1 Thursday, 5 October 2017 2 (9.30 am) 3 MR TONY GLAZEBROOK (continued) 4 Examination by MR MACKENZIE (continued) 5 CHAIR OF THE INQUIRY: Good morning. You're still under 6 oath. 7 MR MACKENZIE: Thank you, my Lord. 8 Good morning, Mr Glazebrook. 9 A. Good morning. 10 Q. I would like you to turn to a document dated March 2008, 11 so just two months before the Infraco contract closed. 12 The reference number is CEC01526381. Go to page 6 13 of this document. I think we'll find this is Project 14 Manager's report, completed by Damian Sharp. 15 We see at the top, “Project Manager Period Progress 16 Report, Project Manager: Damian Sharp”. It's period 1. 17 I think that's period 12 of 2007. 18 I would like you then, please, to go to the next 19 page, page 7. If we can turn the document round, we 20 will see under "Project Risk ID": 21 "List the 5 most relevant to your work stream 22 (owned by Project Manager)." 23 If we see along those risk 52, then please go to 24 page 12 to see what that relates to. If we can blow the 25 top half of this page up, please, we can see the top 1 1 right-hand corner, risk ID 52. We can see "Area of Risk: 2 7.3 Infraco", and the Event, which I understand to be 3 the risk, is: 4 "Amendments to design scope from current baseline 5 and functional specification." 6 Now, we see your name, Mr Glazebrook, as owner of 7 that event or risk. Were you aware of that at the time? 8 A. Yes, I believe so. 9 Q. Do we see then under "Effect", we see: 10 "Programme delay as a result of re-work; Programme 11 delay due late receipt of change requirements and lack 12 of resolution; Scope/cost creep (dealt with through 13 change process); Project ultimately could become 14 unaffordable." 15 Under "Cause" we see: 16 "Political and/or Stakeholder objectives change or 17 require design developments that constitute a change of 18 scope; Planning Department requires scope over and above 19 baseline scope in order to give approval (may be as 20 a result of lack of agreement over interpretation of 21 planning legal requirements)." 22 The significance is high. We then see under 23 "Assessment Matrix", we see under the CAPEX Cost, the 24 capital expenditure cost, we see current figures of 25 essentially nil. Under "Programme", we see, under 2 1 number of weeks, 16.25. We then see under "Model 2 Notes": 3 "CEC to ... project scope and funding availability. 4 Capex change will now be dealt with through Change 5 Process therefore capex impact is nil. Late changes 6 will result in delay to programme." 7 Under "Probability" we see current remote 8 20 per cent. Planned residual nil. 9 Now, do you know, Mr Glazebrook, what is meant by 10 the sentence there: 11 "Capex change will now be dealt with through Change 12 Process therefore capex impact is nil." 13 A. Yes, Capex is capital expenditure. As to what the 14 sentence means, I don't particularly recognise that. 15 That's not to say it's a problem, but it wouldn't have 16 affected what I did because my prime role was the 17 resolution of problems in design. 18 Q. It may be we have to ask other witnesses who were 19 involved in the risk register, but in short, does that 20 sentence mean that there was no allowance made in the 21 quantified risk assessment for this risk? 22 A. I don't know. 23 Q. If we can scroll back up towards the top of the page, 24 please, and focus again on event, what this risk is, if 25 you had been asked for your views around this time -- 3 1 this is around March 2008 -- on the risk of amendment to 2 design scope from current baseline and functional 3 specification, what would you have replied? 4 A. I would have said the very last thing you want to do is 5 to introduce any more change at all. 6 Q. But in terms of that risk, and whether that remained 7 a risk, what would you have replied? 8 A. It's always a risk in any project, whether small or 9 large. People will want to change things, not because 10 of badness, but because they believe the present scope 11 is either wrong or inadequate, and sometimes that's only 12 revealed when design is in progress. 13 Q. Given the incomplete design and the outstanding 14 approvals and consents, given the problems with 15 misalignment between SDS design, the employer's 16 requirements and Infraco proposals, was there a fixed 17 baseline for design scope and functional specification? 18 A. Yes, I think so. The only reason I'm hesitating is that 19 because of the welter of documents comprising that 20 scope, sometimes it would not necessarily be apparent 21 until, as I said before, design had started, what the 22 actual full meaning and intent of a piece of scope might 23 be. 24 In other words, it's not always possible 25 unequivocally to say exactly what a piece of scope 4 1 means. 2 Q. If design is approximately 60 per cent complete, is 3 there a fixed baseline? 4 A. A fixed baseline of programme or design content or 5 scope? 6 Q. I'm just trying to understand what this risk relates to. 7 Amendments to design scope from current baseline and 8 functional specification. 9 A. I think what it's meaning here is -- and I wasn't the 10 person who wrote these words, they were risk people who 11 wrote these words. I think what it's trying to say is 12 that it's inevitable in all projects that things will be 13 very likely to change or people will want to change 14 them. 15 So in any project this sort of thing is always one 16 of the top risks. 17 Q. How about in a project where it is going to award the 18 construction contract for design on one view about 19 60 per cent complete? 20 A. It's unwise to proceed with awarding a contract with 21 such incomplete design and with such a high risk, 22 because clearly if the progress is well behind schedule, 23 then the risk can be none other than higher than it 24 would otherwise be. 25 Q. Thank you. Put that to one side now, please, and revert 5 1 to your statement, please, at page 31. In question 55, 2 towards the bottom, if we blow that up, we can see this 3 refers to a report. You won't have seen this at the 4 time. It's to the Council's Internal Planning Group on 5 16 April, and it sets out the position with the planning 6 prior approvals and technical consents. 7 In this report we can see the bottom of the page the 8 words in bold, the sentence: 9 "There is potential for the approvals to cause 10 a delay to the construction programme." 11 If we then go over the page, please, we asked you 12 various questions about this. In sub-question 1 -- we 13 asked: 14 "What was your understanding of, and views on, these 15 matters?" 16 You said: 17 "This was hardly surprising. For all of the reasons 18 already included in my answers, this result was 19 inevitable." 20 As I understand it, that is in response to the 21 sentence in the report that there is potential for the 22 approvals to cause a delay to the construction 23 programme; is that correct? 24 A. That's correct. 25 Q. I would like now, please, to move on to events around 6 1 the time of financial close. So on 14 and 15 May 2008, 2 the Infraco contract was awarded and certain other 3 agreements were entered into. 4 Could we start, please, at page 32 of your 5 statement, and in question 56, under sub-question 1, we 6 asked: 7 "What was your general understanding at that time of 8 the extent to which design was incomplete and/or that 9 completed design was liable to change?" 10 You say you don't recall the detail, but I think we 11 can help with that by going to another document, namely 12 the SDS Novation Agreement. One of the schedules tells 13 us the state of design at that time. 14 So if we could go, please, to CEC01370880. We can 15 blow this up, we can see this is the Novation of Design 16 Services Agreement between tie, Infraco and 17 Parsons Brinckerhoff. If we then please go to page 81, 18 we can see this is Appendix Part 4 of the Agreement. If 19 we can go to page 84, please, we can see in paragraph 1, 20 "Introduction", it tells us at the top: 21 "This document defines the status of the SDS 22 Agreement between tie and SDS at the point of Novation. 23 The report details: The status of deliverables completed 24 to date ..." 25 If we then, please, go to page 85, we can see we are 7 1 told under, firstly, 5.1.2, the detailed design packages 2 status as at 13 May 2008 of a total number of packages 3 of 329, the total delivered are 296 and the total 4 remaining to be delivered are 333. 5 CHAIR OF THE INQUIRY: No, 33. 6 MR MACKENZIE: Sorry, my Lord. Total remaining is 33, yes. 7 Thank you, my Lord. 8 Just to pause there, Mr Glazebrook, just checking 9 back, we saw earlier -- we looked at November 2007, an 10 email had told us the status then. I think at that 11 point, 227 out of 344 had been delivered. So there's 12 certainly been further progress between the 227 in 13 November 2007 and the 296 delivered as at this date, but 14 for some reason, the total number of packages has fallen 15 from, in November, 344 down to 329 in May 2008. 16 Do you know why the total number of packages fell? 17 A. No. No, I don't. 18 Q. It may or may not matter. I don't know. 19 A. It's probably because of definition rather than because 20 of actual content. The overall content would have been 21 the same, but perhaps they were packaged slightly 22 differently. 23 Q. I understand. Under 5.1.3, "Prior Approvals", we see 24 out of a total number of approvals of 63, 22 have been 25 approved and 41 are remaining. 8 1 Lastly, under 5.1.4, under "Technical Approvals", we 2 see out of 128, 30 have been approved and 98 are 3 remaining. 4 To pause there, Mr Glazebrook, am I right in my 5 understanding that technical approvals mainly concern 6 roads approvals and structures? 7 A. Yes, that's correct. 8 Q. Presumably with roads approvals, the final approval will 9 depend on the results of final traffic modelling; is 10 that correct? 11 A. I don't know about that. That's the first time I have 12 heard such a statement. 13 I think it's important to recognise that technical 14 approvals and prior approvals are only part of the 15 overall approval process. 16 In the design management plan we laid out with the 17 agreement of SDS that as well as those approvals, we 18 needed to have this thing called a design assurance or 19 design verification statement in which the design was 20 described and matched against the overall requirements, 21 and indeed the closure of risks, to show that the whole 22 package or packages complied with all reasonable 23 requirements, and there was a demonstration within that 24 design assurance statement from SDS that that was the 25 case. 9 1 But at this point, none of those design verification 2 statements had been offered nor accepted. So this is 3 a misleading picture. 4 Q. In what way is it a misleading picture? 5 A. It's misleading because it doesn't show the whole 6 picture. It doesn't give any indication of what could 7 change in addition to these things because, as you can 8 imagine, in a place like Edinburgh, particularly with 9 street running, the risks are very considerable. Safety 10 risks to people. All of those risks had to be evaluated 11 and closed with the assistance of the independent 12 competent person who was the person that really 13 represented the Government, and said that the way in 14 which the design had proceeded and had been done not 15 only complied with the specification, but was safe and 16 fit for purpose to be approved to run in public service. 17 So this picture here includes none of those 18 activities at all. And those activities took up a lot 19 of time. 20 Q. In terms of -- I think you said, it doesn't give 21 indication of what could change in addition to these 22 things. So what could change? Do you mean the existing 23 design could change? Do you mean existing approvals 24 could change? Or what? 25 A. All of those things. I mean, an instance might be 10 1 Carrick Knowe viaduct, where there was a lot of 2 discussion about things like drainage to avoid problems 3 with foundations. There were issues subsequent to this 4 around public access. There were issues around things 5 as simple even as the parapet design, and all of those 6 things or -- and more would have taken place after this 7 date. 8 Q. So in short, when you say these three paragraphs, 5.1.2, 9 5.1.3, 5.1.4, when you say these paragraphs give 10 a misleading picture, do you mean by that that things 11 are more fixed than are shown or things are less fixed 12 than are shown? 13 A. Less fixed. 14 Q. I understand. Thank you. 15 If we could then please revert back to your 16 statement, please, to page 32. In question 56, back to 17 answer 1, you explained that: 18 "Any informed person would have foreseen the 19 problems that would arise in proceeding headlong with 20 incomplete design." 21 Just for clarification, by "proceeding headlong", do 22 you mean by awarding an Infraco contract? 23 A. Yes. 24 Q. Could I then please take you to another document at this 25 time. It is USB00000032. It will come up in a second, 11 1 but this is the pricing schedule to the Infraco 2 contract, Schedule Part 4. 3 Now, did you see this document at the time in 4 May 2008? 5 A. No, never saw that. 6 Q. Presumably you had no involvement in the negotiation or 7 drafting of this document? 8 A. Specifically excluded from such things. 9 Q. Now, I think you have -- you were sent it by the 10 Inquiry, I think; is that correct? 11 A. Pardon? 12 Q. You were sent it by the Inquiry as part of taking your 13 statement? 14 A. Possibly. I don't recall looking at it because, having 15 not seen it before, there would perhaps have been no 16 point looking at it now. 17 Q. Okay. Could we then please go to page 3. Under 18 clause 2.3, you will see a reference to the base date 19 design information means: 20 "... the design information drawings issued to 21 Infraco up to and including 25 November 2007 listed in 22 Appendix H to this Schedule Part 4." 23 Then please go to Appendix H at page 53 of this 24 document. If we blow up the top of the page, we see the 25 drawings aren't listed, but instead simply one sentence: 12 1 "All of the Drawings available to Infraco up to and 2 including 25 November 2007." 3 If we then please go back to your statement at 4 page 33, in sub-answer 5, we asked in short why Appendix 5 H didn't contain a list of drawings comprising the base 6 date information. You replied: 7 "Another example of commercial ignorance and 8 impracticality, tabled solely to maintain a programme 9 and the impression of robust progress, but inevitably 10 leading to financial disaster." 11 Are you able to expand upon that a little? 12 A. Not really. I mean, I do clearly recall that on many 13 occasions, the commercial people again specifically 14 excluded us from the provision of data, information or 15 involvement. 16 So if things were given to others without our 17 knowledge, I would not only have no knowledge of them, 18 but I wouldn't be able to underwrite them or make any 19 comment on them. But it happened time and time again. 20 So that's why I wrote that rather emotive comment, 21 because it was, in my experience, in my judgment, a very 22 foolish thing to do. 23 Q. Now, go back, please, to the Infraco Schedule Part 4, 24 please, to page 5. There's one last part I would like 25 to put to you for your views. 13 1 It's USB00000032 at page 5. 2 At the bottom we see, under 3.4: 3 "Pricing Assumptions are ..." 4 We see 1. 5 So in short, Mr Glazebrook, imagine that on this one 6 occasion, the commercial team did involve you. Let's 7 say they come to you in early May and say: we plan to 8 put this into the contract, what's your understanding of 9 it? I'll just give you a couple of minutes to read 10 what's on the screen, please. (Pause) 11 It goes over the page, when you're ready. 12 A. Can I just comment on that, first of all. Pricing 13 assumptions, section 1, the first thing I notice is the 14 use of the word "normal". There was nothing normal 15 about this project whatsoever. So any assumptions about 16 what might happen on a normal project were invalid in 17 terms of this one. 18 Again, just quickly looking through, it would be 19 completely unreasonable to expect that there was 20 anything fixed about the design at all. The reason for 21 that was there were so many disputes between the various 22 parties involved, not because of design incompetence but 23 because of different views about scope, content, detail, 24 everything else, it was just not the case that design 25 was at all fixed. It just couldn't be. 14 1 The key thing is it's -- again, to use my favourite 2 word, it's foolish to regard this as a normal project 3 and to proceed along lines as if it is, when it clearly 4 isn't. 5 Q. Perhaps go over the page so you can see the rest of this 6 clause. Blow up 1.3 and then the paragraph below that. 7 That completes this pricing assumption. 8 A. Yes, I mean, that statement is the sort of thing that 9 would apply again on a normal project that was 10 proceeding to programme with the right degree of 11 teamwork, collaboration involvement, but that was not 12 the case. 13 So sort of boilerplate text like this is not 14 a reasonable thing to base a contract on, in my opinion. 15 Q. Just to test this, Mr Glazebrook, take this out of the 16 context of the tram project. Let's say this was 17 a normal project. On that hypothesis, if you had been 18 asked for your view on this pricing assumption, and in 19 particular if you had been asked: do you understand, as 20 somebody involved in design and as Engineering Director, 21 what this means; what would you have said? 22 A. If it were a project where design was well founded, the 23 scope was well understood, the parties were all engaged 24 and collaborating, this would be a valid comment. 25 Every project, however well founded, will inevitably 15 1 have some sort of development. But because in real life 2 projects, sometimes it's not until you start to build 3 that you discover some problems, that might be due to 4 things in the ground. It might be due to adjacent 5 buildings. It might be kinetic envelope. It could be 6 a multitude of things which are not always absolutely 7 possible to pin down. 8 So every project has some, as they say here, 9 development, but this project was not one of those. 10 Q. Taking us back to this project, if you had been asked 11 for your views in early May 2008 about in some way 12 fixing the price to the design available as at 13 November 2007, what would you have said? 14 A. I would have said I don't see how you could possibly do 15 that, other than price in a giant amount for risk which 16 may or may not arise; risk in that context meaning the 17 risk of the design proceeding in a way that couldn't 18 have been foreseen. 19 Q. Finally on this point, we are likely to hear evidence 20 that tie understood that the contractor had accepted 21 responsibility for normal design development. If that 22 had been suggested to you at the time, would you have 23 had any views on that? 24 A. I think I would have been surprised, but having worked 25 in contracting myself, I know that sometimes you have to 16 1 do that to win a contract that you want or need, and the 2 only defence for the contractor in a situation like that 3 is to make pricing provisions to cover all reasonable 4 outcomes. But it's very difficult to do so, especially 5 when your design is so far from completion. 6 Q. By making pricing provisions, is that essentially to 7 allow for risk premium? 8 A. Exactly so. 9 Q. Thank you. I would like to move on from that document, 10 please, and look at the question of the development of 11 design and the problems experienced after May 2008, 12 after financial close. 13 If we can go, please, back to your statement at 14 page 33. In question 58, towards the bottom, we had 15 asked by way of overview, in relation to the design work 16 carried out after Infraco contract closed and SDS 17 novation, in sub-question 2, we asked: what were your 18 duties and responsibilities after close. You said: 19 "Unchanged, because by then Mr Sharp was the SDS 20 project manager. My role was to review and accept 21 offered design packages ..." 22 Your use of the word "offered", Mr Glazebrook, did 23 that in any way reflect the changed role of tie, in that 24 obviously after novation, the contractor were now the 25 client under the SDS contract? 17 1 A. No, I didn't mean it in that context. 2 What I mean in this case by the use of the word 3 "offered" is that is a design package which is offered 4 for acceptance along our design management plan process. 5 In other words, it's one that is offered for the risks 6 to be shown to have been closed, and all the provisions 7 of the design assurance statement to have been completed 8 satisfactorily. 9 Q. Now, we, I think, had seen yesterday -- I took you to 10 the clause in the SDS contract which dealt with the 11 client representative, and one of the duties was to 12 supervise the day-to-day service provided by SDS. 13 Presumably that would now be the role of the contractor, 14 Bilfinger Berger Siemens consortium. They were now the 15 clients. It was now their role. They were now the 16 client representative under the contract; is that 17 correct? 18 A. I can't answer that question. I just don't know. 19 Q. Sorry? 20 A. I don't know. 21 Q. But is it your understanding that the effect of the 22 novation of contract was that the Bilfinger consortium 23 stepped into the shoes of tie as client under that 24 contract? 25 A. That's not how it worked. 18 1 Q. How did it work? 2 A. It continued as before, where tie, that is me and my 3 group, were the people -- as far as I was aware, and it 4 never changed, we were charged with a duty to review 5 design and ensure that it met the provisions of the 6 design assurance statement process. 7 There was never any suggestion that that would 8 change. Nobody wanted it to change. It didn't change. 9 And it worked or was starting to work satisfactorily. 10 Q. Now, you say that is not how the contract novation 11 worked, and that Bilfinger consortium didn't step into 12 the shoes of tie. Was your understanding that is how it 13 was supposed to have worked? 14 A. I don't know. At no time was I told that the way in 15 which we worked was going to be different. So we not 16 unreasonably carried on as we always had been. 17 I don't really see how, with the organisational 18 arrangements at that time, tie could have just been, if 19 you like, abolished and the consortium put into the 20 position of accepting themselves all offered design, 21 because a contractor can't be a client. 22 Q. So at the time after novation in May 2008, no one spoke 23 to you and said: right, let's all change, here is the 24 new set-up. 25 A. They didn't, but I don't see how it could be, because 19 1 the client still has to be the one that takes the risk, 2 as I understand it, for the design being correct and 3 safe and operable. 4 Q. Now, moving on to this question, we know that there 5 continued to be delays in completing design and 6 obtaining all of the approvals and consents. In a word, 7 why? 8 A. I think in any situation where substantially things 9 haven't changed in terms of processes, procedures, 10 attitudes, organisational arrangements, it's inevitable 11 that the problems that occurred before will continue. 12 It was apparent to me that once Infraco had come on 13 board, they had a genuine and evidential desire to bring 14 to a close the many outstanding design issues, and my 15 recollection is that they were very helpful in trying to 16 bring that resolution about. 17 Q. I think we know, come Mar Hall, in March 2011, even at 18 that stage design wasn't complete. Not all approvals 19 and consents had been obtained. For somebody outside 20 the project, it may seem quite remarkable that almost 21 three years after novation, design was still incomplete. 22 Do you have any comments on that? 23 A. It was remarkable to me as well. But at that time, that 24 was the time, that was a point where I left in 25 March 2011, and Mar Hall, I think, was around that time. 20 1 I would say the relationship, contractual 2 relationship had become toxic. I would strongly 3 emphasise that the engineering relationship was anything 4 but toxic. It was almost as if there were two projects. 5 There were those who wanted it to proceed, who wanted to 6 complete design, and there were those who seemed, for 7 reasons I don't understand and still am amazed at, 8 seemed to direct their energies into confrontation, 9 rather than collaboration. It was almost as if the 10 project had become two. 11 Those who wanted to succeed and those who didn't. 12 Q. So if the engineers worked well together, why couldn't 13 the engineers discuss and agree the remaining design 14 issues? 15 A. Because of the lack of co-ordination within the project 16 as a whole. So we could decide things and then it 17 seemed that others could countermand them and say no, 18 stop progress in that direction. 19 Q. So just to be absolutely clear, who were these other 20 people you were talking about, who would countermand 21 these things? 22 A. Well, we never really knew. It was -- it might appear 23 that from one week to the next what you thought you'd 24 agreed the previous week was not now happening, but the 25 reasons why were never apparent to me. 21 1 The organisation by then had grown quite large 2 within tie, and quite complex, and even more 3 uncoordinated, and as I mentioned, it was as if the 4 imperative was all about money and contractual 5 conditions, rather than actually getting fixation on the 6 design. 7 But as to who caused these and why they caused them, 8 I have no idea. We just found it increasingly 9 frustrating to maintain progress. 10 Q. It's quite a serious allegation to make, Mr Glazebrook, 11 that the engineers are trying to agree design and some 12 other people, who are unnamed, are trying to 13 deliberately stop that. 14 So I think out of fairness to those unnamed 15 individuals, you'll have to try and say who they are. 16 Otherwise they won't have a right of reply? 17 A. I'm not saying anybody deliberately tried to mess things 18 up, but that certainly seemed to us to be the result. 19 It was very frustrating. But there were so many people 20 involved in some of these issues, to attempt to say who, 21 when and why, would be impossible for me. Because 22 I just didn't know. 23 Q. Well, in what way were things countermanded? Was it by 24 email? Was it verbally, or what? 25 A. You have to remember that our -- my role was to help to 22 1 resolve engineering problems and to accept design 2 offered for final resolution to show risks and so on had 3 been closed. 4 So that being the case, that being our focus, the 5 very last thing we would have had time to do or the 6 desire to do would be to delve into the reasons why 7 things on week 2 were not as we thought they might have 8 been on week 1. 9 Q. I don't think I asked the reasons; I think I just asked 10 how were things countermanded. Was it by email, 11 verbally, how it was done? 12 A. It was not apparent to me. We just discovered that 13 things were changing. 14 Q. So you're unable to be any more specific about these 15 matters? 16 A. I can't be any more specific because I just don't know. 17 Q. If we can please go back to your statement, to page 34, 18 towards the bottom, sub-question 6, please, we asked: 19 "More generally, what difficulties and delays were 20 experienced in the completion of design after ... 21 novation?" 22 You responded: 23 "Infraco changed many designs apparently to suit 24 their own design and risk agenda. This resulted in 25 further cost and time escalation." 23 1 Can you give examples even by general areas where 2 Infraco changed many designs? 3 A. I think this related to some of the structures outwith 4 the road running section, street running section. 5 I can't recall the detail because it's so long ago, but 6 I do recall that there were cases where previously 7 offered design had become changed. 8 Now, possibly where in this sentence here I have 9 used the words "to suit their own design and risk 10 agenda", I think the reason I used those words is 11 possibly because that is the impression I got from 12 others within the commercial group out at 13 Edinburgh Park. Because at that time there were lots of 14 people saying lots of things about everything under the 15 sun, and there seemed to be this aura around that things 16 were being changed not because they necessarily needed 17 to be, but because Infraco might have, for instance, 18 believed that ground investigation for a particular 19 structure was inadequate, and it had to be done again or 20 done more of, which might have led to, for instance, 21 larger foundations or bigger things to reduce the 22 likelihood of any physical problem arising later on. 23 Q. I understand. If we go back to your statement, please, 24 to page 34 and to sub-question 7, we had asked: 25 "What were the main reasons for these difficulties 24 1 and delays?" 2 You responded: 3 "Finished design was sometimes rejected by the 4 Infraco themselves; they appeared to distrust existing 5 SDS design." 6 Is this a similar point to the one you have just 7 made or is this a new point? 8 A. It's really a similar point. The reason I put that in 9 is that sometimes I'd -- I'd go down outwith a meeting, 10 go down and talk to SDS designers, and sometimes there 11 appeared to be a slight sense of frustration that they 12 thought things had been fixed and they weren't. But as 13 to why, I don't know because that interface was directly 14 between Infraco and SDS. 15 Q. Now, on this issue of Infraco being able to change SDS 16 design after contract award, presumably if the SDS 17 design had been complete before contract award, and if 18 it had been aligned with the employer's requirements and 19 the contract, then presumably Infraco would have been 20 obliged to construct according to that design and there 21 would have been little scope for Infraco to change that 22 design? 23 A. Exactly so. 24 CHAIR OF THE INQUIRY: Can I just go back and ask you about 25 the contractor having some concerns about the adequacy 25 1 of ground investigations for a structure. 2 If a contractor thought that, what would normally 3 happen? 4 A. In such case they would want to do more, and the reason 5 for that is, I guess any designer would be risking their 6 reputation, and indeed risking the safety of the 7 delivered product, if they proceeded where there were 8 elements of the design that they were not sure of. It's 9 as simple as that really. 10 CHAIR OF THE INQUIRY: So the contractor would then 11 presumably speak with the client and express its 12 concerns about the adequacy of ground investigations. 13 A. Possibly. Such -- yes, that's a fair comment. Such 14 discussions I don't recall taking place with the 15 engineering team. They may well have taken place within 16 the commercial team who might have been presented, if 17 you like, with a bill for some more ground 18 investigation. They might have said why, and the 19 designer, the Infraco might well have said something 20 like: well, there were 20 holes, but we have reason to 21 believe from observation of the pools of water on the 22 ground that we need 30 holes, sort of thing. 23 CHAIR OF THE INQUIRY: This is boreholes? 24 A. Yes. 25 CHAIR OF THE INQUIRY: Thank you. 26 1 MR MACKENZIE: Thank you, my Lord. 2 Go to another document, please, now. TIE00500425. 3 Now, this is the minute, you can see from the top -- 4 blow up the top, perhaps. “BSC/SDS Design Assurance, 5 16 September 2008”. You were one of the people present, 6 Mr Glazebrook. 7 If we then scroll down to purpose, and we see the 8 purpose of this meeting was: 9 "To enable tie/CEC to understand how SDS will issue 10 complete, coherent, assured design which will be 11 ultimately acceptable. This is against the background 12 of: Continuing programme slippage; IFC design preceding 13 full IDC and DAS processes." 14 I think is IDC interdisciplinary check? 15 A. Yes. 16 Q. And DAS must be design assurance statement? 17 A. That's correct. 18 Q. Then: 19 "The plethora of CEC comments still arising on 20 approvals submissions ..." 21 I just take you to this document, Mr Glazebrook. 22 I wonder whether this may be an example of the sort of 23 issues and difficulties still being experienced with 24 design after financial close; is that correct? 25 A. Absolutely. 27 1 Q. I don't think the document itself has any particular 2 value. 3 If we could then please go to March 2011, the 4 Mar Hall mediation. I don't think you had any part in 5 the mediation; is that correct? 6 A. I didn't have any part at all. I didn't even know it 7 was happening. 8 Q. If we then please go to another document which reports 9 on progress after the agreement reached at mediation; 10 the document is CEC02083973. 11 We can see the top right-hand corner, this is 12 a report on progress since completion of Heads of Terms 13 to 8 April 2011. 14 If we scroll down, we can see all the logos of the 15 Council, Bilfinger, Siemens. We can see the report is 16 prepared by Colin Smith of HG Consulting, and at the 17 bottom right-hand corner, it's been reviewed by 18 Martin Foerder and Mr Brandenburger for the BBS 19 consortium. 20 If we go, please, to -- essentially this is, as it 21 states, reporting on progress since the Heads of Terms 22 agreed at Mar Hall. 23 If we go, please, to page 118 and see what it tells 24 us about design. 25 Over the page, please. Sorry, I think it was 28 1 page 118. Could we blow up the page, please. 2 So this is an email from Andy Conway, 5 April 2011, 3 sent to Sue Bruce and others, subject, "Tram - CEC 4 Approvals". 5 Mr Conway is giving an update. Scroll down to the 6 table. I think we'll see something quite dramatic. 7 So we can see as of 24 March 2011, the open or 8 outstanding technical approval comments were 2,782. 9 Within about two weeks, by the bottom of the table, 10 5 April 2011, that was down to 85. So what appears to 11 have happened is that, in short, all these outstanding 12 matters have been cleared within about two weeks. 13 Did you play any part in that process, 14 Mr Glazebrook? 15 A. That was just about exactly the time when I left the 16 project. I recall that Andy, who was a very 17 well-intentioned and effective person for CEC, had begun 18 to galvanise his team and enlarge his team to address 19 all the comments and try and close the issues, and 20 I don't personally recall being involved in that, but 21 I know there was a lot of CEC activity around that time, 22 which was very encouraging and was the right thing to 23 do. It was a shame it hadn't happened a lot earlier, 24 but at least it happened then. 25 That appears to show the success of what I said 29 1 yesterday many times, which is that when people engage 2 and collaborate, this is exactly the sort of 3 dramatically beneficial result that ensues. 4 Q. Is there any reason why the sort of clearance we see in 5 this table couldn't have happened much earlier? 6 A. The only reason would be, as I said, the lack of 7 engagement, possibly of lack of experience. What I mean 8 by that is that in any acceptance scenario, it's very 9 hard to get a complex design which could possibly fulfil 10 all specification criteria. It's almost impossible. 11 What is needed in such a case is for people like 12 Andy, in the case of the Council, who have many years' 13 experience of looking at stuff and understanding, 14 I guess, you could say what really matters and what 15 matters less and can be tolerated; and certainly his 16 involvement around then increased, and his skill and 17 experience and judgment and ability to balance the 18 opposing factors of: yes, maybe that's what we want, but 19 we have to accept this slight deviation from that for 20 practical progress reasons; and it probably reflects his 21 involvement, and as I say, the galvanising of his team 22 into problem resolution mode, rather than rejection 23 mode. 24 Q. Yes. I may have to ask others, but the answer may be 25 very simply that direction came from the top: sort this 30 1 out. 2 A. Could well be, yes. 3 Q. Then just to complete this document, at page 120, 4 please, we can see just really to note this. If we blow 5 up this page a little, if we can. We see under "Design 6 Issues": 7 "Timelines for close out of design." 8 Then: 9 "CEC have stated that timeline for Airport to 10 Haymarket is 7 April 2011 which concurs with Infraco 11 understanding; however, CEC believe deadline for 12 remainder of route is 1 September 2011. Infraco 13 understand that deadline is end of April 2011 and are 14 aiming for this date. To date, CEC and Infraco working 15 very well together to close out remaining issues." 16 I think in short there seems to have been an 17 intention to close out any and all outstanding design by 18 either 7 April or, at the latest, 1 September 2011. 19 Again, in short, is there any reason why that 20 couldn't have happened much earlier? 21 A. The Airport to Haymarket section of course is not street 22 running. So it's in acceptance and risk terms, it's 23 somewhat easier than the street running bit from 24 Haymarket to York Place. 25 The majority of planning, Historic Scotland's public 31 1 realm drainage, those sort of issues, they occurred on 2 the section from Haymarket to York Place. So that was 3 always a harder section to get to closure on. 4 Q. Thank you. We can put that document to one side. 5 Just a few final questions arising from your 6 statement, Mr Glazebrook. I'm not going to ask you 7 about MUDFA and MUDFA design, because I think you have 8 said your role in that was peripheral, and that was for 9 others to manage; is that correct? 10 A. That's correct. 11 Q. Perhaps, I think, Graeme Barclay was tie's MUDFA 12 manager. Is he the main witness we should ask MUDFA 13 questions to? 14 A. Yes. 15 Q. So finally the question of management and governance. 16 If we go, for example, to page 44 of your statement, and 17 towards the bottom, question 81, we had asked, in the 18 first sub-question: 19 "Did you have any concerns, at any stage, in 20 relation to TIE's management of the tram project?" 21 You said: 22 "The Chairmen and Board were distant and 23 disconnected." 24 Pause there to clarify one thing. A number of times 25 in your statement, Mr Glazebrook, you refer to the Board 32 1 as having either done something or ought to have done 2 something. By the Board, do you mean the Board of tie 3 ltd or the Tram Project Board or what? 4 A. I think by that comment, I really mean the people above 5 the Project Director. So my use of the word "Board" is 6 a general term. 7 Q. Well, tie Ltd or also the Tram Project Board? 8 A. I think in answer to that particular question, probably 9 both. 10 Q. When you say: 11 "The Chairmen and Board were distant and 12 disconnected. Their focus became one of keeping the 13 media happy, without necessarily finding out what 14 actually was happening." 15 Does that comment relate to before May 2008 contract 16 closed, also to after then, or what? 17 A. Throughout. At no time did I see any meaningful 18 presence on site or discussing with people like myself 19 and my team, or indeed with sitting down with SDS or 20 Infraco in a fact-finding sense. 21 That just didn't happen. It's always -- it's 22 inevitable that if you have a project which is managed 23 by email and meeting, it will cause decisions to be made 24 on the basis of presented words, rather than necessarily 25 actual fact. 33 1 Q. Now, when you say a project managed by email and 2 meeting, how do you say a project ought to be managed? 3 A. I'm sorry? Say that again? 4 Q. I'm sorry. You say that when you have a project which 5 is managed by email and meeting. I'm just wondering how 6 else should one manage a project that's not by email and 7 meeting? 8 A. If it's evident -- if I were a chairman of a board or 9 whatever, and whenever I have been in charge of 10 significant-sized organisations, when things start to go 11 wrong, you have two choices. You can just listen to the 12 things that are presented to you or you can actually 13 take the trouble to go out and find out from the front 14 line, from the coalface, metaphors such as that, what 15 actually is happening from the people who are facing the 16 day-to-day issues. But that was entirely absent. 17 Q. So that's the key to it? 18 A. Yes. 19 Q. It's not the board and chairmen meeting their more 20 senior staff. It requires the board and the chair to go 21 and speak to the people at the coalface? 22 A. Yes, not to do so is foolish, in my opinion. 23 Q. You also say in your answer that: 24 "The senior project team enjoyed flexing their egos 25 and didn't understand teamwork." 34 1 What do you mean by that sentence? 2 A. I don't think I can really add to that. It's 3 self-evident that had the teamwork been effective, a lot 4 of these problems would have been managed out, designed 5 out, would have disappeared. But they didn't. It just 6 seemed to be the case that the ethos got more and more 7 toxic and less and less effective and focused on 8 problem-solving. 9 Q. I understand the reference to teamwork. I think I'm 10 less sure by what you mean by "flexing ... egos"? 11 A. I'm sure that you can imagine that if you have a senior 12 team full of people who have lots of diverse experience 13 and, indeed, their own personalities, that sometimes it 14 can be the case that personalities supplant other 15 behaviours. 16 Q. Again, for the avoidance of doubt, who do you mean by 17 the "senior project team"? 18 A. The people at my level, in other words, underneath the 19 Project Director. It was very frustrating at that time. 20 Exceptionally frustrating. 21 Q. Sorry, do you say "the people ... in other words, 22 underneath the Project Director"? 23 A. Pardon? 24 Q. Did you say "the people ... underneath the Project 25 Director"? 35 1 A. Yes. 2 Q. So can you give us any examples? 3 A. I would prefer not to. 4 Q. The difficulty I think is, Mr Glazebrook, when you make 5 essentially allegations against people without naming 6 them, it's very hard for them to have the right to reply 7 because they don't know if they're among the people 8 being accused of something or not. 9 A. Yes, I understand that remark. What I'm trying to 10 convey here is my feeling. The question is: did you 11 have any concerns? And I'm trying to answer that 12 question. 13 CHAIR OF THE INQUIRY: So you are saying that your feelings 14 in this regard relate to managers at the same level as 15 you? 16 A. Yes. 17 CHAIR OF THE INQUIRY: Is that all of them or is it -- are 18 there any exceptions? 19 A. I think the best way I can answer that is to say that, 20 again, it's sort of self-evident that -- the word 21 I would use is the toxicity of the relationship at that 22 time between the main parties, being tie and Infraco, 23 had become so bad that progress was painfully slow, 24 very, very difficult. Again, I feel that it's -- the 25 results speak for themselves. Had it been 36 1 a relationship founded on a more professional, objective 2 rather than subjective approach to collaborating, the 3 results would have been such that, for instance, the 4 Mar Hall mediation would not have been required. 5 CHAIR OF THE INQUIRY: Well, I can understand that, but 6 you're speaking about the egos of individuals somehow 7 inhibiting progress here, and is it possible to 8 elaborate upon that? 9 A. I would prefer that my words stand as I've written them 10 there. As I say, this is the impression. It's an 11 impression based on my day-to-day experience which was 12 exceptionally frustrating and made me frankly glad to be 13 relieved of continuing on the project from that point 14 onwards. 15 MR MACKENZIE: Thank you. Just finally in this answer, 16 Mr Glazebrook, you say that it seemed to you as though 17 the commercial team were focused on numbers arising from 18 stuff they didn't understand. By the stuff they didn't 19 understand, by that do you mean engineering and design 20 matters. 21 A. Exactly so. 22 Q. Thank you. I think finally, if I could then please go 23 to page 45 of your statement. We asked you some final 24 thoughts in question 84. 25 Just before I put these matters to you, could I ask 37 1 you this question. Which body or organisation did you 2 understand was in charge of the tram project? 3 A. tie. 4 Q. Was that throughout your involvement? 5 A. Yes. 6 Q. Then under question 84, we asked for any final comments 7 you had, and one, how your experience of the tram 8 project compared with other projects you had been 9 involved in. I think we can see what you say there. 10 Then in sub-question 2 we asked: 11 "Do you have any comments, with the benefit of 12 hindsight, on how the design difficulties and delays 13 might have been avoided or reduced ..." 14 You say: 15 "Clear specification." 16 Does that come back to what we discussed earlier as 17 the Council requiring to give clear specification, or is 18 it a reference to something else? 19 A. It's principally the Council's requirements, yes. 20 Q. Organisational clarity, I think we can understand. 21 You refer to experienced people. In which roles? 22 A. In all roles involving design principally, but actually 23 in all roles generally. 24 I think if people are experienced in major complex 25 multi-disciplinary projects generally, they inherently 38 1 will understand better who should do what and why it's 2 better that they do so. In other words, to reduce the 3 risk arising of pots being stirred, if you like, by 4 people where the results will be less beneficial. 5 Q. Did you consider that experience was in any way lacking 6 within tie? 7 A. Absolutely. 8 Q. Any particular posts or is it a comment on the 9 organisation in general? 10 A. It's a general comment. 11 MR MACKENZIE: Thank you. I have no further questions. 12 CHAIR OF THE INQUIRY: It might be suggested that some of 13 the people in tie had experience of being involved in 14 other contracts, but is the point that you're making 15 that it's not a case of finding a group of individuals 16 who have been involved in a project. What you're 17 looking for is a team who have experience as a team of 18 working in a project of this sort? 19 A. Yes. Yes, I agree with that. 20 CHAIR OF THE INQUIRY: Thank you. 21 I don't think anyone else has any questions. So 22 thank you very much, Mr Glazebrook. You're free to go. 23 Technically you're still subject to a citation and may 24 be recalled, but I hope that's not necessary. Thank you 25 very much. 39 1 A. That's fine, thank you. 2 (The witness withdrew) 3 MR MACKENZIE: My Lord, the next witness is Damian Sharp. 4 CHAIR OF THE INQUIRY: Yes. I think Mr Lake is coming in to 5 take the first part of Mr Sharp's evidence, to deal with 6 issues that have been raised by some core participants. 7 After that, he'll leave and you'll take over. 8 MR MACKENZIE: Yes. 9 MR DAMIAN SHARP (affirmed) 10 CHAIR OF THE INQUIRY: You are going to be asked some 11 questions, Mr Sharp. If you listen to the question and 12 answer it as directly as possible. If it's capable of 13 being answered yes or no, that should be the answer, but 14 you may then go on to explain any qualifications that 15 you have. 16 Could you also speak clearly and into the 17 microphone, so that everyone can hear what you are 18 saying, and finally, speak relatively slowly so the 19 shorthand writer can keep up with what you're saying. 20 Mr Lake. 21 Examination by MR LAKE 22 MR LAKE: Mr Sharp, could you state your full name, please. 23 A. Damian Patrick Sharp. 24 Q. We have your address in the Inquiry records. What is 25 your present occupation? 40 1 A. I'm the Consultancy Director of Ascendancy Water 2 Limited. 3 Q. I think previously you had a career with the Civil 4 Service which included Transport Scotland during the 5 period of the tram project? 6 A. Yes. 7 Q. After that you went on to work for tie? 8 A. Yes. 9 Q. Could I ask you, please, to look at a document which 10 will be shown on the screen and you should also have it 11 in hard copy in front of you. It's referenced 12 TRI00000085_C. 13 Do you recognise that as the statement you have 14 given for the purposes of this Inquiry? 15 A. Yes. 16 Q. I think if you look at the hard copy, you can see it's 17 been signed by you on the last page? 18 A. It has. 19 Q. Are you content that that be adopted as your evidence 20 given to this Inquiry? 21 A. I am. 22 Q. Thank you. 23 I just want to ask you a few other questions about 24 some issues arising out of it. I would like you, 25 please, to look at a document which you will see on 41 1 screen which has reference CEC01875336. You can see 2 from looking at the front cover there that it's the 3 Interim Outline Business Case from May 2005 prepared for 4 the Edinburgh Tram Network. 5 A. Yes. 6 Q. With the date of 30 May 2005. Do you recall seeing this 7 during your time with Transport Scotland? 8 A. Yes, I do. 9 Q. Could I ask you please to look at page 125. If you look 10 at the heading halfway down the page and the text below 11 it, we can see that the heading is "Key Funding 12 Assumptions", with a sub-heading of "Scottish Executive 13 Grant". It says: 14 "The financial model assumes that the grant from 15 Scottish Executive is capped at GBP375 million to be 16 paid either upfront as a capital grant, as LPFS during 17 operations, or as a combination of both." 18 Just in passing, do you know what LPFS stands for? 19 A. I can't remember exactly what it stands for, but it's 20 essentially as contributions to fund servicing of debt. 21 Q. Dealing with the major matter there, we see that the 22 grant of GBP375 million was to be capped at that level. 23 Did that reflect your understanding at the time? 24 A. It reflected that -- it reflected tie's understanding. 25 Ministers had been slightly -- hadn't used the word 42 1 capped at that time. They had said that 375 million 2 would be available, and they hadn't confirmed whether 3 that would be capped at that. They had also made it 4 clear to the City of Edinburgh Council that they should 5 not expect that there should be more funding than that 6 available. 7 Q. I think it's fair to say that there was an issue as to 8 even whether or not that GBP375 million would be indexed 9 to allow for inflation? 10 A. At that point, no indexation assumptions had been made 11 on any of the major public transport projects, including 12 the tram. 13 Q. I would like you to look at another document now. It 14 has reference TRS00002128. 15 We can enlarge the upper half of this. Do you 16 recognise this? 17 A. I do. 18 Q. We can see that it's a paper for the Minister of 19 Transport that was prepared by you in your capacity of 20 Head of Major Projects on 3 February 2006. 21 A. I agree. 22 Q. We look at the purpose of it, just to provide some 23 context. It was to recommend that: 24 "... you [that is the Minister] accept the phased 25 approach to the construction of Edinburgh Trams agreed 43 1 by City of Edinburgh Council on 26 January, and that you 2 agree in principle to indexation of the GBP375 million 3 previously-committed Executive funding in line with 4 general ... cost inflation." 5 A. "... general construction cost inflation." 6 Q. Thank you. 7 A. An important difference. 8 Q. So this is following on from that matter of whether or 9 not there would be indexation and was recommending that 10 the 375 should be increased according to that index? 11 A. That's correct. 12 Q. If you could look quickly, please, at the second page of 13 this. You can see, just above halfway, there's 14 a heading, "Expectations of and conditions on CEC". 15 Then look at paragraph 11 underneath that, where you 16 say: 17 "We have made it clear to City of Edinburgh Council 18 and Tie that the Executive commitment is capped and any 19 future shortfall would be for CEC and Tie to deal with." 20 Were you involved in making it clear to the Council 21 that it was capped? 22 A. Yes. 23 Q. Is that on the basis you've already discussed, that they 24 should not expect there would be necessarily more money? 25 A. They were not entitled to expect any further 44 1 contribution, and that was the Executive's position, 2 although I would say that both CEC and Ministers 3 understood that that was a position that was not 4 necessarily sustainable in the long term. 5 Q. The fact you say to the Minister: we have made it clear 6 to the Council and tie, this matter; it sounds like 7 you're providing the Minister with some reassurance of 8 this matter? 9 A. Yes. 10 Q. Did the Minister particularly want it made plain to 11 those two bodies that there was not necessarily more 12 funding available? 13 A. Both the Minister for Transport and the Minister for 14 Finance were very clear that that was the message that 15 we had to convey to CEC and to tie. 16 Q. Thank you. Can we look then at another document. It's 17 reference is TRS00002205. 18 If we enlarge the upper half of the page again, we 19 can see there's a heading. This is KPMG notes from a 20 meeting with Transport Scotland on 6 March 2006. The 21 attendees from Transport Scotland were yourself, 22 John Ramsay and Lorna Davis? 23 A. That's correct. 24 Q. Do you recall this meeting? 25 A. I don't recall the specific meeting, but I had a variety 45 1 of meetings with KPMG, and I'm familiar with the issues 2 that are in this note. 3 Q. Thank you. Could we look at the second page of this, 4 the lower half of the page. 5 You see there's a heading, "Gain/Pain" there. What 6 is being said is: 7 "There will be no "Pain" mechanism. All costs over 8 and above the Scottish Executive's budget (including 9 headroom) will have to be funded by City of Edinburgh 10 Council. Transport Scotland accept that City of 11 Edinburgh Council have access to limited additional 12 funding, and that the maximum budget for the scheme is 13 likely to be in the GBP535 million range (GBP490 million 14 from TS and GBP45 million from the City of Edinburgh 15 Council)." 16 Is that another example of restating this position 17 that there will be no more from the Ministers than the 18 sum that had then been promised? 19 A. Yes. 20 Q. One more document I would like you to look at. Two more 21 documents in this regard. Could you look at 22 TRS00003241. Enlarge the upper half of the page. We 23 can see here this is a paper directed to the Investment 24 Decision Making Board in respect of the Edinburgh Tram 25 Network. 46 1 Firstly, what was the Investment Decision Making 2 Board? 3 A. The Investment Decision Making Board was an advisory 4 group to which all major -- investment decision-maker is 5 a formal position within Government for major capital 6 projects and the investment decision-maker for all 7 projects within Transport Scotland's remit is the 8 Chief Executive, at that time Dr Malcolm Reed. 9 However, in exercising that function, Dr Reed 10 established the Investment Decision Making Board to help 11 him undertake that function, but ultimately he was the 12 investment decision-maker. So they advised him, but he 13 was able to agree or disagree with them as he wished, 14 provided that that was -- he would then have to justify 15 any disagreement that he had with them. 16 Q. From what you are saying it sounds like this was quite 17 a high level decision-making function? 18 A. Yes. 19 Q. Large sums of money -- these were big decisions? 20 A. Yes. Typically, to go to the Investment Decision Making 21 Board, you would be talking about investment decisions 22 of GBP50 million or more. 23 Q. So it's fair to say you would put some care and 24 attention into producing papers like this? 25 A. Absolutely. 47 1 Q. If we just look at page 3 of this, we can see that this 2 paper actually bears your name and a date of 3 December 2006. 4 A. Yes. 5 Q. We jump back to the second page of it then and look at 6 the lower half. You can see under paragraph 6, you say: 7 "The board is invited to note ..." 8 The second bullet point is: 9 "Ministers are committed to a capped contribution of 10 GBP375 million in 2003 prices towards phase 1a ..." 11 Then you refer to a Minister's statement? 12 A. Yes. 13 Q. This is really a reiteration of what we've seen in the 14 last few documents, that it was a capped contribution, 15 and it was GBP375 million in 2003 prices, which would be 16 indexed up the way? 17 A. That's correct. 18 Q. The final document in this section is -- would you look, 19 please, at TRS00003584. Enlarge the upper half. We can 20 see that this is an email from you on 30 January 2007 to 21 Lorna Davis. I think that was one of your colleagues; 22 is that correct? 23 A. Lorna Davis worked for me, yes. 24 Q. And also two others of your colleagues, Matthew Spence 25 and John Ramsay? 48 1 A. Yes. 2 Q. If we look at the lower half of the page, please, you 3 will see there's a paragraph that begins: 4 "It remains a concern that it is not apparent whether 5 or not the value of inflation on our contribution is 6 calculated consistently with inflation on the overall 7 scheme estimate. We are taking steps to resolve this as 8 part of the review of the scheme estimate following 9 receipt of Infraco bids." 10 Is that part of the indexation that we've already 11 been discussing? 12 A. It is. 13 Q. Then we see there's an indent and highlighted passage 14 saying: 15 "At this stage it is not possible for 16 Transport Scotland or Scottish Ministers to provide any 17 specific guidance about additional capital funding which 18 may be forthcoming." 19 In fact, I think if we go up the page slightly, 20 before the upper indent, you say: 21 "In terms of the specific letter proposed, I have 22 highlighted the two passages that go significantly 23 beyond Ministers' stated position." 24 Do you see that? 25 A. Yes. 49 1 Q. So that second highlighted passage was one that you 2 considered went beyond the Ministers' stated position? 3 A. It is. 4 Q. Can I see the text below that second highlighted 5 passage. You note that: 6 "I consider that this statement is not a full 7 statement of Ministers' position. Ministers have said 8 repeatedly that there won't be further funding beyond 9 the GBP375 million indexed - Nicol Stephen gave the very 10 simple answer "No", to whether there would be any 11 possibility of funding increase when giving evidence to 12 the Tram Bill Committees. The subsequent inclusion of 13 indexation did not alter this principle and Mr Scott has 14 also confirmed publicly that there will not be 15 additional funding available for the tram network. 16 Transport Scotland and Scottish Ministers have 17 therefore given specific guidance about additional 18 capital funding which may be forthcoming - there won't 19 be any." 20 That's quite a pointed statement, isn't it? 21 A. It is. 22 Q. It seems to be wanting to remove any ambiguity about the 23 matter at all? 24 A. Yes. 25 Q. And reflects what statements have been made, including 50 1 statements to the Tram Bill Committee? 2 A. It does. 3 Q. Is that consistent with the other documents that we've 4 already looked at this morning? 5 A. It is. 6 Q. Thank you. 7 CHAIR OF THE INQUIRY: Could you just remind me, what 8 ministerial role at the time when he gave evidence to 9 the Parliamentary Committee did Nicol Stephen hold? 10 A. He was Minister for Transport, and I think some other 11 matters at that time. 12 CHAIR OF THE INQUIRY: And Mr Scott, when he made the -- 13 Tavish Scott. 14 A. Tavish Scott was Minister for Transport when he made 15 those statements. 16 CHAIR OF THE INQUIRY: So they were both Ministers for 17 Transport at different times. 18 A. Yes. 19 CHAIR OF THE INQUIRY: Thank you. 20 A. I would like to refer to the sentence that follows. 21 MR LAKE: Obviously, yes. 22 A. "It is of course possible that this position will 23 change." 24 So we were insisting on consistency with Ministers' 25 public statements, which were that the money was capped 51 1 and there would be no additional funding. 2 Q. Presumably it's always possible that a matter changes, 3 if in future Ministers have a change of heart and make 4 additional funding available? 5 A. Yes. 6 Q. Is it something that's quite common, that the promoters 7 of a scheme for the recipients of grant money are 8 hopeful that more money will be available? 9 A. They are hopeful and in this specific instance they 10 were -- City of Edinburgh Council were aware of the 11 arrangements that had been reached, both in relation to 12 the Larkhall-Milngavie rail scheme and in relation to 13 the Stirling-Alloa-Kincardine Rail Scheme. 14 Q. The Stirling-Alloa-Kincardine, we have heard was 15 something which ran over time and went quite a bit over 16 budget? 17 A. Yes. 18 Q. Who met that budget overrun in 19 Stirling-Alloa-Kincardine? 20 A. Very largely Transport Scotland. 21 Q. And in the other one, did you say it was Larkhall to 22 Milngavie? 23 A. Larkhall to Milngavie, which in fact didn't overrun its 24 budget, but an arrangement was reached and agreed in -- 25 with Strathclyde Passenger Transport who were promoting 52 1 Larkhall to Milngavie, that in the event that it overran 2 the budget, I think it was 85 per cent would be met by 3 the Scottish Government and 15 by Strathclyde Passenger 4 Transport, and that if it came in under budget, then 5 savings would be shared in the same ratio. 6 There was a clear understanding that whatever you 7 say publicly, when you get down to signing contracts, 8 you cannot guarantee that the maximum available funding 9 will be there, and City of Edinburgh Council were clear 10 that they wanted further discussions with Ministers 11 about what would happen in the event of an overrun where 12 it was expected that the available funding would be 13 sufficient, but in reality it wasn't. 14 I had said to City of Edinburgh Council -- I had 15 initial discussions with City of Edinburgh Council 16 officials on that matter, and in my statement I have 17 referred to a document in relation to that, but it was 18 clear that -- I made it clear to them that those 19 discussions could not proceed any further in advance of 20 the May 2007 parliamentary elections because they were 21 not consistent with the Partnership Agreement 22 commitments, which is with the 375 million capped. 23 Q. The Partnership Agreement, to be clear, that is the 24 coalition partnership then forming the administration in 25 Scotland? 53 1 A. Yes, which ran from May 2003 to May 2007. So Ministers' 2 position was fixed until May 2007, but CEC were welcome 3 to revisit the matter with incoming Ministers after 4 that. 5 Q. So there was a hope on the part of CEC, and no doubt tie 6 as well, that additional monies would be made available 7 as they had on these other projects? 8 A. Yes. 9 Q. Now, the Ministers would obviously be aware of these 10 other projects, the Larkhall-Milngavie and the 11 Stirling-Alloa-Kincardine? 12 A. Yes. 13 Q. It was in the knowledge of those projects that they had 14 made the statements as to caps which had been referred 15 to in these documents? 16 A. Yes. They made the statements because the dynamic of 17 the Partnership Agreement was that they would commit to 18 delivering what was in the Partnership Agreement, no 19 more, and no less. 20 And this was particularly critical in relation to 21 another project in the portfolio, and therefore 22 a consistent standard had to be applied across all 23 projects. As I say, the life of the Partnership 24 Agreement ran out in May 2007 and new political 25 decisions would need to be made at that point. 54 1 Q. What was the other project? 2 A. The Borders railway. 3 Q. So it was a concern that if more money was to be given 4 to the Edinburgh Tram Network, that would be seen as 5 undermining other projects, in particular Borders 6 railway? 7 A. Potentially it would certainly undermine the ability of 8 Ministers to do exactly what they had said in relation 9 to the Borders railway, and Ministers, especially 10 Liberal Democrat Ministers, were also saying that if 11 you're going to insist on sticking exactly to the letter 12 of the wording in relation to the Borders railway 13 project, then you must stick exactly to the letter of 14 the wording in relation to all of the other public 15 transport -- major public transport projects. 16 Q. So from that description, it doesn't sound like there 17 was total freedom on the part of Ministers just to do as 18 they wished, standing the Coalition Partnership 19 Agreement? 20 A. No, having signed the Partnership Coalition Agreement, 21 it had set boundaries on what they were willing and able 22 to do ahead of an election in May 2007. 23 Q. In relation to that question of additional funding then, 24 I would like you to look at some papers from the Tram 25 Project Board. 55 1 I think Bill Reeve represented Transport Scotland on 2 the Tram Project Board; is that correct? 3 A. That is correct. Although in practice I attended many 4 meetings when Bill's diary did not allow him to attend. 5 Q. I think hopefully a number of these meetings we will 6 look at, these will be ones that you were familiar with. 7 Could we look therefore, please, at the minutes of 8 the January tram project -- the papers for the January 9 Tram Project Board, with reference CEC01360998. You can 10 see from the front page of this, this is the Tram 11 Project Board's papers for Tuesday, 23 January. You see 12 that's 2007. 13 If we jump forward to page 34, my error, I should 14 have said 32. Rotate that. 15 Do you recognise this part of the document? 16 A. I do. I recognise the format. 17 Q. Is it a risk register from the tram project? 18 A. It is. 19 Q. And did you consider these in the papers that were 20 provided to you for the Tram Project Board meetings? 21 A. Yes. 22 Q. Could we go on two pages to page 34 that I referred to. 23 I'm interested in risks, numbers 268 and 269. We can 24 see 268 is -- the risk description is: 25 "Funding not secured or agreements not finalised 56 1 regarding the total aggregate funding including 2 GBP45 million City of Edinburgh Council contribution; 3 developer contributions; cashflow/funding profile; 4 financial covenant; and public sector risk allocation eg 5 inflation." 6 Then 269 is: 7 "Agreement on financial overrun risks sharing has 8 not been reached between CEC and TS due to doubts over 9 costs staying in budget." 10 Now, that second of those two risks, 269, is that 11 the one you are referring to about the desire to have an 12 agreement as to cost overrun? 13 A. Yes. 14 Q. We can see it is described as a potential showstopper to 15 the project if agreement is not reached. 16 A. That's correct. 17 Q. Are you aware, was there any such agreement ever 18 reached? 19 A. No such agreement was ever reached, other than 20 essentially Minister said: here is 500 million, all 21 additional costs are for the Council to accept. 22 Q. With hindsight, we can see that it wasn't a showstopper 23 after all; is that fair to say? 24 A. It turned out not to be a showstopper, but at this time, 25 CEC had not confirmed whether or not they would agree to 57 1 take what was essentially 100 per cent of the risk of 2 cost overrun. 3 Q. I would then like to go forward to the papers for the 4 next month's meeting, with reference CEC00689788. We 5 can see this identifies this document as the papers for 6 the meeting on 20 February 2007. One of the people to 7 whom they are addressed, we can see, is Bill Reeve on 8 the lower half of the page? 9 A. Yes. 10 Q. In practice would they come to you? 11 A. They would also have come to me. 12 Q. If we can look at the third page of this, please, we can 13 just see once again, as we saw before, the agenda laid 14 out of all the matters that had to be considered? 15 A. Yes. 16 Q. Item 10 there, the matter to be considered at this 17 meeting was tram funding, including Transport Scotland 18 to grant funding and the development of the 19 Transport Scotland/CEC funding contract, including 20 risk-sharing? 21 A. That's correct. 22 Q. We see -- just look at the minutes. We can see they 23 start on page 5. Then we look over to page 6. We look 24 at the lower half of the screen, we can see reference to 25 the risk 269, which we saw in the risk register. It's 58 1 noted there that -- go down a bit: 2 "This relates to the City of Edinburgh 3 Council -/ Transport Scotland agreements on funding. It 4 was noted that the Summary Risk paper incorrectly 5 recommended this risk to be closed. This was an 6 oversight following the Design Procurement and 7 Development Sub-Committee and has already been processed 8 in the Risk register. The actions and resolutions of 9 the board discussion on funding is noted at point 4.0 10 below." 11 If we go straight to point 4, we can see 4.1 just 12 deals with the various sources of funding, but 4.2 is: 13 "Concerns were raised that no agreement had been 14 reached between City of Edinburgh Council and 15 Transport Scotland on the funding of any potential 16 over-runs. Any such agreement will need to be cognisant 17 of the interlocking commercial and contractual issues of 18 the 3 main contracts. Bill Reeve also highlighted 19 that information will be required on the availability 20 of funds from the Central Scottish Executive budget if 21 required. A meeting is to be arranged by the end of the 22 week commencing 22 January between CEC and 23 Transport Scotland to resolve the issue." 24 Was that meeting that's referred to there one that 25 was hoped to try and solve any question of contribution 59 1 towards overruns? 2 A. Yes. I feel that it was overly optimistic to expect it 3 to resolve the issue. That meeting did take place and 4 progress was made. As I said, there was no possibility 5 of resolving the issue before the May 2007 election. 6 Q. The fact that this has been left outstanding and was 7 described as a showstopper risk, at this meeting, just 8 for avoidance of doubt, that makes it clear there was no 9 agreement in place at that time between tie on the one 10 hand and Transport Scotland on the other? 11 A. It would be between CEC on one hand and 12 Transport Scotland on the other. No, you are correct. 13 Q. So as matters stood at that time, anything in excess of 14 the grant would have to be paid by the City of Edinburgh 15 Council? 16 A. That's correct. 17 Q. If you go to page 21 of this then, we see still the same 18 reference to 269, although there has been text added now 19 which says it's to be included in risk 268, by 20 Graeme Bissett, therefore close risk. 21 In fact from what we have just seen, risk wasn't to 22 be closed after all? 23 A. Yes, that it was still to be treated as separate from 24 268. 25 Q. If we then look at the next meeting, please, the 60 1 reference for that is TRS00004079. We can see from the 2 front page, these are the papers for the meeting that 3 was to take place on 20 March 2007. 4 A. Yes. 5 Q. If we look at page 6 of this, we can see that this 6 includes the minutes for the previous meeting, the one 7 we have just been considering, of February 2007? 8 A. Yes. 9 Q. That notes that you had been present at that meeting. 10 You're the first named participant on the right-hand 11 column? 12 A. That's correct. 13 Q. Can we go forward to page 10, please. If we look at 14 14.5, the item at the foot of the page, we can see that 15 it was noted there: 16 "The board agreed on the need for a funding contract 17 to be established by Transport Scotland and the City of 18 Edinburgh Council including risk allocation. This will 19 be essential in the discussion with the Infraco & 20 Tramco bidders ..." 21 I think that will be Graeme Bissett and 22 Stewart McGarrity: 23 "... to take matter of funding forward as a matter 24 of urgency." 25 A. Yes, I agree. 61 1 Q. Why was it essential in discussion with the bidders that 2 that funding arrangement be in place? 3 A. One of the major concerns that bidders had was that the 4 whole thing would collapse. That CEC would ultimately 5 not let a contract and the bidders would have spent 6 a very large sum of money preparing to bid and then not 7 winning. And sorry, then no contract being awarded. 8 Bidders were content to take the risk that they would 9 lose, but not that everybody would lose. And in my 10 statement there was a further -- there had been 11 a discussion about abortive bid costs in those 12 scenarios. 13 But bidders were still very concerned over either 14 delays or indeed complete failure to agree between CEC 15 and the Ministers such that there was actually a viable 16 project budget. 17 Q. Are you aware that in March 2007, there had been a grant 18 provided that would enable the utilities works, the 19 MUDFA works, to commence? 20 A. Yes. 21 Q. But there was no committed grant funding for the 22 installation of the whole of the tram infrastructure 23 itself? 24 A. That's correct. 25 Q. So at that moment Transport Scotland weren't in essence 62 1 on the hook at all? 2 A. Not for -- not in relation to the Infraco contract, no. 3 Q. Can we look then please, going forward, to page 80 of 4 this document. We see that this is a paper that's 5 relating to funding issues drawing everything together 6 and considering this point. There needs to be some 7 funding in place before they can safely move forward and 8 conclude contracts? 9 A. Yes. 10 Q. If we look, please, at page 84 of this, in fact I think 11 it will be easier if I put this in context by going back 12 to page 80. Apologies. 13 If we look at paragraph 1.4 there, you can see: 14 "Financial close for the principal contracts is 15 currently scheduled for October 2007, when tie will 16 contract with the preferred bidders for infrastructure 17 and vehicles. The business case capital cost is 18 GBP351 million. In order to enter into these contracts, 19 tie will require to have legally binding sources of the 20 funding to fulfil its obligations and there will 21 require to be documents in place between 22 Transport Scotland, City of Edinburgh Council and tie to 23 govern the funding." 24 That's the point, that you can't enter into 25 contracts unless you know you've got the funding to pay? 63 1 A. Yes. 2 Q. So that could be one of the critical concerns that tie 3 and the Council would have where it would be 4 a showstopper -- if Transport Scotland weren't going to 5 enter into any commitment to provide funding? 6 A. That's correct. 7 Q. If you look at paragraph 1.8 over the page, you can see 8 there, it's noted that there are three distinct 9 prospective funding streams. The first is funds from 10 Transport Scotland to City of Edinburgh Council and on 11 to tie to finance the Infraco and Tramco contracts, 12 including SDS after novation, and that's referred to as 13 construction and vehicle costs. The second is: 14 "Funds from Transport Scotland to City of Edinburgh 15 Council and on to tie for tie's internal costs ..." 16 If I read forward, the third is funds from 17 Transport Scotland to City of Edinburgh Council for land 18 costs. 19 A. Yes. 20 Q. Again, look over the page to the end of the page, 21 heading 3.0. It says there: 22 "In order to simplify the arrangements, it is 23 suggested that the City of Edinburgh Council 24 contribution be applied as follows, with the first step 25 being to finalise the estimated cash and in-kind 64 1 elements." 2 The first is that land contributions -- over the 3 page: 4 "Land contributions in-kind (including those under 5 section 75 agreements) should be fully applied to the 6 land costs. 7 Cash contributions should be applied in agreed 8 proportions to the land costs and tie direct costs." 9 This is just dealing with how the Council's 10 contributions were to be allocated? 11 A. Yes. 12 Q. To provide some context to the next paragraph I want to 13 look at, which is on page 84, and is a part of 5.1, if 14 you look at the upper half of the page, we see 15 sub-paragraph (c), there is a reference to cost overrun, 16 and it says: 17 "In any of the three funding streams ..." 18 Which are the three we have just seen: 19 "... but especially in construction & vehicles. 20 Although the outline funding structure requires 21 100% of the funding for construction & 22 vehicles to be grant awarded, it is anticipated that 23 Transport Scotland will require issues like cause of 24 overrun to be reflected (eg scope creep) with 25 potentially different proportions of 65 1 Transport Scotland/City of Edinburgh Council 2 contribution applying to different outcomes." 3 Now, firstly, are you aware of how the grant funding 4 was ultimately put into place and whether it was right 5 that particular elements of the contract were funded in 6 different proportions by the Council and 7 Transport Scotland? 8 A. Yes, there were a number of grant letters operating at 9 different times. Each grant letter had its own agreed 10 proportion of funding and then looking at the future 11 funding that had not yet been granted, there were 12 discussions ongoing about when would CEC contribute and 13 in what proportion. So at different times, for 14 different things, CEC would put in different 15 proportions, because CEC had some lumpy contributions it 16 could make, either in the form of actual land or in the 17 form of proceeds from the sale of land; whereas 18 Transport Scotland was more able to smooth out its 19 funding, so it could fund 100 per cent of some things at 20 sometimes, and then at other times it would fund a much 21 lower percentage because CEC could put in a bigger 22 percentage at that particular time. 23 So this is all about the balancing so that overall, 24 if it had cost -- well, at that point, 535 million, 490 25 would have gone in from the Government and 45 from CEC, 66 1 but that didn't mean that every GBP49 that the 2 Government put in, that CEC had to find GBP4.50. It 3 wasn't as rigid as that. It allowed flexibility over 4 time. 5 Q. Could we look then over the page, to page 85. Under the 6 heading, "Overview". It's noted: 7 "There are two extreme views of these arrangements. 8 At one end, it would be possible to adopt a completely 9 arms-length approach whereby Transport Scotland, City 10 of Edinburgh Council and tie act in the manner of client 11 and bankers. At the other end, the do-minimum approach 12 would be to address only those aspects which enable the 13 third party contractors to be comfortable that tie and 14 TEL will meet their obligations." 15 Now, just pausing there, in looking at these two 16 approaches, that's dealing with the question of 17 providing assurance that funding will be available? 18 A. Yes. 19 Q. So that third parties such as the contractors can be 20 satisfied that they are going to get paid at the end of 21 the day? 22 A. That's correct. 23 Q. One of the options is to adopt a client and bankers, 24 which presumably have enforceable and rigorous 25 agreements in place? 67 1 A. I'm not sure exactly what Graeme Bissett meant when he 2 wrote those words. I cannot recall. 3 Q. And the other one, which is a do-minimum approach, which 4 is to address only those aspects which enable the third 5 party contractors to be comfortable that tie and TEL 6 will meet their obligations, are you aware, was that 7 supposing that arrangements of provision of funding 8 would be made on an ad hoc basis? 9 A. Again, I cannot recall exactly what the discussions 10 were. I'm sure that I understood the detail at the 11 time, but I can't recall it now. 12 Q. Okay. I won't press that if you can't recall it. 13 Could I ask you then to look at another document, 14 please. It's the minutes for the next meeting, pages 15 for the next meeting, I should say. It's CEC00688584. 16 We see from the cover page that these are the papers 17 for the meeting on 19 April 2007. 18 A. Yes. 19 Q. Could we look at page 5 of this. We can see that these 20 are the minutes for the previous meeting on 20 March, 21 and if we look at item 1.3, it notes there: 22 "Action on funding for cost overrun between City of 23 Edinburgh Council/Transport Scotland outstanding. 24 DS..." 25 Which I think would be you, and AH, would that be 68 1 Andrew Holmes? 2 A. It would. 3 Q. "... reported that progress has been made at a meeting 4 held on 19 March with a number of actions agreed between 5 all parties. Feedback will continue to be provided to 6 the Tram Project Board." 7 As a result of that meeting, were matters still 8 open? There is no commitment yet from the Ministers? 9 A. Matters were still open, yes. 10 Q. So matters stood really where they had up to that time 11 with the Scottish Ministers' statement that there was 12 a cap? 13 A. In terms of resolution, that's correct. There had been 14 progress in discussing what sorts of options might be 15 acceptable to Transport Scotland and to CEC in the 16 future, but those were at the level of discussions of 17 possibilities. No decisions had been reached. 18 Q. I understand. If we look at page 34, a new risk appears 19 here as 917, which is: 20 "Transport Scotland and City of Edinburgh Council 21 have not agreed funding and risk allocation required 22 from Tram budget for Tram elements of work; Immunisation 23 Works on critical path and it is essential they are 24 complete by October 2009." 25 If you look at the effect of that, it perhaps sheds 69 1 some more light: 2 "Immunisation Works unable to proceed due to lack of 3 funding or works are delayed having a critical effect on 4 programme." 5 Is that dealing with something different from the 6 cost overrun we looked at before? 7 A. This is not dealing with the cost overrun for the 8 project as a whole. This is dealing specifically with 9 the signalling immunisation works that are required to 10 Network Rail's infrastructure between Haymarket and 11 Edinburgh Park as a result of the electrification, of 12 putting an electric tramway next to their 13 infrastructure. So it was possible that that would be 14 resolved in a global settlement on risk and cost 15 overrun, or it was possible that that particular issue, 16 because it was critical path, might be carved out and 17 dealt with separately and in advance. 18 Q. Could we look at page 48 of this. 19 We can see this is a paper to the Tram Project 20 Board, the subject of which is tram project funding, and 21 it's prepared by Graeme Bissett. Do you see all that? 22 A. Yes. 23 Q. And the text at the start, under the heading, "Tram 24 Funding Agreement", notes: 25 "At the last Tram Project Board meeting, we reported 70 1 on constructive meeting between City of Edinburgh 2 Council and Transport Scotland and the proposal that the 3 parties would move to seek agreement on a comprehensive 4 set of Heads of Terms which would be the basis for the 5 binding legal agreements needed to support financial 6 close." 7 Is that just a reiteration really of what we've seen 8 already? 9 A. Yes. 10 Q. There was nothing firm as yet, but there was a desire to 11 move towards something firm, which is necessarily to 12 close? 13 A. That's correct. 14 Q. Look then at the next meeting pack, the reference for 15 which is CEC01015822. 16 I have just got this pack and one more to look at. 17 CHAIR OF THE INQUIRY: Mr Lake, will you find a convenient 18 point. 19 MR LAKE: I was wondering if I looked at this pack and one 20 other, I think I might just take five minutes -- 21 CHAIR OF THE INQUIRY: Yes. 22 MR LAKE: We can see from the cover sheet, these are the 23 papers for the meeting on 24 May 2007. 24 A. Yes. 25 Q. Of course that meeting had been taking place after the 71 1 Scottish general election? 2 A. That's correct. 3 Q. If we go to page 5, these are the minutes of the 4 19 April meeting. If we look at 1.3, it says: 5 "Agreement on funding for cost overrun between City 6 of Edinburgh Council/Transport Scotland outstanding. 7 Damian Sharp reported further progress being made but 8 that it was unlikely to resolve quickly. Feedback will 9 continue to be provided ..." 10 Now, your view that it was unlikely to be resolved 11 quickly, why was that? Why do you say that? 12 A. Well, I said that on 19 April. 13 Q. Yes. 14 A. Scottish parliamentary elections were -- would be the 15 first Thursday in May, I can't remember what the exact 16 date of them would be. Following which there would then 17 be the process of forming whatever the new government 18 would be in the light of those elections. That process 19 had typically taken a couple of weeks. So I felt there 20 was no prospect of there being Ministers in post ready 21 to even look at this until the second half of May, and 22 even then, this might not be top of an incoming 23 Transport Minister, an incoming Finance Minister's list 24 of things to be concerned about. 25 That's in that context that I was setting 72 1 an expectation that on 19 April that they shouldn't 2 expect an answer in the next fortnight. 3 Q. Just to be clear then, on the date of this meeting, on 4 19 April, was there any commitment or even assurance 5 from Transport Scotland that funding over the 6 GBP500 million would be available? 7 A. No. 8 Q. If we go to look at the next pack, this reference 9 CEC01552419, we can see this is a pack for 14 June, and 10 if we go to page 5, these are the minutes of the 24 May 11 meeting. 12 This was really at that meeting, if we look, sorry, 13 at the following page, 3.6, that: 14 "The Board noted the current uncertainties arising 15 from the political situation would impact on progress 16 and costs and will, if decisions are delayed 17 significantly, impact on the rebaselined programme." 18 Of course Scottish National Party formed the 19 Executive -- the Government by this time and there would 20 be awareness that their manifesto had been that they 21 would scrap the tram project? 22 A. But that's broadly correct, on the day in question I'm 23 not sure that the Scottish National Party did yet form 24 an administration because they were a minority 25 administration, and it was -- took -- so I cannot 73 1 remember whether it's -- this meeting is days before 2 they formally became the Government or days after, but 3 the whole situation was uncertain, due to the failure of 4 the previous coalition partners to secure enough votes 5 to -- enough seats to form a new coalition. 6 Q. In terms of the -- standing the fact that the Scottish 7 National Party were the largest party, although 8 a minority, as you point out, and their manifesto had 9 been that they would not proceed with the tram project, 10 did it mean that any question of commitment from 11 Scottish Government was essentially an open one at that 12 stage, entirely open? 13 A. It was entirely open at that stage. 14 MR LAKE: Thank you, Mr Sharp. 15 My Lord, those are the only questions I sought to 16 direct to Mr Sharp. 17 CHAIR OF THE INQUIRY: We will adjourn now for -- until 18 11.45, to give the shorthand writers a break, and we 19 will resume then. 20 (11.25 am) 21 (A short break) 22 (11.45 am) 23 CHAIR OF THE INQUIRY: You're still under oath, Mr Sharp. 24 Examination by MR MACKENZIE 25 MR MACKENZIE: Good morning, Mr Sharp. 74 1 A. Good morning. 2 Q. Now, I would like to start, please, by asking a few 3 questions about your role in Transport Scotland. 4 Could we perhaps go to a short CV you have provided. 5 It's WED00000108. Can we go to page 2, please. We can 6 see from the top of this page that between 7 September 2000 and May 2003, you were employed in the 8 Development Department as Head of Public and Rural 9 Transport Branch; is that correct? 10 A. That's correct. 11 Q. Did you have any responsibility for the Edinburgh Tram 12 Project during this time? 13 A. I had involvement, but not responsibility. 14 Q. I understand. So you had some awareness of the issues 15 around in the project during that period? 16 A. Yes, and I was responsible for grants that were made for 17 the progress of the two Bills in that role, but the lead 18 responsibility for the Edinburgh Tram Network lay with 19 the people who also had responsibility for the 20 congestion charge. 21 Q. Thank you. We then see that between May 2003 and 22 October 2007, you were the Head of Major Projects, 23 initially in the Development Department and then in 24 Transport Scotland. I should just pause. The 25 Development Department of what? 75 1 A. The Scottish Executive. 2 Q. Yes. Transport Scotland, I think, came into being, was 3 it 2005? 4 A. Technically 1 January 2006. But it was operating in 5 shadow form in autumn 2005. 6 Q. Towards the bottom of this page, if we can scroll down, 7 please, we see the last paragraph, you explain that: 8 "As Head of Major Projects I reported initially to 9 Kenneth Hogg ... until Transport Scotland started 10 operating in shadow form in autumn 2005." 11 You then reported to Bill Reeve, the Head of Rail 12 Delivery; is that correct? 13 A. Yes. 14 Q. We can put that to one side, please. 15 Now, Mr Sharp, we know that tie were created by the 16 Council in 2002 to deliver a number of initiatives under 17 the Council's proposed new Transport Initiatives Scheme. 18 Now, when you were in your post at that time, in 19 2002, do you know why tie were created to deliver these 20 initiatives and projects? 21 A. Yes. tie was created for two -- well, three reasons. 22 One, to provide a vehicle that could actually afford to 23 pay the salaries that were being required to gain the 24 expertise, because that would break the Council's pay 25 structure and cause the Council great difficulty. 76 1 That's probably the least significant of the reasons. 2 Secondly, to give a kind of clear and unambiguous 3 focus to delivering the Edinburgh Local Transport 4 Strategy. tie had -- tie was to be there. That was 5 what it was for, and it would be able to give greater 6 focus than the Council which has a number of other 7 competing demands on councillors and senior officials' 8 time. 9 Thirdly, because Ministers had encouraged creation 10 of a special purpose vehicle on the grounds that City of 11 Edinburgh Council's track record in delivering transport 12 projects was patchy. 13 Q. Thank you. 14 CHAIR OF THE INQUIRY: Was the prospect of congestion 15 charging not also a consideration? 16 A. The prospect of congestion charges was why you needed to 17 deliver the transport strategy and you needed to do that 18 effectively, but congestion charging of itself didn't 19 require a separate legal entity. It was a kind of 20 pragmatic decision as to what will actually get the 21 things done. 22 CHAIR OF THE INQUIRY: But was the intention that the income 23 from congestion charging would be paid to tie, and that 24 tie would use that income for transport projects so the 25 public could see that the money levied under congestion 77 1 charging would also then be used for transport projects? 2 A. Yes. tie would be the vehicle that spent the upfront 3 investment before the charge came in, and that it would 4 then also then spend the congestion charging income in 5 further transport improvements in Edinburgh. 6 CHAIR OF THE INQUIRY: And would that not have another 7 benefit from -- if tie were the recipient of the 8 congestion charges, would that not have a benefit for 9 the City of Edinburgh in the sense that the income would 10 not affect the total income of the city? 11 A. Thinking back, my understanding is that the -- 12 technically, the congestion charging income would be the 13 Council's, but that Ministers had agreed that it would 14 not affect -- it would be ring-fenced and treated solely 15 for that purpose and wouldn't affect City of Edinburgh 16 Council's other income, whether from rates or council 17 tax or from block grant from Ministers. 18 CHAIR OF THE INQUIRY: So you understood that it was being 19 ring-fenced other than being ring-fenced within tie? 20 A. Yes. 21 CHAIR OF THE INQUIRY: Thank you. 22 MR MACKENZIE: Thank you, my Lord. 23 Mr Sharp, you mentioned the Council having a poor 24 track record with major projects. In your written 25 statement, I think you mentioned the City of Edinburgh 78 1 Rapid Transit Scheme busway, and also the Western 2 Peripheral road; is that correct? 3 A. That's correct. 4 Q. I think you also mentioned in your statement the Road 5 Congestion Scheme, but I think the public referendum 6 wasn't until February 2005. So that can't have been 7 a factor at the time? 8 A. That wasn't a factor in the setting up of tie. It's a 9 factor in the continuing -- when you are considering in 10 2006 and 2007 who should be delivering. It needed 11 a special purpose vehicle that wasn't the Council. 12 Q. Yes. We may come back to that. 13 Just finally on this point, I think you used the 14 word that the Ministers had encouraged tie to set up 15 a company -- encouraged the Council to set up a delivery 16 company like tie. Was it a requirement on the part of 17 the Ministers for the Council to get grant that they'd 18 created a company like tie or was it something less than 19 that, simply encouragement? 20 A. It wasn't a condition of grant. But my understanding, 21 and I wasn't present, but my understanding is that the 22 political discussion between Ms Alexander, who was the 23 relevant Minister at the time, and the then Head of City 24 of Edinburgh Council, Donald Anderson, was that: I'm 25 only going to go ahead with this if you put this into an 79 1 arm's length vehicle because I don't trust you, that the 2 Council itself can deliver. It would have been open to 3 the Council to convince Ms Alexander that she was wrong. 4 So it wasn't an absolute requirement, but it was a very 5 strong encouragement. 6 Q. Yes. We may hear evidence from a Council witness to the 7 effect that the Council had in any event decided 8 themselves to set up tie to deliver these range of 9 initiatives, and I assume that if we were to hear that 10 evidence, you would not be in a position to dispute 11 that? 12 A. I would not dispute that, no. 13 Q. Thank you. I would like to move on to another matter, 14 please. This concerns the Draft Final Business Case for 15 the tram project and Transport Scotland's comments on 16 it. 17 Do you remember being responsible within 18 Transport Scotland for gathering together 19 Transport Scotland's comments on the Draft Final 20 Business Case? 21 A. Yes. 22 Q. Could we now please go to those comments, and we will 23 find them in document TRS00004145. 24 If we look in the middle paragraph to "Background", 25 I'll just give you a minute to read that to yourself, 80 1 Mr Sharp. (Pause) 2 This suggests that a fairly thorough review of this 3 document took place on the part of Transport Scotland; 4 is that correct? 5 A. It was more than fairly thorough. 6 Q. So you say it was very thorough? 7 A. Yes. 8 Q. If we then please look at some pages in this document, 9 starting with page 4, please. In fact maybe just before 10 taking you through the pages, I should ask you the more 11 general question. 12 This document is dated 30 March 2007. Just standing 13 back a little, what were your main concerns in relation 14 to the Edinburgh Tram Project around this time? 15 A. That the Business Case was not strongly positive, as 16 Edinburgh Airport rail link was part of the base case. 17 That there were delays that had to be recovered. To an 18 extent, at this time we did not accept the programme 19 that was there, but had considered if the programme was, 20 as we realistically thought it would be, would we still 21 be supportive. So we had concerns about the programme. 22 We had some concerns about elements of the capital 23 cost, but not enormous concerns. There is a document 24 that I drafted that says it is likely, but not 25 inevitable, that it is affordable within the envelope of 81 1 funding available. 2 Q. I think you mentioned there were delays that had to be 3 recovered in any particular aspects of the project? 4 A. Principally in design at this point. 5 Q. Thank you. 6 If I could now then return to the document itself. 7 We were at page 4. 8 Under paragraph 5, "Project Scope", I'll just read 9 this paragraph out. It says: 10 "This is one of the areas where greater clarity is 11 required. It was Transport Scotland's understanding 12 that this section would effectively form the functional 13 specification of the project. It would therefore 14 effectively define the baseline scope of the project 15 from any changes (for whatever reason) could be formally 16 considered." 17 Can you explain, please, what is meant by "Project 18 Scope" and "functional specification of the project"? 19 A. What exactly was to be delivered, and that's a kind of 20 infrastructure type definition. And the functional 21 specification is what would it do once you've built it. 22 So it has to both -- there's no point in building 23 lots of infrastructure if the trams can't run at it at 24 the speeds that they are forecast to need to do to 25 operate in relation to the Business Case. 82 1 So it has to not just be physically constructed. It 2 has to be -- it has to do what the -- it has to deliver 3 the outcomes of the Business Case, I would say. 4 Q. Thank you. 5 To what extent, if at all, does design inform the 6 project scope and the functional specification? 7 A. Design deeply informs the functional specification, 8 although to an extent the design is the implementation 9 of the functional specification. But there is an 10 interaction between the two as design is developed. 11 It's sometimes necessary then to say: we have decisions 12 here and we take this decision and now, having taken 13 that decision, that is the specification, and we're not 14 going back to that without going through the proper 15 project control process. 16 Q. So would it be fair to say that the greater the 17 completion or development of design, the greater and 18 more precise one can be with the functional 19 specification? 20 A. Yes. Certainly in relation to preliminary design. When 21 it comes to detailed design, completing detailed design 22 will have less impact -- would make less change to the 23 functional specification, because the detailed design 24 should be delivering the functional specification. It's 25 only if it's found that in the detail it cannot, that 83 1 the functional specification will change. Preliminary 2 design is the thing that has greatest impact on the 3 functional specification. 4 Q. So once one has the preliminary design, one should be 5 able to define the functional specification? 6 A. Yes. 7 Q. On the question of Project Scope, is that at a higher 8 level again? 9 A. Yes. Project Scope includes how far, how many 10 tram stops, route, how big the trams are, and actually 11 how frequently they are able to run and things like 12 that. So it's a less detailed -- there may be many ways 13 to deliver the scope, but there will be fewer ways to 14 deliver the functional specification. 15 Q. Thank you. Then at the bottom of the page, we see the 16 paragraph: 17 "We would imagine early clarification of the 18 functional specification is desirable to help ensure the 19 smooth execution of the ongoing procurement processes." 20 So as well as functional specification being 21 something to be addressed in the Draft Final Business 22 Case or Final Business Case, it's also something which 23 will help the procurement process? 24 A. Yes. 25 Q. Over the page, please, to another matter mentioned. In 84 1 paragraph 6, "Governance", we see this paragraph states: 2 "This section needs to be strengthened 3 significantly. We were hoping that the broad governance 4 arrangements laid down in September 2006 would have been 5 developed both in terms of detail and scope to provide 6 specific reference to how the project would be managed 7 and controlled. This relates to the original 8 requirements to provide project management plans." 9 To pause there, why did the governance section need 10 to be strengthened significantly? 11 A. Because it did not fully reflect what had been agreed in 12 September 2006 as to what the project structure should 13 be, and what was agreed in September 2006, there was 14 supposed to be a level of specific detail about 15 delegated authorities and production of -- which 16 documents would be produced. 17 It needs to be strengthened in that there was an 18 absence of detail, if I recall correctly, rather than 19 what was there was fundamentally wrong. There was 20 supposed to be more detail and we had said that, and it 21 hadn't been delivered. 22 Q. When you refer to something having been agreed around 23 September 2006, agreed between whom? 24 A. Between -- strictly, between Transport Scotland and City 25 of Edinburgh Council, but tie were -- tie and TEL were 85 1 both parties to that and were in agreement with the 2 arrangements. 3 But since it's part of the funding, the strict 4 funding source grant was from -- was to be from 5 Transport Scotland to CEC. 6 Q. When you refer to the details of delegated authority, 7 did you mean within tie, or did you mean between the 8 various bodies and organisations involved in delivery of 9 the project? 10 A. Both, effectively. 11 Q. Thank you. Then going back to this document, please, at 12 page 5, under the heading "7. Procurement & 13 Implementation", we see the paragraph states: 14 "The timing of the Final Business Case means that it 15 comes at the end of the procurement process and the 16 Final Business Case need only cover a description of the 17 process used and the risk transfer achieved. At that 18 point Transport Scotland will be more concerned with 19 evaluating the practical implementation proposals." 20 The reference to "at that point", what is that 21 a reference to? Which point? 22 A. At the timing -- at the time of the Final Business Case. 23 Q. I understand. And what's meant by "Transport Scotland 24 will be more concerned with evaluating the practical 25 implementation proposals"? 86 1 A. That means that if you've got to the end of the 2 procurement process, there is little value in deciding 3 whether the procurement process was the right one or 4 not. That decision has been taken and has gone forward, 5 and at that point you're concerned with: has it 6 delivered the results it's supposed to deliver; not 7 whether it was theoretically the right one or not. 8 Q. Thank you. 9 Then go to the bottom of this page, please. We see, 10 second line from the bottom: 11 "Our main comments regarding procurement now 12 appertain to the associated risks and consequences of 13 failing to achieve the planned convergence and closure 14 within the required timescales. 15 Many of these risks relate to progress of design 16 and perhaps interfacing the utility design to core 17 infrastructure." 18 Now, you mentioned design earlier in your evidence. 19 But what's the reference to the interfacing utility 20 design to core infrastructure? 21 A. The utilities diversions were designed separately, but 22 in relation to the infrastructure design. So the remit 23 on utility diversions was, wherever possible, to remove 24 all utilities from a zone which is the swept path plus 2 25 metres and down to a certain depth. 87 1 That would not always actually be practical, in 2 which case they would have to be protected. But the 3 remit was to do that. You don't need a level of 4 detailed design, but you need a sufficiently finalised 5 infrastructure design to know where you are shifting the 6 utilities from and to. 7 Q. Just for the avoidance of doubt, sticking with that 8 sentence, what were the risks that related to progress 9 of design and perhaps interfacing utility design to core 10 infrastructure? 11 A. If we take the second one first, if I may, so 12 interfacing utility design to core infrastructure, 13 there's two risks there. One is that the core 14 infrastructure design is not sufficiently developed or 15 changes, which means that you have diverted something 16 either that you didn't need to, or worse, that you 17 diverted it to where it will need to be diverted again. 18 So that's one risk. 19 The other risk is that you just don't get the 20 utility design complete in time for the diversion to be 21 undertaken, to be clear of the area when -- in time for 22 the infrastructure contractor to actually come and work, 23 that they wouldn't have a clean site because the design 24 had held up -- at the start of that process had held 25 things up. 88 1 That second bit is also kind of general concern 2 about the design. So if you've got to go and start 3 building a retaining wall, and the design for the 4 retaining wall is not ready when the contractor is ready 5 to build, then there's questions about whose 6 responsibility is that delay, and how will that be 7 funded. 8 This is one of the major concerns that actually 9 manifest itself, and there were lengthy debates and 10 claims about whose responsibility that was. 11 Q. Thank you. 12 Then returning to page 7, please, scrolling down 13 a little, we see under -- carry on -- page 7. 14 We see about halfway down, under "Risk", if you blow 15 that paragraph up, please, we see under "General 16 Comments": 17 "It is clear that significant degree of 18 consideration has been given to the section of the DFBC. 19 We are concerned, however, how the process of risk 20 management will be taken forward (taking into 21 consideration our previous observations around 22 governance and project management processes). Also on 23 a 'rule of thumb basis' a risk allowance equating to 24 approximately 12% for a rail-related project 25 just entering detailed design may be viewed as being 89 1 a little optimistic but this has to be qualified to the 2 extent that it is possible there may be separate 3 allowances for risk type items in the base costs." 4 Do you have any further comments on that paragraph 5 or is it fairly self-evident? 6 A. I think I would agree with that paragraph. 7 Q. Then as a point of clarification, in the second bullet 8 point, we see: 9 "The cost QRA shows that the biggest risk drivers 10 are the cost of delay and a higher than expected 11 inflation figure. It is not clear how these will be 12 addressed." 13 What is meant by "delay"? A delay to what or of 14 what? 15 A. To any aspect of the tram programme. Delay brings two 16 issues here. One is that inflation happens and the 17 longer you wait to do something, the more expensive it 18 gets, broadly, all other things being equal, and the 19 other is that delay, if it's not caused by the 20 contractor, would give rise to successful claims from 21 the contractor. 22 Q. I understand. Then, please, page 9, if we may. 23 Under "Programme", can we see at the very top, under 24 "General Comments": 25 "It is clear that the programme is tight ..." 90 1 Then scroll down a little to bullet point 2, which 2 states: 3 "Section 11.3 highlights that "only little float 4 exists within the programme", which can be acknowledged 5 after a review of the schedule. It appears that the 6 programme provided describes only a "Best Case"-' scenario 7 with no real feasible mitigation of delay or additional 8 time for any secondary works required. This is a very 9 critical programme issue and if the key early milestones 10 cannot be achieved the delay will be extended to 11 months." 12 The next bullet point provides: 13 "The programme with its dates and planned work flow 14 for the SDS Design, INFRACO and MUDFA works is based on 15 a large number of assumptions ... Additionally, Tie 16 highlight in ... that "the programme is based on 17 assumptions of 'right first time and on time delivery'". 18 Edinburgh Tram Network Project is a unique project in 19 Scotland. Therefore the assumptions and pre-conditions 20 appear optimistic." 21 Then two bullet points down states: 22 "The programme shows that the entire Detailed Design 23 for this project will be completed in October 2007, is 24 this realistic?" 25 Then lastly on this page, the bullet point: 91 1 "The procurement process for the INFRACO contract is 2 running parallel to the design stage. The award of the 3 INFRACO contract is scheduled for October 2007 and the 4 commencement of the main construction works will be in 5 December 2007, is this realistic?" 6 Then lastly, on the question of programme, if you go 7 over the page to page 10, in the second bullet point we 8 see: 9 "In summary the overall durations for the 10 construction works and procurement look reasonable. The 11 durations for design, procurement, approvals and 12 commissioning however look very compressed. The lack of 13 float or mitigation opportunities and 'right first time' 14 planning would appear optimistic." 15 I think before we looked at this document, Mr Sharp, 16 I'd asked you for any concerns that you had in the 17 project. I think you did mention programme; is that 18 right? 19 A. That's right, yes. 20 Q. Is this wording I just read out yours or is it the 21 wording of others? 22 A. The precise wording is the wording of others. It's 23 wording that I agree with and agreed with at the time. 24 Q. Thank you. 25 Now, these are all various matters raised by 92 1 Transport Scotland in respect of the Draft Final 2 Business Case. If Transport Scotland had reviewed the 3 Final Business Case in the second half of 2007, would 4 all of these matters I have referred to been followed 5 up? 6 A. Yes. 7 Q. Why? 8 A. Because one of the things that we would have done is 9 take out our previous list of concerns and go through. 10 In looking at the Final Business Case, there would have 11 been two things that would have gone on. One, a de novo 12 look at the Business Case. And the other would be: what 13 did we say previously? And go through that list and 14 say: well, yes, this, yes, yes, no, still not dealt 15 with. 16 So all of these issues would have been gone away -- 17 would have been gone through, and in the meantime, we 18 would have been actively discussing these with tie and 19 CEC. It wouldn't have been a case of: here is a list of 20 comments and now come back seven months later. We would 21 have been following up on this and saying, you know: 22 tell me how you are addressing this, have you got 23 a credible plan; had we remained at the level of active 24 engagement with the project. 25 Q. Thank you. If Transport Scotland had reviewed the Final 93 1 Business Case in the second half of 2007, would it have 2 been a similarly thorough review as that undertaken in 3 relation to the Draft Final Business Case? 4 A. Yes. 5 Q. It certainly wouldn't be any less thorough, I imagine? 6 A. Certainly not less thorough. 7 Q. Thank you. We can put that document to one side, thank 8 you. 9 I would like to look at events following the 10 May 2007 Scottish General Election. If I could start, 11 please, with your statement at page 61. 12 In paragraph 141, I'll just read out what you say, 13 if I may. You say: 14 "The immediate effect of the change of Government 15 following the May 2007 election was that Malcolm Reed, 16 Bill Reeve and I were summoned to see John Swinney and 17 talked about alternatives to the tram project and 18 alternatives to EARL. At that meeting John Swinney said 19 very explicitly that he did not want Transport Scotland 20 to give him any advice as to why the tram project and 21 EARL were a good thing and should be done; that was not 22 for debate. What he wanted was to know what the viable 23 alternatives were that would achieve the projects’ 24 objectives at lower cost. We were told to undertake 25 a rapid review of alternatives and provide advice on the 94 1 viability, potential costs and benefits of alternatives. 2 I went away and assembled teams to do that both in 3 relation to alternatives to the tram project and to 4 EARL." 5 I'll just read out the next sentence as well, in 6 paragraph 141 -- 142, just the first sentence states: 7 "In terms of impact on the tram project, we were 8 told to tell TIE not to start any new work however 9 work which had already started should continue." 10 Pause there. So this must be at a pretty early 11 stage after the creation of the new administration and 12 the appointment of the new Cabinet post; is that 13 correct? 14 A. Yes. This was within a week of the appointment of 15 Mr Swinney as the Cabinet Secretary. 16 Q. Thank you. 17 CHAIR OF THE INQUIRY: He was Finance Minister? 18 A. Finance and Sustainable Growth, I believe was his full 19 title. But transport was part of his portfolio. 20 MR MACKENZIE: Thank you. Now, around this time, did the 21 Scottish Ministers ask for a review or report on the 22 state of the tram project from Transport Scotland? 23 A. No. 24 Q. Why not? 25 A. Because they had decided its fate. Mr Anderson, he did 95 1 not want advice on whether it was a good thing. He 2 wanted advice on alternatives, and that's what he asked 3 us to produce. 4 Q. Thank you. Continuing with this point, could we also 5 please go to page 65 of your statement. In 6 paragraph 151, the final sentence, please, states: 7 "Transport Scotland were giving Ministers advice 8 they had requested about how to withdraw from the 9 project, not whether to withdraw from the project." 10 Does that tie in with the point you made, that 11 ministers had already decided its fate? 12 A. Yes. 13 Q. Thank you. 14 Now, we know that in early June 2007 Mr Swinney 15 asked Audit Scotland to review and report on the tram 16 project and EARL projects. Do you know why that request 17 was made? 18 A. Mr Swinney wanted an independent view of the state of 19 those two projects. 20 Q. Was there any discussion with Transport Scotland 21 officials about whether a review should be obtained from 22 Audit Scotland? 23 A. No, we were told that it was -- it was happening. 24 CHAIR OF THE INQUIRY: Did that follow a debate in 25 Parliament? 96 1 A. I believe not. It certainly doesn't -- it precedes the 2 main debate in Parliament. 3 CHAIR OF THE INQUIRY: Yes. 4 A. I can't remember whether there was -- I believe there 5 was no initial debate in Parliament. 6 CHAIR OF THE INQUIRY: It may not -- 7 A. I'm not certain of that at this length of time. 8 CHAIR OF THE INQUIRY: I think it was raised in Parliament 9 before the debate in June, but whether it was in 10 response to a question or not, I'm not sure. 11 But I can look at that. 12 MR MACKENZIE: Thank you. 13 Did Ministers ever explain to you why they wished an 14 independent view? 15 A. They did not explain it, no. 16 Q. Do you have any idea yourself as to why you think they 17 may have wished for an independent view? 18 A. I do. It was a notable feature of the previous 19 Parliament that Transport Scotland officials would 20 provide factual briefing on a number of projects, not 21 just the major public transport projects, to MSPs that 22 were not Ministers, both from coalition parties and from 23 other parties. 24 These briefings were offered to all concerned MSPs. 25 So both constituency and list MSPs and those who had 97 1 a particular interest in transport. 2 The SNP consistently did not take up those 3 briefings. It was clear that SNP MSPs in 2006 and early 4 2007 were deeply suspicious of civil servants and 5 thought that we were not providing objective advice, 6 which I believe to be completely unfounded. 7 Q. During these briefings that took place in 2006 and early 8 2007, did they include briefings on the Edinburgh Tram 9 Project? 10 A. They did. 11 Q. To what extent, if at all, did they include briefings on 12 any problems and delays affecting the project? 13 A. I cannot recall any detail. The briefings were factual 14 and allowed MSPs to ask questions about the detail and 15 get further information about the support that was 16 offered, the delivery structure. 17 So MSPs would certainly have had the opportunity to 18 ask questions, but I cannot remember any specific 19 discussions. 20 Q. So if those very same SNP MSPs become Ministers and have 21 to make decisions, they won't, in making any decisions, 22 have had the benefit of those factual briefings from 23 Transport Scotland? 24 A. That's correct. 25 Q. When Mr Swinney in the first week of his job discussed 98 1 these matters with you, including looking at 2 alternatives, at that point did he ask for a factual 3 briefing from Transport Scotland in relation to the 4 project? 5 A. No. 6 Q. Now, I would like, please, next to take you to an email 7 of 6 June 2007. The reference is TRS00004432. 8 We can see, I think, this is from yourself, 9 Mr Sharp, dated 6 June 2007. It's to the Minister for 10 Transport, Infrastructure and Climate Change. I think 11 that may have been Stewart Stevenson at this time; is 12 that correct? 13 A. That's correct. 14 Q. We can see then you say, subject "Transport Debate - 15 outline speaking note. You say: 16 "Jessica, I attach a short outline of a speaking 17 note for discussion with the Minister this afternoon. 18 It contains key messages and some bullet points on 19 each key message ... It also does not yet reflect the 20 new administration's key themes." 21 You then say: 22 "We are also pulling together background briefing." 23 Starting, why was this note produced you refer to, 24 the speaking note? 25 A. There was to be -- there's going to be a transport 99 1 debate and I cannot remember which particular transport 2 debate we're referring to from here. I suspect this is 3 not the one at which the decision to continue with the 4 tram is taken. I believe this is an earlier debate. 5 The Minister was going to have to speak in the 6 debate, and this is normal practice that I would write 7 a speaking note for the Minister. As this was the first 8 time I had written a speech for Stewart Stevenson, 9 I took a kind of extra care to get to know what he 10 wanted, what he was interested in, and to make sure that 11 what I was preparing would be something that was 12 satisfactory for him. 13 So this process -- you wouldn't see this process, 14 say, in the February and March with Tavish Scott, 15 because I already had that understanding of what his key 16 messages were, what it was he wanted to say, and I had 17 that kind of understanding. 18 So this is the part of me building that 19 understanding with Stewart Stevenson. 20 Q. When you say that you would take extra care to get to 21 know what he wanted, how was that done? Was that done 22 by you asking his advisers or what? 23 A. I met -- I made sure that I met him and talked with him 24 about the specifics of the speech, but generally about 25 his speaking style, about what sorts of things he liked 100 1 to use and how he liked to construct his arguments. So 2 that as far as possible, what I produced sounded like he 3 had written it himself. 4 Q. So you had actually met with Mr Stevenson before 5 producing this note, we will come to shortly? 6 A. Yes. 7 Q. Just for the avoidance of doubt, to what extent does the 8 content of the note represent your views or the views of 9 Transport Scotland, and to what extent does the content 10 represent the line that you understand the Minister 11 wishes to take? 12 A. This will represent the line that I understand the 13 Minister wishes to take. And I'm seeking clarification 14 that I've got that understanding correct. 15 Q. Thank you. 16 You also mention in the email: 17 "We are also pulling together background briefing." 18 Now, I asked a few questions ago about whether 19 Transport Scotland were ever asked to provide a review 20 of the tram project by Ministers, and you said no. 21 What's this background briefing about, and did it take 22 place? 23 A. So the background briefing which will have been a -- 24 will have been a set of documents, the background 25 briefing will cover, for this transport debate, if it's 101 1 the one I'm thinking about, doesn't just cover the tram. 2 It's about transport more generally, and so there would 3 be background notes on: this is the state of where we 4 are. The factual briefing about each of the projects. 5 But it wouldn't have extended to a review of the 6 state of the governance and matters like that. It was 7 just to make sure that the Minister understood. So the 8 Borders Rail Project has reached this point, these are 9 the key next steps; the Edinburgh Airport rail link, the 10 Glasgow Airport rail link and the forecast cost and 11 things like that. Things that were kind of key 12 information that the Minister would be expected to know 13 during the debate. 14 Q. I see. So this is a background briefing provided for 15 the purpose of this particular debate? 16 A. Yes. 17 Q. It's not a more general review and report on the tram 18 project? 19 A. That's correct. 20 Q. Thank you. Can we then please go to the speaking note. 21 The reference is TRS00004433. Can we read towards the 22 top of the page, under "Key messages". Perhaps from the 23 heading you see: 24 "LABOUR SUSTAINABLE TRANSPORT DEBATE - outline 25 speech". 102 1 Does that suggest this debate may have arisen as 2 a result of a motion on the part of the Labour Party? 3 A. Yes. 4 Q. Thank you. Under "Key messages" we see various bullet 5 points, including: 6 "Government is responsible & accountable for value 7 for money - duty to Scottish taxpayers; Reviewing 8 projects at key stages normal, natural and necessary; 9 Concerned at risks with both tram and EARL; tie not 10 shown ability to contain costs on SAK ..." 11 I think that's the Stirling-Alloa-Kincardine 12 railway: 13 "... so why would tram or EARL be different? 14 Audit Scotland review of project costs; Better ways to 15 invest in Edinburgh's transport than trams or EARL." 16 Pausing there, Mr Sharp, I know this is written with 17 a view to representing a line you think the Minister 18 wishes to take. Putting that to one side, did you or 19 Transport Scotland agree with any of these bullet 20 points? 21 A. Yes to the first three. The fourth one is a fair 22 question. The "better ways to invest in Edinburgh's 23 transport than trams or EARL" is a very debatable thing. 24 It's not ... what other things would one have? And you 25 could -- without running the same level of detailed 103 1 appraisal, I would not be in a position to agree or 2 disagree with that. 3 But as always with transport projects, and indeed 4 generally across the budget, there are more things that 5 you can do than that you can afford to do, and Ministers 6 are entitled to take a decision on political as well as 7 cost-benefit ratio grounds as to what is a better thing 8 to do. And that's what they had done. 9 Q. Yes. I should perhaps be careful in my question, 10 Mr Sharp. Policy is of course a matter for Ministers. 11 So it's really only in relation to factual matters in 12 this speaking note I should ask you about. 13 But as a matter of fact, looking at bullet point 3, 14 were you concerned at risks with both tram and EARL? 15 A. Yes, as you had seen from the previous comments on the 16 Draft Final Business Case, there were concerns. Whether 17 those concerns were sufficient to not go ahead is 18 a matter for Ministers to determine. 19 Q. I understand. 20 Further down the page, please, under "Risks of EARL 21 & Tram", I think we can just read that for ourselves, 22 the various bullet points. 23 However, the first bullet point, as a matter of 24 fact, would you have agreed with that at that time? 25 A. I would agree that further work was needed to be 104 1 convinced that it could be managed effectively. And 2 that that further work was under way in the normal 3 course of events. 4 Q. Is that then a reference back to both 5 Transport Scotland's comments on the Draft Final 6 Business Case and then the regular liaison between 7 Transport Scotland and tie officials that took place 8 regularly? 9 A. Yes. 10 Q. Then the next heading: 11 "Lessons of Stirling-Alloa-Kincardine". 12 You see the bullet point states: 13 "tie ltd given audition for a starring role through 14 Project Management of SAK rail project." 15 Over the page, please, it says at the top: 16 "But they fluffed their lines ..." 17 Are we now entering into political language, 18 perhaps, rather than language that you as a civil 19 servant would use yourself? 20 A. This is words that I expected the Minister would wish to 21 use. 22 Q. Yes. Just on the question of the 23 Stirling-Alloa-Kincardine railway, did you as a matter 24 of fact have any concerns around this time in relation 25 to tie's project management of that project? 105 1 A. Yes, I did. 2 Q. What in outline were those concerns? 3 A. The principal concern was the lack of clarity in the 4 reporting. Shortly before the election, I had had 5 discussions with tie about: if there's something bad, 6 you must disclose it now, not drip it out. So I was 7 concerned at the level of reporting that was trying to 8 make things seem more palatable than they were. 9 Q. To pause there, why did you have, shortly before the 10 election, a discussion with tie about that matter? Is 11 that because you had concerns at that time about the 12 lack of clarity in reporting? 13 A. Yes. 14 Q. Was this in relation to which project? 15 A. To Stirling-Alloa-Kincardine. 16 Q. I see. What was not being reported that you thought 17 ought to be? 18 A. tie knew about issues that had not yet crystallised, and 19 the tendency was to report something at the end, and to 20 hope that the work they were doing meant that they would 21 resolve it and never have to report it, rather than 22 reporting: we have an issue, we are doing this to deal 23 with it, it might have this impact. 24 All in all, on that particular project, it felt like 25 an aversion to telling bad news, and I was unhappy with 106 1 that. 2 CHAIR OF THE INQUIRY: What was the bad news? Was it over 3 budget? 4 A. It was to do with the extent to which the contract was 5 holding and to whether the budget was going to hold. 6 CHAIR OF THE INQUIRY: Did it remain within budget? 7 A. It did not. 8 CHAIR OF THE INQUIRY: Did it remain on time? 9 A. It did not. 10 MR MACKENZIE: Thank you. 11 Who within tie did you have this conversation with? 12 A. When I think about this, this cannot have been early 13 2007. This must have been before that because I had the 14 conversation with Michael Howell. So it would be 15 shortly before Michael Howell left tie that I had that 16 conversation. 17 Q. Presumably, that's a fairly serious matter when public 18 money is being spent and Transport Scotland is giving 19 money to another company to spend public money, then 20 presumably Transport Scotland must require crystal clear 21 clarity in reporting? 22 A. Yes. 23 Q. If reporting is not clear, presumably then 24 decision-making by others may not be correct? 25 A. That's correct. 107 1 Q. Now, in relation to the problems experienced on this 2 project, the Stirling-Alloa-Kincardine, we may hear 3 evidence that tie were brought in part way through that 4 project when it was already experiencing problems which 5 tie were not responsible for. Do you have any comments 6 on that suggestion? 7 A. I would agree that in terms of the situation that tie 8 inherited, much of the trouble that then came to pass 9 was in the post, if you like. And that there was -- if 10 they had reported more fully, I'm not sure that the 11 outcome would have been different, but that it would 12 have been -- it would have been clear to people sooner 13 what the issues were and some different things may have 14 been done. 15 But I think a lot of what tie had to deal with were 16 things that they had inherited from the earlier 17 management regime. 18 Q. So I wonder in short whether in relation to that 19 project, the Stirling-Alloa-Kincardine, whether the 20 problem was -- whether the issue was tie's project 21 management of the project, or rather their reporting in 22 relation to the project? 23 A. It was principally their reporting. As with any kind of 24 major project, there are things that you can learn and 25 do better as a result, including in the project 108 1 management, the reporting was the principal area of 2 weakness that we had been concerned about. 3 Q. Thank you. Returning then, please, to the draft 4 speaking note for the Minister, we can see the last 5 bullet point on our screen: 6 "Audit Scotland will report by June 20. Ministers 7 will consider the report and set out their position to 8 Parliament before the summer recess." 9 Do you know why the deadline was set for June 20? 10 A. I don't know why the Audit Scotland report was going to 11 be delivered on that particular date. But I know that 12 Ministers were keen that this be resolved before the 13 summer recess. Otherwise you leave another -- had they 14 come back after the summer and a decision to cancel was 15 taken in September, you would have had another two 16 months of abortive costs and Ministers were clear that 17 the uncertainty over these projects should last just 18 long enough to work out what was to be done and what was 19 justified to be done and no longer, because otherwise it 20 would waste public money. 21 Q. Thank you. Now, turning to the review, which was 22 carried out by Audit Scotland on the Edinburgh Tram 23 Project and also of course the EARL project, did you 24 speak to Audit Scotland as part of their review? 25 A. No. 109 1 Q. Why not? 2 A. They did not ask me to. I provided -- written documents 3 that were requested, and I provided them, but I was not 4 interviewed by Audit Scotland. 5 Q. What written documents did you provide? 6 A. I cannot remember the details of exactly which ones 7 I did and didn't provide at the time, but in broad 8 terms, documents about project governance, the structure 9 of project reports for the four-weekly reports that tie 10 provided, documents like that that allowed them to see 11 the information that we were seeing in relation to the 12 project and about the governance. 13 Q. Do you know whether Transport Scotland's comments on the 14 Draft Final Business Case, was that a document that was 15 provided to Audit Scotland? 16 A. I cannot remember. 17 Q. Are you talking, Mr Sharp, more about documents which 18 were produced as a part of the regular reporting process 19 that were provided? 20 A. I know that those were provided. I cannot remember 21 whether specific other documents were requested and/or 22 provided. 23 Q. Do you know whether the documents provided referred to 24 the sorts of concerns we looked at earlier that were set 25 out in Transport Scotland's commentary on the Draft 110 1 Final Business Case? 2 A. I cannot remember at this length of time. 3 Q. If Transport Scotland had asked to interview you as Head 4 of Major Projects -- 5 CHAIR OF THE INQUIRY: Audit Scotland. 6 MR MACKENZIE: Sorry, if Audit Scotland had asked to 7 interview you as Head of Major Projects in Transport 8 Scotland, what would you have told them in relation to 9 the tram project? 10 A. Well, it would have depended in part on what questions 11 they asked, but I would have told them that there were 12 issues and concerns around programme, and that there was 13 a management framework in place, and I would have shared 14 the concerns that were set out that we had sent to CEC 15 and tie. I would have considered that that was 16 something that we should tell Audit Scotland if they'd 17 asked to interview me. 18 Q. Presumably the sorts of issues and concerns set out in 19 Transport Scotland's commentary or in the Draft Final 20 Business Case, are these the sorts of issues you are 21 likely to have told Audit Scotland if they had 22 interviewed you? 23 A. Yes. And I would have told them that in the context 24 of: and this is how these issues and concerns are being 25 addressed. So I wouldn't just have thrown: here is 111 1 a list of concerns, and then left it to them. 2 Q. Given that Transport Scotland had experience and 3 expertise in reviewing large scale infrastructure 4 projects throughout the various stages of their 5 development, and given also that officials in 6 Transport Scotland had been involved in the Edinburgh 7 Tram Project from the outset and were well aware of the 8 various challenges that it faced, did it not make more 9 sense for Scottish Ministers to have requested a review 10 or report on the project from Transport Scotland? 11 A. I would say that it certainly made sense to at least 12 also request a review and report from 13 Transport Scotland. Ministers are entitled to also wish 14 what they perceived to be an independent review from 15 Audit Scotland. I have no objection or -- I think 16 that's a perfectly reasonable and sensible thing to do, 17 but I do think that they should have reasonably asked 18 for the review that said: these are the good things, 19 these are the bad things, these are the issues that 20 would have to be addressed in order to deliver this 21 effectively; and an assessment of the likelihood of 22 whether that can be achieved or not. 23 Q. Presumably, without also instructing or asking for such 24 review and report from Transport Scotland officials, 25 presumably Scottish Ministers were at risk of not 112 1 getting the full picture in relation to the project? 2 A. I would say so. 3 Q. Was any body or organisation better placed at this time 4 than Transport Scotland to review and report on the 5 project? 6 A. No. 7 Q. Now, we've also heard in relation to Audit Scotland 8 that, as an organisation, they had not previously been 9 involved in the tram project. Also, as an organisation, 10 they had little experience of reviewing large 11 infrastructure projects. Also, it was very unusual for 12 Audit Scotland to undertake a review of a live project. 13 They usually did projects that were completed, and of 14 course, on top of all that, they had to produce the 15 review within 16 days. 16 Now, in light of these factors, do you consider it 17 was sensible for Ministers to ask Audit Scotland to 18 review the tram project? 19 A. I think it was sensible for Ministers to ask Audit 20 Scotland to review. There are strengths in 21 Transport Scotland's intimate knowledge of the project, 22 but there is a -- as always in life, a risk that you get 23 too close to it, and there is benefit from someone 24 taking an independent view. 25 Q. But we are then back to your answer that in your view 113 1 Ministers should also have instructed a review and 2 report from Transport Scotland to complete the picture? 3 A. Ministers would have had a more -- would have been able 4 to take a more informed decision if they had had both an 5 independent and a Transport Scotland view. 6 Q. Without a review and report from Transport Scotland, do 7 you consider Ministers were in a position to make 8 a properly informed decision? 9 A. That's not a question that I'm qualified or entitled to 10 answer as a former civil servant. That's a question for 11 Ministers. 12 Q. Albeit, looking simply from a factual point of view, and 13 as the former Head of Major Projects in 14 Transport Scotland, do you consider that Ministers were 15 likely to have had all of the facts before them if they 16 did not also instruct a report from Transport Scotland? 17 A. Ministers had access to other information, other than 18 just Audit Scotland and Transport Scotland, and had 19 formed an understanding of the tram project. I did not 20 have access to what other information they had, and so 21 I cannot comment on whether it was sufficiently complete 22 or not. 23 Q. But in short, your position is they would have required 24 to have access to some other information to complete the 25 factual position? 114 1 A. Yes. 2 Q. Now, I would like just to follow up a little some of the 3 consequences of the Ministers' decision to withdraw 4 Transport Scotland from the direct governance 5 arrangements of the tram project. 6 Before I do that, what were your own views at the 7 time in relation to that decision? 8 A. My view was that if you were taking the decision that 9 you were contributing GBP500 million and that all cost 10 overrun risk lay with the Council, it was logically 11 consistent and indeed arguably imperative that 12 Transport Scotland should step away from the detail of 13 the project. 14 To want to be on the Project Board, to want to be 15 involved, when taking no risk, is wanting to have your 16 cake and eat it. You cannot say that we have no 17 responsibility and then do things that impact on the 18 project. 19 Q. Let's explore that a little. 20 Page 61 of your statement, please. In 21 paragraph 140, and I'll read it out, you say: 22 "I recall that following the withdrawal of active 23 Transport Scotland participation, there was less impact 24 on the work of the TIE Board. The impact on the Tram 25 Project Board was the loss of a direct communication 115 1 channel between the highest body responsible for the 2 tram project and the funder. There was an instruction 3 that Transport Scotland could no longer talk to TIE as 4 we had to communicate with CEC who then spoke to TIE. 5 The Tram Project Board itself lost access to the 6 expertise that Bill Reeve, Matthew Spence and I could 7 bring and our knowledge of what was going on elsewhere." 8 The last sentence: 9 "The loss of that access to the expertise and 10 knowledge was unhelpful to the Tram Project Board and 11 TIE Board and there was a note from me in papers about 12 some of those issues and what had to be done to resolve 13 them." 14 So I think in that paragraph you're identifying two 15 disadvantages or two negative impacts of this decision. 16 Firstly, the loss of a direct communication channel 17 to Transport Scotland and the bodies underneath them, 18 but also the loss of expertise; is that correct? 19 A. That's correct. 20 Q. Can I also then please go on to page 69 of your 21 statement. Paragraph 157, about a third of the way 22 down, the sentence: 23 "It did result in blocking the flow of information 24 regarding progress on the tram project from TIE to 25 Ministers. It was difficult to state whether that was 116 1 good or bad. There was good in that it made it clear to 2 TIE to not come to Transport Scotland for answers or ask 3 them to force CEC to do something. It made it clear to 4 TIE that they were going to have to tackle that 5 relationship head on and if CEC was not making 6 decisions then TIE would have to deal with them at the 7 highest level. Where it was bad was that it made it 8 difficult for Transport Scotland to know whether the 9 reports that were being provided represented the truth 10 or not." 11 To pause there, that is against the background of 12 the conversation you mentioned just before the election, 13 where Transport Scotland in any event had concerns about 14 the accuracy and clarity of tie's reporting; is that 15 correct? 16 A. In relation to the Stirling-Alloa-Kincardine Project. 17 At that time we did not have concerns about the accuracy 18 of reporting in relation to either EARL or the tram 19 project. So it had been limited to the 20 Stirling-Alloa-Kincardine project at that time, but it 21 is fair to say that there had been previous concerns 22 about accuracy of tie reporting. 23 Q. Do you remember who within tie was responsible for 24 reporting on the Stirling-Alloa-Kincardine Project to 25 Transport Scotland? 117 1 A. Richard Hudson was the Project Manager who would prepare 2 those reports. 3 Q. Thank you. Then returning to your statement, please, 4 you go on to say: 5 "When TIE was producing a four-weekly report before 6 March 2007, Transport Scotland would scrutinise the 7 report and TIE would have to demonstrate progress and be 8 challenged on the evidence. TIE would have to show 9 their workings and those workings would be scrutinised 10 hard, for example Andy Park's review of the Draft Final 11 Business Case. TIE was at that time subject to a level 12 of scrutiny and challenge that later did not exist, so 13 there was limited scope after July 2007 for 14 Transport Scotland to assess whether an accurate and 15 fair picture was being presented to them or progress 16 with the tram project. Transport Scotland were entirely 17 relying on CEC to have worked that out for them and it 18 was a situation which I know that John Ramsay was 19 uncomfortable with." 20 So in this paragraph are you identifying another 21 negative or disadvantage of Transport Scotland's 22 withdrawal, namely less of an opportunity to scrutinise 23 tie and the project? 24 A. Yes. 25 Q. Now, in relation to the sentence I started with, that: 118 1 "It did result in blocking the flow of information 2 regarding progress on the tram project from TIE to 3 Ministers. It was difficult to state whether that was 4 good or bad." 5 Ministers, of course, are responsible for spending 6 approximately half a billion pounds of public money. Is 7 it not self-evidently a bad thing if they are less well 8 informed about the project they're spending that money 9 on? 10 A. Not self-evidently, no. 11 Q. Can you explain that a little? 12 A. Yes, I'm trying to think of the best way to elaborate on 13 that. 14 Ministers had ultimately -- in the arrangement of 15 granting City of Edinburgh Council GBP500 million and 16 not a penny more, Ministers had essentially reduced 17 their risks to two. One is that that money would get 18 spent and nothing would end -- nothing would be created 19 at the end of it, or that City of Edinburgh Council 20 would be -- the cost overrun would be such that City of 21 Edinburgh Council would successfully come back and ask 22 for more money, because the political consequences of 23 enforcing GBP500 million and not a penny more would be 24 unacceptable to Ministers. And discussions that we had 25 at the time were, well, if it goes so far that, you 119 1 know, City of Edinburgh Council is forced to start 2 closing primary schools in order to pay for the cost 3 overrun on the tram, Ministers are not going to find 4 that politically sustainable. 5 So having reduced your risks to those, you don't 6 need the same level of detailed scrutiny. If it's going 7 to be a bit late, cost a bit more, but within CEC's 8 access to spare -- spare is not the right word -- 9 additional funding, that they could actually -- you 10 know, if it was going to go to 560 million, Ministers 11 could reasonably say: we don't need to know whether it's 12 going to be 555 or 557 or 560 because that isn't our 13 risk and we are going to get what we want, and it's not 14 going to come back to us. 15 It becomes a problem when the risk becomes 16 sufficiently large that you are in a position that it 17 may have to re-open the GBP500 million and not a penny 18 more. 19 And Ministers were aware of that when they took that 20 decision. 21 Q. Be that as it may, isn't fundamentally the main risk to 22 Ministers is public money being prudently spent? 23 A. No. Not in this situation. Ministers put in 24 GBP500 million to get an outcome; provided they got that 25 outcome, whether -- the prudent spending of City of 120 1 Edinburgh Council is City of Edinburgh Council's risk, 2 not Ministers' risk. 3 The primary risk for Ministers is that they don't 4 get anything for their 500 million, or they get 5 significantly less. 6 Q. Which is what happened? 7 A. Indeed. 8 Q. Presumably any public body including Ministers spending 9 public money, the primary consideration must be: is 10 public money being prudently spent? 11 A. You put that question to me before and I gave an answer 12 that I didn't agree, in this instance. Ministers -- 13 Ministers are not accountable for the prudent spending 14 by City of Edinburgh Council. 15 Q. But how about the GBP500 million being given in grant by 16 Ministers to the City of Edinburgh Council? Are you 17 really saying that the primary consideration on the part 18 of Ministers is not that that money is prudently spent? 19 A. It is a question of definition of prudence. Ministers' 20 primary concern with that GBP500 million is that they 21 get what they paid for. 22 Beyond that, the detail of how it's done was not 23 their accountability. It was very clearly CEC's 24 accountability. 25 So Ministers, in stepping back, knew that there was 121 1 a risk that they would not -- that they would not see 2 the sort of problems come that did happen. But had we 3 been talking about a small overrun in cost, that was not 4 Ministers' concern and not their responsibility. Their 5 GBP500 million would have delivered what it said on the 6 tin. And that's their concern and they needed to have 7 in place a sufficient reporting regime that would 8 identify that. 9 That does not involve extreme scrutiny of the 10 detail, as has been happening previously when they were 11 more actively involved and were on the hook for 12 a variable amount of money. 13 Q. Now, you say that Ministers' primary concern with that 14 GBP500 million is that they get what they paid for. 15 Now, we know here they didn't, did they? 16 A. Yes. 17 Q. Is there not a risk that by taking away the direct 18 outlines of communication, by taking out 19 Transport Scotland's expertise, by there being less 20 scrutiny of tie in the project, is there not a risk that 21 by doing these things that Ministers are increasing the 22 risk that they're not going to get what they wanted from 23 the GBP500 million? 24 A. It does increase that risk if City of Edinburgh Council 25 does not step up to the mark and provide the level of 122 1 scrutiny that goes with ownership of the project. 2 So Ministers purposely stepped back to give City of 3 Edinburgh Council no choice but to fulfil the role that 4 Transport Scotland had been performing. CEC had relied 5 very heavily, perhaps too heavily on Transport Scotland, 6 certainly in Ministers' view too heavily on 7 Transport Scotland. 8 If you're going to fill a gap for somebody, they are 9 never going to fill it themselves. 10 So by creating the gap, the clear expectation of 11 Ministers of City of Edinburgh Council was that they 12 would put in place a scrutiny regime that would deliver 13 at least as well as the one that had involved 14 Transport Scotland. 15 Q. Thank you. We will come back to this. 16 My Lord, perhaps we should pause for lunch? 17 CHAIR OF THE INQUIRY: Yes. We will adjourn until 18 2 o'clock. 19 (1.00 pm) 20 (The short adjournment) 21 (2.00 pm) 22 CHAIR OF THE INQUIRY: You're still under oath, Mr Sharp. 23 For your information, I was going to raise the 24 question about the sequence of debates in the 25 Parliament. I have checked. It seems that there was 123 1 First Minister's questions on 31 May, where 2 Jack McConnell asked the question about transport, and 3 then there was the debate on 7 June which was an 4 opposition debate, which was the first serious debate 5 about the trams. 6 Then later on, on 20 June. 7 MR MACKENZIE: Thank you, my Lord. 8 Mr Sharp, we discussed before lunch the question of 9 Transport Scotland's withdrawal from the direct 10 governance arrangements for the project, and you also 11 spoke of the speed for the Council to take a greater 12 responsibility for the project; is that correct? 13 A. Yes. 14 Q. Would it be fair to say that in your view, one of the 15 main reasons or perhaps the main reason for 16 Transport Scotland to withdraw in this way was to make 17 the Council take a greater responsibility for the 18 project? 19 A. Yes. 20 Q. I think it's correct to say also that you had had 21 concerns for some time that the Council were not taking 22 sufficient responsibility for the project; is that 23 correct? 24 A. It is. 25 Q. If you go, please, to your statement, where you explain 124 1 this at page 140, please. 2 We can see in paragraph 327, I'll read out parts, if 3 I may. You start by saying: 4 "The corporate body that I would level that 5 criticism at most was CEC. CEC had passed the detail of 6 the delivery on to TIE because it was not well suited to 7 the actual delivery of the tram project itself. Then 8 CEC acted as though they had no responsibility and no 9 accountability anymore and that it was TIE's problem 10 thereafter and that behaviour was wrong." 11 A few sentences down: 12 "CEC at no time, had throughout its organisation 13 taken seriously that it was accountable for everything 14 it did on the tram project. Nor did CEC take seriously 15 that the tram project was their project and was more 16 important than anything else that they were going to do 17 and that they should be more involved. There were many 18 people within CEC where that would not be a fair 19 description of their individual contribution to the 20 project. However, culturally as an organisation CEC did 21 not organise itself to back the tram project until it 22 was far too late, if at all, to accept the 23 responsibility for its actions which impacted on the 24 tram project plan. From 2001, I always considered that 25 CEC was the body or organisation ultimately responsible 125 1 for ensuring that the tram project was delivered on time 2 and within budget. However, CEC did not act as if that 3 was the case." 4 So around the summer of 2007, when the decision was 5 taken to withdraw Transport Scotland from the direct 6 governance arrangements for the project, and it was 7 hoped that that would result in the Council accepting 8 full responsibility for the project, what is likely to 9 have happened if the Council was either unable or 10 unwilling to take full responsibility for the project? 11 A. Then the Council would have had to decide not to proceed 12 with the construction. If they were unwilling to take 13 that responsibility. 14 Q. What if -- in that event, what would have happened to 15 the Transport Scotland grant paid to date? 16 A. Then it would have been sunk cost. Some of it would 17 have been recoverable, but most of it not. 18 Q. In relation to the irrecoverable part, the Council 19 presumably would have had to have funded that part? 20 A. There was no agreement on that in practice. I think it 21 would not have been possible to recover 22 Transport Scotland's money beyond the resale of land 23 that had been purchased. 24 Q. Again, sticking with the hypothesis that in the summer 25 of 2007, when Ministers are deciding what to do about 126 1 Transport Scotland's involvement, we know of concerns 2 within Transport Scotland about CEC not having accepted 3 full responsibility for the project. We also know about 4 concerns within Transport Scotland in relation to the 5 project itself, for example as set out in the commentary 6 to the Draft Business Case we looked at earlier. 7 Now, you have said in answer to the question, if 8 Transport Scotland were to withdraw and if the Council 9 had not stepped up to the mark and taken responsibility, 10 the Council would have had to decide not to proceed with 11 the construction, but wasn't there another possibility 12 that things just carried on as they were, the project 13 did carry on, but ended up very over budget and very 14 late? 15 A. When you say that they carried on as they were, there 16 was no option of carrying on as they were. 17 Transport Scotland were withdrawing. Things were 18 changing and either CEC would step up or they wouldn't. 19 That's part of the purpose of CEC -- of 20 Transport Scotland withdrawing, was that Ministers 21 wanted to force CEC to either step up or to -- in fact, 22 bear in mind that CEC had given the assurances and had 23 been strong supporters of the debate in Parliament which 24 essentially forced Ministers to continue with the tram 25 project. CEC were saying all the right things, saying 127 1 that they would do all of the right things, and step up. 2 And Ministers said: well, in that case, on you go, 3 and you have to step up. 4 CHAIR OF THE INQUIRY: I think what Mr Mackenzie is saying 5 is would there not be an option of Edinburgh carrying on 6 as it had before and tie carrying on as it had before, 7 and the grant, there were no conditions in the grant 8 to -- related to CEC's control of the project, were 9 there? 10 A. Yes, there were no -- as part of the withdrawal, there 11 was no intention from Ministers or Transport Scotland to 12 tell CEC how they had to manage the project. But by 13 saying that you are clearly responsible for the project, 14 and for all cost overrun, therefore you will have to 15 work out how to manage this project effectively. 16 CHAIR OF THE INQUIRY: So that the answer to Mr Mackenzie's 17 question would be: yes, they could just carry on as 18 before, but there would probably be a substantial 19 overrun in cost and time? 20 A. Sorry, I didn't quite understand. Yes. So if 21 Transport Scotland withdraw and CEC didn't step up, but 22 didn't cancel the project, then the risk of inadequate 23 oversight and of cost overrun would increase very 24 significantly. 25 CHAIR OF THE INQUIRY: Thank you. 128 1 MR MACKENZIE: That may also put at risk the GBP500 million 2 contribution from Transport Scotland, at least to the 3 extent that Transport Scotland may not get built 4 everything they wanted to get built. 5 A. Yes. 6 Q. I understand. 7 A. And Ministers were clear that that risk existed, and 8 they had received political and officer level assurances 9 from CEC that they would not continue as they had 10 before, that they would step up. 11 Q. Did you have any concerns at that time as to whether CEC 12 would step up, given your longstanding concerns about 13 the involvement to date? 14 A. I had some level of concern that -- whether they would 15 be able to step up. As I say, since I then went to work 16 for the tram project, my concerns were not so great that 17 I wasn't willing to continue to support the project and 18 attempt to get it delivered. 19 Q. Just finally, when you say some concern whether they 20 would be able to step up, what do you mean by "able to 21 step up"? 22 A. Stepping up required three things. A change in 23 political leadership to the extent to which senior 24 councillors were willing to go: yes, we want the tram, 25 yes, we want it to happen; if it's not happening, that's 129 1 our problem. Rather than: this is something that we 2 would like the Government to drop on us as a nice 3 present. 4 I talked about that in my statement. 5 So there has to be a change of political leadership. 6 There has to be a change of organisational culture 7 within CEC in relation to the tram project. There would 8 have been plenty of examples of the Council 9 understandably has a wider remit than just the tram. It 10 had to do lots of other things and it was always trying 11 to get -- when we are in there with the tram, maybe we 12 could put better pavements here as part of our wider 13 strategy for redeveloping the city, and it's right that 14 they should think about that, but far too often they'd 15 been letting the tail wag the dog in that situation. 16 So that didn't make it stick, and enforce on people, 17 the cost of delay, in you not making your mind up, in 18 you changing your mind about what should happen here, is 19 this. Therefore, you cannot -- it will wipe out any 20 possible benefits. You need to take a decision and 21 stick with it. 22 And that culture needed to change within CEC for 23 this to work. 24 The third thing they would need is they would need 25 to get some additional technical expertise in-house to 130 1 be a proper intelligent client of tie. They would have 2 to have that access to some independent advice as to 3 whether what tie was telling them was credible and 4 correct. 5 Q. Is that to fulfil a role of independent assurance in 6 a project? 7 A. Yes. They needed some sort of -- when Ministers were 8 looking at what tie were saying, they had views from 9 people like Bill Reeve, Matthew Spence and myself, 10 looking at different aspects of it, and we could -- we 11 had different expertise between us that could comment 12 on: is this plausible; is it sensible? And we employed 13 specialist technical advisers. So we could scrutinise 14 that. 15 CEC didn't have that capacity in-house that 16 Transport Scotland would have, so they would have to, to 17 an extent, replicate that, to assure themselves that 18 what was being reported from tie was credible, was 19 correct, was bringing all the issues to CEC that CEC 20 needed to deal with. 21 Q. Essentially that was to fill the gap left by 22 Transport Scotland's experience and expertise and access 23 to -- experience and expertise being removed from the 24 direct governance? 25 A. Yes. So they needed to replace that, not necessarily to 131 1 the same extent and in the same way, but they needed to 2 replace that capability which was no longer there. So 3 that was the third thing they would have to do in order 4 to step up. 5 Q. I understand. Just to finish this off, three final 6 matters. 7 Can we go, please, to page 49 of your statement. In 8 paragraph 113 you say: 9 "Transport Scotland had made plans to review the 10 state of the tram project including the bids, the 11 allowances for risk and the state of the design before 12 financial close." 13 Now, I think these things didn't happen, did they? 14 A. Transport Scotland did not do those things. I am unable 15 to comment on whether City of Edinburgh Council did the 16 equivalent things. 17 CHAIR OF THE INQUIRY: Would you expect them to have done? 18 A. Yes. 19 CHAIR OF THE INQUIRY: Even although tie was a wholly owned 20 company of the -- 21 A. Yes, because they were carrying the risk that tie was 22 doing it wrong. So I would expect them to undertake 23 those reviews and be satisfied before taking the 24 decision to put the Council's finances at risk, that 25 that risk was properly managed, and that's why 132 1 Transport Scotland would have done that because they 2 were putting Ministers' money at risk. 3 CHAIR OF THE INQUIRY: There might be a suggestion that this 4 was duplication of effort, if you were using the same 5 legal advisers or the engineering advisers. 6 A. Yes. There's -- what I'm not suggesting is that CEC 7 should in any way have attempted to man mark people in 8 tie, to redo everything. That's not what 9 Transport Scotland was doing. 10 When I was involved, Transport Scotland, there were 11 essentially three of us and some -- and parts of some 12 technical advisers, and only one of -- only one of the 13 three was full-time on the tram project. 14 Versus there were 60-odd people in tie at that time. 15 You don't need to duplicate what's there, but you need 16 to have sufficient capacity and capability to scrutinise 17 what's being said, to say -- both on taking a broad view 18 and saying: I'll look at a bit of everything and then 19 I'll look at some things in depth, and if having done 20 that level of inspection, it all holds together, then 21 I have more confidence that things that I haven't been 22 able to look at, will also hold together. 23 MR MACKENZIE: Thank you. Also then in a similar vein at 24 page 57 of your statement. At paragraph 130, please, in 25 the middle of the paragraph, you say: 133 1 "It was normal that there was a test that reviewed 2 the final Infraco price, plus everything that had 3 happened between February and November 2007 to ensure 4 that the benefit-cost ratio had not deteriorated 5 radically." 6 A. Yes. 7 Q. "Tie had had to pass one gateway so that it could have 8 money to start the advance works. To pass the final 9 gateway, TIE had to show that the tram project had not 10 worsened such that it would not have passed the previous 11 gateway." 12 So that would have required to have happened had 13 Transport Scotland remained involved? 14 A. Yes. 15 Q. Finally on this point, please, page 157 of your 16 statement. In paragraph 364, you say, in the second 17 sentence: 18 "Had Transport Scotland been involved in the Infraco 19 contract, then an independent review of the contract 20 structure by a different lawyer from a different firm 21 would have been required before the Infraco contract was 22 signed." 23 Pause there. I'm not sure, Mr Sharp, are you 24 referring to if Transport Scotland had remained involved 25 in the tram project, or are you referring to something 134 1 else? 2 A. Yes, if it stayed -- remained involved in the tram 3 project. This is something we had done on other 4 projects. 5 Q. You go on to say -- I should pause and ask why? 6 A. Because the effectiveness of the Infraco contract was 7 crucial to whether the cost would be achieved, 8 especially in this instance where the purposes of the 9 Infraco contract was to fix large portions of the cost 10 and I would have wanted, had I still been in 11 Transport Scotland, to know that it was likely that the 12 contract would achieve that. 13 That's the question I would have asked an 14 independent lawyer to look at the contract 15 documentation. Say: is this -- is the contract that's 16 been put to Infraco consistent with those risk transfer 17 principles and will it achieve its stated objectives? 18 Not in every comma and dot because that would take 19 forever, but to take and go through the key principles 20 and look at have those key principles actually been 21 implemented or not. 22 Q. Why would you have wished advice from an independent 23 lawyer, rather than a lawyer who had drafted the 24 contract? 25 A. I would have advice of the lawyer who had drafted the 135 1 contract. Then I would be relying on being able to sue 2 that lawyer for negligence after -- CEC being able to 3 sue that lawyer for negligence after the event, after 4 everything had gone wrong. That's not a way I would 5 wish to go. I would wish to have assurance. In the 6 same way that I have asked for assurance, I've got 7 programme experts in to look at the programme and assure 8 me that the assumptions are credible and highlight the 9 risks in the programme, and I have had experts in to 10 look at the risk analysis. 11 The performance of the contract is a key element of 12 any infrastructure project, and as we saw in this 13 particular one, that would have been particularly 14 farsighted because the failure of the contract to 15 achieve what tie thought it was going to achieve was an 16 enormous contributor to the cost and delay. 17 Q. To what extent, if at all, is obtaining independent 18 assurance of matters a feature of guidance and practice 19 on project management generally? 20 A. Independent assurance of some form, and the question is 21 about what sort of form, is a key element of all good 22 project management practice in all realms, not just in 23 transport. Which bits you review and how are then 24 a question to be judged in each case, determining on 25 where the risk lies. In my view, the performance of the 136 1 Infraco contract was a big risk in relation to the tram 2 project. 3 Q. You mentioned you had instructed independent legal 4 review on other contracts, did you say? 5 A. Yes. 6 Q. Can you mention any examples? 7 A. Stirling-Alloa-Kincardine Project. It illustrates that 8 it's not fool proof, that the problems were largely not 9 contractual, although there were some contractual 10 issues. But it's not to guarantee, but it's to give 11 a view that there isn't anything obviously missing. 12 There isn't anything obviously wrong. But what the 13 view -- is being presented of the contract is 14 reasonable. 15 Q. Over the page, please, in your statement, if I may, to 16 page 158. A few lines from the top of the page, you say 17 that: 18 "An independent review was on my checklist of what 19 had to happen before a contract could be signed and 20 would be carried out in other major projects where 21 contracts were reviewed to check that they were going to 22 do what they said." 23 You then go on to say, a few lines down: 24 "An independent review of the Infraco contract 25 should have happened and should always happen on a major 137 1 project where there was reliance on the contract to 2 deliver." 3 You then go on to say that: 4 "An organisation such as the Council should not have 5 taken their in-house lawyer's word for it and should 6 always have an independent view carried out." 7 To pause there, I think the Council's position is 8 that they took advice from DLA Piper, who were also 9 advising tie, and therefore there was no need for the 10 Council to in addition seek independent legal advice. 11 Am I right in thinking -- do you criticise that 12 approach? 13 A. I disagree with that approach and had Transport Scotland 14 been actively involved, and able to impose conditions, 15 I would have imposed the condition of independent review 16 because I did not think that taking only the view of the 17 team that had written the contract was sufficient. 18 Q. Just to be absolutely clear, do you say this being the 19 benefit of hindsight, knowing what happened, or are you 20 absolutely sure that is what you would have done had 21 Transport Scotland been in a position to make that 22 a condition? 23 A. I'm absolutely sure that's what I would have done, and 24 I had done it on other projects. 25 Q. Thank you. 138 1 I would like now to leave your time at 2 Transport Scotland and close that chapter, please. And 3 open another. 4 You joined tie, I think, in October 2007; is that 5 correct? 6 A. That's correct, yes. 7 Q. I think in particular you joined as Design and Consents 8 Manager; is that correct? 9 A. Yes. 10 Q. You were there until August 2011? 11 A. Yes. 12 Q. Can you please just, by way of overview, explain your 13 main duties and responsibilities between October 2007 14 and May 2008 when financial close of the Infraco 15 contract occurred and there was SDS novation? 16 A. So my responsibilities were to make the novation happen. 17 Before that I had to address the design delay and seek 18 to reduce the design delay and resolve obstacles to the 19 design progressing and to ensure that there was a plan 20 in place to get all of the consents and to help resolve 21 any difficulty -- any obstacles to securing those 22 consents. 23 Whilst I could not do many of those things out of my 24 own hands, so my role was to get people together, make 25 sure that: what is the obstacle to this planning consent 139 1 being granted? Make sure that all of the excuses were 2 taken away and everybody was clear about who was going 3 to do what next, and if they do that, then we will do 4 this, and make it happen. 5 So that process had basically stalled completely, 6 and it was my job to restart it and make meaningful 7 progress. 8 Q. Thank you. I think you say you reported to Steven Bell; 9 is that correct? 10 A. Initially, yes. 11 Q. So this initial period, October 2007 to May 2008? 12 A. Yes. 13 Q. I think you didn't report to Mr Crawley or Mr Glazebrook 14 who job shared the role of Director of Engineering, 15 Assurance and Approvals; is that correct? 16 A. That's correct. 17 Q. Did you have to work closely with them nonetheless? 18 A. Yes. They sat opposite me at a set of desks in the tie 19 office, and we talked every day at length about whatever 20 the issues were that needed to be resolved. 21 Q. When you joined, why did you report to Mr Bell and not 22 to Mr Crawley or Mr Glazebrook? 23 A. Because Mr Crawley and Mr Glazebrook had other things to 24 be doing. They didn't need an additional member of 25 staff reporting to them. My role was clear. Their role 140 1 was clear, and we could work together well without 2 needing to report to them. 3 Q. What was their role? 4 A. So their role was to look at the engineering issues that 5 were pertinent to the design, to ensure that the design 6 would deliver the functional specification. To resolve 7 the outstanding issues about the functional 8 specification. So to resolve all the engineering 9 technical matters that were outstanding, and to give tie 10 assurance that the design being prepared by SDS would be 11 satisfactory and safe. 12 CHAIR OF THE INQUIRY: Where did you sit in the management 13 tree, as it were, in relation to Mr Crawley and 14 Mr Glazebrook? 15 A. Level with them, reporting to Steven Bell. 16 MR MACKENZIE: Thank you. 17 If we then, please, go to your statement, page 72. 18 Paragraph 164, I think in short this relates to you 19 getting a better understanding of the reasons for design 20 delay when you joined tie. I'll just read this 21 paragraph out. It says: 22 "The area where I developed the most nuanced 23 understanding was in relation to the design contract, 24 how that had been managed and where delay was 25 attributable between SDS and other people in relation to 141 1 the design production. That was one of the areas where 2 greater insight convinced me that I had not been told 3 the whole truth when I was at Transport Scotland. I do 4 not feel that was in relation to any deliberate attempt 5 to mislead me, but that people did not understand the 6 situation in depth and were therefore telling me what 7 they thought was the truth. When I dug deeper, it was 8 more complicated than they had realised. It was my 9 opinion that TIE overall performed well ..." 10 In the question of the reasons for design delay, 11 what was the difference in your understanding between 12 before, when you were at Transport Scotland, and later, 13 once you had joined tie? 14 A. Well, the difference between -- even when I was at 15 Transport Scotland, there was a difference between my 16 understanding and what I was being told. 17 So when I was at Transport Scotland, the narrative 18 was entirely that this was all SDS's fault, all delay 19 was all SDS not having sorted themselves out, not having 20 done things, arguing about points contractually, and 21 just not delivering. 22 I did not believe that that was the case when I was 23 at Transport Scotland, but I didn't have specific 24 details. It didn't seem to me credible that it was as 25 black and white as that. 142 1 But it wasn't until I was involved in getting in 2 amongst the details that I was uncovering the extent to 3 which there was significant SDS under-performance and 4 the extent to which they were -- the excuses that they 5 were offering were reasonable, sound and they were being 6 held up from working by decisions that were needed from 7 others. 8 I think that there was a narrative in tie that found 9 it convenient to blame everything on SDS. And that 10 wasn't always fair, and because it -- and the really bad 11 consequence of that is because SDS did have lots of 12 things where they could -- where they were accountable 13 for the delay, it meant that people in tie and CEC 14 didn't look at the things where actually SDS were in the 15 right in saying: no, I cannot finish this design here 16 until you make these decisions; and thinking that they 17 were all excuses because it meant that CEC and tie 18 didn't deal with those issues, and as I arrived, we 19 started to unpick and deal with some of those issues. 20 Q. Thank you. Now, I think you said before lunch that it 21 was only in relation to the SAK Project that you had any 22 concerns in relation to tie's reporting, but from what 23 you have just said now, it sounds as though you had some 24 concerns in relation to tie's reporting of design delay 25 in relation to the Edinburgh Tram Project; is that fair? 143 1 A. Slight nuance there. I did not have concerns that they 2 were reporting inaccurately that there was delay and how 3 great the delay was. I thought that they were incorrect 4 in their views as to what was causing that delay. 5 I think that they were reporting truthfully what they 6 thought was the case, but that their analysis of the 7 causes of delay was insufficient. 8 So it wasn't the reporting I was concerned about. 9 I was concerned about their analysis of the delay. 10 Q. Presumably tie as project managers should have known the 11 cause of the delay? 12 A. The person that I replaced, I think, did not do a good 13 job in that situation and was one of those who was in 14 the forefront of the "everything is SDS's fault" 15 explanation of things. And that didn't resolve issues 16 that needed to be resolved. 17 Q. Well, I wonder if that's fair on the individual you 18 replaced. You replaced -- I think actually when you say 19 you replaced somebody, did you replace anybody or was in 20 fact your role a new one that was created for you? 21 A. Well, there was -- the design -- the specific role of 22 design and consents manager was new. But somebody had 23 been the counterparty to the SDS contract, was tie's 24 contract representative on the SDS contract before me. 25 There had been a gap which also didn't help, and then 144 1 I took on that role. 2 CHAIR OF THE INQUIRY: So was your role a more responsible 3 one, or did it have identical responsibilities to the 4 person who left and what have you before the gap? 5 A. Yes. It was a wider role in that it took in the active 6 resolution of the consents issues and the holding 7 everybody in each organisation to account explicitly for 8 what was to be done next. 9 That had not been an explicit part of the previous 10 person's role, and in terms of consents, the presumption 11 had been that SDS would be able to get all consents, and 12 that was their contractual obligation. So since it was 13 their obligation, you just let them -- you tell them to 14 do it and shouted at them when they didn't, and that 15 wasn't a suitable way of achieving success. 16 So that -- tie having realised that brought me in to 17 tackle those issues in a different way and we had much 18 greater success tackling them that way. 19 MR MACKENZIE: I think there came a point in time, Mr Sharp, 20 where you prepared a lessons learned note on the design 21 contract and process. 22 A. Yes. 23 Q. Which may be the best document to go to to see your 24 views at the time of the various reasons for these 25 problems with design. 145 1 If we can go to that, please, CEC01095155. We can 2 see this is addressed to Frank McFadden, who I think 3 within tie was responsible for the Infraco contract, and 4 I think you explain in your statement that this was to 5 inform or help Mr McFadden in relation to the management 6 of that contract, that you had set out the lessons 7 learned from the SDS contract, is that right? 8 A. Yes, and by this time I was working for Frank. 9 Q. I understand. I should, sorry, have asked then: did 10 your duties and responsibilities change in any way after 11 May 2008? 12 A. Yes. So I was no longer directly responsible for 13 managing SDS because we no longer had a contract with 14 them except for some retained utilities design, which 15 I continued to manage. But principally I was there to 16 continue to attempt to resolve design and consents, but 17 working with Bilfinger Siemens CAF, rather than with SDS 18 alone. 19 Q. Thank you. We see in paragraph 3 you set out: 20 "Differences in opinion arise about the causes of 21 the delay, but all of the below are undoubtedly 22 factors." 23 I won't read them out because you come then in the 24 annex to look at each in more detail. In paragraph 4, 25 you say: 146 1 "I have set out more detail on each of these in an 2 annex ..." 3 You also say in paragraph 5: 4 "It is worth noting that most of these issues are 5 people issues rather than technical or commercial in 6 origin." 7 That's something you explain more fully in your 8 written statement. 9 Then on to page 2, please. Simply to note the date. 10 We can see it's 20 August 2008. So things are still 11 relatively fresh in your mind? 12 A. Yes. 13 Q. Then on, please, to page 3. Let's try and deal with 14 parts of these. 15 Under 1, "Flawed contract", can we see this relates to 16 the SDS contract? 17 A. Yes. 18 Q. Do you see in the last sentence in paragraph 3, you 19 said: 20 "Issues arising with key consents and key third 21 parties should always have been owned by tie supported 22 by SDS and legal advisers." 23 Now, I think, is that a reference to the fact the 24 SDS contract made SDS responsible for obtaining or 25 securing all approvals and consents? 147 1 A. Yes. 2 Q. But the reality was that that was something tie were 3 always going to have to have help with? 4 A. Yes. There were many of the consents and approvals that 5 it was appropriate to say to SDS: it's your design, you 6 get it approved. 7 But there were some areas and some particularly 8 important third parties where it was not reasonable to 9 contract that away and that those -- that tie should 10 have taken a more close involvement with that. 11 By this time tie was taking a much more close 12 involvement with these matters, but to an extent some 13 of -- there was damage done that was hard to undo on 14 that point. 15 Q. I understand. 16 The second point, "Poor initial SDS contract 17 management”, you say: 18 "It appears that SDS got their management wrong at 19 the start and have never fully recovered." 20 This, I think, is obviously before your time. So 21 I'll put this point to the Parsons witnesses, I think, 22 is a better way to deal with that point. It's not 23 a matter within your direct knowledge, is it? 24 A. No, but I could see the consequences that they were way 25 behind. And that appeared to be -- but yes, they would 148 1 be able to give a more -- closer account of what 2 happened. 3 Q. Then the next point is tie contract management 4 practices. I think this is a reference to the 5 individual you've mentioned before. I say just in 6 passing, I'm not sure that's entirely fair because 7 I think this individual was only the SDS Contract 8 Manager between, I think, August 2007 and April 2008. 9 I'm not sure that that individual can be blamed for all 10 tie contract management practices either within that 11 period, but certainly without it. But we note what you 12 say in passing. 13 A. I said compounded by. Therefore I did not seek to 14 ascribe all responsibility to that individual. 15 Q. I understand, thank you. 16 Page 2, please. I'm sorry. It's page 4. 17 Paragraph 7, you explain: 18 "The SDS contract has also suffered from a lack of 19 continuity in tie management and often a lack of 20 attention - it has not always been possible to identify 21 the single individual who was really responsible for 22 managing the SDS contract. As a result SDS has at times 23 been given conflicting "instructions" and the culture 24 has grown in tie that it is fair game for anyone to ask 25 SDS to do things and fair game for anyone to convey 149 1 criticism to SDS." 2 I think it's fairly self-explanatory what problems 3 can arise if that practice develops. 4 The next matter, please, is headed "Adversarial 5 behaviour", and I propose simply to take that as read. 6 We can see what it says. 7 CHAIR OF THE INQUIRY: Go back to the fair game point. 8 Previous witnesses referred to people meddling. Is that 9 what you're referring to? 10 A. There's an element of that, yes. But there was a clear 11 contractual line of responsibility, and when people 12 didn't follow that, sometimes through meddling, 13 sometimes just with good intentions, but they would end 14 up giving conflicting instructions to somebody else, who 15 might also have given those instructions out of good 16 intention. So it's not just from meddling. It's the 17 lack of clarity meant that SDS had conflicting 18 instructions, and then -- they then didn't always 19 resolve those conflicting instructions and used it as an 20 excuse for non-performance. 21 CHAIR OF THE INQUIRY: You say lack of clarity, is that lack 22 of clarity in roles or some other form of lack of 23 clarity? 24 A. Well, it was clear what the roles were and it was clear 25 what SDS should do when given instructions by somebody 150 1 who is not entitled to give them instructions. But tie 2 didn't help SDS in holding a firm line there, and it 3 didn't -- it was a culture that was embedded. I don't 4 quite know exactly how it grew up, but could it have 5 reached a point -- and therefore the first thing we did 6 was say: no instruction is valid unless it had my 7 signature on it. 8 CHAIR OF THE INQUIRY: Thank you. 9 MR MACKENZIE: Thank you. 10 On that point, Mr Sharp, I can think of three 11 departments or groups in tie who may have an interest in 12 contacting SDS for design. One of course is the 13 Engineering Department; is that correct? 14 A. Yes. 15 Q. And also perhaps the Utility Department, utility 16 designs? 17 A. Yes. 18 Q. And also perhaps the Commercial or Procurement 19 Department as well. 20 A. Yes. 21 Q. Are there any others? 22 A. The programme team. 23 Q. And -- 24 A. I can't immediately think of any others while SDS were 25 working directly for tie. 151 1 Q. Thank you. Was it your understanding that these four 2 different teams or departments sometimes contacted SDS 3 directly, rather than going through the tie SDS client 4 representative? 5 A. That's kind of -- there's a critical difference between 6 contact -- not -- there's no requirement to -- it would 7 not have been beneficial to restrict the flow of 8 information and exchange of views. 9 But when it came to: here is a decision that you 10 must implement, that has to be done properly through the 11 right channels; and that's where it had really gone 12 wrong. 13 But also, if you're going to criticise SDS for not 14 doing something because they were doing something else, 15 you need to know whether that was already agreed, and so 16 those sort of conversations were being had. People were 17 being critical of SDS without an understanding of what 18 else tie had asked SDS to do and that -- you know, that 19 needed to be managed better because SDS understandably 20 felt put upon that they were getting criticism from all 21 sides that was in some cases, I would say, fair, and in 22 other cases it wasn't fair. 23 That's why bringing that kind of -- if it's an 24 instruction, if it's a formal, I'm not happy with what's 25 happening here, it needed to go through me, because then 152 1 it made sure that there was a consistent view taken by 2 tie, a consistent set of messages, that both helped SDS 3 and it took away one of their biggest excuses for 4 non-performance. 5 So between doing those two things, design delay 6 started to come down. 7 Q. Thank you. Then go back to the lessons learned paper, 8 please, under paragraph 10, "CEC behaviour". You 9 describe how: 10 "In Transport Scotland, Bill Reeve and I used to 11 describe the tram project as suffering from "absent 12 client syndrome". CEC has only recently started to 13 behave as if it really wants a tram project and only 14 even more recently started to show any willingness to 15 grapple with any of key choices that involve being 16 a good client." 17 That's all fairly self-evident and explained further 18 in your written statement as well. 19 Can we please go to paragraph 12 at the bottom of 20 the page: 21 "CEC has persistently changed its mind, refused to 22 make decisions, given third parties additional 23 opportunities to re-open agreements and allowed the tail 24 of smaller projects to wag the tram dog. In short, CEC 25 has never behaved like the tram is the biggest project 153 1 that Edinburgh will see in 50 years." 2 You touched upon some of these things before. 3 Over the page, please, to page 5. In paragraph 13 4 at the top, you say: 5 "Privately at least, someone should convey to CEC 6 that their approach to planning matters in particular 7 has cost a large amount of time and money." 8 Then: 9 "The goalposts have moved so many times, we are not 10 even playing the same sport any more." 11 What is that a reference to? 12 A. What requirements there were, planning in different 13 places would change, and that -- by this time, in 14 August 2008, CEC had kind of recently actually got to 15 grips with that, and it was happening much less by then. 16 But if you go back through 2005 and 2006 and 2007, lots 17 of changes, lots of conflicting views, from CEC's 18 planners. Despite the fact that they had very helpfully 19 produced a Tram Design Manual, they then had individual 20 planners asking for things which were not consistent 21 with the Tram Manual, or even where there was open to 22 interpretation, they would be asking for what was 23 essentially personal preference; and it was very hard 24 for SDS in that environment to produce a set of drawings 25 that they would get approved right first time, which, as 154 1 you will recall from earlier discussions, was a key 2 assumption. 3 Q. Thank you. Then the next factor you list in the lessons 4 learned paper, third party negotiations in paragraph 14: 5 "Failure to close out 3rd negotiations has 6 dogged this project and has undoubtedly prevented SDS 7 from completing design." 8 Go back then to the page, please, the "Do it my way" 9 paragraphs. I'll leave that and take that as read. 10 Then in paragraph 18: 11 "The tie/Transport Scotland dynamic". 12 Can you explain what you mean there, that: 13 "The tie/Transport Scotland dynamic has not always 14 helped." 15 A. I think I mean that Transport Scotland could at times 16 have usefully been more blunt in its description. In 17 this case, this is me could have been usefully more 18 blunt in saying: if you do not do this, if you do not 19 address these issues, either in this way or in some way 20 that achieves the same ends, then we will stop, and we 21 will not progress this. 22 The extent to which that kind of miscommunication 23 where I was thinking I was conveying clear messages, but 24 in fact they weren't being picked up as clearly as 25 I liked, didn't become clear to me until I'd gone to tie 155 1 and was working alongside Stewart McGarrity and we had a 2 lengthy discussion about: well, what I thought I was 3 telling him and what he thought I was telling him and 4 the fact that didn't meet up. 5 So Transport Scotland could usefully have been 6 clearer, blunter, and harder. That would have forced 7 the improvements in governance through more quickly. 8 And the harm with that was not so much that the 9 better governance was delayed. It was that people were 10 spending time sorting out governance when they could 11 usefully have been sorting out other things. 12 CHAIR OF THE INQUIRY: What do you mean by if they didn't 13 do -- you would say to them: we will stop. What does 14 that mean? Does that mean stop the grant? 15 A. Yes, we will either withhold grant that's already been 16 approved, or we will not approve the Draft Final 17 Business Case. We will not approve the outline Business 18 Case. Looking back, I could have been firmer and 19 clearer in the discussions that led up to that, and that 20 would have helped tie. 21 CHAIR OF THE INQUIRY: Would withdrawal of the grant not 22 ultimately be a ministerial decision? 23 A. Yes, and I would have had to be -- it would ultimately 24 be for Ministers, but I would have been saying, for 25 instance: I cannot recommend to Ministers that they 156 1 proceed until you sort this out. 2 If I'd been more direct, that would have been 3 helpful. 4 CHAIR OF THE INQUIRY: Thank you. 5 MR MACKENZIE: Thank you. Going back to this page, please, 6 the next factor, failure to nail down issues completely, 7 in paragraph 19, you say: 8 "The most striking thing about getting to grips with 9 the detail of the tram project has been the very large 10 number of issues that (a) never get completed and (b) 11 are allowed to come back once they have allegedly been 12 closed." 13 Then in paragraph 20 you say: 14 "Failure to close out issues completely has been 15 a characteristic of all the organisations involved in 16 the project." 17 Then in paragraph 21, you say: 18 "Bringing issues back from the dead has mainly been 19 a CEC behaviour although TEL has been guilty of it as 20 have individual technical people who haven't liked the 21 solution to a particular problem. In my view CEC's 22 failure to decide what the tram is for and then make 23 that stick has been the biggest single cause of 24 deadlines being missed and cost increase on the project - 25 particularly in the SDS contract but actually 157 1 throughout the whole of the scheme." 2 Leave that. 3 The last point I'll simply take as read, the 4 question of lack of mutually supportive relationships. 5 I think we understand what you mean by that. The 6 question in paragraph 21 of CEC's failure being the 7 biggest cause of deadlines being missed and the cost 8 increase, could I then please compare that with 9 something you say in your statement at page 111. 10 In paragraph 258, halfway through, I hope I'm not 11 taking this out of context, but here you say: 12 "Whilst CEC contributed to the issues here, they 13 were not the primary problem. The primary problem was 14 the failure to get the design right by the designers and 15 to co-ordinate the design." 16 I just wondered whether are we talking about the 17 same thing or two different things? 18 A. We're talking about different aspects and at different 19 levels, and at different times. In August 2008, up to 20 that point I stick with my view that CEC's failure to 21 have a consistent view of what it wanted the tram to do 22 and to make that stick with everybody in their own 23 organisation, with everybody in tie, and to articulate 24 that clearly enough, had caused very significant delay, 25 and it was the biggest cause of delay to that point. 158 1 Here we're talking a bit later and we're talking 2 about specifically the roads technical design. So 3 there's lots of instants on the tram project of 4 concurrent delay, of: well, if you'd solved one problem, 5 then there would have been another thing that was 6 holding things up at the same time. 7 So here, in the specifics, SDS tried to claim that 8 CEC had made far too many comments on the roads design 9 and it was all wrong and, you know, that was what was 10 causing delay in approving the roads design. 11 When we got down to the detail, which we didn't do 12 until significantly later than August 2008, I think we 13 discovered that that wasn't the case, that most of those 14 comments were fully justified, some were possibly overly 15 picky. And some were wrong. 16 But in the volume of design drawings that we're 17 talking about, it's not surprising that there were some 18 that were wrong. 19 But ultimately, most of this, that particular issue, 20 was around failure to co-ordinate the design in the 21 first place. 22 That was one issue, and previously I was talking 23 about the broad range of the whole project through the 24 parliamentary process and before even the design 25 started. 159 1 Q. That's very clear, thank you. 2 What steps were taken to address the various design 3 problems when you first arrived in October 2007 through 4 to May 2008 in particular? 5 A. Let's get the list of what is stuck. What is 6 progressing. We will go through the SDS programme: what 7 is progressing and why is it not progressing; where are 8 we stuck? I asked for views from tie people. I asked 9 for views from SDS people. I asked for views from the 10 CEC team about what is it that is causing the delay 11 here. Sometimes we got all the same answer and they 12 were relatively straightforward to review, and sometimes 13 you would get different answers. You go, okay, now we 14 will get the people together and have the discussions, 15 so that we get an agreement as to -- from where we are 16 to where we need to be, what were the steps, who is 17 going to take them and when are they going to have done 18 them by. 19 This happened at lots of levels from just lots of 20 aching technical detail through to very significant 21 questions like what did CEC want the layout of 22 Picardy Place to be. One of the issues that rose from 23 the dead many times. 24 Questions about were we to design for there to be 25 a hotel in the middle of Picardy Place? If so, what 160 1 size and shape of hotel? 2 That just didn't get resolved, and that one took -- 3 there was disagreement amongst CEC's own people as to 4 what that should happen, and then I had to take them all 5 to see Andrew Holmes, who had the authority to tell them 6 what was happening next, and to get Andrew to make a 7 decision in December 2007 that this was the assumption 8 for -- that SDS were to use to develop the design at 9 Picardy Place. Now go away and get on with it. 10 Q. I think you also summarise matters in your statement at 11 page 160 -- page 80. 12 At the top paragraph, you say: 13 "The combination of the Approvals Taskforce, looking 14 at the commercial claims and escalating decisions which 15 had to be taken at a higher level reduced design delay 16 between October 2007 and May 2008 by a third. There 17 were still a lot of issues that I could not resolve, 18 such as problems with SDS underperformance and there 19 were still issues where it was difficult to get people 20 to take the necessary decisions in order to move the 21 tram project forward." 22 On the question of looking at the commercial claims, 23 could we go back one page, please, to page 79. 24 Paragraph 183, you explain when you started at tie, SDS 25 had two large contractual claims outstanding: 161 1 "One had been agreed by TIE for settlement but TIE 2 refused to sign and pay because ..." 3 You then say: 4 "The second claim was approximately GBP1 million, 5 where I went to SDS and I assessed the evidence of their 6 claim ... Settling those two claims and paying SDS did 7 improve the willingness of SDS to resolve outstanding 8 design issues." 9 I would like just to try and clarify what these 10 different claims related to. 11 In relation to the first claim you mentioned, could 12 we go, please, to document PBH00036744. We can see the 13 middle email, an email from Steve Reynolds, dated 14 6 September 2007 to Geoff Gilbert. In the first 15 sentence saying: 16 "Further to our exchange of emails below, I am 17 pleased to advise that PB is in general agreement with 18 the principles for settlement as set out in your email 19 of 24 August." 20 If we then scroll down to the bottom of the page, 21 please, we can see an email of 24 August 2007 from 22 Geoff Gilbert to Steven Reynolds. 23 If we go over to page 2, please, if we see the first 24 paragraph, we can see "Basis of Claim Settlement", and 25 an agreed payment in the sum of GBP2.5 million. 162 1 We then see, at the end of that paragraph, all 2 claims are extinguished, and there will be no further 3 delay, et cetera. Claims from SDS provider in respect 4 of any issues arising up to and including 1 August 2007. 5 So in short, what this appears to be is an agreement 6 for tie to pay SDS GBP2.5 million in settlement of all 7 claims by SDS for delay, et cetera, up until 8 18 August 2007. 9 Is that the first claim you referred to in your 10 statement, Mr Sharp? 11 A. I believe so, yes. 12 Q. Thank you. 13 Could we put that to one side, thank you. 14 You had also referred to a further claim for 15 GBP1 million in your statement. Do you remember what 16 that related to? 17 A. So as with the first claim, it was for a shopping list 18 of things. It wasn't for one individual thing. It was 19 for a variety of design issues where SDS were saying: we 20 are entitled to more money under the contract because 21 tie has done something or something has changed that we 22 couldn't reasonably have expected. 23 So from memory there were eight or ten issues that 24 made up that, some of which -- one of which was also 25 just the sheer extra time that was required that was -- 163 1 that was alleged to be tie's responsibility. 2 So I went to -- Steve Reynolds and I had to go 3 through, having done my homework first, what is the 4 evidence for this, and I had to form a view on where it 5 was substantiated and where it wasn't. And so we ended 6 up settling that claim. 7 I can't remember for exactly how much, but it was 8 somewhere between 600,000 and 800,000. Certainly it 9 wasn't for the full million. But these things had been 10 dragging on and impacted on SDS's enthusiasm for getting 11 on with work and doing extra. They certainly weren't 12 willing to go above and beyond while tie was holding 13 these claims over their head. 14 Q. Yes. I'll take you to another document to try and 15 clarify the claims further. 16 If you can't assist, please just say. 17 Go to CEC01295126. You can see this is an email 18 from Dennis Murray of tie dated 13 May 2008 to 19 Mr Reynolds. You're not copied in on this one. We can 20 see the text saying: 21 "I attach a copy of the account status at Novation 22 as discussed and agreed today." 23 If we then go to this account, please, it's a very 24 short one-page document. 25 CEC01295127. 164 1 Now, under the column C, anticipated final account, 2 we can see the contract sum just over 21.8 million. We 3 can see variations agreed, 776,172. And below that, 4 again, we can see agreed the figure of just over 5 1.7 million. 6 We then see settlement of all outstanding change 7 requests and variations at novation, GBP800,000. Is 8 that the figure you mentioned a few minutes ago, 9 Mr Sharp? 10 A. I'm not certain. 11 Q. I understand. It's possible, but you can't be certain? 12 A. Yes. 13 Q. We may have to ask other witnesses about this too. 14 We then see the figure of GBP2.5 million as an 15 additional services agreement. Is that a reference to 16 the settlement we saw earlier between Mr Gilbert and 17 Mr Reynolds? 18 A. Again, I can't be sure. 19 Q. Okay. I think in that case I will leave the figures in 20 this document to someone else, apart from do we see 21 further down the sum GBP1 million 22 under: incentivisation, non-Infraco. Do you recognise 23 that figure and what it was for? 24 A. I recognise the figure, but I cannot remember the 25 details of what it was for. It's not been in any of the 165 1 documents that I have looked at recently, so I can't 2 remember exactly -- the principle was that we were 3 encouraging SDS to complete the non-Infraco design that 4 needed to be done, but I cannot remember the detail of 5 what they had to do in order to secure that funding. 6 Q. I see. We can ask other witnesses about that. Thank 7 you. 8 Put that document to one side. 9 Now, that was to do with claims by SDS against tie. 10 Are you aware whether tie at any time pursued a claim 11 against SDS for any delay or failings on their part? 12 A. In the discussions around the original settled claim, 13 the first claim that you showed me, and in the claim to 14 do with the GBP1 million, in both instances tie prepared 15 essentially counterclaims as to -- even if your claim is 16 justified, then your non-performance has cost us this. 17 So when the claims are settled, those two claims 18 we've discussed, the 2.5 and the one for 1 million that 19 was duly then settled for less, those claims -- in 20 settling those claims, tie had settled its counterclaims 21 up to that point. It was all matters on both sides up 22 to the two dates in question. 23 Q. I understand. 24 On a completely separate point, Mr Sharp, we've 25 heard some evidence of there having been a misalignment 166 1 between SDS design and the employer's requirements and 2 the bidder's Infraco proposals. Is that an issue you 3 were aware of during this period between October 2007 4 and May 2008? 5 A. Yes. 6 Q. Is it an issue you were involved in? 7 A. Peripheral -- peripherally is not quite right. I was 8 not involved in the process of resolving the differences 9 which should prevail. I was involved in instructing 10 some changes to SDS that took account of the agreement. 11 So I was aware of what was going on, and I needed to 12 know some of what was going on, so that I could give the 13 necessary contractual instructions to SDS, but I wasn't 14 actively involved in resolving those because they were 15 of a more technical nature than my skill set allows. 16 Q. Just for the avoidance of doubt, who within tie asked or 17 instructed you to issue the instruction to SDS? 18 A. In the end, it would be Steven Bell, although he would 19 ask me -- the instruction. There were others, such as 20 David Crawley and Tony Glazebrook, and at that time 21 I would think Andie Harper actually. No, actually it 22 would have been Matthew Crosse by then, were involved as 23 well in those discussions. But in the end, the actual 24 instruction -- this is what is agreed, this is what you 25 have to give effect to, would come from Steven. 167 1 Q. Thank you. 2 CHAIR OF THE INQUIRY: Is this a convenient point for the 3 shorthand writer? 4 MR MACKENZIE: Yes. 5 CHAIR OF THE INQUIRY: We will adjourn for 15 minutes for 6 the benefit of the shorthand writer. We will resume 7 again at 3.25. 8 (3.10 pm) 9 (A short break) 10 (3.25 pm) 11 CHAIR OF THE INQUIRY: You're still under oath. 12 MR MACKENZIE: Mr Sharp, we will now go to page 127 of your 13 statement to look at another matter. 14 In paragraph 297 it begins with reference to 15 discussions in Wiesbaden, Germany, between 16 representatives of BBS and tie, and about halfway down 17 you say: 18 "TIE staff received a briefing in the first week in 19 January 2008 from Steven Bell when he returned. I was 20 never taken through any detailed discussion of the 21 Wiesbaden agreement." 22 Now, to pause there, we will hear from Mr Bell in 23 due course, but I don't think he himself was present at 24 Wiesbaden. Do you have any knowledge of that? 25 A. I had thought he had been present at Wiesbaden but I'm 168 1 not certain of that. I'm certain that he gave 2 a briefing to us about Wiesbaden. 3 Q. Can you recollect what was said at the briefing? 4 A. Not in detail, no. In general terms, that there had 5 been an agreement about how we would work together, 6 about that there had been an agreement on programme, 7 changes to that point, and in fact that the slippage 8 from the programme that was in the contract and where we 9 were now had been dealt with, so that a variety of 10 things had been settled with BBS, as they were at that 11 point, and that we would go forward. But not any of the 12 detail of how much was settled and exactly what for. 13 Q. Thank you. We know that financial close took place in 14 May 2008, and you've explained previously how your role 15 changed after then, given that tie were no longer the 16 client under the SDS contract. 17 The question is this. Why did there continue to be 18 such a delay in completing design and obtaining 19 outstanding approvals and consents? 20 A. I think there were continuing issues in SDS, 21 particularly in relation to the roads design. The 22 questions -- the resolution of all the comments that we 23 discussed earlier and whether CEC had made too many 24 comments or whether they were fair comments or not. 25 Those issues continued. In my view BBS were not taking 169 1 a particularly active management of SDS. It suited them 2 for the design to not progress as rapidly as it could. 3 I think that there was -- there were still some 4 issues about people making their minds up about well, 5 this option or that option, and what should happen. 6 So there were instances of lots of different things. 7 There were fewer instances of CEC and tie caused delay 8 than there had been, but that hadn't gone away to zero 9 after financial close in May 2008. But they had 10 certainly reduced, and the SDS performance, there were 11 areas where it had improved and areas where it was 12 stubbornly poor. 13 Q. What do you consider of these factors which was the main 14 factor in the continuing delay in completing design? 15 A. It's not clear to me whether BBS -- what BBS were doing 16 to manage SDS's continuing delay and whether they could 17 have done more. So I can't say whether it was SDS 18 under-performance in the face of strong BBS management 19 or whether BBS were not exercising strong management. 20 We asked them for evidence on a number of occasions that 21 they were managing SDS strongly, and that evidence was 22 not provided. 23 Q. Perhaps on one view it may be unsurprising that it 24 wasn't clear to you what BBS were doing to manage the 25 continuing delay, because of course under the Novation 170 1 Agreement, the contract was essentially now between BBS 2 as client and the designer. So tie had been taken out 3 of that contractual arrangement to a large extent, if 4 not completely; is that correct? 5 A. That's correct. 6 Q. So perhaps it's not surprising that on the part of tie 7 and yourself, there's less visibility about what SDS are 8 doing and what BBS are doing to manage them? 9 A. Yes, that's correct. 10 Q. Can we go, please, to your statement at page 88, 11 paragraph 204. You say: 12 "Fundamentally novation did not achieve the desired 13 result because Infraco deployed little effort to manage 14 SDS to the extent that they should. There were many 15 cases that the Infraco should have rejected SDS changes. 16 Infraco did not do that timeously and often not at all. 17 If Infraco did then it was only after protracted delay. 18 TIE tried to indirectly manage SDS because the Infraco 19 would not ..." 20 Reference to Scottish Water. 21 The question of SDS changes, are you able to give 22 examples even by broad category of the sort of changes 23 SDS were making and why? 24 A. SDS were raising changes for delay and for rework of 25 designs for a variety of things, and they were raising 171 1 changes in relation to consents. So there was this 2 example of the Scottish Water consents, where they're 3 saying we didn't have to -- we are due extra money for 4 gaining these consents. I pointed out contractually 5 that they weren't. 6 Now, that pointing out contractually that they 7 weren't was something that BSC should have done. It 8 should never have got to me to point that out. They had 9 the contract, they should have read it. They should 10 have interpreted it. 11 So there were issues like that. There were others 12 which were much more kind of contentious where for 13 instance, there would be design changes that were 14 requested by -- in order to gain planning consent or in 15 order to gain roads consent, and there was a kind of 16 genuine debate about whether some of those were areas 17 where SDS was entitled to additional funding and in some 18 cases they weren't. Those were much more debatable. 19 Q. I see. I have perhaps misread in that paragraph the 20 reference to SDS changes. Is that a reference to SDS 21 change notices or claims essentially? 22 A. Yes. 23 Q. Rather than to SDS changes to design? 24 A. No, yes. It's SDS seeking change -- compensation for 25 change. 172 1 Q. I understand. 2 Another matter, please, at page 113 of your 3 statement. In paragraph 262, going on to the question 4 of INTCs or Infraco notifications of tie changes, you 5 explain in this paragraph that: 6 "Following Infraco contract close and novation of 7 the SDS contract in May 2008, I was no longer 8 responsible for SDS contract ... 9 As design and consents manager it was my job to 10 take the lead on meeting TIE's contractual obligations 11 to assist and support the Infraco in achieving consents. 12 In relation to the Infraco contract itself, I was 13 assessing all the Infraco Notices of TIE Change (INTCs) 14 relating to design that arose during that. Essentially, 15 there were changes to the design where BSC had to pay 16 their designer more and therefore were asking TOE to pay 17 BSC more ..." 18 If we could continue on this point, please, by going 19 to page 137. In paragraph 317 you explain that: 20 "Most INTCs could be grouped together into common 21 themes ... for example one of the groups was related to 22 the delayed construction due to the design being late." 23 Is that essentially a prolongation claim? 24 A. Yes. 25 Q. Then you say: 173 1 "Another group was if the design had changed under 2 the pricing assumptions 3.4.1, which was then not 3 normal design development, so what BSC were being asked 4 to build was not what they had priced to build. 5 A third group was that the change of design was because 6 the approval body, CEC, had asked for it. Those were 7 the three biggest groups ..." 8 In relation to the second group of INTCs, the 9 question of something not being normal design 10 development, you explain in your statement that there 11 was an understanding certainly within tie, I think, and 12 including yourself, as to what the pricing assumption 1 13 meant; is that correct? 14 A. That's correct. 15 Q. What was your understanding of what it meant and how did 16 you arrive at that understanding? 17 A. My understanding was what it meant was that we'll have 18 some design, it's not yet complete, but that Infraco as 19 a competent contractor and manager of design would know 20 to expect that that design was incomplete and would know 21 what would -- what a complete design would look like, 22 and therefore what -- and they would price on the basis 23 of -- I've got this, and I expect it to change like 24 this, and I'll price on the basis of that, and of course 25 as part of that, Infraco would include some risk that 174 1 their assessment of the change would not be correct. 2 That was tie's understanding of what the normal 3 design development clause meant. That was briefed to me 4 by Steven Bell and by others and it was repeated -- on 5 multiple occasions throughout my time at tie. 6 Q. Thank you. I understand that. 7 Now, I think it's correct to say that you weren't 8 involved in the Mar Hall mediation in March 2011; is 9 that correct? 10 A. Yes. 11 Q. I could perhaps just take you briefly to a document 12 showing the resolution of some of these outstanding 13 design matters after that mediation. 14 The document is CEC02083973. 15 We will see this is a report on progress since 16 completion of Heads of Terms to 8 April 2011. You will 17 see it's prepared by Colin Smith of HG Consulting and we 18 see the logos of the other parties on it as well. 19 But at page 118, please, we can see from the top 20 it's an email from Andy Conway dated 5 April 2011 to 21 Sue Bruce and others. If we scroll down a little to see 22 the table, if we carry on there, we can see from the 23 table as at 24 March 2011 that open or outstanding 24 technical approval comments were 2,782, and by 5 April 25 they were down to 85. Were you aware of this at the 175 1 time? 2 A. Not of the precise numbers, but yes. 3 Q. Were you involved in the process of resolving closing 4 out these matters? 5 A. Absolutely. I was chairing meetings at which people 6 were in the room and going through the comments one by 7 one and ticking them off and agreeing what needed to be 8 done in order to resolve those particular comments. 9 Q. We see a dramatic reduction in comments over a short 10 period. Why had it not been possible to do this before 11 Mar Hall? 12 A. There was a -- in my view, a fairly tactical 13 consideration as to when to bring this to a head. So 14 there was a very large number of comments, and as 15 I said, in my view, the vast majority of them were 16 justified and the design needed to be changed. And 17 there was kind of a lengthy, no, we are not engaging 18 with this, no, we're not engaging with this, no, we are 19 not engaging with this, and then suddenly, shortly 20 before the Mar Hall mediation was coming, BSC and SDS 21 suddenly wanted to engage with this. 22 What I believe had happened is essentially that they 23 had been working on these comments. They had been 24 resolving this design. They knew what the answer was. 25 They knew that -- they could quickly change the design 176 1 where that was appropriate to resolve comments, and they 2 knew what they were going to do with the vast majority 3 of them. 4 So at that point they were willing to come to the 5 table and talk about it, and suddenly make progress. In 6 reality they had made a large amount of progress over 7 time, but because of commercial claims, they had not 8 been willing to show that they were making progress, and 9 they were not willing to re-issue new drawings, because 10 they were claiming more money for doing that. 11 Q. So to be quite clear, when you said there was a fairly 12 tactical consideration as to when to bring this to 13 a head, you mean on the part of Bilfinger and Siemens 14 and not on the part of tie and/or the Council? 15 A. Yes. In relation to this particular aspect of the -- of 16 what had been holding up progress. 17 CHAIR OF THE INQUIRY: There was a sort of -- maybe ransom 18 is the wrong word, but holding back to secure a better 19 deal, was there? 20 A. Yes, and once there was a framework in which to secure 21 a deal, there was no reason to hold back any more, 22 because once they'd done the deal, they would wish to 23 march on and construct as rapidly as possible. 24 MR MACKENZIE: Do you have a basis for saying that or is 25 that speculation on your part? 177 1 A. It's partly speculation, but it's also the nature -- the 2 speed with which that many comments were altered on that 3 many drawings, given how much progress there had been 4 previously, and how much not -- how much -- how long 5 I would expect it would normally take to produce new 6 drawings. I do not think it was feasible to produce the 7 number of new drawings in the time that they were 8 produced if some of the pre-work on the design had 9 not -- a large amount of the pre-work on the design had 10 not been done before the meetings to discuss how the 11 design needed to change in relation to the CEC comments. 12 Q. What happened at these meetings? Did the Council say: 13 this is what we require; and/or did the consortium 14 say: this is -- here is one we made earlier; or what? 15 A. Well, so, we went through -- in some cases comment by 16 comment, often groups of comments, and would say, okay, 17 so in this instance we have a conflict between the 18 traffic lights and the overhead line equipment pole. 19 And we come along and go yes, we will move it to behind 20 the traffic light, and -- or we will make them -- we 21 will place the traffic lights on the pole, depending on 22 whether that was a viable solution, and they would come 23 and say: that is fine, this thing we have resisted for 24 ages, we will now just do. 25 On some of them, on others they would kind of say: 178 1 yes, you have made this comment but you're wrong. And 2 here is the evidence of why you're wrong. Or some of 3 the comments were asking for them to essentially show 4 their working and they would come and say: I will show 5 my working and here is a pile of reports that show our 6 working. 7 In other instances, it would come down to: what you 8 want here cannot be achieved. And there would be 9 a discussion about what would be sufficient to take the 10 comment away. What solution would still maintain the 11 integrity of the design and make CEC happy at the same 12 time? 13 But that was the -- that was the minority of the 14 discussions on closing out comments. 15 Q. Thank you. 16 Then please go on to page 120. We can see this is 17 headed "Design Issues". Blow up the top of the page, if 18 we may. "Timelines for close out of design": 19 "CEC have stated that timeline for Airport to 20 Haymarket is 7 April 2011 which concurs with Infraco 21 understanding; however CEC believe deadline for 22 remainder of route is 1 September 2011. Infraco 23 understand that deadline is end of April 2011 and are 24 aiming for this date." 25 So I think in short, the intention is to complete 179 1 all outstanding design by either the end of April or 2 certainly at the very latest by 1 September 2011; is 3 that correct? 4 A. That's correct, yes. 5 Q. Do you know whether that happened? 6 A. Whether absolutely everything was complete, I'm not 7 certain, but very, very close was complete by the time 8 I left tie in the August of 2011. 9 Q. The same question as before. Why had it not been 10 possible to do this before Mar Hall? 11 A. Lack of willingness. 12 Q. On the part of who? 13 A. On the part of BSC/SDS. 14 Q. Again, do you have a basis for saying that or is it 15 speculation? 16 A. We had fortnightly meetings with BSC about a number of 17 these issues because they were subject to Infraco 18 notices of tie change. 19 And fortnightly they would come back with no 20 progress update even though they had agreed to give 21 progress updates. Halcrow wouldn't come to the meetings 22 to talk about some of their changes. There was just 23 a lack of action, and then suddenly they were able to 24 resolve everything in a very short period of time, and 25 the only thing in my view that changed was that they 180 1 wanted to resolve things because suddenly not resolving 2 them was their problem, and not something that they 3 could use as commercial leverage over tie. 4 CHAIR OF THE INQUIRY: The [draft] transcript has recorded 5 you as saying lack of willingness was on the part of 6 CEC/SDS. 7 A. BSC. 8 CHAIR OF THE INQUIRY: BSC. 9 MR MACKENZIE: Thank you, my Lord. 10 Now, we can put that to one side. Thank you, 11 Mr Sharp. 12 Just a couple of final matters. The question of 13 utilities, I think you essentially say that wasn't 14 something you were responsible for; is that correct? 15 A. To a large extent. I had some involvement with the 16 utilities design, but not -- none with the actual 17 undertaking of the utilities works. 18 Q. Okay. But you do deal with that in your statement. So 19 I think we'll take that as read. 20 Simply just one or two management and governance 21 issues to finish off with, if I may. 22 At page 141, please, of your statement. In 23 paragraph 329 you begin by saying: 24 "I recall that there was initial deep suspicion from 25 TIE of the motives of Transport Scotland, which was the 181 1 Scottish Executive before Transport Scotland was 2 created." 3 I'm just interested. Can you explain why there was 4 a deep suspicion from tie towards Transport Scotland and 5 also over what period you felt that lasted? 6 A. I think the period, you're talking 2002 through to part 7 way through 2005. It was coming -- it was coming down 8 over that period, but I think it was still continuing. 9 You've got to bear in mind that part that I was the 10 person who pulled the plug on the City of Edinburgh 11 Rapid Transit Scheme. So I did have previous of having 12 killed a major transport infrastructure project in 13 Edinburgh for failing to deliver. 14 So against that background, it's not surprising that 15 people would look at me a bit suspiciously, and wonder 16 if that's what I was going to do to the tram. And it is 17 also just the whole kind of difference of language and 18 approach and concern between somebody who had been 19 a career civil servant and people who were -- many of 20 whom were kind of boots on the ground type people, and 21 it's not cultures that naturally go together, and it 22 took time to kind of build-up that trust on both sides 23 that we meant what we said, we weren't stringing people 24 along. Where we were not able to act fast, it wasn't 25 because we didn't want things to happen. It's because 182 1 we had things, processes that had to be completed. 2 But people saw that as initially as wanting to not 3 make things not happen. So it did take time to overcome 4 those barriers. 5 CHAIR OF THE INQUIRY: What was wrong with the rapid transit 6 scheme that caused you to pull the plug? 7 A. This goes a very long way back to the mid-1990s, where 8 the then Conservative Administration had granted City of 9 Edinburgh Council some money conditional on this -- on 10 that scheme being done by PFI. So it was progressing by 11 PFI, but in order to reach financial close on the PFI, 12 City of Edinburgh Council and FirstGroup could not reach 13 financial close. 14 City of Edinburgh Council wanted not to pay anything 15 to FirstGroup. FirstGroup wanted several millions in 16 addition to the right to use the bus -- the exclusive 17 right to use the busway. 18 So it was stuck and it was broken and it wasn't 19 going anywhere. So the question was: could it be 20 resolved? Or did we have to stop that process and start 21 again and do something else, which was initially the WEB 22 Scheme, the west of Edinburgh Busway Scheme, which then 23 was converted to part of the tram. 24 So that was a -- it was a scheme that had been 25 a good idea in the mid-1990s. Things had happened that 183 1 had undermined its original assumptions and by the time 2 I became responsible for it in 2000, and then killed it 3 off in early 2001, the original assumptions no longer 4 held about all sorts of things and the Business Case had 5 moved on and it no longer stacked up. 6 CHAIR OF THE INQUIRY: Was that an example of Edinburgh 7 being incapable of delivering a project or was that -- 8 A. It was -- it was an example of a failure, but I'm not 9 sure that they could ever have made it work. In 10 insisting that it was done by PFI and insisting that 11 there was no capital grant to go with it, I'm not 12 convinced that the then Scottish Office set them up in 13 a way that they could have succeeded. And I think that 14 that was difficult. 15 But the perception among bidders was exactly that 16 that was a CEC failure to get things done. 17 MR MACKENZIE: Thank you. 18 If I could go, please, to page 142 of your 19 statement. Paragraph 331, you say: 20 "In my view, TIE did not ever attempt to 21 deliberately mislead Transport Scotland or deliberately 22 attempt to mislead CEC. There was information that TIE 23 should have shared more explicitly than they did, 24 however that was a tough call and in my view there was 25 not any deliberate pattern of deceit by TIE." 184 1 Pause there. What was the information that you 2 consider that tie should have shared more explicitly 3 than they did? 4 A. I say that -- for instance, on programme, they could 5 have -- they were presenting programmes to -- in their 6 four-weekly reports that they were reviewing because 7 they did not believe that they could hold to those 8 programmes, but they were not -- in providing the 9 programme, they were not providing that supporting 10 information that said: this is the programme just now, 11 but it is under review and we are concerned that we 12 cannot meet it, and that changes will have to be made. 13 So it was that sort of -- what we have told you is 14 the truth, but we haven't told you all of the supporting 15 information, and there's a question about 16 Transport Scotland didn't need to know all the 17 supporting information. It's how much of it was 18 material and should have been disclosed. 19 I think there had been -- that people maybe got some 20 of those judgment calls wrong, but I don't think they 21 were trying to bury things under the carpet because they 22 were -- they weren't pretending that -- certainly 23 internally, they weren't pretending that the programme 24 was fine. They were doing the things to try and fix 25 things, but they weren't letting on to 185 1 Transport Scotland that that's what they were doing. 2 So I think they were -- and on a number of design 3 issues, there were similar sorts of not reporting all of 4 the things that were being done to resolve issues, which 5 might have been helpful, but at the -- I could 6 equally -- easily have come to a huge list to 7 Transport Scotland that would -- that Transport Scotland 8 would have not been able to make any sense of. So you 9 had to judge, tie had to judge what was essentially an 10 executive summary of the issues, and as I say, I think 11 that they didn't always judge that correctly. 12 But it was a hard thing to do. 13 Q. Does this refer to the time period when you were still 14 within Transport Scotland or afterwards? 15 A. Yes. That's the time period I was with 16 Transport Scotland. I did not have sight of the full 17 reports that were going to Transport Scotland while 18 I was at tie. That wasn't part of my role. So I'm not 19 able to comment on what tie were reporting to 20 Transport Scotland. I only saw the bits that were 21 directly relevant to my work. 22 Q. So I think in terms of the period when you were still at 23 Transport Scotland, you have referred to reporting on 24 programme not being all it could have been, and also you 25 referred to design previously as not being all it could 186 1 have been, in particular in terms of the underlying 2 causes of the design difficulties; is that correct? 3 A. That's correct, and in some cases that was because tie's 4 analysis was incorrect. It wasn't a reporting issue. 5 It was an analysis issue. 6 Q. But that sounds from what you've said as though tie 7 didn't have a proper understanding of the causes of 8 design delay and possibly the causes of the programme 9 slippage too? 10 A. There was a period of time in, I would say from late 11 2006 through to early to mid-2007, where that was the 12 case. 13 Q. Thank you. 14 Just before we leave the question of governance, who 15 did you understand to be the senior responsible owner 16 for the tram project? 17 A. There's a slight complication here in that at one level 18 there were two. So in the strict terms there's the 19 senior responsible owner which -- within tie and then 20 TEL, which changed over time as to who that individual 21 was. Essentially it was the Tram Project Director and 22 then the Head of Tram within TEL. 23 Within Government there was also a senior 24 responsible officer who had -- who was responsible for 25 the Government's bit of the work, and was accountable, 187 1 and that was me. 2 Q. I understand. In terms of -- you say -- putting the 3 internal workings of Transport Scotland to one side, and 4 any allocation of responsibilities there, looking at the 5 tram project as a whole, who was the senior responsible 6 owner up until May 2008? 7 A. From memory, and the papers may illustrate that my 8 memory is faulty, I would have said that it was the Tram 9 Project Director at that time. 10 Q. So that's up until -- that's during the procurement 11 phase, up until May 2008. How about during the 12 construction phase from May 2008 up until the tram is 13 running? 14 A. I am unclear in my mind as to when the transfer to TEL 15 being -- to somebody at TEL being the responsible senior 16 owner took place. 17 Without -- at the time I was clear, but without 18 access to my documents, I can't remember when various 19 changes took place, and I don't trust my memory as to 20 the answers that I've been giving about who it was. 21 I know at the time that I was clear, because part of 22 what I have been doing in the September -- in the 2006 23 governance was to make it -- was to force clarity of who 24 that individual was. 25 Q. Yes. The reason I ask, Mr Sharp, is that we've seen 188 1 documents that show that in September 2006, the OGC type 2 2 review that took place were told that Neil Renilson, 3 the Chief Executive of TEL, was the senior responsible 4 owner for the project. 5 However, we may hear evidence from Mr Renilson in 6 due course that he was only the senior responsible owner 7 for the operational phase. Does that help jog your 8 memory at all? 9 A. That does help jog -- that sounds to me that the -- my 10 recollection of when TEL became senior -- somebody at 11 TEL became senior responsible owner happened much 12 earlier than I was remembering. I would not agree with 13 Mr Renilson's interpretation. You cannot be the senior 14 responsible owner for the operational phase. By that 15 point it's operating. That's not a project at that 16 point. You're either the senior responsible owner or 17 you're not. 18 Q. So it's your recollection that Mr Renilson as 19 Chief Executive of TEL was the senior responsible owner 20 during the procurement phase? 21 A. If you're telling me that in September 2006 he was 22 senior responsible owner, then yes. 23 Q. Thank you. 24 Finally, on the question of governance, which body 25 or organisation was in charge of the tram project? 189 1 A. Officially at all times City of Edinburgh Council. 2 I have read lots of testimony about the governance 3 structure. I think that there was some lack of clarity, 4 but that from September 2006 onwards there was written 5 down clarity. However, people did not always act in 6 accordance with the structure that was written down, and 7 I think that's why you see people being -- expressing 8 confusion about the structure; about how the Tram 9 Project Board sat, what its accountability was and to 10 whom. 11 That was written down clearly and -- but that people 12 did not always behave in the way that was written down. 13 People -- decisions were taken at the tie Board that 14 should have been taken at the Tram Project Board. 15 Things were discussed in the wrong forums and there 16 wasn't sufficient discipline about enforcing: no, this 17 is the structure, this has to happen. 18 So from my point of view, there was no lack of 19 clarity from September 2006 onwards as to what the 20 governance structure was, but the practice did not 21 always align with the structure. 22 Q. The final matter I would like to ask you about, please, 23 relates to certain observations on your part about the 24 contractor Bilfinger Berger. We find them at page 154 25 of your statement, please. In paragraph 357 you start 190 1 by saying: 2 "The crucial difference with the tram project was 3 the attitude of the contractor compared to all other 4 infrastructure projects that I had been involved in." 5 The beginning of paragraph 358, you say: 6 "The contractor's attitude was influenced by 7 Scottish Ministers' withdrawal from the tram project. 8 Part of TIE's and Transport Scotland's original strategy 9 was for contractors to know that behaving well as 10 contractor would put them in a good position when it 11 came to award the next round of contracts. Contractors 12 knew that there would be consequences in those next 13 round of contracts if the word got out that they were 14 difficult and awkward and managed the contract for as 15 much money as possible. The change to that strategy 16 gave Infraco the perception that they could be difficult 17 commercially and refuse to start and progress 18 construction with impunity and they were proved right." 19 Pause here. Is what you say based on any hard 20 evidence, or is this an opinion or speculation on your 21 part? 22 A. It is based on observations of the change of behaviour. 23 It is based on things that I heard said, some of which 24 people possibly didn't realise that I overheard, some of 25 which people possibly forgot that I spoke German. And 191 1 the whole feel was that Bilfinger were taking comfort 2 from the fact that Ministers didn't want this project, 3 Ministers forecast that this project would be 4 a disaster, that it would cost too much, and if we were 5 to prove them right, there will be no political 6 consequences for us for proving them right. 7 That was certainly their -- everything they did and 8 how they behaved said to me that that was their 9 perception of what had happened. 10 Q. When you refer to conversations in German you had 11 overheard, can you give any examples? 12 CHAIR OF THE INQUIRY: Preferably in English. 13 A. Not in detail, but I heard -- the way that people spoke 14 and said -- they were clearly not worried about the 15 press coverage and they were not worried about the fact 16 that this was politically -- that this was making 17 political news. I would have expected any contractor to 18 be wary, and it was clear that people weren't wary, and 19 that they viewed this as a matter of no concern. 20 It is telling that they refused to work. In any 21 other major contracts where there was dispute, people 22 would work while in parallel the dispute was resolved. 23 Because they knew the prize of being seen to get it 24 done, behaving responsibly and doing well was that 25 whatever the settlement of their claims, that there was 192 1 also the likelihood of further work, and that just never 2 happened. 3 MR MACKENZIE: On that point, it may be suggested on behalf 4 of the consortium in due course that they were simply 5 following the contract in terms of particularly the 6 point about refusing to work in parallel while the 7 dispute was resolved. They may point to clause 85 and 8 simply say they were following that. I'm not sure why 9 you infer from these things that the reason the 10 contractors didn't get on with doing the work was 11 because they took some reassurance from the fact that 12 the Ministers had withdrawn from the project. 13 A. Refusing to work when you've closed Princes Street is 14 a very public act of contractual dispute. 15 It doesn't align with principles of a contract where 16 people are supposed to try and resolve things, are 17 supposed to try and get work done, are supposed to work 18 in partnership to overcome the issues. It's a: we're 19 not working, and we're going to make it very obvious to 20 the whole world that we're not working. 21 That isn't consistent with the principles that are 22 written into the contract. And even if it could be 23 justified by the letter, I have never known on any other 24 contract where there was the scope of a continuing 25 relationship and continuing funding for future 193 1 contracts, I have never known in this industry or 2 another a contractor to so publicly refuse to work 3 because they would be concerned about the consequences. 4 Yes, there would be concern to get a fair 5 settlement, but to visibly escalate the dispute to the 6 public domain so early on in the process indicated to me 7 that that is exactly what they intended to do and that 8 they had no fear that Ministers would extract sanction 9 against them. 10 Q. In paragraph 360, another matter you raise is that: 11 "Not long after the Infraco contract was awarded, 12 Bilfinger Berger took the decision to pull out of the UK 13 market. They were no longer going to operate in the UK 14 so they were not concerned any more about the impact on 15 their reputation in relation to future contracts." 16 Again, is that something that has a factual basis or 17 is that your opinion or speculation? 18 A. It is -- my understanding at the time was communicated 19 to us by the tie senior team that Bilfinger Berger were 20 pulling out of the UK market. And it was my -- what -- 21 the biggest -- one of the biggest planks underpinning 22 tie's and Transport Scotland's procurement approach had 23 just been taken away, which is that a contractor who -- 24 that if a contractor isn't incentivised to make more 25 money through future contracts, he's going to seek to 194 1 maximise money from the current contract. 2 So the first part is, I believe, factual. The 3 second part is inferred by me. 4 Q. The last matter I would like to ask you about again in 5 this paragraph, you say, a third of the way down: 6 "BB's commercial attitude was also influenced by 7 a tunnel collapse on a project that BB were doing in 8 Cologne, Germany." 9 You then later on say: 10 "There was no doubt that BB had to go through 11 lengthy litigation, but BB knew that they were going to 12 have to find a lot of money to pay for their liability 13 for the collapse of the tunnel and the Cologne archive. 14 BB suddenly had very different priorities as an 15 organisation and the change in their contract behaviour 16 reflected that." 17 Again, the same question in relation to the Cologne 18 tunnel collapse and how that influenced Bilfinger's 19 behaviour. Is that something that has a factual basis 20 or is it your opinion and speculation? 21 A. Something that was widely reported and understood within 22 the civil engineering community in Europe. So it's -- 23 there's an extent to which it's my opinion, but it's 24 opinion that is shared by a very large number of people 25 at that time with knowledge of the construction 195 1 industry. 2 Q. I can see the tunnel collapse may have been widely 3 reported -- 4 A. The retrenchment by Bilfinger Berger, back to some core 5 activities, was also widely reported. 6 Q. I understand. 7 Mr Sharp, there are many other matters you deal with 8 in a very full statement, thank you, but I'm quite 9 content to take these as read and I have no further 10 questions. 11 Questions by CHAIR OF THE INQUIRY 12 CHAIR OF THE INQUIRY: Just one thing I would like to 13 clarify. Earlier today, before lunch, when you were 14 speaking about utility diversion was to remove utilities 15 from the swept path, presumably -- can you tell me, 16 would it be enough, if the strategy was to remove 17 utilities before the contractor came on site to build 18 the -- do the civil engineering for the line, would it 19 be enough to plan to remove utilities from within the 20 lines that were vertical and horizontal lines of 21 deviation as indicated in the legislation; or would that 22 run the risk of undertaking work that may not be 23 necessary? 24 A. There's two risks there. The swept path extends beyond 25 the line of the actual tracks. So there's the risk 196 1 that, yes, you're outside the limits of deviation, but 2 if the track is up close to the limits of deviation, 3 you're still within the swept path, and it is not safe 4 for the utilities to work on those utilities while the 5 tram is running. So that's one issue. 6 But the other issue is precisely if you cleared the 7 whole of the limits of deviation, you are going to move 8 a lot of utilities that you don't need to, and where are 9 you going to put them all in some cases? Because in 10 some cases there's nowhere left after you've used the 11 limits of deviation. 12 CHAIR OF THE INQUIRY: So there has to be an element of 13 design -- 14 A. To narrow that envelope. 15 CHAIR OF THE INQUIRY: Thank you. I don't think there's any 16 issues from anyone else. 17 Thank you very much, Mr Sharp. You are free to go. 18 Technically you're still under citation and it may be 19 that you will be recalled, but I hope that's not 20 necessary. Thank you very much for your help. 21 A. Thank you. 22 (The witness withdrew) 23 MR MACKENZIE: My Lord, the next witness is Mr Jim Harries. 24 We certainly won't finish him today, but we can deal 25 with the preliminaries. 197 1 CHAIR OF THE INQUIRY: Yes, I understand he's keen to get 2 started. 3 MR JIM HARRIES (affirmed) 4 CHAIR OF THE INQUIRY: Could I ask you to speak clearly into 5 the microphone so everyone can hear you, and also 6 relatively slowly so the shorthand writer can keep up 7 with you, and to answer the question as directly as 8 possible before adding any qualifications. 9 Examination by MR MACKENZIE 10 MR MACKENZIE: Good afternoon, Mr Harries. Thank you for 11 waiting. Can you state your full name, please. 12 A. James Richard Harries. 13 Q. And your current occupation? 14 A. I'm the Director of a company called Mondalus. 15 Q. Now, you have provided a helpful CV to the Inquiry. 16 I would like to go to that. It's CVS00000045. If we 17 can please go to page 3, we can see in the left-hand 18 column, you set out that you have an engineering degree 19 and you're a chartered engineer and your membership of 20 various professional bodies. 21 Then just starting then at the right of the page and 22 working up, we can see you have experience with 23 British Rail, with Freightliner in Manchester, and then 24 up we see Greater Manchester Metro, you were Engineering 25 Director and Engineering Manager between 1990 and 1996. 198 1 We can then go to page 2, please, to continue this. 2 We can see you were then the Managing Director for the 3 Greater Manchester metro between 1996 and May 1998. We 4 can see one of the bullet points under that, if I may. 5 We can see third bullet from the bottom, you delivered 6 the tender for the fund, design, build, operation and 7 maintenance of the extended Metrolink system. 8 If we then go up the page, we can see John Mowlem & 9 Co London. You were Assistant Director for railways 10 between May 1998 and August 1999. We can see the first 11 bullet point there states you were responsible for 12 commissioning the Lewisham extension of the Docklands 13 Light Railway and it opened early. Then one up, we see 14 in Nottingham for Bombardier Transportation, you were 15 the Operations Manager for the Nottingham tram system 16 between August 1999 and November 2004. 17 We see the first bullet point, you were responsible 18 for the commissioning and acceptance of the tram system. 19 So clearly you have considerable experience in light 20 rail and trams; is that correct, Mr Harries? 21 A. I believe so. 22 Q. Then one up we see your involvement in the Edinburgh 23 problem for a company called Transdev. You were Project 24 Engineer between November 2004 and February 2008, and 25 I'll come back to your role in that shortly. 199 1 On page 1 we can see under "Metrolink Transport for 2 Greater Manchester", you were Engineering Manager 3 between February 2008 and June 2014. We can see the 4 text states you led the engineering team with 5 responsibility for the rapidly changing and developing 6 Metrolink system. Changes include tripling the size of 7 the system, procuring a fleet of 104 new trams, 8 replacing the signalling, et cetera. 9 Then one up, please, under your current role as 10 Director of Mondalus Limited from June 2014 to present, 11 we can see involvement in various rail matters, 12 including the first bullet point, Network Rail, 13 supporting the Sheffield tram-train project, and down 14 below that, Balfour Beatty, in the commissioning of the 15 extension to the Midland Metro system in Birmingham. 16 Then third from the bottom, Nottingham Trams 17 Limited, et cetera. Are there any UK tram schemes you 18 have not been involved with, Mr Harries? 19 A. Oh, yes. 20 Q. There are some others not on the list? 21 A. Oh, yes, there are, plenty. 22 Q. Thank you. So that's your CV. 23 You have also provided a statement to the Inquiry. 24 I think you should have a hard copy before you and 25 a copy will also come up on the screen. The reference 200 1 is TRI00000128. I should just formally ask you to go to 2 the last page of the statement at page 26. Page 26 will 3 come up on the screen in a second. We can see 4 a signature dated 25 July 2017. Could I ask you to 5 confirm, please, that is your signature and this is the 6 written statement you have provided to the Inquiry? 7 A. It is. 8 Q. Thank you. So, Mr Harries, your evidence to the Inquiry 9 will comprise both that written statement and the 10 evidence you give at the hearings. 11 If I could now please go to page 2 of the statement, 12 to look at the role of Transdev. 13 So on page 2 of the statement, towards the bottom, 14 on question 2, we stated that: 15 "On 20 April 2004 the TIE Board endorsed the 16 recommendation to approve Transdev plc as the preferred 17 bidder and tram operator under the Developing Partnering 18 and Operating Franchising Agreement ..." 19 We asked: 20 "What was the role of Transdev in the Edinburgh tram 21 project?" 22 You answered: 23 "To provide TIE with operational and technical 24 advice in the development of the system, and then to act 25 as the operator of the system once built." 201 1 We then asked you: 2 "Do you know why Transdev's contract was terminated 3 in August 2009?" 4 You say: 5 "Yes. I left Transdev and the Edinburgh tram 6 project in February 2008, so I have no direct knowledge 7 on this matter. My understanding from discussing the 8 matter with others is that TIE felt that they could 9 operate the system at a lower price by using alternative 10 arrangements with Lothian Bus." 11 It may be helpful here just to jump to page 22, 12 please. We can see in question 33 we state: 13 "By letter dated 21 August 2009 TIE gave Transdev 14 plc notice of their intention to terminate the DPOFA." 15 And we give a reference for that. We can leave 16 that, thank you. 17 If we can go back to page 5 of the statement, 18 please, on the question of design. 19 About 5(c), halfway down the page, we asked: 20 "What was your understanding of the main 21 difficulties in carrying out the design work ..." 22 For the tram project, and you replied: 23 "It was challenging to meet the 24 requirements/aspirations of all the parties involved. 25 Edinburgh as a city is the most challenging environment 202 1 that I have experienced. A core issue here was the lack 2 of an integrated approach from both TIE and Edinburgh 3 CEC/Lothian Bus. This was compounded by the 4 difficulties presented by the multiple stakeholders who 5 tended to be very demanding." 6 When you say "Edinburgh as a city [was] the most 7 challenging environment that I have experienced", why do 8 you say that? 9 A. There were several factors to that. First of all, 10 Edinburgh is a -- it's a wonderful historic city and it 11 wasn't laid out with trams in mind. 12 So putting a tram system through narrow streets in 13 a very densely populated area will be challenging. 14 It's also a very historic city, with lots of 15 wonderful buildings and heritage that we do not wish to 16 disturb. 17 The people of Edinburgh, compared with a lot of 18 other cities, are probably more demanding and overall 19 perhaps more educated than perhaps is elsewhere. 20 When you put those factors together, and it results 21 in very challenging environment for a tram project. 22 Q. You also referred in this answer to a core issue being 23 the lack of an integrated approach from both tie and 24 Edinburgh CEC/Lothian Bus. What did you mean by that 25 sentence? 203 1 A. In other projects I've been involved with, the ultimate 2 client and the contract chain are all absolutely behind 3 the delivery of the project. 4 I did not feel that either CEC or Lothian Bus were 5 pushing for the delivery of the project as I believed 6 they -- well, I had hoped they would. 7 There were tensions between tie and Edinburgh CEC, 8 even though one organisation is a subsidiary of the 9 other. 10 Q. Just the last sentence, for the avoidance of doubt, you 11 refer to multiple stakeholders who tended to be very 12 demanding. Who did you have in mind there? 13 A. Almost everybody. Pressure groups. I went to several 14 public meetings, and it was -- it was hard work to 15 convince everybody that we were doing the right thing. 16 Q. Did you also mean by that a reference to multiple 17 stakeholders, third parties with an interest in the 18 project. I'm thinking of Forth Ports, the SRU, 19 Edinburgh Airport Authority, these sorts of bodies? 20 A. Yes. 21 Q. And also the utility companies? 22 A. I didn't have any direct understanding of the utilities 23 companies' input to the project. 24 Q. Thank you. 25 Going back to your statement, please, in the next 204 1 question and answer, (d), we asked: 2 "What steps were taken to address these 3 difficulties?" 4 You say: 5 "Transdev attempted to escalate these concerns, but 6 there were no easy answers and ownership of these issues 7 within TIE was variable." 8 What do you mean by saying "ownership of these 9 issues within tie was variable"? 10 A. I say elsewhere that tie was a large organisation and 11 ownership of issues within tie was something that I had 12 difficulty understanding. 13 I suppose the apparent lack of structure and 14 ownership was what I was trying to get at in my answer. 15 Q. Finally, in terms of a last general question I would 16 like to ask today, if I may, on page 7, please, page 7 17 is headed "Risk", and in question 7(d), we had asked: 18 "Do you consider that risk management was effective 19 and can you give the reasons for your view?" 20 You replied: 21 "The cost increases seem to indicate that the risk 22 management process did not work effectively. TIE lacked 23 the will to accept that the emerging costs and risks 24 should be recognised." 25 Can you explain that last sentence, please? 205 1 A. Whilst I was there, it was clear that there were 2 problems with the delivery of the project and that costs 3 and risks would escalate in my personal view. 4 I did attempt to escalate those concerns within tie 5 and within my own involvement with Transdev. 6 Q. Now, in terms of your attempt to escalate these matters 7 within tie, between the period 2004 to February 2008, 8 when you stopped being involved, can you remember when 9 during that period did you attempt to escalate these 10 matters within tie? 11 A. I cannot remember, but the documentation, particularly 12 the monthly reports that were in the pack of the 13 documentation, shows what was done there. 14 Q. What do you mean by monthly reports? Monthly reports by 15 Transdev or -- 16 A. Yes. The contractual arrangements between Transdev and 17 tie were we provided a monthly progress report, and some 18 of those reports are in the evidence pack. 19 Q. I see. So if we go to these monthly progress reports, 20 that's where we will find you trying to escalate your 21 concerns? 22 A. Yes. 23 Q. Who were these reports sent to within tie? 24 A. These reports were formally issued to tie's Transdev 25 Contract Manager who was their Operations and 206 1 Maintenance Director. 2 Q. Do you remember the name of that individual over the 3 period 2004 to February 2008? 4 A. Alastair Richards. 5 Q. Thank you. My Lord, I'm about to move on to 6 a particular document. This may be an appropriate time 7 to stop for the day? 8 CHAIR OF THE INQUIRY: Well, Mr Harries, sorry you've been 9 kept waiting, but we'll adjourn until tomorrow at 9.30. 10 Ms Fraser will speak to you about arrangements for 11 coming to enable us to start at that time. 12 We will adjourn until tomorrow morning. 13 (4.31 pm) 14 (The hearing adjourned until Friday, 6 October 2017 at 15 9.30 am) 16 17 18 19 20 21 22 23 24 25 207 1 INDEX 2 PAGE 3 MR TONY GLAZEBROOK (continued) .......................1 4 5 Examination by MR MACKENZIE (continued) .......1 6 7 MR DAMIAN SHARP (affirmed) ..........................40 8 9 Examination by MR LAKE .......................40 10 11 Examination by MR MACKENZIE ..................74 12 13 Questions by CHAIR OF THE INQUIRY ...........196 14 15 MR JIM HARRIES (affirmed) ..........................198 16 17 Examination by MR MACKENZIE .................198 18 19 20 21 22 23 24 25 208