1 Wednesday, 23 May 2018 14 (10.30 am) 15 CHAIR OF THE INQUIRY: The next submission is by Mr Fairley. 16 Closing submissions by MR FAIRLEY 17 MR FAIRLEY: Thank you, my Lord. 18 My Lord, uniquely amongst those who appear for core 19 participants, I do not represent either a business, 20 a corporation or an emanation of the state. I say that 21 because it may be worth repeating at this stage that 22 I do not represent Transport Initiatives Edinburgh, 23 otherwise known as tie, nor have I ever done so. 24 Rather, as my Lord is aware, I represent 25 a collection of individuals who each performed differing 20 1 roles in that organisation at various times during the 2 Edinburgh Tram Project, and there are two consequences 3 which flow from that. 4 In the first place, I do not and will not seek to 5 defend tie as an institution. Nor do I seek to justify 6 the constitutional position in which it sat within the 7 structure of the project more generally. Those are 8 matters for others, in my respectful submission. 9 The second consequence is that I readily accept that 10 there are certain individuals within tie, principally in 11 my submission Mr Gilbert, Mr Gallagher and Mr McGarrity 12 who may well be the subject of justifiable and justified 13 criticism for actions which they took on the project as 14 representatives of tie. In that regard, I simply adopt 15 what is said in the written submission that has already 16 been produced for your Lordship insofar as it relates to 17 those individuals. 18 All of that said, I accept that it might be thought 19 that of those who I represent, they may on occasion have 20 made errors of judgement, but the context in which they 21 made decisions about the Edinburgh Tram Project was 22 frequently, if not invariably, one of extreme difficulty 23 created by others who either preceded them or in some 24 cases were senior to them within the organisation. 25 Nowhere was that more so than in the context of the 21 1 contract and in particular the Pricing Schedule and the 2 first Pricing Assumption. 3 My Lord, with those introductory remarks, I can 4 indicate that what I propose to do is to speak 5 relatively briefly under three chapters: the first to do 6 with the contract, the second to do with the Dispute 7 Resolution Procedures, and the third to do with 8 communications and reporting. 9 I also have a couple of miscellaneous sweep-up 10 points which I will deal with towards the end of my 11 submissions, but those are the three principal chapters, 12 and if I may therefore start with the contract. 13 If I may paraphrase a recent pronouncement by 14 President Trump, this was a contract which was 15 ridiculous and which should never have been made. It 16 was a terrible contract for tie, and by extension 17 a terrible contract for CEC. 18 I respectfully agree with the view which was 19 privately expressed by Dundas & Wilson at one stage to 20 Transport Scotland that the way in which the contract 21 was constructed tended to encourage disputes. 22 The change mechanism procedure within the contract 23 was clunky, it was cumbersome, and it was at best 24 productive of extensive delays. As an aside, it 25 respectfully seems to me from the evidence that the 22 1 change mechanism process in its final form seems to have 2 been a misguided attempt by Mr Gilbert to maintain total 3 control over the possibility of escalating costs. 4 But an unintended effect of that was to allow 5 a contractor, if it had a mind to do so, to hold its 6 employer to ransom. Whatever Bilfinger Berger may now 7 seek to suggest, that in my submission is precisely what 8 happened and we see the earliest example of that in the 9 Princes Street dispute. 10 Again, pausing there, I note that it has been 11 suggested in the written submission on behalf of 12 Bilfingers that my identification of the genesis of the 13 Princes Street dispute as being over access to a bus 14 lane as "ridiculous". It is ridiculous. It's 15 absolutely ridiculous. But that position wasn't one 16 which I invented. That position was taken directly from 17 correspondence by Bilfingers to tie at the time. 18 Contemporaneous correspondence. It evinces, in my 19 respectful submission, the mindset of a contractor which 20 was determined to disrupt and extort, without, at least 21 at that very early stage, any clear idea of the legal 22 basis on which it might do so. 23 The pricing schedule within the contract and in 24 particular Pricing Assumption 1 was sufficiently 25 confusing and opaque that those who gave evidence about 23 1 it seemed for the most part to have widely differing 2 views of precisely what it meant or what it was intended 3 to mean. Even experienced adjudicators apparently 4 struggled to interpret it and ultimately reached 5 differing views as to its meaning. 6 Accepting all of that, it would be fair to say that 7 any contract which left the door open to an argument by 8 the contractor that something as basic and fundamental 9 as the Employer's Requirements for the construction of 10 the tram network was an extra over and above that which 11 had been priced was an extremely poor deal for the 12 Council. 13 Precisely how that situation arose never became 14 particularly clear in the evidence. Plainly, it was 15 a consequence of the incompleteness of the design at the 16 point of contract close, but what was never fully 17 bottomed out in the evidence was whether the path was 18 sowed by Mr Gallagher in Wiesbaden, or whether 19 alternatively it was the drafting process, 20 responsibility for which seems to have been assumed by 21 Mr Gilbert, and whose inexperience in these matters 22 seems to have been exacerbated by the absence of 23 effective legal advice. 24 For my purposes, my Lord, it does not, I would 25 suggest, appear from the evidence that anyone who 24 1 I represented played any significant role in the 2 drafting or in the auditing of the Schedule Part 4. 3 Rather, those who I represent, especially Messrs Bell, 4 Jeffrey and Mackay, were left to pick up the pieces of 5 the mess that Schedule 4 ultimately created. 6 I note, my Lord, the suggestion in written 7 submissions for those acting on behalf of DLA that 8 Mr Bell was fully aware of the likely extent of Notified 9 Departures, and I submit that that is simply wrong. 10 Mr Bell, in common with others within tie, plainly 11 expected there to be some Notified Departures consequent 12 upon the version 26 to version 31 programme change, but 13 he also said very clearly in his evidence that it was 14 reasonably believed that sufficient allowance had been 15 made for those limited Notified Departures within the 16 budget. 17 What was not expected and what tie were not advised 18 would happen, but what ultimately did substantially 19 increase both price and time, were Notified Departures 20 running to many millions of pounds, because of issues 21 such as the very one to which I have already referred, 22 that the Employer's Requirements did not form part of 23 the original base price. 24 But in my submission there is absolutely no proper 25 basis for any assertion that Mr Bell, or indeed anyone 25 1 else in tie, was aware that such a level of risk had 2 been transferred back from Bilfingers to City of 3 Edinburgh Council. 4 That is corroborated by the fact that the legal 5 advice which tie received prior to contract close was 6 completely inconsistent with such an extreme position. 7 If I can turn then to the second of my chapters, 8 my Lord, which is the Dispute Resolution Procedures. 9 Of the clients who I represent, the one who was most 10 closely connected with the DRPs was Richard Jeffrey, and 11 he arrived in post shortly after the Princes Street 12 Supplementary Agreement had been reached. In that 13 regard, his appointment bore certain similarities to the 14 arrival of the 1st Polish Independent Parachute Brigade 15 on the fifth day of the battle of Arnhem under heavy 16 mortar and machine gun fire. 17 Or putting it rather less picturesquely than I have 18 just done, with hindsight, Mr Jeffrey himself noted that 19 the position when he arrived was that many of the 20 problems were by that stage baked in, was the way he put 21 it, the primary one being of course the problem with the 22 contract itself. 23 Given the recent history to which Mr Jeffrey 24 arrived, and by that I mean the Princes Street 25 Supplementary Agreement, and also the potential for 26 1 open-ended liabilities for Notified Departures, in my 2 submission the only prudent thing for Mr Jeffrey to have 3 done was to have taken the best legal advice that he 4 could obtain, and that of course was precisely what he 5 did. 6 He obtained advice not only from DLA and McGrigors, 7 but also from two different Queen's Counsel, one of whom 8 was then the Dean of Faculty. It is notable, my Lord, 9 that at no stage did any of the lawyers from whom tie 10 obtained advice at that time suggest that there was 11 simply no point in bothering to contest Bilfinger's 12 substantial claims for additional payments. At no stage 13 did any of those lawyers advise that the contract was so 14 fundamentally unfit for purpose that there was simply no 15 point in embarking upon or thereafter in continuing with 16 a strategy of referral to the contractual Dispute 17 Resolution Procedures. 18 Mr Jeffrey, for his part, on behalf of tie, seems to 19 have taken the entirely sensible course of acting 20 according to the legal advice which he received, and 21 there's certainly no evidence at any stage that 22 Mr Jeffrey ignored such advice. 23 Now, with the benefit of hindsight, acting upon that 24 advice did not go well for tie. But that was not 25 something which Mr Jeffrey could possibly have 27 1 anticipated at the time. 2 I note, my Lord, that in the written submissions for 3 the Council, they appear to dispute the suggestion made 4 by the SETE group that invoking the DRPs saved the 5 Council money. I would simply reply to that, my Lord, 6 by saying that since Bilfinger's claims were reduced by 7 approximately 50 per cent on the amounts claimed by them 8 as a result of the DRP challenges, the proposition that 9 money was saved by invoking the DRPs would seem to be 10 irrefutable. 11 Given the contractual mechanisms with which tie were 12 saddled, the DRP process was a process which in my 13 submission had to be gone through by tie. When it 14 became apparent that it had not worked, or had at least 15 not worked as well as had been hoped, it was 16 discontinued. That was again, in my submission, 17 a prudent and sensible reaction to the way that the 18 adjudications had gone. 19 If I can turn then to the third of my chapters, 20 which is communications and reporting, there seems to be 21 a view amongst certain of the elected members of the 22 Council who gave evidence that, having established 23 a structure for the project which included tie, TEL, the 24 Tram Project Board, and the IPG, that they were 25 nevertheless entitled to be informed and consulted on 28 1 a regular basis on all developments in the project, 2 including matters of detail and confidential matters. 3 They were quite simply wrong about that, my Lord. 4 tie's principal link to the elected members of the 5 Council was through Council officials, but tie also 6 provided information to the Tram Project Board and, 7 I say importantly, to the IPG. I would ask 8 your Lordship in considering the terms of his report to 9 look carefully at the minutes of the IPG and references 10 to certain of those have been provided in the written 11 submissions which we have submitted, and to look at 12 those in the context of any suggestion that overall 13 tie's reporting on the progress of the project was 14 deficient or inadequate. 15 It is notable, in my respectful submission, that the 16 IPG reports, being as they were FOISA exempt, that's 17 Freedom of Information exempt, were very much fuller on 18 certain issues than were the Tram Project Board 19 equivalents. 20 The reason for that was quite clear in the evidence 21 of many of the witnesses who gave evidence to this 22 Inquiry. There were quite simply certain members of the 23 Council who could not be trusted to maintain the 24 confidentiality of information which was potentially 25 damaging to the commercial relationship between tie and 29 1 its main contractor, Bilfingers. 2 This was indeed a problem which seems to have 3 bedevilled the project and was one of the elements which 4 Mr Jeffrey described as being baked in at the point of 5 his arrival. 6 In my submission, my Lord, if Mr Jeffrey did make 7 any mistake following his arrival, it was in stepping 8 outside the formal reporting process and engaging 9 directly with certain Council elected members, and in 10 particular with party leaders. That was a move which 11 hindsight tells us resulted in his words to them being 12 either misunderstood or misremembered, but certainly 13 misreported at a later stage when they gave their 14 evidence. 15 With particular reference to the outcomes of the 16 adjudications, in my submission, the evidence showed 17 that members of City of Edinburgh Council's own in-house 18 legal team, and I specifically mention Mr Nick Smith, 19 had not only received copies of the adjudication 20 decisions in full, but had read them. 21 Now, whether or not Mr Smith understood those 22 submissions is not something on which I'm able to 23 comment, other than that he seems to have understood 24 them well enough to have been able to brief one of the 25 elected members, Councillor MacKenzie, when he was asked 30 1 to do so. 2 My Lord, those are the only submissions I wish to 3 make under the three chapters, and I have one final 4 chapter entitled "Miscellaneous points", which don't 5 perhaps directly concern those who I represent but may 6 be of assistance to your Lordship, given the remit of 7 his Inquiry. 8 The first of these relates to the withdrawal of 9 Transport Scotland. In my submission, the preponderance 10 of evidence demonstrated that this was a particularly 11 ill-judged decision, the decision to withdraw 12 Transport Scotland from the governance structure of the 13 project. It resulted, in my submission, in 14 Transport Scotland officers being more detached from the 15 project than was desirable, and indeed being detached 16 from the detail of the project to an extent that was 17 surprising. My Lord may recall that one 18 Transport Scotland officer, Mr Ramsay, said in his 19 evidence that when he saw that there were disputes about 20 BDDI to IFC, he didn't know what that meant. 21 That is astonishing. 22 But if it's true, and if your Lordship accepts it, 23 it can only be the direct consequence of 24 Transport Scotland being kept at a distance from this 25 project, a decision which, in my respectful submission, 31 1 was to the detriment of the project as a whole. 2 I simply note that of those I represent, Mr Mackay was 3 particularly critical of that decision and Mr Jeffrey 4 also viewed it as being undesirable. 5 The final point under my miscellaneous section, 6 my Lord, relates to the observations that were made by 7 some of the witnesses about the construction strategy of 8 swept path in relation to MUDFA. 9 Given that your Lordship may have to consider 10 reporting on what would be an appropriate strategy for 11 any further developments of the tram network, it 12 respectfully seems to me that the preponderance of 13 evidence suggested that in a city like Edinburgh, the 14 swept path strategy simply does not work for all of the 15 reasons that the witnesses spoke to. I would therefore 16 respectfully invite your Lordship, in any report that he 17 makes on this, to recommend that in any future 18 development of the tram network, that that is not part 19 of the construction strategy for MUDFA, but that instead 20 something closer to the bow wave strategy, which was 21 ultimately adopted in this case, is followed. 22 My Lord, I don't propose to say anything about 23 Mar Hall, simply because those I represent were by that 24 stage marginalised in the process. I would repeat that 25 both Mr Bell and Mr Jeffrey expressed reservations about 32 1 the amount of money that the Council ultimately was 2 prepared to pay at Mar Hall and noted that there were 3 difficulties in justifying that objectively. Whether 4 they were right about that will be a matter ultimately 5 for your Lordship to determine. 6 My Lord, unless there is anything arising from the 7 submissions that I have made today, or from the very 8 full written submissions which have been submitted by 9 the team acting on behalf of the SETE staff, there is 10 nothing further which I wish to say. 11 CHAIR OF THE INQUIRY: I think there are two points, 12 Mr Fairley, arising out of what you said. 13 First of all, you mentioned that the claims had been 14 reduced by 50 per cent. Could I just be quite clear 15 that you're talking about all claims, and not simply the 16 claims that went to adjudication? 17 MR FAIRLEY: Yes. 18 CHAIR OF THE INQUIRY: Secondly, you mentioned the 19 difficulty surrounding the concerns that some people had 20 about certain councillors not respecting 21 confidentiality. If that is so, and in the context of 22 a commercial contract it clearly would be a significant 23 difficulty, but if that is so, would that mean that 24 local authority should never be entrusted with 25 a contract of this magnitude, rather that it should be 33 1 left to the central government agency? 2 MR FAIRLEY: My Lord has my submissions on 3 Transport Scotland. What in my submission it 4 illustrates is the lack of fit between the traditional 5 democratic model of local Council and a commercial 6 contract, and what I would say is that it illustrates 7 the extreme difficulties that can be experienced where 8 a Council is dealing with a contract of this type, where 9 each of the councillors wish to have the right to be 10 informed, consulted and to warn. That sounds a bit like 11 Bagehot's definition of the sovereign, but that seems to 12 be what some of the councillors were suggesting. 13 There is nothing wrong with councillors being kept 14 advised of matters, provided that that does not trespass 15 into areas of commercial confidentiality which, if they 16 were to leak into the public domain, would be 17 prejudicial, and that perhaps is why the particular 18 procurement and delivery model was developed in this 19 stage. 20 What I say about that, my Lord, is that there's 21 nothing wrong with a Council embarking upon a project 22 like this, as long as the expectations of the 23 councillors are not set as high as they apparently were 24 in the case of some of the councillors who gave evidence 25 to your Lordship. 34 1 CHAIR OF THE INQUIRY: Thank you very much, Mr Fairley. 2 Well, we'll adjourn until tomorrow morning for the 3 final three submissions. Thank you. 4 (10.55 am) 5 (The hearing adjourned until Thursday, 24 May 2018 at 6 9.30 am) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 35 1 INDEX 2 PAGE 3 Closing submissions by MR BORLAND ....................1 4 5 Closing submissions by MR FAIRLEY ...................20 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 36