correct, yes. 25 Q. The email chain that you were referred to earlier by 207 1 Counsel to the Inquiry, I think, began on 15 May and you 2 were taken up as far as an email from Mr Hamill, which 3 was dated, I think, 27 May 2008? 4 A. I recall the emails, yes, not the dates. 5 Q. That was all post the signing of the contract on 13 and 6 14 May 2008? 7 A. It was, yes. 8 Q. Thank you. 9 Finally, Mr Bissett, in the discussions that you had 10 with the commercial team within tie prior to the various 11 reports being sent to Council at financial close, was it 12 your understanding from those discussions that what the 13 commercial team in tie were saying to you, that they had 14 substantially achieved a level of risk transfer to the 15 private sector which had been anticipated in the 16 procurement strategy? 17 A. Yes, that -- that was my understanding at the time, yes. 18 Q. That understanding was based on what you were being told 19 by those within the commercial team at tie? 20 A. I would say that was easily the most influential factor. 21 Q. I'm sorry? 22 A. It was easily the most influential factor, yes. 23 Q. Yes. Did you have any reason to doubt the genuineness 24 of the belief of those in the commercial team that what 25 they were telling you accurately reflected their 208 1 understanding? 2 A. I had no reason to doubt it, no. 3 MR FAIRLEY: Thank you. I have no further questions, 4 my Lord. 5 CHAIR OF THE INQUIRY: Thank you very much, Mr Bissett. 6 That's all. You're still subject to your citation in 7 case we want to recall you. Hopefully that won't be 8 necessary. Thank you for your time. 9 A. Okay, thank you, my Lord. 10 (The witness withdrew) 11 CHAIR OF THE INQUIRY: We will adjourn until tomorrow at 12 9.30. 13 (4.10 pm) 14 (The hearing adjourned until Wednesday, 1 November 2017 at 15 9.30 am) 16 17 18 19 20 21 22 23 24 25 209 1 INDEX 2 PAGE 3 MR GRAEME BISSETT (sworn) ............................2 4 5 Examination by MR LAKE ........................2 6 7 Examination by MR DUNLOP QC .................192 8 9 Examination by MR LAKE (continued) ..........197 10 11 Examination by MR FAIRLEY ...................202 12 13 14 15 210 1 Wednesday, 21 March 2018 2 (9.30 am) 3 CHAIR OF THE INQUIRY: Good morning. Yes, Mr Lake. 4 MR LAKE: Thank you, my Lord. 5 The first witness today is Mr Graeme Bissett. 6 I should say he has previously attended to give oral 7 evidence to the Inquiry, but it was considered that 8 there were some matters that he could usefully be asked 9 further questions on, and he has come back for that 10 purpose. 11 MR GRAEME BISSETT (recalled) 12 Examination by MR LAKE 13 MR LAKE: Mr Bissett, we obviously already have your details 14 from the first time you came here to give oral evidence. 15 What I would like to do is turn to ask you a few 16 questions about the quality assurance systems and 17 schemes that were put in place on the lead-up to close 18 of the project. The first document I would like you to 19 look at is CEC01431194. 20 You can see that on the screen at the moment, and 21 this is an email that was from you to Andrew Fitchie, 22 Steven Bell, Jim McEwan, Geoff Gilbert, Alasdair Sim, 23 Susan Clark, Stewart McGarrity, and then copied to 24 various others. Do you see that? 25 A. I do, yes. 1 1 Q. It was dated 25 March and the subject matter was 2 Financial Close and QC programme. 3 A. Yes, indeed. 4 Q. Now, first of all, looking at those recipients and the 5 various people to whom it was copied, what determined 6 who got this email and who was copied into it? 7 A. I think these individuals would be the primary people 8 involved in the key sections of the close report and 9 related documents who would therefore either have 10 drafted or would understand the content of the 11 documents. 12 Q. When you say the close report, was that the suite of 13 documents we looked at last time that consisted of 14 a report on the contract, a report on the final stages 15 of the contract -- negotiations, the legal report from 16 DLA and so on? 17 A. Yes, indeed. 18 Q. Could we look at the first paragraph. You see there it 19 says: 20 "Thanks for your time and input this am. For those 21 who have not been involved in this discussion to date, 22 the attached paper is a summary of the process we intend 23 to apply to ensure the Financial Close documents are in 24 robust shape. The paper will also go to the tie Board 25 for their information. The spreadsheet sets out the 2 1 detailed responsibilities." 2 If we look further down, we see: 3 "Andrew will provide a list of finalised Infraco 4 schedules for QC action this week. It would be useful 5 if he would do the same next Monday for further action." 6 Underneath that there's a programme with four 7 different dates specified, and against the first three 8 of them, in each there's some reference to QC programme? 9 A. Indeed, yes. 10 Q. That's referring to the quality control of the various 11 documents? 12 A. It is, yes. 13 Q. What was your role in relation to quality control of the 14 documentation? 15 A. I think at this stage it was to design the quality 16 control programme probably with discussion amongst the 17 team, and then to oversee the delivery of that 18 programme. 19 Q. What do you mean by oversee delivery of the programme? 20 A. Well, to monitor where things needed to be done, either 21 at this stage probably still preparation or finalisation 22 of documents, but then also the checking and 23 second-guessing of documents that that programme was in 24 place and being executed. 25 I should possibly add that the colleague who did the 3 1 day-to-day monitoring of what was being done was 2 Susan Clark, who I regarded as a very diligent and 3 organised person and was the Deputy Project Director, 4 I think, at that time, and she took the day-to-day 5 responsibility for the chasing and harrying and making 6 sure that things were being done. 7 Q. For completeness, we can see at the foot of the screen 8 at the moment the paragraph which notes that: 9 "Susan will manage the Close Programme, including 10 the QC work over the next three weeks." 11 That's what you are confirming to us there, that she 12 had day-to-day responsibility? 13 A. Indeed, yes. 14 Q. In terms of your responsibility and how it related to 15 hers, did you work alongside her in providing some 16 oversight or monitoring of the process? 17 A. Yes, I think that's a fair description. It certainly 18 wasn't a reporting line in that sense. We were 19 colleagues in the senior team. 20 Q. We saw in the first paragraph, there was a reference to 21 an attached paper. If we could look at that now, 22 please, it's document reference CEC01431196. Perhaps 23 firstly I could ask you to confirm, is that the paper 24 that would have been attached to your email? 25 A. Yes, I think so, yes. 4 1 Q. We can see, as we scroll down there, there's a table 2 which is the same four dates and the same sort of text 3 that appeared in your email as regarding the various 4 actions to be carried out at each of those dates? 5 A. Yes. 6 Q. If we scroll further down, under the heading "Quality 7 control" and the sub-heading "Outputs", we see the 8 things that this was designed to achieve. One of the 9 things, the first thing, is the Infraco Contract Suite, 10 second, necessary third party agreements, the third, the 11 close report and appendices, and the fourth, the DLA 12 report and appendices. There are two others after that. 13 A. I see that. 14 Q. Now, again, if we go over the page, in the process in 15 relation to these various outputs, enlarge the top of 16 the screen, we see the first of the processes is the 17 management of the close process and issue resolution. 18 That's assigned to JM. Would that be Jim McEwan? 19 A. I think it would be, yes. 20 Q. What was that process about and what it was intended to 21 achieve? 22 A. This was March, I think, the date of the year, was it? 23 Q. Yes. 24 A. I think at that time Jim was pretty closely involved in 25 the final negotiations with the Infraco side of the 5 1 house, and he probably had visibility over all of the 2 key areas, so the concept was -- and I should say, 3 I can't quite remember for sure if this was the case, 4 but from memory, that was Jim's role, and therefore the 5 concept was that Jim with that visibility was in a good 6 position to make sure that that piece of the closeout or 7 the quality control was executed properly. 8 Q. The second matter, finalisation of the Infraco Contract 9 Suite, that's assigned to DLA, the firm of solicitors 10 acting? 11 A. Indeed, yes. 12 Q. What was their role then in relation to finalisation of 13 the Contract Suite or what was the process that you 14 envisaged being undertaken there? 15 A. Well, I think I would have assumed the same as with any 16 major firm of lawyers with whom I had worked in closing 17 out a major contract, which is that the firm would have 18 its own internal quality control procedures to make sure 19 that all of the components of the contract were in 20 existence. They had final read-throughs, potentially, 21 and I don't know DLA's internal procedures, but possibly 22 a review by an independent partner or senior person 23 within the firm. That sort of thing. 24 Q. We touched very briefly on your business experience last 25 time. Do you have experience of working with large 6 1 firms of solicitors in relation to the conclusion of 2 significant contracts? 3 A. Yes. Over a good number of years. I should say mostly 4 in corporate transaction or fundraising, bank debt or 5 equity raising activity. 6 Q. In that situation, what is the role of the solicitor in 7 your experience in finalising or overseeing the terms of 8 the agreement? 9 A. In my experience, the firm takes responsibility for the 10 final quality control over all of the legal 11 documentation which they've obviously been involved in 12 negotiating and advising on; and once they sign off, 13 very often with a summary report in some form, obviously 14 it varies depending on the circumstances, but a summary 15 report which is in more of a, if you like, a commercial 16 analysis and summary for boards to feel comfortable that 17 that part of the process has been executed. 18 I think that is pretty well standard practice. 19 Q. I should say this document, as we have seen, was 20 attached to the email, the first recipient of which was 21 Andrew Fitchie at DLA. Can you recall getting any 22 feedback from him about this or any indication he wasn't 23 happy with the role that DLA were being assigned in this 24 document? 25 A. No, none at all, and I think I would have remembered if 7 1 there had been any difficulty. 2 Q. Would it have been significant if the solicitors had 3 come back and said: no, we are not willing or able to 4 undertake that particular role. 5 A. I think it would have been very significant, yes. 6 Q. We see in the third bullet on the top of the screen, 7 there is the DLA report and appendices finalisation. We 8 have already seen that report and naturally that's 9 assigned to DLA? 10 A. Indeed. 11 Q. The fourth element is the close report and appendices 12 finalisation, and is that the suite of documentation 13 you've already referred to this morning? 14 A. It is, yes. 15 Q. Looking further down to the "Quality control approach" 16 heading, we see it notes that: 17 "The objective is to ensure that a knowledgeable tie 18 or TEL person, semi-independent of the front-line 19 negotiating and legal team, reviews the final form of 20 the documents. The review should identify (1) fatal 21 flaws; (2) potentially important issues needing an 22 internal debate before sign-off; and (3) obvious errors. 23 This review is not about nuances or minor drafting 24 changes, nor is it designed to second-guess negotiated 25 commercial positions unless there is an obvious serious 8 1 issue." 2 Now, we see one description there, but in general, 3 what was this intended -- this process, the quality 4 control process, intended to achieve in relation to the 5 various documents referred to? 6 A. Well, I think possibly to separate between the contract 7 suite on the one hand and the more -- if I could say -- 8 informal documents, namely the close report itself, 9 which wasn't itself a legal document. 10 As far as the Contract Suite was concerned, as 11 I mentioned earlier, when we looked to the legal adviser 12 to confirm that that contract was in shape for signing, 13 in all respects, as far as the more internal documents 14 were concerned, the point was: do these documents 15 provide a fair representation of all the key issues that 16 are relevant to people being asked to approve the 17 contract signing? 18 Q. Could I ask you firstly to move the microphone slightly 19 closer to you. 20 A. This one? 21 Q. Yes, thank you very much. 22 Dealing with the second point there, in relation to 23 documents other than the Contract Suite, what you seem 24 to be describing is almost a check for the accuracy of 25 the factual statements that are made in those documents? 9 1 A. Yes, and also a representation -- a fair representation 2 of judgements, to the extent there were important 3 judgements being presented as well. 4 Q. However, differently in relation to the Legal Suite, 5 Contract Suite, because they were obviously not making 6 factual statements? I'm just trying to be clear about 7 what it was you were looking for in relation to that? 8 A. In terms of the Contract Suite? 9 Q. Yes. 10 A. Well, I probably just repeat myself. It was the final 11 sign-off and approval from our legal advisers that the 12 contract was in a fit state for signature on both sides, 13 but particularly the client side. 14 Q. You make the point obviously that it's not intended to 15 be minor drafting nuances, ie could have expressed this 16 better, but trying to identify problems; is that 17 correct? 18 A. That's correct. You can always find minor things, but 19 this was important in the sense of being focused on key 20 issues only, whatever that may appear to be in the eyes 21 of the reviewers. 22 Q. Sometimes in that sort of process you find things 23 whereby, because of many changes, versions of 24 the document, it might refer to Schedule 10 and there is 25 in fact no Schedule 10, or it refers to clause 30 10 1 dealing with one issue, and in fact because of 2 renumbering, it doesn't deal with that issue anymore. 3 Presumably it would be intended to pick up that sort of 4 thing? 5 A. I think so, but as long as it was quite evident that if 6 Schedule 10 was being described, and it should be 7 Schedule 11 because things had moved on, then that would 8 be less of an issue. But clearly well worth flagging 9 any points that did arise of that type. 10 Q. We know we also ended up in the situation in relation to 11 this contract where clause 80, which dealt with 12 variations and notified departures, had a mechanism for 13 dealing with them which ultimately led to the contract 14 not progressing. You will be aware of that? 15 A. In general principle, yes, it was a problem, yes. 16 Q. Would you expect that sort of thing to have been 17 considered at the time of the quality control process? 18 A. I think it possibly depends on the sequence of events. 19 If -- I'm not quite sure where that situation ended up, 20 but if a commercial view had been taken by the team in 21 a discussion with the legal advisers, and that final 22 position was, as far as they could tell, the extent of 23 the negotiating power that they had, and it was properly 24 represented in the documents, it may not -- excuse me -- 25 of itself be something that would be flagged because it 11 1 was there as an agreed position, and understood to be 2 agreed. 3 On the other hand, if the presentation in the 4 documents seemed to say something that was at odds with 5 the apparently agreed position, then one would expect 6 that to be flagged and, you know, that would be one 7 example, had that transpired. 8 Q. So how is the person carrying out the review to make 9 a judgement about whether or not this is drafting which 10 should be corrected, a problem, or simply something 11 which is what the parties have agreed and should be 12 left? 13 A. I think because the people doing the reviewing were 14 knowledgeable about the way the contract and the 15 negotiations had evolved, and also I think we were 16 saying to flag up if there were -- there were issues or 17 things that with the benefit of taking a cold towel look 18 at the document, just didn't seem to make sense. This 19 was the chance to raise them. But it was -- I would 20 say, distinguish that from someone reviewing the whole 21 set of negotiated positions and trying to second-guess 22 why those commercial positions, if you like, had been 23 arrived at. That really was not what was needed at this 24 stage. We were through that. 25 Q. I can see that it would at that stage not really be 12 1 advantageous to have people expressing their view as to 2 whether or not the underlying agreement was a good one 3 or not, because you were past that. But in terms of 4 finding processes within the contract which it was 5 thought would not work smoothly, was that the sort of 6 thing that would be -- 7 A. Yes, I think so, and it's very difficult to be black and 8 white about these sort of issues, but if the reviewer 9 felt: well, I know that's where we've got to, but this 10 clearly carries significant risk, for example; that 11 would be something that might be raised and discussed 12 further before people put pen to paper. 13 So I don't think there was anything in this process 14 that was intended to preclude the raising of that sort 15 of issue, if people felt that it was significant enough 16 to discuss further. 17 Q. If we are returning to the document on screen, which is 18 your paper attached to your email, looking at the 19 paragraph towards the centre of the screen, it begins: 20 "The attached matrix sets out the detailed 21 responsibilities: 22 "The responsibility for finalisation of the Infraco 23 Contract Suite is based on the matrix controlled by 24 Geoff. 25 "The Primary Reviewers for each important document 13 1 must review the document in full and sign-off. 2 "The scope of work by the Secondary Reviewers should 3 be agreed with the Primary Reviewer and comments finally 4 provided to the Primary Reviewer who can judge how they 5 should be handled." 6 Now, how were the primary review and the secondary 7 review to interact with one other? Were they intended 8 to achieve different things or two versions of the same? 9 A. I think it was maybe on the more complex documents to 10 have two sets of eyes rather than one. But the extent 11 of the work by the secondary reviewers would vary, 12 I think, depending on the scale and complexity of the 13 document they were being asked to consider. If it was 14 fairly straightforward, for example, there may not have 15 been much value in that secondary review. 16 Q. If we scroll down the page a little bit as it appears on 17 screen, in the paragraph after the underlined one, we 18 see that: 19 "DLA will perform their own legal QC review on the 20 full set of final documents and this will support and 21 complement the review by tie/TEL people." 22 We've been discussing already how we might have 23 things in relation to the commercial agreement which you 24 were not interested in at this time, and matters 25 relating to what might be termed the working of the 14 1 documents which you would be interested in. 2 How does the role of DLA in these things differ from 3 or relate to the role of the tie people in carrying out 4 this review? 5 A. I think in terms of the Contract Suite as I described 6 earlier, their role would be quite clear cut in 7 principle at least from my point of view. 8 So far as their role in the internal documents is 9 concerned, I think it was about consistency and ensuring 10 that any key issues that were in the Contract Suite were 11 fairly represented in the more informal internal 12 documents. 13 Q. We saw reference in the -- before the bullet points 14 there was a reference to an attached matrix. Could we 15 look at another document, please, which is reference 16 CEC01431195. 17 Is this the schedule that would have been attached 18 to your paper? 19 A. Yes. I'm sure that is, yes. 20 Q. We can see we have got at the top left, the heading 21 "FINANCIAL CLOSE -- QC PROCESS", and underneath that 22 a sub-heading, "Documents", and then a list of various 23 different documents running down the page. Do you see 24 that? 25 A. Indeed, yes. 15 1 Q. If we just take under the heading "Infraco Contract 2 Suite", the first thing, the Infraco contract, we can 3 see the responsibility for finalisation there is 4 assigned to GG/DLA. That would be Geoff Gilbert and 5 DLA, presumably? 6 A. Yes. 7 Q. If we go further down the page to row 21, I think we can 8 see that the document in question there is Pricing 9 Schedule 4. Do you see that? 10 A. I see that, yes. 11 Q. The responsibility for finalising that is GG/BD/DM. 12 Would that be Geoff Gilbert, Bob Dawson and 13 Dennis Murray? 14 A. I'm sure that's correct, yes. 15 Q. Their responsibility in the top of that column is 16 described as finalisation. What does that entail? 17 A. Again, it probably varies by document, but where issues 18 were still subject to potential movement and discussion 19 or negotiation with the Infraco, these were the parties 20 who were closest to that process to make sure that the 21 final positions were reflected in the document to the 22 extent there was any change. 23 Q. We can see to the right of that in a blue column, the 24 main QC review was SMcG. That would be 25 Stewart McGarrity? 16 1 A. Yes. 2 Q. The secondary reviewer, there's just the one, SB, would 3 be Steve Bell? 4 A. Steve Bell, yes. 5 Q. I should have noted the Infraco contract, row 9, the 6 main QC review was Steve Bell, and the secondary 7 reviewers were Dennis Murray, Jim McEwan and 8 Stewart McGarrity? 9 A. Yes. 10 Q. In relation to both the Infraco contract and Schedule 4 11 of that contract and in fact all the matters we see in 12 the upper part of the table there, there's a tick in the 13 brown column to the right, indicating that there will be 14 a full DLA QC review? 15 A. Yes. 16 Q. What records were kept of the quality control reviews 17 that had been carried out? 18 A. I'm afraid I can't recall. As I mentioned, Susan was 19 handling that and I'd be surprised if that wasn't 20 documented pretty rigorously. 21 Q. What about input by DLA? Was there any formal document 22 obtained from them confirming that they had carried out 23 the QC review? 24 A. There may have been confirmation in the documents that 25 Susan Clark controlled, but other than that, I'm not 17 1 aware of anything. I suppose the final sign-off on the 2 contract and their reports at financial close was the 3 final conclusion to that process, but before that, I'm 4 afraid I can't recall. 5 Q. Can we look at a different document, please, reference 6 CEC01374219. This is not an email to which you were 7 a party, but you can see, just looking at it, it's from 8 Dennis Murray, to Stewart McGarrity and Andrew Fitchie, 9 copied to Steve Bell and the subject is ETN Schedule 4. 10 There's a date of the email of 22 April 2008. 11 A. I see that, yes. 12 Q. It says: 13 "Schedule 4 attached for QA review." 14 Were you involved in these emails at all, monitoring 15 them or being informed they were being sent out? 16 A. I don't think so at all, no. 17 Q. Do you have any understanding of what the purpose of 18 this email was? 19 A. It looks as if it's -- this is from Dennis Murray. It 20 looks as if it's Dennis doing the final quality control 21 review that maybe in this case he was asked to do, 22 namely checking that things were in order, that 23 documents were there that should be there, et cetera. 24 So I'd take it as an example of the type of activity 25 that was going on to execute the QC process. 18 1 Q. Was there a system in place to ensure that all the 2 quality control checks specified in your table had in 3 fact been carried out? 4 A. Again, I think I could only say that I would have relied 5 on Susan to maintain that control and as far as 6 I recall, there was no significant debate about the 7 responsibilities or timescale so far as the individuals 8 could control it. 9 So I would be quite confident that it was executed, 10 but direct answer to your question is: I don't know what 11 documents were used to do that. 12 Q. Turning to a slightly different matter now, in relation 13 to the documents used at close, financial close of the 14 project in 2008, I would like you to look, please, at 15 document CEC01319006. 16 We can see that this is a minute of a meeting of the 17 tie management team to confirm readiness to proceed with 18 the completion of the Infraco Contract Suite set to take 19 place on 13 May 2008. And you were one of the six 20 persons attending that meeting. 21 A. Yes. 22 Q. Do you recall this meeting in this minute? 23 A. I recall the events at that time. This, I think, was 24 a day before contract signature, and it may have been me 25 that instigated the meeting to make sure that at the 19 1 very last stage, that all of the senior team were 2 comfortable with the documents that were being used to 3 support the sign-off. 4 Q. We can see the first paragraph notes the meeting had 5 convened to consider the readiness of the Infraco 6 Contract Suite for completion: 7 "All present noted that adequate information had 8 been provided on which to competently proceed. In 9 particular, the terms of the Infraco Contract Suite and 10 all key related information had been set out in 11 successive versions of ..." 12 There are a number of documents set out there? 13 A. Yes. 14 Q. This minute is in a typeface which is one that you 15 frequently use for your documents. Did you draft this 16 minute? 17 A. I think I would have, yes. 18 Q. Would it be normal practice, when facing sort of 19 completion of contracts, to draft these minutes in 20 advance? 21 A. Yes, I think so, to make sure that there's a proper, if 22 succinct, record of the key decisions and conclusions 23 that were reached. 24 Q. They are intended also to act as a -- fair to say -- 25 check list for what is to happen on the day? 20 1 A. That's fair as well, yes. 2 Q. I think on the day there are a number of different 3 meetings, and that there had to be a meeting of the 4 Council or the Policy and Strategy Committee to give 5 their approval, meetings of the tie management team, and 6 meetings and Approvals Committee of the various 7 companies in order to give the go-ahead. Were you aware 8 of these things? 9 A. I can't remember the detail, but that would be a logical 10 way to conclude, yes. 11 Q. With that many meetings to take place, was it in essence 12 that they all had to be planned and the minutes prepared 13 in advance? 14 A. I believe so, yes. 15 Q. So when we see on this screen here the note that all 16 present noted that adequate information had been 17 provided on which to competently proceed, in essence 18 a decision was made about that before 13 May? 19 A. Yes, that would be the formal conclusion to the -- 20 I suppose, the whole quality control process, yes. 21 Q. Were you involved in discussions in advance of the date 22 here, 13 May, to reach the conclusion and ensure that 23 everybody was of the view that adequate information was 24 available? 25 A. In specific and limited ways in the sense that, as 21 1 I think I mentioned previously, I wasn't involved in the 2 negotiations on the contract. I did oversee elements of 3 the close report and the process. So awareness of the 4 broad sweep of the documents that were required, but not 5 necessarily involved in the detailed discussions on 6 them. 7 Q. What work was done in advance of this meeting to reach 8 the conclusions that are expressed in this document? 9 Perhaps I should ask the other way round. Bear with me 10 one moment. 11 I take it the conclusions that you express in this 12 minute weren't simply reached on the day, 13 May? 13 A. No. No, no. 14 Q. So what work was done in advance of 13 May to get to 15 these conclusions in advance? 16 A. Well, I think this was really the culmination of in fact 17 many months of work. I mean, you could include in this 18 the whole negotiating process with the Infraco, but 19 leaving that to one side, we produced, I think, the 20 first draft of at least some of the final documents in 21 January 2008, and there were a number of iterations 22 following that time through to the version which was 23 eventually signed off at this stage; and throughout that 24 period, the negotiation on some key issues was 25 continuing, which meant that some, not all, but some of 22 1 the terms in the documents and in the contract were 2 changing because of the outcomes of the negotiations. 3 So I would say it was a rolling process really to 4 make sure that the full set of documents that was 5 finally arrived at at this stage had been properly 6 compiled and reflected what people expected they should 7 reflect. 8 Q. But reaching the view that we see expressed in the 9 second line of that minute there, that adequate 10 information had been provided, was there in a sense 11 a separate meeting or separate emails where people 12 expressed a view: yes, we are satisfied that the 13 information is adequate. 14 A. No, I think the -- the piece that would probably address 15 the point you make is the way that the quality control 16 work was actually documented, as I mentioned. But 17 I don't think there was a separate meeting before this 18 meeting to consider the issues again in the sense of 19 that day or very close proximity to that day. 20 Q. Could we scroll down the first page here to get to the 21 paragraph above the signature. You see another 22 conclusion is expressed here that: 23 "It was concluded that procedures to ensure the 24 quality and acceptability of the terms of the Infraco 25 Contract Suite had been adequately executed and that the 23 1 tie Chairman should send the letter to the CEC 2 Chief Executive with the recommendation that completion 3 should proceed." 4 Dealing with that question there, that the 5 conclusion that the quality procedures had been 6 adequately implemented, reading it short, for you to 7 draft that minute in advance, you must have been 8 satisfied that that was the case; is that correct? 9 A. Yes. That is fair comment. However, it's also designed 10 to make sure that everybody else in the meeting was 11 addressing the same question. 12 For example, if someone felt that there was an 13 inadequacy to the procedures that had been followed or 14 there were major issues that were still outstanding, 15 then this was a final chance, if you like, to raise that 16 point. 17 So it's designed to achieve both ends. 18 Q. But was there an opportunity to raise that, or would the 19 management team attending that meeting really have taken 20 a view that: Mr Bissett has provided us with a minute 21 saying that there's adequate information, and that we 22 can conclude the quality control is accurate; therefore 23 it goes through on the nod, without anybody applying 24 their mind to it? 25 A. No, I certainly wouldn't say that any of the senior team 24 1 members on the list would put things through on the nod 2 just because I had written something down. They were 3 robust and professional characters. If there was an 4 issue, it would have been raised. 5 Q. From your involvement with corporate transactions, you 6 will be familiar with verification tables or 7 verification notes in which a record is kept of the 8 basis for every material statement of fact or opinion on 9 a sentence by sentence basis. 10 A. I am, yes. 11 Q. Nothing like that was prepared for the statements in the 12 various close suite of documents in the report to the 13 Council? 14 A. No, it wasn't. 15 Q. Was there any reason why that wasn't done? 16 A. I don't think it was considered. I think we felt that 17 that suite of quality control procedures which we've 18 discussed this morning was adequate to make sure that 19 the documents were in good shape. 20 Q. I referred earlier to the Approvals Committee. I would 21 like to take a look at the minute of that, please. It's 22 reference CEC01289240. We see this is headed "MEETING 23 OF tie AND TEL APPROVALS COMMITTEE TO CONFIRM THE 24 AUTHORITY TO PROCEED WITH COMPLETION OF THE INFRACO 25 CONTRACT SUITE". Again, it's got the same day, 25 1 13 May 2008? 2 A. I see that, yes. 3 Q. There are three attendees. You're not one of the 4 attendees at this meeting? 5 A. No, I think those three attendees are the members of 6 that Approvals Committee. 7 Q. But nonetheless, from the appearance of this, it looks 8 as if it's another minute that was prepared by you? 9 A. It does, yes. 10 Q. And would have been prepared in advance? 11 A. Indeed, yes. 12 Q. So if we scroll down and look under the heading "Infraco 13 contract", we can see that in advance you expressed the 14 conclusion that: 15 "The Committee and each member individually noted 16 that adequate information had been provided on which to 17 competently proceed." 18 Do you see that? 19 A. I see that, yes. 20 Q. Now, if you are making that essentially as a statement 21 in the minute presented to the meeting, was there ever 22 any consideration by the members of the committee as to 23 whether or not there was adequate information to 24 proceed? 25 A. Well, that minute, I think, would have been on the table 26 1 when the meeting took place. As you'll be aware, 2 they're very often used as an agenda for the meeting. 3 So again, I would say if it was written in the 4 expectation that by that stage, there wouldn't be any 5 issues because one would have hoped to have heard of 6 them before this stage, but that was a final opportunity 7 where if someone felt that what was in the minute wasn't 8 supportable, they had the opportunity to raise that 9 matter. 10 Q. Do you think that was a realistic opportunity to raise 11 that, or, on 13 May, when everything had to be done to 12 get to signature, was it essentially a conveyor belt 13 decision, a process which had to be done to get to 14 completion? 15 A. I think the opportunity in real terms did exist, but 16 I would say by that stage, given the amount of work and 17 the amount of discussion that had already taken place, 18 it would have been a surprise if someone had raised an 19 issue at this very late stage that hadn't been raised 20 earlier. So it didn't preclude it, but nor was there 21 any expectation that we would have another debate on any 22 particular matter. 23 Q. This was a day on which it was intended by all parties, 24 by which I mean the Council, tie, the Project Board, and 25 the contractors, that the contracts were going to be 27 1 executed? 2 A. Yes. 3 Q. If someone had said at one of these meetings: I'm not 4 sure that adequate information had been provided; that 5 would have derailed the entire process? 6 A. It could have, but that's happened before and that 7 opportunity existed. 8 Q. But in reality, the way that has to be avoided, and 9 assuming everybody does want to avoid it, is all the 10 work has to be done in advance? 11 A. Indeed, yes. 12 Q. I come back to: was there any record of the work having 13 been done in advance by this Approvals Committee to 14 record their satisfaction and the basis of their 15 satisfaction? 16 A. I'm afraid I don't recall any records being tabled at 17 that meeting. 18 Q. If I could ask you to look at another document, please. 19 It's CEC01515189. This is a minute of a meeting of the 20 Tram Project Board -- sorry, it is headed "Tram Project 21 Board", and if we see the heading, it notes underneath 22 that, it is a resolution of the members of the Tram 23 Project Board at a meeting on 23 January 2008, held 24 jointly with the Boards of tie Ltd and Transport 25 Edinburgh Limited? 28 1 A. I see that. 2 Q. Are you familiar with this document? 3 A. I'm pretty sure I would have seen it at the time, but 4 I can't recall specifically, I'm afraid. 5 Q. If you take it from me there are corresponding documents 6 of the same date appearing to be from the tie Board and 7 the TEL Board, just for completeness? 8 A. Okay. 9 Q. If we look down to the delegated authority reference at 10 the foot of the screen, paragraph 4 says: 11 "To approve the proposed delegated authority 12 arrangements to be adopted in order to ensure an 13 efficient and properly controlled process was followed 14 through to contractual commitment and during project 15 implementation: 16 "The delegated authority arrangements proposed and 17 approved were ..." 18 We see what it says: 19 "A Committee of the Boards of the Company, the Tram 20 Project Board and tie Limited would be immediately formed 21 comprising Messrs Gallagher, Mackay and Renilson, to 22 whom authority is delegated to approve final execution 23 by the tie Chairman of Notification to Award, the 24 Infraco Contract Suite, and any necessary related 25 agreements on condition that ..." 29 1 The first condition is: 2 "The final terms of the contractual arrangements are 3 within the terms of the Final Business Case, subject to 4 slippage of up to one month in programmed revenue 5 services ..." 6 And 2: 7 "They unanimously conclude that it is appropriate to 8 do so; and 9 "3. Approval has been received from the CEC 10 Chief Executive to proceed to execution of the Infraco 11 Contract Suite." 12 Do you see that? 13 A. I see that, yes. 14 Q. Did you understand these three things as being the 15 matters of which the Approvals Committee had to be 16 satisfied before they should recommend conclusion of the 17 contract? 18 A. That seems to be clearly stated, yes. 19 Q. Now, in the minute that you have drafted, it is inherent 20 in it that the three-man committee concluded it is 21 appropriate to conclude or to enter into the contract? 22 A. If they approved that minute, that would be the 23 conclusion, yes. 24 Q. There is no express mention in your draft minute for the 25 Approvals Committee, and we can go back to it if you 30 1 would like, of a consideration of whether the 2 contractual arrangements are within the terms of the 3 Final Business Case. Would you agree with that? 4 A. That seems to be the case, yes. 5 Q. Are you aware whether or not a separate exercise had 6 been carried out by the Approvals Committee to assess 7 whether the Contract Suite was within the terms of the 8 Final Business Case? 9 A. I'm not aware of any additional process having been 10 carried out. 11 Q. Were you aware of whether or not that process was ever 12 carried out at all? 13 A. Not in the sense of a specific process, but the people, 14 the members of that committee would be, I would expect, 15 fully knowledgeable about the content of the Final 16 Business Case and the close report documents, and that, 17 I would think, would be the documents they would use to 18 conclude with respect to that matter. I can't speak for 19 them, obviously, but that's what I would understand had 20 happened. 21 Q. We heard evidence from the three members of the 22 committee. It was your understanding of the person who 23 had prepared the minute, and you didn't include 24 consideration of that matter, it was your understanding 25 it had been dealt with separately? 31 1 A. Yes, and any other issues that were relevant to the 2 meeting that I did prepare the draft minute for. 3 MR LAKE: I understand. 4 Thank you, Mr Bissett. It's not been many 5 questions, but that's all I have to ask this morning. 6 A. Okay, thank you. 7 CHAIR OF THE INQUIRY: I don't think there are any issues. 8 Thank you very much, Mr Bissett, you're free to go, and 9 hopefully we won't call you again. 10 A. Thank you. 11 (The witness withdrew) 32 1 INDEX 2 PAGE 3 MR GRAEME BISSETT (recalled) .........................1 4 5 Examination by MR LAKE ........................1 6 7 MR ROBERT DAWSON (affirmed) .........................33 8 9 Examination by MR LAKE .......................33 10 11 Examination by MR DUNLOP QC ..................95 12 13 14 15 16 17 18 19 20 21 22 23 24 25 114