1 Tuesday, 5 September 2017 2 (9.30 am) 3 CHAIR OF THE INQUIRY: Good morning. Welcome to the start 4 of the Edinburgh Tram Inquiry public hearing. 5 As I made clear at the preliminary hearing, 6 I started work at the Edinburgh Tram Inquiry immediately 7 after my appointment in June 2014 and, following upon 8 the appointment of members of the Inquiry team, each 9 member of the team has worked diligently in recovering, 10 coding, and analysing a volume of material that has not 11 been experienced before in any Scottish public inquiry. 12 We have made good progress in the investigation and 13 today we are commencing the public hearing. 14 The Inquiry has taken written evidence from over 150 15 witnesses. Many of the statements taken from these 16 witnesses are extremely detailed. In this hearing, some 17 of the witnesses who have given written evidence will be 18 asked to supplement it by giving oral evidence, although 19 questioning by Counsel to the Inquiry may not be 20 confined to the content of the written evidence of any 21 witness. 22 Evidence from witnesses will be led by one of the 23 three Counsel to the Inquiry, Mr Lake QC, Mr Mackenzie 24 QC or Mr McClelland Advocate. Core participants' legal 25 representatives may, with my permission, ask questions 1 1 of witnesses. 2 For technical reasons all witnesses have been cited 3 to attend today and all succeeding days, although each 4 witness has been given a copy of the guidance for 5 witnesses and a more accurate indication of when they 6 might be required. They will be kept updated of any 7 changes. 8 They have been told that they need not attend until 9 asked to do so. Only the first two witnesses must 10 attend today. A timetable of the witnesses for the 11 first two weeks appears on the Inquiry website and that 12 will be updated as the Inquiry progresses. 13 The procedure for the conduct of the Inquiry has 14 been published on the Inquiry website and recently 15 updated. In short, the hearing will commence at 9.30 am 16 and finish at around 4.30 pm each day on Tuesdays to 17 Thursday inclusive. On occasions the Inquiry may also 18 sit on Mondays and Fridays. There will be short breaks 19 in the morning and in the afternoon for the benefit of 20 the shorthand writer and a longer break at lunchtime for 21 everyone's benefit. 22 I intend to be in the chair at the beginning of each 23 day, and following each break, promptly at the allocated 24 time. 25 I will commence each session as soon as I'm in the 2 1 chair, irrespective of the presence or absence of 2 representatives of core participants who may choose when 3 to attend the hearing without notifying the Inquiry 4 team. 5 Following each day's evidence, the transcript of 6 proceedings will be published on the Inquiry website 7 along with the written evidence of the witness and 8 relevant documents. 9 At the conclusion of the evidence of all witnesses 10 speaking about facts relating to the project, I will 11 adjourn for a fixed period to be determined at that 12 time. This is to enable core participants to prepare 13 written closing submissions, and to enable the Inquiry 14 team to obtain any expert reports finalised in the light 15 of the evidence given at the public hearing, and to 16 determine whether, and to what extent, evidence from 17 experts should be led. 18 At the conclusion of any evidence from expert 19 witnesses, core participants will be afforded a short 20 period to revise their written submissions before 21 lodging them with the Inquiry. Thereafter, the 22 representative of each core participant will have 23 an opportunity of elaborating upon their written 24 submission. I will issue more detailed directions about 25 closing submissions at the appropriate time. 3 1 Before hearing the evidence of the first witness it 2 will assist me, as well as the shorthand writer and all 3 parties and members of the public and media attending 4 this hearing, if the leader of each group of 5 representatives introduced themselves and their team, 6 starting with counsel to the Inquiry. 7 MR LAKE: Thank you, sir. My name is Jonathan Lake. I'm 8 a Queen's Counsel and I'm leading a team of advocates 9 consisting of, as you said already, Euan Mackenzie QC 10 and Ross McClelland. We are instructed by and assisted 11 by Gordon McNicoll who is the solicitor to the Inquiry, 12 the assistant solicitor, Nicholas Duffy, and the 13 remainder of their team. 14 MR BORLAND: Garry Borland QC, representing Bilfinger 15 Construction UK Limited, instructed by Louise Forster of 16 Pinsent Masons. 17 MR DUNLOP: Roddy Dunlop QC representing DLA Piper Scotland 18 LLP, along with my learned friend Gavin Walker QC 19 instructed by Alan Calvert of Brodies and several other 20 solicitors from Brodies also involved. 21 MR BARNE: Jonathan Barne QC instructed on behalf of the 22 Scottish ministers and Transport Scotland. I am 23 instructed by Stephen Rees of the Scottish Government 24 Legal Department. 25 MR MARTIN: Good morning, my Lord. Roy Martin QC. I'm 4 1 instructed by Brandon Nolan of Pinsent Masons with my 2 learned friends Mr Burnet who is not here today and 3 Mr Dunlop. 4 MR FAIRLEY: Good morning, my Lord. Douglas Fairley QC, 5 instructed on behalf of a group of former employees of 6 Transport Initiatives Edinburgh who are listed as core 7 participants, and assisted by Simon Whyte and 8 Callum Hiller of Messrs Beltrami & Company. 9 MR SPICKETT: I'm Mark Spickett. I'm a solicitor for 10 Siemens plc. Our Counsel is Murdo Macleod QC who is not 11 attending today. My colleague, James Freshwater, is a 12 legal intern with Siemens. 13 MR FARNDALE: Morning, my Lord. Richard Farndale from 14 Burness Paull. I'm representing Parsons Brinckerhoff 15 together with my colleague, Caroline Bone. 16 MR BROOME: Jonathan Broome, advocate for Carillion Utility 17 Services Limited, instructed by Gavin Thomson of 18 MacRoberts. 19 CHAIR OF THE INQUIRY: Mr Lake, would you like to call your 20 first witness? 21 MR LAKE: My Lord, the first witness is Jennifer Dawe. 22 MS JENNIFER DAWE (affirmed) 23 Examination by MR LAKE 24 MR LAKE: Good morning, could you state your full name, 25 please? 5 1 A. Jennifer Ann Dawe. 2 Q. I think the Inquiry has your address. We will take that 3 as read. What is your occupation? 4 A. I am now retired. I do voluntary work in three 5 organisations. 6 Q. I think previously you were a councillor, indeed, leader 7 of the Council here in Edinburgh? 8 A. I was, yes. 9 Q. Could I ask you to look at a document to be given to you 10 in hard copy, and we will also put it up on the screen, 11 please. On the screen it is document reference 12 TRI00000019_C, but could we have the hard copy of the 13 statement. 14 A. It's not appearing on my screen. 15 Q. Do you have a hard copy of that? 16 A. I have the hard copy here. 17 Q. We will proceed with the hard copy for the time being. 18 Do you recognise this document? 19 A. Yes, I do. I signed it on the last page. So assuming 20 all this contains the material that I read and signed, 21 then yes, this is the correct document. 22 Q. That is your statement to this Inquiry? 23 A. Yes. 24 Q. Thank you very much. 25 I'm not going to take you right through the 6 1 statement. I just want to ask you some particular 2 issues arising out of it. 3 A. Okay. 4 Q. What I would like you to do is first look at 5 paragraph 11 of that statement. 6 CHAIR OF THE INQUIRY: Mr Lake, I'm not sure if it's on the 7 screen yet. 8 MR LAKE: My Lord, it's not on anybody's screen and I don't 9 know why that is. 10 You should see on screen, a copy of that statement 11 is now available, so we can be sure we're all looking at 12 the same thing. 13 Could we go forward, please, and look at page 3 of 14 that. We will find paragraph 11. We can see there 15 roughly in the middle of the paragraph, you refer to 16 Transport Initiatives Edinburgh, or TIE, being set up in 17 2002 to deliver on the LTS. I think you explain in that 18 paragraph, LTS is the local transport strategy that has 19 been produced at that time? 20 A. Yes. 21 Q. Why was it that there was a decision made to use TIE, an 22 external company, as the delivery vehicle for this? 23 A. My understanding of that is that the Council felt that 24 it did not have the capacity within Council officers to 25 actually deliver on the strategy itself. And so the 7 1 decision was taken that the best means to do so would be 2 to have dedicated people in an arm's length company 3 preparing -- implementing the strategy that the Council 4 had decided upon. It's my understanding of it. 5 I wasn't involved in the decision-making at that time as 6 a relatively new opposition Councillor. 7 Q. You indicated you are not sure of this, but when you say 8 the capacity within the Council, was that a capacity 9 simply in terms of manpower, or was it a matter of 10 expertise? 11 A. I took that to mean expertise, that the Council itself 12 within its offices did not have the expertise to deliver 13 on a transport strategy, is my understanding of it. 14 Q. You have used the expression "arm's length company" 15 there. 16 A. Yes. 17 Q. I think arm's length companies are used elsewhere within 18 the Council; is that correct? 19 A. Yes, that's correct. 20 Q. What do you mean by an arm's length company? 21 A. Well, I mean a sort of -- basically a company that was 22 set up outside the Council over which the Council 23 exercised some control, but that was not actually within 24 the sort of framework of the Council itself. So it was 25 like, for example, Edinburgh Leisure, where leisure 8 1 facilities were provided by a company outside the 2 Council. Similarly, the Edinburgh International 3 Conference Centre was set up in a way that meant that 4 Council officers were not directly involved in the 5 day-to-day implementation or running of a set of 6 operations. 7 Q. Who generally would own these arm's length companies? 8 A. They were companies of the Council. 9 Q. The Council would own the shares in the company? 10 A. Yes. That's what I believe, yes. 11 Q. The day-to-day administration would not be -- from what 12 you say, not a matter for the Council officers? 13 A. That's correct. 14 Q. To what extent would the Council exercise control over 15 the activities of these companies? 16 A. It would vary. There would be -- Council officers would 17 generally, and councillors at different stages have been 18 on the boards of those companies, and that was the main 19 way that the link was provided between the company and 20 the Council. 21 Q. I'll come back to ask about the question of councillors 22 sitting on boards, but apart from the councillors on the 23 board, were there means of controlling or exercising 24 influence over the activities of these companies? 25 A. Well, the companies were implementing the policy that 9 1 the Council had decided. So to that extent there was 2 control over what the company actually did, although how 3 they went about implementing that strategy was the 4 business of the company. 5 Q. With these companies, arm's length companies, where do 6 they get funding? 7 A. In the case of transport -- of TIE, the funding came 8 through means like Transport Scotland, for example, for 9 the tram project. The main funding came through 10 external sources. The Council would apply for grants or 11 for money from different sources. In some cases the 12 money would come from the Council. And I wasn't 13 involved in the setting up of this so I don't know how 14 it was set up in the first place as regards that. 15 Q. I'm just looking for your understanding when you did 16 come to dealing with TIE? 17 A. Sorry? 18 Q. I'm just looking for what your understanding was at the 19 time you did start dealing with TIE? 20 A. Right. 21 Q. I want to consider then the question of information 22 passing to and from these companies. How did the 23 Council obtain information about what was going on in 24 these companies? 25 A. Some of that would come from the Council officers or 10 1 councillors that sat on the boards. 2 One of the issues that my group had at the start of 3 TIE was that we felt there wasn't the information 4 sharing that there should have been, but because we were 5 in opposition, we weren't involved in being on sort of 6 boards such as that at the set-out. But the information 7 would come through reporting from the company to the 8 Council. 9 Q. I would like to -- 10 A. There would be annual reports produced and that kind of 11 thing. 12 Q. If I can ask you to jump in your statement to page 114, 13 and paragraph 438, which is towards the foot of the page 14 here. 15 Leaving aside the question of the standoff with the 16 consortium, what I'm interested in is the second 17 sentence, where you discuss that the Council was being 18 asked to stand side by side with TIE. 19 A. Yes. 20 Q. Now, that I understand to mean that you were to 21 essentially -- the Council were to endorse the approach 22 being taken by TIE and agree with it? 23 A. Yes. 24 Q. Now, to what extent does that rather undermine the idea 25 of the company being arm's length, if the Council have 11 1 to go along with what is being said by the company? 2 A. Well, at the time that's being referred to here, there 3 were various issues that TIE was involved in as regards 4 the progress of the project, and we were as 5 a councillor -- as a councillor, I was asked to 6 basically, yes, stand side by side as I say with TIE. 7 There was the idea that we were all on the same sheet, 8 that it wouldn't do anybody any favours if the Council 9 was to start saying: actually we don't agree with what 10 TIE is saying. That was the situation at that time. 11 So ... 12 Q. So at that time was there really any independence as 13 between the Council and the company? 14 A. I'm not quite sure what you mean by that. 15 Q. Were they acting independently or was one following the 16 other? 17 A. As far as I'm aware, TIE was acting independently, but 18 we as a Council were being asked to support TIE in the 19 way that it was implementing the policy, which was to 20 deliver the tram project that the Council had asked TIE 21 to do. 22 Q. You said that one of the reasons you understood for 23 setting or establishing TIE was to obtain expertise. 24 A. Yes. 25 Q. Was the performance of TIE subject to review by the 12 1 Council? 2 A. I don't recall whether -- I don't recall any sort of 3 formal review of what it was doing. 4 I wasn't very closely involved with TIE. I wasn't 5 on any of the boards that were involved, and so I don't 6 know to what extent there was a sort of continual review 7 of what the company was doing. 8 Q. I think it's clear from your statement, you were leader 9 of the Council during the time the TIE was operative? 10 A. That's correct. Well, some of the time. 11 Q. Were you aware at the time you were leader whether or 12 not there were any essentially performance reviews of 13 TIE and how it was performing? 14 A. I don't recall actually being involved or seeing that 15 kind of review. It may have been that the Council's 16 Audit Committee may have looked at it. It may have 17 happened, but I don't recall seeing it happen. 18 Q. If I can ask you to look at another part of your 19 statement. It's page 239, paragraph 899, towards the 20 foot of the page. 21 A. Yes. 22 Q. It says there that: 23 "The only external piece of information that 24 probably would have led me to think that TIE were 25 capable was the fact that TS [which I think is Transport 13 1 Scotland] gave the GBP500 million grant for the project. 2 I would not have thought that Transport Scotland would 3 have willingly given that GP500 million in if they 4 thought that the Council or its arm's length transport 5 company did not have the capacity to project manage the 6 project." 7 Do I understand that what you're saying there is 8 that you worked on the basis that because Transport 9 Scotland trusted TIE with that sum of money, you felt it 10 was safe to trust TIE also? 11 A. No. What I was saying there was an answer to 12 a particular question, and it was -- what I was saying 13 there was the only sort of objective external piece of 14 evidence was the fact -- I was being asked about the -- 15 I think at that point I was being asked about the 16 performance of TIE and whether I knew about certain 17 other projects that they had been involved in. I think 18 it was around this time, I was being asked about various 19 projects where in fact TIE had been withdrawn from 20 a project by Transport Scotland. 21 In the initial stages, Transport Scotland was giving 22 the 500 million to the Council to then pass on to TIE. 23 Transport Scotland was -- and the Council were the sort 24 of conduit of the money to TIE. 25 So I'm not saying that that was why I thought that 14 1 TIE was capable, because TIE had been set up long before 2 that money came in, because it had been initially set up 3 to do the local transport strategy which at that point 4 involved a lot of other projects. 5 What I was -- as far as I can remember, what I was 6 talking about there was the fact that Transport 7 Scotland, I would have thought, must have been satisfied 8 that the money was going to be put to the use for which 9 they had given the money, for which the Council had 10 applied for money, and that they must have been 11 satisfied that TIE was a suitable means of delivering 12 that, was -- my belief, given that Transport Scotland 13 had within them a great deal of expertise about how 14 these sort of projects should be run. 15 Q. So in essence you took it that Transport Scotland had 16 applied critical judgment to TIE and satisfied 17 themselves? 18 A. I -- I did assume, I didn't know, but I assumed that 19 they must have done some investigations as to how the 20 Council was going to use that money. They weren't 21 just -- Council wasn't just going to be given 22 500 million and -- delivered a project that they perhaps 23 couldn't deliver. 24 So I think my understanding would be that Transport 25 Scotland would have satisfied themselves that the money 15 1 was going to go for the purpose for which it was 2 intended and be delivered by a means that they felt was 3 sustainable and would work. 4 Q. You referred to other projects that had been withdrawn 5 from TIE there. I think one of those was the 6 Stirling-Alloa-Kincardine railway; is that correct? 7 A. I believe so, yes. 8 Q. And also a park and ride out in Edinburgh where problems 9 developed? 10 A. Yes. 11 Q. Did they cause you any concern? 12 A. I was not particularly aware of them at that time. When 13 I was asked about that, I believe I said that I knew 14 that there had been some schemes, but I was not aware of 15 the detail in them, and I was referred to various 16 aspects of that in the documents to this Inquiry. 17 Q. That's in the course of your statement being taken? 18 A. Yes, yes. 19 Q. But you hadn't been particularly aware of them at the 20 time the decisions were made to proceed with the tram 21 project in 2007 and 2008? 22 A. No, I wasn't, no. 23 Q. Turning to the question of the governance of the tram 24 project, apart from TIE, what other companies were 25 involved in the tram project? 16 1 A. TEL was probably the -- well, that's -- that was 2 probably the other main one, which was -- TIE was to 3 bring the tram project to the state of having tramlines 4 on the street, and TEL was Lothian Buses and trams 5 combined together to provide an integrated transport 6 system for the city. And TEL eventually became the sort 7 of overriding company once the actual tramlines were 8 down, the trams there, and TEL was the kind of operating 9 company for the actual integrated bus and tram system. 10 Q. And TEL, that's for the record, Transport Edinburgh 11 Limited? 12 A. Edinburgh Limited. 13 Q. What about the Tram Project Board? Were you aware of 14 that? 15 A. I had heard of it. I was not involved in it. As far as 16 I'm aware, it involved a lot of external experts, 17 Council officials and at some stage, I'm not sure 18 exactly when, councillors became involved in that. 19 I never sat on the Tram Project Board. I didn't get 20 its minutes. So I'm not very aware of precisely what it 21 did, although I do know that at one stage it was -- the 22 whole status of the Tram Project Board was looked at and 23 it was decided that it did not have any real kind of 24 status, legal status as regards TIE and the Council, and 25 so steps were taken to make the Tram Project Board, as 17 1 far as I can recall, a sub-committee of TEL, Transport 2 Edinburgh Limited. So that it had more kind of obvious 3 reporting lines. 4 Q. We will come to look at that in a little bit more 5 closely in a little while. Are you aware of what the 6 role or function of the Project Board was as compared to 7 TIE on the one hand and TEL on the other? 8 A. I took the Tram Project Board to be very important in 9 the governance of the project, that the people involved 10 in that had the expertise to ensure that TIE was 11 operating the way that the Council expected it to. In 12 very general terms. 13 Q. We have talked a little bit about TIE and the Council; 14 what was the relationship between TEL and the Council? 15 A. Again, I was not on the Board of TEL. So I don't know 16 precisely how it worked, but it was a sort of company of 17 the Council. And there were representatives of the 18 Council on the Board of TEL. 19 Q. The relationship of the Tram Project Board with the 20 Council, are you able to comment on that? 21 A. Again, because I wasn't on it, I can't comment really 22 specifically on it. But I do know that there were 23 senior Council officers on the Tram Project Board. So 24 there was an interlinking between the Council, TEL, Tram 25 Project Board and TIE. (Pause) 18 1 MR LAKE: Could I ask you to look at another production, 2 please, that will come up on the screen. It's 3 CEC01566497. I think you will see this is a -- it's 4 headed up "TIE Governance Arrangements, Briefing Paper 5 for the Chief Executive". 6 This is a document you refer to in your statement. 7 Did you see this at the time you were preparing for 8 the tram project to go ahead? 9 A. I can't recall whether I saw it at the time. It's been 10 quite difficult to remember back to what I actually saw 11 at the time and what I've since seen in the documents to 12 the Inquiry. I may have commented in the statement, at 13 that time, it would all have been fresher to me, 14 and I may have said that I had or had not seen it. But 15 I don't recall whether -- right now, whether that was 16 one that I had seen. 17 I do not know whether this was an internal private 18 and confidential briefing for the Chief Executive or 19 whether this was something that was within Council 20 papers. I would really need to know, you know, how it 21 had been produced and where it was published. If it was 22 published as part of Council papers, I certainly would 23 have seen it. If it wasn't, if it was an internal 24 memorandum, then I probably wouldn't have seen it. 25 Q. Could we look at paragraph 2.4, towards the foot of the 19 1 page, please. We see there it refers to: 2 "When the respective roles of the Council and TIE 3 were identified, it appeared that the Council would 4 merely be exercising an approval function in respect of 5 statutory matters such as planning, prior approvals and 6 traffic regulation. All other matters were to be 7 undertaken by TIE. Increasingly, officials have found 8 it necessary to undertake a much closer and proactive 9 role in seeking to protect the Council's interests. It 10 cannot always be said that TIE's close focus on the tram 11 project and the Council's wider interests are at one." 12 Turning to the statement in the middle there, that 13 the officials have found it necessary to take "a much 14 closer and proactive role in seeking to protect the 15 Council's interests", was that something you had noted? 16 A. As far as I can remember, not at -- not at this time. 17 Q. Then the comment towards the last sentence, that it 18 can't always be said that "TIE's close focus on the tram 19 project and the Council's wider interests are at one". 20 Was that your view? 21 A. What date is this briefing paper? 22 Q. I think it -- if I can tell you it comes from July 2007? 23 A. Right. No, at that time I would not have been, I think, 24 aware that there was concern about that. 25 Q. In fact for completeness of the date, you can probably 20 1 see it at the top of the screen, the reference in 2 paragraph 1.1, to the fact that the paper was prepared 3 in response to a memorandum of 28 June 2007. 4 A. Okay. 5 Q. Would you have found it useful to have this sort of 6 information at the time? 7 A. Yes. I think what I've found during the course of 8 reading the documents that have been provided for the 9 Inquiry, there was quite a lot of information that was 10 being regarded as private and confidential, and emails 11 between officers where there did appear to be some views 12 on TIE in particular that certainly as a Councillor, 13 I was not made aware of; and at this point, my 14 recollection was that I thought that TIE was the correct 15 means of delivering the tram project and was not aware 16 that there were already concerns at that point that 17 perhaps the interests of TIE and the interests of the 18 Council were not as sort of hand-in-hand as I had 19 thought they were. 20 Q. You appreciate, if you take it that this is July 2007, 21 that was before the decision had been made to fully 22 proceed with the tram project? 23 A. Yes, it was. I mean, a lot of the background work 24 obviously had been done by this time, but yes, that was 25 before the -- well, it was before the final decision was 21 1 taken that the Chief Executive should authorise TIE to 2 enter into the contracts. 3 Q. What difference would it have made to you in practice, 4 having this sort of information available to you as 5 a Councillor? 6 A. Well, it's easy to say now, of course. I would have 7 immediately been alerted to this, that and the next 8 thing, and immediately done something about it. It's 9 very difficult to say what I would have done at the 10 time, but obviously I would have wanted to know that 11 there was concern about whether TIE was in the 12 relationship that it should have been with the Council. 13 But I can't say at this stage what I would or would not 14 have done at that time. It would have depended on 15 asking a lot of questions about it, what had led to this 16 belief, exactly what was meant by the wider interests of 17 the Council, and the concentration of TIE on the tram, 18 because of course TIE was always supposed to concentrate 19 on the tram, or by this time it was, because of having 20 lost various other projects, they were no longer on the 21 agenda. 22 So as far as I was concerned, TIE was -- main 23 interest was in the tram project. 24 Q. Would it have been a matter that you would have followed 25 up? 22 1 A. Yes, I believe I would certainly have queried it. 2 Q. If we look at page 3 of this document, you can see 3 there's a heading, "Governance within each company". 4 A. Yes. 5 Q. Then there's a table in which the first entry is 6 TIE Limited. 7 A. Yes. 8 Q. The text to the right of that, at the beginning of the 9 second paragraph, it notes that TIE has an executive 10 chair, as it doesn't have a Chief Executive. 11 I think in your statement at paragraph 226, I don't 12 think we need go to it, you were uneasy -- you recalled 13 you were uneasy about the idea of having an executive 14 chair at TIE? 15 A. Yes. In general terms I always feel that that is not 16 the most open way to go forward where one of the roles 17 of the chair of a board is to look at the work of the 18 Chief Executive and ensure that they are operating in 19 the way that they should. 20 So to have the same person in the role of chair of 21 the board and also the Chief Executive for the 22 day-to-day workings of the company, did not seem to me 23 to be a very correct way to take that matter -- to take 24 things forward. 25 Q. What opportunity would there be within the Council to do 23 1 something or at least say something about the fact there 2 was an executive chairman? 3 A. I do remember having a conversation with the Council's 4 Chief Executive about this. It does mention there, it 5 was seen as a stopgap measure. In fact, I can't 6 remember the precise time now, but the stopgap measure 7 went into what most people would regard as a lot more 8 than a stopgap measure; a year or so, a year and a bit 9 later, I believe this was still the situation. 10 I seem to think that -- I seem to remember that at 11 the time, the reason for doing this was that the company 12 did not have a Chief Executive and it was necessary to 13 have somebody in place at this moment in time, which was 14 obviously becoming quite a crucial time. 15 I don't think it was an ideal way forward, and until 16 there was the appointment made of a new Chief Executive, 17 that was always to my mind going to be very much a last 18 resort measure. 19 Q. If we look at the eighth page of this document, we can 20 see a heading there, "Options for Future Governance"? 21 A. Yes. 22 Q. In paragraph 4.2 we can see there are three options that 23 are provided. The first is winding-up of TIE and 24 bringing the relevant and necessary staff into the 25 employment of the Council. 24 1 Do you see that? 2 A. Yes. 3 Q. Now, in some occasions, rather than using an arm's 4 length company, are matters done simply by procuring the 5 necessary expertise directly to the Council? 6 A. Yes. 7 Q. Presumably one way of doing that is to engage 8 consultants on a temporary contract? 9 A. Yes. 10 Q. Are there other situations in which the relevant 11 expertise is provided by the Council? 12 A. The relevant -- what, bringing in -- 13 Q. People with the relevant expertise are brought in to the 14 Council? 15 A. The Council certainly has, in the past, employed a lot 16 of consultants, and I believe in the statement, I did 17 make comment on the fact that at one stage, we at that 18 time as an opposition group felt that there seem to be 19 quite a few Council officers, senior Council officers, 20 who were retiring on the Friday and coming in on the 21 Monday as a consultant. 22 So we were sometimes a little bit dubious about the 23 use of consultants, and one of the ideas that -- 24 I thought was one of the ideas behind the setting up of 25 TIE was to avoid the expense of the Council bringing in 25 1 multiple consultants which it would have had to have 2 done in order to progress the transport strategy. 3 So TIE was a means of avoiding bringing in a lot of 4 consultants and was believed to be a kind of cheaper and 5 better way of doing it. But, yes, I mean, that would 6 have been reverting to what the situation had been 7 previously, where consultants would advise on certain 8 matters. 9 Q. When you're talking about people with the expertise 10 might be found within the arm's length company, would 11 they simply be employed by the arm's length company or 12 would they be the directors and management of the arm's 13 length company as well, the entire company? 14 A. That I've got no particular view on, but I would assume 15 that the company would employ directly, if that was felt 16 to be the best means of doing so, or on a limited time 17 consultancy basis, to fill any gaps in the expertise 18 that they had within their own staff. 19 Q. What about the possibility that the Council didn't 20 engage people as consultants, but actually took on 21 employees who had the necessary expertise? That would 22 have been a possibility. 23 A. It would have been a possibility. How the cost would 24 have worked out, I don't know, because that could have 25 been very expensive. 26 1 I would imagine that Transport Scotland would 2 perhaps have had some say in that, if they felt that the 3 means by which they thought the tram project was going 4 to be provided had changed. 5 So obviously that, as it says there, was an option. 6 It was not an option that was followed through. 7 Q. Clearly that option -- 8 A. At that time. 9 Q. At that time, because we come back to how the tram 10 project was ultimately implemented later? 11 A. Yes. 12 Q. That was much more in-house? 13 A. Yes, yes, but also using the expertise of external firms 14 like Turner & Townsend. 15 Q. But going back to 2002, when TIE was established, the 16 decision then had been taken to use an arm's length 17 company, rather than do it internally? 18 A. Yes, yes. 19 Q. The second of the options in this paper is that TIE 20 continues to progress the project on the basis of fully 21 documented principal/agent agreement with the Council. 22 Do you understand what difference that would make 23 from what was actually being implemented at that time 24 with the arm's length company? 25 A. I believe that I would have actually thought that there 27 1 should have been some kind of form -- properly 2 formulated agreement with the Council anyway. 3 Q. The third of the options we see is that the Council are 4 to set up a tram committee meeting on a four-weekly 5 cycle, to replace the Tram Project Board, essentially 6 performing its functions. 7 A. Yes. 8 Q. Are you aware whether there was any discussion about 9 that, about taking the core management function of the 10 project back into the Council but leaving TIE otherwise 11 in existence? 12 A. If by that it was meant, as I assume it was, to actually 13 set up a sort of committee of the Council, then there 14 would not have been the capacity within that to bring in 15 the sort of experts that would have been needed because 16 committees of the Council are made up of councillors 17 alone. And they certainly would not have had the 18 expertise to have taken over the functions of the Tram 19 Project Board, which involved those who were -- had 20 expertise in the field as well as others involved in 21 different aspects of it and Council officials. 22 Q. I understand. We can see, for completeness, if we 23 scroll down to see paragraph 4.3, in fact right to the 24 foot of the page, we can see that Mr Jim Inch records 25 that these are just three possible scenarios, but there 28 1 may well be other options? 2 A. Yes. 3 Q. For completeness, we can see there the source of the 4 date of July. The report is dated 20 July 2007. 5 A. Yes. 6 Q. I would then like to go to another document which is 7 just after that. The document reference is CEC01891408. 8 We can see that these are the minutes of a Council 9 meeting that took place a little bit later, in 10 August 2007? 11 A. Yes. 12 Q. We can see that from that first page that you were one 13 of the councillors that were in attendance at that first 14 meeting? 15 A. Yes. 16 Q. Can we go to page 31 of this document, please. We can 17 see the heading there, 22, "Edinburgh Tram: Update". And 18 recent updates were provided, and the first thing is to 19 note the contents of the report by the Chief Executive 20 with respect to the revised funding arrangements for the 21 tram project, and the implications for the transfer of 22 financial risk to the Council. 23 Now, can you recall what that concerned? 24 A. I would need to look at the relevant report to be -- to 25 remember properly what it was about. 29 1 Q. Were you aware that about this time, Transport Scotland 2 had indicated that they were to be taking less of an 3 active role in the project? 4 A. I did at some stage become aware that Transport Scotland 5 were taking a less active role, having been the means by 6 which the Scottish Government money was transferred. 7 But I don't know whether I was aware -- I don't know how 8 I became aware of that, but I certainly was aware that 9 Transport Scotland felt that their involvement was not 10 necessary. I assume because they thought that the 11 arrangements in place were suitable to deliver the 12 project. 13 Q. In the second numbered paragraph there, we can see that 14 there's a note -- a requirement for a revised governance 15 structure? 16 A. Yes. This business about a revised government structure 17 is something that came up certainly quite a few times 18 during the course of the project. It was always a very 19 complicated structure, and there were attempts to make 20 it -- make it a bit simpler, which gradually over time 21 it did become slightly less complicated, but really not 22 until after the Mar Hall mediation in 2011, when the 23 whole progress of the project changed. It wasn't really 24 until then that there was a governance structure that 25 became considerably simpler. 30 1 Q. You referred there to the governance structures being 2 complex or complicated. Did that impede proper 3 governance of the project? 4 A. My guess would be that it would have done. The more 5 bodies there are looking at things, the more complicated 6 it can become. 7 So yes, I think a simpler governance structure would 8 certainly have made the lines of communication clearer 9 and the lines of accountability clearer. 10 Q. If you look at the fifth numbered paragraph there, you 11 see that one of the decisions was to establish 12 a sub-committee of the Transport, Infrastructure and 13 Environment Committee? 14 A. Yes. 15 Q. That's of the Council? 16 A. Yes. 17 Q. With a remit to review and oversee decisions with 18 respect to the tram project. 19 A. Yes. 20 Q. If there's going to be -- I'll start again. 21 Which decisions were going to be reviewed or subject 22 to oversight? 23 A. Well, obviously it doesn't identify what kind of 24 decisions these were. 25 As it turned out, the Tram Project Sub-Committee did 31 1 not seem to meet very often and did not seem to have 2 very full agendas. So it certainly -- one reading of 3 that would be that it was going to take a much more 4 proactive role than I think it actually eventually did. 5 Again, I did not sit on that sub-committee. So I'm 6 unaware of the reason why it perhaps had a more limited 7 role than that might suggest that it should have had. 8 Q. But as one of the councillors who was involved in that 9 meeting and taking this decision that's recorded here -- 10 A. Yes. 11 Q. -- was the intention of introducing this review and 12 oversight function, having TIE less at arm's length, 13 bringing the management closer into the Council? 14 A. No, no, I don't think so. I think one of the reasons 15 behind setting up that sub-committee was, as you can see 16 from the name, the Transport Infrastructure and 17 Environment Committee covered a great many topics, and 18 the tram project was on the agenda at some of its 19 meetings, and it was felt that there was not time at 20 full committees, meetings of that committee, to actually 21 do justice to looking more closely at the tram project. 22 So I think it was set up more to enable councillors 23 who had a particular interest in transport, the 24 transport spokespersons, the conveners, to actually 25 have -- have the chance to have more prolonged 32 1 discussions on it. 2 I didn't see that as being actually involving sort 3 of any -- any real decision-making. It was reviewing 4 and overseeing decisions. I didn't ever feel that that 5 sub-committee had a particularly strong role in directing 6 the project. 7 That was my understanding of it, and from that, and 8 the fact that it was set up as a sub-committee to allow 9 more time to be devoted to the tram project, which 10 otherwise had just been part of the agendas of meetings 11 that covered everything from waste management to 12 buildings to other transport matters. 13 Q. That picks up on something I would like to ask you 14 about: the time available for the whole Council to 15 consider the tram project. 16 A. Yes. 17 Q. The tram project was obviously just one of very many 18 things that had to be considered by the Council? 19 A. Yes. 20 Q. We can see here, we are on page 31 of a document which 21 runs to 72 pages. I don't know if we're able to go to 22 the last page of this, just to verify that there are 23 72 pages in this. 24 We come right to the end of the minute there. It is 25 72 pages just to record the minutes of this. 33 1 It was item 22 to be dealt with by the Council on 2 that date, as we saw on page 31. 3 A. Yes. 4 Q. There clearly were a lot of things that the Council had 5 to consider that day in August 2007. 6 A. That was the case on most occasions of Full Council 7 Meetings. Some of them were very, very lengthy 8 meetings. 9 Q. The tram had to fit into that overall picture? 10 A. Yes. When matters came to Full Council. The benefit of 11 a committee system was that committees did have more 12 time to question, to bring in people to question. 13 I think I described it within my statement that full 14 Council is rather more of a kind of formulaic meeting 15 where there's not the same opportunity for discussion 16 that there is at a committee of the Council, or indeed 17 a sub-committee of the Council. 18 But yes, we had very full agendas and they covered 19 every aspect of what the Council deals with. 20 Q. You used the word "formulaic" there, and I think you do 21 use that in your statement? 22 A. Yes. 23 Q. Are you there describing the discussions and the 24 consideration of these matters by the whole Council? 25 A. Yes. 34 1 Q. Do I take it then that in view of the time available and 2 the number of people involved, there would be a limited 3 chance for discussion, debate and enquiry? 4 A. At Full Council, yes. I would say that there is a much 5 more limited chance for discussion than there is at 6 committees or sub-committees or working groups or the 7 other means by which councillors came together to 8 discuss aspects of Council business. 9 What I meant by formulaic was there's not the same 10 opportunity for questioning of people brought in. It 11 tends to be that it's set into different sections. You 12 have deputations. You have questions. You have the 13 Council leaders' report. There's a whole sort of series 14 of headings, and then you go into the actual debates, 15 and the tram project might be up as -- with a paper for 16 debate. But it would not be the place where councillors 17 would get the information that -- it would have been 18 expected that they would have got that information 19 beforehand by briefings from Council officers or from 20 TIE or other people that had been brought in to discuss 21 matters. 22 But at the Full Council Meeting itself it -- there 23 have been occasions where there have been people brought 24 in, and within the tram project there have been 25 occasions where there was more discussion. But in 35 1 general it would be the paper would be there, there 2 would be a motion from the administration which might be 3 accepting the recommendations of the officers, because 4 after all the administration had been involved in 5 producing those recommendations; or the administration 6 might decide: well, okay, we are happy with eight 7 clauses but we don't like the ninth, and so we would put 8 a motion to say that. 9 The opposition parties would do the same. They 10 would look at it and decide whether they accepted it or 11 not. They would look at the motion that the 12 administration had put forward, and they would then put 13 forward their own amendments. It didn't always work. 14 Sometimes everybody agreed. But there wasn't the 15 same -- you were called by the Lord Provost to speak. 16 You would literally just put your hand up and the lord 17 provost would call you. 18 So in most cases not an enormous number of 19 councillors would have the opportunity to speak on any 20 matter. So to that extent, yes, it's more limited than 21 committees. 22 Q. And voting at the Council, the whole Council, that 23 tended to divide on party political lines, party group 24 lines? 25 A. Yes. Yes, I would say in most cases it was. Over the 36 1 course of the time I was on the Council, there were 2 a few occasions where all parties had literally what we 3 called a free vote. In my particular group we did not 4 have a whip. And so therefore there was no compulsion 5 on any member of my group to actually vote in a certain 6 way, though we would have reached a consensus 7 beforehand, and it very, very seldom happened that 8 somebody didn't agree with that. 9 Other parties had a whipping system whereby their 10 members were supposed to vote in the way that they had 11 decided at their group meeting or which -- I don't know 12 precisely how their whipping systems worked, but we 13 always knew that the majority of parties on the Council, 14 groups on the Council did have a whipping system. 15 So as a result, you would very seldom find people 16 straying from their party line. 17 Sometimes the party lines totally agreed. We often 18 had discussion beforehand. The opposition parties would 19 know what we were going to propose. We would know what 20 they were going to suggest. And so we had opportunity 21 to decide whether -- yes, that seems a good idea, let's 22 accept it, or not. 23 So but yes, it is a party political system and so 24 people are expected to go along with their party. 25 That's why they are a member of that party. 37 1 Q. So it's not really a matter of individual councillors 2 being won over by arguments or persuaded by facts put 3 before the whole Council. They will tend to vote with 4 their group? 5 A. Once a Council meeting has started, I doubt if there 6 would be very many people who would change their minds, 7 having heard the debates. We did quite often have 8 deputations. We would generally have a break after the 9 deputations, and there were certainly occasions where 10 people were swayed by what they had heard a deputation 11 say. It might have been something that nobody had -- 12 none of us had thought of and it seemed a good idea. 13 So there were occasions when there would be an 14 interval for groups to assemble and make their decision 15 on what they were going to do as a result of what they'd 16 heard. But once the debate had started, I can't recall 17 any instance where there was -- anybody called for 18 a chance to discuss what had been said within their 19 group, because it was known beforehand. The motions and 20 amendments were printed out and circulated beforehand. 21 Sometimes not very long beforehand, but people had sight 22 of them before the actual debate. 23 CHAIR OF THE INQUIRY: Could I just go back slightly to the 24 stage where we were discussing the creation of 25 a sub-committee or the passing of responsibility to 38 1 a sub-committee, to review and oversee decisions of the 2 Tram Project Board. 3 Basically, from what you've been saying, would that 4 basically be an information gathering exercise? 5 A. It would give much more opportunity for that. Largely 6 because you would have a group of the councillors in the 7 room who could call in anybody they wanted, whether it 8 was officers or outside people, and they could -- yes, 9 they could get the -- they could request the information 10 to be presented to them at that sub-committee, which 11 wouldn't happen at a Full Council Meeting. It gives 12 much more opportunity to actually discuss matters in 13 depth. 14 CHAIR OF THE INQUIRY: Can I then just move on. Having had 15 such a meeting and having gathered information, then 16 what? They wouldn't have any power. 17 A. Right. 18 CHAIR OF THE INQUIRY: To direct the -- 19 A. Right. What would happen in those cases would be -- 20 and I imagine it worked the same for other groups. If 21 there was something that, for example, our Transport 22 Convener felt they did not have enough information or 23 enough backing or they wanted to know what the rest of 24 the group considered about it, they would then bring 25 that matter to one of our group meetings where we could 39 1 discuss it. 2 For example, at one stage there was a lot of 3 discussion about whether Princes Street, for example, 4 should open to traffic during the very busy periods for 5 the traders, and that sort of thing would be -- I'm not 6 saying that was an item, but that's the kind of item 7 that might have been discussed and then would be brought 8 back to our group and we would consider: well, the 9 traders are suggesting this, TIE is suggesting that, the 10 Council is suggesting this, and we would have 11 a discussion about it, and it would then go back to -- 12 could go back to the sub-committee. It could go back to 13 the Transport Infrastructure and Environment Committee, 14 or it could go to the Policy and Strategy Committee, or 15 the end result of it all could be that it would come 16 back as a motion to Full Council. 17 CHAIR OF THE INQUIRY: So that if the sub-committee or 18 members of the sub-committee were unhappy with a decision 19 or thought that the decision of the tram project was not 20 in the interests of the city -- 21 A. Yes. 22 CHAIR OF THE INQUIRY: -- would that be a matter that would 23 ultimately be taken to the Council as a motion, to do 24 something about it? 25 A. Yes, I think if it was, you know, serious unhappiness 40 1 about it. At any stage, any councillor can put forward 2 a motion to Full Council on anything. It would usually 3 come with the backing of their political group within 4 the Council. But if somebody had been, let's say, at 5 that tram sub-committee, decided that there was an issue 6 that they felt concerned about, they could -- I don't 7 remember an instance where it happened, but they could 8 in theory bring a motion on that topic to the full 9 Council meeting. 10 But the real nitty-gritty discussion, the 11 information gathering, wouldn't take place at that full 12 Council meeting, or very, very, very seldom would it be 13 the case where you would have people answering from 14 outside at a Full Council Meeting. 15 CHAIR OF THE INQUIRY: Thank you. 16 MR LAKE: Just following on from that, the sub-committee that 17 Lord Hardie was referred to -- we saw in the minute, 18 referred to review and oversight of decisions. Would we 19 understand that as being the decisions that were being 20 taken by TIE, TEL and the Tram Project Board as the 21 project was going along? 22 A. Yes. 23 Q. When it came to what we might call the big decisions to 24 approve business cases and to decide to go ahead with 25 the tram project, they were always taken by the Council 41 1 as a whole? 2 A. Yes. Or in one instance by the Policy and Strategy 3 Committee. 4 Q. That was in May 2008? 5 A. Yes, because of the timing. But the actual main 6 decisions on the tram were taken at Full Council. But 7 that was after there had been all sorts of opportunities 8 to get more information and discuss it through people 9 coming to group meetings. Sometimes there was 10 a presentation to all councillors together. It varied 11 the way on any topic how the information was passed on. 12 But yes, that's pretty much what the situation was. 13 Q. I want to just ask you a few questions about gathering 14 information. When we're talking about coming to 15 meetings of the whole Council, presumably one source is 16 reports from the Council officials prepared for the 17 meeting? 18 A. Yes, that is the main sort of written source of 19 information. 20 Q. If they are reporting on something that's internal to 21 the Council, function of a Council department, 22 presumably it's very -- it's straightforward for them to 23 go and get the information and report on it for 24 councillors? 25 A. Yes. The reports would generally come either in the 42 1 name of the Chief Executive or in the name of 2 a Director, but the Director would have got -- the 3 Director himself didn't have all that information, but 4 had people within the department who would provide him 5 with the information. 6 So the actual reports themselves were signed off by 7 a very senior officer of the Council, but they would get 8 that information from whatever sources, whether it was 9 from TIE or from their officers who were involved in the 10 project. 11 Q. That really highlights the point that I was concerned 12 with. On the other hand if it's getting information 13 from Council officers, it's all internal, and you can 14 get the information quite readily, I would imagine? 15 A. Yes. 16 Q. When you're talking about an arm's length company, 17 you've got to go to a different entity. Is it more 18 difficult to get the information in that situation? 19 A. Yes. Yes. Yes. Just largely because they are external 20 to the Council, physically they're removed from the 21 Council. They were in an office at the West End, and as 22 councillors, we would usually request information 23 through the Chief Executive. 24 We wouldn't go to individuals within TIE and ask for 25 that information. Rather different for those who were 43 1 on the boards. You know, councillors who were involved 2 in the actual boards who presumably did go to people 3 within the company and get information, but for other 4 councillors, it would be unusual for somebody to go to 5 an individual within a company and say: give me this 6 information. 7 The request would usually be via the Chief Executive 8 of the Council. 9 Q. So is the result of that that when an arm's length 10 company is used, the line of reporting is actually 11 extended a bit? 12 A. Yes. 13 Q. Presumably, that must introduce the possibility of the 14 message getting distorted, as it goes through different 15 people, there's always the possibility that the sense of 16 it is lost? 17 A. Yes, which is one of the issues when you have a very 18 complex governance arrangement, just exactly that. The 19 Chinese whispers sort of thing that matters can change 20 a great deal as the information is transmitted from 21 person to person. 22 Q. In terms of the information being provided to the 23 Council, one thing I want to consider is the volume of 24 material that's provided for Council meetings. We will 25 come to look at things like the Final Business Case in 44 F 1 a little while, but I think that was -- the Final 2 Business Case itself was just shy of 230 pages. There 3 was an officer’s report of 40 pages on top of that for 4 one item that was on the agenda that day? 5 A. Yes. 6 Q. May I take it there's a very significant volume of 7 documentation provided for a great number of Council 8 meetings? 9 A. Yes. There's a huge amount of documentation. In my 10 time on the Council, we were still in a -- very much 11 a paper society. Now I believe the information is 12 generally provided through iPads and suchlike, but at 13 that time, yes, it was huge volumes of paper. 14 Q. Whether it's paper or electronic, there's a lot for 15 anyone to consider? 16 A. A lot of reading. 17 Q. How far in advance of the meetings was that information 18 generally provided? 19 A. The actual papers, the actual reports for the Council 20 meeting were given to councillors a week before the 21 meeting. However, that was not the first time most 22 people would have had sight of various reports because 23 we would have the opportunity -- we would know what was 24 coming up on the agenda, and the Chief Executive and 25 senior officers as required would give briefings to the 45 1 various groups on the Council. Sometimes groups would 2 get together and have a briefing. Sometimes there would 3 be a briefing to the whole Council. But there would 4 usually have been an opportunity to have actually seen 5 the content of a report before it actually came to the 6 stage where you're presented with the finished document 7 prior to the Council meeting. 8 There were some occasions where the paperwork wasn't 9 ready in time, or there might have been reasons for not 10 wishing it to get into the public domain, and so it 11 would be put on what was called the B Agenda, where the 12 information would be publicly produced or produced for 13 councillors a bit later in the process. 14 But it always was that for every item on the agenda, 15 there could be quite a long report presented within the 16 Council papers, and before that, there would almost 17 certainly have been opportunities to discuss what was in 18 that report. 19 Q. I want to come back to the briefings in a more -- detail 20 in a moment, but allowing for the fact that there had 21 been some preparation prior to getting the papers, was 22 it realistic and possible for the councillors to digest, 23 understand and come to a view on all the material in 24 these papers in order to make an informed decision when 25 it came to Council meetings? 46 1 A. It can be difficult, and some people are more assiduous 2 than others. You could always tell, looking at the 3 desks at that time, which councillors had actually read 4 the papers and which councillors had picked up the 5 papers from their pigeonhole just before walking into 6 the meeting. 7 So it varied from councillor to councillor. But if 8 you were assiduous about it, as many of us tried to be, 9 then it did certainly involve trying to digest a great 10 deal of information. From group's point of view, each 11 individual group's point of view, in preparation for the 12 Council meeting, you would generally have at least two, 13 possibly three, group meetings, where the group would 14 discuss whether to put forward a motion or an amendment 15 if a motion had been tabled to that. In order to do 16 that, you would do have to have read what's in the 17 report. But there's no doubt that it does involve 18 a considerable amount of reading matter and digestion of 19 that reading matter, and obviously councillors have 20 different interests, different abilities, different 21 expertise, and so for some it would be easier than 22 others to actually read, obviously in this case, 23 a report on the tram project and make good sense of it. 24 The reports were written in such a way that it 25 should not have involved anything other than a general 47 1 kind of layman's interest in it to be able to understand 2 it, and if you didn't understand it, you merely picked 3 up the phone and asked the officer whose name was on the 4 report: what do you mean by this? 5 So there were opportunities beforehand. It wasn't 6 a case of just arriving at the Council meeting: there's 7 your bundle of papers, make a decision. 8 But I agree, there was an enormous amount of 9 paperwork. 10 Q. I think you said it's up to the individual councillors 11 whether they or not they are willing to apply themselves 12 to consider it? 13 A. Yes. 14 Q. And not all of them did? 15 A. I merely comment on the fact that when you walk into 16 a Council meeting at that time, you can't tell now 17 because they have got their computers there, but at that 18 time you could always tell if a councillor had been 19 through their paperwork. 20 Q. Turning to the question of briefings, were these 21 briefings that you or your group would seek when you had 22 a concern, or were they sort of provided pro-actively 23 ahead of concern arising? 24 A. It would be both. Before a Council meeting, before 25 a report for the Council, we would almost certainly be 48 1 offered a briefing. But we could at any time, if we 2 wished it, ask for a briefing, and that applied to both 3 administration and opposition councillors. When we were 4 as a group in opposition, we could ask for the 5 Chief Executive or senior officers to come and give us 6 a briefing on a topic and sometimes we would. Sometimes 7 it would be something on the agenda. Sometimes it might 8 be an issue that we felt we ought to know a bit more 9 about. But we were never inhibited in asking for 10 briefings. 11 Q. At any briefing such as that, would you be able to get 12 officers from an arm's length company to attend if you 13 wished? 14 A. From my memory, TIE did sometimes attend these briefings 15 either through the Chief Executive asking them to, or us 16 asking them to be there. But it's difficult to remember 17 now who was present in all these meetings, because there 18 were so many of them, but in general it would have been 19 Council officers who were transmitting information to 20 us, especially if it was in the time surrounding 21 a report going to a Full Council Meeting. 22 Q. So you would have the usual situation that we have 23 already considered, that essentially there's another 24 tier, another link in the chain that the information has 25 to go through to get to you, if you're using an arm's 49 1 length company? 2 A. Yes, that would usually be the case, yes. 3 Q. At these briefings, is it open, very much open for 4 anyone to ask questions, or are they structured and 5 controlled? 6 A. I can only speak for my own group on the Council, and 7 when we were in coalition with our coalition partners, 8 and certainly at those meetings, it was open absolutely 9 to -- everybody was expected to attend. Every member of 10 the group was expected to attend, and anybody could ask 11 any questions. There was absolutely no inhibition on 12 what questions could be asked. 13 Q. Were the briefings provided to the political groups or 14 were they provided on -- even individuals where that was 15 required? 16 A. It could be any combination. It might be that the 17 members of the Transport Infrastructure and Environment 18 Committee would feel that they wanted more information 19 about something. In the case of my group, we would 20 usually all be circulated by the convener to say he'd 21 asked X, Y and Z to come in and give a briefing on 22 something, and if somebody was interested, they could go 23 along. 24 So it varied as to who was calling the meeting, who 25 was offering it, and -- but it was certainly open to 50 1 anybody who wanted to, to get more information about 2 a topic. 3 Q. Where a briefing has been provided to a political group 4 or a smaller selection of councillors, was anything done 5 by the officers in question to try and make sure that 6 the same information was spread throughout all the 7 councillors, or is it just left to those other 8 councillors to ask if they wanted? 9 A. Well, in theory, I would expect the briefings that they 10 gave to be the same. At one stage when we had a great 11 many briefings about the tram project, I would generally 12 get a briefing first from the officers. They would come 13 to my office, maybe two or three of them, and they would 14 go through the PowerPoint presentation they were going 15 to give, and I would then go to the briefing that they 16 gave my group or the administration two groups together, 17 and the information -- I don't recall any instance where 18 that differed from what I had initially been shown, and 19 then on other occasions, I went to the same presentation 20 that was given to all councillors. 21 It certainly involved officers in an awful lot of 22 duplication of the information they were giving, but in 23 a political system, that's the way it tends to work. 24 But the information -- okay, occasionally, I suppose, 25 I might have been given a very private piece of 51 1 information by the Chief Executive that was not shared, 2 and he would explain why he felt it wasn't appropriate 3 to share this at that time, but I would say that 4 99.9 per cent of the time, the information that I was 5 given individually was the same as given to my group, to 6 the administration two groups, and to other councillors. 7 Of course I wasn't at the other groups' meetings, so 8 I can't say for sure, but I would certainly have 9 expected officers of the Council to have been giving the 10 same information to opposition councillors as they were 11 to administration councillors. 12 Q. You refer to it there as being rather a complicated 13 exercise for the officers to give piecemeal briefings to 14 several different groups? 15 A. Yes. 16 Q. Would it not have been more satisfactory and ensured 17 a level playing field if the briefings were provided 18 collectively? 19 A. It might have been and there were occasions when that 20 did happen, and once the project got back on to the 21 footing that we wanted it to, in 2011, I think most of 22 the briefings were probably joint briefings then. But 23 up until that point, as you recall from my statement, 24 there was a bit of a difficulty in that the coalition 25 administration comprised two parties, one of which was 52 1 anti-tram, one of which was pro-tram. So there were 2 some difficulties about what information perhaps might 3 be shared at some points. 4 Q. That's something I want to come back to -- I will pursue 5 that just now. Is that suggesting there would be 6 different information provided on the one hand to the 7 pro-tram part of the coalition than would be provided to 8 the anti-tram element of the coalition? 9 A. No, it was rather more a case that the information might 10 not be provided as early to the anti-tram. 11 Q. Why? 12 A. Very simple reason. We knew that there had been 13 information getting into the press at various times that 14 was unhelpful, and we believed that source to be coming 15 from the anti-tram group on the Council. 16 Q. So -- 17 A. But this wasn't the case throughout. I'm talking about 18 the early stages at this point. There came a point in 19 time when the whole Council was in favour of the tram, 20 when the SNP voted along with everybody else for the 21 project to go ahead. 22 Q. That was quite a bit later on? 23 A. Yes. 24 Q. When I'm looking at the time round about the 25 administration -- looking at the period 2007 onwards, 53 1 when you were leader? 2 A. Yes. When the -- in May 2008, all parties agreed to -- 3 that the Chief Executive should be given the green light 4 to tell TIE to sign the contracts. So at that point 5 everybody agreed on it. But at different stages 6 thereafter, the SNP were very quick to remind people 7 that they had been anti-tram at the beginning. 8 Q. They had been anti-tram earlier than May 2008? 9 A. Yes. Right back in 2007 the SNP had gone into the 10 Scottish party elections at that time with an anti-tram 11 stance. 12 Q. In terms of providing information later to anti-tram 13 groups, that obviously restricted their ability to 14 disseminate that information for a while. Did they not 15 have to be given the information by the time it came to 16 taking any decision? 17 A. They could ask for that information. I'm not saying 18 that they were prevented from getting the information. 19 It was just we didn't have joint briefings with them at 20 some stages. They could ask the Chief Executive to come 21 and talk to them about it. And what I don't know is 22 what information would have been transmitted to them. 23 Q. To be clear, I think from your answer a few minutes ago, 24 it wasn't just that you didn't know, but it was your 25 understanding that the anti-tram lobby were not given 54 1 information at the same time. It was later, being 2 provided to them later with a view to it not being 3 disseminated? 4 A. Perhaps I should have clarified that a bit. What I was 5 thinking of at that point was I had a great many 6 briefings from the Chief Executive, and for -- and the 7 Deputy Leader who was the leader of the SNP, we had 8 weekly meetings that we both went to. Sometimes more 9 than weekly. But we did not discuss the tram at that 10 point because -- for whatever reason. The 11 Chief Executive felt that it was more appropriate to 12 speak separately to us about the tram. 13 So perhaps I was making too -- giving too sweeping 14 an impression of that, because there was nothing to 15 inhibit the SNP for asking for briefings and being given 16 briefings. But I wasn't present at their briefings at 17 most stages, not always, because we did, as I say, have 18 joint briefings. So I don't know whether they were 19 given precisely the same information. 20 Q. Could I ask you, please, to look back at your statement. 21 That was the one with the reference TRI00000019_C. 22 A. In my statement? 23 Q. Yes. It will come up on the screen. 24 A. Oh, right. 25 Q. If you could look at page 21 of that, paragraph 87. You 55 1 note there that being Council Leader made a huge 2 difference and it became clear -- perhaps I should 3 identify before reading that, the heading at the top of 4 the page is "Updates and sources of information". 5 That's the context we were looking at. 6 Then, looking back at paragraph 87, it says: 7 "Being Council Leader made a huge difference and it 8 became clear that the amount of information that 9 I received as Council Leader was very different to when 10 I was the Opposition Leader (that is prior to 2007 when 11 the Scottish Liberal Democrats was the largest 12 opposition grouping). As the Opposition Leader and as a 13 Group Leader prior to that, I did not feel inhibited in 14 asking for information, but I was definitely getting 15 a lot less information." 16 A. That was referring as much as anything to the number of 17 meetings. As an Opposition Leader I had regular 18 meetings with the Chief Executive at different times 19 once in every four weeks, once in every two weeks. It 20 varied. And I can't remember precisely what it was at 21 different times. 22 When I meant by that was that as Council Leader, 23 I was getting updates practically daily on various 24 things, and I certainly was not being given that 25 information in that quantity when I was an Opposition 56 1 Leader. I would assume, I don't know, but I would 2 assume that the Council Leader at any time, the 3 Chief Executive is, you know, on the phone or in their 4 office sort of saying what's happening, not just about 5 the tram project, but about everything else in the city. 6 However, as I do stress there, I could certainly 7 have asked for -- I never felt inhibited about asking 8 for more information, but the information that was 9 actually sort of provided without me asking for it was, 10 I would say, considerably more when I became Council 11 Leader. 12 To a large extent because all the various Council 13 officers wanted to be sure that I was up to speed with 14 everything in the Council, which you never can be to the 15 same extent when you're in opposition. 16 Q. Just in relation to the daily updates, could I ask you, 17 please, to look at another document. It's one you've 18 already seen. The reference is CEC00870592. If we just 19 enlarge the upper half of the page to make it a bit 20 clearer, we can see this is a letter, dated 21 5 March 2009, and it's addressed to David Mackay, who is 22 then the Interim Chairman of TIE. Can you see that? 23 A. Yes. 24 Q. If you look at the second page, just to see who it's 25 from, towards the foot of the page, you see it's from 57 1 Tom Aitchison, who is the Chief Executive of the 2 Council? 3 A. Yes. 4 Q. If you go back to the first page and look at the lower 5 half of the screen, we see there's a bullet point just 6 at the foot of the page, the Council's TMO. I think 7 that's Tram Monitoring Officer; is that correct? Is TMO 8 Tram Monitoring Officer? 9 A. Yes, it is. 10 Q. Should be provided with daily high level update from 11 TIE, reflecting developments in the DRP -- I think 12 that's dispute resolution process or procedure -- and 13 any other relevant matters. Do you see that? 14 A. Yes. 15 Q. If you could look at the appendix, the third page of 16 this letter, we can see that it gives the provisional 17 list of Council representatives authorised to receive 18 daily and other reports from TIE. 19 A. Yes. 20 Q. You're one of only two councillors referred to, the rest 21 of them all being Council officers? 22 A. Yes. 23 Q. You were in an unusual position of being the one who was 24 getting these daily provisions of information? 25 A. Yes. If that's -- yes, it must be. 58 1 Q. Now, I think you've said in your statement also that the 2 group leaders within the various of each parties, they 3 were also given briefings over and above the rank and 4 file; is that correct? 5 A. There were occasions when there would be a meeting of 6 group leaders, yes. 7 Q. Were -- 8 A. And they would then transmit the information to their 9 groups. 10 Q. That's what I was asking. Was the intention always that 11 anything told to the group leaders would be 12 disseminated? 13 A. Yes, unless it was something that was clearly, we were 14 told, was highly confidential and would be requested 15 that we not disseminate it. That would be in regard to 16 any of the Council business. 17 Q. But it did arise in relation to trams. From time to 18 time the group leaders were told stuff and told it was 19 confidential? 20 A. Yes, but not -- I mean, the more common situation was we 21 were told we couldn't be told stuff because it was 22 highly confidential, rather than -- 23 Q. I do want to return to that. Just looking at the 24 situation where the group leaders are told that they 25 can't tell their party members, does that not create 59 1 a very uncomfortable position within the Council, that 2 some people had information, others don't, and everyone 3 is taking a decision? 4 A. I cannot think of any situation where it actually would 5 have had an effect on what happened at the Full Council. 6 It would more be a case of -- I can't -- I can't think 7 of a concrete example, but the kind of thing might be 8 that I would be told: oh, there's an issue about to 9 arise, you know, TIE is about to issue some -- about the 10 dispute resolution process, for example. There's some 11 issue there, and it won't be made public until tomorrow 12 or something. And so I would honour that. 13 The more usual situation was the fact that board 14 members of whatever party they were on the TIE Board had 15 to honour their commitment to keep within TIE what they 16 heard within TIE, and that, I think, probably was more 17 of an issue. 18 If I was given this kind of information, it would be 19 something that I would transmit to the group. We had 20 regular group meetings where we had information exchange 21 and I would -- or the Transport Convener in this -- at 22 this time, Councillor Wheeler, would transmit the 23 information to the group. Very often they didn't need 24 to -- it wasn't something that they needed to know, but 25 we would generally try and keep them informed as to what 60 1 was happening. 2 I think a bigger issue came from our -- the board 3 members who had to sort of wear their board hat when 4 they were in board meetings and then in the Council, 5 they had to put the Council's interests first. Of 6 course they should have been the same, but they weren't 7 always. 8 Q. That's something I want to discuss further, but in view 9 of the time, that might be something raised -- was the 10 break at 11.00? 11 CHAIR OF THE INQUIRY: I was thinking a bit later. But if 12 this is what you're -- I thought maybe nearer half past. 13 MR LAKE: Turning then to the question of confidentiality, 14 it is a feature of your statement -- if we look at 15 paragraph 93 within your statement, I'll give you the 16 page reference for that. That's at page 23. 17 A. Yes. 18 Q. You said there: 19 "I do not know what the particular confidentiality 20 issues referred to in this document were or when 21 confidentiality issues were first mentioned, but this 22 was a theme that ran throughout everything concerned 23 with the Edinburgh tram project. We were repeatedly 24 told that there was confidential information that we 25 could not be told about and that we could not be given 61 1 certain figures." 2 Do you see that? 3 A. Yes. 4 Q. If you look towards the foot of the page at paragraph 5 95, we see it's echoed there that: 6 "The issue of confidentiality ran through everything 7 and our councillors who also acted as board members had 8 to comply with their duties as board members." 9 We will come back to that in a moment. But were 10 there particular times when confidentiality was invoked 11 that you found frustrating? 12 A. I think I found it most frustrating it when it was 13 concerning the dispute resolution process, where we were 14 being told -- it was sort of described in a win or lose 15 manner, and the information that we were getting from 16 TIE, whether -- I can't remember whether it was directly 17 or indirectly through the Chief Executive, but the 18 information we were getting was that the dispute 19 resolution was going in favour of TIE. They described 20 it as a win or lose situation and they were winning and 21 the other side was losing. 22 By that time, and I can't remember when I first 23 became aware of it, but it may well have been through 24 our board members, but it soon became obvious that that 25 really wasn't perhaps quite what the situation was, and 62 1 so we wanted to know more information about that, as an 2 example of the sort of thing that was quite frustrating. 3 It would have been useful to have been given a bit more 4 information at times. 5 Also about the costs and the timing. There was 6 very, very often we were told: oh, no, we can't tell you 7 that; and particularly when the matters had reached 8 a kind of what you might call a standoff with the 9 consortium, and we were basically told: no, we can't 10 give you that information; and I don't remember whether 11 it was said directly, but certainly the implication 12 was: you can't be trusted not to tell the consortium 13 what we, TIE, are thinking, and so we're not going to 14 give you information. 15 I was put in the situation where I was having to 16 talk to quite a lot of people and to the media and, you 17 know, basically not able to answer a lot of the 18 questions they had about cost and time because I didn't 19 know because I had been -- I had not been given the 20 information. 21 So there were quite a lot of situations where it 22 became very frustrating to be told that we could not be 23 given details that we perhaps might have wanted. We 24 didn't need to know right down to clause 10(b)(1) or 25 something, but just to have been given a bit more 63 1 information at times might have enabled us to get 2 a fuller picture of what was going on. 3 Q. Just to be clear, you said that the information as to 4 the outcome of the disputes? 5 A. Yes. 6 Q. You were getting one story from TIE, but you 7 understood -- what led you to believe it wasn't correct 8 was information that was coming from the councillors who 9 sat as board members? 10 A. Really, I think, from two sources. I did have a meeting 11 with a representative of the consortium at one time 12 which was merely just me listening to what was said, and 13 I was painted a very different picture about the 14 contract on that occasion; and also without them giving 15 me full detail, I certainly got the impression from our 16 two board members, from Councillor Wheeler and 17 Councillor MacKenzie, that perhaps things were happening 18 that they couldn't describe in detail, but that perhaps 19 TIE were being a bit bullish about things when they 20 shouldn't have been. 21 Q. I will just ask you about some other things where issues 22 of confidentiality may have arisen. 23 The make-up of the various elements in the initial 24 bids -- this is going back to 2007 -- was that something 25 that the councillors had any interest in? 64 1 A. The make-up of -- 2 Q. The precise make-up of the bids, the components of the 3 bids by the competing contractors. 4 A. No, we were not involved in assessing the bids, if 5 that's what you mean. 6 Q. What about the issues of the tactics or the strategy to 7 be engaged between TIE on the one hand and the 8 contractors on the other once the disputes arose? 9 A. At one stage, I believe from recollection there was 10 a Council paper, a paper came to a Full Council Meeting, 11 where we were asked to sort of -- I think the phrase was 12 stand side by side with TIE and endorse the -- basically 13 the way that they were moving forward. 14 The dispute process was quite convoluted. There had 15 to be, obviously, as in most cases like this, some way 16 of trying to sort things out internally, and when that 17 didn't work, it then went to external adjudication. 18 We were -- as far as I can remember, I think we were 19 asked, and I believe we did, take the view that TIE were 20 pursuing the correct strategy. 21 However, it is fair to say that we did not have all 22 the detailed figures because we were told the contract 23 did not allow either party, in this case TIE or the 24 consortium, to actually discuss any matters of dispute 25 resolution with anybody outside the two contract 65 1 holders. 2 Q. You have talked about the effect -- it was difficult if 3 you were speaking to third parties, you didn't have that 4 information. Did it actually impede your work as 5 a councillor in relation to this project, not having 6 that information? 7 A. I would have welcomed further information. It's 8 difficult to say now what I would have done with it, 9 because I don't know what that information would have 10 been. But I think there was prior to the mediation in 11 2011, I think there was a sort of secrecy surrounding 12 the information in some aspects that wasn't there after 13 mediation, and I think it would have been helpful 14 sometimes to have had more information. 15 Q. Do you accept that there is a need for some matters to 16 remain confidential in a contract such as this? 17 A. Yes. If the contract is drawn up in such a way that the 18 parties to a dispute are prohibited from discussing the 19 outcome of that dispute or how the resolution was 20 achieved, then I would honour that. But I think there 21 was information -- I think there perhaps was a bit of -- 22 became -- everything -- around the disputes became 23 rather shrouded in secrecy, and I think it would have 24 been helpful to have perhaps been given a clearer 25 picture of what was happening. 66 1 Q. Presumably the subject matter of the disputes was 2 something that were already known to both sides in the 3 contract? 4 A. Yes. 5 Q. So -- 6 A. Well, the subject matter was known, but the precise 7 detail wasn't known. If I can perhaps give an example 8 that happened relatively early on, and which ended up 9 with the sort of special agreement about Princes Street, 10 the information that we were getting from the two sides 11 was very different. We were -- and there is a document 12 which I was referred to in the Inquiry and which I think 13 there's a comment on it in my statement, where there was 14 an email that said that the consortium were refusing to 15 go on to Princes Street, and then further on in the same 16 email, it says a directive had been given by TIE that 17 they should not go on to Princes Street. 18 So that sort of -- it was quite difficult to assess 19 just what the situation was sometimes, and all that was 20 very much shrouded in secrecy. 21 Q. In terms of why information might be kept confidential, 22 one desire might be to prevent it from getting into the 23 press. I think you have already referred to that? 24 A. Yes. 25 Q. That's -- that could be difficult or damaging in 67 1 political terms? 2 A. Yes. I think that the trouble is that if we didn't know 3 what the true situation was, we don't know whether -- 4 who was briefing the press and whether that information 5 was correct or not. 6 Q. There might also be a situation in which there was 7 information that was already known to all the parties in 8 the contract, but it was their preference that that be 9 kept confidential just for the proper management of the 10 contract, and both parties to the contract would agree 11 with that? 12 A. Yes, I can understand why if the contract said that 13 neither party should divulge information about certain 14 situations, then I think both parties should honour 15 that. But when there was information filtering out, 16 then it would have been useful to have actually been 17 then given -- not necessarily, you know, every detail of 18 the information, but just a little bit more clarity 19 about what the situation was. 20 Q. I'll come back to the filtering out in a moment, but 21 just looking at a third situation where confidentiality 22 might arise, there might be material, for example, that 23 TIE had about their plans and their tactics where they 24 wouldn't want it to get to the consortium. 25 A. Well, that was the reasoning behind it, that if -- 68 1 I guess their thinking on it was that if they gave 2 councillors that information, they -- even if they were 3 told not to divulge it to anybody, there was always the 4 chance that somebody, and particularly perhaps somebody 5 who was not in favour of the tram, then briefing the 6 other party in the dispute as to what TIE was thinking. 7 You know, if TIE were saying, "We think we're 8 actually going to have to spend an extra 2 million on 9 this", and the consortium at that stage had thought "We 10 will ask for 50,000", then I think -- the impression 11 I got was that that was the sort of situation that they 12 wanted to avoid, where somebody who was told something 13 by TIE would then divulge that information to people 14 who, by that time, to my mind, felt like they were 15 treating as the enemy rather than the partner in trying 16 to deliver the project. 17 Q. Or if the information was divulged to the press, it 18 would get to the other contracting parties? 19 A. Of course, yes. 20 Q. And that's a legitimate interest, isn't it? 21 A. It is, yes. But perhaps there were situations where 22 councillors could have been trusted not to and they 23 needn't have necessarily given every last detail, but it 24 would -- I definitely felt that, particularly 25 surrounding the disputes, there was a huge amount of 69 1 secrecy. 2 Q. But leaks did happen, didn't they? 3 A. Yes, they did. 4 Q. So what we've got is a tension on the one hand between 5 providing a degree of openness to the Council -- 6 A. Yes. 7 Q. -- and in maintaining confidentiality which is 8 appropriate to make the contract run efficiently? 9 A. Yes, yes. 10 Q. Is there really going to be anyone in a better position 11 than the company to make a judgment as to how to achieve 12 that balance? 13 A. That was what we had to accept, that they knew the 14 situation, they knew what was going to damage their 15 interests, and so -- and they said the contract stated 16 that information could not be divulged. So yes, we had 17 to honour that. 18 All I'm saying is it would have been helpful to have 19 had more information. I'm not saying that we should 20 have been given all the detail, but it would have been 21 helpful to have had it. 22 Q. Two things arise from that. Firstly, the filtering you 23 spoke of a minute ago. When some information had got 24 out, it would have been helpful to have more 25 information. Why would it have been helpful to have 70 1 more information just because something had leaked out? 2 Why would that mean you naturally wanted more about it? 3 A. If I can give an example, at various times there were 4 statements in the press, sometimes from named 5 individuals, sometimes a source, where, for example, 6 they might imply that the project that at that time, as 7 councillors, we were still being told was within what we 8 called the funding envelope of GBP545 million, there 9 were -- long before that figure, as far as councillors 10 were concerned, was breached, there was information in 11 the press that, you know, the sum had now reached, let's 12 say, 700 million or something like that. 13 So in those situations we obviously -- if there was 14 something appeared in the press that suggested it was 15 running away with itself, we would make enquiries as to 16 where that figure had come from, and I don't know where 17 the figures came from. 18 Q. But if the company was then to say, "Yes, we've come to 19 the view that, although we're in dispute with the 20 contractors about how much liability to pay we have, 21 we're making a provision for another 20 million on this 22 item", if that gets out, that could be damaging to the 23 company. So that's precisely the sort of thing they 24 will need to keep confidential. 25 A. Yes, it could, and that was, I assume, the reasoning 71 1 behind TIE's decision not to divulge that information. 2 But if there were figures already in the press, then 3 I would imagine that the consortium would be reading the 4 papers and would already have seen this figure. So 5 perhaps, you know, the damage had been done. 6 But that was the sort of situation where it was 7 quite difficult, having -- you know, I was having to 8 say, and quite honestly, obviously, say, that that was 9 not a figure that was familiar with me. As far as I was 10 concerned, we were still within the 545 million funding 11 envelope. 12 Q. I look at things there from the standpoint of the 13 company and its needs and wishes. If we could now look 14 at the standpoint of you as a councillor or the Council 15 collectively, how much information -- I'll start that 16 again. 17 Did the Council need more information than it 18 actually had or did it simply want it? 19 A. To the extent that as councillors we felt that we could 20 reach a reasoned conclusion on reports, we had enough 21 information to do that. We had enough information to 22 arrive at a conclusion to support officer 23 recommendations or put forward a different proposal and 24 we could always ask for more information. 25 So, looking back, we had goodness knows how many 72 1 by -- I think by some time in 2011, we'd already had 2 something like 74 actual decisions taken at Council 3 concerning the tram project, and each of those decisions 4 was reached on the basis that we had enough information 5 to reach the conclusion that we did. 6 Sometimes you would see from looking at the minutes 7 of meetings that we asked for further information 8 formally through a motion where we felt that we've been 9 shown this draft business case, we don't feel that 10 there's enough information about certain aspects of 11 that. So we would ask the officials to go away and come 12 back with more information with a revised case for us to 13 look at. 14 But every time that we as councillors took 15 a decision on the tram project, we did that on the basis 16 that we felt we had enough information to reach the 17 conclusion that we did. 18 It was not a case of: we're desperate to get this 19 tram project going, therefore we are just going to say 20 yes, yes, yes, to every report that comes up. We always 21 did look at it, analyse it, and come to a conclusion as 22 best we could, and where we didn't have the information, 23 we asked for it. 24 Q. So is it fair to draw it together by saying that, 25 although you were frustrated and perhaps a little 73 1 annoyed by the claims of confidentiality that were made, 2 even at today's date you don't consider that that 3 impeded your decision-making? 4 A. I don't think it impeded the decision-making. However, 5 I have to put a sort of caveat to that in that in 6 looking at the documents for this Inquiry, I have of 7 course found that there were internal highly 8 confidential memos going around which did suggest that 9 councillors were perhaps being kept in the dark and 10 obviously querying whether -- how necessary this was. 11 But at the time, apart from the shroud of secrecy 12 around certain aspects, particularly the details of 13 disputes and the precise amount of money that was likely 14 to be required, apart from that, we did -- we felt we 15 had enough. We were unaware that there were aspects 16 that certain officers within the Council were aware of, 17 but they themselves were telling their senior officers 18 about this, who presumably also didn't know. 19 Q. Still sticking with this question of provision of 20 information, but going back to your statement -- I don't 21 know if we still have it available easily on the screen 22 to go back to. The full reference is TRI00000019_C. If 23 you go back to page 23 we were looking at before, we 24 looked at a little bit of paragraph 95. 25 If we could go back to that, about halfway through 74 1 there's a sentence which begins: 2 "Occasionally, I would be shown something that 3 perhaps I should not have been shown, but in general 4 I think we all felt hamstrung by the fact that we did 5 not always get the figures we wanted. That was 6 especially the case when the business cases for the ETP 7 were being analysed by the Council. In those 8 circumstances, it did not seem right for us not to be 9 given the figures supporting those documents." 10 So is that a situation in which your ability to take 11 an effective proper decision was being impeded by 12 incomplete information? 13 A. It's difficult to say now because obviously I don't know 14 what that information was, and whether it would have 15 affected the decision that we took. But unless the 16 Council minute reflects the fact that we -- the formal 17 decision on a report was that we were not satisfied at 18 the amount of information and wanted further 19 information, apart from those situations, although it 20 might have been useful to have had more supporting 21 documentation, we had enough, we felt, to make the 22 decisions that we did. 23 It's hard to say now whether, had we seen certain 24 supporting documents, it might have coloured our view on 25 what our conclusion should be. There's always that 75 1 possibility, but equally, there's the possibility that 2 our conclusion would have been the same. 3 Q. I want to turn now to the question of the councillors 4 who sat on the boards of arm's length companies. 5 CHAIR OF THE INQUIRY: Mr Lake, this might actually be 6 a good opportunity. 7 MR LAKE: Very well. 8 CHAIR OF THE INQUIRY: We will resume again at about 11.45. 9 (11.20 am) 10 (A short break) 11 (11.45 am) 12 MR LAKE: As I said just before the break, I want to turn to 13 the question of councillors who sat on the boards of 14 arm's length companies, including TIE. First of all, 15 what in your view was the function that they performed 16 by sitting on the boards? Why have them there? 17 A. I suppose in general terms their role is to ensure that 18 the Council's interests are being looked after. 19 They are kind of there to monitor what's going on. 20 Q. Now, just taking those two in turn, we will take them in 21 reverse order, monitor what's going on. They can keep 22 an eye on things, but are they really in a position to 23 report back to the Council on what they're hearing as 24 a Director of the company? 25 A. It's not usual for councillors who are on boards to make 76 1 direct reports to Council. It would normally be if 2 there was a Council official on the board, if there was 3 to be a report, it would usually be the Council official 4 who would make any formal report. 5 There were limitations as I have already said that 6 they cannot use what they learn in a board in, for 7 example, a Council meeting. If they're given some 8 information as a board member, they cannot then stand up 9 in Council and say, "But on the board meeting on such 10 and such, X, Y, Z happened". 11 So their role is limited as regards reporting back. 12 Q. If they can't report back, does that not rather 13 undermine the monitoring function? Because they can see 14 what's going on, but are not really in a position to do 15 very much about it if they see something they don't 16 like? 17 A. I think as much as anything, it's to ensure that there 18 is some sort of democratic accountability that an 19 elected councillor is sitting on a board and can just 20 ensure that things are going the way that they should. 21 I, as you know, did not sit on the Tram Project 22 Board, but I did sit on several other boards and my role 23 there, I felt, was to do as much as I could to ensure 24 that the Chief Executive of the company and the staff 25 were performing the way they were expected to perform 77 1 and delivering what they were expected to deliver. So 2 that's what I mean by a kind of monitoring role, and as 3 members of those boards, I don't believe on any occasion 4 I ever reported back formally to Council, and if 5 I reported anything to my group about it, it would be 6 a very, very general statement. 7 If, for example, a Chief Executive was retiring or 8 had resigned and somebody new was coming in, I would 9 mention we will be recruiting a new Chief Executive, but 10 it was very, very headline information that would be 11 transmitted back by the councillors on the board. 12 Q. I will look at these various roles that were played by 13 the board members in turn, but one thing I want to go 14 back to your statement, if we can, please. The 15 reference for that is TRI00000019_C. If you could go to 16 page 21, and paragraph 84. 17 I'm just -- this is concerning the councillors that 18 sat on the boards. It says: 19 "Council officers responsible for transport and our 20 Transport Convener would report to our group on meetings 21 that they had had and they would tell us what they 22 could." 23 That's fine. It goes further to say: 24 "Some councillors were board members." 25 This is what interests me: 78 1 "They did their best to honour the requirement that 2 what was said in the boardroom was kept in the 3 boardroom." 4 The way you put it there suggests that there was in 5 fact -- information in fact was passing back from the 6 boardroom to the Council? 7 A. No. That's not how that is meant to read. That is 8 meant to read they did their best to honour. It in 9 other words, they did honour it. 10 There were occasions which again I refer to in my 11 statement where I did say, for example, I think I have 12 already mentioned it this morning, actually, that 13 regarding the disputes, for example, I was informed that 14 TIE were being rather more bullish than they should have 15 been about some things, but I was not given any detail 16 whatsoever, and that was to myself, that was not to the 17 entire group. 18 Q. Moving then to one of the other factors that you raise, 19 one of the other justifications, it was to represent the 20 interests of the Council -- 21 A. Yes. 22 Q. -- within the company. 23 Now, how would they do that? 24 A. Well, to some extent that would be looking at the 25 Council's own policies, for example on equalities and 79 1 that kind of thing, and make sure -- do what they could 2 to ensure that the board was also applying those kind of 3 attitudes to the way that they were operating. 4 So I don't know how they all performed in boards. 5 Obviously I wasn't there to see it. But I would expect 6 them, if for example it be -- came to their attention 7 that there was a bullying culture, for example, within 8 an organisation, this is just a hypothetical example, 9 I have to say, if there was evidence of that, then that 10 was not in the Council's best interests to have 11 a company operating in a way that the Council itself 12 would hope not to operate. 13 So it was that kind of interest that I'm referring 14 to. 15 Q. You may recall this morning when we looked at the report 16 that was prepared by Jim Inch in July 2007, it referred 17 to the interests of the Council not necessarily being 18 aligned with the interests of TIE in relation to the 19 tram project. 20 If that sort of situation arose, what is the role of 21 a councillor sitting as a board member there? On the 22 one hand, the Council's interests, on the other hand, 23 they have the company's interests. How do you see the 24 councillor is expected to perform? 25 A. I don't know what was actually being referred to by 80 1 Jim Inch, but I would imagine if there was something 2 that he felt he should be drawing to the attention of 3 councillor board members on that board, then he should 4 do so. 5 Q. I'm really more asking if a councillor board member is 6 faced by -- I'm just using Jim Inch as an example, as a 7 situation, on the one hand you think the company has one 8 interest, objective, and the Council has a different 9 one, what's the councillor supposed to do, faced with 10 that conflict? 11 A. It would be up to the Council to ensure that the company 12 was working in the interests of the Council, because 13 that's why it was set up. 14 Q. Now, the Council could only know about that perhaps if 15 it was getting full information. 16 A. Yes. 17 Q. So are you saying that the Council would have to be 18 informed of the matter and essentially intervene to pull 19 matters back? 20 A. I would imagine -- expect it to be through the board 21 members on the body that that would -- that intervention 22 would happen. 23 Q. The councillor board members? 24 A. Or Council officer board members. 25 Q. But they would only be able to take control of the 81 1 matter if they were in a majority of the company in 2 question? 3 A. Yes. I have no idea how this particular board operated. 4 Most boards that I have been on have operated in a very 5 consensual way, and that sort of situation never arose. 6 So it's -- I don't know how members would -- how members 7 of the board would see that the interests were aligned. 8 One of the things was mentioned in that Jim Inch 9 report was the fact that there was not a sort of proper 10 operating agreement between the Council and the board, 11 and clearly within that operating agreement it would -- 12 it should make some comment on how that kind of 13 situation might be dealt with. I would expect it to 14 anyway. 15 Q. That would be -- it might deal with a situation where 16 the company's interests conflict with the interests of 17 the Council. Is that what you mean? 18 A. Yes. I mean, I don't know what specific matter Jim Inch 19 was referring to in his report. You know, I don't know 20 where he was coming from on that, and I don't think it's 21 said in that paper precisely what it was he was 22 referring to. 23 So without knowing what he's referring to, it's 24 difficult to assess what could or should have been done. 25 Q. I'm just really interested in what the individual does, 82 1 what the person, the man or woman does, when, on the one 2 hand, the Council interests conflict with those of the 3 company and they are both a councillor and a company 4 director. So they have got competing interests. How 5 are they able to resolve that? 6 A. I suppose it would depend on what that conflict was 7 about. Is it a personnel issue? How would that -- it 8 might be dealt with differently from -- I can't 9 really -- I have no idea what sort of issue the Director 10 of Corporate Services was talking about, so it's very 11 difficult to judge what should have been done. But 12 without an operating agreement, without a proper sort of 13 accountability between the two, it would be difficult to 14 assess what should be done. 15 Q. I'm simply using that Jim Inch memo as an example. 16 I don't want to get bogged down in what Mr Inch had in 17 mind. What I'm really concerned with is what does an 18 individual do when they're faced with their conflict of 19 interest between the company on the one hand and the 20 Council on the other? 21 A. Well, when they're in the board, they have the interests 22 of the board -- I suppose in a way takes precedence over 23 the interests of the Council. Similarly when they're in 24 the Council, the interests of the Council take 25 precedence. 83 1 It's a very -- it's a difficult -- it's always been 2 that potential for conflict between the two, because 3 when you become a board member, you are basically 4 signing up to saying you are putting that company's 5 interests above all others. Similarly, when you're 6 a councillor, you are putting the interests of the 7 Council above all others. 8 I have never been in a situation where there has 9 been a conflict between a board that I have been on and 10 being a councillor. So it's quite difficult to 11 envisage, you know, what would be done in those 12 circumstances. But there is that inherent conflict, as 13 it were, between the two roles. 14 Q. With that inherent conflict, is there really ever going 15 to be a situation where the board -- councillor board 16 member will be able to represent or advance the Council 17 interests if the company interests are different? 18 A. In the Council -- the Council interests should be the 19 same as the company interests, because the company was 20 set up to deliver the tram project and that -- in this 21 instance is what they should both be aiming for. 22 How that is done operationally is a different matter 23 and councillors would not be involved in the operational 24 matters. 25 Q. Put it this way. If the company interests and the 84 1 Council interests are aligned, as you would expect, 2 there's really no need to advance the Council interests 3 in that company? 4 A. You would expect the councillors to have in mind that 5 they are there as councillors and I can't envisage -- 6 because I have no idea what kind of conflict was being 7 spoken about, it's difficult to envisage what would be 8 done, other than the fact that the individual board 9 member would have to decide what they would do about it. 10 Would it be a case of speaking to the Council's 11 Chief Executive? Would it be a case of speaking to 12 TIE's Chief Executive. 13 I don't know, and because I find it hard to envisage 14 exactly what was meant by that, when the company had 15 been set up to deliver in the Council's interest, you 16 know, I think perhaps it's showing an early indication 17 of the breakdown that came about between the Council and 18 TIE. 19 Q. You also referred to the possibility of the councillor 20 board members providing democratic accountability. How 21 does that work? 22 A. Well, because they are elected councillors, and they are 23 there to -- as that, which none of the other members of 24 the board are elected. Because it was a Council 25 company, it at that time was the -- it was seen as the 85 1 right way to go forward. 2 I have always been aware that there is that 3 conflict, and what the councillor is providing is not 4 the expertise that other board members are providing. 5 It's -- I suppose in a way they are there as the sort of 6 face of the Council. 7 Q. We will come back to the face of the Council, but in 8 terms of democratic accountability, we've already 9 established that once the person sits as a director, 10 their only obligation is to the company. 11 A. That is what we are told when you -- when you join 12 a board or become a trustee, that you are putting the 13 interests of the company first. 14 Q. So once the councillor sits there, they are really 15 functioning as company director, not councillor; how is 16 there democratic accountability in that? 17 A. Well, they should have in mind that they are -- they're 18 aware of the fact that the company has been set up to 19 deliver for the Council, and so that is always there at 20 the back of your mind, and it would be up to you at 21 board meetings to express a view that would reflect -- 22 if I as a company director sitting in a board meeting 23 felt that what was being suggested by the employees of 24 the company or the Chief Executive of the company seemed 25 to me to conflict with why that company had been set up, 86 1 I would say so at the board meeting. 2 Q. So although it might be -- there might be restrictions 3 on the individual providing information about the 4 company to the Council -- 5 A. Yes. 6 Q. -- they could perform a function of informing the 7 company of the Council's objectives and policies and 8 desires? 9 A. Yes. 10 Q. So the information flow might be in that direction? 11 A. Yes. 12 Q. The other thing you said is looking at the performance 13 of people within the company, directors and employees, 14 how do you see the director performing a function in 15 that regard? 16 A. I'm not sure what you mean by that. 17 Q. I'm trying to tease out precisely what you meant -- 18 A. Where is this. 19 Q. It's not in the statement. It's an answer you gave in 20 this session. You thought, as I recall, that 21 a councillor sitting as a director of the company might 22 be able to oversee the performance of the individuals 23 within the company, and the discharge of its duties. 24 Have I picked that up correctly? 25 A. They would not be looking at the operational capacity. 87 1 They would be -- it would be a more kind of strategic 2 role. I'm not quite sure exactly what -- in answer to 3 what question that came about. 4 Q. Do you see that the directors are there in any sense to 5 report back to the Council, not on confidential 6 information within the Council, but on how it is 7 performing and discharging its responsibilities? 8 A. Well, it would be Council officers that reported back. 9 Q. And councillors? 10 A. No, there's no reporting line between a councillor on 11 a board and the Council. 12 Q. Again, if I could go back to your statement, if we 13 still -- it's document reference TRI00000019_C. 14 This time, look at page 28. I'm interested in 15 paragraph 113. 16 You note there: 17 "I do not think that we were encouraged to ask 18 questions of TIE staff (or consultants) or seek 19 information from them. We felt that our relationship 20 was with the Council Officers. Those officers, in turn, 21 had a relationship with TIE." 22 The passage I'm most interested in: 23 "It did not seem up to councillors to interfere in 24 the operations of an arm's length company like TIE 25 except insofar as councillors sat as board members of 88 1 the company." 2 That suggests that as far as the board members are 3 concerned, that they were there to -- you say 4 interfering or participate in the operations of the 5 company. It comes back to as directors, did they do 6 anything more than represent the interests of the 7 company? Do you see this as they represented the 8 interests of the Council? 9 A. No, it would not be the case that a board member or 10 a councillor would ever be involved in the actual 11 operational arrangements. A councillor isn't involved 12 in the operational business of the Council. And 13 similarly, I would not expect a board member to be 14 involved in the sort of management of the staff of the 15 company. 16 Q. So what did you mean in that sentence there that I just 17 read out, the last sentence? 18 A. Well, I'm not sure what is not understandable in it. 19 I was saying that the councillors should not be involved 20 in the operations of an arm's length company. And the 21 relationship was between -- the only relationship with 22 that company was the councillors who sat as board 23 members on the company. 24 Any councillor who was not a board member, there are 25 only a very few who were board members, but those who 89 1 weren't, had no direct relationship with TIE. 2 I kind of know what I meant, but perhaps it's not -- 3 Q. No, I just wanted to understand precisely what it was 4 you were saying in that regard. 5 Turning back to this issue of monitoring and 6 performance, I think the passage in evidence that I had 7 in mind was where you said you didn't sit on the Tram 8 Project Board, but you did sit on several other boards: 9 "... and my role there I felt was to do as much as 10 I could to ensure that the Chief Executive of the 11 company and the staff were performing the way they were 12 expected to perform and delivering what they were 13 expected to deliver." 14 A. Yes, that's going back to why an individual company was 15 set up in the first place. 16 So I would be making sure that the company was doing 17 what it should be doing through the Chief Executive and 18 members of the staff. 19 Q. What happens if you feel that it's not? 20 A. The situation didn't arise in any of the boards that 21 I was on. Difficult to know what -- you know, what 22 I would have done in those circumstances, but if, for 23 example, I felt that a company was wanting to take on 24 some additional task that seemed to me to be outwith the 25 reason for the company being set up in the first place, 90 1 if they were getting involved in some totally different 2 field, then certainly as a board member I would query 3 that. 4 So I don't know if that's clear, but that's the sort 5 of thing that I would -- that I would have in mind. 6 Q. You could raise it at the board of the company in 7 question. Could you do anything else? 8 A. Yes, you could raise anything at the board of any of the 9 companies that -- which I was on the board. There 10 wasn't any inhibition about raising matters. 11 Q. Would you really be in a position to take matters back 12 to the Council and raise them there, your unhappiness 13 with the company? 14 A. On many of the boards there was a member of the Council 15 there, either as an observer or part of the board; the 16 Director of Finance, for example, was present at some of 17 the board meetings I was at, and I guess if there was -- 18 some really difficult situation arose, in the first 19 instance, because he was aware, he had been in the board 20 meeting, he knew what had transpired, I would discuss 21 the issue with him. 22 But as I say, that particular issue never did arise, 23 and so I never kind of worked out how I would deal with 24 it, but I would expect the company to be performing to 25 deliver what the Council had asked it to deliver. 91 1 Q. Yes. 2 I want to turn now to a quite different matter, 3 which is looking at the information that was available 4 to you at the time of the -- as you moved toward the 5 close of the contract. And obviously, in deciding 6 whether or not to go ahead, it would be an exercise on 7 the part of the Council in weighing up the potential 8 benefits and the potential costs. 9 A. Yes. 10 Q. Had the contract gone according to plan, the 11 contribution of the Council would not have been more 12 than GBP45 million. You would be aware of that? 13 A. Correct. 14 Q. So when the Council are weighing up costs and benefits, 15 were the Council comparing the GBP45 million that they 16 might have to put in with the entire benefit, or were 17 you also having to consider the whole of the extra 18 GBP500 million that Transport Scotland would be putting 19 in? 20 A. When we were looking at the project, we were looking at 21 the entire 545 million at that time. The 45 million 22 was -- at the beginning it was not expected that all 23 that money would actually be needed, but we were looking 24 at the project as a whole. We knew that the 500 million 25 that was provided by the Scottish Government through 92 1 Transport Scotland was a limited sum, and that was it. 2 So we obviously had to take the whole sum into 3 account because 45 million would have delivered nothing. 4 So we were looking at the benefits of the whole -- the 5 project as an entire entity. 6 Q. You looked at the benefits of the entire project of the 7 tram as an original plan to go all the way from Leith 8 out to the airport? 9 A. Yes. 10 Q. What the Council was going to have to expend of its own 11 money to get that was up to, as you say, GBP45 million. 12 A. Yes. 13 Q. Would it not be said on that sort of level essentially 14 that the decision was, to use the colloquial term, a 15 no-brainer for the Council, in that they would get an 16 asset costing roughly 545 million for GBP45 million of 17 Council money? 18 A. Yes. It was the Council itself who had applied for the 19 funding from the Scottish Government several years 20 before, and the Scottish Government had looked at all 21 the bids that were made to the then transport fund, and 22 I think Edinburgh's tram project was placed something 23 like fourth out of 25 projects maybe. So it had been 24 assessed by the Scottish Government obviously on the 25 basis of a lot of the information that had been supplied 93 1 by the Council. 2 But the Council could not on its own have provided 3 545 million. So, yes, it would have been impossible to 4 have gone ahead without the Transport Scotland money. 5 Q. But just looking at the decision the Council had to 6 take, they were faced with something where the benefit, 7 however you precisely quantify it, but the benefit was 8 always going to massively outweigh the Council's 9 GBP45 million? 10 A. Yes. 11 Q. So it was nearly inevitable that, political differences 12 aside, that that would be seen as a desirable decision, 13 a desirable asset? 14 A. Yes. Yes. That was not the kind of out of the blue 15 that we were just thrown: here is 545 million. It had 16 been a long process in drawing up the case because the 17 Council felt as part of its transport strategy that the 18 tram was an integral part of that. 19 Q. Looking at the Council contribution, original maximum of 20 45 million and Transport Scotland saying they would put 21 in GBP500 million and no more, that meant any cost 22 overruns would all fall on the Council, obviously? 23 A. That's right, yes. 24 Q. So if there was, say, roughly a 10 per cent rise in 25 costs, an increase of another 54 million, that would 94 1 double the Council's contribution? 2 A. Yes, although at the beginning it was a maximum and in 3 fact it was kind of almost more than a maximum. At the 4 original time it was thought the whole -- the Council 5 would not be called upon to provide as much as that. 6 Q. So the 45 million was a maximum, you are saying? 7 A. Yes. Yes. The 500 was always fixed. Well, it started 8 out at 375, and then with inflation, et cetera. But 9 once the 500 million had been granted by the new 10 Scottish Government in 2007, that sum was fixed and we 11 always knew it was fixed. 12 So, yes. 13 Q. So was there then a particular concern on the part of 14 the Council to ensure that the cost wouldn't creep up 15 because the Council would be bearing the brunt of that? 16 A. Well, that was one of the reasons why the fact that it 17 was kind of sold to us as a fixed cost contract was very 18 important at the beginning. As things transpired, fixed 19 cost contract came to mean something entirely different 20 from most people's understanding of what that means. 21 But at the time it was believed that that was the 22 situation, that a contract had been drawn up and, okay, 23 there might be a small element that would cost more 24 because there were certain things -- it was fixed 25 cost -- fixed cost to perhaps, I don't know, my estimate 95 1 at the time would probably be it was 95 per cent or 2 something like that. There was always a possibility 3 that there might be some more if sort of ground 4 conditions proved to be totally different from what was 5 expected. There was always an element in there that 6 might take it more, but it was important to us when we 7 were making our decisions that we believed it, and we 8 were told, that it was a fixed cost contract, and that 9 phrase is repeatedly used for quite a long time until it 10 became fixed cost but, or fixed cost plus. And it 11 developed into something entirely different. 12 Q. You said there could be different meanings of fixed 13 cost. What was your understanding of the general 14 understanding of what fixed cost meant in 2007 when 15 you're coming up to take the contract decision? 16 A. My understanding was that the figures were such that it 17 was pretty well fixed cost, other than, as I said, apart 18 from extreme circumstances where there might be 19 a situation where it would be a little bit more than 20 that. 21 But to my mind, and I think to most people's mind, 22 the contract was not going to come in at more than what 23 we were told. 24 I can't remember what the precise figure was at 25 different times that we were told, but that was the 96 1 understanding, and it was -- that was a very important 2 aspect of it, that it wasn't going to be on the basis 3 that it would be a certain cost and then there would be 4 additional monies added in at all sorts of stages, and 5 that was largely because we knew the 500 million was 6 fixed and we did not want the Council to expend more 7 than the 45 million that we felt was achievable and 8 desirable to achieve the project. 9 Q. You said the fixed cost aspect was important to you as 10 councillors. Was it known that it was important? Did 11 you make it plain that it was important? 12 A. Certainly, yes. That was certainly in all the briefings 13 and -- that we had. It was -- yes, it was -- I don't 14 think anybody would have thought that that wasn't what 15 we were expecting. And in report after report, it is 16 referred to. 17 Q. That is what I just wanted to look at, a little bit of 18 that. I think it is understood that it was a draft 19 Final Business Case in December 2006 and then the Final 20 Business Case a year later in December 2007? 21 A. Yes. 22 Q. Can we look back to the draft Final Business Case from 23 December 2006. That's document reference CEC02083466. 24 Do you recognise that as a report to Council of the 25 draft Final Business Case, and it's dated for a meeting 97 1 that was due to take place on 21 December 2006? 2 A. Yes. 3 Q. If you could look at page 7 of this document, and we 4 look at the text that's underneath the table, you can 5 see the first paragraph there says: 6 "These costs are based on either rates and prices 7 from bids received, or known rates or market rates 8 applied to quantities derived from the preliminary 9 design. The estimating process is the most thorough and 10 up to date that could be prepared at this time. It 11 should be noted that tenders for the infrastructure 12 works will not be received until January 2007 and even 13 then will only be initial prices subject to 14 negotiation." 15 If you could read into the next paragraph, 4.3, it 16 says: 17 "However, cost estimates for the infrastructure 18 works have been compared with detailed pricing 19 information obtained from other tram projects in the UK 20 and have been reconciled with cost estimates 21 independently prepared by consultants Cyril Sweett on 22 behalf of Transport Scotland. Costs for the utility 23 diversions and tram vehicles are based on tender 24 returns." 25 Now, what did you as councillors take from this 98 1 information that this was the most up-to-date estimating 2 and that it had been tested and verified in the way 3 referred to? 4 A. I suppose we took that at face value, that it had been 5 assessed. We certainly knew that the price at that 6 stage, because the tenders had not been returned, we 7 knew that that was not what the final price was going to 8 be, but of course it could have gone up or down. 9 So that was made very clear in the report, that this 10 was an estimate, and that the final -- when we came to 11 the Final Business Case, that we would expect to have 12 clearer figures based on what had actually come back in 13 the tender documents. 14 Q. You say the prices are still under discussion then. In 15 the light of that, could we look at page 12 and 16 paragraph 4.32. You say there: 17 "To maintain control over the capital cost of the 18 project, the following actions will be required." 19 The first is that the utility diversions should 20 proceed first, but the second is: 21 "Negotiations with bidders should continue with 22 a focus on achieving a high proportion of fixed cost in 23 the final contracted capital cost (so far as the public 24 sector is concerned)." 25 Was that reflecting the Council concern, that as 99 1 much of this should be fixed as practical? 2 A. Yes. Yes. 3 Q. Could I then look at a different document. The 4 reference is CEC02083536. Here we have got a cover 5 sheet which indicates this is relating to a Council 6 meeting which was to take place on October 2007, and it 7 concerns the Edinburgh tram and it was a presentation by 8 TIE, TEL and the Council to the councillors? 9 A. Yes. 10 Q. If we could go through this, the pages come up in 11 a slightly strange order. If you could go forward two 12 pages from this, which I think will be page 3, is it 13 possible to rotate that? Thank you. 14 What I want to ask you here is it refers to various 15 background items within the tram, and under the heading 16 "June 2007", there's a reference to a review of the tram 17 project by Audit Scotland. Were you aware of that 18 review having taken place? 19 A. Yes. That review, as far as I can recall, was initiated 20 by the Scottish Government who at that point had not 21 awarded the 500 million, and I believe that they were 22 very keen to have some kind of objective assessment of 23 the situation. 24 Q. To what extent did either you individually or the 25 Council in general, if you're aware, place reliance on 100 1 the review that had been carried out by Audit Scotland? 2 To what extent did you as councillors place any reliance 3 on the audit that had been carried out by Audit 4 Scotland? 5 A. I think it would have added to the information we had in 6 that if Audit Scotland were satisfied, that the project 7 was set up in such a way as it would deliver what we 8 wanted, it obviously had some bearing on it. Probably 9 the most important aspect of it, from the Council's 10 point of view, was that the review was such, the results 11 of the review were such that it did enable us to get the 12 500 million grant through Transport Scotland. 13 Q. That was the reaction of the Scottish Government to the 14 report? 15 A. Yes. Yes. 16 Q. At the foot of that page, we see there's a reference to 17 a further external audit, OGC. I think we know that's 18 the Office of Government Commerce? 19 A. Yes. 20 Q. To what extent did that influence your thinking in 21 proceeding with the project? 22 A. Again, there had been, I think, two previous OGC audits. 23 I think the first one was red. The next one was amber, 24 and this one green. 25 So that would certainly have had some bearing that 101 1 an external body had looked at the information and had 2 thought that the project was a sustainable one to go 3 ahead. 4 Q. I should have asked before looking at the particular 5 pages of this, can you recall who gave the presentation? 6 A. I think -- I might be wrong, but this -- there was 7 probably -- I could be wrong, but I have a feeling 8 Neil Renilson was there from TEL, from Lothian Buses, 9 and I can't remember who actually presented from TIE. 10 I do remember Neil Renilson being present at 11 presentation like this because, again, as I looked in my 12 statement here, there had been a feeling that perhaps 13 Neil Renilson who was then Chief Executive of 14 Lothian Buses was perhaps not as much in favour of the 15 tram as some people were. 16 If this is the presentation I'm remembering, he was 17 very whole-hearted in his support for the tram as part 18 of an integrated transport system within Edinburgh. 19 So I think he was there, and I recall that for that 20 reason, and as far as I remember, he only was present at 21 one -- in one such instance at a Full Council Meeting. 22 So this was probably it. 23 Q. Could we look then at page 14 of the presentation. We 24 can see there the estimates of capital cost. If we look 25 at the bullet points below, we see the second last one 102 1 says: 2 "In total, 99% of costs now firm. Fixed or 3 based on agreed rates." 4 A. Yes. 5 Q. Was that of importance to the councillors? 6 A. Yes, it was. That was -- that was extremely important 7 because we didn't want that element of surprise coming 8 in if there were millions that we didn't know about that 9 could be claimed. 10 Q. If you look at the next page, if you look at the second 11 bullet point there, we see it says: 12 "If programme and scope are adhered to by Council 13 and TIE, very limited exposure to cost overrun." 14 Again, was that something of significance to the 15 Council? 16 A. That was -- that was extremely -- significance. The 17 other aspect that was particularly significant was that 18 the risk element which you'll notice in that diagram, it 19 was quite important to us that the risks had been 20 properly quantified so that it made that -- made it more 21 likely that the project would come in in the cost sense, 22 and that that element of risk, the amount of money that 23 was laid aside for that, was adequate to cover risks 24 that could be quantified. 25 Q. This presentation we saw in the cover sheet was 103 1 October 2007. 2 A. Yes. 3 Q. Were you given any explanation as to the state of the 4 contracts at that time, how complete they were? 5 A. I can't recall what we were told at that time. 6 Q. Were these statements as to limited exposure to overrun, 7 and 99 per cent of costs formed, did you form an 8 impression of how complete the contracts were? 9 A. On that assumption I -- I'm only saying now what I think 10 I would have thought at that time with that information 11 there, which would be that that was saying that matters 12 were near finalisation, and that there were -- that 13 the -- all the financial groundwork had been -- had been 14 done. 15 But that there was always the potential that 16 something could happen that would change those figures. 17 This was the draft Final Business Case. So we knew it 18 was not the final case. 19 Q. I think what we're looking at, however, was from 20 October 2007. 21 A. Oh, right. 22 Q. If we could perhaps just look at another document for 23 completeness, it's document reference CEC01649235. 24 I think the title sheet will probably be enough here. 25 We can see that by 3 October 2007 the version 1 of the 104 1 Final Business Case had in fact been prepared? 2 A. Okay, yes. 3 Q. What I would like to do now is look at version 2, or the 4 final version of the Final Business Case, and that's 5 document reference CEC01395434. 6 We can see there the date on that is 7 7 December 2007. It's referred to as version 2? 8 A. Yes. 9 Q. Do you recall seeing this at the time? 10 A. I'm sure I would have done, yes. It's hard to say now 11 what precise documents I saw at what particular time, 12 but if that was -- yes, I would certainly have seen 13 that, yes. 14 Q. If you can take it from me, without looking through 15 every page, this is a document that's 228 pages long? 16 A. Quite possibly, yes. 17 Q. Would there have been a proper opportunity to consider 18 this before the matter came before the Council? 19 A. One of the ways that we would have informed ourselves 20 about it would be obviously we would -- we tried to read 21 everything that was given to us, but there would almost 22 certainly have been presentations to our group meetings 23 about the content of that, and explanations for anything 24 that anybody had found within it that they didn't 25 understand. 105 1 Q. Where a presentation was being provided, can you recall, 2 would that be by TIE officers or Council officers? 3 A. To the best of my recollection, Council officers gave 4 most of the presentations to us, and I don't know at 5 what stage we had representatives from TIE, but they 6 certainly were there at some points. I couldn't tell 7 you. We had so many presentations, it's impossible to 8 say at this stage who was present at what presentation, 9 but if there was anything within the document that 10 either councillors or Council officers felt that they 11 needed to get further information about, then obviously 12 that would have been sought. 13 Q. Obviously reading through a document like this takes 14 a long time. 15 A. Yes. 16 Q. Was there a temptation, rather than reading through the 17 document, to rely on what you were being told at 18 presentations? 19 A. I'm sure some people may well have merely relied on what 20 they were told at presentations. They would have looked 21 at the sort of headline case, because this would just be 22 one of many documents that we were getting on all sorts 23 of aspects of Council business at any one time. 24 I know that I certainly tried to read through 25 everything that I got, but I certainly developed a knack 106 1 for reading rather quickly, and I know that many of my 2 colleagues did the same; that they would have read it 3 very thoroughly, particularly those closely involved in 4 the Transport Committee, but any presentation should 5 certainly have -- they were quite long presentations, 6 some of these. They might last for an hour, and then 7 questions. So there was a lot of opportunity to learn 8 about it. 9 I can't guarantee that every single person read 10 every single word, but certainly it was important that, 11 as many people as possible should read it. 12 Q. I'm not going to be asking you to look at every single 13 word of it today. I just want to look at certain 14 highlights of it. 15 Before I do this, this Final Business Case came out 16 in December 2007, and that's when the Council took the 17 decision in principle to go ahead with the tram project? 18 A. Yes. 19 Q. Were you aware of any reason why that decision had to be 20 taken at that time? 21 A. Other than the fact that we obviously wanted to get 22 things going, I don't know why it was particularly on 23 that agenda. 24 I think that that was at that meeting, I might be 25 wrong, and it will be in the Council minutes, but 107 1 I think at that meeting we did give authority to the 2 Chief Executive, provided he was satisfied that 3 everything was as it should be, and that nothing had 4 changed dramatically, that we gave him the -- delegated 5 the power to him, which is a very common process. 6 Because councillors themselves are not signing up to 7 things or directing companies to do things, the 8 Chief Executive of the Council will be the one that 9 actually is the one that presses the button, as it were, 10 and he was given -- I think it was at this meeting he 11 was given -- it may have been before that meeting and 12 this was refreshing it. 13 But one way or the other, he was given the authority 14 to enter -- to tell TIE to enter into a contract, 15 because the contract was TIE and the contractor, not the 16 Council and the contractor. And so it was TIE that were 17 actually signing the contract, but the Chief Executive 18 was giving the go-ahead to that on behalf of the 19 Council. 20 But I don't know -- it's very difficult to recall at 21 this time whether there was any particular imperative at 22 that time. It may have been in the report, but 23 I don't -- I don't remember there ever being an 24 imperative saying: you must sign this today, or we are 25 going to lose the 500 million; or something like that. 108 1 I don't recall such an imperative. 2 Q. I would like to start by looking at section 6 of the 3 report, which begins on page 84 of the document. 4 We can see this is headed "Governance". 5 A. Yes. 6 Q. If we look down at the governance structure, look at the 7 second half of the page, would be the easiest. You can 8 see paragraph 6.4 is that: 9 "The structure deployed in the period to mid-2007 is 10 described in the following sections and highlights the 11 following four key bodies, the roles of which are 12 represented in figures 6.1 and 6.2." 13 We see in the bullet points we have got the TEL 14 Board, the Tram Project Board, and then two 15 sub-committees of the Tram Project Board, making up the 16 four. 17 It's apparent from that that TIE are not considered 18 one of the key bodies. Was that surprising to you, 19 standing in the history of time in this project? 20 A. Again, I'm not clear on the chronology, but at some 21 point, and it may have been by this time, but I wouldn't 22 have thought it was, but it's possible. At one stage 23 TIE was kind of amalgamated with TEL, so that TEL became 24 the main board. 25 I wouldn't have thought it was as early as this, so 109 1 I'm not sure why it's not there. 2 Q. For completeness, I should say, if we look at page 85 of 3 the following page, you can see at the foot of the page, 4 without going into the details, some consideration of 5 the TEL Board. The position of that. 6 A. Yes. 7 Q. Then if you look at the following page, page 86, at the 8 foot of that page are some consideration of the TIE 9 Board separately. 10 A. Right. 11 Q. So we have got the entities still in existence and still 12 separate, but the situation where TIE are not considered 13 one of the four key bodies implementing the project. Or 14 were not regarded as having been key even to the period 15 up to mid-2007. 16 I suppose it comes back to the question: was that 17 a surprise to you, to understand that that was how it 18 was viewed? 19 A. Looking at it now, yes, it does seem rather surprising 20 that its role is not regarded as a key one, and clearly 21 the fact that it does sound as though it was later than 22 this, that TIE sort of came under the umbrella of TEL, 23 because TIE was to deal with the contract, the actual 24 infrastructure of the tram system, and TEL the operating 25 of the system, and once the actual work had been done on 110 1 the ground, then TEL -- yes, I suppose looking at it 2 now, I probably had a greater understanding of it at the 3 time than just looking at it briefly now. 4 Q. I just want to try and establish how things stood at 5 that time. 6 If you go back to page 85, and look at the final 7 heading and final paragraph, the heading is "TEL Board", 8 and what is says in paragraph 6.8 is that the role of 9 the TEL Board was focused on its statutory stewardship 10 role and on its overall responsibility to deliver an 11 integrated tram and bus network for Edinburgh on behalf 12 of the Council. 13 Now, we see there it seems to be saying that the TEL 14 Board had the responsibility for delivering it, albeit 15 as an integrated network, including the buses? 16 A. Yes. I mean, TIE was the company that was actually 17 delivering it, and it was generally my understanding 18 that TEL was more to do with Lothian Buses and the 19 operating side of the tram system coming together. But 20 it is to deliver an integrated tram and bus -- there are 21 two readings of that. It could be that it's actually 22 meaning the delivery of the -- not the actual steel 23 rails down on the ground, but the integrated network, 24 the system -- you know, bus times and tram times and so 25 on. I don't know what my understanding of it was at the 111 1 time. 2 Q. Okay. 3 I don't intend this to be too much of a memory test 4 in that regard, but if you look at the following page, 5 page 86, at the heading at the top of the page and the 6 two paragraphs that follow it, you see the heading is 7 TPB, Tram Project Board, and paragraph 6.9 is: 8 "The TPB was established as an independent body to 9 monitor the execution of the project. In doing so, the 10 TPB followed normal best practice in project 11 management." 12 Now, that has the Tram Project Board down as being 13 something to monitor the execution of the project. Was 14 that your understanding? 15 A. Yes. As I say, I didn't receive minutes of it. 16 I wasn't very aware of what it was doing. But yes. 17 Q. If we look at the composition of it in paragraph 6.10, 18 we can see at this time that it had no elected member 19 sitting on it? 20 A. Yes, yes, that's right. 21 Q. If we go back to the full page and look at the final 22 paragraph on the page, 6.17, you can see it notes -- the 23 heading is the "TIE Board" and it says: 24 "In addition to the four primary bodies, the TIE 25 Board retained a specific role, in line with its 112 1 previous responsibilities, as follows." 2 It's firstly to apply quality assurance to the 3 execution by the Tram Project Director and their team; 4 two, to make formal funding requests to Transport 5 Scotland and be accountable for expenditure; and three, 6 to enter into contractual arrangements necessary to 7 execute the project delivery. 8 Now, with those particular responsibilities, did 9 that seem to be a stepping back for TIE to what you 10 understood their overall role to be beforehand? Quality 11 assurance, funding requests and concluding contracts. 12 A. I would have expected that, I think, to -- no, no, it 13 does say to apply the execution. 14 No, I think that's perhaps -- I thought that TIE was 15 basically the people who were dealing with the contract 16 and with the implementation of that contract. So 17 whether quality assurance to the execution by the Tram 18 Project Director and their team encompasses the sort of 19 operational side of it and making sure that the contract 20 delivered, then that would be roughly what I thought. 21 If somebody said to me what was TIE, it was set up 22 to -- initially for all sorts of different transport 23 aspects, and latterly from about 2007 it was -- its sole 24 responsibility was the tram. I would have seen that as 25 entering into contracts and ensuring that the contracts 113 1 were implemented. 2 So whether clause 1 there covers that 3 implementation, my reading of it would be that it might 4 do. But I would have certainly thought that the TIE 5 Board was ensuring that TIE was doing what it was set up 6 to do. 7 Q. If you look at page 91 of the same document, we can see 8 at the top the heading, "Governance structure 9 Construction period", and the first thing, we have now 10 got the role of the TEL and the TIE Boards. In 11 paragraph 6.32 it says: 12 "The TEL Board is focused on its overall 13 responsibility to deliver an integrated tram and bus 14 network for Edinburgh on behalf of the Council. It will 15 make formal recommendations to the Council on key 16 aspects of the project." 17 That's largely the same as we saw previously? 18 A. Yes. 19 Q. Then paragraph 6.34, you've got: 20 "The TIE Board presently comprises a group of 21 elected members and a group of independent non-executive 22 directors under the Executive Chairman. The TEL Board 23 presently comprises elected members and Council 24 officials under the non-Executive Chairman." 25 So you can see that both these bodies contain 114 1 representation by way of elected members? 2 A. Yes. 3 Q. If we then look down at paragraph 6.38 towards the foot 4 of the page, it also notes: 5 "It is also envisaged that certain of the elected 6 members of the TIE Board and its independent 7 non-executive Directors will join, if not already 8 members of the TEL Board or the Tram Project Board, 9 (including specific sub-committees) to ensure consistency 10 of approach and to utilise the relevant experience 11 productively." 12 This is essentially to merge the same people in each 13 of the three bodies? 14 A. Yes, that's what it looks like, yes. 15 Q. "The re-deployment of Elected Members and the 16 independent non-executive Directors will reflect: 17 "1. The emphasis of the TEL Board on oversight (on 18 behalf of the Council) of matters of significance to the 19 elected members in relation to project delivery and the 20 preparation for integrated operation." 21 Is that the sort of oversight you discussed with me 22 earlier when we were talking about why councillors sit 23 on arm's length bodies? 24 A. Yes. 25 Q. You have then got the second point, which is the 115 1 emphasis on the Tram Project Board on delivery of the 2 tram system to programme and budget and the preparation 3 for integrated operations. 4 That appears to be saying that it is now the Tram 5 Project Board responsible for delivery of the tram 6 system to programme and budget and the preparation of 7 integrated operations? 8 A. Yes. 9 Q. That appears to be a change, doesn't it, from the 10 responsibility that TIE might have had, to now it is 11 with the Tram Project Board? 12 A. Yes. The Tram Project Board was always important, but 13 it did not have a proper formal status when it was first 14 set up. Again, it's very difficult now to remember the 15 chronology of when different things happened, but 16 certainly at some stage, the Tram Project Board was put 17 on a sort of proper footing and I assume it must have 18 been about this time that that was the job that it was 19 always sort of set up to do, but now it was doing it -- 20 it had a formal relationship both with the Council and 21 with the other bodies. 22 Q. Leaving its status aside, what we see here is its 23 responsibility, its obligation is now the delivery of 24 the tram system to programme and budget? 25 A. Yes, although I would have expected TIE as the arm's 116 1 length company still to be at the end of the day the 2 body that was responsible for it. But that is how that 3 reads, yes. 4 Q. If we look over the page in paragraph 6.41, you can see 5 it's noted there that it's recognised that: 6 "... there is an inevitable duplication between the 7 scrutiny by the TIE Board of its executive activities 8 and the oversight role performed by the Tram Project 9 Board. However, in a large complex project, this seems 10 a worthwhile price to pay for robust governance." 11 In your view, does an overlapping of 12 responsibilities or duplication lead to robust 13 governance? 14 A. My view would generally be that the less overlapping you 15 had, the less duplication of duties, the more robust the 16 governance is. But at the time that must have appeared 17 to be a reasonable way forward, although, as I mentioned 18 much earlier, it was a very complex relationship, and 19 that was referred to in Audit Scotland reports and other 20 reviews later on. There was comment on just how complex 21 it was. 22 Q. But this was what was being served up to the councillors 23 for approval? 24 A. That was what was being presented, yes. 25 Q. If you look down the page to paragraph 6.45, this is 117 1 under the heading, "TPB and its sub-committees", you can 2 see that the TPB maintains its role as the pivotal 3 oversight body in the governance structure: 4 "The TPB is established as a formal sub-committee of 5 TEL with the full delegated authority through its 6 Operating Agreement to execute the project in line with 7 the proposed remit set out in section 6.32. In summary, 8 the TPB has full delegated authority to take the actions 9 needed to deliver the project to the agreed standards of 10 cost, programme and quality." 11 Now, I don't know if it's possible for you to cast 12 your mind back. Was it already your understanding at 13 that time that the Tram Project Board was the pivotal 14 oversight body? 15 A. I always knew it was an important body, and obviously 16 I did read these papers at the time, and so I must have 17 read that. 18 But it was not the Tram Project Board, for example, 19 that entered into the contract, and I would have thought 20 responsibility for delivery of the contract to some 21 extent must still have remained within TIE. But clearly 22 this is saying that -- I knew it was the most important 23 body, but -- and I must at the time have read this, and 24 understood it. But now, you know, looking back at it, 25 it's difficult to remember what I thought at that 118 1 particular time. 2 Q. On the one hand, as you say, you've got TIE entering 3 into the contract? 4 A. Yes. 5 Q. On the other, we are being told here that it's the Tram 6 Project Board under its agreement must execute the 7 project in line with the agreement? 8 A. Yes. 9 Q. Does that cause you any concern that one company is 10 entering into the contract and another entity is 11 actually responsible for delivery? 12 A. Yes, it does, and that reflects the confusion that 13 I always felt there was between the responsibilities of 14 all the different bodies that were involved in this. 15 And as I said earlier, I feel a simpler structure makes 16 everything considerably simpler, and so it does seem to 17 me, looking at it now -- I mean, at the time, I'm sure 18 we asked questions about it, and were, you know, 19 reassured that this was the best way to take things 20 forward, but looking at it now, and in view of 21 everything that transpired, it always did appear there 22 were an awful lot of bodies involved and it could have 23 been helpful if there had perhaps been fewer and things 24 might have been clearer. 25 Q. We have been told there that the Tram Project Board is 119 1 now to be a formal sub-committee of TEL? 2 A. Yes. This was -- this is what I was referring to about 3 how initially when it was set up, they sort of realised 4 that it actually didn't have any formal power or remit, 5 and this was the point at which -- or shortly before 6 that that it was established in a proper manner. 7 So there was a difficulty at the beginning with the 8 Tram Project Board in the way it had been set up. 9 Q. There's no statement in this document, and I don't know 10 if you're able to recall why it was therefore that the 11 Tram Project Board was set up as part of TEL and not 12 part of TIE, when it was TIE that was entered into the 13 project? 14 A. There were several papers that referred to governance, 15 and there was -- within those papers at various times, 16 there was always the view that the end result was going 17 to be that TEL, because it was going to be dealing with 18 the actual operations of the tram as part of an 19 integrated system, it was always the view that TEL would 20 be the overarching body once the project had -- actually 21 had trams running on tracks. 22 So there was always that sort of end view of TEL as 23 becoming the most important. What I don't recall now is 24 the precise chronology of when all these different 25 changes in the governance happened, but we certainly had 120 1 quite a few papers on the governance and very often they 2 referred to the complexity of it, and the fact that it 3 wasn't working -- because it was so complex, it wasn't 4 all working as smoothly as it should. 5 Q. Turn now away from the governance to issues of 6 procurement and procurement strategy, if you turn to 7 page 97 of this document, you can see we're turning to 8 section 7, with the heading, "Procurement". 9 If you go over the page to page 98, we can see just 10 before paragraph 7.10, we are moving to a section with 11 the sub-heading, "Key elements of Procurement Strategy". 12 Just for context, what I would like to look at is 13 a paragraph over the page, on page 99, paragraph 7.13. 14 We can see there it says: 15 "In summary the key attributes of the strategy ..." 16 That's the procurement strategy, and the third one 17 is: 18 "Early commencement of design by SDS." 19 I think that's system design services, an acronym 20 for that. Is that your understanding? 21 A. Yes. 22 Q. "... to reduce the scope and pricing risk of 23 infrastructure and tram vehicle bids, together with 24 a reduction in overall programme." 25 What was your understanding as a councillor as to 121 1 the importance of the design, timing of the design of 2 the project? 3 A. I thought it was important that the design should be 4 advanced far enough so that bidders putting in for the 5 infrastructure contract would know precisely what it was 6 that they were bidding for. 7 Without that design being fairly far advanced, it 8 would be difficult, I would imagine, for any company to 9 actually put in a bid. 10 At a later stage the design was moved over, was 11 novated, but at this stage my understanding was that it 12 was important to have the design fairly well advanced to 13 allow for the project to go ahead. 14 Of course, as it turned out, we found out much later 15 on that the design was -- there were a lot of queries 16 about the design and how far advanced it actually was. 17 Q. That's something I want to look at and what you were 18 told about that or not told about that in this report, 19 but we will come back to that design. 20 I ask you to look at the fourth last bullet point on 21 this list. You can see it says there: 22 "Separate procurement of utilities works to enable 23 completion of the utilities diversions before 24 commencement of infrastructure works, thus reducing risk 25 to the construction phase and avoiding the risk premiums 122 1 that would otherwise be included if this work were 2 included with the Infraco package." 3 That speaks for itself. The idea was that the 4 utility works would be done before the infrastructure 5 works commenced? 6 A. Yes. It certainly -- it was expected -- my 7 understanding of it was that the utility diversions 8 which involved the digging up of a great many streets 9 and moving pipes and cables, replacing pipes and cables, 10 would be completed before the work started because 11 clearly it would be extremely difficult for a contractor 12 coming in to a street that was full of ditches and pipes 13 and all the rest of it; and the work had to be done 14 before the tracks started to be laid because otherwise 15 it could be the case that the contractor was drilling 16 into a water pipe that should have been moved. 17 So to my mind it was very important. It was also, 18 I felt, one of the aspects of the project that had 19 potential for taking longer than they might originally 20 foresee because with a city like Edinburgh, and the 21 knowledge that we had of the lack of knowledge of where 22 pipes and cables were, it was clearly always a risk that 23 that part of the project -- it was known as the 24 MUDFA project -- could jeopardise the starting of the 25 actual contractors coming in and doing their part of the 123 1 job for the laying of the track. 2 Q. I want to look at what else this Final Business Case 3 says about those two aspects of work, the design and the 4 MUDFA, as you termed it. 5 If you could look at page 104, we can see, just over 6 halfway down the page, the heading SDS, and then further 7 down, a heading, "Introduction", and it's 8 paragraph 7.48: 9 "The commencement of design early in the procurement 10 process, followed by a novation of the contract at 11 financial close is a key element in delivering the 12 procurement strategy." 13 That reflects what you have already said to us? 14 A. Yes. 15 Q. Then in the following paragraph: 16 "Development of the design ahead of and during the 17 Infraco tender has helped to create improved scope and 18 cost certainty and is significantly reducing the overall 19 project programme and, in particular, the lead time 20 between approvals and commencement of construction. It 21 also substantially reduces the risks associated with 22 planning approvals, TROs [traffic regulation orders], NR 23 [Network Rail] and other key stakeholder interfaces. As 24 a result, the work of the SDS contractor substantially 25 reduces the risk for which the Infraco bidders would 124 1 have otherwise included significant risk pricing. This 2 is borne out by the low level of risk pricing included 3 in the Infraco and Tramco bids." 4 Again, how does that relate to what you understood 5 about to what extent the design was to be complete in 6 order to assist with accurate pricing? 7 A. I think it sort of speaks for itself really. It's 8 saying how important it was that the design and the 9 removal of the utilities should happen in good time, so 10 that it did reduce the risk that the contractor would 11 find that the streets were not ready for them to come 12 in, or they didn't know precisely what it was they were 13 supposed to be doing, where the tram stops were, for 14 example, that kind of thing. 15 Q. The final sentence of that paragraph was that this was 16 borne out by the low level of risk pricing including in 17 the Infraco and Tramco bids. 18 Were you given any information as to what the 19 approach of the bidders was to the state of the design? 20 A. Not that I can recall, because I didn't see the tender 21 documents and I didn't see what was returned as a result 22 of that. But certainly my understanding, which wasn't 23 of course what happened at the end of the day, but my 24 understanding was that the design would be well advanced 25 and the utilities work would be completed before the 125 1 contractor went on road. 2 Q. Perhaps reflecting that, we can see in paragraph 7.51, 3 further down page 105, the second half of the paragraph 4 is to the effect that the Infraco bidders had prepared 5 their bids on the basis of the emerging SDS designs: 6 "... and the successful bidder is required, 7 following a process of due diligence of the design, to 8 adopt the SDS provider's design at the date of Infraco 9 contract signature." 10 Tending to indicate that they had been provided with 11 design information? 12 A. Yes. Of emerging design information. I think at that 13 stage it would not have been complete, but it had been 14 started some considerable time before this. 15 Q. If you could look at paragraph 7.53, the heading above 16 it, the heading is "Activities under the SDS contract", 17 and what it states there is: 18 "The original assumption was that the overall design 19 work to detailed design would be 100% complete 20 when the Infraco contract is signed. Due to a number of 21 delays, largely outwith TIE's control, this is now not 22 achievable. However, by identifying key risk areas and 23 prioritising SDS activities, TIE is completing several 24 key elements of the detailed design in time to inform 25 the Infraco bids on price critical items. This has 126 1 enabled the Infraco bidders to firm up their bids, based 2 on the emerging detailed design, and thereby reduce the 3 provisional scope allowances and design risk allowances 4 that they would otherwise have included." 5 I think my first question to you, what did you 6 understand that meant? 7 A. I understood that to mean that the design work, although 8 it was hoped it would be 100 per cent complete by that 9 time, it wasn't, but there was enough there to enable 10 the bidders to work out exactly what they were bidding 11 for. 12 But it was quite clear that at this stage, it had 13 not been complete as they had hoped by this stage. It 14 had not advanced as far as it should have done. 15 I don't remember being given any kind of percentages 16 as to how much remained to be done, and of course that 17 became an area of contention, where there were questions 18 about how far the design had been progressed, but my 19 reading of this was that TIE had given enough 20 information to the bidders to -- for them to have 21 a pretty good idea of precisely what the final detailed 22 design would be. 23 Q. Did you understand that the procurement strategy of 24 getting fixed prices had nonetheless been implemented, 25 despite the fact design was not 100 per cent complete? 127 1 A. I think we knew that the design was not 100 per cent 2 complete, but I don't remember being given figures about 3 what -- how much it was complete, and how that affected 4 what the bidders bid for the project. 5 Q. Had it nonetheless been possible to implement the 6 procurement strategy of trying to get fixed prices, as 7 far as you were aware? 8 A. As far as I'm aware, that is what we were being told by 9 TIE, that they had progressed the design to a stage 10 where that was possible. 11 CHAIR OF THE INQUIRY: Mr Lake, is this a convenient moment? 12 MR LAKE: Yes, my Lord. 13 CHAIR OF THE INQUIRY: Very well. We will resume again at 14 2 o'clock. 15 (1.00 pm) 16 (The short adjournment) 17 (2.00 pm) 18 CHAIR OF THE INQUIRY: You are still under oath. 19 MR LAKE: I had just finished looking at paragraph 7.53 20 within the Final Business Case before lunch, which was 21 to do with the extent to which design had been thought 22 to be completed and was actually completed. 23 If you would like to move on now and take a little 24 look at the position recorded in the Final Business 25 Case, at the utilities works, the MUDFA contract, so 128 1 what I would like to do is look at page 109 within that 2 document. 3 We can see the heading there activities under MUDFA. 4 I'm interested in paragraph 7.78. 7.78, towards the 5 foot of the page. 6 What it says there is: 7 "The physical diversion of utilities commenced in 8 July 2007 and is scheduled to end in winter 2008. This 9 will result in the majority of utilities diversion works 10 being completed prior to commencement of on street works 11 by Infraco. This means that potential conflicts between 12 the utilities and infrastructure works will be minimised 13 and any remaining time overlap can be managed so as to 14 avoid programme conflicts on the ground." 15 If I just pause there, that was the procurement 16 strategy that you outlined before lunch? 17 A. Yes. 18 Q. Do you see, the final sentence notes that: 19 "To date work has commenced on some of the most 20 congested sections such as Leith Walk, and it is 21 expected to be complete on cost and programme." 22 Were you given any other information at the time to 23 indicate any departure from that, that it would be on 24 cost and on programme? 25 A. No. As far as I'm aware, that was the only information 129 1 I had at the time. 2 Q. Since then, have you learned information which suggests 3 that wasn't accurate? 4 A. Yes. 5 Q. That it was in fact running over budget and was quite 6 substantially behind programme? 7 A. Yes. 8 Q. I would then like to you look at page 173, please. We 9 can see here, under the heading of "Risk impact Capital 10 costs", some text in relation to the risks. If we look, 11 please, at paragraph 11.17, it says: 12 "Risks have been identified in relation to the 13 progress of detailed design and the progression of TROs 14 which could affect the overall programme. TIE have 15 mitigated these risks as follows." 16 The first is: 17 "Progress of detailed design. Through a staged 18 release of design information to Infraco bidders, the 19 project maintained the flexibility for Infraco to take 20 a greater role in design development and by applying 21 effective project and contract management to the design 22 process. Further, the acceptance of the SDS design by 23 the Infraco is dependent on the outcome of the due 24 diligence of the design." 25 My first question is: basically, did you understand 130 1 what you were being told there? 2 A. Yes. I think -- difficult to know now what I understood 3 at the time, but I felt that that was fairly 4 self-explanatory, what it was saying. 5 Q. Was there any indication within that of delays that 6 might result in the design, and the consequences of what 7 could be? 8 A. I don't think that was spelt out. 9 Q. Were you given it in any supplementary briefing? 10 A. Not that I can recall, although I do have a general 11 awareness. Whether that came later when it became clear 12 that the design had not been progressed as far as 13 perhaps we thought it had been. I don't know whether my 14 awareness of that came later or at this stage, but 15 certainly it was always pointed out to us, as along with 16 the MUDFA side of things, it was always an area where 17 there was potential for there to be difficulties. 18 Q. The risks that had been identified in relation to the 19 progress of detailed design, were they identified to 20 you? 21 A. We were -- on risk we did have quite a lot of briefings 22 about how risk had been written into the case. 23 I don't recall now precisely what information we 24 were given, but certainly we knew that that was an area 25 that -- where potentially there could be difficulties. 131 1 Q. Look, please, at page 180. If you look at 2 paragraph 11.57, there's reference there to the public 3 sector being exposed to significant but diminishing and 4 manageable risks during the remaining period of scheme 5 development: 6 "The introduction of the SDS contractor and 7 MUDFA contractor in the procurement strategy reduced 8 risk to an extent. However, as in all projects of this 9 type, the major responsibility for identifying and 10 managing potential risks during this period remained 11 with the project team and its advisers." 12 You saw that? 13 A. Yes. 14 Q. Again, this is really asking again what I have already 15 asked. Were there particular risks that were arising 16 out of the SDS contractor and MUDFA contractor spelt out 17 to you at that time? 18 A. At that time I can't be sure of precisely what was spelt 19 out, and probably my recollection of what we were told 20 was more to do with MUDFA and the fact that there might 21 be unexpected things found underground, as indeed there 22 were. 23 I don't remember getting any huge detail on what the 24 risks were associated with the design, other than the 25 fact if it was not -- if it had not reached a stage 132 1 where a contractor could put in a reasonable bid based 2 on information, other than that, I don't remember there 3 being particular issues. 4 I'm not sure whether it came under that scheme or 5 something else, but there was at one stage some 6 discussion about risks over which the Council actually 7 had some control over planning consents and that sort of 8 thing which in some way was related to design, but 9 I don't remember having, you know, a separate paper 10 actually identifying precisely what risks they were. 11 But presumably it was from this, amongst other things 12 that I was aware that there were risks involved in the 13 design and MUDFA side. 14 Q. What was your understanding of the risks that arose from 15 those areas where the Council had control, such as 16 planning approvals? 17 A. There could be delays in getting planning consent was 18 one of them. The other one was just that I think it 19 would be difficult for a contractor to put in a bid if 20 they didn't know precisely what it was that they were 21 bidding for, and therefore design would need to have 22 reached a stage where that was reasonable. 23 Q. Dealing with things like not being able to obtain 24 consent on time, would that be a matter of really the 25 Council have control and would be able to overcome that 133 1 risk by giving the consents more quickly. 2 A. The Council had some control over that. However, the 3 planning process can be quite convoluted. There may be 4 objections to certain things from the public. It may 5 have to go through the development quality sub-committee 6 at the time, Planning Committee. There are difficulties 7 in just the time it takes to do that. 8 It was -- at this stage Edinburgh did not have 9 a particularly good reputation at reaching quick 10 decisions on planning matters, which was of some concern 11 to particularly commercial developers who were wanting 12 to come into the city and it might take years before 13 they got consent. 14 So it was always a bit of an issue, but to the 15 extent that the Council was the planning authority, the 16 Council did have control over that to some extent. 17 Q. Was that a concern, if the Council had a reputation for 18 being slow in making decisions on planning, that that 19 would affect the procurement strategy for the tram? 20 A. I -- other than just that headline that planning 21 consents was part of the risk, I don't recall there 22 being particular discussion on that. 23 Q. We see under that paragraph, there's a heading, 24 "Allocation during the Construction Period". If we look 25 over the page to 11.59, there's a sub-heading, "Design", 134 1 and then it says: 2 "Changes in design which are required by the public 3 sector after signing of the Infraco contract will be at 4 the risk of the public sector. The progress of detailed 5 design has somewhat mitigated this risk." 6 Firstly, the first sentence, was there any 7 difficulty with the understanding that if there were to 8 be any changes made once the contract was signed, that 9 would be at the public expense? 10 A. No, well, it was certainly drawn to our attention. I am 11 familiar with that sentence, and the fact that if the 12 Council decided, for example -- well, for a start, the 13 tramline had been through Bills, had been through 14 Parliament, and it was very much set down. So the 15 Council couldn't suddenly decide, oh, we are going to 16 change the actual route. You know, we are going to go 17 to Little France instead of to Leith or whatever. 18 But it was -- if for any reason -- and one of the 19 examples that I'm pretty sure we were given was if there 20 was a desire, once the designs had been drawn up, if the 21 Council decided, and there certainly was discussion on 22 the location of tram -- the actual stations on the road. 23 If the Council had decided we want to have an extra five 24 stops, then that -- we were always aware that that was 25 something that the -- that would be borne by the public 135 1 sector, that you could not expect a contractor who had 2 bid for design with three stops in an area, was actually 3 being asked to provide ten stops in the area. 4 So we always knew that -- I certainly always knew 5 that that was a potential risk, but one that we -- 6 because the Council was well aware of it, certainly it 7 was not expected that it would happen. 8 I think that's fair enough. If a contractor is 9 given a design, and then that design is changed by the 10 Council, I would not expect the contractor to bear the 11 cost of that. 12 Q. No. It's noted after that, the progress of detailed 13 design has, as it is put, "somewhat mitigated" this 14 risk? 15 A. Yes. I don't know what percentage of completion there 16 was to the design at that stage, but obviously that was 17 important and I'm pretty sure that in our briefings 18 about this we would have asked, you know: how far has 19 that been progressed? In other words: how big is that 20 risk? Because "somewhat mitigated" is a little bit 21 half-hearted. 22 Q. Indeed. Were you ever given anything in writing to 23 record precisely what the position was, in terms of how 24 complete it was and to what extent that risk could and 25 would be mitigated? 136 1 A. I don't remember getting anything in writing. It's 2 possible I did, but I don't recall at this stage. 3 Q. In the following paragraph in relation to utilities, it 4 notes: 5 "As discussed above, the risk associated with 6 utilities diversion under the swept path of the tramway 7 remains with the public sector. The risk of the impact 8 of any delays caused by incomplete utility diversions at 9 the time of the commencement of onsite work by Infraco 10 will be carried by the public sector (but it is expected 11 that they will be complete in key areas)." 12 So that seems to be reinforcing the message we saw 13 earlier in this document that the utilities works were 14 on time and on budget? 15 A. Yes. 16 Q. We then look through to perhaps -- firstly go to 17 page 184. There's a heading you can see towards the top 18 of the page, "Key Milestones in Risk Management". 19 Further down the page, we can see that there's a table 20 particularly in relation to risk management solutions. 21 What I would like to do is still under that -- I won't 22 develop that. Can we go instead to page 188. 23 You see this is now section 12 under a heading of 24 "Programme summary". If you look at page 189, the 25 following page, we can see there's a sub-heading, 137 1 "Milestone summaries". Thereafter you see some tables 2 which give such summaries on this page of the business 3 case on the utilities. Do you see that? 4 A. Yes. 5 Q. What I would like to do is if we could go, please, to 6 page 191, we can see in the lower half of the page the 7 summary table in respect of design and traffic 8 regulation orders. We can see there that the date given 9 for the completion of detailed design for phase 1a is 10 6 November 2008. 11 A. Yes. 12 Q. With that in mind, I would like you to look back to the 13 draft final business case which had document reference 14 CEC01649235. 15 CEC01649235. I referred to it in the introduction 16 as the draft Final Business Case. I correct myself. 17 It's the Final Business Case Version 1 dating from 18 October 2007 that we looked at briefly this morning? 19 A. Yes. 20 Q. Now, I would like you to look at exactly the same page 21 in this document. It's page 191. This time we can see 22 the table there for the completion of the design and the 23 TROs, if you could enlarge the table. You can see there 24 that the completion for detailed design phase 1a is 25 given as 12 September 2008. Do you see that? 138 1 A. Yes. 2 Q. So in October you were actually told that the design 3 would have completed on 12 September 2008. 4 A. Yes. 5 Q. Whereas when you get to the Final Business Case, later 6 in the year, the date is already slipping. When I said 7 already, 12 September 2008 is the following year because 8 this is dating from 2007. 9 A. Which document is on screen at the moment? 10 Q. Can we go back to page 1. That's my fault. 11 This is version 1 of the Final Business Case, 12 October 2007. I'm sorry I caused confusion there. 13 Could we go back to page 191. As of October 2007, 14 you were being told that the completion of detailed 15 design would be 12 September 2008. 16 A. Yes. 17 Q. Now, when we looked at the Final Business Case, which 18 was dated December that year, just two months later, we 19 can see that the date for completion of design which we 20 referred to earlier had slipped to 6 November 2008. 21 A. Yes. 22 Q. Now, that is something that you can pick up on the 23 detailed examination comparison of the two drawings, two 24 documents. Was it explained to you at the time that the 25 design was slipping to this extent? 139 1 A. It's extremely difficult to recall now exactly what 2 I was told at the time, but certainly it was not -- it's 3 not a surprise to me. So certainly at some stage I'm 4 sure that we were told that -- we would have seen if we 5 were comparing, you know, one document to the other or 6 a Transport Convener would have seen or been told that 7 there had been that slippage. 8 So I think it's something that we probably were 9 aware of. Whether it was explicitly pointed out to us 10 and whether any reasons were given, I can't recall at 11 this time. 12 Q. It's perhaps a lot to remember going back ten years, but 13 did anyone carry out that sort of comparison at the 14 time? 15 A. We would usually -- if we were presented with a draft of 16 a Business Case, and then presented with the final one, 17 then yes, it is something that we would be -- that we 18 would be looking at. 19 I'm pretty sure that somebody within our group would 20 have noticed that. I can't say for sure, and I don't 21 know whether I noticed it, but it's not surprising that 22 there would be a difference between the two cases. 23 If we did see it, then we would have asked for an 24 explanation of it. How full an explanation we would be 25 given, I can't remember. 140 1 Q. We've established with what we were looking at this 2 morning that the completion of designs was a key part of 3 the procurement strategy. 4 A. Yes. 5 Q. If you look at this comparison, it's apparent that the 6 design is slipping. 7 A. Yes. 8 Q. And that the design would actually not be completed 9 until November 2008? 10 A. Yes. 11 Q. If councillors had the knowledge that design was 12 slipping to that extent, what effect did that have on 13 the decision to approve the Business Case and go ahead 14 with the project? 15 A. Well, what isn't apparent from this document is just how 16 much that -- we can see the time period that's slipped 17 but there's a big difference between if the design was 18 70 per cent complete on one date and 50 per cent on 19 another. 20 In some ways, if that was the final design, it might 21 just have been a small element that was holding it up. 22 So we would certainly have enquired about what that 23 meant, what that slippage meant, what was causing the 24 slippage and was it a huge element of it or a small 25 element. You know, was it 99 per cent complete on one 141 1 date and then 100 on the other, or was there a bigger 2 gap between the state of readiness. 3 There certainly isn't in this part of this document. 4 Q. Can you recall even in general terms what you were 5 informed about that issue, about design slippage and 6 what significance that might have? 7 A. No, other than the fact that I know that design slippage 8 became an issue. Exactly when it became an issue, it's 9 impossible for me to recollect that. 10 Q. If I could ask you, then, to look at the report which 11 accompanied the final business case when it went before 12 the Council. It's document CEC02083448. 13 I take it you recognise this as the report to the 14 Council for the meeting of 20 December 2007. We see the 15 purpose is down as recommending approval of the Final 16 Business Case Version 2? 17 A. That's certainly what the heading suggests, yes. 18 Q. If you look at the foot of this page, paragraph 3.2, 19 which continues on to the next page, it says that: 20 "The cost estimates for the project reflect 21 provision for evolution as the detailed design will be 22 completed in the coming months. The design is completed 23 under the Infraco contract from the point of award of 24 that contract through novation of the system design 25 services contract with Parsons Brinckerhoff to Infraco." 142 1 What did you understand it was meaning when it said 2 the cost estimates for the project reflect provision for 3 evolution? 4 A. That the -- that the costings had taken into account the 5 fact -- they would have made some estimates based on 6 what stage of completion it was and how much it was 7 reckoned it would cost, taking it to the necessary 8 stage. 9 Q. Was it trying to look ahead and trying to -- 10 A. Well, that's what that sounds like to me. They had 11 made -- that they'd made provision for the fact that the 12 design was not complete, but that they had taken into 13 account the extent to which it wasn't complete. 14 Q. If we look at paragraph 5 of this, on page 4 of the 15 document, we can see there it says that the Final 16 Business Case Version 2 is included as a background 17 paper to this report and reflects no material changes 18 since Final Business Case Version 1 in respect of, and 19 the third bullet point is the risks retained by the 20 public sector. 21 Was any significance attached to the lack of change 22 in risk on the part of the Council? 23 A. Sorry, I'm not sure what you mean by that. 24 Q. Well, this is telling us that the risks haven't changed. 25 A. Well, it's telling us that it hasn't changed in -- yes, 143 1 in respect of the amount that was retained by the public 2 sector. It's not giving an overall -- it's only 3 including certain things which reflect no material 4 changes. 5 Q. Yes. Was that something, the fact that the risk 6 retained by the public sector hadn't changed, something 7 to which any significance was attached by the 8 councillors? 9 A. Yes, clearly if that had said that the risk to the 10 public sector had increased, that would have been of 11 huge concern. So the fact that it had not changed from 12 what it was, that there was no greater a risk being 13 pushed over to the public sector, would obviously have 14 had some impact on our decisions about it. 15 Q. It may seem obvious, but why do you say an increase in 16 risk would be of huge concern to the councillors? 17 A. Because one of the whole points of the exercise, as far 18 as the Council -- as far as I was concerned, my group, 19 the Council, was concerned, was that as much risk as 20 possible should not devolve upon the public sector, that 21 what we were looking for was a fixed price contract 22 where the risks were not held by the public sector, but 23 that -- at a price, probably, but it would be reflected 24 in the price that the risk would be put over to the 25 contractor. 144 1 Q. If we could look, please, at page 7 of this document, at 2 paragraph 8.12. You can see here there's a description 3 of what would be done ultimately to enter into the 4 contracts. Is that what you have described to us 5 earlier, that the chief executive is given delegated 6 authority to decide when it's appropriate to authorise 7 TIE to enter into the contracts? 8 A. Yes. As I think I said earlier, a common practice that 9 delegation is given to a Chief Executive or a Director 10 to undertake certain -- certain actions. And with the 11 understanding that if anything has changed from the 12 situation that was in place at the time that the person 13 was given that delegated authority, that they would have 14 to come back and have that authority refreshed or 15 otherwise dealt with at another meeting. 16 So yes, that was the point at which the Council was 17 delegating the authority to the Chief Executive to tell 18 TIE that they should enter into the contracts, with the 19 certain provisos there that due diligence, et cetera. 20 Q. I think the effect of that meeting was to give the 21 authorisation to the Chief Executive to do just that. 22 In a sense to go ahead with the project? 23 A. Yes. 24 Q. It is also generally known the contracts weren't 25 ultimately signed until -- the Infraco contract wasn't 145 1 signed until May? 2 A. That's correct. 3 Q. What I would like to do is look at another report of the 4 Council from 1 May. 5 CHAIR OF THE INQUIRY: Mr Lake, may I go back to that last 6 document. 7 MR LAKE: Yes. If you go back to the report of -- it's 8 still on screen. 9 CHAIR OF THE INQUIRY: The passage you are looking at? 10 MR LAKE: At 8.12. 11 CHAIR OF THE INQUIRY: Yes. 12 Do you see that that delegates to the 13 Chief Executive the authority to permit TIE to enter 14 into the contract, but it also says that he would be 15 supported by the Directors of City Development and the 16 Director of Finance together with the Council Solicitor? 17 A. Yes. 18 CHAIR OF THE INQUIRY: It's almost the expectation that 19 these people would be involved in undertaking some sort 20 of check of the documentation before it would be 21 authorised for signature. 22 A. Yes. The expectation would be that the Chief Executive 23 might not have the necessary expertise in matters that 24 the Directors of City Development and Finance and the 25 Council Solicitor might have, and so it would be 146 1 expected that the Chief Executive would be seeking 2 advice in the same way as we as councillors sought 3 advice from Council officers, a Council officer would 4 seek advice from other relevant people. 5 In this case, that's what -- it was expected that 6 the Chief Executive would obviously, City Development, 7 Finance and the Council Solicitor were all dealing with 8 different aspects of it, but the Council Solicitor, for 9 example, would need to be advising the Chief Executive 10 that the contracts appeared to be at a suitable stage 11 for signing. City Development would be looking at the 12 sort of MUDFA and design and that kind of thing, and the 13 Director of Finance would be looking at how the 14 finances. 15 Really, to make sure that everything was as far as 16 in order as it could be. But the Chief Executive 17 himself would not be expected to have all of the 18 necessary knowledge to come to an informed decision 19 without advice from others. 20 CHAIR OF THE INQUIRY: Thank you. 21 MR LAKE: As you said, although that Council decision was 22 taken in December, final -- the contracts were -- the 23 Infraco contract was signed in May. What I want to do 24 is look at a Council meeting that took place at the 25 start of May, to see what information you were given as 147 1 to what had been going on in the meantime. 2 So could we look, please, at the document with 3 reference CEC00906940. 4 I think we can see that this is a report to the 5 whole Council for the meeting to take place on 6 1 May 2008. 7 A. Yes. 8 Q. It's headed "Edinburgh Tram - Financial Close and 9 Notification of Contract Award". 10 A. Yes. 11 Q. If we see paragraph 2.3 provides a narrative, saying 12 that negotiations have taken longer than expected due to 13 the complexity and scale of contractual and related 14 issues arising from the contract suite: 15 "There has also been a substantial amount of work 16 undertaken to minimise the Council's exposure to 17 financial risk with significant elements of risk being 18 transferred to the private sector. This has resulted in 19 95% of the combined Tramco and Infraco costs 20 being fixed with the remainder being provisional sums 21 which TIE Limited have confirmed as being adequate." 22 We can see there the figure of 95 per cent, which 23 I think you have already referred to? 24 A. Yes. 25 Q. Although we saw, I think, in the October briefing, there 148 1 was even a figure of 99 per cent? 2 A. That's right, yes, but my recollection is of that 3 95 per cent. Yes. 4 Q. So although it refers to a transfer or minimisation of 5 the Council's risk, the element that's fixed appears to 6 have dropped from 99 to 95 per cent? 7 A. Yes. The earlier figure was obviously produced before 8 a lot of the work that was undertaken since that date 9 had happened, and so this was closer to being definite 10 and final costs. 11 Q. What was your understanding of what was meant by 12 provisional sums in that passage? It's just about -- 13 A. Well, the -- my understanding of that would be that TIE 14 had made an assessment of what that 5 per cent might 15 involve, and that that had been taken account of in the 16 pricing. It was -- the crucial thing about this was the 17 fact that the Council's exposure to risk was minimised, 18 and that was something that we were particularly looking 19 for. 20 Q. In the period from the December report to this report on 21 1 May, were you aware what risks had been transferred 22 away from the public sector? 23 A. I couldn't at this stage tell you what they were, but 24 I do know that we did have briefings about the risk and 25 how it had been -- how it had been worked out. 149 1 There was definitely some information given to us. 2 I can't recall just how detailed that information was, 3 but we would have been -- I'm pretty sure we were given 4 some information about that. 5 Q. Do you know -- can you remember who gave it? 6 A. No, I can't. The most likely combination of people 7 would have been that it would be the -- well, the 8 Chief Executive is usually present at briefings. 9 Probably the Director of Finance and City Development, 10 but that's just surmising what would normally have 11 happened in those cases. 12 Q. Can I just be clear. When you say Chief Executive, is 13 that of the Council or of TIE? 14 A. I mean of the Council. 15 Q. Of the Council? 16 A. Of the Council. 17 Q. Were there any representations or explanations provided 18 directly by officers of TIE, or any of the other 19 companies? 20 A. Not as far as I can remember. There may have been -- it 21 may be that they did, but at this point I couldn't tell 22 you. 23 Q. If we could look through the same document, please, to 24 paragraph 3.4 and 3.5 on the following page. 3.4 25 records an increase in the cost, base costs going up to 150 1 508 million, whereas previously it had been 498 million. 2 Do you see that? 3 A. Yes. 4 Q. And a repetition of the fact that firm costs represent 5 95 per cent of the sum, with the remainder being 6 provisional? 7 A. Yes. 8 Q. Was your understanding that the provisional sums might 9 vary? 10 A. Yes, because they were -- they were not precisely 11 identified, then we would have assumed that TIE had 12 produced estimates that obviously in this case they say 13 they have confirmed as being adequate, but the 14 expectation from that would be that there was within 15 that a slightly unknown quantity, because that could 16 obviously vary. It was not -- they are provisional sums 17 and that could vary either way, up or down. 18 Q. Were you given any idea in what circumstances those 19 provisional sums would vary in either way? What would 20 cause them to change? 21 A. I don't know. At this point, again, it's extremely 22 difficult to remember back to, you know, which of many 23 multiple briefings we were told matters, and I can't -- 24 I couldn't, you know, say that I remember clearly what 25 the situation was regarding the risks, and whether we 151 1 were told precisely what they were. 2 My guess would be, if it followed the pattern of 3 most of the information that we were given, that we 4 would have been given some information about that, but 5 at this point I can't remember the precise detail of 6 that. 7 Q. In paragraph 3.5 we can see it records that the increase 8 in baseline aggregate costs is largely due to the 9 firming up of the provisional prices to fixed sums, 10 currency fluctuations and the crystallisation of risk 11 transfer to the private sector as described in the Final 12 Business Case. 13 What was your understanding of the risk transfer 14 that had been crystallised? What was that referring to? 15 A. Well, the fact that more of the risk had been 16 transferred. More of the risk had been transferred to 17 the contractor, which was all along we wanted the 18 Council to bear as little risk as possible. And my 19 understanding of that was that what had previously been 20 an estimate or assessment had now been firmed up. 21 Q. Presumably any reduction in risk is going to be welcome 22 to the councillors? 23 A. Yes, but it may come at a cost. But yes, we were always 24 looking for the transfer of risk being -- the risk being 25 borne by the private sector and not the public sector. 152 1 Q. All we see here is the crystallisation of risk transfer 2 to the private sector as described in the Final Business 3 Case. Do you know what that's referring to, which 4 transfer in particular it's representing? 5 A. No, again, I can't remember at this point. As you saw 6 the length of the document, it's difficult to recall 7 phrases in it now. 8 Q. Is that something that might have been covered by 9 briefings at the time? 10 A. Yes, certainly. I know that we did have quite a lot of 11 briefings where either we asked questions on risk or it 12 was brought up as a topic because it was extremely 13 important to us. 14 Q. Could we look please at the following page, page 3. At 15 paragraph 3.10. We see there that: 16 "A number of the adjustments to risk allocation are 17 positive, reflected in the reduced QRA." 18 Which is quantified risk analysis: 19 "As a result of the overlapping period of design and 20 construction, a new risk area has emerged which has been 21 the subject of extensive and difficult negotiation. 22 TIE Limited advise that the outcome is the best deal 23 that is currently available to themselves and the 24 Council. Both TIE Limited and the Council have worked 25 and will continue to work diligently to examine and 153 1 reduce this risk in practical terms." 2 I'm asking you to look back a long time once again, 3 but what was this risk that they're referring to? 4 A. I imagine from this, and I believe that it would have 5 been at the time, the fact that there was always 6 a problem. If the -- if construction was expected to 7 begin before the design was complete or -- and before 8 the utilities had all been dealt with, and those were 9 two areas that we knew there was a potential for risk. 10 And so the overlapping period of design and construction 11 by this time would have been much more clear than it had 12 been earlier when there was a hope that the design would 13 be finished by a certain date, and obviously it was not. 14 As we saw already, there was slippage between the draft 15 and Final Business Cases. The version -- two versions, 16 1 and 2. 17 Q. Although we're told here about the overlapping period in 18 design and construction, it's as a result of that that 19 there is a new risk area, but there's not a statement 20 here of what that risk area is. Were you told that at 21 the time? 22 A. I'm -- we probably were. I think we would have wanted 23 to know precisely what that risk area was, but looking 24 at it now, my assumption would be that it is that 25 problem that you cannot start the construction if the 154 1 design is not complete. 2 Q. We see the reference to a deal being done which is 3 considered to be the best currently available. Were you 4 told the details of the deal, can you recall, or was it 5 just left that you were to take it that it was the best 6 that could be done? 7 A. As far as I'm aware. It's possible we had more 8 information, but I suspect it was probably just that 9 headline view that the -- that the best deal had been 10 done, and obviously that's what we as a Council were 11 looking for. 12 I don't remember the actual detail of what that 13 deal -- what it was, but we had to -- the only way that 14 you can operate as a councillor is to look at the 15 information that's being provided by the Council and TIE 16 in this case, and at this point there was -- I think 17 I could say that at this point there was trust between 18 the Council and TIE and councillors; and so if TIE were 19 telling us that it was the best deal and TIE and the 20 Council were working to continue to work on the risk 21 aspects, then we would have accepted that, although 22 probably after asking further questions about it. 23 But we reach decisions as councillors on the basis 24 of our reading of the information and reports that are 25 put before us, and we have to make a value judgment 155 1 about whether everything in reports is to be trusted and 2 ask further questions, but all the decisions that we 3 took on the tram project, which are detailed in the 4 Council minutes, were taken as a result of deliberation 5 on the contents of reports and the view that we came to 6 that the information that we had been given was adequate 7 for us to reach the decision that we did. 8 So it's difficult at this point in time to be able 9 to say precisely what I asked, you know, nine, ten years 10 ago or what anybody in my group asked at that time, but 11 the net conclusion of what we asked and the answers we 12 were given and the reports we were given was that it 13 warranted whatever decision we took as a Council. 14 Most of the decisions on the tram were taken by 15 a big majority of councillors in all but one party. 16 Q. There does seem to be a pattern that the reports don't 17 give a complete information of the basis -- complete 18 picture of the basis on which decisions were taken, 19 because there's always supplementary information by the 20 way of briefings or presentations or otherwise, and then 21 the question would be: who had what information when 22 they were making their decision? 23 A. Yes. I think if every paragraph in -- this was what, 24 180-odd page report. If every paragraph was elaborated 25 upon, it would just be absolutely impossible. So you 156 1 have to, you know, read it, and where you think you need 2 further information to actually reach a conclusion, then 3 we would ask for it. But I think to incorporate all the 4 detail in reports would just be -- it would be 5 impossible. 6 As councillors, we rely on the knowledge and 7 expertise of Council officers and in this case TIE as 8 the arm's length company which had been -- it had been 9 decided was the best way to deliver a transport 10 strategy. You had to a large extent, obviously not 11 without question, but to a large extent you had to 12 believe that what they were telling you was the 13 situation, the correct situation. 14 Q. Just while we are still on this page, for completeness, 15 we can see paragraph 3.9, notes that the quantified risk 16 analysis has reduced from GBP4.9 million to 32 -- 17 GBP49 million to GBP32 million. 18 A. Yes. 19 Q. Just for completeness, I should say that although, if we 20 look at the next page, while we certainly have looked at 21 some very long reports, we can see that this one 22 finishes on page 4. This one was a bit shorter. 23 I'm concerned when you refer to this being hundreds 24 of pages, you were mixing this up with an earlier 25 report? 157 1 A. Right. No, I thought you were referring to -- no, 2 I thought you were referring to the Final or Draft 3 Business Cases, yes. 4 Q. Okay. That was on 1 May. I would like to look at 5 another May Council document, please. Could we look at 6 the document USB00000357. We can see that this is 7 a report to the Policy and Strategy Committee for 8 a meeting on 13 May, and it's entitled "Edinburgh Tram - 9 Financial Close and Notification of Contract Award"? 10 A. Yes. 11 Q. I think you were at that time on the Policy and Strategy 12 Committee, and in fact chaired this meeting; is that 13 correct? 14 A. Yes. 15 Q. If we go to the final page of this, page 3 of this 16 document, we can see it's been signed by Tom Aitchison, 17 the Chief Executive of the Council; it is dated 18 13 May 2008, the day the meeting was due to take place? 19 A. Yes. 20 Q. Was that unusual to get information that last minute? 21 A. Referring to the first page of that document, you'll 22 notice that it's numbered B1, I think. 23 Q. Go back to page 1? 24 A. And has "not for publication" printed on it. So that 25 item was done -- was deliberated upon behind closed 158 1 doors. It was a B agenda item, where anybody other than 2 councillors and relevant officers are excluded from the 3 meeting, and so the item would be signed on that day. 4 However, that's not to say that we would not have 5 had notice of what was -- of what was coming up. But it 6 was not published for wide public availability before 7 the meeting. And so that's why it would be signed on 8 the day of the meeting. 9 Q. I see. To understand the purpose of this report, if you 10 look at paragraph 2.2, it notes that: 11 "While the contracts are now almost concluded and 12 ready for signature, the final terms differ from those 13 anticipated in my report to the Council on 1 May, with 14 the estimated capital cost for phase 1a now standing at 15 512 million, with a further contingent payment of 16 3.2 million due if phase 1b is not built, although this 17 remains well within the available funding of 18 545 million." 19 So we see that last time it was 508 and it's 20 increased to 512? 21 A. Yes. 22 Q. Paragraph 2.4 notes that there have been some further 23 changes to the commercial position of the consortium 24 following the publication of previous reports to 25 Council: 159 1 "For this reason, details of the revised final 2 position will not be released until contract closure is 3 achieved." 4 Now, does this refer back to the confidentiality 5 issues we have discussed earlier, this indication that 6 certainly Mr Aitchison considers there's been some 7 detriment as a result of the release of information? 8 A. Yes. This is the sort of issue that was sort of 9 shrouded in commercial confidentiality, where we were 10 told we could not have all the information that we might 11 have asked for. 12 Q. It seems to me from this that Mr Aitchison believes that 13 as a result of something being told to the Council 14 earlier, it's been leaked to the consortium and they 15 have changed their position accordingly? 16 A. It could be read that way, or it could just be that 17 there have been changes following the publication. It 18 wasn't necessarily that the commercial position had 19 changed because of the publication, would be the way 20 I read that. 21 Q. Okay. 22 A. He could have meant either. It is somewhat ambiguous. 23 Q. Could you look over the page, please, page 2 at 24 paragraph 2.9. Perhaps easiest to read the whole: 25 "Following the introduction by Bilfinger Berger 160 1 Siemens of additional cost pressures late in the due 2 diligence process, TIE Limited held negotiations with 3 BBS to substantiate its requests for contract price 4 increases and to seek to limit the increase. To help 5 reduce the risk of programme delays, the price increase 6 agreed will be paid as a series of incentivisation 7 bonuses over the life of the contract on achievement of 8 the specified milestones. This approach should minimise 9 the risk to businesses and residents of Edinburgh of 10 delays to the agreed programme of works. These changes 11 increase costs by 4 million to 512 million, but have 12 corresponding advantages of further transferring risks 13 to the private sector. In addition, part of the package 14 negotiated entitles BBS to an additional payment of 15 GBP3.2 million, should the Council decide not to 16 construct phase 1b of the project." 17 Now, we see there a reference to transfer of risk to 18 the private sector. That's something presumably that 19 would be welcome for all the reasons already outlined? 20 A. Yes. 21 Q. Were you given any indication of what risks had been 22 transferred? 23 A. I'm sure we probably were in briefings behind the 24 scenes, but if it's not in this report, then that would 25 be how we would have been informed of that. But 161 1 certainly we did ask a lot of questions about -- about 2 risk, both when we had presentations to our group, 3 and I know that our councillors involved, our Finance 4 and Transport Conveners would follow that up themselves 5 and find out more information about that. Because we 6 certainly were always aware that -- of the -- that 7 difficult area of risk and the fact that we did want to 8 transfer it, but that sometimes transferring risk 9 increases a cost, although the end result may be 10 favourable, but you don't necessarily transfer risk 11 without it adding into a price. It doesn't necessarily 12 mean that you reduce the risk of sort of X pounds. You 13 may have to pay X minus pounds in order to achieve that 14 transfer. 15 Q. Perhaps for completeness I should refer you also to 16 paragraph 2.12 further down the page. Sorry, my fault. 17 2.11, please. 18 "In return for the financial amendments, TIE has 19 secured a range of improvements to the contract terms 20 and risk profile. Currently these areas are regarded as 21 highly confidential but, subsequent to contract close, 22 a more detailed report will be submitted to the Tram 23 Sub-Committee." 24 So it seems that the intention was that little 25 information would be provided to the councillors on the 162 1 date of this hearing, 13 May meeting? 2 A. Yes. Again, this is an example of where we were not 3 given information because we were informed it was highly 4 confidential. 5 Q. But paragraph 2.8 on that page summarises the report 6 that was given on 1 May, that the contract sum was 7 508 million with a quantified risk allowance of 8 32 million. 9 A. Yes. 10 Q. Were you aware whether or not there was any reduction 11 made to that quantified risk allowance as a result of 12 what was said to be the transfer of risk at the last 13 minute here? 14 A. I can't remember, if it's not in this paper or in one of 15 the other papers, I can't remember now what was in what 16 report. 17 Q. There's certainly no indication in this report of 18 a decrease of the QRA? 19 A. Yes, unless it -- if -- I'll take your word for it that 20 it isn't elsewhere in this report, because that is not 21 saying that the situation is the same or has changed. 22 Q. It's a long time ago. Once again, was there any sort of 23 discussion of that issue at the time? 24 A. There certainly would -- I'm sure there would have been, 25 but to recall that discussion is really impossible. 163 1 I just could not honestly say we did -- we did discuss 2 it or on what day we discussed it or who was there, but 3 yes, we certainly did not just accept at face value 4 reports that were presented to us. 5 Q. I'm finished with that document now. I would like to go 6 to a different one which has the reference CEC01397538. 7 This we can see, just an email from Alan Coyle to 8 Andrew Holmes and Donald McGougan, copied to various 9 others. I don't know if you recognise those names as 10 being officers within the Council? 11 A. Yes, most of the names I recognise. A couple I don't. 12 Q. You're not named anywhere on this? 13 A. No, none of those are councillors. 14 Q. But it clearly has an attachment, Directors draft 15 Briefing Note, and I would like you to look at another 16 document with the reference CEC01397539. 17 Take it that this is the attachment to the document 18 which we've just seen. If we look at paragraph 3.2 on 19 the second page, 3.2 and 3.3, if we take it in at the 20 same time, we can see that it's noted: 21 "It is currently unclear to the Council as to the 22 scope of the works, the timescale of the project and the 23 allowance for incomplete detailed design and implication 24 for gaining approved designs. All of the above can have 25 potential impacts of time and costs and under this form 164 1 of contract, potential major cost implications because 2 of delay and disruption to the position at final close." 3 Is that information that was given to you round 4 about the time that you were taking the December 5 decision? 6 A. No, the first that I saw of this document was in the 7 bundle of documents that was sent to me for this 8 Inquiry. I had not seen this document and I don't 9 remember having any discussion about the issues in it. 10 Q. I think I may not have mentioned, but the covering email 11 was dated 3 December, shortly before the matters came to 12 the Council for decision. Would this have been material 13 information to the councillors making their decisions? 14 A. Yes. There are several documents within the bundle of 15 documents prepared for the Inquiry where there was 16 information that it would have been helpful, if not 17 essential, to have had at the time, where there were 18 questions raised that cast serious doubt on the validity 19 of some of the information that we were being given, and 20 this is an example of this, where we were being informed 21 that something was a situation, and it does appear that 22 there were people within the Council who had doubts 23 about the veracity of some of the information we were 24 being given as councillors. 25 Q. That paragraph 3.2 refers to incomplete detailed design. 165 1 If we read on to 3.3, it notes: 2 "This form of contract was adopted 'fixed price' on 3 the basis of complete approved designs however, as 4 this is not where we are, this current position requires 5 to be reflected in the QRA and contingency allowance." 6 Again, is that something that would have been 7 material to your deliberations in the Council? 8 A. Yes, but I think in one of the documents that came up on 9 screen, we were aware that the designs were not 10 complete, and that there had been an estimate put in. 11 But I think this is laying it out rather more 12 clearly than it was within the documents that we were 13 actually presented with as councillors. But we did know 14 that the designs were not complete. How far incomplete 15 we didn't know. 16 Q. If you could look over the page to paragraph 4.1. It 17 notes there: 18 "The current risk allowance stands at GBP49 million. 19 This figure drops to GBP34 million following financial 20 close due to a number of risks being closed out at that 21 point. This reduction is subject to a number of 22 caveats, not least a 100 per cent fixed price contract 23 being in place at the contract close. CEC have not seen 24 the re-run QRA to demonstrate the reasons for the figure 25 decreasing and the risks excluded. This information has 166 1 been requested from TIE, as clearly there must have been 2 some changes due to commercial reasons on the 3 498 million and the risk allowance through negotiations 4 with Bilfinger Berger Siemens." 5 So we can see here that the Council appear to be 6 having some difficulty getting information from TIE to 7 substantiate the figures? 8 A. Yes, but this was something at the time that I was not 9 aware of, that there was that difficulty that the 10 Council was having in getting information from TIE. 11 Q. Again, would that be material to your deliberations as 12 councillors? 13 A. Yes, it would have been. 14 Q. There's a reference there to the contract would have to 15 be 100 per cent fixed price for that risk figure. Could 16 we look, please, at paragraph 7.3 on the following page. 17 It notes that the Council have always sought TIE to 18 procure a fixed price contract: 19 "Inevitably, the absolute fixing of the price by BBS 20 would require finalised approved drawings. For whatever 21 reason, TIE and SDS have failed to obtain approvals for 22 the drawings to date." 23 You have always said that you were aware that there 24 was not 100 per cent completed detailed design? 25 A. Yes. 167 1 Q. Was it discussed with you the effect that that would 2 have on the extent to which the contract was a fixed 3 price contract? 4 A. To the extent that if the design was changed by the 5 Council as I referred earlier, if, for example, they 6 added things in to the design that were not there 7 originally, then we were very aware of that. 8 But I don't think we realised the extent to which 9 the price would only be a fixed price if the designs 10 were 100 per cent complete and with the different 11 consents in place. 12 Q. Would it have made a difference to know that? 13 A. Yes, it would. 14 Q. What difference? 15 A. It's difficult to say now what difference it would have 16 made, but we would clearly have raised questions about 17 how you could have a fixed price contract when that was 18 based on complete finalised approved drawings and they 19 didn't have that. 20 Q. I want to turn to a different matter now. I have 21 finished with that document. 22 As you say in your statement, a dispute -- 23 CHAIR OF THE INQUIRY: Sorry, Mr Lake. Can we go back to 24 that document, please. At the passage where we saw that 25 the Council had been trying to get information from TIE, 168 1 and that hadn't been forthcoming, you said that you 2 weren't aware of that. 3 If you had been aware of that as a councillor, what 4 could the Council have done in relation to TIE? 5 A. I think if we were aware that Council officers were 6 having difficulty in getting information from TIE, 7 I think that would have raised serious warning signals 8 that possibly the information that we were getting, 9 which was based on what officials were getting from TIE, 10 might not have been as accurate as it should have been. 11 So as I say, this document was one that I didn't see 12 until I got the bundle of documents of productions for 13 the Inquiry, and it was not clear to me -- I never got 14 the impression at this point that the Council was having 15 any difficulty working with TIE. 16 CHAIR OF THE INQUIRY: Thank you. 17 MR LAKE: I now move on to the matter you explain in your 18 statement that you became aware in February 2009 that 19 a dispute emerged between TIE and the consortium in 20 relation to the works on Princes Street. 21 A. Yes. 22 Q. What was your reaction to the fact that a dispute had 23 arisen at that stage in the contract? A dispute that 24 stopped works? 25 A. Obviously it was extremely disappointing that we had 169 1 that problem, and throughout the project, at any time 2 that there was that sort of issue arising, it was -- 3 clearly the initial reaction was one of great 4 disappointment. 5 It was quite difficult to establish exactly what the 6 reason for it was, because we were being told one thing 7 by TIE, and the information from elsewhere seemed to 8 be -- seemed to be rather different. 9 Q. What did you as councillor -- yourself individually or 10 councillors generally want to see happen in relation to 11 that once the dispute arose? 12 A. Wanted to see it sorted out so that TIE and the 13 contractor were working side by side to deliver the tram 14 project. And this was very early on to find that there 15 was a major issue, that we were told by TIE, I think 16 possibly at that stage we actually had a briefing from 17 TIE. I might be wrong, but I think at that stage 18 Richard Jeffrey was probably Chief Executive of TIE. 19 Q. I think he hadn't come in just by that time, to be fair. 20 I think he was later? 21 A. I know that we did have a briefing, and I can't remember 22 whether it was a full group briefing or whether it was 23 a smaller number of people. But we certainly did have 24 TIE telling us that the story that we were told was that 25 the contractor was refusing -- well, we were told two 170 1 things. We were told the contractor was refusing to go 2 on to Princes Street on the one hand, and then we also 3 heard, from other sources, about the same time, that 4 they had been directed not to go on to Princes Street. 5 So I was never quite sure exactly where the truth 6 lay in that, but we were certainly informed by TIE that 7 there was a standoff and that the contractor was 8 demanding more money, which immediately called into 9 question just how much of a fixed cost contract it was. 10 At the end of the day, of course, the contractor was 11 due more money. There was an agreement reached whereby 12 the contractor was awarded considerably more for the 13 works on Princes Street. 14 My understanding at the time was that on the one 15 hand TIE saying that they were basically just refusing 16 to go on because they wanted more money, but we also, 17 I think it was about this time that I had a meeting with 18 Richard Walker of Bilfinger -- I think it was Bilfinger 19 Berger, and basically saying that this was not the first 20 dispute, and that the street was not ready for them. 21 That they could not go in. 22 So that was the sort of information we were given at 23 the time. 24 The net result as far as we were concerned was that 25 it was extremely disappointing because we wanted to see 171 1 work going ahead on Princes Street. 2 Q. It was also a very public drawing to a halt of the 3 project at that time? 4 A. Extremely public because all the Traffic Regulation 5 Orders were in place to enable the contractor to go on 6 to site, and that couldn't be stopped. So we had the 7 traffic to a standstill, and nothing being done. 8 Later on, of course, this also came to a situation 9 where all over Edinburgh there were sites which had been 10 sort of work started on them and then work stopped on 11 them. 12 So it was -- of course at that stage, in the Princes 13 Street situation, we didn't know that this was going to 14 be something that was going to escalate considerably. 15 We thought that was bad enough. 16 Q. Just as you were at the time facing the Princes Street 17 situation in 2009, the very fact it was such a public 18 problem, did that create pressure to get something done 19 about it and done quickly? 20 A. All along, as councillors, we were saying we want 21 something happening and we want it happening quickly. 22 This must be sorted out. That was -- 23 Q. Who are you saying that to? 24 A. To the -- probably largely to the Chief Executive who 25 would -- was discussing matters with TIE, and when -- if 172 1 TIE were at meetings, then we would certainly have been 2 telling them the same thing, that we needed to get this 3 sorted out. 4 Q. Just be clear. When you say Chief Executive, you 5 mean -- 6 A. Of the Council, yes. 7 Q. So the councillors were telling the Chief Executive of 8 the Council that this was of concern to them and it had 9 to be sorted? 10 A. Yes. I think it was obvious to anybody who was in 11 Edinburgh that something needed to happen. 12 Q. You have mentioned that a supplementary agreement was 13 entered into between TIE and the consortium in relation 14 to the Princes Street works? 15 A. Yes. 16 Q. Could you look, please, at a report to the Council in 17 respect of this. It's document reference CEC02083772. 18 We can see the purpose of the report is given in 19 paragraph 1.1. Just to update the Council on progress 20 that has been made on the Tram Network. The report also 21 addresses the funding position in relation to phase 1a 22 of the Edinburgh Tram Network, the impact of the Princes 23 Street traffic diversions and the issues surrounding the 24 development of phase 1b of the ETN and the appointment 25 of the new Chief Executive of TIE Limited. 173 1 A. Yes. 2 Q. If you go to the second page of this, under the heading, 3 "Relationships with BSC", there's paragraph 3.3. You 4 see: 5 "Following the commercial difficulties experienced 6 between TIE Limited and BSC in Princes Street, 7 a supplementary agreement has been entered into between 8 TIE Limited and BSC to allow progression of principles 9 street infrastructure works on demonstrable cost. This 10 allows the contractor to be paid on this basis for 11 Princes Street works only, should they discover 12 unforeseen ground conditions. This represents no 13 further transfer of risk to the public sector." 14 A. Yes. 15 Q. Now, did you understand the expression "demonstrable 16 cost"? 17 A. I took that to mean that they would have to explain to 18 TIE what it was that was -- that they required extra 19 money for. 20 Q. But if they did incur extra money, they would be able to 21 be paid it by TIE? 22 A. Because they had reached this agreement. 23 Q. You were then told this represents no further transfer 24 of risk to the public sector? 25 A. Yes. 174 1 Q. What, if anything, did you take from that? 2 A. As it stands, that the Council would not be called upon 3 to pay this money, that it was within the bounds of 4 the -- well, from a financial point of view, that it was 5 within the bounds of the 545 million, and that the -- 6 that it would be contained within the agreement, that 7 TIE would not be -- that it was contained within the 8 supplementary agreement that the risk would not be paid 9 for by the public sector. 10 Q. So did you expect the cost to TIE and the Council to 11 increase as a result of that agreement? 12 A. This was probably the first obvious instance where what 13 we had been sold and which was repeatedly long after 14 this time referred to as a fixed price contract, it made 15 it pretty obvious that it couldn't be as fixed a cost as 16 we had been led to believe, because of the extra money 17 that in this instance was -- TIE agreed that the 18 contractor was due. 19 Q. We've already seen that the Infraco contract itself was 20 described to you as one that was fixed price. Or at 21 least 95 per cent fixed? 22 A. Yes. 23 Q. Then in relation to this Princes Street supplementary 24 agreement, you are being told it represents no further 25 transfer of risk to the public sector. 175 1 A. Yes. 2 Q. Were additional sums found to be payable under the 3 Princes Street supplementary agreement, do you know? 4 A. Yes, the cost of the work being done on Princes Street 5 was much greater than TIE had allowed for. I can't at 6 this point remember the exact sums, but there were all 7 sorts of figures being bandied around at the time and 8 I don't know what the final cost was, but we had 9 everything from -- in the press saying that it was going 10 to be 80 million more, somebody was quoting, and we had 11 the contractor saying they'd never ask for that much. 12 There was a lot of dispute about how much it was, 13 but it was perfectly clear that more was being paid than 14 had been allowed for by TIE for that part of the 15 project. 16 Q. It's a matter of detail, so you may not be able to 17 comment, but can you recall how ground conditions were 18 dealt with in terms of the Infraco agreement itself? 19 A. No. 20 Q. Is that too much detail? 21 A. No, I don't. 22 Q. If we could go back to your statement, which was 23 document TRI00000019_C, and page 132, paragraph 503 of 24 your statement in this regard. In the second half of 25 this, this is in relation to Princes Street, you say: 176 1 "I received a lot of correspondence from interested 2 parties in the city saying how important it was to have 3 a quick settlement. That included a phone call I had 4 from the Scottish Transport Minister, Stewart Stevenson 5 MSP who said that he would be very uncomfortable if we 6 got no more than a few holes in the ground and that the 7 quicker things got sorted out the better. That would 8 have been around February or March 2009." 9 Were you surprised to get a phone call from the 10 Transport Minister regarding this? 11 A. Not really, because it was so obvious that things were 12 not happening, and I had fairly reasonable sort of 13 regular contact from Stewart Stevenson on various 14 matters. I was called down to his office to discuss 15 things a few times, and it -- I think what surprised me 16 about this one was that he actually phoned me at home, 17 which I found a bit surprising, but I'm pretty sure that 18 was the occasion when he did, and clearly it was of 19 great importance to the Scottish Transport Minister and 20 the other Ministers that things could get moving. 21 He would know that the Council was doing as best it 22 could to get things moving, but he was just adding his 23 voice to the many people who were letting us know what 24 they thought about the city being disrupted with no 25 apparent work being done on that section. 177 1 Q. Was that the first time he had phoned you regarding the 2 project? 3 A. I can't be sure of that. I did certainly have a few 4 phone calls. As I say, I had quite a few meetings with 5 him, but it could have been -- it might have been the 6 first time. I can't remember. 7 Q. Is it fair to say he was seeking to influence you in the 8 way that the Council dealt with this situation that had 9 developed? 10 A. No, I think if anything he was just really adding his 11 voice and saying: look, you know, we're aware of the 12 situation, and we didn't give GBP500 million for a few 13 holes in the ground. 14 Throughout the whole course of this, I was told many 15 times by the Transport Minister, by the First Minister, 16 by the Minister for Finance, that it was, as we knew, it 17 was GBP500 million and no more because the SNP group had 18 gone into the 2007 election on an anti-tram agenda and 19 because of the make-up of the Parliament, it had gone 20 through. So they were very keen to make sure that the 21 Council was always aware that we couldn't go and ask for 22 more money. 23 So I was not really surprised because it was so 24 obvious what was happening, and I think it was -- in 25 a way it was quite helpful to know that, you know, he 178 1 saw that the sooner we got things sorted out, the 2 better, which was always the Council's view on this. 3 Q. The Government and Transport Scotland had made it plain 4 that their contribution was capped at GBP500 million? 5 A. Yes, it was, but the GBP500 million was in order to 6 fulfil the reason that the grant had been given in the 7 first place, which was to have a working tram in 8 Edinburgh. 9 So they certainly still retained an interest in that 10 money, and if they thought that the money was not doing 11 what it was supposed to do, then clearly they retained 12 a very strong interest in it. 13 I think one of the reasons that there was some 14 feeling that perhaps the SNP Government thought that the 15 tram was maybe not the best of projects was that 16 geographically, I think, many of them felt that the 17 north east of Scotland could have used money that 18 perhaps Edinburgh had been given. I think there was, 19 you know, a little bit of a sub-agenda there. 20 But as a result of that, they were very keen, as we 21 all were, to make sure that the money was put to the use 22 for which it was intended. 23 CHAIR OF THE INQUIRY: In his phone call to you did the 24 Transport Minister make any constructive offer of help 25 by suggesting that Transport Scotland officials might be 179 1 available to come back into the project? 2 A. As far as I can recall, Stewart Stevenson never made 3 that suggestion to me. I don't think he was providing 4 any suggestion as to what we should do about it, but 5 just that we should exercise all efforts to make sure 6 that the impasse was broken. 7 MR LAKE: I want to turn then, and finish with that 8 document, to some of the later disputes that arose. 9 You refer in your statement to being given briefings 10 regarding the dispute resolution procedures that were 11 undertaken -- 12 A. Yes. 13 Q. -- with a positive message. Who would be giving you 14 those briefings? Can you recall? 15 A. Some of them certainly involved the Council's legal 16 people. I don't remember whether TIE were present at 17 these. The Director of Finance and the Council's 18 Chief Executive would almost certainly have been there. 19 The dispute resolution process was an area where we 20 were continually told that commercial confidentiality 21 meant that we could not be given full details. 22 Q. In your statement -- I do not know if it's necessary to 23 go to it, let me know if you would like to -- at 24 paragraph 441, you say: 25 "From the time I first heard about DRP being used, 180 1 the message directly from TIE at briefings was positive. 2 The message from TIE and probably from Council officers 3 as well was that the majority of disputes had been or 4 would be decided in their favour." 5 A. Yes. 6 Q. Now, who in TIE was giving you that briefing, do you 7 recall? 8 A. It would almost certainly have been the Chief Executive 9 of TIE. I don't remember many of the other officers of 10 TIE coming along to meetings. It was usually the 11 Chief Executive who would appear if there was 12 representation from TIE at a briefing. 13 Q. If the Council officers are giving you briefings, were 14 they adding anything to what TIE said, an independent 15 view or were they just repeating TIE's view? 16 A. Not that -- I can't remember them differentiating 17 between what they thought and what TIE thought, because 18 they were presumably getting their information about 19 this from TIE. 20 And certainly because we were merely given very much 21 sort of top information about it, rather than going down 22 into the detail of it, my main recollection of it is we 23 were told how the dispute resolution process worked, 24 that there would be, as you would expect, internal 25 attempts to sort out any difficulty, and that the 181 1 dispute resolution process proper, as it were, where 2 there was external adjudication of issues, was only 3 brought in as a last resort. 4 So we were given information about how it worked and 5 that it was laid down in the contract as to how this 6 worked. 7 We were told that we could not be informed about the 8 precise detail of any of it and that we should not get 9 that information from the other side as well, that they 10 were both bound by commercial -- the confidentiality 11 clause within the contract regarding disputes. 12 Q. If you had been given information that was quite 13 positive about these processes, were you given any 14 indication whether that was the view of the officers 15 within TIE or whether it was the legal advice that they 16 were getting? 17 A. I'm not sure about that; but I believe that they were 18 being advised by a company about this, by DLA Piper, 19 I think is my understanding, that they were getting 20 advice from them. 21 Now, whether -- but presumably when we were getting 22 the message that disputes were being decided in their 23 favour, those must have been matters that had gone to 24 external independent adjudication. So that would have 25 been what they were informing us was what -- how they 182 1 read the situation. 2 Q. Were you privy or were you given copies of any legal 3 advice regarding or informing you of what the outcome of 4 the various dispute resolution procedures were? 5 A. I don't remember ever getting any detailed advice 6 because of the fact that we were told that we couldn't. 7 But -- so my recollection of it is just a kind of 8 general one that we were being told. It was referred to 9 very much in terms of winning and losing. And that they 10 were winning and the other side was losing, was how it 11 was described to us. 12 Q. Were you aware that Council officers had actually 13 instructed another firm of solicitors to consider the 14 review of the DRP provided by TIE's solicitors, DLA? 15 A. At some point I became aware of that. How and when in 16 the procedure it was, I don't know because I know there 17 came a point where the Council was getting advice from 18 the same firm that was giving advice to TIE, and I think 19 because there was perhaps this filtering out of 20 information, that maybe it wasn't all going as clearly 21 in TIE's favour as TIE were telling us, I think it would 22 make a great deal of sense that the Council should get 23 some objective opinion of their own on it because up 24 until -- at one point DLA Piper, I believe, I was never 25 heavily involved in that area of things, but as far as 183 1 I know, they were giving advice to the Council as well 2 as to TIE, and that was fine when we were being told, 3 you know, we were basically the same thing. We were 4 standing side by side. We were -- what was said to TIE 5 could be said to the Council and there was no 6 differentiation, but there did come a point, when 7 I think it must have become clear that it would make 8 sense to get another view of the dispute process. 9 CHAIR OF THE INQUIRY: Mr Lake, is this a convenient point 10 for a break? 11 MR LAKE: Yes, my Lord. 12 CHAIR OF THE INQUIRY: I just wondered if it's appropriate 13 to have a break or if you've got much longer? 14 MR LAKE: I've got a bit further to go with this witness. 15 CHAIR OF THE INQUIRY: Very well. We'll break until 3.40. 16 (3.24 pm) 17 (A short break) 18 (3.40 pm) 19 MR LAKE: I would like to move forward in time from Princes 20 Street and the various disputes to November 2010, at 21 which time you proposed an emergency motion to the 22 Council in relation to get the matter to mediation. 23 A. Yes. 24 Q. Could I take a look at a copy of your motion, please. 25 It's document reference CEC02083139. We can see here 184 1 these are the minutes, I should say, of the meeting on 2 18 November 2010, and if we could jump forward to 3 page 21. We can see that the item here was tram project 4 mediation, and it's the motion that you made. 5 A. Yes. 6 Q. We can see the motion is put down by you that the 7 Council was to note the three matters in the five 8 paragraphs, to instruct the Chief Executive to continue 9 to make preparations with TIE and BSC for mediation and 10 other dispute resolution process and to request the 11 Chief Executive to report back on the matter. 12 A. Yes. 13 Q. You wanted to move the matter as fast as possible 14 towards mediation; is that correct? 15 A. Yes, it may not seem very fast really because we'd been 16 undergoing all the difficulties for some considerable 17 time before that, but everything else seemed to have 18 reached a dead end and the idea of a sort of formal 19 professional mediation being conducted had been raised 20 with me by various members of the public and 21 professional people, and by this stage it was quite 22 clear that we had this horrendous impasse where nothing 23 was happening, the city was dug up, and looked 24 a complete and utter mess, and it seemed this was very 25 much a last resort. The dispute resolution process had 185 1 done its bit, but there now had to be something done 2 that was actually going to, in the crudest of terms, 3 knock heads together and get things moving. 4 Q. This was you leading the Council to provide direction as 5 to what should happen? 6 A. Yes. I mean, this had -- I did discuss this with -- 7 obviously with my group, with other people. So when it 8 came to the time of that Council meeting, councillors 9 would have known that this was on the agenda and that 10 this was what I was suggesting. 11 The motion was approved. It was agreed that we had 12 reached a point where this seemed to be the last resort, 13 as it were, of trying to get things moving. 14 Q. Is this really an abandonment of the arm's length aspect 15 of TIE and the Council is now asserting: we will take 16 control, we will say what happens. 17 A. Well, this was us as a Council saying: TIE has failed to 18 achieve what needs to be achieved, and therefore we'll 19 use another means. 20 Of course, the end result of it all was that TIE's 21 role in the whole project some months later was 22 eventually nil. It was basically closed down. 23 So this was us saying we've heard what's been said. 24 We've been patient about waiting to try and get things 25 quite literally moving again, and this now seems to be 186 1 all that we can attempt to do. We didn't know what the 2 outcome would be. We didn't know if it would work, but 3 we felt we had to try it. 4 I knew there was support for this. As you'll see 5 there, there's mention of a meeting that I'd had with 6 John Swinney, the Cabinet Secretary for Finance and 7 Sustainable Growth, and we discussed mediation at that 8 point. 9 Q. We will come back to Mr Swinney in a moment, the 10 Minister in a moment. 11 I suppose was this the end of TIE really being arm's 12 length and from now it was under Council control as to 13 what going to happen and what was being done? 14 A. Not formally. TIE was still there as an entity and it 15 was clearly of some importance in trying to get this 16 sorted out because the contract was between TIE and BSC, 17 and -- 18 Q. Can I say -- 19 A. I suppose in effect this was the Council saying: TIE 20 hasn't solved it, so we're having to come in and try and 21 solve it. 22 Q. In relation to your discussions with John Swinney, you 23 said, I think, you had met with him. Was that to 24 discuss mediation or the contract in general? 25 A. I had quite a few meetings with the Cabinet Secretary 187 1 over a period of years, and as far as I can remember, 2 I think this -- mediation was the main point that we 3 were discussing at this meeting and he was very much in 4 favour of mediation as the way forward. 5 Q. When had you and he first started discussing mediation 6 as the way forward? 7 A. This might have been the first formal meeting at which 8 mediation was discussed. I don't remember whether we 9 had actually had -- I suspect that this was maybe the 10 first time that we discussed mediation. 11 Q. You and the Cabinet Secretary you're talking about? 12 A. Yes, and the Chief Executive was also present at that 13 meeting. 14 I had quite a few meetings with John Swinney, either 15 sort of ad hoc meetings after other meetings where he 16 would quite often mention the tram project, and I had 17 other sort of more set meetings where we had an agenda 18 with various things to discuss, of which the tram 19 project was one. 20 But as far as I can remember, this one was purely to 21 discuss mediation and his view was that that was the 22 right way forward and at this point -- and I could be 23 wrong, but I think this was the first time that it was 24 mentioned that Transport Scotland should play a bigger 25 role in it. It may have been mentioned before then, but 188 1 certainly I recall that when we were discussing 2 mediation and how it would be done, there was 3 certainly -- I believe it was his view that 4 Ainslie McLaughlin of Transport Scotland would be able 5 to help in the process. 6 Q. In the mediation process? 7 A. In the mediation process. 8 Q. Because in response to an earlier matter, Lord Hardie 9 asked whether Mr Stevenson had suggested that Transport 10 Scotland should become involved. Would this be 11 something that Mr Swinney had suggested before this time 12 or was it just at this time? 13 A. No, as far as I can recall, and it's so difficult to 14 remember just exactly what happened on what date, but 15 this, I think, was the first time that I had -- 16 I suppose become aware that Transport Scotland, having 17 taken a back seat, might now have a more prominent role 18 to play. 19 I don't remember it being mentioned before, but 20 that's -- you know, that's just my memory on it, that, 21 you know, I could be wrong. It may well be that it had 22 been mentioned before, but this is the first time that 23 it had a strong impact on me, to the extent that I do 24 recall he mentioned, and that he mentioned that 25 particular name. 189 1 Q. In relation to the earlier discussions you had with 2 Mr Swinney, in particular the formal ones, rather than 3 the informal ones, what was it he wanted to know, or 4 what was the function of those meetings in relation to 5 the tram project? 6 A. The agendas for these sort of set meetings would include 7 all sorts of things, and the tram project was just 8 a heading there, and my memory of most of it is that it 9 was reiterating what I knew and he knew and everybody 10 knew, which was that GBP500 million was what was going 11 to be paid and not a penny more. 12 But for that GBP500 million, they expected to have 13 something other than disruption and streets that were -- 14 had had fencing round them and nothing happening. 15 So I don't believe before this time that he made any 16 suggestions as to what we should do other than that we 17 should continue trying to reach some resolution. 18 Q. Were any offers of assistance, not financial assistance, 19 but other assistance to try to resolve matters? 20 A. Until this point I don't remember it being mentioned. 21 It may have been mentioned to others, but I don't 22 remember it being mentioned. I'm sure, had he suggested 23 some months prior to this, for example, that he was 24 suggesting that Transport Scotland come in, then I think 25 I would have remembered that and done something about it 190 1 or suggested that somebody do something about it. 2 But I don't recall it being discussed until then, 3 because most of the time what John Swinney was saying: 4 it's not doing the capital city any good to have the 5 streets looking the way they are. 6 Q. It seems odd that he would say that over and over again 7 when it must have been obvious to you anyway? 8 A. Yes. Yes. 9 Q. So what was the function of him saying that to you? 10 A. I don't know, other than just to ensure that I knew, as 11 I did, that, you know, they could see what was happening 12 or not happening. 13 Q. Why was it at that time and not earlier that you 14 considered that mediation would be the way forward? 15 A. It was, I think, a growing realisation that the disputes 16 were not going TIE's way anyway, and that TIE and the 17 contractor were just -- they just could not work 18 together. 19 Whatever the rights or wrongs is another matter, but 20 that the situation was such that we appeared to be 21 unlikely to see anything happening on the streets of 22 Edinburgh unless something else was used to get people 23 to sit down round a table and discuss a way forward that 24 was acceptable to everybody. 25 So I think it was just a sort of growing frustration 191 1 that nothing was happening. Something had to happen, 2 and there seemed no other way to do it, and by this time 3 it seemed to me that there was no other way. 4 I'd also, in the sort of perhaps in the month prior 5 to this, been approached by several people, professional 6 resolution mediation type people, and they had suggested 7 that they might be able to help. 8 I had an offer from the editor of the local 9 newspaper that perhaps they could broker some kind of 10 meeting to get people round a table. So I had had quite 11 a few suggestions in the sort of period not long before 12 this, where the sort of word "mediation" was in a sort 13 of professional sense rather than the way that mediation 14 had been looked at up until then, was the way forward. 15 Q. We know that the mediation ultimately took place. 16 I think it's correct that no councillors were actually 17 involved in the conduct of that mediation? 18 A. That's correct. It was behind closed doors, the sort of 19 chief officers of the various bodies, and it was never 20 suggested to me that councillors should participate in 21 that, and that was a situation. It was very much behind 22 closed doors, and involved people who had the capacity 23 to take decisions on behalf of their company or their -- 24 the body that they were representing. 25 Q. I think that the Council, it was led by the then 192 1 Chief Executive Sue Bruce? 2 A. Yes. By this time Sue Bruce had come in as 3 Chief Executive and she came in as Chief Executive in 4 the January following that motion to Council, although 5 she had been around during the December. She was sort 6 of making herself known people and getting familiar with 7 the City of Edinburgh Council. 8 Q. Were councillors involved in giving any advice or 9 guidance as to what they would like to see coming out of 10 the mediation to the officers that were going to conduct 11 it? 12 A. Not as far as I'm aware. Because I think what we wanted 13 to come out of it was that we would get work moving one 14 way or another on the streets of Edinburgh, and that was 15 what the final result was that we wanted. 16 If the final result was that it was going to be 17 impossible for people to come to some agreement, then 18 obviously that would have been something that would have 19 had to be addressed. But it was left to Sue Bruce to 20 lead the Council's side and express the views on behalf 21 of the Council. 22 I had a lot of discussions with her about what form 23 this might take and she mentioned to me -- I think it's 24 in my submission here -- the statement that she had 25 informed me that she had worked closely with somebody 193 1 who was very familiar with big engineering projects and 2 she would find it helpful to have him there; and she did 3 say, you know, she did sort of basically give me a CV 4 and say: I would find it helpful, I think he would be 5 essential to this because the Council doesn't have the 6 engineering capacity to make informed comments on some 7 aspects of the scheme. 8 So to some extent she discussed with me who she 9 wanted to be -- who she wanted to have with her, and she 10 knew that what they wanted was the best possible deal 11 for the Council, and matters to move ahead. 12 I had around this time also had meetings with 13 members of the consortium, and to a large extent, that 14 was to establish did they want to continue with the 15 project and did they see mediation as a potential way 16 forward, would they be participating in it 17 whole-heartedly and hoping for an outcome; and the 18 message from that was that, yes, they were still 19 committed to delivering the -- what we needed on the 20 ground. 21 Q. You said in your answer there that it was left to 22 Sue Bruce to lead the Council's side and express the 23 views on behalf of the Council. 24 Really what I was wondering was: did you, the 25 councillors, provide input to Sue Bruce as to what the 194 1 views of the Council were? 2 A. She would have -- the views of the Council were known 3 through the -- by this time probably, I don't know, 4 probably nearly 80 decisions that had been taken by 5 Council, which was to go forward with the tram project. 6 So the headline view of the Council was that they 7 wanted the project to go ahead, and certainly my own 8 personal view that I expressed to Sue Bruce was that 9 I wanted it to go ahead with the contractor that had 10 entered into the contract in the first case. It seemed 11 to me that it was going to make for an extremely 12 difficult situation if we were unable to reach some 13 arrangement with BSC on this, or mainly Bilfinger Berger 14 and Siemens at this point. 15 Q. What was Sue Bruce and the remainder of her team 16 authorised to do or authorised to achieve at the 17 mediation? 18 A. They were authorised to get the best deal possible that 19 they could and to break the impasse that there was 20 between TIE and the contractor. 21 Q. I think they weren't able actually to sign up to the 22 deal at the time. That had to come back to the Council 23 for approval? 24 A. Yes, I suspect that lessons had perhaps been learnt 25 already from the fact that there appeared to be several 195 1 different readings of the contract, that the contractor 2 had one reading of it and TIE had another, or were 3 telling us that they had another. 4 So we were never going to -- they were never going 5 to come out of that meeting with a long document 6 saying: this is it, it, this is exactly what's going to 7 happen. 8 There was over the few months after the Mar Hall 9 mediation in the March, there was a lot of work done on 10 making sure that the settlement agreement that was 11 reached was one that was to a large extent sound 12 legally, and that there was not the ambiguity that there 13 appeared to have been in the original contract. 14 Q. Was that work that was done after the mediation itself 15 undertaken by the Council officers and other 16 professional advisers? 17 A. I believe that they put that work out to various 18 consultants. I think there were engineering consultants 19 and legal consultants who were involved in that process, 20 because we come back to the reason for TIE being created 21 in the first place, which was that the Council within 22 itself did not have the capacity to deliver that, and it 23 had also become -- we were told relatively early on that 24 the Council's legal section did not have the capacity to 25 do the intricate work on contracts. So it made a lot of 196 1 sense to have external people to look and make sure we 2 had a sound agreement in place. 3 Q. So after the mediation itself and all that additional 4 work with lawyers and engineers to produce the finalised 5 version of the deal, am I correct in saying you expected 6 it to come back to councillors for final approval? 7 A. Yes. Although the Chief Executive had power to act for 8 the Council, it was necessary -- obviously for a start, 9 the finance -- the financial figures had changed by that 10 time. So it needed to come back to Council to take 11 a decision on the way forward, and as it transpired, we 12 had some very contentious debate about the way forward. 13 Q. Which of the options to take? 14 A. Yes. 15 Q. But nonetheless when you were having that debate, you 16 were really faced, I think, with a number of options 17 that had been produced as a result of the mediation and 18 further work after that? 19 A. Yes. The mediation had changed the working relationship 20 between the contractor and -- well, then it became 21 Turner & Townsend took over the contract. The Council 22 took over the contract instead of TIE. 23 Turner & Townsend came in as project managers, but the 24 whole atmosphere of the project changed after mediation. 25 Instead of it being the two sides of the original 197 1 contract appearing to be completely at loggerheads with 2 each other, it was very much more a case of what we had 3 hoped from the very beginning, that there was an actual 4 partnership to get the tram project under way again. 5 Q. I ask you to look at another document please. It's 6 reference TRS00011725. This is a report to the Council 7 for a meeting on 25 August 2011, entitled "Edinburgh 8 Tram Project". I think this was a meeting to consider 9 which of the options would be pursued after the 10 mediation had taken place; is that right? 11 A. Yes. By this time we realised that it was going to cost 12 a lot more, and so we had to look at the best way 13 forward. 14 Q. Also if we can look at another document, slightly 15 earlier, CEC02044271. 16 Again, this is the -- this is a report we can see 17 headed again "Edinburgh Tram Project", the whole 18 Council, this time dated 30 June 2011? 19 A. Yes. 20 Q. This sets out in a little bit more detail what the 21 various options were, starting from paragraph 3.31 on 22 page 6. We can see the options appraisal, and they were 23 put before the Council for some consideration. Initial 24 consideration. 25 A. Yes. 198 1 Q. Now, various figures were given in relation to the 2 option as to what it would cost to complete the 3 contract, either to St Andrew Square, York Place on the 4 one hand or Haymarket on the other? 5 A. Yes. 6 Q. I take it the councillors weren't really involved in 7 discussing the sums that would be payable. It was only 8 one of the various options they were going to go for? 9 A. Well, we knew what the costings were for those options 10 because obviously that was important and it was then 11 a case of appraising what you were getting for what sum 12 of money and whether termination of the line at 13 Haymarket, for example, which we were told would run at 14 a GBP4 million annual loss, you had to balance that 15 against the fact that that was a slightly cheaper option 16 than going to St Andrew Square. 17 So all the Councils and all the Council groups 18 looked at the paper and looked at both what it was going 19 to deliver and the cost of delivering that. 20 Q. But essentially the costs, the deals that were on offer 21 were fixed as a result of the negotiations that the 22 officers had entered into? 23 A. Yes. The figures that were produced for that paper were 24 a result of the discussions that had started at 25 mediation and that eventually ended up with the 199 1 agreement. 2 Q. Ultimately, after initially approving the works only so 3 far as Haymarket, the Council approved it to St Andrew 4 Square and York Place? 5 A. Initially, and then there was a Council meeting where 6 the decision was taken -- yes, the decision was taken to 7 go to Haymarket, which I certainly did not think was the 8 best option. But for a variety of reasons, as I mention 9 in my statement, this was now approaching the next local 10 Council elections and whether the decisions taken by the 11 various groups would have been the same had it have been 12 earlier in the period, I don't know. 13 But we ended up with extremely contentious meeting, 14 where we had motions and amendments and amendments and 15 other amendments, and eventually because the SNP in 16 the -- in that meeting, where the decision was taken to 17 go to Haymarket, did not vote with ourselves as 18 coalition partners, they decided not to vote in that 19 particular issue, not expecting that the Labour group 20 would agree with the Conservative group that the line 21 should stop at Haymarket. 22 So there was a lot of politicking around it by that 23 time and to a large extent it was because of the timing 24 of it. Everything becomes a bit more contentious in 25 Councils as you approach election time and stances start 200 1 to be laid out for what will be in manifestos and all 2 the rest. 3 Q. By the time you came to considering the cost of the 4 various options later in 2011, I think the councillors 5 had some -- the benefit of some independent reports that 6 had considered the costs that were involved? 7 A. Yes. 8 Q. I would like you to look at one of them, please. It's 9 document reference CEC01727000. That's a front page of 10 a report, headed "Post Settlement Agreement Budget", 11 budget report dated 19 August 2011, and it's been 12 prepared by Faithful+Gould? 13 A. Yes. 14 Q. Were you familiar with that report? 15 A. Yes, I'm sure pretty sure I saw that at the time. 16 I certainly knew that Faithful+Gould were one of the 17 companies brought in to provide the expertise that the 18 Council didn't have and to look objectively in their 19 case at the financial aspects. 20 Q. Could we look at page 5 of this where the recommendation 21 is given. 22 Could we go to page 5. Sorry, it may be the 23 numbering of the pages is different from the document. 24 Could we enlarge paragraph 2.8. We see that it 25 notes that the recommendation: 201 1 "Due to the circumstances and contractual agreement 2 presently in place for this project, it is almost 3 impossible to change contractors. The grossly inflated 4 prices from Infraco for the on-street works indicate 5 that it would almost be more cost-effective to carry out 6 this section of works on a cost plus basis. If this was 7 an option, it would require more management from the 8 clients' side to closely monitor all the works being 9 undertaken, to make sure the correct labour was on site 10 and the contractor was working efficiently. If managed 11 properly, this can be quite successful but can lead on 12 disputes on efficiency of labour, et cetera. This 13 should be considered, but would also nullify any costs 14 that Infraco have built into their costs for carrying 15 out the remedial works on Princes Street, which is 16 possibly part of the issue why their costs were grossly 17 inflated (which should be Infraco cost)." 18 Now, you are faced here with a report describing the 19 on-street works, that is the works between Haymarket 20 Station and York Place, as being grossly inflated? 21 A. Yes. That was their view, yes. 22 Q. But nonetheless that's ultimately what was carried out? 23 A. Yes. 24 Q. We see here also the note that it was impossible to 25 change -- almost impossible to change contractors? 202 1 A. Yes. 2 Q. How did you manage to square with councillors taking the 3 decision to do this, the fact they were grossly inflated 4 on the one hand, with the desire that this is what 5 should be done? 6 A. As it says, it was almost impossible to change 7 contractors and I think on assessing it, we decided that 8 the best way forward -- and that would have been with 9 advice from Director of City Development. I think in 10 these instances it would have been the person who headed 11 up the transport side who was also the Tram Monitoring 12 Officer. He certainly gave us some information on this, 13 and just as a judgment of the costs of what they're 14 suggesting there, the management necessary to complete 15 the works in any other way, we took the decision that 16 this was the way that we thought was the best way 17 forward. 18 The report that was put to Council by officers did 19 recommend that we should remain with the contractor, and 20 go ahead with various options that had been looked at. 21 But certainly something that we looked at a long 22 time prior to this, there had been the suggestion from 23 TIE that they would break with the contractor or that 24 they would, you know, split the consortium up into bits 25 and work with one bit and not with another bit and so 203 1 on. 2 So the idea of changing contractor was something 3 that had been brought to our attention a lot earlier 4 than this, but the judgment that we came to as a result 5 of this report, all the other reports, and the advice 6 that we were getting from Council officers and that 7 eventually appeared in the report was that it made sense 8 to continue with contractors. 9 One of the arguments that was put was, you know, 10 they know the road, they have got all the people lined 11 up to do the work that had been put on hold while the 12 impasse had been going on, and so the conclusion that we 13 reached was to agree with the Council officers that the 14 best way forward was to retain a relationship with the 15 contractor that had been originally appointed. 16 Q. I'm finished with that document for the moment. 17 You will be aware that there have been people 18 commenting on the project and the implementation of it 19 who suggested that the Council should have showed a 20 greater leadership, that there should have been more 21 political leadership of the project. How would you 22 respond to that? 23 A. It's difficult to know exactly what is meant by that. 24 A lot of those comments came from other political 25 parties on the Council in the run-up to the elections, 204 1 where it's a very common practice that you make 2 derogatory comments about the administration. 3 So we had all sorts of comments made about we hadn't 4 shown leadership. However, there was every opportunity 5 for other parties on the Council to come forward with 6 constructive suggestions as to how they thought -- what 7 they meant by that, how they thought that could have 8 been done differently. 9 There never was any suggestion. 10 So I won't say I dismissed it, nobody likes to be 11 told that they're not doing a job well that they're 12 doing to the best of their ability, but I took a lot of 13 those comments and the period in which they were made as 14 being more about party politics than about the good of 15 the Council. 16 Q. More generally, to what extent would you expect the 17 Council to be exercising political leadership where it's 18 dealing with something that's been set up as an arm's 19 length company? 20 A. Well, not only was it set up by an arm's length company, 21 but it was set up before the administration that I was 22 leading had actually come into being. It had been set 23 up, the whole TIE had been set up in 2002, which long -- 24 was long before I was involved at political leadership 25 level. 205 1 So yes, extremely difficult to know just exactly 2 what was meant by that. I sought information when 3 I thought I needed it. I was involved in discussions 4 about the mediation, as I have said. I asked what 5 questions I could. We took discussions as a group that 6 we thought were in the best interests of the city, and 7 so it's difficult to see what is actually meant by that, 8 because I would never expect any councillor to be 9 involved in the -- in operational matters. 10 No councillor was going to walk into the TIE offices 11 and say: I don't like the way that -- you're looking at 12 the way that road is being dug up or whatever. There is 13 a limit to what a councillor does. We set the strategy 14 and we do not get involved in the operational matters. 15 It's very difficult to know precisely what is meant 16 by a lack of political leadership. 17 Q. Thank you very much. 18 A. I'm not the best one to answer that. You should ask the 19 people that said it what they meant by it. 20 MR LAKE: Those are my questions for this witness. 21 CHAIR OF THE INQUIRY: Thank you very much. You're free to 22 go today. I don't expect to recall you at any stage but 23 you're still subject to citation in case anything comes 24 up, and if that happens, Ms Fraser will get in touch 25 with you. 206 1 A. Okay. Thank you. 2 (The witness withdrew) 3 MR LAKE: The next witness is Lesley Hinds. 4 MS LESLEY HINDS (affirmed) 5 Examination by MR LAKE 6 MR LAKE: Could you state your full name, please. 7 A. Lesley Adelaide Hinds. 8 Q. We have your address as a matter of the Inquiry records. 9 What is your occupation? 10 A. Semi-retired at the moment. 11 Q. And the bit that's not retired? 12 A. Sorry, I was a councillor for 33 years. 13 Q. Other than being retired at the moment, you give the 14 impression you actually do something else? 15 A. I'm on a number of boards. I have only just given up 16 the Council in May of this year. So just enjoying the 17 freedom. 18 Q. I would like you to look at a production that will be 19 shown on the screen, and you should also have a hard 20 copy of it in front of you. It's reference 21 TRI00000099_C. 22 A. Okay, yes. 23 Q. Now, both -- I think we can see it all on the screen, 24 but you should have a paper copy? 25 A. Yes. 207 1 Q. Is that a copy of a statement that was prepared by you 2 for the purposes of the Inquiry and signed by you on the 3 last page? 4 A. Yes, it is. 5 Q. Are you content that that be accepted as your evidence 6 to this Inquiry? 7 A. Yes. 8 Q. I want to ask you a few questions on particular aspects 9 of it, things that are of particular interest. The 10 first is I want to ask you about the whole question of 11 an arm's length company. You have heard TIE being 12 described as an arm's length company. I think there 13 were other arm's length companies within the Council? 14 A. Yes, there are a number. 15 Q. Were you involved in any of them? 16 A. On a number of them, I have been involved over the 17 years, for example in Edinburgh International Conference 18 Centre. And also EDI, arm's length property company, 19 and other ones that -- those are the main ones that are 20 I have been involved with other the years. 21 Q. EDI is a property development company? 22 A. Yes, arm's length. 23 Q. What does it mean, arm's length in this context? 24 A. Well, it's a company that's a private company but it's 25 wholly owned by the Council. That's my understanding. 208 1 Q. What's the purpose of keeping it at arm's length? 2 A. Well, I suppose each one might be different. Perhaps 3 you might want to give me -- I'll give you the example 4 of Edinburgh conference centre, if you want to do that. 5 Would that be okay? 6 Q. Yes? 7 A. So it was set up originally for a conference centre 8 which had been promised in Edinburgh for a number of 9 years, and the idea of setting up as an arm's length was 10 to set up a board that could bring in non-executive 11 members on to the board and executive members on to the 12 board who had expertise, in particular the International 13 conference business, and also involved at that time 14 enterprise company who had members on it as well. 15 So it was to give that expertise and to give 16 a delivery for a new Edinburgh International Conference 17 Centre at that time. So I would say as a Council over 18 the years, there have been arm's length companies being 19 set up for different reasons, and particular reasons for 20 either efficiency, for example Edinburgh Leisure, you 21 could call that an arm's length company. Originally 22 that was set up because of the issue to do with rates 23 and savings that could be made there, but also ways that 24 we could engage as well in terms of leisure. 25 So each one has been quite different over the years. 209 1 Q. The purpose of setting up the company has been 2 different? 3 A. I would say so, yes. 4 Q. With the conference centre it was expertise and 5 experience. With leisure it might be different? 6 A. Yes. 7 Q. When it's referred to as an arm's length, is that 8 intended to indicate a degree of lack of control by the 9 Council over what it does, it lets go? 10 A. No. The Council sets out the strategic direction and 11 the policy direction, and there would be obviously 12 a scrutiny process in terms of the company's reporting 13 to the Council in terms of their work and their plans, 14 and we scrutinised for that. So the Council would set 15 out its policies, its strategies, for that company, and 16 would expect that company to deliver it in terms of 17 being arm's length. 18 Q. What about the day-to-day management and control of the 19 company? Is that something the Council get involved 20 with, with an arm's length company? 21 A. There would be -- normally on an arm's length company 22 would be Directors who were perhaps councillors and 23 Directors who were officers of the Council as well. And 24 they would have a role. But obviously the role would be 25 if they sat on the board of that arm's length company, 210 1 their responsibility would be to the board of that 2 company, but there would be an expectation of reporting 3 back to the Council on a regular basis in terms of not 4 the day to day, but in terms of the strategy and policy 5 being delivered. 6 Q. The company, like any company, presumably, would report 7 to the Council as its shareholder on what it is doing 8 and how it's achieving matters. 9 A. Yes. 10 Q. That would be perhaps every six months, every 12 months, 11 whatever is agreed? 12 A. Yes. 13 Q. But does the Council have more day-to-day control, 14 day-to-day dictating how the company will do things? 15 A. As I say, they would have -- on some companies they 16 would have perhaps a Director who sat on the board of 17 that, and they would also have advisers as well who may 18 well be officers of the Council who would give guidance 19 and support to that company from the Council. 20 Q. I'll come back to ask about those Directors in a little 21 while. 22 Just returning to arm's length companies and TIE, 23 what was the reason TIE was set up as an arm's length 24 company? Are you aware? What was it supposed to 25 achieve? 211 1 A. It was set up -- I don't know if you can remember. This 2 is many, many years ago, but it was set up as -- my 3 understanding is that there had not been, for example, 4 a tram project in the city and therefore the setting up 5 of that company was to bring in non-executive Directors 6 with experience in terms of engineering and experience 7 in terms of tram projects elsewhere, perhaps not so much 8 in Great Britain but in Europe as well. So to bring in 9 people who would be able to give that expertise, advice 10 and support and be able to deliver that project. 11 Q. Bringing in people with experience of trams or these 12 matters, transport, was there any reason why that can't 13 be done by means of either finding consultants or even 14 employing people? 15 A. That has -- that could be the case, that it could be -- 16 as it was at the end of the project, that the tram 17 project was then brought in-house, if you wanted to call 18 it that, brought back to the Council. But at the 19 time -- and this is me reflecting many, many years ago 20 of the reasons why the TIE and TEL were set up at the 21 time, and my understanding from many years ago was 22 particularly because of the expertise it could bring in 23 in terms of delivering that project. 24 Q. But is there any advantage to bringing in that expertise 25 through an arm's length company, rather than just buying 212 1 it in direct to the Council? 2 A. I think it was to be able to deliver it quickly and 3 efficiently as well as possible within the strategic 4 direction and the policies of the Council. 5 Q. Could that be done by the Council in-house? 6 A. Well, as has been proved, it was brought back in-house. 7 So it can be. Obviously, the reasons we'd go back, and 8 there would be reports which, you know, went back to 9 that time. The report would come to the Council so the 10 councillors can be briefed on the reasons that 11 particularly officers may well think would be an 12 advantage to setting up a TIE and a TEL at that time or 13 a company, an arm's length company, and the report would 14 give the reasons why and the elected members, the 15 councillors would scrutinise why was the reasons for 16 that and to set up that arm's length company. 17 Q. You say in your statement -- it's at paragraph 114 if 18 you are interested -- that you think in principle that 19 arm's length companies are a good idea, subject to 20 obviously who they recruit. 21 What I'm interested in is why is it better to use an 22 arm's length company to do this than to do it in-house, 23 or is it really not necessarily better, it's just one 24 way of doing it? 25 A. I'm repeating myself, but each individual setting up of 213 1 the company would then -- for example, if it's EICC, 2 Edinburgh International Conference Centre, a report 3 would have come to the Council and the reasons why the 4 officers felt that this would be a better way of 5 delivering that project and give the reasons why, and 6 then elected members, the councillors, would make 7 a decision whether they believed that was the best way 8 of delivering it. 9 I'm just giving my experience in some -- in the 10 arm's length companies that I've been involved with have 11 been successful in terms of -- EICC, I know it was 12 a long time ago, but it delivered it on time and on 13 budget. So you can only go with your own experience. 14 Do you mind if I just take my jacket off? It's very 15 warm in here. 16 Q. You mentioned there that councillors might be appointed 17 as Directors on an arm's length company. I think you 18 said Council officers also. What is their function? 19 Why put them on to the Board of the arm's length 20 company? 21 A. It would be because normally if it would be a convener 22 or a vice convener, someone that had particular 23 expertise or a particular interest in that and would be 24 responsible on the Council for that -- that project, 25 would be responsible basically back at the Council, and 214 1 therefore to give an indication of the strategy and the 2 policy and give support and help to the project as well 3 and to the arm's length company. 4 Q. That's talking about a flow of information from the 5 Council to the company. 6 A. Yes, but they're always -- as I in my statement say, 7 there is obviously that balance that you're very clear 8 on any training that I've done, and I'm sure other 9 councillors have done, that your responsibility in terms 10 of governance is your responsibility to that board that 11 you sit on, and that's your responsibility. 12 That obviously has been -- it's like a conflict of 13 sitting on that board and take the best interests of the 14 Council, but also you're there on behalf of the Council 15 as well, and those kind of two can be quite difficult to 16 be able to balance in terms of doing your best, as you 17 believe, on behalf -- as a councillor on behalf of the 18 Council, but also sitting on the board, and that is made 19 very clear in terms of governance. 20 Q. So what happens when a conflict arises between you 21 sitting as a Director and there is a conflict of 22 interest between the company and the Council? 23 A. It's difficult without giving an example, but obviously, 24 if you were unhappy with a direction that the board was 25 going, sitting as a board Director, you would address it 215 1 there at the board and record that, and perhaps ask for 2 more information, et cetera. And then if you were 3 unhappy, then I would expect, if you didn't believe that 4 you as a board member were happy with the way the board 5 was functioning and the company was functioning, then 6 you would go back. 7 My advice -- and would be to other people -- I've 8 given in the past would go back to either the leader of 9 the Council or the Chief Executive of the Council to say 10 their unhappiness because they were appointed by the 11 Council to go on that board and would be to say their 12 unhappiness with the direction that company was going. 13 Q. That involves really -- it would be necessary to reveal 14 the affairs of the company to the Chief Executive of the 15 Council to express that unhappiness? 16 A. Well, whether they had to give absolute detail, but to 17 say that they were unhappy. They had been appointed by 18 the Council to sit on the board, and obviously, as 19 I explained before, the governance says very clearly 20 that you are sitting on a board to make your judgment 21 for the best interests of that company. But also if you 22 were unhappy, then I would expect you then to either 23 say, "I don't want to be part of this anymore because 24 I don't feel it's going in the right direction", or 25 I would report back to say I was unhappy with the way 216 1 the direction the board would be. 2 I would then expect either the leader of the Council 3 or the Chief Executive to then have some discussion with 4 the company in terms of unhappiness of that individual 5 board member. 6 MR LAKE: Now, we talked about -- 7 CHAIR OF THE INQUIRY: Mr Lake, is this -- 8 MR LAKE: Yes, this would be -- 9 CHAIR OF THE INQUIRY: I'm sorry, the previous witness took 10 a lot longer than we thought and we intend to rise about 11 4.30 each day. So we'll adjourn. Could you come back 12 tomorrow in time to start afresh at 9.30. 13 A. Okay. I just thought that was me finished now, that was 14 me gone. Okay, yes, that would be okay. 15 (4.30 pm) 16 (The hearing adjourned until Wednesday, 6 September 2017 at 17 9.30 am) 18 19 20 21 22 23 24 25 217 1 INDEX 2 PAGE 3 MS JENNIFER DAWE (affirmed) ..........................5 4 5 Examination by MR LAKE ........................5 6 7 MS LESLEY HINDS (affirmed) .........................207 8 9 Examination by MR LAKE ......................207 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 218