1 Tuesday, 20 March 2018 21 MR LAKE: My Lord, the next witness is going to be 22 Dennis Murray, but I don't think he's here just yet. So 23 that might be an appropriate time to take a slightly 24 earlier break. 25 CHAIR OF THE INQUIRY: We will resume again -- it will 60 1 certainly be after 11.10, but it may be later, depending 2 on the arrival of Mr Murray. 3 (10.49 am) 4 (A short break) 5 (11.09 am) 6 MR DENNIS MURRAY (sworn) 7 Examination by MR LAKE 8 CHAIR OF THE INQUIRY: You will be asked questions by 9 Mr Lake who is Counsel to the Inquiry, and if you just 10 listen to the question and answer it as directly as 11 possible. 12 If you also speak slowly so that the shorthand 13 writers can keep up with what you're saying, and will 14 you speak into the microphone so everyone can hear what 15 you're saying. If you don't understand a question or 16 need clarification, just say so. 17 A. Thank you, my Lord. 18 MR LAKE: Mr Murray, could you state your full name, please. 19 A. Dennis Murray. 20 Q. You have been of assistance to the Inquiry in providing 21 a number of different statements, and what I would like 22 to do just at the outset is identify these. 23 First of all can we have on screen document 24 TRI00000063_C. I think you should have a paper copy 25 also? 61 1 A. Yes, I do. 2 Q. Is this a copy of a statement that you provided to the 3 Inquiry in a question and answer format? 4 A. Yes. 5 Q. You have signed that on the second last page, page 55, 6 with the addition of certain comments, and that was from 7 April last year? 8 A. Yes. 9 Q. That's the first statement. Then could you also look on 10 screen at a document TRI00000156. We get another set of 11 questions and answers that were put to you under cover 12 of a letter of 31 August. Do you recognise that? 13 A. That's correct, yes. 14 Q. They too are matters that were provided by you for the 15 purposes of the Inquiry? 16 A. Yes, correct. 17 Q. That one is not signed. 18 Then could we look at a document on screen, 19 TRI00000155. Do you recognise this as additional 20 questions that were put to you, as it says in the 21 heading there, in an email dated 28 September 2007? 22 A. Yes, I do. 23 Q. You have added your responses there, the lighter type, 24 as opposed to the bolder type? 25 A. That's correct, yes. 62 1 Q. Finally, could we look at document TRI00000249. Once 2 again, are these questions that were put to you under 3 cover of an email of 16 November 2017 with your 4 responses in red? 5 A. That's correct, yes. 6 Q. Are you happy that all these documents be taken as being 7 your evidence given under oath for the purpose of this 8 Inquiry? 9 A. I am, yes. 10 Q. Thank you very much. 11 What I would like to do is just ask you a few 12 questions of clarification about particular matters. If 13 we could take things in reverse chronological order and 14 start with Mar Hall, if I may? 15 A. Okay. 16 Q. You were present at the Mar Hall mediation, I think? 17 A. I was, yes. 18 Q. What was your role at that mediation? 19 A. My role at mediation was to assist the principals in 20 arriving at a success in the mediation, which was to 21 primarily attempt to reach some kind of settlement with 22 the consortium going forward. 23 Q. Were you involved in discussions with -- I should start, 24 when I say the principals, who were you referring to 25 there? 63 1 A. The principals who -- at that time and during that 2 mediation would be Sue Bruce, Vic Emery -- Sue Bruce and 3 Vic Emery, I guess, yes. 4 Q. Were you involved in discussions with them about 5 strategies and desired outcome? 6 A. Not -- not with Sue Bruce and Vic Emery, but with others 7 at tie and CEC, I may well have had some conversations, 8 but not in a structured manner. I was often asked to 9 attend some meetings, not all meetings, but attend 10 meetings to give what would be a quantity surveying 11 piece of advice. 12 Q. It's clear, and we will come on to look at this a little 13 bit, that you had conducted various analyses beforehand 14 with a view to identifying what costs would be for 15 various options? 16 A. That's correct, yes. 17 Q. You provided that information to the Directors of tie, 18 and it also went on to Sue Bruce? 19 A. Yes. 20 Q. Did you also get involved with discussions with anybody 21 in which strategies might be the best, or which outcome 22 was the most desirable? 23 A. Not in a -- not in a sense that it was a formal meeting 24 to decide those matters, but I would -- there were so 25 many different meetings and discussions going on, 64 1 I expect I would have been invited to comment. 2 Q. What I would like to do is just concentrate for the time 3 being on the information that you provided, rather than 4 strategic discussions. If we could look, please, at 5 a document, it's TIE00106500. 6 Do you recognise this document? 7 A. I do, yes. 8 Q. It's one that you prepared? 9 A. I was the author of that, yes. 10 Q. Can you recall who asked you to prepare it? 11 A. I think it was born out of discussions that were going 12 on elsewhere in respect of what would have been Project 13 Carlisle that ended up as Project Phoenix. And there 14 were parallel discussions going on with that, and 15 I can't remember how I was instructed to produce this, 16 but my memory would be that it would be Steven Bell 17 would have discussed it with me and asked me to come up 18 with an entitlement paper, from the tie QS perspective. 19 Q. Perhaps a clue is in the title, "Infraco Entitlement", 20 but what were you asked to consider? What were you 21 asked to do here? 22 A. I was asked to consider what would be -- I think this 23 report discusses principally Project Phoenix, and I was 24 asked to consider what the outturn cost would be for 25 taking the off-street section from the airport to 65 1 Haymarket. 2 Q. If we could enlarge the upper half of this page, it 3 notes there right at the top: 4 "The following is a Report of tie assessment of 5 financial entitlement for Infraco in two parts. 6 "1. To complete the Infraco works for Airport to 7 Haymarket." 8 It refers there to Project Phoenix or PP, then: 9 "2. To complete works to a suitable point and 10 demobilise (Project Separation, PS)." 11 I think the whole of this paper deals with the first 12 of those two questions, the pricing to Haymarket? 13 A. It does, yes. 14 Q. Was there a separate paper prepared by you that 15 considered the cost of separation, or was that dealt 16 with by others? 17 A. I don't think there was a separate paper. I think the 18 intent was to present the two papers, but the contents 19 of this report would inform both of those particular 20 tasks. 21 Q. In terms of the question of taking the project to the 22 airport, could we go to page 2 of this, please, and 23 enlarge the upper half. We can see the heading, 24 "Infraco Entitlement to complete works from Airport to 25 Haymarket (Project Phoenix)", and under "Methodology" 66 1 you say: 2 "A separate calculation is shown for each Infraco 3 Member." 4 In terms of things being shown, this is going to 5 involve a little bit of jumping around in this document, 6 but if we go to a table that appears on page 15 of this 7 document, we can see the heading, "Report PP1A", and: 8 "Calculation of Assessment of Infraco Entitlement (A 9 using tie estimate of change)." 10 When you refer to different figures being given, is 11 this the table that you are referring to? 12 A. Yes. 13 Q. I think we will be jumping back and forward a little 14 bit, but if we could go back to page 2 for the moment to 15 look at your methodology. 16 The heading, "Civils", you start by saying: 17 "Infraco Entitlement is assessed by tie and 18 established by building up the Infraco Contract Price 19 from the contract works price plus changes and other 20 contractual entitlements to estimated final price, 21 adhering to the mechanisms in the Infraco Contract." 22 I just want to be clear. The approach you've taken 23 here is essentially starting from the basic price and 24 adding to it everything that additional has had to be 25 done; is that correct? 67 1 A. That's correct. What I have called, I think, elsewhere, 2 a bottom-up approach, using the contract as the base. 3 Q. Were you aware -- was that the same approach that was 4 being taken by the contractors? 5 A. No. Sorry, I was aware it wasn't. 6 Q. Were you aware of what approach was being taken -- 7 A. I was aware of the approach taken by the contractors. 8 Q. What was their approach? 9 A. Their approach was to arrive at what I would call 10 a top-down approach, by taking the total cost of the 11 supply chain and the total costs that they anticipated 12 to completion of this work, and made no reference to the 13 base price or any of the changes that had gone on or 14 would likely to be discussed and agreed in future. 15 Q. If we read on, then you say: 16 "This assessment commences with the construction 17 work price." 18 I think when you say 55177, that's GBP55 million? 19 A. It is, yes. 20 Q. "... then adds Changes properly notified, agreed and 21 payable under the Contract, then Changes properly 22 notified but not yet agreed, then changes still to be 23 ascertained/notified to arrive at an estimated final 24 value of works properly due under the terms of the 25 Infraco Contract." 68 1 Is that the building-up scope that you describe? 2 A. That is, yes. 3 Q. So if we jump forward to see how that appears on page 15 4 in the table, there are other versions of this table, 5 but we will stick to this one for the moment. For 6 example, if we look at the left-hand column, it's headed 7 "BB". I take it that's Bilfinger Berger? 8 A. It is, yes. 9 Q. We start there with what we say is the CWP Section A, 10 and we see that figure we have just referred to, the 11 55,177,000? 12 A. That's right, yes. 13 Q. Underneath that we have got the various components you 14 referred to, changes agreed, changes to agree, and 15 changes not notified. 16 A. Yes. 17 Q. Now, changes agreed, presumably that was 18 a straightforward matter of looking at documentation to 19 see whether something had been resolved between the 20 parties? 21 A. That would have been the status of the change register 22 at that particular time, I think. 23 Q. Now, there had been a considerable amount of 24 controversy, the Inquiry is aware, as to whether or not 25 matters amounted to changes? 69 1 A. Yes. 2 Q. Presumably, if changes were agreed, it was simply 3 a matter of -- there was no longer any doubt in relation 4 to that? 5 A. That's correct, yes. 6 Q. What about in relation to other areas, where there was 7 a dispute as to whether or not something was a change? 8 A. That was -- if we move down in -- to the next line, the 9 changes to agree, was -- we will come to the other table 10 after this, I guess, but that was the -- changes to 11 agree was the amount that the tie QS team had ascribed 12 to changes that were notified and priced using tie's 13 version of the pricing. 14 Q. Now, in some -- start again. 15 The Inquiry has already heard that there were 16 disputes at earlier stages in the project as to whether 17 or not something even was a change and these were taken 18 to adjudication. Were you aware of that? 19 A. Yes. 20 Q. When the question was of a change to agree, was the only 21 dispute as to the value of that change or what did you 22 do as to whether there was a change at all? 23 A. The changes to agree amount was taking all of the 24 changes that had been notified to that point, and 25 assumed that the liability would be against tie. 70 1 Q. So you gave -- 2 A. And there would be entitlement on these without -- 3 without challenging that at this point. 4 Q. Essentially for these purposes you acceded to the 5 Infraco argument that anything they had claimed would be 6 a change? 7 A. Correct, yes. 8 Q. We can see there the figure that's been put on this 9 table is 13,793,000? 10 A. Yes. 11 Q. For completeness we should note that the figures above 12 it are 55,177,000 and 12,238,000. Do you see those 13 also? 14 A. Sorry? 15 Q. I'm talking about the first two entries in that 16 Bilfinger Berger column, 55,177,000 and 12,238,000? 17 A. Yes. 18 Q. You referred to it, and I have referred to it also, 19 another table. Could we look at the next table, please, 20 page 16. We can see this time the heading is, "Report 21 PP1B, Calculation of Assessment of Infraco Entitlement 22 (B - using Infraco estimate of change)". 23 A. Yes. 24 Q. It starts, the first two entries in the Bilfinger column 25 are exactly the same for CWP and changes agreed? 71 1 A. Yes. 2 Q. But the third entry under "Changes to Agree", whereas 3 previously it was 13.7 million, it is now 28,942,000? 4 A. Yes. 5 Q. What's this figure? Where is it derived? 6 A. This figure is the -- the amounts taken from estimates 7 that we'd received from Bilfinger at that time. Rather 8 than our appraisal of those, if you like, which was on 9 a previous form, this form was to simply plug in all of 10 the estimated notices of change that had been provided 11 at that stage. 12 Q. So not only are you accepting the principle of change, 13 you are accepting the Infraco valuation of that change? 14 A. Yes. 15 Q. If we go back to the previous page for a minute -- if 16 you go back all the way to page 2, to look at the 17 methodology. You have noted there that in the second 18 full paragraph, it's calculated separately for each of 19 the members. Then you say: 20 "Then is added an assessment of the prolongation of 21 Preliminaries built up from agreed extension of time and 22 estimate of extension of time yet agreed, priced using 23 the schedules in the Infraco Contract." 24 A. Yes. I think that should say "of EOT not yet agreed". 25 Q. I'm stumbling reading it slightly. If we look back to 72 1 page 15, to see where that happens, if we look halfway 2 down the table, we can see a separate section of the 3 table with the heading "Prelims"? 4 A. Yes. 5 Q. And the figures are put in there? 6 A. Yes. 7 Q. Now, once again we can see, if we look under the 8 Bilfinger column, roughly 8.8 million, 27.7 million, and 9 10.2 million, using the tie figures? 10 A. Yes. 11 Q. If we go over to the following page, the corresponding 12 three figures, the first two are the same, 8.8 million 13 and 27.7, but the EOT extension of time figure has gone 14 up from 10.2 million to 20.665 million. 15 A. Yes. 16 Q. Is that once again using Infraco's figure as opposed to 17 tie's figure? 18 A. It's using, I think -- it's using -- we had some 19 exercises carried out by independent consultants in 20 respect of time, and it was using a lower end and 21 a higher end, because I don't think we actually had at 22 that stage an Infraco fully priced EOT submission. 23 So we looked at it on two bases. One was the lower 24 end as advised to us in terms of an extension of time, 25 and this one was intended to be the higher end of that. 73 1 Q. Once again, if we look back at page 2, and if we scroll 2 down a little bit and look under the heading "Systems", 3 we see: 4 "For systems the Contract Price is established from 5 the Contract Price Analysis and Changes under the 6 Infraco Contract are added. The Contract Price Analysis 7 figure includes off-street Construction (38,390,000) 8 plus System Wide (4,919,000) plus Design (8,124,000). 9 An apportionment of on-street is added as follows." 10 We will go on to look at what follows in a minute. 11 Is this analysing out the projected Siemens price? 12 A. It is, yes. 13 Q. Others can check later if they wish, but if we add up 14 the three figures that have just been given in that 15 paragraph, I think they come to 51,433,000? 16 A. Yes. 17 Q. If we look at -- again, carry that through to page 15, 18 and we can see that is the first figure that's been 19 entered into the Siemens column? 20 A. Yes. 21 Q. Looking down, we can see a similar process is 22 undertaken. Changes agreed. They are rather fewer, the 23 systems work not really having got underway at that 24 time? 25 A. Yes. 74 1 Q. But then you have also got a separate section set out 2 below that for preliminaries, where once again there are 3 fixed time and extension of time values given? 4 A. Yes. 5 Q. For completeness, if we go over to page 16, you can see 6 once again that whereas the extension of time figure in 7 the first table was 8.1 million, in the second one it's 8 12.96 million. Once again, does that reflect the upper 9 and lower bounds of the independent assessment that had 10 been carried out? 11 A. Yes. 12 Q. Going back to page 2 then, just so we understand the 13 various allocations made, still looking under the 14 heading, "Systems", the second paragraph notes: 15 "Siemens System Wide Works are works not specific to 16 the geographic section from Airport to Haymarket but 17 works may be completed such as to hand over to tie (if 18 appropriate for use in the remaining works) to install. 19 A 75 per cent apportionment is made for work done." 20 Can you explain what's happening there? 21 A. Yes, I think there is another spreadsheet in here which 22 breaks down the contract construction works price, and 23 from that construction works price breakdown, there's an 24 element of Siemens system-wide works which is to cover 25 the whole system. 75 1 So it's very, very -- in other words, there was no 2 accuracy attached to making any kind of geographic split 3 between the off-street and the on-street. That 4 information wasn't available to me. 5 So what we did was we took a -- perhaps you would 6 call it an arbitrary split, but on the basis that we had 7 no better information, so we took a 75 per cent 8 apportionment for work done. 9 Q. Below that, on page 2, we can see it says "Siemens 10 System Wide Design": 11 "tie has no visibility of the status of design to 12 complete by Siemens and if a Project Phoenix conclusion 13 is reached then this design will require to be reviewed, 14 warranted and assessed for its fitness for purpose for 15 tie to adopt in the remaining works. A 75 per cent 16 apportionment is made in respect of the Siemens design 17 work carried out system wide - on-street." 18 Is that the same process that you're talking about? 19 A. It is. 20 Q. A nominal allocation carried out. 21 A. There was a commercial allocation rather than a review 22 of the whole status. 23 Q. You see further down on that page, you go on to consider 24 SDS and CAF with whom we're less concerned at the 25 moment, but you did carry out an assessment of those 76 1 also? 2 A. Yes. 3 Q. Go over to page 3, please. Enlarge and look under the 4 heading, "PP1A Calculated Assessment". That's a 5 reference to the table we have just been looking at; is 6 that correct? 7 A. Yes. 8 Q. What you say there is: 9 "The Change Register in relation to Section 2A-7..." 10 That's the airport to Haymarket: 11 "... has been priced by tie to incorporate:" 12 Actual changes, estimated changes, and 13 contamination. Do you see those three? 14 A. Yes. 15 Q. I think the first two are the changes we have already 16 discussed? 17 A. Yes. 18 Q. What was meant by contamination? 19 A. I think there was a notice that there was some 20 contamination works in the off-street, but I don't think 21 anybody had actually -- in other words, there was 22 something to be dealt with there, but I don't think it 23 had actually been ascertained, and I think -- I believe 24 Bilfinger gave an estimate of what that would be, and we 25 simply plugged that estimate into here to give it 77 1 some -- to include it in the figures. 2 Q. Then you note that the values for these three elements 3 have been added to the construction works price. 4 A. Yes. 5 Q. And provisional value engineering sums are 6 added/deducted as appropriate, and the subtotals have 7 been spread amongst Balfour -- Bilfinger Berger, 8 Siemens, CAF, SDS and maintenance? 9 A. Yes. 10 Q. You note: 11 "In addition for completeness of the assessment of 12 Infraco Entitlement in a Project Phoenix scope, the 13 amounts for work carried out in Sections 1A, 1B, 1C, 1D 14 and Princes Street Supplementary Agreement are added." 15 A. Yes. 16 Q. That is also because they would have to be taken account 17 of any price for the works -- 18 A. Exactly so they would compare apples with apples, for 19 the ongoing Project Phoenix. 20 Q. So if we go back to page 15 and see how these matters 21 are carried into the table, we'd already looked at the 22 first three entries, the construction work price, 23 changes agreed, and changes to agree. 24 The changes not notified, insomuch as there hadn't 25 yet been a claim or anything similar made by the 78 1 consortium, how did you put a figure on those? 2 A. My recollection is that Bilfinger had given us a figure 3 of 8 million for changes not notified at that time, and 4 it possibly came out of the Project Phoenix proposal. 5 I'm not entirely certain of that, but it was a figure 6 that was given to us, I believe from Bilfinger, and we 7 simply plugged that in because we had no better 8 knowledge at that time. It was a stated additional 9 amount, so we just felt obliged to plug it in to the 10 numbers. 11 Q. So essentially you had to take what the consortium said 12 at face value? 13 A. We did, yes. 14 Q. For that reason, if we look over to the following page, 15 page 16, in the table with the consortium values, it's 16 exactly the same number, the GBP8 million? 17 A. Yes, we had no better information. 18 Q. If we go back to page 15, the previous page, and just 19 follow through the various elements, we can see the 20 allowance for contamination, provisional systems and 21 value engineering, are all put in there. We see those 22 explained? 23 A. Yes. 24 Q. After that, the additions made for the work done and the 25 Princes Street Supplementary Agreement? 79 1 A. Yes. 2 Q. If those things follow all the way through, they bring 3 out a grand total in respect of Bilfinger at the foot of 4 the page of 148.5 million. 5 A. Yes. 6 Q. And similarly follow down the Siemens column, ultimately 7 we come to a total of 98.6 million there? 8 A. Yes. 9 Q. Then the column to the right totals the two aspects of 10 that element of the infrastructure works. 11 A. Yes. 12 Q. Going back, please, to page 2 -- 13 CHAIR OF THE INQUIRY: Sorry, before doing that, we see the 14 contamination figure as 3,000, which you explain was the 15 4,000 less 1,000 for change; is that right? 16 A. I think my recollection is that there was probably some 17 amount already paid and included in the previous 18 changes. So that was the 1 million off the total of the 19 4 million, leaving a balance of 3. 20 CHAIR OF THE INQUIRY: I think you said the 4 million was 21 a figure that you got from Infraco. 22 A. Yes. 23 CHAIR OF THE INQUIRY: If you look at the next table on 24 page 16, contamination there is 6 million. Could you 25 understand how it came to be that? If the original 80 1 figure of 3 million came from 4 million given by 2 Infraco. 3 A. Yes. I can't remember. 4 I can't remember. 5 CHAIR OF THE INQUIRY: Thank you. 6 A. I think all I can say is it wasn't something that we'd 7 calculated. It was figures that were used from -- and 8 provided by others. 9 MR LAKE: Could I ask you to go back to page 5, please. 10 I think we may have an explanation here for the point 11 that Lord Hardie has raised. Do you see there is 12 a heading towards the centre of the page, "PP1B", and 13 this time it's related to that table, with the title, 14 "Calculated Assessment of Infraco Entitlement using the 15 tie estimated change values". Do you see that? 16 A. Yes. 17 Q. What it says underneath that is: 18 "Figures all as PP1A except that the Changes to 19 Agree figure represents the Infraco position based upon 20 Estimate values submitted. This is shown for comparison 21 purposes only, given that the submitted Estimate values 22 will not represent finally agreed values by historical 23 reference. In addition the amounts for Contamination 24 are included as GBP8 million less GBP1.8 million 25 included in the Changes value." 81 1 Was that GBP8 million a consortium figure? 2 A. Yes. 3 Q. When you say that these figures are shown for comparison 4 purposes only, given that submitted estimate values will 5 not represent finally agreed values by historical 6 reference, could you explain that? 7 A. I think I'm saying there that the estimated final values 8 may not be -- they were only estimated values at that 9 time. When it was all worked through, the numbers may 10 well change. 11 Q. Looking further down that page, we see a sub-heading, by 12 reference to the table on page 15, of "Further 13 Entitlements". We note: 14 "In addition to changes under the contract there 15 are other items to consider when assessing the 16 entitlement due to Infraco in a Project Phoenix 17 calculation. For example it is expected that Siemens 18 will have incurred cost in the delivery or part delivery 19 of certain items not included in the measured value of 20 Off Street works or elsewhere. These items are only to 21 be considered if the deliverables associated are 22 satisfactory to tie, warranted and appropriate for tie 23 to use in the remaining works. 24 "In addition, Infraco will pursue disruption and 25 other claims some or all of which may have to be given 82 1 credence. 2 "A tie assessment of Further Infraco Entitlement is 3 set out in Report PP4." 4 It's given a total value of 18,967,000. 5 What claim is this considering over and above 6 preliminaries and the various changes that are referred 7 to in the contract? 8 A. I think it would include the balance of Siemens 9 materials, which had -- if or to the extent that they'd 10 been procured and supplied to that particular point in 11 time, there was the feeling that we should include for 12 that value of materials, because it may well have been 13 particular to the Edinburgh Tram Project and not be able 14 to be re-used elsewhere. 15 Q. I'll come back to the question of materials in a little 16 while. 17 If we go forward to reading down the page to 18 "Summary", you note that: 19 "tie's assessment of Infraco entitlement is 20 summarised in attached Spreadsheet in Report PP1A and 21 PP1B to this Report. 22 "In addition a check exercise has been carried out 23 to verify the Infraco Entitlement for the civil 24 engineering works. 25 "This is in the form of a cross check of entitlement 83 1 with Bills of Quantities prepared by Cyril Sweett for 2 works from Airport to Haymarket (Project Phoenix cope). 3 "Cyril Sweett have been commissioned to produce 4 a Bill of Quantities for the civil engineering works 5 from Airport to Haymarket. The Bills were compiled from 6 current IFC drawings where available. The Bills have 7 then been priced by a team of tie Quantity Surveyors 8 using Schedule Part 4 Rates and Prices or rates deduced 9 therefrom. This exercise is intended to be a reference 10 point and check basis for the scope of works that will 11 be constructed compared with a CWP plus changes approach 12 that reflects Infraco Entitlement in the contractual 13 arrangement." 14 Could you explain why Cyril Sweett were brought in 15 and what the objective of that exercise was? 16 A. I think, to give some check to the exercises that we'd 17 done and produced in the forms that we looked at, PP1A 18 and PP1B, we felt it was necessary to have an 19 independent review of that, given that it was going to 20 be extremely under scrutiny, if you like, in the Project 21 Phoenix negotiations. 22 So we interviewed five different QS firms and we 23 picked Cyril Sweett, and Cyril Sweett went off and 24 carried out complete -- or produced a complete Bill of 25 Quantities for the off-street works, using what were 84 1 pretty fairly developed IFC drawings at that stage of 2 the works, so it would then give us a complete picture 3 from which to assess whether our allowances were in the 4 right ballpark or not. 5 So we then, once the Bills were produced, and the 6 Bills were not -- they were not influenced in any way by 7 tie. They were done completely independently. 8 When the Bills were produced, the original idea was 9 to have Cyril Sweett to be given a set of Schedule 10 Part 4 rates and price it using Schedule Part 4 rates, 11 and alternatively price it using market rates that they 12 believed was correct for that civil engineering works. 13 But ultimately it was seen that it was a better -- 14 it would be quicker because the tie quantity surveyors 15 had a better knowledge of the Schedule Part 4 rates, 16 that they populated -- we populated the Schedule Part 4 17 rates into the Bills of Quantities, and Cyril Sweett 18 populated the market rates into it. 19 That was the process and that was the thinking. 20 Q. In an earlier answer to me this morning, you have 21 explained that your approach was a bottom-up, the 22 consortium approach was top-down? 23 A. Yes. 24 Q. How does the Cyril Sweett approach fit into that 25 dichotomy? Were they also doing bottom up or were they 85 1 just looking at the end and pricing it? 2 A. If you like, the Cyril Sweett approach would be to do 3 neither. It would be to actually do a complete 4 correlation of the work that required to be done, 5 measured and valued from start to finish, rather than 6 have the -- so you wouldn't have the original contract 7 works price, whether that was adequate or not, and the 8 changes, whether they were adequate or not, in pricing 9 terms. You had a complete independent view from a Bill 10 of Quantities that didn't exist in the tender. 11 Q. If we look under the heading back on the page on the 12 screen, you see "Summary of Bill Totals": 13 "A spreadsheet comparison of Infraco Entitlement 14 against the priced Bill of Quantities is attached in 15 Report number PP2. 16 "In essence the price the BOQ totals for civils 17 construction works are marginally less than entitlement 18 using tie's valuation of Change and the contract 19 mechanisms. 20 "This cross check exercise identifies that the 21 Infraco Entitlement coming from the original Contract 22 Price plus changes to entitlement value is consistent 23 with a full remeasured value of works taken from IFC 24 scope." 25 Is that saying that the exercise carried out by 86 1 Cyril Sweett produced a figure very close to but in fact 2 less than the bottom-up exercise that you had conducted? 3 A. Yes. 4 Q. It refers to table PP2. Could we look at that table, 5 please? You will find it on page 17. What we can see 6 there is the -- it starts in the second-most left-hand 7 column, CWP amount. You can see once again the total of 8 55.177 million, in relation to which you have priced 9 changes of GBP26 million, bringing out a total of 81? 10 A. Yes. 11 Q. To the right of that there's a heading, "BOQ Amounts". 12 What are the figures contained in that column? 13 A. The -- those are the totals from the Bills of Quantities 14 that were priced by Cyril Sweett. 15 Q. That brings out a value of GBP78.871 million? 16 A. Yes. 17 Q. Now, there isn't a third category there, but if you look 18 also with me, please, at page 21, it's the second 19 report, also PP2. It may in fact be that this is the 20 one that was referred to earlier. But you see there are 21 three shaded columns towards the centre of the table? 22 A. Yes. 23 Q. Perhaps could we enlarge those shaded columns to assist 24 reading them. 25 Left-hand column, the total tie assessed value, we 87 1 can see it brings out the value of GBP81.208 million 2 that we saw in the previous table and you said was your 3 bottom-up valuation? 4 A. Yes. 5 Q. To the right of that, the priced BOQ by reference to 6 Schedule Part 4 rates, that was the GBP78.871 million 7 which we saw again in the previous table was produced by 8 Cyril Sweett, as this contract says, using the contract 9 rates? 10 A. No, I think column D in this report is -- is the price 11 BOQ using the Schedule Part 4 rates. So it's the 12 Cyril Sweett quantities priced by tie using the Schedule 13 Part 4 rates. 14 Q. And column E? 15 A. Column E is the alternative exercise, which was the 16 Cyril Sweett Bills priced by Cyril Sweett at market 17 rates. 18 Q. We can see that that column E brings out a comparative 19 total of GBP75.795 million, less than either of the two 20 previous ones? 21 A. Yes. 22 Q. So what defect did this Cyril Sweett exercise have on 23 the confidence you felt could be placed on your 24 bottom-up exercise? 25 A. I think we -- we felt it was -- it gave some comfort to 88 1 our numbers because it's quite a complex exercise to 2 carry out. So we -- we felt that these numbers were 3 close enough to give us comfort that it was of -- within 4 a reasonable margin correct in our view, in terms of 5 a measured value of work. 6 Q. Over what sort of period of time did you prepare the 7 figures in this report? 8 A. I guess the tie spreadsheets, PP1A and B, were evolved 9 over a two or three-month period, and Cyril Sweett's 10 exercise was done about -- in maybe a six-week period or 11 something. 12 CHAIR OF THE INQUIRY: Sorry, did I understand you to say 13 that Cyril Sweett were effectively doing a measure of 14 the work that had been done, putting aside the contract 15 works price, and putting aside money paid for changes. 16 A. Yes. 17 CHAIR OF THE INQUIRY: Apart from a measure of work done, it 18 then did a measure of work that they thought would be 19 required to be done? And then they applied market rates 20 to that? 21 A. Yes. 22 CHAIR OF THE INQUIRY: So are you comparing like with like 23 when you look at Cyril Sweett's exercise and your 24 exercise? Because you start with the contract works 25 price, and then add on the actual payment for change. 89 1 A. We are not comparing like with like in terms of the 2 exercise that's carried out and the mechanics of the 3 exercise, but what it does do is it gives you an answer 4 using two different techniques to come to an evaluation 5 of the works to be carried out. In fact, Cyril Sweett 6 did two different exercises. They actually valued the 7 works to that date in time, ie a progress value of the 8 works, and a valuation of the works to complete. 9 So the exercises are different, but at the end of 10 the day, they're basically comparing the measured work 11 carried out. 12 CHAIR OF THE INQUIRY: When you did the exercise of work to 13 be done or measuring the work to be done, was that done 14 as a separate exercise or was it all ultimately lumped 15 together as a Bill of Quantities? 16 A. There's a full report from Cyril Sweett with a due 17 diligence report, which actually splits it all up in 18 there. 19 CHAIR OF THE INQUIRY: Yes. Thank you. 20 Mr Lake? 21 MR LAKE: Although not a full report, if we look at page 10 22 of the same document, this is headed Document 5, "tie 23 Planning", on the top left-hand corner. We can see the 24 Cyril Sweett logo. 25 Is this part of the output that they provided for 90 1 the exercise? 2 A. That's the summary page. 3 Q. That's the summary page. If we go to the next page, I 4 think the summary continues. 5 If we go to the next page, there is further summary 6 information provided? 7 A. Yes. 8 Q. But a separate report underlies this? 9 A. Those are extracts from the Sweett report, yes. 10 Q. If we go back for a moment to page 15, which is the 11 table PP1A, we can see there -- I'll try and pick some 12 figures. If we look at the "Further Entitlement" 13 section at the foot of the table here, there's a blank 14 under the Bilfinger column and a total of 15 GBP20.19 million under the Siemens column. Do you see 16 that? 17 A. Yes. 18 Q. Just following this through, the first figure on the 19 Siemens column for construction work price is 20 55.625 million. Do you see that? 21 A. Yes. 22 Q. Could we look now, please, at 19 of this. This is 23 a report, again, it's got a heading, "Report PP1A 24 Calculation of Assessment of Infraco Entitlement (A - 25 using the estimate of change)", so once again it seems 91 1 to be there. But the differences appear to be that the 2 Siemens figure, which was previously 51.433, here has 3 gone up to GBP55 million, and if we look at the further 4 entitlements, whereas previously there was nothing for 5 Bilfinger, but a Siemens figure of 20.19 million, here 6 we've got separate figures for Bilfinger and Siemens, 7 making up a total of 18.967 million. 8 Why is there a separate version of this table and 9 what is that representing? 10 A. There's a report PP4 in there which may explain that. 11 Q. Go to PP4, go to page 23, which is headed "Analysis of 12 "Deckchair" figures and "Infraco Entitlement" papers Project 13 Phoenix"? 14 A. Yes. 15 Q. It starts on page 23, and it's easier perhaps if we go 16 straight to page 26, the end of this part. 17 We can see that the final figure brought out here is 18 the total of GBP18.967 million which we've also seen in 19 the further Infraco entitlement as part of the table at 20 page 19. 21 A. Yes. 22 Q. For completeness, if we go back to the start, following 23 that figure through, if we go back to a passage 24 I already identified, starting at page 5, at the foot of 25 the page we began with further entitlements, and if we 92 1 go over the following page, after reference to PP4, 2 brings out the figure of GBP18.967 million. 3 Can you explain in summary what this alternative 4 calculation is intended to indicate? 5 A. I think it intended to indicate that there were other 6 things that needed consideration beyond the addition of 7 the contract works price and the changes. And the 8 preliminaries re-assessment. 9 Q. One of the matters we can see -- in fact, it started at 10 the foot of the previous page. If we go up to the 11 previous page, further entitlements. When we were 12 looking at the beginning of the second line at the end 13 of the page there: 14 "For example it is expected that Siemens will have 15 incurred cost in the delivery or part delivery of 16 certain items not included in the measured value of 17 Off Street works or elsewhere." 18 I think you said that related to Siemens materials; 19 is that correct? 20 A. Yes. 21 Q. So do we understand then -- sorry, for completeness, 22 sorry, this involves going back and forward, but if we 23 can look at the report PP4, which begins at page 23, and 24 go to the foot of the page, we can see a heading there 25 for Siemens materials. 93 1 A. Yes. 2 Q. What you seem to do there is -- there are figures for 3 Section A construction value, plus system wide, which 4 are totalled to give a figure, and you contrast that 5 with the total Siemens figure of GBP62 million. Go over 6 the page, you will see the 62. 7 Then there's a proportional -- enlarge the top. 8 Proportional pro rata figure, working out what 9 proportion Section A is of the total Siemens value? 10 A. Yes. 11 Q. Now, just follow this through. It then says: 12 "Siemens Materials are assessed as GBP11 million for 13 materials at Broxburn Yard (figure confirmed by Siemens) 14 and an assessment of GBP5 million for rail and sleepers 15 in various locations around the site." 16 Do we understand this is the value of the additional 17 Siemens material that were presently on site and 18 available to tie or the Council? 19 A. I believe so, yes. 20 Q. You referred there to a figure of GBP11 million for 21 materials at the Broxburn Yard being provided by 22 Siemens. Can you remember who and when it was provided? 23 A. I personally went to the Broxburn Yard to have a look 24 around, to convince myself that there was GBP11 million 25 worth of material, but who gave me the figure, I don't 94 1 know. 2 Q. You go on to consider: 3 "These items will only be considered if the 4 materials are suitable for Siemens to install under 5 a Project Phoenix scope and for tie to adopt and 6 incorporate into the remaining works. 7 "Section A is included in entirety in the 8 construction price." 9 What we see then is the total Siemens materials on 10 and off site is 16 million, and that's the 11 million 11 plus the 5 million we see above; is that correct? 12 A. Yes. 13 Q. You then say: 14 "Others including Bilfinger ..." 15 There's GBP10 million of material for them? 16 A. Yes. 17 Q. Bringing out a total of 26? 18 A. Yes. 19 Q. You then multiply by 69 per cent, which we see is the 20 percentage for the top of the page derived from the 21 pro rata calculation between Section A and the total 22 Siemens works? 23 A. Yes. 24 Q. So there is that -- as we see, you brought out a figure 25 of 17.94 million. Is that intended to identify all the 95 1 materials that are currently on site, on a rough and 2 ready basis the proportion of those which in fact will 3 have to be used to complete Project Phoenix? 4 A. Yes. 5 Q. Now, presumably the point is you wouldn't want to pay 6 for those materials if you were also going to be paying 7 for them under the Project Phoenix scope? 8 A. That's right, yes. 9 Q. So you then got materials not included as -- it will be 10 8.06 million, which I think is the GBP26 million less 11 the GBP17,940,000? 12 A. Yes. 13 Q. So was this an assessment by you of the additional 14 materials belonging to -- here not just Siemens, but 15 both contractors that would not be included in the -- 16 would not be required to complete the Phoenix works? 17 A. That's what I'm trying to do here, yes. 18 Q. We see you have brought out a value of GBP8.06 million? 19 A. Yes. 20 Q. Were you ever provided with any information to suggest 21 that that was incorrect or wrong? 22 A. Not during this process. 23 Q. Did you get it later on? 24 A. Later on when there was a discussion about the amount of 25 Siemens materials in the on-street section, we had 96 1 a difference of opinion with Siemens as to the value of 2 that work -- materials. 3 Q. And how was that resolved? Were you involved in it 4 being resolved? 5 A. I was -- it was round about the end of my involvement in 6 the project. It probably was the summer of 2011. Yes, 7 summer of 2011. And Siemens had put forward a price for 8 the materials that were being handed over. The issue 9 I had with that was the price that was being put forward 10 was again built on a basis that didn't refer back to the 11 original contract price. 12 So I was fairly clear in my mind that the starting 13 point for agreeing the price of those materials should 14 be reconciled back to the contract price. 15 It never was, and I had quite lengthy meetings with 16 Siemens to discuss that, and we reached an impasse on 17 that. I say an impasse; my queries weren't resolved. 18 And I don't know what happened beyond that, but we had 19 a significant difference. 20 Q. You explain -- 21 A. I think that the amount that Siemens were claiming for 22 materials were considerably out of line with the 23 original contract works price. That was my feeling at 24 that time. 25 Q. Can I just ask you to look at a production, please. 97 1 It's another one for the moment. It's SIE00000393. 2 This, as you can see from the heading, is 3 a certificate of vesting of materials that arose in 4 relation to the -- what was known as Minute of Variation 5 4 entered into following the Mar Hall Agreement. 6 A. Yes. 7 Q. One of the things was that materials from Siemens were 8 purchased under that agreement. Were you aware of that? 9 A. No. 10 Q. We can see from the top of the page here that there's 11 payment of GBP14.595 million being made, and in return 12 for that it is said that materials are being transferred 13 to tie. Have you seen this document at all? 14 A. No. 15 Q. I won't take too long with it then. 16 If I could just jump forward to page 6. We can see 17 there's a heading here of Schedule 2, Schedule of 18 Materials and Parts. 19 If you go to the following page, page 7, an 20 inventory of various pieces of Siemens equipment in 21 relation to which a customer value is given. Were you 22 ever asked to look at this or comment on this? 23 A. I may have seen a version of this at some stage. Not 24 this document, but that inventory which set out the 25 numbers for each individual component part, yes. 98 1 Q. Was that part of your link to your concerns about the 2 value being placed on materials by Siemens? 3 A. It was, yes. 4 Q. Did you make your views known within tie? 5 A. Yes. 6 Q. To whom did you make them known? 7 A. I would have made them known to Steven Bell, who was my 8 line manager, and I'm pretty sure that it was discussed 9 at meetings between Siemens, myself and Steven and 10 Colin Smith, and others, because at that point in time 11 I was being less involved, shall we say, in the process. 12 Q. You said as far as you're aware, the matter wasn't 13 resolved while you were involved? 14 A. That's correct, yes. 15 Q. Do you know how the matter was resolved at all? 16 A. I don't. 17 Q. Okay. 18 We are finished with that document on screen now. 19 If we go back to the document TIE00106500, and if we 20 go to page 15 again, we can see the fourth column along 21 is a subtotal which aggregates the Bilfinger figure and 22 the Siemens figure? 23 A. Yes. 24 Q. If we look to the very -- the grand total at the foot of 25 the page there, we can see a number is given of 99 1 GBP247 million? 2 A. Yes. 3 Q. That's using the version on page 15. If we go to the 4 version on page 19 which includes the additional 5 subjects of claims, we can see the aggregate there is 6 a little bit larger, coming out at GBP250 million? 7 A. Yes. 8 Q. But both those are using the tie figures, if you like? 9 A. Yes. 10 Q. If you go back to page 16 and look at the corresponding 11 figure, if you use Infraco estimates, we can see that 12 the total for Bilfinger and Siemens on page 16 would be 13 GBP280 million. 14 A. Yes. 15 Q. If we go to the corresponding table later, which would 16 be on page 20, the corresponding figure there has been 17 brought out at GBP283 million? 18 A. Yes. 19 Q. Obviously, I have given you a lot of figures there, but 20 we were looking at a range which ran, on the bottom end, 21 from GBP247 million to GBP283 million. Do you know what 22 use was made of these for the purposes of the mediation? 23 A. I had certainly always used this as my base for any 24 discussions that I had. Having been given the comfort 25 of the Cyril Sweett view, I was fairly comfortable to go 100 1 forward and discuss these with anybody who was involved 2 at that time, and we had lots of individual non-formal 3 meetings to discuss these which I put forward. Numerous 4 occasions. 5 Q. I will ask you to look at another production, please. 6 It's TIE00355078. Now, this is a slightly condensed 7 version of a larger spreadsheet with many more columns 8 and many more colours. Do you recognise this? 9 A. I do, although I wasn't the author of it. But I do 10 recognise it, yes. 11 Q. Have you heard of a document being referred to as the 12 deckchair analysis or deckchair figures? 13 A. I have, yes. 14 Q. Is that what we're looking at here? 15 A. I think that's a condensed version of it, yes. 16 Q. If we look down -- it's a slightly different version. 17 Under the pink heading, we have there in rows U and V, 18 we've got a heading, Phoenix QS view low and Phoenix QS 19 view high. Do you see that? 20 A. Yes. 21 Q. Then if we look across to what is now column H, and look 22 down to rows 24 and 25, we've got entries first of all 23 for infrastructure, BB and S certified, and 25, Infraco 24 build to Haymarket. 25 Do you see those? 101 1 A. Yes. 2 Q. Now, if we look across to the pink columns, and we take 3 the left one, which is Phoenix QS view low, the two 4 entries there are 124 million and 144 million, which 5 would bring out a total of GBP168.8 million -- sorry, 6 GBP268.8 million? 7 A. Yes. 8 Q. It's exactly the same figure being given for the high 9 level. 10 Do you know whether your figures that you produced 11 in your table were the ones that were used to inform 12 this view taken in this table? 13 A. I believe they were, although, as I say, I didn't 14 populate this sheet. But I believe they were, and 15 I think, from memory, if you've got the 124 and the 144, 16 you add those two together to get the 268. I think that 17 was broadly an average taken of the two -- I don't know 18 why it's been populated with a low and high with the 19 same figures. I think they've both been taken as being 20 a medium. 21 Q. If we look further down at row 29, we can see on the 22 total BSC figure, on both of those is the same figure of 23 GBP341 million? 24 A. Yes. 25 Q. We can see from the rows above that that in addition to 102 1 the -- what we saw in rows 24 and 25, that's to include 2 the vehicles, CAF, the design post novation, SDS, and 3 the SDS design risk? 4 A. Yes. 5 Q. Then if we go back to the previous document, 6 TIE00106500. Go back to page 15 of this. 7 Instead of just looking at the totals for Bilfinger 8 and Siemens, which we did before, if we look at the far 9 right-hand column, we see this is a total for everything 10 including CAF, SDS and maintenance. Do you see that? 11 A. Yes. 12 Q. The grand total on page 15 is GBP321 million; on 13 page 16, which is the tie figures, it's GBP354 million. 14 A. Yes. 15 Q. For completeness, if we go to the slightly different 16 version of the table with the extras on page 19, the 17 corresponding figure, that's GBP324 million? 18 A. Yes. 19 Q. The following page, page 20, the final figure is 20 GBP357 million? 21 A. Yes. 22 Q. So these all seem to be clustered around the figure we 23 see in deckchair? 24 A. Yes. 25 Q. Could we look at a different document now. Could we 103 1 look at document WED00000134. We look at page 235 in 2 there. 3 If we enlarge the lower part of that page, it 4 describes the various offers and counter-offers and 5 settlement. We can see in the second paragraph, 7.7, it 6 notes that the first offer to BSC was for GBP304 million 7 for the off-street section. But there were exclusions 8 of 80 million. Then in the final paragraph it notes 9 that the final offer that was made, and we've heard 10 ultimately agreed, was of a sum of GBP362.5 million. Do 11 you see that? 12 A. Yes. 13 Q. Now, going back to the figures we saw in your 14 entitlement document, that's between 79 million and 15 115 million more than the figures that you were bringing 16 out. 17 A. If you go to the first offer, the 304 million, I think 18 what's particularly confusing is that CAF are sometimes 19 in and sometimes out of these numbers. When the 362.5 20 was agreed, that excluded CAF of 60. 21 Q. Mm-hm. 22 A. So CEC's first offer to BSC of the 304, I'm not entirely 23 sure, but I guess that excludes CAF, which would be 24 60ish, taking that to 364. 25 Q. If we look at the final offer, just concentrate on the 104 1 one of GBP362.5 million, and if you take it from me that 2 that did not include CAF? 3 A. Yes. 4 Q. How do you reconcile the additional sums being paid to 5 the consortium there, as opposed to the figure that you 6 had brought out? 7 A. I can't reconcile them to that number. What -- what 8 we've gone through so far in terms of my Infraco 9 entitlement paper was the calculated amount for the work 10 as we had calculated it. To that there may well be 11 other factors, including other risk items beyond that, 12 but we had a calculated position that I felt that we 13 should build up from that, from that particular 14 position. 15 So I don't have a calculated position that comes to 16 the 362.5. 17 Q. Did you ever see anyone produce a calculated position in 18 support of the 362.5 million? 19 A. No. 20 Q. Were you told of the intention to offer that 21 GBP362.5 million before it was made and accepted? 22 A. I may well have been in a room where the figure was 23 mentioned. So I was probably aware of it, yes. 24 Q. What was your reaction to it? 25 A. I thought it was too high. From the calculated position 105 1 I had in my Infraco entitlement paper, that was -- 2 that's the reason for saying that. Of course there are 3 other factors that come into play that may well be the 4 non-calculated amount, if you like, for a settlement. 5 But I didn't have any knowledge of how that was built 6 up. 7 Q. Were there other representatives of tie, such as 8 Steven Bell with you at that time? And Richard Jeffrey? 9 A. They were in the mediation at that time, yes. 10 Q. Did they have a view on the figure of 362.5? Did they 11 make their view known to you? 12 A. I believe they were in the same position as me. They 13 thought it was too high. But we were all working -- 14 certainly the two gentlemen you have mentioned plus me 15 were working from the Infraco entitlement paper that we 16 had produced earlier. 17 Q. Okay. I'm finished with that document now. 18 This has been looking at the question of the 19 off-street works. That's the section from Haymarket out 20 to the airport. I would like to look at the on-street 21 works between Haymarket and what ultimately turned out 22 to be York Place. 23 A target figure was agreed at Mar Hall for that of 24 some GBP39 million. Do you know how that -- were you 25 involved in reaching that figure at mediation? 106 1 A. No. 2 Q. We'd earlier seen in figures such as the deckchair 3 analysis, a figure of roughly GBP22 million. Were you 4 involved in fixing that or providing information for 5 that? 6 A. I may well have been, but I can't remember how it was 7 made up. 8 Q. Okay. Were you involved in the mechanism for reaching 9 a final agreement with the consortium as to carrying out 10 the on-street works and what the price for that would 11 be? 12 A. I was, yes. 13 Q. How did parties go about trying to fix the price of that 14 element of the works? 15 A. If I take the -- obviously there's two different 16 parties. There's Bilfinger and Siemens. So they were 17 separately dealt with, if you like. 18 Bilfinger, from memory, had produced a price. 19 I can't remember the numbers because I don't have them 20 in front of me, but circa 20 million for the off-street 21 section. 22 Q. So that's the Siemens element? Or the -- Bilfinger, 23 sorry? 24 A. The Bilfinger element. And I did a report based on what 25 I thought of that, which was I thought that was too 107 1 high. And I did a detailed report on that. 2 Q. I think it might be the report you're talking of. Could 3 we look at document TIE00691425. 4 Is that your report? 5 A. That's it, yes. 6 Q. If we just look at what you say under the heading "BBUK 7 Price", you list five areas of concern. The average of 8 tender prices taken, the tender is not used, it's based 9 on a Bilfinger price. The prices are based on tenders 10 received in June that are currently being updated. The 11 prelims are too high, and that the tender clarifications 12 weren't carried through to Pricing Assumptions. 13 Are these all the things that are set out in more 14 detail in this report? 15 A. Yes. 16 Q. When you talk about obtaining tenders, these were 17 tenders that were to be obtained for the purposes of 18 pricing the contract? 19 A. Yes. The on-street works was going to be carried out by 20 civil contractors, not -- I didn't believe it was going 21 to be self-delivered. It was going to be carried out by 22 a subcontractor. And on that basis Bilfinger had gone 23 out and obtained five tenders from civil contractors for 24 the work. As my note says there, I would have expected 25 consideration to have been given to the lowest tender. 108 1 In fact, there was no consideration given to any of 2 the tenders because Bilfinger had put in a price 3 themselves which didn't relate to any of the tenders 4 that they'd received. That is what this report is 5 telling. 6 Q. Then if we go to page 3 of this, when you deal with the 7 Siemens component, the Siemens price, you note that: 8 "Siemens submitted an On Street price of 9 GBP20 million. Large amounts were included for Extended 10 Preliminaries which basically filled the gap between 11 their PPP [Project Phoenix proposals] end date and their 12 On Street programme. Essentially Siemens sought to 13 recover prelims values that were already deemed included 14 in the lump sum for off street." 15 Can you explain what your concern was there? 16 A. Yes. The -- on the basis that the on-street was settled 17 and there's a core set of prelims for both companies 18 included in the on-street section, and the on-street 19 programme, but I understood when I reviewed this 20 20 million price that Siemens had included core prelims 21 in there which would have been double dipped with the 22 core prelims that were in the off-street section. And 23 I had a long meeting with Siemens to debate this 24 subject. 25 Q. Before coming back to the remainder of this document, 109 1 could we look at another one, TIE00688781. We can see 2 we're looking at an email chain here, the last one of 3 which is from Vic Emery to Steven Bell, dated 15 July. 4 Do you see that? 5 A. Yes. 6 Q. If we look to the second page of this, on the lower half 7 of the page, this is an email I think now from you to 8 Alan Coyle of the Council, dated 8 July 2011. 9 A. Yes. 10 Q. If we look at what you say here, there is a brief note 11 on this -- I should say the heading is "Siemens". You 12 see that also? 13 A. Yes. 14 Q. You say: 15 "A brief note on this matter is as follows. 16 "I had been invited by Axel ..." 17 Would that be Axel Eickhorn? 18 A. It is, yes. 19 Q. "... to comment on the Siemens proposal for the Target 20 Sum for on-street works. The price was submitted as 21 GBP20 million. 22 "My estimate using the Contract Price Analysis for 23 the on-street works was just over GBP4.5 million. I had 24 many technical questions prepared for discussion with 25 Axel suggesting that the on-street price was not correct 110 1 but it became clear in our discussions that the price 2 difference was for reasons other than the actual price 3 to carry out the on-street works. 4 "At the meeting with Axel yesterday he explained 5 that he had priced all Siemens project resources from 6 September 2013 to May 2014 as if it were an Extension of 7 Time claim to cover the total programme movement from 8 the Project Phoenix proposed end date (September 2013) 9 to the current Revision 3a programme end date 10 (May 2014). This programme shift however is not solely 11 representative of the on-street works. It picks up an 12 overall programme shift from the off-street works which 13 ought to be included in the lump sum Settlement price. 14 The resulting price is therefore not only for carrying 15 out the on-street works." 16 Just pausing there, is this what you were saying 17 before, that essentially they had already included some 18 of this in the off-street works? 19 A. Yes. 20 Q. Now it was being claimed once again in the on-street 21 work? 22 A. Yes. 23 Q. This essentially is double counting? 24 A. That's what I believed when I reviewed this. 25 Q. You continue in your email: 111 1 "Having established this fact Axel went on to say 2 that it was his understanding that the agreement at 3 Mar Hall was such that any programme movement would be 4 picked up in the on-street Target Sum and illustrated 5 the following. 6 "Phoenix Siemens Price was circa GBP140 million. 7 Agreement at Mar Hall reduced to GBP126 million. 8 A reduction of GBP14 million. He believes that the 9 reduction was on the understanding that the cost of any 10 programme shortfall was to be picked up in the on-street 11 Target Sum price." 12 Just to be clear, is that essentially he was saying 13 to you, he wasn't disagreeing with you, but he was 14 saying he felt there was an agreement that they should 15 be entitled to do this? 16 A. Yes. 17 Q. The email continues: 18 "Axel's view is that the actual price for carrying 19 out the on-street works is GBP4 million (which compares 20 with my GBP4.5 million) and an explanation of the 21 current proposal was reconciled as - the shortfall of 22 GBP14 million added to the actual cost of GBP4 million 23 to carry out the on-street works and add GBP2 million 24 for changes post Mar Hall to arrive at a total of 25 GBP20 million. 112 1 "I have a complete breakdown of all my figures 2 reconciled with the Siemens figures if you wish to see 3 them." 4 Over the page: 5 "Hope the above is clear. Please call me if you 6 wish to discuss further." 7 So that's you setting out how you think Siemens have 8 got to the GBP20 million, and of it, GBP14 million is 9 recouping a deduction made in the off-street settlement 10 for Mar Hall? 11 A. That's the way it was explained to me, yes. That was 12 their interpretation of -- of what was -- what the 13 position was after Mar Hall. 14 Q. When you had passed on that information, did you get any 15 response from your line manager, Steven Bell, or others 16 within tie about it? 17 A. Well, as you see, the note was circulated up to 18 Vic Emery. I don't know who else, and obviously 19 Alan Coyle at the Council had seen it because I'd sent 20 the email to him. 21 I don't know what happened -- well, I do know that 22 the price subsequently was reduced from 20 to 14. 23 Q. Well, following that up, if you go back to your note on 24 this matter, which was reference TIE00691425, 25 TIE00691425. We were at page 3 of this. 113 1 I'm looking under the heading, "Siemens Price". 2 Now, taking it from the third line of that paragraph 3 there, you note: 4 "Essentially Siemens sought to recover prelims 5 values that are already deemed included in the lump sum 6 for off-street." 7 Is that what you explain in your email? 8 A. Yes. 9 Q. "This was highlighted by tie and Siemens reduced their 10 submission to GBP14 million." 11 I think that's what you have just told you us? 12 A. Yes. 13 Q. "Siemens then responded to all of the detailed queries 14 posed by tie. However, there are still many issues that 15 remain illogical and a lot of detail missing. There is 16 no attempt to correlate programme with resources for 17 each section of work." 18 So did you feel your questions, your queries had 19 been satisfactorily answered? 20 A. No. 21 Q. If we look over to the following page, please, the 22 paragraph at the top, you note that: 23 "tie responded with a further commentary and this 24 was briefly discussed at the commercial meeting on 25 10 August 2011 when Siemens stated that they have 114 1 arrived at a price for the works and there was to be no 2 further reduction. Infraco confirmed at this meeting 3 that the price was the price and if we did not like it 4 then we could find another contractor. Given this lack 5 of further communication tie has compiled a price using 6 the information provided and this is detailed in the 7 attached spreadsheet. 8 "In summary, the tie price is currently 9 GBP8.4 million. The range provided previously was 10 GBP7.7 million to GBP11 million." 11 Yes? 12 A. Yes. 13 Q. Essentially you were faced with a situation where the 14 consortium said they weren't willing to negotiate the 15 on-street price any further? 16 A. Yes. 17 Q. And it was take it or leave it? 18 A. Yes. 19 Q. The price you were concerned with then, if you go back 20 to the first page, you noted at the top here that the 21 Bilfinger element was GBP33 million, and the Siemens 22 element we can see was originally GBP20 million, reduced 23 to GBP14.5 million. 24 A. Yes. 25 Q. So taking the total of those coming out in excess of 115 1 GBP47 million, as considered in your paper, was that 2 something which you considered to be justified or 3 justifiable? 4 A. No, for the reasons I have stated in the report. 5 Q. In the final paragraph I read there you referred to 6 information in an attached spreadsheet. Just for 7 completeness, could you look, please, at document 8 TIE00691426. 9 Is this the spreadsheet that you produced that was 10 attached to your report? 11 A. Yes, I think so. Yes. 12 Q. Because if we scroll down and look at row 56, we can see 13 there the figure of GBP8.4 million is the tie view that 14 was referred to in your report. 15 A. Yes. 16 Q. To the left of that, the figure of GBP14.5 million, was 17 that claimed by Siemens at that time? 18 A. Yes. 19 Q. Okay. Thank you very much. 20 We have finished with that document now. 21 I want to go back to a very different matter, having 22 started at the end, to go back to your beginning of your 23 involvement with the project, and you came in, in 24 January 2008? 25 A. Yes, that's correct. 116 1 Q. The intention was that you would be a commercial manager 2 for the post-contract period. That's after the contract 3 had been entered into? 4 A. Yes. 5 Q. Of course when you arrived, it was clear that the 6 contract had not in fact been entered into, and it 7 wasn't until May that that was done. 8 A. That's correct, yes. 9 Q. So in the meantime what was your role in relation to the 10 negotiation of the various elements of the contract? 11 A. When I arrived, I was told that contract close was going 12 to be end of January, and that was the plan at that 13 time. And Steven Bell, whom I reported to, had asked me 14 to simply sit in at various meetings that I thought was 15 appropriate, to gain or to get up to speed with the 16 issues and the -- the project as quickly as I could. 17 So I used the time to sit in and listen and see what 18 I could -- see if I could bring myself up to speed. 19 Q. Were you aware when you arrived that Geoff Gilbert 20 intended to leave the project around about the early 21 part of 2008? 22 A. I believe it was always the case that Geoff Gilbert 23 would leave at the end of the procurement phase 24 and I would effectively take over, because it would move 25 into post-contract phase, and my role was described as 117 1 being post contract. 2 Q. In terms of post contract, if there were to be claims 3 arising under a contract, was that something that would 4 fall within your remit? 5 A. Yes. 6 Q. So insofar as when the contract was being concluded, 7 there were various terms which might give rise to 8 claims, was that something that you were asked to pay 9 any attention to? 10 A. Not in particular terms, but I was made aware of them of 11 course. There were pricing assumptions that would in 12 most contracts often result in something becoming 13 a post-contract change. 14 Q. When you were made aware that there were going to be 15 pricing assumptions in the contract, did you carry out 16 any evaluation of the likelihood of claims arising and 17 the likely magnitude of those claims? 18 A. No. I didn't have sufficient knowledge of the design, 19 the drawings, the issues that had been discussed in the 20 procurement period, the tender, et cetera. So I didn't 21 have enough knowledge to -- at that stage to put 22 a handle on that. 23 Q. In other contracts you have been involved in, not the 24 tram, where there were going to be pricing assumptions 25 that might give rise to claims, is that sort of exercise 118 1 carried out, an assessment of likely claims? 2 A. An assessment of likely risk, not necessarily claims as 3 such, but yes. 4 Q. An assessment of the risk that that pricing assumption 5 presents? 6 A. Yes. 7 Q. That would involve an assessment of potential exposure 8 and what the possible magnitude of the claims might be? 9 A. Yes. 10 Q. Was anybody carrying that out at tie in relation to the 11 pricing assumptions? 12 A. Well, there was a risk register in play at that time. 13 I hadn't had any input into that. But there was a risk 14 register. 15 Q. Would you know whether any work was being done to ensure 16 that those risks were carried into the risk register and 17 were quantified appropriately? 18 A. I wasn't particularly involved in that. So I don't know 19 for sure. 20 Q. Who would normally -- what role would carry the 21 responsibility for ensuring that those risks -- such 22 risks were carried into a register and were evaluated? 23 A. It would most probably be a team effort, because there 24 was a risk manager and there was a procurement director. 25 And there were engineering directors and staff. So it 119 1 would be a team effort between all of those, I would 2 suggest. 3 Q. Would you say it's fair to say it would be obvious to 4 everybody that where there were assumptions, there was 5 going to be some element of risk? 6 A. I think if there's an assumption, then there's 7 a likelihood, however small or however big that might 8 be, that it could occur, yes. 9 Q. You were the one that was going to have to deal with 10 that risk when it arose, when there were any claims? 11 A. Yes. 12 Q. No one suggested to you that you would be the person who 13 would be best placed to come in and start quantifying 14 what that risk was? 15 A. No. No. 16 Q. You mentioned a procurement director. Was that 17 Bob Dawson? 18 A. Geoff Gilbert. 19 Q. Geoff Gilbert was overall. Were you aware of working 20 with Bob Dawson also? 21 A. Geoff Gilbert and -- Bob Dawson reported to 22 Geoff Gilbert. So yes, he was around at the time 23 I started. 24 Q. Were you aware also that Bob Dawson was intending to 25 leave the project? 120 1 A. I wasn't aware of when he was going to leave the 2 project. I knew, given that his title was procurement 3 manager, I think, he was going to leave around about the 4 same time that Geoff Gilbert would leave. I had no 5 feeling for that. 6 Q. A number of email communications concerning Part 4 of 7 the Schedule that dealt with pricing, where you appear 8 to have been included as a recipient, and seem to have 9 been involved in meetings and discussions. What was 10 your role in relation to Schedule Part 4? 11 A. I was involved in certain meetings and discussions. The 12 meetings would be on the basis as I explained earlier 13 that Steven had asked me to sit in at some meetings and 14 try and get myself up to speed with the project. 15 So I did so, and on that basis, by being -- 16 by sitting in at meetings, I was naturally copied into 17 emails and the like that may have come out of that. 18 What I did in relation to Schedule Part 4, I was 19 given or maybe assumed a series of tasks. One thing, as 20 was explained a minute ago, I was going to be 21 responsible for post-contract change management. 22 Therefore, I wanted to be really sure, and there wasn't 23 at the time I arrived, there wasn't a mechanism or 24 a clear mechanism in Schedule Part 4 to have a schedule 25 of rates and all the prelim build-ups. So I was given 121 1 that task to go and meet with the consortium and agree 2 a schedule of rates to put into the Schedule Part 4 3 which would be used as a mechanism to value change post 4 contract. 5 Q. Was that not a natural context though to ask you to 6 provide any indication of whether you thought there was 7 a risk exposure in relation to change? 8 A. No. 9 Q. It appears that you were involved from the very outset. 10 You were a recipient of even the very first draft of 11 Schedule Part 4 in January and continued with it right 12 the way through to its -- the contract being signed in 13 May. You did that along with Geoff Gilbert and 14 Bob Dawson. There was a team of three dealing with it; 15 is that fair to say? 16 A. No, I think I was copied into it. I had certain tasks 17 that I undertook to do with it, but the document was -- 18 procurement document, I was happy to assist where 19 I could in terms of I was concerned about post-contract 20 change that would have a mechanism to deal with that. 21 So I was very particular about being involved in that. 22 Q. Could we look at another document, please. It's 23 reference CEC01448511. 24 We can see that this is an email from Bob Dawson. 25 It's actually going to Richard Walker, who was at 122 1 Bilfinger, and it has a date of 11 February 2008. Do 2 you see that? 3 A. Yes. 4 Q. For completeness, I would say it's copied to you and has 5 a heading, "Schedule 4 Base Case Assumptions - further 6 meeting". 7 A. Yes. 8 Q. What Mr Dawson says is: 9 "Richard, further to the voicemail messages that 10 I left on your office telephone and mobile, we need to 11 confirm arrangements for going through the balance of 12 your points on Schedule 4. 13 "Geoff said tomorrow and suggests the following 14 attendees:" 15 It starts with people from Bilfinger, that's you, 16 Scott, someone from Siemens, Herbert or Steve, and goes 17 on: 18 " ... Either Andrew Fitchie or Phil Hecht, Dennis Murray, 19 Geoff and me." 20 That seems to put you into a team of four of people 21 from tie who were going to be negotiating it, which -- 22 team of three, I can't count. Dennis Murray, 23 Geoff Gilbert and yourself. 24 A. I attend -- I assume I attended the meeting, yes. 25 Q. That seems to identify you as the three people who are 123 1 dealing with this schedule. 2 A. Yes, but what I was explaining earlier is my -- in 3 dealing with it, I was dealing with the -- with certain 4 aspects of the tasks I was given to it, not the document 5 as a whole. 6 Q. We see a reference there to Andrew Fitchie or 7 Phil Hecht, both of whom were solicitors at DLA. What 8 was their role in relation to Schedule Part 4? 9 A. Any meetings I attended, either Andrew or Phil Hecht was 10 at it, at that meeting. 11 Q. What role did they perform? 12 A. The legal role in terms of the drafting of the 13 documents. 14 Q. If it was suggested that they really just kept the draft 15 of the agreement, marked up changes suggested by others, 16 would that accurately reflect their role? 17 A. I don't think so. 18 Q. Were they involved in drafting or giving advice? 19 A. They were involved in drafting. 20 Q. In relation to advice generally, and I'm not just 21 talking about 11 February, I'm talking about the whole 22 of the negotiation of Schedule Part 4, do you ever 23 recall getting advice from DLA to the effect that the 24 terms of Schedule Part 4 presented a substantial risk to 25 tie? 124 1 A. No. 2 Q. If we could look at another production, it's 3 CEC00592619. If we go to the start of the second page 4 of this, so we look at it in chronological order. 5 It starts, if you look at the foot of the page, with 6 a message from -- the one that we have just seen, 7 I should say, which was suggesting a meeting and 8 including you within the team. If we go to see what the 9 response to that was, Richard Walker says to 10 Geoff Gilbert: 11 "Last Thursday we signed a document where we 12 committed to holding our price. Schedule 4 was clearly 13 dealt with, why is Bob trying to re-engage? The matter 14 is closed." 15 Just in relation to signing the document the 16 previous price, we have heard of a document called the 17 Rutland Square agreement. Were you involved with that 18 at all? 19 A. No. 20 Q. If we look at the first page of the email, and the foot 21 of the page, Geoff Gilbert's response to that was to 22 say: 23 "Richard, this is not correct. Bob is not looking 24 to re-open anything already settled, but Schedule 4 is 25 not concluded." 125 1 You see he goes on after that. Do you see that? 2 A. Yes. 3 Q. Further up the page to see what the further response 4 was, it's forwarded by Bob Dawson to you, saying: 5 "Dennis, below is Geoff's response to 6 Richard Walker's email. 7 "As you’ll see he has said that we'll send an 8 updated Schedule 4 so have you any comments before 9 I send (I'm going to incorporate another appendix for 10 ground conditions)." 11 This seems to be giving you quite a fundamental role 12 in making comments on the terms of Schedule 4 before 13 it's sent to the other side. Does that not indicate you 14 had quite a central role in relation to this? 15 A. Well, I didn't have a central role in relation to it. 16 I did the tasks that I explained a few minutes ago, 17 which was quite a major task to fix. But I was being 18 copied into these things, but I didn't have the -- 19 I wasn't the leader of that document. 20 CHAIR OF THE INQUIRY: I think you are recorded by the 21 shorthand writer as saying "I didn't have a central role 22 in relation to it", and then you went on to explain the 23 tasks that you undertook. Is that accurately recorded, 24 that you didn't have a central role? Is it "did" or 25 "did not"? 126 1 A. I did not have a central role. Unless you call the 2 tasks that I was doing a central role. So my role was 3 the tasks that I was given to do. 4 CHAIR OF THE INQUIRY: Thank you. 5 MR LAKE: In terms of questions of drafting of the Pricing 6 Assumptions, I think you attended meetings where there 7 was some discussion about how they should be drafted and 8 what they should say. What was your input in relation 9 to that? 10 A. I do believe that some of the technical descriptions 11 where I was given to read and to discuss with Bilfinger, 12 in terms of road makeups and things like that, just to 13 make sure it was clear going forward, what that pricing 14 assumption was telling us. 15 Q. Following that through, could I ask you to look at 16 a production CEC01451012. 17 We can look at the email at the top of the screen. 18 It's from Ian Laing, who is the solicitor acting for 19 consortium members, in particular Bilfinger, and it's 20 addressed to Bob Dawson, Suzanne Moir, who is another 21 solicitor at Pinsent Masons. We see you are one of the 22 people to whom it has been copied. Do you see that? 23 A. Yes. 24 Q. It's dated 19 March, and the subject matter is 25 Schedule 4 pricing. The message says: 127 1 "In advance of our meeting tomorrow, I attach our 2 mark-up of Schedule 4 in relation to the Pricing 3 Assumptions. This is ... simply to align the content 4 with the outcome of recent discussions." 5 I think you were at the meeting that took place to 6 discuss that. Would that be correct? 7 A. Yes. 8 Q. Had you been involved in the recent discussions in 9 relation to the terms of Schedule Part 4? 10 A. No. 11 Q. If we look at the attachment of that, in particular it's 12 CEC01451013. This is the attachment to that email. We 13 can see that it's a draft of Schedule 4 with a heading 14 "Pricing", and we can see the mark-ups on it. Do you 15 see that? 16 A. Yes. 17 Q. If we could go to page 7. We can see a page which has 18 been quite heavily marked up with revisions. Do you see 19 that? 20 A. Yes. 21 Q. If I try and read through the modified version, it would 22 now say, 3.4: 23 "Pricing assumptions are the design prepared by the 24 SDS Provider will not (other than amendments arising 25 from the normal development and completion of designs) 128 1 in terms of design principle, shape, form and/or 2 specification be amended from the drawings forming the 3 Base Date Design Information." 4 Do you see that? 5 A. Yes. 6 Q. Beneath the three indented paragraphs, it appears in red 7 on the screen: 8 "For the avoidance of doubt normal development and 9 completion of designs means the evolution of design 10 through the stages of preliminary to construction stage 11 and excludes changes of design principle, shape and form 12 and outline specification." 13 Do you see that also? 14 A. Yes. 15 Q. Were you involved in discussions regarding this wording? 16 A. I don't believe I was, no. 17 Q. Who dealt with this wording? 18 A. My memory would be that the wording was drafted by 19 Ian Laing and I think would have been vetted by our 20 solicitors, DLA Piper. 21 Q. Who within tie would comment on or consider or give 22 instructions in relation to this wording? 23 A. I don't know who in tie would do that. But I guess -- 24 I guess the procurement director may -- may have a say 25 in the wording, but -- 129 1 Q. Is that Geoff Gilbert? 2 A. Yes. 3 Q. Can you recall at all -- I appreciate it's a while ago, 4 but when there are meetings taking place to discuss 5 these things, who was speaking on behalf of tie to make 6 the sort of changes that we see marked up there? 7 A. I don't really remember, but mostly Geoff Gilbert on 8 behalf of tie, is my memory. 9 Q. I'm finished with that document. Could we look at 10 a different email now, please. It's reference 11 CEC01451185. Enlarge the upper part of the screen. 12 This email is from Ian Laing, again at 13 Pinsent Masons, dated 26 March 2008. The subject is 14 Schedule 4, and you're one of the primary addressees of 15 that; do you see that? 16 A. Yes. 17 Q. What he says is: 18 "As we discussed earlier today, the Design Delivery 19 Programme will be version 28. The Pricing Assumption in 20 Schedule 4 of the Infraco Contract assumes that the 21 Design Delivery Programme will not change from version 22 26. It follows that there is the possibility that there 23 will be an immediate Notified Departure on contract 24 execution. Given the unusual position that we are in, 25 please can you confirm that this is understood and 130 1 agreed by tie." 2 Do you recall getting this email? 3 A. I don't recall the email, but I do know what it's 4 saying, yes. 5 Q. What was the concern? 6 A. I think the concern was that the Design Delivery 7 Programme was moving, that the procurement period was 8 longer than anticipated, and the Design Delivery 9 Programme would be rolling along out of sync, if you 10 like, with the procurement, which should have been 11 finished in January. 12 So quite what that meant in terms of the difference 13 between VE28 and VE26, I don't know, but it was a fact 14 that VE28 was in existence at that time. 15 Q. He notes that this might give rise to an immediate 16 Notified Departure on the contract execution, which 17 would be a claim immediately on contract conclusion? 18 A. Yes. 19 Q. Was that something that would fall to you as 20 a particular concern, because you would be managing that 21 going forward? 22 A. Yes. 23 Q. So were you asked to comment on this? 24 A. I wasn't asked to comment because I didn't know -- 25 I wasn't involved in the design at that stage. It would 131 1 clearly be a change, but the effect of that change, 2 I didn't know at that time. 3 Q. You weren't involved in any discussions about the 4 potential effects of this sort of thing on the company, 5 or what other immediate changes? 6 A. No. It was a fact, and it would have to be dealt with 7 post contract, is all I remember. 8 Q. Going back to the advice you were getting from DLA, do 9 you recall getting advice at any time that it would be 10 advisable to put the procurement on hold and wait until 11 design and other matters had caught up? 12 A. I don't recall that. Not to me. 13 Q. Do you ever recall getting advice from any of the legal 14 advisers to the fact there would be a bar on getting 15 a fixed price deal, because they simply weren't 16 interested in doing that in all the circumstances? 17 A. No. 18 Q. Did you have any involvement into Clause 80, which is 19 a provision in the contract dealing with changes? 20 A. No. 21 Q. Do you recall changes, were you involved in changes 22 being made to that at any time by Geoff Gilbert? 23 A. I recall him having drafted some changes to it, but 24 I don't recall being personally involved in it. 25 Q. Do you know when he drafted those changes? 132 1 A. Sorry? 2 Q. Do you know when he drafted those changes? 3 A. I can't remember. 4 Q. If it was suggested he had redrafted it right at the 5 last minute, in the last couple of weeks before contract 6 signature, does that ring a bell? 7 A. No. 8 Q. Could we look at a different production, please. It's 9 CEC01431194. 10 My Lord, I should indicate that I'm almost finished 11 with Mr Murray. In that there's no other witness this 12 afternoon, if it's not inconvenient for the shorthand 13 writers or other parties, it may be a more satisfactory 14 use of time if I carry on until 1.05 or 1.10 past, 15 rather than take a lunch break and bring everyone back 16 in an hour's time. (Pause) 17 CHAIR OF THE INQUIRY: We will have a very brief break of 18 about five minutes so that the shorthand writers -- the 19 session has been quite long. So we'll just adjourn for 20 five minutes. 21 MR LAKE: Just pause without -- 22 CHAIR OF THE INQUIRY: Yes, we don't have to leave, but the 23 shorthand writers can. 24 (12.53 pm) 25 (A short break) 133 1 (12.55 pm) 2 MR LAKE: I think that's the shorthand writer indicating 3 that she's content to resume. 4 We have got this document on screen now, Mr Murray, 5 and we can see that it's an email from Graeme Bissett, 6 dated 25 March, which is copied to you amongst others. 7 A. Yes. 8 Q. The subject of it is Financial Close and QC programme. 9 The first paragraph says: 10 "Thanks for your time and input this am. For those 11 who have not been involved in this discussion to date, 12 the attached paper is a summary of the process we intend 13 to apply to ensure the Financial Close documents are in 14 robust shape. The paper will also go to the tie Board 15 for their information. The spreadsheet sets out the 16 detailed responsibilities." 17 Do you recall this email at all? 18 A. Not particularly, no. 19 Q. If we look at the first of the documents referred to, 20 the quality control process, it's document CEC01431196. 21 We can see the heading here, "EDINBURGH TRAM PROJECT 22 FINANCIAL CLOSE PROGRAMME AND QC PROCESS". 23 If you go over to the second page of it, we can see 24 the processes at the top are Management of Close process 25 and issue resolution, Finalisation of Infraco contract 134 1 suite, DLA report and Appendices finalisation, Close 2 Report and Appendices finalisation, and two entries 3 there for approval process. Do you see that? 4 A. Yes. 5 Q. Do you know who is responsible for administering this 6 process within tie? 7 A. Administering? 8 Q. The quality control and close process? 9 A. No, but Graeme Bissett was someone who tended to send 10 out these messages and control the overall process, 11 heading to contract close. 12 Q. A second document referred to in the email was 13 a schedule setting out responsibilities. Could we look 14 at that document, please. It's reference CEC01431195. 15 We can see this is in spreadsheet form. At the top 16 left it says "FINANCIAL CLOSE - QC PROCESS". Do you see 17 that? 18 A. Yes. 19 Q. Now, if you look down the left-hand column, at row 21, 20 we can see the document in question there is Pricing 21 Schedule 4; do you see that? 22 A. Yes. 23 Q. In the next column, with the heading "Finalisation", it 24 gives three initials, GG, BD, DM. You presumably are 25 the DM there? 135 1 A. Yes. 2 Q. That seems to say that you are one of the people 3 responsible for finalising Schedule Part 4. Was that 4 correct? 5 A. That's correct, in relation to the population of all the 6 schedules that are discussed earlier. 7 Q. Thank you. I'm finished with that document. 8 Could I look at a different email, please, from you, 9 it's CEC01374219. You see that's an email from you 10 dated 22 April 2008, and is addressed to 11 Stewart McGarrity and Andrew Fitchie, copied to 12 Steven Bell. The subject matter is ETN Schedule 4. Do 13 you see all that? 14 A. Yes. 15 Q. You say: 16 "Schedule 4 attached for QA review. 17 "Still to do: 18 "Appendix A2 BB and S to insert the Final Price 19 Breakdowns to match the Construction Works Price in 20 Appendix A1 and the Milestone Schedule in Schedule 5 21 (will take some time). 22 "SDS to go through figures to be inserted at 2.5 (DM 23 to do tomorrow). 24 "Schedule of Rates to be inserted in Appendix F (DM 25 to do tomorrow). 136 1 "Base Date Design Information to be inserted in 2 Appendix H (waiting SMcF - DM to do tomorrow)." 3 I take it those DM things are responsibilities that 4 you would undertake? 5 A. Yes. 6 Q. One of them is inserting the schedule of rates that you 7 have referred to in your evidence with us today? 8 A. Yes. 9 Q. Why were you sending this to Stewart McGarrity and 10 Andrew Fitchie? What did you want them to do? 11 A. Well, Andrew and -- I'm not sure why I would send it to 12 Stewart, but, well, given that that was matching the 13 construction works price in the schedules, I think he 14 would want to be -- to understand that, and the 15 Milestone Schedule in Schedule 5, which I was involved 16 in negotiating and dealing with Bilfinger with. 17 So the Milestone Schedule, being a drawdown 18 valuation schedule, again Stewart McGarrity would be 19 interested as the Finance Director in relation to that. 20 These are essentially a list of all the tasks that 21 I ended up carrying out over the period which I alluded 22 to earlier. Some of them are filled in schedules, as 23 I say, and some of them are other things that landed 24 with me to do. 25 Q. Under the heading "Still to do", there are a number of 137 1 tasks which you have acknowledged some of them are for 2 you to do? 3 A. Yes. 4 Q. What I'm interested in, why you sent the email saying 5 Schedule 4 attached for QA review, what did you expect 6 the recipients to do? 7 A. Well, it was -- as I say, I had a series of work 8 streams, if you like, involved in putting together the 9 points that are listed in this note, and I would be 10 sending it back to Andrew and Stewart to say: the bits 11 that I had been involved in, here is the current status, 12 that's it going back over to you to final quality assure 13 it. 14 Q. So in terms of quality assurance, what did you expect 15 Andrew Fitchie to be carrying out? 16 A. Well, I expected there to be an overall quality 17 assurance on the whole document. 18 Q. The whole of the contract? 19 A. Well, this would incorporate the pieces that I had been 20 involved in. So it was basically sending off the pieces 21 that I was involved in, given the status and the 22 completion or non-completion of those items, and sending 23 that back for the final put-together. 24 Q. One more quality control question, please. Could we 25 look at a document -- 138 1 CHAIR OF THE INQUIRY: Before that, see the last thing which 2 had to be done was the Base Date Design Information to 3 be inserted in Appendix H. 4 A. Yes. 5 CHAIR OF THE INQUIRY: You say that you would do that 6 tomorrow. Did you ever do that? 7 A. I think the note says "waiting SMcF", is Scott McFadzen 8 of Bilfinger, and my task there was to chase Scott to 9 provide the drawings, which were drawings that were 10 linked to the Infraco proposals. So all those drawings 11 Scott had undertaken to provide, but never, ever did. 12 I'm not sure the reason why, but it never happened. 13 My name was against chasing him to do that. 14 I thought he was going to do that, but it was never 15 achieved. 16 CHAIR OF THE INQUIRY: Did you ever tell anyone that you had 17 never got the information to put into Schedule H? There 18 seems to be a schedule to the contract where information 19 was to be inserted, and in fact it's blank, so that if 20 it was important, did you not think of pointing out that 21 you didn't have this? 22 A. Well, in actual fact it would have been pointed out, and 23 what had happened, at the end of the day, was in the 24 absence of having this list or schedule of drawings, it 25 was agreed that we put in the wording that it would be 139 1 all the drawings up to a point in time in a SharePoint 2 Dropbox electronic. 3 CHAIR OF THE INQUIRY: Thank you. 4 MR LAKE: Going on to one further document, please. It's 5 reference CEC01274408. 6 This is an email that comes from Graeme Bissett. 7 It's sent to just you and Alastair Richards at TEL, 8 although copied to Susan Clark. 9 The subject matter is "For QC", and what 10 Graeme Bissett says is: 11 "As discussed, - the most up-to-date version of your 12 QC homework. Fatal flaws or key omissions only." 13 We can see there's a document attached to that. If 14 we could look at that, it's reference CEC01274409. We 15 can see that this is a document with a heading "Report 16 on Infraco Contract Suite" and we can see it contains 17 a number of marked-up changes. 18 A. Yes. 19 Q. What was your quality control role in relation to this? 20 A. I don't know, other than having a general run-through to 21 make sure the pieces that I had been involved in were 22 inserted correctly. I don't know the reason for it 23 other than that. 24 Q. Did you carry out any general check of the various 25 estimates that were made in it to check that you were 140 1 satisfied that they were accurate? 2 A. I don't think a general check would have been done, no. 3 Only on the parts that I was particularly involved in 4 and particularly interested in going forward. 5 Q. Can you remember what parts you were particularly 6 involved in or interested in? 7 A. The Schedules of Rates and Milestone Schedule would be 8 two. 9 Q. So if we, for example, were to go to page 5, it's not 10 very easy to see because it's added on to the paragraph 11 before, but we can see a heading there "Milestones and 12 Payment schedule" in red and a red paragraph beneath it. 13 A. Yes. 14 Q. Is that material that you would have been concerned 15 with? 16 A. Yes. 17 MR LAKE: Thank you very much, Mr Murray. 18 CHAIR OF THE INQUIRY: I don't think there are -- yes? 19 MR WALKER: There's one matter I would like to canvas with 20 Mr Murray, if I may. It relates to the issue that my 21 learned friend raised about Mr Fitchie ever giving any 22 advice about procurement risk associated with Schedule 23 Part 4. 24 CHAIR OF THE INQUIRY: I'm just wondering about time. I'm 25 quite happy to allow you to ask the questions. It's 141 1 just a case of do we do it before lunch? 2 MR WALKER: I really think it will take just a few minutes. 3 There's only one document that I would like to put to 4 the witness, if I may. 5 CHAIR OF THE INQUIRY: Very well. 6 MR WALKER: Thank you, my Lord. 7 Examination by MR WALKER 8 MR WALKER: I wonder if the witness could have before him 9 DLA00006319. Go to page 2 of that, please. 10 Mr Murray, I think you see before you a DLA file 11 note, and you see that it relates to 9 April and the 12 date of 2010 is given. It may be that the Inquiry has 13 heard evidence that the date there should be 2008, which 14 would put this before contract close. 15 A. Okay. 16 Q. So if you just proceed on that basis for now, on the 17 basis that the Inquiry may accept that it's been 18 misdated, do you see reference here to a meeting at 19 which you were an attendee? 20 A. Yes. 21 Q. Do you recall a meeting pre-close on 9 April 2008? 22 A. No. 23 Q. If the Inquiry has heard evidence from Mr Fitchie that 24 a meeting did take place, would you be in a position to 25 contradict that or dispute that? 142 1 A. No. 2 Q. If you could just look down the page a little bit, you 3 will see a heading "AF" underlined. Do you see that? 4 A. Yes. 5 Q. Just a couple of lines down, and it reads there: 6 "Advised that this represented a major procurement 7 risk in the light of the very slim price differential at 8 PB appointment in December. Also advised that Schedule 9 Part 4 already contained numerous 10 relief/compensation/arguable risk allocation points for 11 BB(S) - on civils work especially. Biased for Infraco. 12 Risk of BB exploiting Schedule Part 4." 13 Do you see all of that? 14 A. I don't see that on this page, sorry. 15 Q. It's just under the underlined initials "AF"? 16 A. Oh, right. Sorry, I was looking at the "AF" down below. 17 Q. I'll just let you read that to yourself, the bit I read 18 to you there. (Pause) 19 Have you read that? 20 A. Yes. 21 Q. Do you recall Mr Fitchie saying anything along those 22 lines? 23 A. I don't recall it, no. 24 Q. If Mr Fitchie has given evidence under oath that he did 25 say that, are you in a position to contradict him? 143 1 A. No. 2 Q. Just looking a little bit further down, you will see 3 there are a number of bullet points, and after the third 4 bullet point we see the initials "AF" again? 5 A. Yes. 6 Q. And it's recorded there: 7 "AF - clear that Schedule Part 4 not negotiable. Had 8 had one serious endeavour to shift Pinsents but the 9 document was cemented into BB's approach from Wiesbaden 10 Agreement." 11 A. Yes. 12 Q. Do you recall Mr Fitchie saying anything along those 13 lines? 14 A. I can't recall the specifics, but, again, I wouldn't -- 15 I couldn't say he didn't say them, but I can't remember, 16 no. 17 Q. So if he's given evidence under oath that he did, you 18 are not in a position to contradict that? 19 A. No. 20 MR WALKER: Thank you very much. 21 Nothing further, my Lord. 22 CHAIR OF THE INQUIRY: Thank you very much, Mr Murray. That 23 concludes your evidence. You're still under your 24 citation, so it would be possible for you to be 25 recalled, but hopefully that is not required. You're 144 1 free to go. 2 A. Thank you, my Lord. 3 (The witness withdrew) 145 1 INDEX 2 PAGE 3 MR STEWART STEVENSON (sworn) .........................1 4 5 Examination by MR LAKE ........................1 6 7 MR DENNIS MURRAY (sworn) ............................61 8 9 Examination by MR LAKE .......................61 10 11 Examination by MR WALKER ....................142 12 13 14 15 16 17 18 19 20 21 22 23 24 25 146