1 Tuesday, 20 March 2018 2 (9.30 am) 3 CHAIR OF THE INQUIRY: Good morning. Mr Lake? 4 MR LAKE: My Lord, the first witness this morning is 5 Stewart Stevenson. 6 MR STEWART STEVENSON (sworn) 7 Examination by MR LAKE 8 CHAIR OF THE INQUIRY: First of all, can I advise you that 9 at 10 o'clock there will be a fire alarm test, and 10 secondly, you will be asked questions by Mr Lake, 11 Counsel to the Inquiry. If you listen to the question 12 and answer it as directly as possible, and if you don't 13 understand it or wish clarification, just say so. 14 Speak clearly into the microphone so that everyone 15 can hear you, particularly the shorthand writers, and 16 will you speak in a measured pace so that they can keep 17 up with you. 18 Mr Lake? 19 MR LAKE: Thank you, my Lord. Mr Stevenson, could you state 20 your full name, please. 21 A. James Alexander Stewart Stevenson. 22 Q. What I would like you to do with me first is to look at 23 a document. There is a hard copy in front of you, but 24 it will also be brought up on the monitor. It's 25 reference TRI00000142_C. Hopefully we are looking at 1 1 the same document both on screen and on paper? 2 A. I am. 3 Q. Can you confirm that that is a transcript of an 4 interview that you prepared for the purposes of this 5 Inquiry? 6 A. I do. 7 Q. If we look at the second last page, that's page 95 of 8 the paper version, also we can see that you have signed 9 it and dated that, 12 September 2017? 10 A. Correct. 11 Q. Are you content that that be taken as your evidence to 12 this Inquiry under oath? 13 A. I am. 14 Q. Thank you. I want to ask you about a few additional 15 questions in relation to this. You explained at the 16 very beginning, on the first page of the statement, that 17 you were the Minister for Transport Infrastructure and 18 Climate Change from 17 May 2007 to 11 December 2010? 19 A. I do. 20 Q. That of course covers the period in which the tram was 21 approved, the grant was approved, and implementation of 22 the project commenced? 23 A. Indeed. 24 Q. At that time John Swinney was the Cabinet Secretary for 25 Finance and Sustainable Growth? 2 1 A. He was. 2 Q. Now, the Inquiry is aware that a grant of GBP500 million 3 was given by the Scottish Government to City of 4 Edinburgh Council for the trams under the 5 Transport Scotland Act 2001. 6 A. Yes, it was, although of course it was paid in tranches, 7 not in one payment. 8 Q. Indeed. But the total grant in that sum was approved in 9 2007/2008 time? 10 A. I understand that to be correct. 11 Q. Now, obviously there's a question of the sum of money 12 that is paid, but it was also a grant for transport 13 purposes. So what I wondered is within Government, who 14 is accountable for that money, you or Mr Swinney? 15 A. Mr Swinney as the Minister for Finance was responsible 16 directly for financial matters, but insofar as it 17 related to a project, the City of Edinburgh's project, 18 for which I would be expected to provide Parliament with 19 such information as it wanted, I had an interest in his 20 grant -- his responsibility that was financial because 21 I had responsibility to answer questions -- in 22 Parliament and in writing that might arise in relation 23 to a transport project. 24 Q. You said you had an interest. I want to be clear about 25 this. What was your interest or your responsibility in 3 1 relation to this money? 2 A. Well, I did not sign off the amount of money, is I think 3 the essence of what you're asking me. But in relation 4 to, for example, the debate in June 2007, that debate 5 opened with a statement from me as the Transport 6 Minister, and such parliamentary activity that related 7 to trams thereafter for the rest of my time as Transport 8 Minister would be activities I would undertake, rather 9 than Mr Swinney. 10 But it's also worth making the point that if of 11 course in the absence of either of us, we would 12 undertake the duties which were allocated to the missing 13 person. In other words, we worked as a team. 14 Q. Okay. Looking at your statement now, could we go to 15 page 3 of this. If you could enlarge paragraph 5. 16 If I read from the third line of this, you say that: 17 "In line with our desire to improve clarity of 18 responsibility for delivery of the project, we withdrew 19 Transport Scotland from the Tram Project Board as their 20 presence may have given the appearance of 21 Transport Scotland bearing some responsibility for 22 delivery of the project. We were clear that we were 23 funders and funders only." 24 First of all, what was your personal involvement 25 with the decision to withdraw Transport Scotland? 4 1 A. I was present at most of the meetings where that subject 2 was discussed. I use the word "most" simply because 3 I can't give you the certainty I was present at them 4 all, and therefore was participating in the discussion 5 that took place in relation to the withdrawal, and of 6 course I had an interest in the personnel that were 7 deployed to the Edinburgh Tram Project because we had 8 many other railway projects which, as Transport 9 Minister, I was keen to see people deployed to them, 10 although that did not directly form part of the 11 discussion, which was really about the governance of the 12 project. 13 Q. Were you supportive of the decision to withdraw from the 14 Tram Project Board? 15 A. 100 per cent supportive. 16 Q. Were you supportive of the decision to withdraw or limit 17 Transport Scotland's involvements in other respects in 18 the project? 19 A. Yes, I was. 20 Q. We see here then that you say that one of the purposes 21 of that was to improve clarity, that's in the fourth 22 line, desire to improve clarity of responsibility. 23 What clarity was needed? 24 A. Well, if we had -- and this is merely an example. If we 25 had people sitting as the decision-making members of the 5 1 Tram Project Board, you had the possibility that the 2 Tram Project Board would make a decision which, when it 3 came -- that affected the interests of the Government, 4 and particularly Transport Scotland, when it came to 5 Transport Scotland, differed from the policy, practice 6 or objectives of Transport Scotland or the Government. 7 So you had people, particularly as we moved into the 8 delivery phase of the project, who, wearing two 9 different hats, could be required to take opposing 10 views. 11 Now, I say this because of course I spent my 12 professional life in project management. Indeed, spent 13 two years lecturing on project management to 14 postgraduate students. So therefore I'm familiar with 15 the substantial risks that there are where in managing 16 and being responsible for decision-making a project, you 17 ask people to play multiple potentially conflicting 18 roles. 19 Q. Just looking at what you say here in that sentence that 20 begins on the third line, to improve clarity in 21 responsibility for delivery of the project, was anyone, 22 do you think, under the impression that 23 Transport Scotland were in some way responsible for 24 delivery prior to 2007? 25 A. Well, I -- this is a post hoc comment based on what 6 1 I have seen has happened here. 2 I think particularly Mr Renilson, for example, in 3 his evidence, appeared to think, and I use "appeared", 4 because I wasn't here to hear his evidence, to think 5 that Transport Scotland were part of the project. But 6 in any event, leaving that to one side, because we 7 weren't aware of that at the time, the important thing 8 is that in line with the resolution that was passed in 9 Parliament which restated that it was a City of 10 Edinburgh project, it was important that we moved to 11 a very clear understanding that our role was -- as 12 finance and delivery was entirely the City of 13 Edinburgh's responsibility. 14 Q. As you say, it was quite clear that the tram was a City 15 of Edinburgh Council project. They were the promoters 16 of the Bills? 17 A. Yes. 18 Q. It was quite clear that Transport Scotland were the 19 majority funder because they were putting up a sum. The 20 sum wasn't fixed until later on? 21 A. The huge majority of the funding was from the Government 22 via Transport Scotland. Although the project pre-dates 23 Transport Scotland to some extent, of course. 24 Q. But the understanding of these various roles, promoter 25 on the one hand and majority funder on the other, was 7 1 really quite clear, both before and after the vote in 2 Parliament in 2007. 3 A. Yes, that's correct. 4 Q. So while Transport Scotland was sitting or had 5 a representative, I should say, sitting on the Tram 6 Project Board, their role as majority funder and the 7 Council's role as promoter was quite clear? 8 A. I accept that. 9 Q. So why was there a need to disturb things in 2007 to 10 withdraw Transport Scotland to achieve clarity? 11 A. Well, as we moved into the delivery phase, it was 12 inevitable -- 2,500 years ago Sun Tzu said no plan 13 survives first contact with the enemy, and the same is 14 true in project management. When you engage with 15 digging holes in the ground and engaging with the 16 physical business of a civil engineering project, you 17 will meet problems that are unforeseen. That will lead 18 to the problem having to be modified, and that, with our 19 people from Transport Scotland sitting at the Board, 20 carrying responsibility as all Board members should for 21 progressing those matters, carried the very real danger 22 of drawing Transport Scotland staff into issues which 23 properly were the City of Edinburgh, because we had 24 moved into a different phase of the project, and 25 therefore it was the right time to withdraw the 8 1 Transport Scotland people, and of course to redeploy 2 them on other rail projects that the Government were 3 seeking to pursue. 4 Q. Was it unusual, if there was going to be grant funding 5 in the realm of hundreds of millions of pounds, to have 6 a representative from Transport Scotland sitting -- 7 A. I'm not sure I can answer that question. I don't know 8 of another instance, but I don't suggest that I've 9 systematically looked for others. 10 Q. Although I think you had -- your role within Government 11 had changed, once the mediation had taken place, and the 12 project recommenced, Transport Scotland did once again 13 sit on the governance bodies? 14 A. Yes, that, as you say, happened in 2011 and thereafter, 15 and in particular Ainslie McLaughlin appears to have 16 been the bridge at the Mar Hall talks. But that is 17 post hoc information, not relating to my time as 18 a Minister. 19 Q. In your view, did that give rise to any concern that 20 post mediation Transport Scotland were in some way 21 responsible for the delivery of the project? 22 A. Do forgive me, but I'm not going to give a direct answer 23 to that question, and the reason I don't give a direct 24 answer is, first of all, it post-dates my time in 25 office, but more substantially, I'm not familiar with 9 1 the terms of engagement that related to 2 Ainslie McLaughlin, and indeed others' engagement in the 3 project, after my time as Minister stopped in 4 December 2010. 5 Q. If you go to page 33 of your statement, please. If you 6 could look at paragraph 63, please. Looking at the 7 second half of that, it says that there was the prospect 8 of the Tram Project Board with Transport Scotland 9 members sitting on it, making recommendations to 10 Transport Scotland. So there was a potential conflict 11 of interest for the Transport Scotland member sitting on 12 the Board. For example, if Bill Reeve sat on the Board, 13 then he might have to make recommendations to himself in 14 his capacity as a Director at Transport Scotland. 15 What recommendations did you consider that the Tram 16 Project Board might be making to Transport Scotland? 17 A. Well, I have made some reference to this, but 18 specifically, for example, it might be that the Tram 19 Project Board concluded, that the finance available from 20 the Scottish Government, which we capped at 21 GBP500 million, was no longer adequate when they looked 22 at what they could see the City of Edinburgh Council 23 might be able to provide, and the Board could have -- 24 I'm not aware that it did, but it could have concluded 25 that the Government should be approached for additional 10 1 money. 2 Now, if Bill Reeve was on a Board that came to that 3 conclusion, Bill Reeve of course would, on the other 4 side, when he returned to his desk at 5 Transport Scotland, be likely to be part of assessing 6 that. So there is the potential -- and that's only one 7 example that relates to money. There could be other 8 examples relating to changing the specification 9 materially, so that it diverged from the authorisations, 10 for example, that were granted by the two Bills that 11 were passed by Parliament. 12 So I can think of a range of options where 13 Bill Reeve could be in the room party to decisions with 14 which he would have to take a different view when he got 15 back to his desk at Transport Scotland. 16 Q. Is that not something that could be dealt with simply by 17 avoiding the situation where the particular individual 18 deals with this in two different capacities, having 19 Bill Reeve on the Board and not having Bill Reeve as 20 part of the decision-making group in Transport Scotland? 21 A. Well, I think you exactly identify the dilemma, that 22 when someone has a conflict of interest, the standard 23 way of dealing with conflicts, and it's in Parliament 24 and in business and elsewhere, is to exclude people from 25 decision-making process. 11 1 Now, of course, if a Transport Scotland official is 2 on the Project Board for the trams, he or she could 3 exclude themselves from the decision-making at the 4 Project Board. Alternatively, they could exclude 5 themselves from the assessment of that decision back at 6 Transport Scotland, and the choice could be made. 7 But either way, what you are doing is, by having 8 someone with these two roles, you're limiting the 9 operation of one or other of the parties to the 10 agreement, and I think a more satisfactory conclusion, 11 particularly as we moved into a new phase of the 12 project, where we were in delivery mode, was simply to 13 ensure that there was clarity and simplicity in the 14 responsibility, and I think that was part of the 15 arrangements that were put in place. 16 Q. All the things that you have described there could have 17 been equally true prior to June 2007; would you agree? 18 A. They could, but with the caveat -- now, of course, we 19 were not responsible for the arrangements as 20 a government before 2007 -- before May 2007. So I don't 21 speak to the decision-making that was made prior to that 22 point because I don't have knowledge of the detail. 23 But the real cranking up and spending of money was 24 about to start in 2007/2008. Prior to that the main 25 expenditure, as I recall, had been from the Government 12 1 providing money to promote the parliamentary process to 2 gain authorisation. 3 Q. But decisions about routes, benefits, and suchlike, 4 would clearly have to be taken, and the same tension, if 5 indeed there is a tension, between the Council and 6 Transport Scotland, would have existed then as well? 7 A. Well, many of those decisions actually took place even 8 before Transport Scotland was created, and were largely 9 taken by tie working as an agent of the City of 10 Edinburgh Council. I understand, and my knowledge of 11 this is incomplete, so I don't want to give the Inquiry 12 false certainty on that, and you will have heard from 13 others how those decisions were arrived at. 14 But yes, but we inherited arrangements which we 15 looked at, and we looked at the project that was clearly 16 moving to a different phase, and we made a decision 17 based on that and what we found when we came into 18 office. 19 Q. When you came into office, were you given an explanation 20 of the rationale for the involvement of 21 Transport Scotland in the project? 22 A. I don't recall that particular issue coming up in the 23 briefings which were obviously quite extensive, more or 24 less from the date of appointment as a Minister. 25 The first briefing that included reference to trams 13 1 for me personally took place certainly within a week of 2 being appointed a Minister. So there was engagement 3 there. 4 But of course you're not briefed on the 5 decision-making processes that were taken by previous 6 administrations. 7 Q. I'm not interested in the processes, but you had 8 inherited a structure in relation to the delivery of the 9 project, and that structure involves Transport Scotland? 10 A. Indeed, correct. 11 Q. There was a representative of Transport Scotland sat on 12 the Tram Project Board? 13 A. Correct. 14 Q. There was also the ability of Transport Scotland to 15 consider the business cases and their approval would be 16 required? 17 A. That is the arrangements, yes. 18 Q. But -- and changes were made in both those respects? 19 A. Correct. 20 Q. What I'm interested in is was any consideration as to 21 what the rationale had been for having a member on the 22 Tram Project Board, and what the rationale was for 23 Transport Scotland having a say in approval of the Final 24 Business Case? 25 A. My recollection is that our interest was focused in what 14 1 we needed to do in the future rather than reviewing what 2 had happened in the past. 3 Q. But in understanding what the rationale was in the past, 4 would that not inform you as to whether or not that 5 rationale still existed or indeed whether it was a good 6 one? 7 A. We were looking at the change in the project -- the 8 phase the project had got to, moving from planning and 9 gaining authorisation into engineering, civil 10 engineering works on the streets of Edinburgh, a very 11 different phase, and we were focused on what now needed 12 to be done, rather than examining how things had reached 13 the pass that we inherited in May 2007. 14 Q. Can we go on to a different passage within your 15 statement. Could we go to page 35, please and look at 16 paragraph 68. 17 It's probably best to provide the context, if we 18 look at the question also: 19 "The main concern appeared to be that there would be 20 a call for more funding from Transport Scotland and that 21 this was a reason for withdrawing from the governance 22 arrangements. Was consideration given to 23 Transport Scotland continuing with the existing 24 governance arrangements and simply making it clear that 25 there would be no extra funding? Why was that option 15 1 discounted?" 2 The response was: 3 "In his memo Malcolm Reed notes the concern that 4 there may be a call for more funding from 5 Transport Scotland. That was not a reason for 6 withdrawing Transport Scotland from the Tram Project 7 Board. The reason for Transport Scotland withdrawing 8 from the Tram Project Board was to ensure clarity of 9 responsibility." 10 Have you discussed that matter with people within 11 Transport Scotland as to whether or not the concern 12 about funding was part of the rationale? 13 A. I can't give you the absolute certainty that your 14 question perhaps requires, but our focus was on how to 15 structure taking the project forward, because we were 16 quite clear beyond any substantial debate that the 17 amount of money was capped, and indeed our view was it 18 should be capped. But also the Parliament in a motion 19 that it agreed on in June 2007 explicitly set that cap, 20 and we as the Government accepted that cap because that 21 aligned with the view we had. 22 So the financial issue was not really an issue that 23 greatly exercised us in deciding what was the 24 appropriate structures for the project -- our 25 relationship to the structures that would take the 16 1 project forward. 2 Q. Could we look at an email, please. It's reference 3 TRS00004547. We looked at the lower half of the screen 4 here. 5 A. Sorry, just a minute. I'll just get the right bit of my 6 glasses. 7 Q. I'm interested in the email which is now at the top of 8 the screen, which is one dated Wednesday, 18 July 2007. 9 We can see it's from Malcolm Reed, within 10 Transport Scotland. It's addressed to Damian Sharp and 11 Bill Reeve, amongst others. Do you see that? 12 A. Yes, I see it. 13 Q. If we look at what Mr Reed says is: 14 "Damian, I'm getting very strong signals from the 15 Cabinet Secretary that TS should not be on the Project 16 Board. He reiterated this at the Portfolio Meeting on 17 Tuesday morning. Of course we need to fulfil any 18 obligations under the SPFM [the Scottish Public Finance 19 Manual] but we need to withdraw from active engagement 20 in the delivery of the project and, crucially, in any 21 decision-making processes that could compromise the new 22 arrangements for allocation of financial risk for this 23 project." 24 That, following from a meeting with the Cabinet 25 Secretary, seems to be a very clear statement that one 17 1 of the concerns was to ensure that there could be no 2 financial risk to the Government. 3 A. Correct. 4 Q. Was that in fact a consideration for taking 5 Transport Scotland away from the Board? 6 A. I don't believe that -- I think there were two separate 7 issues if I may, Mr Lake. The capping of finance -- and 8 this email is about approximately three weeks after the 9 Parliament's decision. The capping of the amount is 10 something that would be quite independent from the 11 structures. If we hadn't amended the structures, the 12 capping would have still been in place. 13 So I think there were separate issues, but that 14 isn't to say that the capping of the finance was 15 unimportant. It was clearly very important, and indeed 16 part of our rationale for not wishing to proceed with 17 the tram project is because we had other priorities for 18 the Government's money, and we were aware that we didn't 19 have limitless funds of money. 20 Q. What you say about the capping on the one hand and the 21 governance on the other are separate issues. I take it 22 you would accept that there's no reason why the Scottish 23 Government could not have imposed a cap, but 24 nonetheless, if they wished, to continue with the 25 governance arrangements? 18 1 A. I agree with that. 2 Q. Turn now to page 42 of your statement. I think if we 3 could look at the upper half of this, please. Again, 4 it's easy to look at the question for context: 5 "On 23 August 2007 Damian Sharp sent an email to 6 Malcolm Reed and Bill Reeve to update them on progress. 7 He wrote that he had made it clear that all discussions 8 should now be between CEC and Transport Scotland. In 9 the attached paper Damian Sharp wrote that 'We will have 10 access to a significant amount of information about the 11 tram project and will be able to spot issues that are 12 important to tram success. However, the role instructed 13 by Ministers suggests we should not be acting on some of 14 this information. On the other hand, we very clearly 15 remain interested in information about the financial 16 profile to manage our overall budget'." 17 You were asked: 18 "What did he mean by this?" 19 Your response was: 20 "Damian Sharp should be asked what he meant by that. 21 I will make the observation that I am slightly surprised 22 to read 'However, the role instructed by Ministers 23 suggests we should not be acting on some of this 24 information'." 25 You add: 19 1 "While I would certainly think in the context of 2 directly intervening in the responsibilities of the Tram 3 Project Board, that's correct, I would be surprised if 4 they were excluding themselves from acting upon relevant 5 information." 6 Now, it's more focused on this last sentence. You 7 seem to be approving of the idea that there would be no 8 direct intervention of the Tram Project Board; is that 9 correct? 10 A. Correct. 11 Q. But nonetheless you think they should nonetheless act 12 upon relevant information in a form that isn't direct 13 intervention? 14 A. Well, I think if one becomes aware of information in 15 relation to a project to which one is party to any 16 degree, it would be quite proper if that touches on 17 interests, financial interest, for example, and the 18 interest the Government had in seeing the project 19 completed, it would be perfectly proper for the 20 professionals to make aware any concerns of which they 21 became aware of. But it was not their responsibility to 22 deliver the project, and I think one would always wish, 23 whatever one discovers, to make sure that you have acted 24 properly in relation to any information, even if it's 25 outside the direct domain of knowledge which you require 20 1 to undertake for functions you have been allocated. 2 Q. You said there the professionals. Who do you mean when 3 you say professionals? 4 A. I'm not identifying any particular individual, but when 5 I'm talking about professionals in Government, I'm 6 talking about the people in the rail team. Clearly 7 Bill Reeve would be one. He's been a railway person, 8 man and boy -- 9 Q. Senior civil servants within Transport Scotland? 10 A. Correct, and indeed people who had been hired as 11 specialists to work in Transport Scotland. 12 But that would be equally true of a Minister. It 13 would be equally true of anyone who should properly be 14 interested in seeing that the project is delivered in 15 exchange for the money that the Government is providing. 16 Q. What would equally be true of a Minister? 17 A. Well, if the Minister were by whatever means to have -- 18 to -- by whatever means have something brought to his or 19 her attention. It would be perfectly proper for the 20 Minister then to, having had it brought to their 21 attention, to enquire as to the veracity of what has 22 been brought to their attention, and whether someone is 23 carrying the responsibility for dealing with it if it's 24 a matter that meant -- being dealt with. 25 Indeed, even as someone who ceased to be Transport 21 1 Minister seven years ago, people in the railway system 2 still raise things with me as a backbench MSP and I pass 3 them on to relevant authorities. I think that is the 4 model which I think anyone in public life, civil servant 5 or elected person, should properly use in guiding their 6 way forward. 7 Q. You said in that answer they would enquire into the 8 veracity of information, and in relation to an earlier 9 matter, you gave the answer it would make people aware 10 of their concerns. Of whom would they inquire and to 11 whom would they make their concerns known? 12 A. The answer would vary depending on what it is that's 13 being put, is, I'm afraid, the not terribly helpful 14 answer. But in general terms, as a Minister, you would 15 seek to identify an official who might reasonably have 16 an interest in the matter, and make sure that they were 17 made aware of it. 18 Now, the official might conclude that it was not for 19 them and it was for someone else, but it would now be 20 with that official to make a decision. 21 Let's be quite clear, we are talking here in 22 a rather hypothetical sense, rather than identifying 23 actual instances where this might have applied. 24 Q. Yes, but I'm interested in trying to make it more 25 concrete. What you're talking about there is the 22 1 relevant official, which sounds like concerns or 2 verification would be sought within Scottish Government? 3 A. Sure. 4 Q. What I'm interested in here, in looking at what was said 5 there, is that the civil servants might have 6 information, and Damian Sharp suggested they shouldn't 7 act on the information? 8 A. Well, that is not something -- that comment by 9 Damian Sharp is not one I was aware of at the time. 10 Q. So what I'm trying to get to is what action do you 11 consider might have been taken by people within Scottish 12 Government? 13 A. Well, I think before I could answer that, you might have 14 to give me an example of what you have in your mind, 15 Mr Lake, as what might have happened that I might then 16 act on. 17 Q. We could take, for example, things like late design, 18 late running of utilities work, late running of 19 infrastructure works, and things going over budget, to 20 name an easy four, all of which could conceivably have 21 been thought to be known by Transport Scotland; would 22 you agree? 23 A. Yes. 24 (Alarm) 25 Yes, they were known by the general public indeed as 23 1 well. So they were very widely known, but at the end of 2 the day, the -- in the context of the arrangements we 3 put in place, Transport Scotland's interest would be 4 whether the 500 million that was being provided to the 5 City of Edinburgh's project was actually delivering 6 something that had been done that was properly related 7 to the project. 8 So I think the examples that you raise are perfectly 9 legitimate, and I understand why you raise them, but 10 they weren't ones where the Minister alone had become 11 aware of something, or a civil servant alone and 12 separately from the project might have become aware of 13 something, whereas without putting words into 14 Damian Sharp's mouth, because I can't do that, and 15 wasn't aware of his having that attitude at the time, 16 I can only imagine that he might have been in the 17 position of saying: this is something which I need to 18 make sure the relevant people know. 19 Q. I'm not asking you to guess what Damian Sharp said. I'm 20 interested in what you are saying, that in the final 21 part of your answer, 82, "I would be surprised if 22 they were excluding themselves from acting upon relevant 23 information". I have given you examples of subject 24 areas where Transport Scotland were being briefed, and 25 what I'm interested to know is what action you felt that 24 1 Transport Scotland or Government could take on the basis 2 of this information? 3 A. Well, I think if it's -- I think the appropriate point 4 for a civil servant, or indeed an elected official such 5 as myself, to take action is if information comes to 6 hand to you that you suspect is not known by the people 7 who have the responsibility for taking the project. You 8 would wish to make sure they were aware of it. 9 Can I give you a contemporary -- 10 Q. I would like to press you on this, because we do have 11 time, and you are talking about the point at which 12 action would be taken. My concern, just so there's no 13 doubt, is what action would be taken by 14 Transport Scotland and/or Scottish Government. What 15 action? 16 A. The action I would expect is that Transport Scotland 17 would make the person responsible for dealing with the 18 issue aware that there was an issue to deal with. 19 Q. Would they do that even if the information had come from 20 tie in the first place or the Council in the first 21 place? 22 A. Well, I think you touch on an important point there, and 23 this is partly post hoc looking at some of the evidence 24 the Inquiry has had. 25 I think there always was an uncertainty about how 25 1 well communication between tie and the City of Edinburgh 2 Council worked. So it wouldn't be unreasonable that 3 certain kinds of information that might come into the 4 possession of Transport Scotland from tie, that it was 5 thought, for example, the Chief Executive appeared to 6 be -- of City of Edinburgh Council appeared to be 7 uncertain. It would be perfectly proper to draw it to 8 that person's attention. That would be an example of 9 what one might do. 10 In the climate where I certainly felt, and I think 11 others felt, that communication was not as effective as 12 it might have been, that might be a category of action 13 that could be taken. 14 Q. Was there anything else Transport Scotland -- you 15 considered Transport Scotland would be able to do by way 16 of action other than sharing information? 17 A. Only insofar as if it touched upon Transport Scotland's 18 ongoing interest in ensuring that it paid money out for 19 work done. If information came to hand that touched on 20 that subject, then I would expect action to be taken in 21 Transport Scotland, for example, perhaps to stop or 22 cancel or rescind payments that might be being made. 23 Q. But that was the only control that Transport Scotland 24 had, wasn't it? 25 A. Correct. 26 1 Q. As long as the work had been done, they had to pay? 2 A. Correct. 3 Q. They had no other ability to take any other action if 4 the project was going wrong? 5 A. That is correct. 6 Q. Okay. Turning to a different matter now, could we go to 7 page 20 of your statement. Can we look, please, at 8 paragraph -- it's actually at the top of the page, it's 9 the end of paragraph 27. You can see the last sentence 10 there, you state: 11 "Our experience with the Stirling-Alloa-Kincardine 12 rail project informed our decision to withdraw from the 13 governance arrangements to some extent." 14 What experience from that project informed your 15 decision? 16 A. It was -- we came in pretty late in the project's life 17 circle. Let me preface my remarks by saying that, and 18 at a point where the amount of money that was being 19 spent was more than double the original budget. 20 We had -- the Council were active parties. We had 21 tie who were active parties. We had Transport Scotland 22 who was engaged, and certainly it was not working as 23 what should have been on the face of it a relatively 24 straightforward project, taking a line up over an 25 existing track bed to support goods traffic primarily, 27 1 with passenger traffic as secondary, delivery should 2 have been straightforward. It just simply seemed to us 3 that first of all tie didn't have in-house heavy rail 4 experience that appeared to be relevant to the project, 5 and that it simply looked a rather messy piece of 6 oversight. 7 So having tie withdrawn from that project simplified 8 the governance of the project. But it was very late in 9 the process, but it did inform us that simplicity 10 delivers more effectively than complexity 11 organisationally. 12 Q. What you had there is that Transport Scotland were 13 funders? 14 A. Yes. 15 Q. And tie were involved as agents for the local authority 16 in delivery? 17 A. Yes. 18 Q. Before the election in 2007? 19 A. Yes, sorry. I missed out of course Network Rail who 20 were a clear party to it as well and had the veto over 21 certain actions that could be taken. 22 So -- but we were very near the end of the project. 23 I could be corrected on this. I think most of the rail 24 had been laid by this time. 25 Q. The decision then was to take the project away from tie 28 1 and increase the role of Transport Scotland? 2 A. Yes. 3 Q. Now, in the trams the decision you took was to decrease 4 the role of Transport Scotland and increase the role of 5 tie. So what I'm trying to get to is what was it, what 6 experience about the Stirling-Alloa-Kincardine line was 7 it that informed what you did for the trams? 8 A. Organisational complexity was one of the big burdens on 9 what should have been a relatively modest project, but I 10 would also bring my professional experience, that 11 simplicity is easy. 12 The other thing it's worth saying is a technical 13 point that the Stirling-Alloa-Kincardine project was 14 a heavy rail project. The Edinburgh Tram Project is 15 a light rail project. The technology is different. The 16 interactions, for example of trams with other traffic, 17 is quite different. And tie had employed people with 18 light rail experience and knowledge, but really didn't 19 have people with heavy rail experience and knowledge. 20 That essentially lay in Transport Scotland. 21 So I don't think we had an extended discussion on 22 the matter because of where that project was, but 23 I think the fact the organisational complexity was one 24 of the key things that we were looking at in the lessons 25 that we might learn from that project. 29 1 Q. Are you sure tie didn't have people working on 2 Stirling-Alloa-Kincardine with heavy rail experience? 3 A. I believe that to be the case, but, you know, I didn't 4 examine that matter in detail. That's -- that's 5 probably a post hoc observation rather than an ad hoc 6 one. 7 Q. If we look, please, at a document, please, CEC01318113. 8 I don't know if you recognise this document. It's an 9 Audit Scotland publication entitled "Review of major 10 capital projects in Scotland", and we can see there's 11 a date in the lower right-hand corner of June 2008; do 12 you see that? 13 A. Yes, I do. 14 Q. What I would like you to do with me is look at page 21, 15 first of all. 16 If we enlarge the lower half of the page, first of 17 all, and paragraph 50. If I ask you to scroll down 18 first of all, we should see the heading on this section, 19 we see the heading above paragraph 47, is the costs of 20 some current projects have increased since initial 21 approval. If you go down to paragraph 50 it says: 22 "Case study 2 provides an overview of the changes in 23 time and cost estimates affecting the 24 Stirling-Alloa-Kincardine rail link. At the time of our 25 review (autumn 2007), Transport Scotland had recently 30 1 taken direct control of this project and project 2 management and governance had improved. The project was 3 completed in May 2008, within the revised timetable 4 approved by Transport Scotland when it took over the 5 project." 6 So really what we're talking about here, what had 7 happened, was simply a transfer of project management 8 and governance from tie to Transport Scotland. 9 A. That's my understanding. 10 Q. Part of that was because you were dissatisfied with the 11 performance of tie in delivery of the project? 12 A. Correct. 13 Q. If we look then at the case study 2, if we look at 14 page 26 of the document, enlarge the upper half, under 15 "Inception and procurement", it says: 16 "Clackmannanshire Council promoted the private 17 parliamentary Bill required for the project (the 18 Stirling-Alloa-Kincardine Railway and Linked 19 Improvements Act 2004). The Scottish Executive and 20 later Transport Scotland were the principal funders of 21 the project. Tendering of the main design-and-build 22 contract took place in 2003 and 2004. The Council 23 awarded a Phase 1 contract (preliminary design and 24 target cost preparation) to First Nuttall Joint Venture 25 in July 2004; it awarded a Phase 2 contract (detailed 31 1 design and implementation) in September 2005. The 2 Council led the project until 2007 but problems resulted 3 in Transport Scotland taking direct responsibility from 4 August 2007. 5 "Other key parties involved in the project 6 include: Network Rail (which owns and operates the new 7 railway); Jacobs Babtie (a contract management 8 consultant the Council retained to oversee construction 9 work, later the nominated project manager for the 10 contract); and tie Ltd (which provided project 11 management services to the Council, overseeing the 12 contracts with Jacobs Babtie and First Nuttall as the 13 Council's agent, and managing contacts with Network Rail 14 and others)." 15 Did that reflect your understanding of the factual 16 position? 17 A. Yes. It's a qualified yes in the sense that I think our 18 involvement as Ministers was pretty high level. 19 Q. Well -- 20 A. I think we were acting on recommendations from 21 Transport Scotland, is my recollection. 22 Q. In what? 23 A. That we should simplify the organisation of the project. 24 We were at a position where the budget was -- appeared 25 to be running out of control. The progress was not 32 1 being made that was required. My recollection is that 2 the final technical difficulties related to level 3 crossings and the ground conditions there, and progress 4 just didn't appear to be being made, and my recollection 5 is that it was on the basis that we had a complex 6 structure, we needed to simplify it, and we needed to 7 get this project complete and delivered within a lower 8 budget. 9 Q. You said that was -- did you have advice to that effect 10 from civil servants? 11 A. The detail of the advice, I cannot recall. 12 Q. Did you have advice that the basis for 13 Stirling-Alloa-Kincardine was the need to simplify, and 14 that you should do the same in relation to the trams? 15 A. Don't let me make the linkage yet. The project for 16 Stirling-Alloa-Kincardine railway was standalone. 17 Q. Could I just get an answer to my question. Did you have 18 advice that Stirling-Alloa-Kincardine had been 19 a simplification exercise and you should do the same for 20 the trams? 21 A. I have no recollection of having advice in those terms. 22 Q. No. Let's see what Audit Scotland said about the 23 difficulties that arose in Stirling-Alloa-Kincardine. 24 Can we have a look at the heading, "Reasons for cost 25 increases" further down the page. We see: 33 1 "Estimated costs increased by 67 per cent between 2 the Bill estimate and the contract stage. The main 3 factors were: 4 "Higher land costs (up by GBP6 million) mine working 5 remediation (up GBP4 million), earthworks (up 6 GBP1 million), changes in contract method (up 7 GBP2 million), and scope changes on a station and level 8 crossing (up GBP2 million). 9 "Inflation not allowed for at the Bill stage 10 (GBP5 million). 11 "After the contract was awarded, costs increased by 12 a further GBP25 million, principally on construction 13 costs (up GBP21 million), land costs (up GBP3 million) 14 and an additional GBP1 million for Network Rail costs." 15 There all the increase in costs are given -- quite 16 precise details of the causes, none of which are 17 directly related to the management of the project? 18 A. Do forgive me if I perhaps take a slightly different 19 view on that. I think where we're looking at 20 an increase in the costs after the contract, that 21 perhaps may lead one to a slightly different conclusion, 22 and indeed, you know, construction costs up by 23 21 million. But perhaps at the stage we were at, the 24 costs that we were looking at were higher than they 25 ultimately ended up being. In other words, the putting 34 1 of Transport Scotland in, and I can't put a figure on 2 it, it wasn't a huge figure, but we did rein in the 3 costs by changing the organisation at 4 Stirling-Alloa-Kincardine. It would be single figure of 5 millions, my recollection is perhaps 3 to 5 million. 6 But, you know, every penny is a prisoner. 7 Q. Let's roll down the page and see what is said under the 8 heading, "Project management and governance". It notes 9 there that -- the Auditor General notes that in June 10 2007, because of a range of concerns about the project, 11 Transport Scotland took a direct role in the project 12 management on behalf of the Council and commissioned 13 a technical audit: 14 "The resulting audit report revealed project 15 liabilities significantly greater than previously 16 reported. 17 "Scottish Ministers announced, in June 2007, that an 18 improved project governance structure would be put in 19 place to take the project through to completion in 20 March 2008 and to contain costs within GBP85 million. 21 The new arrangement removed tie Ltd from the project. 22 Transport Scotland took over day-to-day project 23 management in August 2007 and put in place a range of 24 measures to improve control. 25 "Our review of the project confirmed significant 35 1 shortcomings before Transport Scotland took control of 2 the project. 3 "Project requirement specifications were not 4 formalised and there was no clear baseline for planning. 5 Costs and programme timescales were based on 6 a preliminary design which was untested against 7 requirements. 8 "Control and challenge were weak in the project 9 governance. Reporting was ineffective and there was 10 a poor level of challenge and poor management of cost by 11 key stakeholders. 12 "Not all of the right skills and experience were 13 available. 14 "Risk management was not embedded and not all 15 significant risks were identified. 16 "Project management and governance significantly 17 improved after Transport Scotland's direct involvement. 18 Construction was complete by 28 March 2008 and services 19 commenced in May 2008. Final cost for the project are 20 dependent upon negotiations with contractors on any 21 outstanding claims." 22 Now, there's nothing in that that suggests that the 23 project governance was unduly complex or there was 24 a need for fewer parties, was there? 25 A. If -- 36 1 Q. Just answer the question. There's nothing in that that 2 indicates there's a problem with complexity of 3 governance? 4 A. I disagree. 5 Q. Really? Where does it say there's a problem with 6 complexity of governance? 7 A. It is indirectly referred to when it says: 8 "Control and challenge were weak in the project 9 governance. Reporting was ineffective and there was 10 a poor level of challenge and poor management of cost by 11 key stakeholders." 12 I would take the conclusion from that, looking at 13 any such report, that that is -- there are too many 14 cooks stirring the pot, that the allocation of 15 responsibilities was probably unclear. That is what 16 I read into what the -- Audit Scotland is saying to us 17 at the second bullet point in those points there. 18 Of course, equally, we see the figure of 85 million. 19 When we first came to the project, my recollection, I'm 20 not going to give you the exact number, because I don't 21 have that, is the point at which we looked at it, the 22 cost was looking north of 90 million. So therefore 23 there was considerable anxiety about the project and how 24 it was progressing. 25 Q. We've seen a description in this report of the various 37 1 parties involved and their roles, and the effect of the 2 change made was to take tie out and therefore amalgamate 3 the role of the project funder, Transport Scotland, and 4 the project management, formerly tie, now 5 Transport Scotland. 6 A. Yes, but, as you read into the record, it also -- 7 Transport Scotland took a direct role on behalf of the 8 Council. In other words, the Council's role was 9 a little diminished. There was greater clarity on who 10 was responsible, and indeed Transport Scotland's first 11 action, as it says in this paragraph, was to commission 12 a technical audit. In other words to understand what it 13 was they were taking on. 14 Q. We also read that originally tie were providing project 15 management services to the -- on behalf of the Council. 16 A. Correct. 17 Q. Once tie were taken out, Transport Scotland were 18 providing the project management services. Ultimately 19 it was still a Council project? 20 A. Correct. 21 Q. So in terms of the simplification, the role of 22 Transport Scotland had been increased so that they 23 undertook project management in addition to funding? 24 A. Correct. 25 Q. How did that possibly provide a template for taking 38 1 Transport Scotland out or diminishing their role in the 2 trams? 3 A. Well, there's perhaps several things we might say. 4 Clackmannan Council is one of the very smallest councils 5 in Scotland. I think Western Isles is probably smaller, 6 the island councils generally, and had a different 7 experience and capability of doing projects, and 8 I think, to be fair to the Council, they wouldn't, 9 I suggest, have said anything different. 10 But equally, in looking at the City of Edinburgh 11 Council, you had a Council who had established an arm's 12 length company, who had sought to hire the specialist 13 skills to make the project work, and that was quite 14 a different situation from the organisation in 15 Stirling-Alloa-Kincardine. 16 But what did -- and in structural terms, the 17 structure that appeared to be in place for the trams 18 project was not an inappropriate structure, and I think 19 a range of witnesses have suggested that was the case. 20 The problems were elsewhere. Whereas the 21 Stirling-Alloa-Kincardine one was a much smaller, 22 focused project, very near the end, and it just needed 23 the final heave to get it over the line, because we are 24 looking at this period of actually not more than about 25 six months. 39 1 Q. You have given me a number of factors there which 2 indicate why the projects are different: the size of the 3 Council, the structure, and the scale of the project. 4 Although they do -- I think we agree that the arm's 5 length company that was set up was exactly the same in 6 both cases, it was tie? 7 A. Oh, yes, yes. 8 Q. The company that was set up by the Council was exactly 9 the same. 10 A. Well, yes and no. I understand that tie's role was 11 essentially in the Stirling-Alloa-Kincardine as 12 a contractor. In other words, it wasn't owned by, in 13 the ownership of Clackmannanshire Council. It was in 14 the ownership of City of Edinburgh Council. So 15 therefore the owners of a company quite reasonably 16 direct and control and carry responsibility for the 17 operations of the Council. So when tie were working for 18 the City of Edinburgh Council, I suggest they were in 19 effect City of Edinburgh Council, whereas in the 20 Stirling-Alloa-Kincardine instance, they were simply 21 another external contractor who had been brought in for 22 the supposed expertise they could bring to that 23 particular project; and in the event it was mutually 24 agreed that that was not working and they were removed 25 from it, as you could remove any contractor from 40 1 a project. 2 Q. Other than that, you have identified the size of the 3 Council, the structure of the project, and the size of 4 the project as being different in Stirling than in 5 Edinburgh. So why was Stirling an inspiration for what 6 was done in Edinburgh if there were so many differences? 7 A. It was an inspiration in one narrow respect, and that 8 narrow respect was that it illustrated the difficulties 9 one could have in a project if one had an overly complex 10 structure of responsibility. It was simplified in 11 Stirling-Alloa-Kincardine right at the end of the 12 project, and in the project that was being progressed in 13 Edinburgh, you were right at the stage of ramping up 14 from the planning and authorisation of the project into 15 the major part of the project which was to undertake the 16 civil engineering necessary to deliver the tram project. 17 Very different phase of the project. Simplification 18 at the outset of Stirling-Alloa-Kincardine would have 19 equally benefited that project. By the time we got 20 involved, that was a very limited option because we were 21 right at the end. 22 Q. You were quite critical of the role that tie played in 23 Stirling-Alloa-Kincardine, weren't you? 24 A. Yes. I don't recall being publicly overly critical. 25 I think I certainly made comment on the subject. 41 1 Q. You said they had had an opportunity and they'd fluffed 2 their part? 3 A. Yes, correct. 4 Q. That's quite critical, isn't it? 5 A. Yes, I accept, it was intended to be critical. It 6 wasn't intended to be supportive. 7 Q. So having been critical of them, was it not then 8 slightly strange to take Transport Scotland away and 9 leave tie to run the whole of the tram project? 10 A. As long as -- you could argue that as long as 11 Transport Scotland was sitting on the table, and the 12 owners of tie were City of Edinburgh Council, it avoided 13 them confronting what needed to be done in relation to 14 their project, because it was their project. 15 Q. If we look at page 54 of your statement, please, 16 paragraph 116, we look at the question above 116, it 17 gives context: 18 "In February 2009 contractors refused to start work 19 on Princes Street. This became known as the 20 'Princes Street Dispute'. You sent a letter to Jenny Dawe 21 on 26 February 2009 seeking reassurance that there would 22 be an early settlement of the dispute." 23 You are asked what your understanding was of the 24 reasons for the dispute. 25 What you have said about the limited role of 42 1 Transport Scotland, why was it appropriate for you to 2 write to the leader of the Council seeking reassurance? 3 A. Because we, contributing 500 million, had an interest in 4 seeing the project delivered, and it appeared, and 5 that's the word I have to use, that the stasis that had 6 happened in the project over the Princes Street issue 7 put the whole project at risk and that our money, not at 8 that stage 500 million, but a substantial amount of that 9 500 million, could be at risk with the project 10 incomplete. 11 Now, the fact that the Public Finance Manual allows 12 the Government to recover its money that it's granted to 13 a body, if the project is not undertaken, is very little 14 consolation in the circumstances where the sum of money 15 that might have to be recovered was so substantial as to 16 inhibit the proper operation of the Council. 17 Q. Looking back, as you know them now, and as you say, 18 having GBP500 million of Government money put into the 19 project, do you not think it would be better to have 20 a more effective means of control than writing letters 21 to the leader of the Council? 22 A. That was supplementary and complementary to the control 23 that Transport Scotland had whereby they released the 24 monies to the City of Edinburgh Council. 25 Q. What control did Transport Scotland have in your view? 43 1 A. It had control over the cash flow. 2 Q. In what way? 3 A. Because it only released money against evidence of work 4 having been done in the civil engineering realm. 5 Q. So as long as work was being done, money would have to 6 be released? 7 A. As long as work that was in the agreed plan of work was 8 being done, and it's an important qualification, that 9 one. 10 Q. Even as matters started to go wrong, and the future of 11 the project was in jeopardy, and the Princes Street 12 dispute arose, as long as work was being done, 13 Transport Scotland would still be handing over money? 14 A. That was the agreement that was in place, but always 15 with -- 16 Q. Do you -- 17 A. Do forgive me. But always with that caveat that it was 18 based on the project being completed. 19 Q. As concerns might legitimately arise as to whether or 20 not the project would be completed, and whether or not 21 Transport Scotland would get value for their money, 22 looking at matters now, do you not think it would be 23 preferable for Transport Scotland to have had an ability 24 to take a more direct role, more direct intervention? 25 A. No, because it comes back to the central issue of why 44 1 Transport Scotland no longer sat on the Project Board, 2 that there would then be an easy out for the Council to 3 dump problems into Transport Scotland's lap, rather than 4 exercise their proper responsibilities for the delivery 5 of the project. 6 Q. With that in mind, please, could we look at page 19 of 7 your statement, paragraph 25. You say there: 8 "Transport Scotland were supportive of the Tram 9 Project Board in the sense of being a critical friend. 10 When confronted with a problem, it is easy for a project 11 board to become engaged and pursue a solution against 12 all the evidence that the solution is not going to work. 13 A project board can cease to see another way of doing 14 things and therefore requires an external person to 15 encourage a different approach. That was what 16 Transport Scotland tried to do for the Tram Project 17 Board." 18 Do you have any example of Transport Scotland doing 19 that for the Tram Project Board during the project? 20 A. I don't have any direct examples, but my -- what I'm 21 referring to is the psychological phenomenon of 22 conformance bias, where you keep retrying an approach 23 that you've decided to take, regardless of the evidence 24 from repeated failures, it's not going to work, and 25 that's something that happens from all projects from 45 1 time to time, and I think that's all I'm seeking to say 2 at that point. 3 Q. No, I'm not interested in that part. I'm interested in 4 your last sentence, where you say: 5 "That was what Transport Scotland tried to do for 6 the Tram Project Board." 7 That's seeing other ways of doing things and 8 encouraging a different approach. Are you suggesting 9 that's what Transport Scotland in fact did? 10 A. I'm fairly confident, although I can't give specific 11 instances, that in their interactions with City of 12 Edinburgh, they sought to make sure that the City of 13 Edinburgh were not falling into the trap of putting 14 their head down and not looking for wider solutions to 15 the problems that confront them in our project, as 16 indeed will happen in any project. 17 Q. Is that just speculation on your part? 18 A. It is essentially speculation, but it's speculation 19 informed by the interactions between Ministers and civil 20 servants, and quite informal observations that I can 21 think of, having been made, that things had been said 22 from time to time. Not necessarily major things, 23 I hasten to add. 24 Q. If suggestions are being made of alternative ways to do 25 things, would you expect that to be recorded in some 46 1 way? 2 A. Well, only if -- only if that led to actions, 3 would I expect it to be recorded. Anyway, I'm not 4 necessarily trying to put it in quite the terms you put 5 to me. I think as much as anything, what I would expect 6 Transport Scotland to have been doing in this context is 7 to -- is not to necessarily provide a solution, but to 8 point to the fact that there is a problem needing solved 9 which they're persisting with a failing solution. 10 That's what happens in projects very, very regularly. 11 Q. If that's being done, I repeat my question, would you 12 not expect a record to be kept of that? 13 A. I would expect a record to be kept of the decisions that 14 the Project Board made, and indeed that the project 15 office in the project -- 16 Q. Can I be quite clear, I'm not interested in what the 17 Tram Project Board do in their records; I am interested 18 in records of what has been done by Transport Scotland. 19 Would they keep a record, if they're making this sort of 20 suggestion or recommendation, or comment, call it what 21 you will, which is intended to influence the conduct of 22 the Tram Project Board, would you expect a record to be 23 kept of that? 24 A. I'm not talking about recommendations. I'm talking 25 about what I would imagine to be the relatively informal 47 1 things, when two people in a room doing a review of the 2 expenditure that's being undertaken, which is the proper 3 involvement of Transport Scotland, and saying the kind 4 of things that you would expect in that exchange, if it 5 was a material matter, I would expect a record to be 6 kept. If it was something where it was 7 Transport Scotland saying to tie or City of Edinburgh 8 Council, then I would expect a record to be kept. But 9 if it's two professionals in a room who are having an 10 informal chat, I would expect a record to be kept of 11 actions that followed; because just as you and I are 12 developing our mutual understanding here of this, 13 I would expect that between two professionals who have 14 different responsibilities in relation to this; and it 15 would be entirely a matter for the recipient of any 16 observation, what was done with that observation, if any 17 such observation were to be made. 18 CHAIR OF THE INQUIRY: How would that happen? If there were 19 informal discussions between experts, you say you would 20 expect a record to be kept if action were taken. 21 A. Yes. 22 CHAIR OF THE INQUIRY: So would that record be kept by 23 Transport Scotland, for instance, by the official who 24 had made the recommendation, once he or she sees that 25 it's been acted upon? 48 1 A. My Lord, I would not use the word "recommendation". 2 What I think I'm talking about is something at a lower 3 level, simply an observation about the progress of the 4 project, which would be entirely for the recipient of 5 that observation to do whatever they professionally 6 deemed would be right. 7 I just bring my general experience of project 8 management over 30 years or so, that often it can be 9 a single sentence sometimes that draws you up sharp and 10 makes you realise you have to go and look at something, 11 and when professionals are in the room, that happens. 12 CHAIR OF THE INQUIRY: I can see that, but what -- I'm 13 interested in what you said about a record being kept if 14 action were taken upon -- following the discussion, 15 putting it neutrally. 16 How do you see that? Would Transport Scotland, 17 having had this informal discussion, then see action 18 following upon it, would Transport Scotland then note 19 somewhere that tie had acted following the discussion 20 between Transport Scotland and tie? Would that -- 21 A. My Lord, I hope I made the distinction between 22 Transport Scotland expressing a view to the project and 23 an individual professional from Transport Scotland to 24 a professional colleague making an observation. These 25 are different things, which I would expect to be dealt 49 1 with in a different way, and I would expect -- it might 2 well be, of course, that the observation -- I don't 3 describe it any other way -- that might be made by 4 a professional from Transport Scotland, or indeed 5 anywhere else, would be based on incomplete 6 understanding and information; and it would be entirely 7 as in a matter of normal conversation for the recipient 8 to deal with that -- to possibly establish almost at 9 once that it was an ill-informed observation and not to 10 do anything with it. 11 But if anything was done with it, I would expect the 12 project to record that it had done something with it, 13 and in projects in which I have been involved, in the 14 change management part of the systems in projects, 15 I would expect the origins of that change to be 16 recorded, so that one had a record. 17 But only if change happened to the project under 18 these relatively informal circumstances that can be 19 immensely useful in just a practical sense. 20 Now, I think that's what I'm trying to get at in 21 paragraph 25. 22 CHAIR OF THE INQUIRY: Thank you. Mr Lake? 23 MR LAKE: You talked about materiality. We are talking here 24 about GBP500 million worth of Scottish Government money. 25 Whether you call them observations, comments or 50 1 suggestions, if Transport Scotland is performing 2 a critical friend role, is it not appropriate that 3 a record is kept of that and what is said? 4 A. I think the critical friend role that I'm bringing to 5 the Inquiry in my answer at paragraph 25 is partly 6 discharged through the formal process in monitoring and 7 measuring the expenditure, and looking at what is being 8 bought by the money that is being spent and is it 9 against the plan. 10 Of course, in the nature of projects, a project 11 without change is a project that's died. Let me make 12 that assertion. 13 CHAIR OF THE INQUIRY: Mr Stevenson, sorry, the question was 14 quite simple. If Transport Scotland were performing 15 a critical friend role, is it not appropriate that 16 a record is kept of that? 17 A. If Transport Scotland are doing it, then I would say 18 yes. 19 MR LAKE: Was a record kept of any observations, comments or 20 suggestions? 21 A. That's not something a Minister would be aware of. 22 Q. Do you think it should be kept? Just be clear about 23 this? 24 A. If Transport Scotland as an institution were making 25 suggestions, I would expect a record of that to be kept. 51 1 If an individual in an informal suggestion to a fellow 2 professional is saying: I was a bit surprised to see you 3 selected this particular company to do that particular 4 piece of work; that would be of a different character. 5 Q. How is anyone supposed to differentiate between what has 6 been said by Transport Scotland and simply a civil 7 servant engaged working at Transport Scotland? 8 A. Well, I think that -- that precisely takes us back to 9 when Transport Scotland records something and as 10 Transport Scotland puts something into the project, that 11 is Transport Scotland speaking and it should properly be 12 recorded. 13 Q. Were any written records kept of briefings provided by 14 tie or the Council to officials at Transport Scotland? 15 A. Only Transport Scotland can answer that question. 16 I can't. 17 Q. Were you not concerned in your role as to whether 18 records of such briefings were being kept? 19 A. I think Ministers have a proper assumption that the 20 Civil Service has high standards of record-keeping and 21 in the absence of -- and certainly no evidence ever 22 emerged to my gaze that suggests they were doing other 23 than keeping proper records. 24 Q. Look, please, at page 16 of your statement. Can we look 25 at paragraph 16. You say: 52 1 "The primary role and responsibility of 2 Transport Scotland and the Scottish Government was to 3 ensure that the GBP500 million grant was paid to the 4 Council at agreed milestones. I did not see the detail 5 of the payment plan but I understand the payments were 6 made monthly for work that was completed. It was not 7 Transport Scotland's responsibility to assess whether 8 that work was contributing to the success of the 9 project." 10 Then you go on to talk a little bit about secondary 11 interests. 12 What you're saying there about paying out monthly 13 against -- the repayment is what you have already told 14 us, that monies were only paid to the Council if the 15 Council could establish that works within the agreed 16 tram project were taking place? 17 A. Correct. 18 Q. But do you not consider that it was also a principal 19 responsibility of Transport Scotland to ensure that they 20 obtained value for money? 21 A. Well, the project was the City of Edinburgh Council's 22 project. Transport Scotland were paying against the 23 agreed work activities, and in a project you would 24 normally expect the project office to maintain a work 25 breakdown structure, which is all the individual tasks 53 1 that are being undertaken. Now, that does change over 2 time, as I previously made reference to, and it would be 3 against that activity that the money was being paid. 4 Q. That deals with the fact that you don't pay money where 5 it has not been spent on the project. I'm asking you 6 about a separate matter, which is a value for money. 7 Now, you said it was City of Edinburgh Council's 8 project. But would you agree that it was GBP500 million 9 worth of Scottish Government money? 10 A. Yes. 11 Q. So was it not a concern of the Scottish Government to 12 ensure they got value for that GBP500 million? 13 A. Yes, but our concern was not about the detail, which was 14 a matter for City of Edinburgh Council, and if there was 15 not value for money, the risk in any excess costs lay 16 entirely with City of Edinburgh Council. 17 Q. But you could end up with a situation such as has 18 happened where Transport Scotland, the Scottish 19 Government, paid GBP500 million and got less of a line 20 than it thought. Is that not a concern? 21 A. Of course it's a concern. I would, notwithstanding our 22 position in relation to trams, having concluded that the 23 tram project should proceed, we wanted it to be 24 a success, and to complete, and -- 25 Q. Could we look at production TIE00677729. 54 1 This is an excerpt from an article which appeared in 2 the Herald newspaper on 8 June 2007, shortly after the 3 change of Government following the Scottish General 4 Election. 5 What I would like to do, if we look at the foot of 6 the first column, the left-hand column? 7 A. Thank you. 8 Q. We see it starts by indicating, it's a reference to you: 9 "Stewart Stevenson, the Transport Minister, said the 10 rising cost of the Stirling-Alloa-Kincardine railway, 11 which was estimated at GBP65 million to GBP70 million, 12 and is now priced at GBP83 million, was proof the 13 executive was right to revisit the Edinburgh projects. 14 "He said: 'It is precisely to bring the necessary 15 objectivity to these projects that we invited 16 Audit Scotland to look at the projects'." 17 I think we've heard about that was something that 18 was done shortly after the SNP assumed government. 19 If we look down that centre column, you will see 20 a paragraph, just to the left of the foot of the 21 photograph of Wendy Alexander, which says: 22 "It's our priority to protect the Scottish taxpayer 23 and ensure all major transport projects deliver value 24 for money." 25 That's not just ensuring that money is paid when 55 1 it's due. That's trying to ensure that you get value; 2 would you agree? 3 A. Yes. 4 Q. Does that ensure that the money is going to be well 5 spent? 6 A. It's -- the reference there is to the Scottish taxpayer. 7 We protected the Scottish taxpayer in relation to the 8 trams project by capping our contribution at 9 500 million. 10 Incidentally, it wasn't actually a new cap. It was 11 merely an uprating for inflation of the GBP375 million 12 that had been previously there, but it was perhaps, 13 I think, more unambiguous a cap than perhaps it had 14 been. 15 So we were protecting the Scottish taxpayer. It's 16 worth just making the incidental comment in relation to 17 this particular article, of course, that this is also 18 covering the Edinburgh Airport rail link, which is not 19 the purview of this Inquiry directly, but which actually 20 was a much more substantial area of concern in value for 21 money. 22 So the comments are in this particular article, they 23 are not simply about the tram scheme, and in fact we 24 were much more concerned about the Edinburgh Airport 25 rail link. 56 1 Q. Can we look back to your statement, please, at page 40? 2 CHAIR OF THE INQUIRY: Before doing that, do you think the 3 Government got value for its money in the tram project? 4 A. My Lord, we got a tram system up and running. We would 5 have got -- and for our 500 million we got a system that 6 runs. The risk that was associated with the project was 7 for City of Edinburgh Council who had to find quite 8 substantial additional funding. 9 It would have been better, of course, and better 10 value for money if for the money spent the project had 11 gone all the way down Leith Walk, et cetera, to its 12 final proposed destination, and that's just 13 self-evident. 14 CHAIR OF THE INQUIRY: So do you say yes, the Government did 15 get value for money, or no, it did not? 16 A. Yes, it got value for money. It could have got better 17 value for money. The City of Edinburgh Council could 18 have got better value for money for its project. 19 MR LAKE: Following that up, Mr Stevenson, could you look at 20 page 40 of your statement and enlarge paragraph 78. 21 A. Yes. 22 Q. "The oversight Transport Scotland had over the spending 23 of GBP500 million after it withdrew from the Tram 24 Project Board was effective in the sense that the 25 Government did not spend more than GBP500 million. So 57 1 we achieved the financial objective set by Parliament on 2 27 June 2007. I hold the opinion that our unambiguously 3 constraining our financial commitment to the tram 4 project limited the ultimate overspend." 5 Now, you say you were satisfied there in relation to 6 the limit of GBP500 million. It's really following up 7 on what Lord Hardie has already asked you. 8 Were you satisfied in that you got what you paid 9 for? 10 A. We got what we paid for. Now, the reason I say that is 11 that of course we paid out money against specific work 12 activities. 13 I think the broader question which is underlying the 14 exchange with Lord Hardie and with yourself is whether 15 the City of Edinburgh got what it paid for, and I think 16 that comes back to the point of it being an abbreviated 17 route. Indeed, at one stage there was a risk the tram 18 would stop at Haymarket. 19 Q. It might be said that when the Government approved the 20 grant under the Transport (Scotland) Act it thought it 21 was getting a tram that would run all the way from the 22 airport to Newhaven. Would you agree with that? 23 A. That was the plan. 24 Q. So the Government didn't get what it thought it was 25 going to get? 58 1 A. We were sharing the costs with the City of Edinburgh 2 Council and the risks were with them. And as I've said, 3 it would have been better value for money for our 4 500 million if it had gone all the way. 5 Q. That's all very well, Mr Stevenson, but it doesn't 6 answer my question. Would you try again? 7 A. Yes, please, if you could. 8 Q. The Government didn't get what it thought it was paying 9 for, a tram from the airport down to Newhaven? 10 A. Correct. 11 Q. And that must be a disappointment to the Government? 12 A. Yes, of course. 13 Q. And by your own value for money test referred to in the 14 Herald, you didn't achieve the value for the money that 15 you intended? 16 A. That is a different question. If -- the intention was 17 to take the tram all the way down to the coast. That's 18 for sure. 19 The question of whether the 500 million delivered 20 value for money is a broader question in that it 21 delivered less value for money than going all the way. 22 But that is not to say that it did not deliver value for 23 money. 24 Why do I assert that? I assert that because you 25 have a project whose utilisation is exceeding targets. 59 1 It is -- in commercial terms, it's in profit. So as 2 a project it is delivering a return for the public 3 investment. So in that perhaps more narrow sense than 4 the way you were asking me, it is value for money. 5 But I accept that it is less value for money than 6 a project that had -- would have gone all the way down 7 to the shore would have delivered. 8 Q. You didn't get the value that you thought you were going 9 to get when you decided to pay the grant? 10 A. Correct. 11 MR LAKE: Thank you. 12 No further questions, my Lord. 13 CHAIR OF THE INQUIRY: Thank you very much. I don't think 14 there's anyone else. 15 Thank you very much, Mr Stevenson. That concludes 16 your evidence. Technically you're still under your 17 citation and we could recall you. Hopefully that won't 18 be required. Thank you very much. 19 A. I'm obliged, my Lord. 20 (The witness withdrew) 60 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