1 Wednesday, 22 November 2017 2 (9.30 am) 3 MR IAIN MCALISTER (continued) 4 Examination by MR MCCLELLAND (continued) 5 CHAIR OF THE INQUIRY: You're still under oath, 6 Mr McAlister. 7 Yes, Mr McClelland. 8 MR MCCLELLAND: Thank you, my Lord. 9 Mr McAlister, when you were in yesterday we were 10 having a look at a report that you had done in 2009. If 11 we could just have that back up on screen, please, it's 12 CEC00583955. If you could please go to page 34 of that. 13 In this section there's a discussion of a process 14 that you were involved in with tie in gathering 15 evidence. So we see at the start of paragraph 7.2.2, 16 just the first sentence there: 17 "In September 2009 tie directed Acutus to assist its 18 project team in the execution of a delay attribution 19 exercise." 20 Was that an exercise you were involved in? 21 A. I think I might have been slightly involved in it. It 22 does appear to be an exercise that Mr Burt led. I could 23 be wrong there, but I think that's what that is. 24 Q. Okay. I'll carry on. If these are things you can't 25 answer, please just feel free to say. 1 1 Paragraph 7.2.3: 2 "Acutus proposed and agreed with tie the format of 3 this exercise. It involved collating all relevant 4 information and evidence from tie's various systems and 5 records and grouping it in an orderly manner set against 6 a time-line. A Gantt chart schedule was created for each 7 principal element of the Infraco Works." 8 Then reading on to 7.2.4: 9 "There are currently 80 of these charts to cover the 10 scope of the Infraco infrastructure works." 11 Are you able to say why there were 80 charts? 12 A. Yes. Now that you have read some more of the report, 13 it is the work that Mr Burt headed up. But I'm familiar 14 with it. 15 It was looking at the project in its component 16 parts. There would be a chart for each individual 17 bridge, each individual wall, individual sections of the 18 project. So it was trying to focus on individual 19 component parts. 20 Q. And the number 80, did that reflect the entire project? 21 A. More or less. I would guess it probably wouldn't cover 22 every metre of track, but it would embrace the majority 23 of the project, I would think, and certainly the main 24 component parts within that. 25 Q. Thank you. Reading on where we left off: 2 1 "Acutus prepared the first draft of each of these 2 and then passed them to tie for the addition of more 3 detailed information, allocation of liability, and sense 4 checking." 5 Then 7.2.5: 6 "When each schedule has been fully populated and 7 sense checked, it will be possible to examine the full 8 data set for that particular element and filter out the 9 minutiae, isolate delaying factors that have been 10 subsumed by other matters, and identify where dominant 11 cause and criticality actually lie." 12 As far as you know, was the process of filling out 13 these 80 charts completed? 14 A. I think certainly a large number of charts were 15 produced. I couldn't say for sure. I'm not trying to 16 pass the buck here, but I think Mr Burt is familiar with 17 it, and in fact has been asked to look at the report 18 that contains those charts. 19 Q. Were any of the charts made available to you for later 20 work that you did on the Infraco delay? 21 A. I don't think they were provided to me, but one or two 22 of the charts probably were populated by information 23 from my work because I had looked at one or two specific 24 elements and it may indeed have been my work on 25 particular elements that were identifying different 3 1 causes of delay and exactly what this exercise was 2 trying to achieve. But it was considered worth doing 3 it, not just on the one or two structures that I had 4 looked at, but to expand the exercise to look at it 5 across the project as a whole. 6 Q. So the question of whether this exercise was done to an 7 extent that made it easier to have a clear view of the 8 causes of delay and the allocation of responsibility for 9 it, is that something we should ask Mr Burt, or can you 10 help us with that? 11 A. I'm trying to recall exactly how this was all pulled 12 together, and as I say, I'm aware that Mr Burt has been 13 asked to look at a report. I saw it in his hands and he 14 said to me a day or two ago: I have been asked to look 15 at this. I could see it contained a large number of 16 those reports, and I would guess that there would be 17 a write-up of that, at least pulling it together in some 18 shape or form. 19 I don't recall the exact wording of that report, but 20 I would guess he was the author and therefore will be 21 better placed to explain it further, I suggest. 22 Q. Thank you. We will take that up with him. 23 CHAIR OF THE INQUIRY: Could I just ask you about 7.2.4. 24 You say that the first draft was passed to tie for the 25 addition of more detail and information, allocation of 4 1 liability. So was it tie who were asked to allocate 2 liability? 3 A. I think the -- as I recall, the charts may have had 4 a column on them to suggest if there was liability. 5 Perhaps more so for the tie staff to say: yes, that's 6 actually our issue. 7 For example, it may be that they would have the 8 opinion: we can see no reason, therefore that appears to 9 be the contractors' issue. But it was basically -- if 10 you take, for example, a bridge, is it affected by 11 utilities? What is the status of the design of that 12 bridge? Are there any third party approvals that are 13 holding up the issued for construction drawings? Has 14 the City Council asked for something different to be 15 carried out or the finishes to this particular bridge, 16 do they want different fancy stone finishes, that type 17 of thing? Has that changed, and therefore would give 18 the contractor an entitlement to a tie change or 19 a Notified Departure, et cetera. 20 So it was trying to summarise the facts. 21 CHAIR OF THE INQUIRY: Thank you. 22 MR MCCLELLAND: If we could please look at another document, 23 which is WED00000533. We see just from the title, this 24 is headed up, "Draft Expert Report regarding Estimate in 25 Respect of INTC number 536 Access Dates Provided by tie 5 1 up to and including 31 July 2010 - Delay Resulting from 2 Incomplete Utilities Works". We see down at the bottom 3 that this draft is dated 31 March 2011. We also see 4 from that front page, that report was prepared by you. 5 A. That's correct, yes. 6 Q. Do you recall this report? 7 A. Yes, I do. 8 Q. Why had it been instructed? 9 A. As I recall, the Infraco contractor had submitted a tie 10 change estimate, and that was a claim for extension of 11 time for further delays to the utilities diversion work. 12 It was, I suppose, what I would view as a next stage 13 of -- following on from the MUDFA 8 submission. This 14 was the contractor's next version of its claim for delay 15 due to utilities. 16 Q. Okay. We see there that the reference to INTC 536, 17 would that be the Infraco Notice of tie Change 18 containing the extension of time claim? 19 A. That is correct. 20 Q. I think we saw earlier that the previous claim in 21 relation to utility delays was INTC 429, or -- I think 22 I've got that number correct. 23 A. It's 42 something or 43 something, yes. 24 Q. Thank you. 25 We see just from the title of this report, it's 6 1 concerned with access dates up to and including 2 31 July 2010. Was that a later date than had been 3 covered by the issue in relation to the MUDFA Revision 4 8, the extension of time claim? 5 A. I'm almost certain that's correct. 6 Q. As far as you recall, were these the two major extension 7 of time claims made by the consortium in relation to 8 utility delays? 9 A. That would be my understanding. They are the two that 10 I was asked to look at specifically, and the two that 11 I was asked to produce reports for. 12 Q. Thank you. This report is headed up as a draft, and the 13 written answers, I think, from both you and Mr Burt, 14 confirm that it was the last version that was produced. 15 Although it was a draft, are you able to say how 16 complete your analysis was that was set out in this 17 version? 18 A. It certainly wasn't entirely complete. As I recall the 19 situation, the contractor had submitted its estimate for 20 the tie change relating to this event, and as with the 21 previous one, there was pressure to try and resolve it. 22 tie felt that it was overstated, as the previous one had 23 been, and therefore asked me to look at it. 24 I think I'm correct in recalling that there was 25 again either the threat or the perceived threat that it 7 1 could be quickly referred to adjudication, and therefore 2 tie asked me to look at the -- look at the estimate and 3 to produce a report identifying what I thought were the 4 major issues that it raised. 5 So this report covers quite a number of different 6 issues that I had to comment on with respect to this 7 particular estimate. But it was trying to address all 8 of them because they would still have to be considered 9 by tie, its legal advisers, et cetera, in relation to 10 the different points I was drawing out -- drawing to 11 their attention, and of course if it went to 12 adjudication, the report would be tailored to respond to 13 whatever the questions were put by the contractor in his 14 referral. 15 Q. So do we understand from your answer then that while you 16 produced this draft report, it was still -- had things 17 run on as intended. It was still to be subject of 18 review by tie's legal advisers on legal issues and by 19 tie, perhaps, on factual issues? 20 A. Yes. Just looking at it on the screen, the right -- the 21 dark panel of shading down the right of the screen, 22 I think, if you were to scroll down a number of pages, 23 you will see marginal comments, electronic comments, 24 about things to be discussed further, this to be 25 developed further. 8 1 So it certainly wasn't complete, but it was trying 2 to draw out the major issues that I could see from this. 3 Like most of the work we did on this project, it was -- 4 there were a lot of time constraints on us. We were 5 working under, you know -- trying to achieve a lot of 6 work in a relatively short period of time. But produce 7 something that was hopefully informative and as accurate 8 as we could make it. 9 Q. As far as you can recall, was there a specific reason 10 for time pressure in the production of this report? 11 A. I can't recall exactly when the notice of -- the 12 estimate for the Notice of tie Change was delivered, but 13 because of what -- the experience on the previous MUDFA 14 8 submission, there was the concern that it could be 15 very quickly referred to adjudication and therefore we 16 had to be prepared, and delay analysis, particularly in 17 a complicated project like this, requires a lot of 18 research, a lot of investigation, to produce something 19 that is robust, and we were trying to get as much done 20 as quickly as possible to inform tie and its legal 21 advisers. 22 Q. Okay. When you say there was a concern that this might 23 be referred to adjudication quickly, do you mean 24 referred by the consortium or do you mean by tie? 25 A. On -- by the consortium, I think. tie would only refer 9 1 it when they were ready, I would guess, as would the 2 consortium. 3 Q. Thank you. If you could look at page 7, please, 4 paragraph 1.1.1, we see there that you say: 5 "I have been instructed by tie to provide an 6 impartial expert report in respect of the estimate 7 submitted by the Infraco ..." 8 In the last sentence: 9 "I understand that my report is to be submitted as 10 part of tie's response to the Infraco's referral of the 11 Estimate for decision by adjudication." 12 I think that confirms what you've just said. 13 Did that adjudication take place? 14 A. Not to my knowledge. 15 Q. Do you know why that was? 16 A. I think looking at the timing of this report, the 17 mediation that resolved the major dispute took place not 18 long after this, and again, that, I think, was why we 19 were asked to get the report to the stage that we could, 20 and then again, like some of our previous work, it was 21 parked, because discussions were going on -- ongoing to 22 try and resolve the matters. 23 Q. I think we can see from the -- as we saw a moment ago, 24 the date of this report was 31 March 2011, and the 25 mediation at Mar Hall took place at the start of 10 1 March 2011. So it looks as though this has perhaps been 2 completed after the mediation. 3 A. That timing doesn't sound right. I thought all of this 4 was wrapped up before Mar Hall mediation because that 5 resolved the matter. So -- but I could be wrong, 6 perhaps it's the printing date on it. But I thought it 7 was prior to Mar Hall. We had no involvement beyond 8 that date. 9 Q. So in any event, your understanding is the adjudication 10 didn't happen because all of the disputes were resolved? 11 A. Correct. 12 Q. Yes. 13 Now, in this report you identify a number of 14 criticisms of the way that the consortium had presented 15 its claim. I don't want to go into those. 16 Instead, what I would like to do is to look at an 17 alternative analysis of delay that you presented. If we 18 could go, please, to page 10 of the report, we see there 19 a heading, "Alternative analysis of delay". If we just 20 read out what's here from 1.8.2: 21 "Using the Infraco's delay analysis programme as 22 a starting point, I updated it for actual progress and 23 revised programme projections using Infraco reports and 24 programme updates for design and construction, all as 25 presented in July 2010 (ie the most up-to-date reported 11 1 data provided by the Infraco prior to the INTC 536 base 2 date). By adding this actual data, the projections of 3 delay far exceeded those claimed in the INTC 536 4 Estimate. The table below summarises the magnitude of 5 the differences and the dominance of other delays over 6 those sought by the Infraco in the Estimate." 7 Could I ask you just to explain the point that 8 you're making in that paragraph. 9 A. The INTC has a base date in July 2010. That is when the 10 Notice of tie Change was served. That is when the 11 assessment of delay has to be made. 12 The Infraco, in their assessment, were using 13 a project -- a programme, a baseline programme that 14 pre-dated that date by quite a period. 15 What I was doing was bringing into that baseline 16 programme the actual progress that had been made on 17 design and on construction up to the date immediately 18 prior to the event that was to be assessed to see what 19 effect that would have before the event itself, the late 20 utilities diversion, was impacted into that baseline 21 programme. 22 So by bringing in the actual progress, it was 23 projecting delay and that was not being projected by the 24 utilities. 25 Q. The impression one gets from that passage in your report 12 1 is that to do this, you were using only information that 2 had been supplied by the consortium; is that correct? 3 A. It was the contemporaneous reports. So they were 4 producing monthly reports as is normal in a contract 5 like this, and that they were reporting actual progress 6 on design, approvals, certification, as well as the 7 actual construction work that they were undertaking. 8 So I was using that information to update the 9 baseline programme for their analysis. 10 Q. So just in short, you were carrying out an alternative 11 analysis of delay from the one founded upon by the 12 consortium in its extension of time claim, using other 13 information available from the consortium? 14 A. I was using information from the consortium's 15 contemporaneous records to update the baseline programme 16 before I considered impacting the events of late 17 completion of utilities, whereas the contractor's 18 approach was not to consider all of those updates of 19 what had actually happened, just simply impacting the 20 event that it was assessing in the estimate. 21 CHAIR OF THE INQUIRY: What's the advantage or disadvantage 22 of your exercise? 23 A. Well, the purpose of the estimate is to assess the delay 24 to completion due to that event. As I looked at the 25 contractor's assessment, he was ignoring all other 13 1 matters that had actually happened prior to the event. 2 And I do not think that that is correct; my 3 understanding of the interpretation of contract law in 4 most contracts, and the wording here didn't seem 5 radically different, is that that is wrong. You have to 6 look for cause and effect. You have to establish 7 causation associated with the event, the event being 8 late completion of utilities. 9 So if the project is going to be, let's say, two 10 years late, prior to the event that you're trying to 11 assess, you need to take that into account. 12 So I was taking it into account before I started my 13 assessment of the effect of the event. 14 CHAIR OF THE INQUIRY: Thank you. 15 MR MCCLELLAND: Perhaps related to that point, Mr McAlister, 16 you say in this paragraph that you used programme 17 information as presented in July 2010, and you refer 18 that to the INTC base date. Can you just explain the 19 significance of that date, please? 20 A. As I understand it, that would be the date when the 21 contractor served the notice, and that that would be the 22 base date that you would take for the assessment of the 23 event. 24 Q. So were you taking account only of programme information 25 made available prior to that date? 14 1 A. Correct. 2 Q. Now, you say that the approach you took to the analysis 3 of delay identified projections of delay greater than 4 those that the consortium claimed in their extension of 5 time claim, INTC 536. What in your view was the 6 significance of that? 7 A. If we take as an example a bridge or a section of track, 8 there were a number of reasons -- a number of 9 prerequisites that would have to be achieved before the 10 work could actually start. One of those would be the 11 diversion of the utilities, assuming that it was 12 affected by those. But the others would involve having 13 designs, approvals, consents, in place, and also 14 procuring subcontractors; perhaps materials that were on 15 long lead times would have had to have been pre-ordered, 16 et cetera. All of these things would have to be in 17 place before the works could start. 18 So I was trying to look at all of the information 19 that we had to determine what was actually going to 20 determine the start of the construction of this bridge, 21 or the construction of this section of track, and was 22 that actually being driven by the later than planned 23 completion of utilities, if that indeed was the case? 24 Q. If, as you identified, there were projected delays which 25 went beyond those claimed by the consortium as having 15 1 been caused by utilities, what was the significance of 2 that in your view? 3 A. Well, the utilities themselves, although perhaps late, 4 were not actually the driving force. They were not the 5 dominant cause of delay. Other things were running late 6 and they were the cause of delay. And therefore in an 7 assessment of this particular event, the event was not 8 being shown as the cause of delay. 9 Q. Thank you. 10 Now, we looked yesterday, Mr McAlister, at the 11 decision at adjudication by Robert Howie QC, and in 12 particular the passage where he dealt with your 13 submission on the appropriate method of delay analysis. 14 Do you recall that? 15 A. Yes, I do. 16 Q. Put briefly, Mr Howie accepted the consortium's argument 17 that delay analysis had to be prospective rather than 18 retrospective under the Infraco contract. Do you recall 19 that? 20 A. Yes, I do. 21 Q. To what extent was the approach to the analysis of delay 22 that you took in this report that we're looking at now, 23 in your view consistent or otherwise with Mr Howie's 24 reasoning at adjudication? 25 A. I think it is consistent. It is entirely consistent. 16 1 Q. Had you taken account of Mr Howie's decision when you 2 carried out this analysis? 3 A. I certainly was aware of it, and I think, as I said 4 yesterday, what I was doing, both in the MUDFA 8 5 analysis and indeed in this one, is not a retrospective 6 analysis. I'm not sure why Mr Howie used that 7 particular word. But it is a prospective method of 8 analysis. 9 Q. Is that related to the point we looked at a moment ago, 10 that you looked only at programme projection information 11 presented up to July 2010 being the base date for the 12 extension of time claim? 13 A. That's correct. 14 Q. If we look at the table which sits below that paragraph, 15 can you just briefly explain to us what's shown in that 16 table, please? 17 A. The table that looks at the four section completion 18 dates, the contractual dates that I'm assessing, A, B, C 19 and D, the middle column shows the projection of delay 20 to those dates following me adding in the actual records 21 of progress up to the July date, and the right-hand 22 column is the delay claimed in this estimate INTC 536. 23 Q. Okay. So just to go back over that, the right-hand 24 column is the number of days delay claimed by the 25 consortium as having been caused by utility delays? 17 1 A. Yes. 2 Q. And the middle column -- and I think we can see that 3 each of those numbers, number of days, is higher -- 4 that's the delay which your analysis had assessed as 5 having existed; is that correct? 6 A. Prior to the event, yes. 7 Q. Prior to the estimate? 8 A. Yes. 9 Q. Extension of time estimate. 10 To be clear, those are delay projections based on 11 programme-related information which you had obtained 12 from the consortium? 13 A. It's using the same baseline programme that the 14 consortium is using for its estimate, but bringing it up 15 to date to the date -- the impact date where the event 16 has to be assessed from. The consortium had not done 17 that because they had focused solely on the event 18 itself, and not considered the actual progress and other 19 actual matters that pre-dated it. 20 Q. Yes, and the information used to carry out that updating 21 exercise, that was information reported by the 22 consortium? 23 A. That's correct. 24 CHAIR OF THE INQUIRY: You say using the programme. Does 25 that involve running a computer programme, that 18 1 computer programme, or does it involve a manual 2 adjustment of the figures? 3 A. It is -- it is inputting actual data into what is run on 4 a computer system, yes. But, for example, I don't 5 recall the actual base date of the baseline programme, 6 but it was significantly prior to the date of the event 7 that was to be assessed. 8 So it would have lots of activities that would be 9 reported, perhaps not started because they weren't due 10 to start, but by the date that the event has to be 11 assessed from, they should have started, but they 12 hadn't. 13 So I updated it for progress to show what had been 14 achieved, what hadn't been achieved, and the normal 15 practice against each activity listed out in this very 16 long, complicated programme is that there would be 17 a column for percentage complete. So there would be 18 a start date inserted and then percentage complete, it 19 was 100 per cent something is finished. 20 So I was putting that information in, based on what 21 the contractor was reporting in his monthly reports to 22 tie. 23 CHAIR OF THE INQUIRY: Thank you. 24 MR MCCLELLAND: If we could move to the next page, please, 25 paragraph 1.8.4. I'll just read that: 19 1 "My overall finding was that, at the INTC 536 2 Estimate base date of 31 July 2010, the Infraco Work had 3 experienced a significant amount of delay and the 4 programme was projecting considerable over-runs on the 5 four Sectional Completion Dates. These delays and 6 overruns were not being driven or actually caused by 7 late completion of MUDFA works and other utilities 8 diversions. The critical delays were the result of, 9 amongst other things, late delivery of design for the 10 Infraco Works and the Infraco's apparent refusal to 11 commence available works pending resolution of 12 contractual disputes. While the MUDFA works were, in 13 several locations, being completed later than planned, 14 they in virtually every location ..." 15 We should note you have put a little box there to 16 say: 17 "Review this wording." 18 "... did not actually cause delay. They were not 19 the dominant cause of delay, and therefore, in my 20 opinion, did not give rise for requirements for 21 extensions of time." 22 Just clarify, if you may, Mr McAlister, what was the 23 significance of the box you had there saying: 24 "Review this wording." 25 A. Because the report was prepared at a point in time. 20 1 I wasn't sure when it would be finalised. Quite 2 possibly other information would come back, and indeed 3 some tie staff would review a report like this and 4 perhaps point out if I picked up something wrongly, or 5 perhaps there was an exception to that. 6 So you tend to be fairly cautious in your wording as 7 you're drafting it, and as you get to the point of 8 finalising the report, then you update it with your full 9 knowledge at that point in time. 10 Q. Did you depart at any later point in time from the views 11 that you expressed in that paragraph? 12 A. I don't think so, no. Thinking of the date of the 13 report, it was 31 March. We had relatively little 14 involvement beyond that date. So I don't think so. 15 Q. You had an earlier time expressed a different view, that 16 utility delays were the dominant cause of delay. Are 17 you able to explain in overview why your view had 18 changed? 19 A. Yes. I think with the passage of time, it was becoming 20 more apparent that there was underlying issues with 21 delivery of design, procurement of subcontractors, 22 procurement of materials. Those were things that we 23 assumed were on schedule or appeared to be on schedule 24 because they weren't yet due to have occurred. But with 25 the passage of time, we were starting to see that other 21 1 things were not happening when they should have 2 happened, and as the design procurement programmes, 3 et cetera, were being updated by the contractor, we 4 could see that there were bigger underlying issues, and 5 that is why it was becoming more apparent with the 6 passage of time that the contractor was not ready to 7 start lots of activities, and it wasn't because of the 8 utilities. 9 On top of that, of course, we had what you might 10 call a standoff in relation to: do disputes have to be 11 resolved, do estimates have to be agreed before works 12 progress, or should the works progress anyway; and argue 13 during and after the event about who is liable for it 14 and whether the contractor should be due extension of 15 time and additional money. Works were just not being 16 progressed because of that stalemate, if we may call it 17 that. 18 Q. Thank you. 19 Now, this is a very detailed report, which runs to 20 about 150 pages, I think. So we can't go through all of 21 it, but there are some passages I would like you to look 22 at further, please. 23 If we go to page 68, please. Just to put this in 24 context, I'll read paragraphs 8.1.1 to 8.1.3: 25 "Clause 60.2 of the Infraco Contract requires the 22 1 Infraco to update the Programme in accordance with the 2 Employer's Requirements. The Employer's Requirements 3 state at paragraph 12.2: 4 'The Infraco shall undertake programme management 5 including the implementation, regular updating and 6 management of a fully detailed comprehensive Programme 7 illustrating how the Infraco proposes to execute the 8 whole of the Infraco works in compliance with the 9 Project Programme.' 10 As I have explained in subsection 7.3 of this 11 report, the Infraco has regularly updated two parts of 12 the Programme, namely the SDS design delivery programme 13 and the Infraco construction programme. I have been 14 provided with copies of the July 2010 versions of each 15 of these." 16 Again, that's the base date that we looked at 17 a moment ago; is that correct? 18 A. That's correct. 19 Q. "They are the updates that immediately pre-date the base 20 date of the INTC 536 Estimate. I enclose copies of 21 them. 22 In this section I provide my observations on these 23 updated programmes and explain why I believe the 24 information contained within them should be taken into 25 account in any consideration of the delay analysis 23 1 contained within the INTC 536 Estimate." 2 In the sections that follow, you go on to consider 3 two programmes supplied by the consortium. So at 8.2, 4 we see the heading there, "Updated Infraco construction 5 programme (Revision 1)", and if we forward on to 6 page 72, we see heading 8.3, and in that section you 7 consider the updated Infraco construction programme 8 Revision 3. 9 Then if we go on again, please, to page 74, at 10 8.3.8, just reading that: 11 "On closer inspection of the updated Infraco 12 construction programme Revision 3A and in comparison 13 with the other two (ie the updated Infraco construction 14 programme Revision 1 and the INTC 536 Estimate delay 15 analysis) I note that the actual and projected dates for 16 significant elements of the Infraco Works that have been 17 undertaken or are yet to be undertaken are much later 18 than those projected in the INTC 536 Estimate delay 19 analysis programme. There appears to be no information 20 in this updated programme to explain why these works are 21 being delayed. All I can conclude is that for a great 22 number of them, their start is not being determined or 23 driven by the completion date for utilities diversions. 24 Something else is the dominant cause of delay and it is 25 that which is determining when they will (or can) 24 1 start." 2 Could I ask you briefly just to explain that point 3 for us? 4 A. I think that is just exactly what we have been talking 5 about a few minutes ago, that the actual programme 6 that's been updated is showing certain points being 7 delayed, but not by utilities, and yet that has not been 8 reflected in the delay analysis programme. 9 Sorry, I mean the INTC 536 estimate delay analysis 10 programme. 11 Q. If we move forward to page 75, please, the heading at 12 8.4, "Updated SDS design delivery programme". In that 13 section that follows, you consider that programme, and 14 at 8.4.4, just reading from there: 15 "All of that said, the updated data contained within 16 this programme does not appear to be aligned with that 17 in the updated Infraco construction programmes from that 18 same time period. I consider this to be a very 19 significant matter. It appears to me that this 20 important information about the design of the Infraco 21 Works, contained within one of the elements of the 22 Programme, is not being taken into account in the 23 Infraco's analysis of delay and assessment of 24 requirements for extensions of time." 25 Again, could you just briefly explain that point for 25 1 us, please? 2 A. The programme as defined by the contract has six 3 component parts, as I explain elsewhere in this report. 4 In terms of the design, there is a particular 5 programme, very detailed programme, that sets out when 6 all of the design works, the approvals, the consents, 7 the sign-offs by the various stakeholders and regulatory 8 bodies, when all of that is planned to take place. 9 Another component part of the defined programme is 10 the construction programme, and that shows when the 11 physical works are planned to be undertaken on site. 12 There is a connection between the two, albeit it's 13 not -- the two programmes are not linked together in the 14 computer system, ie the completion of the design ready 15 for construction is showing the design programme as the 16 sort of concluding activities in a series of activities, 17 and in the construction programme, there is a common 18 milestone that starts the construction work. 19 At the time the contract was signed, those two 20 programmes aligned the dates of those milestones and the 21 programmes aligned, but the two programmes are not 22 connected in the electronic world, in the way that they 23 were prepared separately. 24 As the project progressed, the contractor is 25 reporting actual progress into those programmes. So the 26 1 design programme is getting its percentages, its actual 2 start dates, things being complete, and if things are 3 running late, the issued for construction drawings 4 milestones are running late. 5 In the updated construction programmes, those 6 milestones remained where they were. They were not 7 being updated to maintain that alignment with the 8 projections in the design programme. So there was 9 a disconnect between the two programmes. And the 10 product of that was that if the design was running so 11 late that it would be impacting the construction 12 progress and the forecast dates for carrying out 13 construction work, that was not appearing in the updated 14 construction programme. 15 Q. You referred there, I think, Mr McAlister, to 16 a connection between the design programme and the 17 construction programme being the issue of a drawing for 18 construction -- an issued for construction drawing; is 19 that correct? 20 A. Yes, that's correct. 21 Q. To put that at the most simple level, is that because 22 you can't start the construction work until you have 23 that drawing issued for construction? 24 A. That is correct. It may even be the case that you 25 cannot start procurement until you have that design. 27 1 You may not be able to design temporary works. There 2 are various things that could be linked into it in 3 different ways, but yes, you certainly have the -- 4 advanced the design. You can't build something without 5 having the design. 6 Q. Thank you. 7 If we could move forward, please, to page 94, we see 8 the heading at the top, Section 11, "Review of Section 9 Completion Date C". I think we clarified yesterday that 10 Section C was essentially the completion of all of the 11 construction work in phase 1a; is that correct? 12 A. Yes, which is in effect the entire route from the 13 airport down to -- down to Newhaven. 14 Q. Thank you. 15 Just following on in this section to page 107, 16 please, the heading there, 11.7, "Actual and dominant 17 cause of delay", I'm just going to read through this 18 passage, Mr McAlister. 19 11.7.1: 20 "As I have noted in the preceding paragraph, it is 21 readily apparent that the Infraco Works have experienced 22 considerable delay. Through the INTC 429 and INTC 536 23 estimates ..." 24 That's the two estimates concerned with utility 25 delay? 28 1 A. Correct. 2 Q. "... the Infraco has sought considerable awards of 3 extension of time for later than planned completion of 4 the MUDFA Works and other utilities diversions under 5 by, or on behalf of tie. Based on my examination of 6 these estimates and the other information I have been 7 provided with, including but not limited to Period 8 Reports and updated programmes produced by the Infraco, 9 it appears to me that the subject matter of both these 10 INTCs are not actually causing delay. There appear to 11 be other matters that are the dominant cause of delay. 12 That being so, I believe that it should be a proper 13 consideration of these that determines whether or not 14 extensions of time are due to the Infraco." 15 11.7.2: 16 "I have been asked if I can identify what is the 17 dominant cause of delay. I have found it difficult to 18 be certain in my answer for the following reasons. 19 (a) The Infraco has not properly and routinely 20 updated the Programme in accordance with the 21 requirements of the Infraco Contract; 22 (b) Much required information has not been included 23 in the reports and programme updates provided by the 24 Infraco and therefore I have somewhat limited 25 information on what appear to be significant matters. 29 1 In particular I cite lack of detailed information on E 2 and M design, third party consents and approvals, 3 procurement of resources, and preparation and approval of 4 pre-requisites to commencement of construction 5 activities. 6 (c) The Programme has not been updated to reflect 7 change to date, including instructed change and changes 8 to the Infraco's actual or planned order and manner for 9 the delivery of the Infraco Works." 10 In short, Mr McAlister, was it the case that you 11 lacked the information needed to be certain about the 12 dominant cause of delay? 13 A. Yes, certainly to be certain, yes. 14 Q. 11.7.3: 15 "Having said all of that, with the passage of time 16 and lack of progress on many significant work fronts, it 17 appears to me that the following matters are, or most 18 likely to be, the actual dominant causes of delay. 19 (a) Much later than planned delivery of the M&E 20 [mechanical and electrical] design. 21 (b) Much later than planned delivery of the civil 22 engineering and building design for a considerable 23 proportion of the Infraco Works. 24 (c) Much later than planned commencement of many 25 elements of the Infraco Works arising from the actual 30 1 time taken to complete the processes required by the 2 change mechanisms contained in the Infraco Contract and 3 the resolution of disputes associated with the same." 4 Now, those reasons, were those reasons that you 5 detected from your delay analysis that we were looking 6 at a moment ago? 7 A. That's correct. 8 Q. 11.7.5: 9 "At the time of writing this report, I have been 10 unable to form an opinion on where culpability for these 11 delays lies. For the purposes of this report I consider 12 that matter of no consequence." 13 Just pausing there, it would be of no consequence 14 for this report, because it was essentially preparing 15 a defence to a claim for extension of time that was 16 based only on utility delays; is that correct? 17 A. That is correct, yes. 18 Q. "In my opinion, what is important is that these matters, 19 other than the later than planned completion of the 20 MUDFA Works and other utilities diversions, appear to be 21 the dominant causes of delay. For that reason, 22 I consider that the extensions of time claimed by the 23 Infraco ... are without justification ... That is not to 24 say that the Infraco may not be due extensions of time 25 for matters that are associated with the dominant causes 31 1 of delay." 2 Now, in short, you were unable to say whether the 3 design delays you'd detected were ones for which tie 4 bore the risk or ones for which the consortium bore the 5 risk; is that -- 6 A. That's correct. 7 Q. That passage that we've just read through about the 8 dominant cause of delay and so on, I think out of 9 fairness, it should be acknowledged that some or all of 10 these would be matters of contention between tie and the 11 consortium; is that correct? 12 A. Certainly some of them, yes, I would guess so. 13 Q. As we saw, this matter was to go to adjudication. So 14 presumably there were arguments lined up on both sides 15 which would have been ventilated had that adjudication 16 taken place? 17 A. The -- the one on INTC 536? 18 Q. Yes. 19 A. That is correct, yes. 20 Q. If we could fast-forward, please, to page 114 of your 21 report. This section headed up, "Late delivery of 22 design". Paragraph 13.1.1: 23 "As I have noted in the paragraph 11.7.4, late 24 delivery of design is a most significant source of delay 25 and appears to be the dominant cause of delay to the 32 1 overall delivery of the Infraco Works in most, if not 2 all, parts of the tram route. I have not been directed 3 to conduct a detailed examination of the design 4 programmes and progress reports but have been asked to 5 provide an explanation of why I consider that delivery 6 of design is such a significant and dominant matter." 7 Do you know why you hadn't been instructed to carry 8 out a detailed examination of the design programmes and 9 progress reports? 10 A. I think at this time I was starting to flag up this as 11 an issue. When I was looking at the design programmes 12 and the delivery of the design, it was becoming more and 13 more apparent that this was a bigger issue, but as 14 I say, I was asked -- this task on its own was to deal 15 with this estimate, which might be going to 16 adjudication. So I was being asked to provide opinion, 17 but I hadn't been asked nor given the time to look at 18 this in more detail. That was why I made that comment. 19 Q. Were you at any later stage instructed to carry out that 20 analysis? 21 A. No, as I said earlier, this is getting quite close to 22 the Mar Hall mediation time, when matters were resolved. 23 So no. There was no more involvement in this one. 24 Q. How significant a task would it have been in terms of 25 cost and time to carry out the detailed examination that 33 1 you talk about here? 2 A. It's a difficult question to answer because we don't 3 know what the claim might have been from the contractor, 4 what the reasons might have been. 5 What we were starting to see was that civil 6 engineering design, which was the works, first works to 7 be carried out, was -- appeared to be being held back or 8 being changed by the -- either the finalisation or 9 the -- or changes to the mechanical and electrical 10 design. 11 As I recall, and as I understood at the time, the 12 mechanical and electrical design was always the 13 contractor's. It was being carried out by Siemens. 14 They were the experts in dealing with that. 15 I don't think tie -- when the designers were working 16 with tie, they were looking at that in any great detail. 17 So there was the question of alignment of design for 18 the consortium, for the contractor. Siemens on one hand 19 were designing the systems, the electrics, the tracks, 20 the signalling systems, and SDS, the novated designer, 21 who had come from tie across to the contractor, was 22 designing all of the civil engineering works, and the 23 two had to align, not just physically line up, but you 24 would be building concrete components in a particular 25 shape or form to support overhead wire poles to provide 34 1 ducts and entries for signalling systems, that type of 2 thing. 3 Within tie, there certainly appeared to be an 4 increasing awareness that there were alignment issues, 5 and I think that was put to me that in some cases 6 certain things were actually being built, concrete was 7 being put in the ground, and then it was going to have 8 to be changed because of the evolving design for 9 mechanical and electrical works that was being carried 10 out by Siemens. 11 I don't know if that is true, but that is certainly 12 the impression that was being given, and when we were 13 looking at, perhaps in some instances I think there were 14 certain construction drawings, civil engineering 15 drawings that had been approved for construction, so you 16 think: that's it, finished, that is what is to be built; 17 they were then subsequently being changed again, 18 sometimes before the work started, but on an odd 19 occasion after some work had actually been carried out. 20 This was an evolving picture. It wasn't clear at 21 the time. So that would be another reason it's 22 difficult to say how we might analyse it. 23 Q. So -- thank you for that answer. The original question 24 was: how much work do you think would have been involved 25 in carrying out the sort of detailed analysis that you 35 1 referred to in your paragraph? I think we can take it 2 from your answer that you don't really know because it 3 wasn't done. 4 A. I don't know. But it wasn't done, and I don't know what 5 the magnitude of the task would be. 6 The information was -- at that point would 7 predominantly be with the contractor, within the 8 contracting organisation. So I could only see what was 9 being reported through the monthly reports, what had 10 actually been signed off by tie, and probably more 11 importantly, what was still to be signed off. But it 12 was difficult to say when that sign-off material might 13 come forward to be presented as ready for sign-off, so 14 that works could progress. 15 Q. Yes. Even if you were to try to estimate on a rough and 16 ready basis, are we talking here about an analysis 17 involving one person for a few days, or is it a number 18 of people for a few months or are you just not able to 19 say? 20 A. It's very difficult to say, but it was a large project, 21 and I would guess that there would be a lot of detail 22 behind it. The design programme for construction 23 certainly was a pretty weighty document with a lot of 24 detail in it. I would expect if that existing 25 programme -- if there was in existence a programme for 36 1 the mechanical and electrical design, it would be 2 equally complex. 3 So I would think certainly many weeks, if not 4 several months of work, providing the information was 5 available to conduct the analysis. 6 Q. In your answer there you referred -- I think you said if 7 there was a programme for the E and M design. 8 Did I hear you directly? 9 A. That is correct. I don't recall having seen one. It 10 may be that one existed. It may even be that tie had 11 it. It may even be that I did see it, but I don't 12 recall having seen that. 13 As I say, this was all starting to become a bigger 14 issue, or becoming -- it was an issue that needed to be 15 considered at the point where I was finalising this 16 report. 17 So I was making reference to it, but hadn't spent 18 any time or effort starting to investigate it. 19 Q. Thank you. 20 Reading on, heading at 13.2, "SDS Variance 21 Statement". If we just read 13.2.1: 22 "The SDS Variance Statement summarises the dates 23 from the SDS design delivery programme for the 'Issue 24 Construction Drawings' milestones. It presents and 25 compares the milestones from the Version 31 SDS design 37 1 delivery programme (ie the version aligned with the 2 original Infraco construction programme Revision 1) with 3 similar milestones in the Version 59 and 60 programmes." 4 Now, versions 59 and 60, were those the latest 5 versions of the design programme available at the time 6 that you did this report? Or would it be the base date 7 for the estimate? Can you recall? 8 A. I would guess that's the base date. Yes, that would be 9 the programmes from round about the July 2010 date. 10 I would -- my recollection is that they were 11 produced monthly on a particular date. So it may be 12 that I would have to look at two of them to get close to 13 the actual -- establishing what the position was at the 14 base date. 15 Q. From that explanation, and as we might guess from the 16 name "Variance Statement", what you would see from that 17 document is the change between the two versions of the 18 design programme that were being compared; is that 19 correct? 20 A. Yes, that's correct. 21 Q. In particular, if there had been an increase in the 22 number of IFC drawings that would be required? 23 A. Sorry, would you repeat that. 24 Q. In particular, one change that you might see is whether 25 or not there was an increase in the number of IFC 38 1 drawings which were to be produced? 2 A. Quite possibly. I would need to look at the Variance 3 Statement again to see what level of detail that 4 contained. 5 Q. Okay. Something else that you might see from the 6 Variance Statement is any change in the dates for the 7 production of such drawings; is that correct? 8 A. As I have written there, I think it presents and 9 compares the milestones. I would guess those milestones 10 were the dates for delivery of certain things. 11 Q. Thank you. 12 If we go forward to 13.2.4, which is on the next 13 page, please: 14 "Version 60 of the SDS design delivery programme 15 contains 202 No. "Issue Construction Drawings" milestones, of 16 which, again, 29 No. relate to Section 3 (Phase 1b of the tram 17 route. Therefore, of these 202 milestones, 173 relate to the 18 works on the Infraco construction programme. I conclude 19 that between Version 31 and Version 60 of the SDS design 20 delivery programme, the number of "Issue Construction 21 Drawings" milestones associated with the Infraco Works 22 construction and installation activities has increased 23 from 81 to 173. This more than twofold increase should 24 be considered against a factual background where, in 25 general terms, the physical scope of the Infraco Works 39 1 has experienced very little change. It appears to me 2 that additional milestones have been introduced to cover 3 works not separately identified in the Version 31 SDS 4 design delivery programme or by sub-dividing the scope of 5 some of the milestones in Version 31 of that programme." 6 So in short, there had been an increase in the 7 number of IFC drawings between the original and the 8 latest versions of the design programme; is that 9 correct? 10 A. No, not necessarily. I think what it reflects is that 11 there are more milestones being added into the -- this 12 programme. So, for example, in the original programme 13 there might be one milestone for issued for construction 14 drawings for a particular retaining wall. But perhaps, 15 as the project moves on, that one milestone becomes two, 16 perhaps one for the east section of it, one for the west 17 section, subdividing it down. So it's not automatically 18 that there would be more drawings, although that might 19 be the case. 20 Q. Okay. I understand. 21 Then 13.2.5: 22 "Whatever the reason for the increase, from 23 a comparison of these two versions of the SDS design 24 delivery programme the time required for the delivery of 25 the detailed design has increased from approximately six 40 1 months from the award of the Infraco Contract (and 2 thereby the novation of the SDS Services Contract to the 3 Infraco) to 23 months." 4 So in short, the period of time for the completion 5 of these milestones had increased from six months to 23 6 months; is that correct? 7 A. That's correct. 8 Q. So put fairly briefly, there were more milestones in the 9 design programme and more time was needed to complete 10 them? 11 A. That's correct, although I wouldn't necessarily link the 12 increased number with the time required. It's not that 13 there was more work to do, as I understand it. 14 Q. Thank you. 15 Then 13.2.6: 16 "The histogram below provides an indication of the 17 extent and magnitude of this delay by comparing, on 18 a month by month basis, the number and timing of the 19 achievement of the "Issue Construction Drawings" 20 milestones between the Version 31 and Version 60 SDS 21 design delivery programmes." 22 If we look over the page, we'll see that diagram. 23 Can you just explain to us what that diagram shows, 24 please? 25 A. The blue bars -- well, if we start along the bottom, 41 1 obviously, we have a calendar. That is the timeline. 2 And on the vertical axis we have the number of issued 3 for construction milestones. So the timeline is in 4 monthly periods, and the blue bars indicate the number 5 of issued for construction drawing milestones achieved 6 in that particular month, on the Version 1 programme. 7 So if you just look at the blue bars, you can see 8 that they're all been carried out between the period 9 April 2008 and what looks like January 2009, all the 10 blue bars fall in that time frame. 11 The vertical red bars represent the number of INTC 12 milestones that have been achieved in the months as 13 shown on the Version 60 programme, which is the one 14 round July 2010. So it's showing that there are 15 an increased number of milestones represented by the 16 total length of all the vertical bars, if you had to sum 17 them up, but a lot of them are occurring a year or more 18 later. 19 Q. Yes. So this is showing in visual form the increase in 20 the number of milestones and the period over which they 21 are to be completed? 22 A. That is correct. 23 Q. And the blue -- if we just look at the blue colour, that 24 was the position in the original design programme at 25 commencement of the Infraco contract, and the red, which 42 1 has the extended period and the greater number, that's 2 the position in the latest design programme that was in 3 existence at the base date for the extension of time 4 claim? 5 A. That is correct. 6 Q. Thank you. 7 If we read 13.2.7: 8 "As can be seen by inspection, the Version 31 9 programme (blue vertical bars) shows the delivery of all 10 IfCs by the end of 2008, whereas the Version 60 11 programme shows a greatly increased number of IfCs with 12 a large proportion of them being delivered approximately 13 one to two years later than the Version 31 date for the 14 latest IFC." 15 So I think that's the point we've just been 16 discussing? 17 A. Exactly. 18 Q. 13.2.8: 19 "Exactly why this has occurred is not known to me 20 but it is clearly a major issue. Without design the 21 Infraco Works cannot be delivered." 22 You say there that you didn't know the reason for 23 it. Did you become aware of the reason for it at any 24 later stage, or was that where your knowledge rested? 25 A. I was aware of certain issues in certain locations that 43 1 could be causing this, but I was not aware of 2 underlying -- major underlying issues that were 3 evidencing the breadth of the delay. You know, it was 4 across a large proportion of the project. 5 Q. Thank you. 6 Then 13.2.9: 7 "It should be noted that these IfC relate to the 8 design being delivered by the Infraco using the SDS 9 Provider. It is predominantly the civils and building 10 works design. As can be seen in the following 11 sub-section, there appears to be a similar pattern of 12 design delay on the mechanical and electrical design." 13 So you distinguish here between the civils and 14 building design on the one hand and the mechanical and 15 electrical design on the other. Can you explain why 16 you've done that? 17 A. Well, the SDS programme is part of the -- part of the 18 contractual programme. The mechanical design 19 information is -- I think we will come to that further 20 down in the report, if you want to look at that, but 21 there was limited information on that. It was either in 22 the construction programme or in the SDS design 23 programme. I suspect it might be in the construction 24 programme. 25 So that was why I was saying that, as I said 44 1 earlier, there may have been a much more detailed M&E 2 programme for delivering design, but I wasn't aware of 3 it, but there was limited information on M&E design 4 within -- I think it was a construction programme. 5 Q. Okay. Thank you. 6 Had you formed any view on the relative significance 7 on these two parts of the design when it came to causing 8 delay to the Infraco programme? 9 A. As I said earlier, I think this was a factual situation 10 that appeared to be evolving, that certainly as it was 11 being put to me by tie's project managers, that things 12 were being held up because the mechanical design, 13 mechanical or electrical design, was still evolving, and 14 that they were aware that the SDS designer was having to 15 go back and revisit its design or was holding back, 16 waiting for information from the M&E designers to allow 17 it to complete its design work and have it certified. 18 Q. What was your understanding of the way in which the 19 civils and building design on the one hand and the 20 mechanical and electrical design on the other related to 21 one another? 22 A. You mean physically or how the process was managed or... 23 Q. Yes. In terms of the extent to which delay in one can 24 cause delay to the other and so on. 25 A. Yes. Well, the first thing that you see happening on 45 1 the site is the construction, but until -- you can't 2 start construction until you have a complete design. 3 And the tram system involves civil engineering design, 4 electrical design, mechanical design, information 5 technology design. All those components have to come 6 together to allow the finished product to be 7 constructed. 8 So the civils design has to align with that 9 mechanical electrical design, and both designers have to 10 come together at some point and agree that -- how their 11 different component parts will fit together. And they 12 rely on each other. I would suggest the civils designer 13 to a certain extent cannot complete his work until the 14 mechanical electrical designer has at least set down 15 some firm parameters. 16 As I explained earlier, the trams are powered by 17 electricity. They need posts, gantries, wires, overhead 18 wires, to -- they need civil engineering foundations to 19 support those gantries. So you can't start doing the 20 work in the ground, you can't start putting in the 21 foundations for those gantries until the mechanical 22 electrical designer has said: this is where they need to 23 be, and this is the size they need to be, these are the 24 loadings that they have to be able to support and 25 resist. 46 1 CHAIR OF THE INQUIRY: The delay in the civils design and 2 production of the civils design could be caused in part 3 at least by the delay on the part of Siemens in 4 producing their design for the M&E? 5 A. That was certainly the view that tie was starting to 6 form, that there were issues to do with this, and they 7 were quoting me examples, as I said earlier, of work 8 having to be redone, changed, because the mechanical and 9 electrical work was not being signed off; and they were 10 starting to be aware, whether formally or informally 11 through discussions, that certain pieces of the work 12 were not being finalised from a civil engineering point 13 of view because of what were called alignment issues. 14 This alignment of the two designs, the mechanical and 15 electrical, and the civil engineering design, the two 16 had to align before you could more or less rubber stamp 17 it and say: yes, go and build that. 18 CHAIR OF THE INQUIRY: In the context of a joint venture, or 19 Infraco where Siemens and Bilfinger are working 20 together, it may not really matter in the sense that 21 a delay in the delivery of the civils design, if it's 22 caused by the M&E design, it's still the responsibility 23 of Infraco? 24 A. If it is as simple as that, my Lord, yes. Exactly. 25 CHAIR OF THE INQUIRY: That's an oversimplification, but 47 1 that would be the position. 2 A. Yes. 3 MR MCCLELLAND: The section that follows, Mr McAlister, is 4 headed up, "Mechanical and Electrical Design". You say 5 at 13.3.1: 6 "The Infraco is responsible for the delivery of the 7 mechanical and electrical design. It is also 8 responsible for its integration with the civils and 9 building design." 10 Reading over the page, 13.3.2: 11 "There is relatively little information in the 12 Programme on mechanical and electrical design. It 13 appears to have been summarised in the Infraco 14 construction programme in a brief series of activities." 15 I think a moment ago you couldn't recollect exactly 16 where the information was, but does this give us the 17 answer? 18 A. It does indeed. 19 Q. Then 13.3.3: 20 "Shown below for comparison purposes are the 21 relevant extracts from the INTC 536 Estimate Appendix G 22 programme (which in respect of the activities shown is 23 the same as that on the original version of the Infraco 24 construction programme Revision 1) and the updated 25 Infraco construction programme Revision 1 as presented 48 1 by the Infraco in July 2010." 2 There are then pictures showing extracts from each 3 of those programmes. 4 Can you just explain, please, what's shown in these 5 diagrams and what you took from it? 6 A. The top -- the top of the diagram is an extract from the 7 original contract programme, the Version 31, and 8 although it might not be particularly clear, just above 9 the yellow line there is a milestone, the little black 10 diamond, and the description opposite that on the 11 left-hand side states "M&E design freeze", and the date 12 for that is, I think, 27 November, and I'm pretty sure 13 that will be 2008. 14 CHAIR OF THE INQUIRY: Can that be enlarged any more? 15 A. The words beside the little black diamond at the top of 16 the page there is the same as the description. It's 17 "M&E design freeze". I know it's not very clear, but 18 hopefully you can interpret that from the shape of the 19 words. 20 MR MCCLELLAND: Yes. So if we were to pan slightly to the 21 left, so we can see the left of this, where the text is 22 written, we see probably the sixth entry in that column 23 of text reads "M&E design freeze". As you say, if you 24 read along that line, we have a date of 27 November. To 25 me it looks like 2008, but in any event, if we look at 49 1 the diagram to the right and the black diamond that you 2 have been talking about, where the words "M&E design 3 freeze" appear again, we can perhaps see that the dates 4 around and about it in the table are 2008. Do you agree 5 with that? 6 A. Yes, correct. That's correct. 7 Q. So what does that tell us about the M&E design freeze? 8 A. Normally what is meant by design freeze is that it is 9 the date when the design will be frozen, as in it will 10 not change. The reason for that, introducing a design 11 freeze, in the context of what we're looking at here is 12 the M&E design is to be determined, frozen, and that 13 then allows the civils designer to finish off his design 14 to match up with that; and then following that, of 15 course, he will complete and issue for construction the 16 design of the civils works. 17 Q. I understand. Just confirm for us what was the source 18 of the -- that diagram that we've just been looking at? 19 A. That is -- I think as it should say there, it's the -- 20 it's the -- let's see. Actually that one is from the 21 Revision 1 programme. So that is from the INTC 22 estimate. It's the baseline programme that is in the 23 contractor's estimate for INTC 536. 24 Q. Okay. If we look now to the diagram below it, can you 25 explain to us what that shows? 50 1 A. That is an extract from the Infraco's construction 2 programme. So this is the programme that is updated 3 monthly by the Infraco and submitted to tie. It's the 4 programme that aligns with the base date of the INTC 536 5 estimate, and what it is showing, again if -- it's the 6 fourth activity on the schedule extract, just above the 7 yellow line. It's that same activity again. M&E design 8 freeze. 9 At that point in time, it's been reported as being 10 completed or aimed to be complete at 30 July 2010. 11 So at the base date -- from mid-July 2010, the M&E 12 design had still not been frozen. 13 Q. Yes, because as we saw earlier, the base date, I think 14 itself was in July 2010. So if a programme being 15 produced at that date gives the date for the freeze as 16 being July 2010, what does that tell us about whether or 17 not that design is -- has been frozen or completed? 18 A. Well, on the face of it, it has not been frozen, and the 19 red writing with the -- around the red arrow at the top 20 shows that the difference between the baseline programme 21 being used by the contractor and the actual 22 contemporaneous reported programme showing progress has 23 got 20 months difference. In other words, the 24 contractor's delay analysis programme that it's trying 25 to show the effect of the late utilities is -- contains 51 1 information that says that the M&E design was frozen on 2 27 November 2008. But its own updated progress 3 programme from that same point in time is showing that 4 it is still not complete. That is 20 months later it's 5 projecting that it's to be complete at the end of July. 6 Whether that would actually be achieved, who knows. 7 Q. If we just close down that zoom and look at the text 8 below those boxes, you say: 9 "I note that the July 2010 SDS design delivery 10 programme indicates that this design will continue 11 beyond that date. This has become evident through the 12 passage of time and at the date of this report the M&E 13 design still remains [complete]." 14 Can you expand on that a little bit, please. 15 A. I think you said "complete". It actually says 16 "incomplete". 17 Q. Sorry, "incomplete". 18 A. Again, that's the point I have just been making, that at 19 the end -- in middle of July, the updated programme is 20 showing that that activity remains incomplete. The 21 projection shown in the programme for it to be complete 22 is that it will be in another couple of weeks. 23 Whether that was actually achieved or not, I don't 24 know. My suspicion is that it -- as I recall it, it 25 wasn't, if we were to look at the next month and the 52 1 next month again and the next month again, it would 2 continue not to be complete. And be projected to be 3 completed some time soon in the future. 4 I couldn't say when it actually was completed. 5 Q. Are these matters that you would have looked into 6 further if the disputes hadn't been resolved, at the 7 Mar Hall mediation? 8 A. Well, I would look into whatever I was instructed to 9 look into, but in terms of conducting analysis and 10 taking this -- the point forward, yes, I would expect 11 I would. 12 But I have limited information. I think what you 13 can see in the screen there is showing that the design 14 freeze is not happening. The design is continuing to 15 move forward. But I don't know why and I don't know to 16 what extent it is -- certain elements might be complete. 17 Other elements are not. But clearly everything is not 18 as was planned and it all suggests to me that there are 19 issues that are causing delay. 20 Q. Thank you. 21 I think 13.3.5, you say: 22 "I am unaware as to why the mechanical and 23 electrical design is running so late, but it certainly 24 appears to me to be having a most significant delaying 25 effect on the delivery of the Infraco Works." 53 1 Can you just say why you came to the view that 2 whilst it was late, it was also having a delaying effect 3 on the delivery of the Infraco works? 4 A. When I was asking questions about why certain civils 5 works were not under construction, I was being told the 6 design still isn't signed off, or I was looking at 7 progress reports and seeing that the design was still 8 incomplete. If the mechanical and electrical design is 9 still moving, if we're actually seeing on site civils 10 work that has advanced being changed, all the 11 indications are that the design is not yet finalised, 12 and that the mechanical and electrical work is certainly 13 playing a part in that. 14 Q. In your answer there you said that you were asking 15 questions about why certain civils works were not under 16 construction and you were being told that design still 17 isn't signed off. 18 Where was that information coming from to you? 19 A. That would be coming to me from -- well, there would 20 probably be two sources. One, the people in tie that 21 I was speaking with, but also if I was looking at the 22 contemporaneous monthly reports, I would see if an 23 issued for construction milestone for the design 24 drawings for a particular structure had been issued, and 25 if it still hadn't been issued, the design is not signed 54 1 off yet. 2 Q. That second source that you talked about, being the 3 contemporaneous monthly reports, what was the source of 4 those? 5 A. Those would be the reports produced by BSC and submitted 6 to tie. 7 Q. Thank you. 8 If we could move forward, please, to page 119 of 9 your report. Paragraph 13.4.3: 10 "The Infraco Contract obliges the Infraco to 11 progress the Infraco Works in accordance with the 12 Programme (Clause 60.1) and holds it wholly liable for 13 the performance of the SDS Services (Clause 11.4). 14 Delivery of design is a fundamental element of the 15 Infraco Works and the principal element of the SDS 16 Services. I note that the Infraco Contract includes 17 provisions and mechanisms whereby the Infraco may claim 18 extensions of time for delay arising from design matters 19 for which it is not liable." 20 If we just pause there, that appears to acknowledge 21 that under the Infraco contract responsibility for delay 22 in the design sometimes lay with tie and sometimes with 23 the consortium. Was that your understanding? 24 A. Yes, that's correct. 25 Q. Whether it lay with one or the other, that would 55 1 presumably depend on a precise understanding of the 2 reason it was delayed? 3 A. Yes, you would have to treat each case on the facts that 4 related to it. 5 Q. I think you've explained in your report that you were 6 unable to say where culpability for the delay lay. Was 7 this at the root of that difficulty? 8 A. Yes. I could see that the design was late. That was 9 striking me as -- for large swathes of the project, that 10 that was what was holding back construction on the 11 ground. And why was it late? There appeared to be 12 a number of reasons. Some of which, as I understood it, 13 were the contractor's responsibility, some may be 14 excusable or relief events under the contract because 15 they were tie change, perhaps instigated for whatever 16 reason. 17 So until the contractor would make his case, explain 18 why it was late, and make a case as to what was the 19 cause of that, it was difficult for me to know. 20 Q. Then reading on from that paragraph: 21 "I am advised by tie that the Infraco has, as at the 22 date of this report, notified some of these as 23 Compensation Events or tie Changes but has not 24 submitted any required substantiation/Estimate/claims 25 for extensions of time arising from late design." 56 1 You say there that tie had told you there was a lack 2 of substantiation. Was that something that you had 3 verified for yourself to any extent? 4 A. I don't recall doing that. The exercise to do that, 5 I would think, would involve going through all of the 6 notified delays or tie changes and probably by this 7 point this time we were into many hundreds of them, 8 understanding what they related to and that sort of 9 thing. So I didn't have the time. Nor was I instructed 10 to examine that. 11 Q. If we could move forward, please, to page 120. I'm just 12 going to read paragraphs 13.4.6 to 13.4.8: 13 "tie has made me aware that the Infraco has 14 submitted a considerable number of Estimates for 15 tie ..." 16 It says "charges", I think it must mean "changes"? 17 A. Yes. 18 Q. "... tie [changes] associated with design change from 19 BDDI to IfC." 20 Then there's a note there: 21 "Explain what this is." 22 I think probably those of us in this room are 23 familiar enough with what that means by now. 24 "I am also advised that tie considers some of these 25 to be tie Changes but others not to be. It is my 57 1 understanding that in relation to all of them the 2 Infraco has not submitted substantiated claims for 3 extension of time. 4 Many of these claimed tie Changes have become the 5 subject of disputes between the parties leading to 6 delays to the commencement of the associated works. 7 I am advised that the agreement of these tie 8 Changes, their resolution through the DRP or their as 9 yet incomplete status is the principal and dominant 10 cause of delay throughout virtually all parts of the 11 tram route." 12 So this section, Mr McAlister, this is discussing 13 delay in the change mechanism provided under the Infraco 14 contract; is that correct? 15 A. That's correct. 16 Q. The discussion of these issues here seems to be 17 undeveloped in your report. Is that fair? 18 A. Yes, I would say so. 19 Q. What you said in paragraph 13.4.8 about the agreement of 20 changes and the resolution through the dispute 21 resolution procedure being the principal and dominant 22 cause of delay, who advised you of that? 23 A. I think it was readily apparent from anyone who was 24 involved with the project, that works were not being 25 progressed because the contractor was of the opinion 58 1 that it was not obliged to commence work in particular 2 areas until certain matters were resolved. 3 So whether the design was in place or not, the 4 contractor was not prepared to more or less set foot on 5 to a particular part of the site or put a digger in 6 there and start to break the ground, because it was -- 7 it's of the opinion that under the terms of the 8 contract, it shouldn't be. It wasn't obliged to, it had 9 to wait until certain matters were resolved, and those 10 were matters relating to extension of time and 11 adjustment to the price. 12 Q. It was your characterisation of that issue as being the 13 principal and dominant cause that I was interested in. 14 Was that a view you yourself had formed through analysis 15 or was that something that, as I think it says in this 16 passage, you were advised about by somebody else? 17 A. It wasn't determined necessarily by analysis, but 18 looking at the tram project, it's a long linear project. 19 In theory, given the complete free hand and infinite 20 resources, the contractor could work on every single bit 21 of it along the entire route at any point in time. 22 Clearly that's not practical from a contractor's point 23 of view. You don't have infinite resources and also 24 from delivering the project in phased manner, so that it 25 minimised the interruption to the public and the 59 1 utilities and all the services that are in the city. 2 But the project involved a whole lot, a large number 3 of construction operations on discrete sites. Bridge 4 built here, wall built there, sewer built in another 5 location, and until all of those major civil engineering 6 works were complete, you couldn't start to contemplate 7 putting in large sections of track that would go over or 8 under those structures. 9 So in my eyes, this job needed -- if it was going to 10 reach any sort of completion date, we had to start to 11 see this huge volume of work being tackled and the 12 amount of work that could be completed, completed as 13 early as possible, because everything couldn't be built 14 at the one time. 15 But on the ground there were areas where it appeared 16 that works could be progressing. There didn't appear to 17 be any reason that they couldn't be progressing, 18 assuming that design was in place, that utilities had 19 been diverted and I could identify a number of areas 20 where that was the case. 21 And the construction programme suggested that work 22 could be progressing, where it was not progressing on 23 this sort of point of contractual principle or 24 interpretation. 25 That was the only reason it was not advancing. 60 1 And that has to be a concern, given that there is 2 this huge amount of work to be carried out to deliver 3 the project as a whole. 4 Q. What you say in 13.4.8 is that it's the delay in the 5 change process that is the dominant cause of delay, and 6 elsewhere in the report we see it's stated that it's 7 delay in the design that is the dominant cause of the 8 delay. 9 Are those two statements inconsistent? Or if not, 10 can you explain to me how they're reconciled? 11 A. I think we looked at earlier on in the report, I said 12 there appeared to be -- and I listed three or four 13 dominant causes. This was one of them. The design was 14 another. It would depend on the particular location. 15 There may be a particular location where it would be 16 lack of design. There would be other locations where, 17 as far as I could see, it was not design, it was either 18 the contractor wasn't prepared to progress on principle 19 or there were other factors at play. Perhaps the 20 contractor wasn't ready for other reasons. He might 21 have his design in place, but he does have to do other 22 things, procure subcontractors, procure materials, seek 23 approvals for temporary works, things like that. Quite 24 a lot of the construction work was adjacent to the live 25 railway, for example. That involves -- there can be 61 1 quite an involved process in agreeing with the rail 2 regulators, exactly how the work would be carried out 3 safely and not bring undue risk to the trains travelling 4 past. 5 Q. Thank you. Just reading on to 13.5.1, just summing up 6 a point I think we have covered: 7 "At the time of writing this report I have been 8 unable to form an opinion of where culpability for these 9 design delays lies." 10 Then: 11 "For the purposes of this report I consider that 12 matter of no consequence." 13 Were you at any later stage able to form a view or 14 a clearer view on where culpability for design delay 15 lay? 16 A. No. 17 Q. Now, as we saw, that report is a draft. Can we just 18 briefly look at another document, which is WED00000588. 19 Do you recognise this document, Mr McAlister? 20 A. I'm just looking. It seems to be the -- is that the 21 same date as the main report we've looked at? 22 Q. Yes. We see down at the bottom a date of 31 March 2011? 23 A. Yes. 24 Q. Which is the same date as the report we've just been 25 looking at? 62 1 A. Yes. 2 Q. If we look at the final page, page 5 of this document, 3 we see there that it appears to be signed off by you on 4 that date? 5 A. There's no question -- it's my -- I'm trying to recall 6 why it was produced because it coincides with the date 7 of the report. 8 It could have been produced as a shorter summary of 9 the contents of the report. I don't actually recall, 10 but I am in absolutely no doubt it's mine. I recognise 11 the style of the document as well as having my name on 12 it. 13 Q. I can help you out, Mr McAlister. If we just go to 14 paragraph 1.1 it reads: 15 "This file note relates to the DRAFT Expert Report 16 version 10." 17 Which I think is the report we've just been looking 18 at? 19 A. Yes. 20 Q. "This is an incomplete document, the preparation of 21 which was put on-hold by tie pending the outcome of 22 mediations and discussions between the Parties." 23 I think we have discussed that already. 24 If we go to paragraph 1.3: 25 "It should be noted that there are a number of 63 1 matters associated with this report still to be resolved 2 and that there may be changes to tie's strategy in 3 addressing these issues. This is likely to include the 4 review and development of various legal arguments. The 5 reader of these notes and the draft report should bear 6 these matters in mind before drawing any conclusions or 7 opinion for these documents as, in their current state, 8 they are incomplete, unchecked and may be subject to 9 further development and revision based on legal advice 10 and opinion." 11 To what extent had you taken account of any legal 12 advice in the preparation of the report we've just been 13 looking at? 14 A. That particular report or the reports in general? 15 Q. Well, insofar as relevant to the report we've just been 16 looking at? 17 A. I was party to several discussions about the 18 interpretation of the contract through -- throughout my 19 time that I was involved with it. I think perhaps it 20 would be fair to say that it was perhaps more a case of 21 what my opinion was and how the contract should be 22 interpreted in terms of applying it to the analysis of 23 delay, applying the wording to the facts, and thereby 24 conducting an analysis, and that that was aired in 25 meetings with others who were advising tie on the 64 1 correct interpretation of the contract. 2 So my thoughts and views on those things were 3 expressed and on occasions commented upon. 4 My recollection is more that the lawyers involved, 5 in many cases, at least certainly in one case I can 6 think of, QCs were involved, where they were perhaps 7 more in a listening mode than necessarily giving out 8 advice, but I took it that if I explained what I was 9 doing, how I saw the facts relating to the words of the 10 contract, and thereby used that to conduct my analysis, 11 they were not saying that I was wrong or off the mark, 12 and that is the way I would normally proceed in dealing 13 with this. 14 Inevitably you have to read the contract and try to 15 interpret it to provide opinion and analysis based on 16 the mechanisms set out in the contract. 17 Q. If I can put it this way, were you aware at the time you 18 completed this report of legal issues on which you 19 considered you required further advice to be confident 20 about the views you'd expressed in your report? 21 A. I don't think so. I don't recall that as being a major 22 stumbling block. But reports like this, particularly if 23 they were going to be served into formal Dispute 24 Resolution Proceedings, would be reviewed by those 25 advising tie, the lawyers, et cetera. It would be quite 65 1 common for any expert report to be checked against the 2 pleadings, and to how that might be put forward, that it 3 was consistent and that it was robust. 4 Q. Just to be clear, that stage hadn't been reached with 5 this report; is that correct? 6 A. Not with this report. It was perhaps more involved with 7 that than the previous MUDFA 8 report, which was on the 8 same subject, applying the same sort of principles. 9 Q. Thank you. 10 A. But I was aware at that time that the legal issues 11 were -- continued to be debated, and that both parties 12 had quite different views on how the contract should be 13 interpreted and applied. 14 Q. Thank you. If we move to page 3 of your note, please, 15 paragraph 8.1, under the heading, "Late delivery of 16 design", 8.1 reads: 17 "More work to be done to subsection 13.4 of the 18 draft report if it is to be finalised and published." 19 I think that was the passage about the consequences 20 of later than planned delivery of the design. Does that 21 seem right to you? 22 A. Quite possibly. I would need to check the 23 cross-reference. 24 Q. Then on page 4 of your note, at paragraph 13.1: 25 "Section 14 of the draft report, 'Opinion and 66 1 conclusions' has yet to be drafted as its content can 2 only be considered and set-down when the other sections 3 have been finalised." 4 13.2: 5 "An initial draft of the Executive Summary has been 6 included but like section 14, it can only be 7 meaningfully concluded when the other sections are 8 finalised." 9 So we see there, and in the rest of your note, the 10 caveats that you are placing around it. Are you able to 11 say to what extent, if this report had been finalised, 12 you would have anticipated any change of substance to 13 the passages that we've looked at today? 14 A. It certainly would be possible, because the drafting of 15 the report was -- its intent was to prepare for formal 16 adjudication proceedings. 17 I think as I explained yesterday, until the 18 referring party, who in this case tie would be 19 anticipating that that would be BSC, until it was made 20 clear what questions were put to the adjudicator, the 21 arguments that were being pressed, what he was being 22 asked to decide, then my report would have to be 23 tailored to respond to those points. So we would not -- 24 there might be sections in that report that would not 25 actually be put to the adjudicator. So they wouldn't 67 1 play out unless we thought that they were explaining 2 something that was put to the adjudicator. 3 It was an attempt to produce a report with -- 4 addressing as many of the issues as we could identify 5 associated with the estimate. But it would not be 6 finalised until we knew what the case was -- that was 7 being pressed by the contractor in adjudication. 8 Q. Would you, for example, have anticipated a fundamental 9 change to your view that it was design delay which was 10 the dominant cause of delay, rather than utilities? 11 A. I would find that quite strange if the contractor was to 12 press that in adjudication because the subject that -- 13 the high level subject matter of this report is late 14 completion of utilities. So if the contractor was to 15 put the case that it was actually design, he's 16 undermining his own argument. 17 Q. No, sorry, I mean did you anticipate that your view that 18 design was the dominant delay would have fundamentally 19 changed between this draft report and its completion? 20 A. If -- if the contractor submitted something in his 21 referral that required me to look deeper and, dare 22 I say, produced some more evidence, then yes, I might 23 have to revisit that. I didn't expect that would be the 24 case, based on my experience on the previous 25 adjudication, but you never know. 68 1 Q. Thank you. 2 CHAIR OF THE INQUIRY: Are you going on to something else, 3 Mr McClelland? 4 MR MCCLELLAND: There's a brief point that follows on from 5 this, my Lord, after which I'll go on to another report. 6 So if it's convenient, I may get this finished 7 before 11.15. 8 CHAIR OF THE INQUIRY: Very well. 9 MR MCCLELLAND: If we could go, please, to document 10 WED00000587. Now, just read short, Mr McAlister, this 11 is an earlier version of the report that we've just been 12 looking at. 13 If we scroll down to the bottom, we can see that 14 this is a draft dated 4 March 2011. The significance of 15 that is that it's the -- as we understand from the 16 written answers, the final version of the report that 17 was prepared prior to the Mar Hall mediation which took 18 place between 8 and 11 March 2011. 19 You can take it from me that there are some 20 differences, but this still sets out the view that 21 design and not utilities was the dominant cause of 22 delay. 23 Are you able to confirm if this draft was sent to 24 tie prior to 8 March? 25 A. Sitting here, I can't say for sure, but I would have 69 1 expected that it would be. I would have to try and 2 check back through emails unless you have evidence 3 otherwise, but I would have thought so because we would 4 be discussing with them as it evolved. 5 Q. Would it be your normal practice to issue draft reports 6 to the client for review and consideration? 7 A. As requested, normally. Because as I explained earlier, 8 this was quite a complicated estimate to look at. We 9 were under pressure to try and produce as much as we 10 could as quickly as we could, and so I would -- I can't 11 recall for sure, but I would have expected that they 12 would want sight of the draft prior to the mediation. 13 I could be wrong. 14 Q. It may help. Your colleague, Mr Burt, says in his 15 written answers about this, and the reference for the 16 record is TRI00000146, at page 43, his answer to 17 question 125, he says that "this was issued by my 18 colleague on 4 March 2011", but he doesn't say to whom. 19 I'm just wondering, does that help you at all or 20 should we take it up with Mr Burt? 21 A. You could take it up with Mr Burt, but Mr Burt, I'm 22 sure, has checked that, and he probably has found the 23 email when he was drafting his answers to the questions 24 you set him. 25 Q. Okay, thank you. 70 1 If I could put it this way, whether or not you sent 2 this report to tie, were tie in any event aware at that 3 time -- that's before the mediation -- of your view that 4 design and not utilities was the dominant cause of 5 delay? 6 A. I would have thought so. It was a long time ago, but 7 there were always ongoing discussions. We weren't doing 8 this work in isolation in a vacuum. The reasons had 9 been evolving -- you know, the actual causes, what had 10 been happening on site, the questions of design delay 11 and whether it was having an impact or not, those were 12 all things that we were discussing with tie, because we 13 had to go to tie to get the information for those 14 contemporaneous records of design. We'd asked for more 15 information on that, in preparing this report. 16 So there would definitely be discussions with them, 17 and, yes, it makes perfect sense that this report states 18 that it was at -- 4 March would be issued, and I dare 19 say I would be working on it right up to the minute 20 before the send button was pressed on the email. 21 Q. Who at tie would be more likely to know? Rather, who at 22 tie would you have been discussing these issues with? 23 A. As you can see, the report mentions Susan Clark and 24 Susan was very much at the centre of our relationship 25 with tie. Not solely Susan, but she was the main point 71 1 of contact, and she would be the main one who would 2 communicate any requirement to submit the report. 3 Q. Your view that it was design and not utilities that were 4 the dominant cause of delay, are you able to say whether 5 that view would have been significant to anyone who had 6 the responsibility for assessing tie's liability for 7 costs associated with delay on the Infraco contract? 8 A. I would think the people who were dealing with that 9 would be very much aware of it, yes. Are you thinking 10 of anyone in particular? 11 Q. No, just from in general -- in the general. 12 If we could go, please, to document WED00000134. 13 This will just be brief before the break. 14 Just to put this in context, Mr McAlister, this is 15 a report by a Colin Smith and Alan Coyle of the City of 16 Edinburgh Council from 2012, which discusses aspects of 17 the Mar Hall mediation and preparations for it. 18 If we could go, please, to page 233 -- sorry, the 19 page after that, please. It must be 234. We see there 20 a section 7.4, "Settlement with the Current Contractor 21 and Re-procure". This is a discussion of tie's scenario 22 planning or rather tie's or CEC's scenario planning in 23 advance of the mediation. 24 I'll just read from it: 25 "This scenario seemed to be tie's preferred strategy 72 1 with mediation in mind. There are a number of fatal 2 flaws in the assumptions that tie made in this scenario. 3 For example, the cost of settlement with Infraco was 4 forecast by tie at GBP33 million, which was essentially 5 the balance of entitlement for work done set against 6 work certified to date. This number was not cognoscente 7 of any contractual entitlement Infraco would have had 8 for delay ..." 9 This is really the point, in brackets: 10 "... (MUDFA delay being the dominant cause) or 11 disputed design changes ..." 12 The simple question for you, Mr McAlister, is: that 13 would appear to be inconsistent with your view; is that 14 correct? 15 A. Yes, certainly at that point in time, yes. 16 Q. That MUDFA delay was the dominant cause? 17 A. Correct. 18 MR MCCLELLAND: I'm happy to pause there, my Lord. 19 CHAIR OF THE INQUIRY: We will have the pause for shorthand 20 writers at that time. We will resume again at 11.30. 21 You will be taken back to the witness room. If you want 22 a cup of tea or coffee, you can have one. 23 A. Thank you, my Lord. 24 (11.15 am) 25 (A short break) 73 1 (11.30 am) 2 CHAIR OF THE INQUIRY: You're still under oath, 3 Mr McAlister. 4 MR MCCLELLAND: Can you please have document TIE00899963. 5 Now, do we see, Mr McAlister, that this is an email from 6 you to Fiona Dunn, and, amongst others, Dennis Murray 7 and Susan Clark at tie, dated 4 March 2007 [4 May 2011]. 8 A. Yes. 9 Q. Do you recall this email? 10 A. Yes, I do. 11 Q. Is it correct to describe this as the last piece of 12 advice supplied by Acutus on the delay in the tram 13 project? 14 A. I'm almost certain that's correct. 15 Q. Just reading out from the first paragraph: 16 "Further to our telephone conversation on Monday 17 morning, when you asked if Acutus could provide 18 estimated information for your use in an extension of 19 time liability risk assessment, please find as follows 20 our reply. 21 You asked that we consider the Employer's potential 22 liability for extension of time awards under the Infraco 23 Contract, providing our best estimate of upper and lower 24 limits for both utilities delays and design delays 25 (incorporating the matter of Change Orders)." 74 1 Just that passage I have read out, is that a fair 2 summary of your remit? 3 A. As I recall, yes. 4 Q. You say that you were asked to focus on two types of 5 delay, being utilities delays and design delays. As far 6 as you know, were there any other significant causes of 7 delay in the project at that time? 8 A. Related to design, there was, as I recall, there were 9 still questions as to the finalisation of the tram 10 layout at Picardy Place, which I believe was an issue 11 with the City Council in that there was still 12 uncertainty -- the exact alignment in that area, and 13 therefore that was preventing the finalisation of the 14 design in that area. That's one item I recall. 15 I think there was also something to do with the 16 termination of the overhead line structures at the 17 airport, which I think there was a technical solution 18 for, but it was considered by, I think, the airport 19 authority to be not aesthetically pleasing or practical 20 from their perspective. 21 There were one or two other issues, but I think that 22 in general terms utilities and design were the two main 23 issues that were still alive and creating concern. 24 Q. Thank you. 25 In the sentence we read out, there was reference to 75 1 utility delays and design delays, and then in 2 parenthesis, "(incorporating the matter of change 3 orders)". 4 Was that a reference to the change procedure in the 5 Infraco contract? 6 A. Yes, that would be tie Change Orders. 7 Q. This email is dated 4 May 2011. So about two months 8 after the mediation at Mar Hall. 9 What was your understanding of the reasons why tie 10 wanted your advice at this point in time? 11 A. Earlier this morning I was -- when we were talking about 12 my report of 31 March, and then you pointed out that an 13 earlier draft had been issued on 4 March, and you 14 reminded me when the Mar Hall mediation took place, that 15 was where I was slightly confused about the timing of 16 Mar Hall because -- not from my recollection, but 17 I found it strange that I'd been asked for this on 18 4 May. It sounded like the sort of thing that I might 19 have been asked to produce in a hurry because this was 20 produced in just over a day for the mediation. 21 But perhaps not. The timing of it does seem rather 22 strange to me. I would have to go back through my diary 23 notes to try and recall exactly why that was the case. 24 Q. As things stand today, is it the position that you don't 25 know why tie were asking for your advice in May? 76 1 A. I presume that they were looking at their liability, but 2 reading the email and looking at the date, if this is 3 after Mar Hall, I'd thought Mar Hall mediation would 4 have resolved these issues in that it wouldn't have to 5 be considered again later. But perhaps my recollection 6 isn't correct. 7 Q. You mentioned there that this work was produced in 8 a hurry. As we'll see, the email runs on to six pages. 9 So it's a fairly lengthy piece of advice. 10 Can you recall why it had to be produced in a hurry? 11 A. That's why I'm -- my recollection is that there was 12 a pressing desire for it or someone had asked for it at 13 relatively short notice, and presumably tasked someone 14 in tie to do this, and they would turn to me to do it. 15 I do recall it was -- you know, obviously an 16 important thing to do, and it was having to be done very 17 quickly. 18 The reason it's in email form is that it was very 19 pressing, and it was just trying to go back to what I'd 20 previously done, and reflect on it, and come up with 21 some ranges of risk. 22 The exercise itself is not an uncommon one. But it 23 was -- as I recall, it had to be done very quickly, and 24 if the details -- if the date is correct, then the 25 conversation on Monday -- on Monday morning would be, 77 1 I think a day or two before 4 May, which is, I think, 2 a Wednesday. 3 Q. Well, that's right. I have checked, and 4 May was 4 a Wednesday. So that would suggest a turnaround of 5 a day and a half or two days; is that your recollection 6 of that? 7 A. My recollection is that it was -- you know, I was trying 8 to do something very, very quickly. And so that would 9 make sense in terms of those timings. 10 As I say, I would need to go back and look at my 11 diary notes. I do have them. And they would be 12 reasonably detailed, but when I was asked to look at 13 this document in preparation for coming here today, it 14 started to make me think that Mar Hall mediation must 15 have been just at the beginning of May or middle of May, 16 and you have mentioned that it was actually in March. 17 So it makes me question whether that date is correct. 18 But perhaps I'm just totally wrong with that. 19 Q. In terms of the time period that you were given to 20 fulfil that particular remit, did you regard that as 21 a sufficient amount of time to address the remit 22 properly? 23 A. It certainly was quite a task. Normally you would -- 24 you would expect a bit more time, even having done all 25 the previous work that we had on the project, this was 78 1 a project-wide risk assessment. We hadn't been asked to 2 do that before. And most of our work that we had been 3 doing was focused on specific disputes; as we have been 4 discussing previously, the two MUDFA estimates and the 5 challenges that were put to those. 6 Q. I think I'm right in saying that Mr Burt, in his written 7 answers, explains that one of the reports that he did, 8 which analysed delay on parts of the project, but not 9 all of it, had taken something like 800 hours of work. 10 You're being asked, with this remit, to advise on delay 11 across the whole project within a couple of days. 12 Does that give us an indication of why that was 13 a challenging timescale? 14 A. Exactly. 15 CHAIR OF THE INQUIRY: Who is Fiona Dunn? 16 A. Fiona Dunn is a quantity surveyor. I think her job 17 description was Commercial Manager Strategic in tie. 18 She was based in the main office of tie, rather than the 19 project offices, and I can't recall if she reported 20 directly to Dennis Murray, but she worked very closely 21 with him and Susan Clark. 22 MR MCCLELLAND: Just reading on from the second paragraph of 23 the email, in the third line: 24 "Before going into any detail, as I'm sure you will 25 appreciate, it is important that we note that the 79 1 following information and estimations are, primarily, 2 based on our own judgement and NOT on a completed/fully 3 detailed analysis. That is because we have not to-date 4 been directed to carry out such detailed assessment in 5 respect of overall liability for critical and dominant 6 delay which comprehensively addresses all of those 7 matters." 8 So in short, whatever work you had done before was 9 not sufficient to provide a fully informed view on the 10 matters in this email; is that fair? 11 A. Yes, I was having to caveat it from a professional point 12 of view. I had a general understanding of the project. 13 I had been involved for quite a period of time, but most 14 of the work that I had been asked and directed to 15 undertake was focused in a particular way. I had not 16 prior to that, I think, been asked to look at things in 17 the round. And this is what I was being asked to do 18 here. 19 Q. I think you said there that the previous work that you'd 20 done informed this email to some extent. Can you give 21 us an indication of to what extent it informed this 22 email? 23 A. I think, if we're going to work our way through the 24 email, some of the numbers in the tables about 25 determining ranges of potential liability for extension 80 1 of time will have been lifted from the INTC 536 report, 2 which was the most up-to-date work we had done. We had 3 started to look at delay and whether that was dominant 4 and where it was affecting the programme. So that was 5 one area where we had, in preparing the defences to the 6 claim for MUDFA delays, we had said no, there are 7 bigger, wider issues that are causing delay, and that 8 has informed this exercise. 9 Q. You're referring there to the report that we looked at 10 in the morning session? 11 A. Just before the break, correct. 12 Q. Is it possible for you to say how close you had got to 13 a full analysis of all of the issues that are covered in 14 this email, from the work that you had done before? 15 A. As we discussed this morning, in terms of design, we 16 could say that there were big issues, but we were not 17 knowledgeable as to where liability may reside in terms 18 of the degree to which it was late. 19 I was aware that there were some things that 20 appeared certainly to me, and in tie's opinion were 21 contractor risks, and that that was causing delay. But 22 there was also recognition by myself and, I would 23 suggest, within tie that there were other things that 24 the contractor would be entitled to additional payment, 25 and at least consideration of extension of time for 81 1 matters that were outwith its control and were employer 2 risks under the contract. 3 Q. The phrase that you use in your email here are that 4 what's set out in the email is based on your own 5 judgement and not a fully completed analysis. 6 What degree of confidence did you have in the 7 estimates that are set out in this email? 8 A. You will see that there are pretty wide-ranging and on 9 reflection, I would say that the ranges are probably 10 based on: I'm completely wrong and the contractor is 11 completely right; and the other end of the range being 12 what I think is correct and reasonable; and the answer 13 is likely to be somewhere in -- the risk assessment is 14 within that range. 15 I couldn't be much more precise than that. So it is 16 pretty broad brush, but I presume those who were trying 17 to resolve matters at the highest level in the project 18 needed some guidance of the -- particularly the risk 19 that they were exposed to, that tie, its advisers, my 20 advice was all unreliable, and if it ended up in front 21 of an adjudicator or the judge, he may favour the 22 arguments put forward by the contractor. 23 Q. We'll look at the reasoning in a bit more detail in due 24 course, but for the moment to get our bearings, it may 25 be helpful just to look at the structure of the email 82 1 and your conclusion. 2 We see, if we just zoom back out of the first page, 3 please, we see the heading on that page, "Utilities 4 Delays", and you then go on to discuss that. 5 If we move forward to page 2, please, we see about 6 halfway down, there's a section headed, "Design Delivery 7 Delays and associated tie Change Orders". You go on to 8 discuss that section by section. So there's 9 a sub-heading below Section A, and then if we move on to 10 the next page, please, we see there a sub-heading, 11 Section B, and then the next page, Section C, and the 12 following page, Section D and so on. 13 Then at the bottom there is a table which I think 14 summarises your views, and if it's possible, can we have 15 the next page of the email put up beside that one, so we 16 can see the table in its entirety. 17 Am I right that that table sets out your conclusions 18 on the remit that you were set? 19 A. Yes, I would think so. 20 Q. If we just take a look at the columns, the left-hand 21 column headed "Sections", A, B, C and D, those are the 22 work sections under the Infraco contract; is that 23 correct? 24 A. Correct. 25 CHAIR OF THE INQUIRY: I'm sorry. Where do we see D? 83 1 MR MCCLELLAND: The table that's at the bottom -- 2 CHAIR OF THE INQUIRY: At the top, yes. 3 MR MCCLELLAND: D is on the next page. 4 The second column, can you just explain to us what 5 that is, please? 6 A. That, as I recall, is the extension of time claimed by 7 the Infraco at that point in time, which unless I'm 8 mistaken, would be the figures claimed in the INTC 500 9 and -- whatever it was we were looking at this morning. 10 Q. 536? 11 A. 536. If you say so, yes. 12 Q. So in short, the most up-to-date claim for extension of 13 time that had been made by the consortium? 14 A. Correct. 15 Q. Then at the third and fourth columns, if we perhaps take 16 those together, can you explain those, please? 17 A. The -- the lower risk assessment is explained in the 18 narrative above against whichever section it relates to. 19 Predominantly it will be the assessment as I've 20 viewed it as being the -- the lower end of the risk 21 range. And the upper is -- it tends to be a reflection 22 of the -- what the Infraco had claimed, but adjusted as 23 explained in the comments column and explained more 24 fully in the main body of the email. 25 Q. If I can put it this way, the column headed up, "Lower 84 1 risk assessment", is that your assessment of the lower 2 amount of extension of time for which tie might be 3 liable? 4 A. Yes, that's correct. 5 Q. Then the upper risk, is that your assessment of the 6 upper risk of the extension of time for which tie might 7 be held liable? 8 A. It is, although it's founded on the Infraco claim, but 9 it includes some additional time allowance for other 10 things that I was aware of, or potential risks that 11 I thought were either in the pipeline or were known 12 about at that point in time. 13 Q. Yes, because if we compare the second column, being 14 Infraco's claim, and the fourth column, being your 15 assessment of the upper risk, we see in each case that 16 your upper risk assessment is actually a greater period 17 of extended time than the Infraco were claiming for? 18 A. That's correct. 19 Q. In each case, if I'm correct, the amount of the increase 20 over the Infraco claim is 120 days. Are you able to 21 explain why you'd added that figure on? 22 A. It says in the table it's explained further up. Could 23 you perhaps help me by taking me to the appropriate bit 24 of the email to refresh my memory. 25 Q. I can try. I can try. 85 1 If we -- 2 A. I can see it in the paragraph at the top of page 5, 3 perhaps if that can be blown up, it might explain it. 4 Q. I think it -- 5 A. Sorry, the one -- 6 Q. The one that begins, "The upper limit for Section C"? 7 A. That's the correct one, yes. 8 Q. If you could perhaps just take a moment to read that? 9 A. Yes, thank you. (Pause) 10 Yes, I have added on the 120 days, which is 11 an estimate of four months, as it says there: 12 "However, if the further delay in the issuance of 13 the tie Change Orders sought by Infraco is taken at the 14 present date a further four months are to be added." 15 So if in the -- determining the dispute it was 16 accepted that the tie Change Orders had to be concluded 17 before the works could proceed, and therefore that that 18 was causing delay, my estimate was that even with the 19 best will on all parts, it would take another four 20 months to reach that point, so there was another four 21 months of delay going to be incurred on top of what was 22 already being claimed. 23 Q. So this 120 days, does it relate to delay in the change 24 approval process within the Infraco contract? 25 A. In resolving the tie Change Order, getting to the point 86 1 where a tie change is actually agreed rather than being 2 disputed. 3 Q. The figure of 120 days, it sounds from what you're 4 saying that that was a pretty broad brush? 5 A. Yes. If there was a will at that point in time, to 6 bottom out all of those items, I was estimating it could 7 take four months. I was being cautious in some ways, 8 bearing in mind of course prior to any settlement, it 9 was after several years arguing about certain of them, 10 agreement was not reached. But presumably if a new way 11 forward was to be found, it would take a bit of time to 12 bottom those things out, get them all agreed, signed 13 off, and therefore the works would be even later before 14 they would start. 15 Q. If we just return to look at your table at the bottom, 16 and if we compare your upper and lower risk assessments, 17 we see that the range is either just above or just below 18 an entire calendar year. 19 Can you explain why there was such a large range? 20 A. Yes, because the -- it was a fairly strong principle. 21 Was the contractor entitled to extension of time for 22 matters which appeared to me not to be the dominant 23 causes of delay? 24 If they were entitled to that, then they would win 25 their case. But if they didn't, they would get nothing. 87 1 Perhaps reflecting back to the adjudication before 2 Mr Howie, the contractor was seeking, as I recall, 200 3 or 300 days, perhaps, extension of time, and Mr Howie's 4 conclusion on the case being made was that there was -- 5 his assessment was nil. 6 So it was an all or nothing risk. 7 Q. Thank you. 8 Could we look in a little bit more detail at your 9 reasoning. 10 If you go back to page 1, please, in the section 11 headed up "Utilities Delays", just reading from there: 12 "As you are aware, there have been many areas 13 affected by later than planned completion of utilities 14 diversions. The Infraco's approach to seeking 15 entitlement to extension of time is to analyse these 16 delays in isolation from all others. We do not agree 17 that this approach is correct, nor do tie's legal 18 advisers. That said, because we are dealing here with 19 a bespoke contract there remains the risk that the 20 Infraco's approach may find support from a third party 21 determiner. That being so, the 'upper limit' of tie's 22 liability is likely to be based on the Contractor's most 23 recent claim for such matters ..." 24 With reference to INTC 536: 25 "Our analysis of this claim did identify what we 88 1 considered to be errors in the Infraco's analysis. 2 Assuming these have been correctly identified, it would 3 appear reasonable to reduce the upper limit extensions 4 of time by the amount we have identified as arising from 5 these errors (as per that set out in our draft report on 6 the INTC 536 Estimate)." 7 That's the report we looked at this morning? 8 A. That's correct. 9 Q. "In assessing the 'lower limit' of risk we refer to our 10 identification of the fact that, with respect to the 11 Sectional Completion B, C and D Dates, the utilities 12 delays do not appear to be the dominant delays. That 13 being so, it is the analysis and assessment of the 14 dominant delays that should determine tie's potential 15 liability for extension of time. On that basis, the 16 lower limit for extension of time arising from later 17 completion of utilities diversions could on one view be 18 said to be nil." 19 So again, in short, this is repeating the point 20 you'd made in that report that utilities in your view 21 were not the dominant cause of delay. 22 A. That's correct. 23 Q. If we move on to page 2, please: 24 "It is important to note that the Infraco's Estimate 25 for INTC 536 had a base date of 31 July 2010 and that 89 1 includes projections of delays to utilities diversions 2 up to 2 February 2011. One of the errors included in 3 the above assessment is that the latest utility 4 diversions date that should have been used ... is late 5 November 2010. All of that said, we are aware that some 6 of those projected dates for completion of utilities 7 diversions have since slipped further, albeit we do not 8 know by how much. That being so, the Section C and D 9 Dates delays should be increased by the amount of that 10 further slippage. 11 (This is for utilities diversions on Intermediate 12 Sections 1A, 1B and 1C and we currently estimate that 13 further slippage to be at least six months (182 days)." 14 Can you just explain what impact that figure of 15 182 days has on the upper and lower estimates that are 16 shown in your table above it? 17 A. Could I see the table again, please? 18 Q. Sorry. Can we could pan out and look at pages 1 and 2 19 together so we can see the whole table. What I'm not 20 clear about, Mr McAlister, is whether that 182 days is 21 included within the figures in your table or whether it 22 has to be added in. 23 A. I think from looking at the charts, it's to be added 24 into the table that is above the words. 25 Q. Just for clarity's sake, where would you be adding that 90 1 figure in? 2 A. That would be being added to the lower limit and indeed 3 the upper limit, I would think. No, sorry. Not 4 necessarily the upper limit. The lower limit. 5 Q. Thank you. This further delay in utilities, did that 6 alter your view that utilities were not the dominant 7 cause of delay? 8 A. You may recall yesterday I spoke about an example of 9 a utility that was discovered, I think it would be in 10 Section 1B or 1C. It appeared to have been discovered 11 very late on, round about the time a lot of this work 12 and opinion was being formed, and that that had not been 13 known about before or certainly wasn't -- I wasn't aware 14 of it, and that this was adding substantially to the 15 work that required to be carried out in this area. It 16 was down Leith Walk area; and that that, although it was 17 unknown at that point in time exactly how long it would 18 take, it was being estimated as a significant delay to 19 the work in that area. 20 If that section of the tram route was to prove to be 21 critical to completion, then it would have a major 22 impact. However, if the delays on the other sections of 23 the tram work, let's say from Princes Street heading out 24 towards the airport, were going to take longer, perhaps 25 it would not. 91 1 But it was -- it was thrown in at the last minute, 2 after we had done a lot more detailed work, that there 3 was this fairly big issue, and it looked to me as if it 4 had the potential to be a major issue. 5 But we just at that point in time didn't have time 6 to analyse it or to consider it in any more detail than 7 that. 8 Q. Thank you. 9 Moving on to the section on page 2 which is headed 10 up, "Design Delivery Delays and associated tie Change 11 Orders", just reading from there: 12 "As part of our examination of the INTC 536 estimate 13 (MUDFA 2) and through the delay attribution work we 14 undertook on certain parts of the Infraco Works (up to 15 June 2010), we identified that matters other than late 16 completion of utilities appeared to be, or appeared most 17 likely to become, the dominant cause of delay. In 18 particular we identified the following elements." 19 That list there, Mr McAlister, do those all concern 20 design related matters? 21 A. Trackform design applies to the whole route, I think. 22 And then obviously you've got section by Section A and 23 B, which I have just spoken about. The utilities that 24 might have affected Section 1B. Picardy Place roadworks 25 and tram works, I mentioned previously there about the 92 1 Council not having decided the exact orientation or 2 location of the tram route in that area. 3 Then we move into structures on Section 5A and B. 4 That is going out past Murrayfield. So we're off-street 5 in that section. That is presumably being delayed or 6 likely to be delayed by late design. 7 The depot, I think the build work was progressing at 8 the time. So it's more likely to be associated with 9 track works and M&E design. 10 Then there was earthworks, particularly over 11 a rather poor area of land that had been an old landfill 12 site in Section 7A. Some of those things were still 13 unresolved. 14 Q. Thank you. 15 Then the section headed up, "Section A (Depot)", you 16 say: 17 "We are aware that construction of the Depot has 18 been prolonged as a result of ..." 19 Things which you then list. 20 "These are to a certain degree concurrent with the 21 late completion of utilities diversions ..." 22 Then moving on to page 3: 23 "We have not, to-date, undertaken any form of 24 detailed investigations into, and/or analysis of these 25 four listed matters." 93 1 Can you just confirm why was that? Why had no 2 detailed investigation been carried out into that? 3 A. We hadn't been asked to. The only thing that we had 4 really considered at the depot was the late diversion of 5 the utility in that area, which is one of the very 6 earliest works on the project. 7 Q. Moving down, there's a paragraph that begins "From our 8 various discussions": 9 "From our various discussions with tie members of 10 staff, it appears to us that tie is likely to be liable 11 for at least some delay arising from matters associated 12 with the INTCs cited by the Infraco. Without analysing 13 all of them in some detail we cannot provide informed 14 comment on what tie's extension of time liability for 15 this might be. However, based on our experience of 16 other Infraco claims and its method of presenting them, 17 and taking into account tie staff's acknowledgment that 18 there may be at least a number of INTC issues for which 19 it may be held liable, we suggest that the lower limit 20 of tie's potential liability for extension of time might 21 be estimated as the 154 days (as awarded by the Adjudicator), 22 plus 50% of the balance claimed by the Infraco 23 in its recent claim submission. That gives an estimated 24 lower limit of extension of time liability of 340 days." 25 Is it fair to describe the reasoning here as very 94 1 broad brush, Mr McAlister? 2 A. I would agree entirely. That's what I have tried to 3 explain. 4 Q. Was it any more than a guesstimate? 5 A. It's -- there is an adjudication decision in place for 6 one part of it. And the other is recognition that 7 neither tie nor BSC are entirely devoid of any potential 8 liability or -- for the issues that were raised. So the 9 award might reasonably be somewhere in the middle. So 10 hence 50 per cent. 11 Q. Then the next paragraph, you deal with the upper limit. 12 Do the same caveats apply to your calculation of the 13 upper limit? 14 A. I would guess so, yes. 15 Q. Don't guess, please. 16 A. Sorry. 17 Q. Please take time to read the paragraph. 18 A. Okay. 19 Q. And confirm whether ... (Pause) 20 So in essence, the upper limit is simply the amount 21 claimed by the Infraco plus that extra 120 days you have 22 identified? 23 A. Correct. 24 Q. Then the next section, Section B, and just very briefly, 25 do you recall what work Section B was? 95 1 A. Yes, it was rather unclear exactly what was required to 2 achieve the -- what Section B was set out to be. 3 Section B is the test track for the trams. Once the 4 trams were to be delivered to the depot and assembled, 5 there was initial testing required to be carried out. 6 That required a relatively short length of track, 7 perhaps 1 or 2 kilometres, where the trams could be run 8 backward and forwards to make sure that they were 9 operating properly, before they moved on to the next 10 stage of trials. 11 But exactly where that track -- section of track was 12 to be located was unclear from the contract. Clearly it 13 would have to be connected to the depot. It would have 14 to have electrical power, from whatever location the 15 power was coming from in that area, along its length. 16 But it could be to the east or to the west of the depot. 17 The presumption at the start of the contract would be 18 that it would be the section or at least part of the 19 section of the track running out towards the airport, 20 because that was expected to be completed fairly early 21 on. 22 But there was -- there was the question it didn't 23 have to be that section. And if there was a holdup on 24 that section, perhaps it could be the tram running 25 a short distance in the opposite direction. 96 1 Q. Put very shortly, Mr McAlister, was your assessment of 2 the range of extension of time in relation to this 3 section affected by uncertainty to a similar degree as 4 in Section A? 5 A. Yes. 6 Q. If we could go to page 4, please, the section headed up 7 "Section C". You have explained already this is the 8 construction works over the whole length of the scheme. 9 If I just read out the passage here: 10 "The delays that impact upon the achievement of 11 Sectional Completion C Date are many and varied. Some 12 are clearly Employer liability, eg later than planned 13 diversion of utilities ... Others are clearly Infraco 14 liability, eg later than planned procurement and 15 achievement of many pre-requisites to commencement of 16 construction. However, for a considerable proportion of 17 the Infraco Works the factual matrix behind the delays 18 is a complex, inter-related and intertwined set of 19 factors which, taken together, make it very difficult to 20 apportion liability and culpability without fully 21 detailed research and analysis. This is further 22 complicated by the fact that many of these complex and 23 inter-related delays remain, at this point in time, live 24 issues. This brings added uncertainty as to the actual 25 extent of each delay and, most significantly, which 97 1 would ultimately prove to be the dominant and critical 2 delays within the matrix of the Infraco Contract 3 Programme." 4 In short, Mr McAlister, a considerable degree of 5 uncertainty over allocation of responsibility for delay 6 in this section too? 7 A. Correct. 8 Q. If we just look briefly at the table again at the bottom 9 of page 5 and the top of page 6, we've been through some 10 of the uncertainties that attended this advice. And 11 they're set out at more length in your email. 12 Could you rule out the possibility that, had further 13 detailed investigation taken place, tie's liability for 14 extension of time might have fallen outside of the range 15 that you give in your table? 16 A. Yes, I think that's -- that is certainly possible. Yes. 17 Q. It's possible that it could have fallen outside -- 18 A. It could have fallen outside of the range, yes. Both 19 upper and lower. 20 Q. Yes. So I think you're saying that you yourself could 21 not rule out based on the investigations you had done, 22 the possibility that tie's liability for extension of 23 time might be significantly lower than shown as the 24 lower estimate in this table? 25 A. It's certainly -- it certainly could be, yes. 98 1 Q. Now, the Inquiry has heard evidence, and will no doubt 2 hear more, about the settlement between tie, City of 3 Edinburgh Council, and the consortium negotiated at the 4 Mar Hall mediation. 5 At that mediation, a new higher price was agreed for 6 the Infraco works, which were reduced from the original 7 scope. 8 That price included settlement of the consortium's 9 claims for extension of time and related costs which had 10 accrued to date. And there may be evidence about the 11 basis on which that price was agreed. 12 If that evidence is to the effect that in agreeing 13 the higher price, the Council in substance accepted that 14 the consortium's claims for extension of time and 15 related costs were largely justified, would you regard 16 that as having been supported to any extent by the 17 advice that you had given? 18 A. It may have been. I don't know what the final agreement 19 was, and if it was substantially higher or lower or 20 within the ranges that I have set out in this email, 21 I had absolutely no involvement post Mar Hall mediation, 22 other than pointing to this email, which surprises me 23 slightly, because why would tie be asking me that after 24 Mar Hall? I'm not sure -- I'm slightly puzzled by it, 25 but if I go back and look at my diary notes, perhaps it 99 1 would all become clear. 2 Q. Were you consulted about the level of the settlement 3 that was agreed at Mar Hall? 4 A. No. 5 Q. Do you consider, from the information that had been made 6 available to you, up to the date of this email, that the 7 information available was sufficient to come to a view 8 on tie's liability for extended time and associated 9 cost? 10 A. I think anyone can come to a view. They can look at and 11 read what I've written, look at what others are saying. 12 The advice that people are being given, and in trying to 13 resolve large complicated disputes, very often there 14 is -- the level of detail is taken very high. I mean, 15 as in high level in reaching a settlement where the 16 parties at least strike a deal so that things can move 17 on. 18 My experience of that sort of thing is that very 19 detailed and precise work might inform people's opinions 20 generally, but the actual settlement will be arrived at 21 looking at things at a much higher level. 22 Q. Just two further very brief points, Mr McAlister. 23 Could we please have TRI00000146. These are the 24 written answers supplied by your colleague, Mr Burt. 25 If we could go, please, to page 29. Question 84 and 100 1 the answer to it. In short, Mr Burt was asked to give 2 an indication of the amount of work and likely cost of 3 definitively analysing delay on the project, and what he 4 says is: 5 "The task described above is a very significant and 6 resource intensive undertaking. To carry out a detailed 7 forensic analysis of the delay incurred on the project 8 (such that definitive conclusions were reached) would 9 have taken a large team (say four/five staff) many 10 months (quite possibly more than a year) to carry out on 11 all areas and structures. In addition, given the fact 12 that the project was ongoing, the exercise could not be 13 completed until completion of the works. That too would 14 have prolonged the full exercise." 15 Then skipping a paragraph: 16 "In terms of cost, an average of 1,840 hours are 17 worked in one year ... 18 An average rate for forensic support ... was then 19 GBP138.50 per hour. As such, one person for a year 20 would cost GBP254,840." 21 Then there's an estimate for a Director at 22 GBP360,000 a year: 23 "The precise total, while difficult to gauge 24 depending on actual timescales involved, would have been 25 very significant." 101 1 That's plainly a high level estimate, but do you 2 agree with it? 3 A. A full analysis after the event, let's say if it was 4 heading for litigation, yes, I can -- I can envisage 5 that type of thing being required. It's a large 6 complicated project with lots of complicated intertwined 7 delays. To analyse that out in the way that it might be 8 argued and defended against in litigation would require 9 some serious investigative work. 10 Q. To what extent do you consider that greater clarity on, 11 for example, the issues covered in the email we've just 12 been looking at could have been achieved for a more 13 modest investment of time and cost? 14 A. I think, as I said yesterday, one of the difficulties 15 was that there was little information available in terms 16 of the design, how it was being advanced, what the 17 issues were that were causing it to be late. When 18 you're conducting a sort of forensic analysis, the 19 amount of effort often depends on the volume of 20 information that you have and certainly the orderliness 21 of that information. Very often there is lots of 22 information thrown at experts in the form of: here is 23 a memory drive with 30,000 emails on it, see what you 24 can find in there; that type of thing. It can involve 25 an awful lot of effort before you even get down to doing 102 1 the serious work of trying to see what effect these 2 things might have on programmes and projections of 3 delay. 4 So I'm -- it's just so difficult. We do this sort 5 of work all the time. And sometimes commissions can 6 require a few weeks' work. Other times we can be 7 involved in projects for -- particularly if they're 8 heading for litigation, more than a year. Not 9 necessarily solidly for that period, but it's just the 10 timescale that commercial disputes can take to proceed 11 through the courts. 12 CHAIR OF THE INQUIRY: Would the location of the detailed 13 records have a bearing on such an exercise? 14 A. Well, for us, we live in Scotland, and the records are 15 likely to be in Scotland. And modern world, they're 16 predominantly in electronic format as well. 17 CHAIR OF THE INQUIRY: I meant, for instance, if records 18 were with the contractors, and you were being instructed 19 by the employer, would that have any effect on your 20 exercise? 21 A. Well, yes. If the contractor was withholding the 22 information, and again, if we are proceeding through 23 litigation, then there is likely to be a process of 24 disclosure as part of that, and very often it's only 25 then that more information is given, and very often when 103 1 it is given, it is given in large volumes, and in an 2 unordered manner. 3 MR MCCLELLAND: The very final point, Mr McAlister. If you 4 can just have document TRI00000171, please. 5 As you will see, this is the written statement of 6 Axel Eickhorn of Siemens, which has been given to the 7 Inquiry. 8 If you can go, please, to page 44, paragraph 90. 9 You will see about seven or eight lines from the bottom 10 there's a sentence that begins "In general". 11 A. Yes. 12 Q. If we just expand that, please, that passage: 13 "In general, there was a concern in the Siemens team 14 that the sheer number of changes made the change process 15 unmanageable and responsibilities for delays and cost 16 overruns could not be allocated properly any longer." 17 To what extent, based on the work that you had done, 18 do you consider that on this project, it was no longer 19 possible to properly allocate responsibilities for 20 delays and cost overruns? 21 A. I find that a difficult question to answer. This looks 22 to be between Siemens and BB, Bilfinger Berger, is it? 23 Is it changes within the contracting organisation, or 24 are we looking at changes between tie's requirements, 25 the Employer's Requirements and what the contractor is 104 1 to produce? 2 Q. I'm just interested in the general proposition, and 3 whether you agree with it or not, on whether or not the 4 sheer number of changes had made the change process 5 unmanageable and responsibilities for delays and cost 6 overruns could not be allocated properly any longer. Is 7 that something that you have a view upon, based on the 8 work that you did? 9 A. The contract requires the changes to be dealt with 10 individually. That's the mechanism within the contract, 11 and I think it would be reasonable to summarise that it 12 anticipates that as changes evolve, they will be dealt 13 with separately, individually, sequentially, in the 14 order that they come, and at the time, therefore, viewed 15 their impact in terms of cost and time viewed 16 prospectively. 17 To administer a contract in that way, then you have 18 to be quickly picking up on each of those and processing 19 them. 20 I think what had happened on this particular 21 contract, which is not uncommon, is that that process 22 has not been adhered to. Many things are left behind 23 and in some cases perhaps it might be argued the delay 24 effect of something has been subsumed by a bigger event 25 that has come along later. Maybe one party would hold 105 1 that view. The other wouldn't, and it does end up 2 becoming a situation where there are so many unresolved 3 issues, that it is quite a task to go back and try and 4 relive it in time, and administer the contract in the 5 way that it should have been. 6 I suspect that is what has happened here. And that 7 might be why this particular individual has come to that 8 conclusion. 9 MR MCCLELLAND: Thank you very much. I have no further 10 questions for you, Mr McAlister. 11 CHAIR OF THE INQUIRY: Do you have any points? 12 MS FORSTER: Yes, thank you, my Lord, I do have a few 13 questions. 14 Examination by MS FORSTER 15 MS FORSTER: First of all, in relation to your report on 16 INTC 536, obviously there were two versions of that. 17 I think both were drafts? 18 A. Correct. 19 Q. I think you weren't sure if they had been given to tie, 20 but can I take it from you that as drafts, they were 21 definitely not given to Infraco? 22 A. I don't know for sure, but I wouldn't -- expect that 23 they had not been given to Infraco, yes, that would be 24 my expectation. 25 Q. Thank you. If they hadn't been given to Infraco, can we 106 1 assume that issues such as misalignment between the M&E 2 design and the civils design, for example, would not be 3 something that had been put to Infraco and them given 4 a chance to answer? 5 A. I certainly was not present at any meetings that that 6 was -- that that was the case. My understanding was 7 that there were a number of meetings taking place in 8 relation to that, but that is only my understanding from 9 what was being discussed, that there was concern about 10 the alignment of the design; particularly at that point 11 in time, and that that was causing delay, and that that 12 was being discussed. But exactly with who, and at what 13 time, and in what level of detail, I couldn't say. 14 Q. Thanks for that. I'm sure we can pick that up with 15 another witness. 16 I wanted to ask you now about the first 17 adjudication, MUDFA 8, as it was termed. 18 That was an adjudication which took place before 19 Mr Howie, roughly in about May 2010, I think. I think 20 you were involved in that, as was I, I should say for 21 the record. 22 A. Yes. 23 Q. I think you said yesterday that you read Mr Howie's 24 adjudication decision at the time. But did you say you 25 hadn't read it in preparation for appearing before the 107 1 Inquiry? 2 A. That's correct. I haven't read through the whole of it. 3 Q. I think you also said that in relation to that action, 4 that Mr Howie was not persuaded by Infraco's delay 5 analysis, and awarded nothing. Was that your 6 recollection? 7 A. That sounds like what I said, yes. 8 Q. I wonder if we could look at a document, please. It's 9 CEC00310163. 10 This is a fax from Mr Howie to Steven Bell of tie of 11 16 July 2010 which says: 12 "Please find a copy of the Adjudicator's decision." 13 If we can go to page 2 of that document, please. If 14 we could blow up the top part, thank you. 15 What we see there is the adjudicator's decision 16 which says: 17 "I find and declare that the period of extension of 18 time to which Infraco is entitled under Clause 80 of the 19 Infraco Contract in relation to the several sectional 20 completion dates therein provided for is as follows. 21 Section A - 154 calendar days (to 10 November 2010)." 22 And in relation to Sections B, C and D, he awards no 23 extension of time; is that correct? 24 A. That's correct. 25 Q. So when you said yesterday that he didn't find at all in 108 1 favour, he awarded nothing to Infraco, that wasn't 2 correct, was it, because he he's awarded 154 days for 3 Section A? 4 A. You're correct there, yes. 5 Q. I think you also said, as we mentioned a moment ago, 6 that he was not persuaded by Infraco's case on delay 7 analysis. I wonder if I could pick you up on something 8 else which you said yesterday, Mr McAlister; which was 9 that in relation to the MUDFA dispute, you said there 10 was a lot of debate between the lawyers as to whether 11 this was a compensation event or a tie change. 12 A. That is my recollection. 13 Q. I think when you mentioned tie change, it was put to 14 you, did you mean Notified Departure, and I think at 15 that point you said that was probably what you meant by 16 compensation event. But I wonder if actually Notified 17 Departure is what you mean by tie change? 18 A. I'm struggling to recall exact terminology, because some 19 of the terminology used in this contract was slightly 20 different from the terminology that is in other 21 construction contracts. 22 Q. Yes. I think that's fair to say. I think you have 23 referred to it elsewhere as being a bespoke contract? 24 A. That's correct. 25 Q. We heard from you yesterday that in relation to methods 109 1 of delay analysis, however, would you accept that the 2 approach to delay analysis in every situation depends 3 upon what the contract dictates you should do, in 4 relation to ascertaining any extension of time, for 5 example, that a contractor might be entitled to? 6 A. Certainly that's where I would start from in conducting 7 any delay analysis. You would read the contract, look 8 at the mechanism, the words that were used to determine 9 the methodology. 10 It is rarely explicit in the contract what methods 11 should be used. So you have to look at the wording, and 12 interpret it that way. 13 Q. Just then to go back to this debate between the lawyers, 14 if I put it to you that tie at that point were arguing 15 that all delays should be compensation events, and that 16 should be progressed under Clause 65 of the contract, 17 and in contrast to that it was Infraco's position that, 18 particularly that adjudication, which was the MUDFA 19 delay, if you like, was falsification of a pricing 20 assumption and therefore a Notified Departure, and that 21 it should be dealt with under Clause 80 of the contract. 22 Does that ring a bell with you at all? 23 A. The whole discussion about that rings a bell. Please 24 forgive me, it was a long time and I haven't looked at 25 the legal analysis and the comments that were made at 110 1 the time, but yes, I do recall there was considerable 2 legal submissions by your own organisation and the 3 lawyers for -- for tie as to how it should be properly 4 interpreted in terms of the contract. 5 Q. I wonder if we could look then at Clause 80 of the 6 contract, and the reference is CEC00036952_0190. 7 CHAIR OF THE INQUIRY: Did you say underscore 190? 8 MS FORSTER: Underscore 0190. 9 This is Clause 80 of the contract, headed up "TIE 10 CHANGES". Put simply, this clause deals with what 11 should happen when a tie change or arises, and also 12 provides for the provision of estimates which you may 13 recall was part of the MUDFA dispute; what did the 14 estimate look like. 15 If we could blow up clause 80.4, please. What is 16 said there is that: 17 "As soon as reasonably practicable, and in any event 18 within 18 Business Days after having received a tie 19 Notice of Change ... the Infraco shall deliver to tie 20 the Estimate. The Estimate shall include the opinion of 21 the Infraco (acting reasonably) in all cases on:" 22 Then looking down, 80.4.3: 23 "Any impact on the Programme and any requirement for 24 an extension of time." 25 A. Yes, I see that. 111 1 Q. You may recall that was the position that Infraco 2 adopted in the MUDFA 2 adjudication, that this was the 3 relevant clause for dealing with that particular 4 Notified Departure? 5 A. I'm pretty certain that is the case, yes. 6 Q. I wonder then -- first of all, what was -- do you recall 7 what Mr Howie's decision was in relation to who was 8 correct on this, whether it should be Clause 65, 9 a compensation event, or whether Infraco were correct in 10 terms of adopting Clause 80? 11 A. It will be in his reasons. 12 Q. If we could look then at those reasons, please. This is 13 the second decision. I think when Mr Howie did was 14 issue a short decision of his findings and then a couple 15 of weeks later he issued his reasons for his decision. 16 The reasons are found at CEC00407650. 17 We see that this is a document headed up, "DELAYS 18 RESULTING FROM INCOMPLETE MUDFA WORKS". 19 If we could go to page 4 of this decision, please, 20 it's underscore 4. If we could look at the bottom 21 paragraph of this. If I can just read what he 22 determines here, starting from the second sentence of 23 that bottom paragraph: 24 "I accept that, despite the impression which may 25 have been given by paragraph 5.44 of the Referral, the 112 1 claim pursued in this adjudication was ultimately 2 presented under the aegis of clause 80 of the Infraco 3 Contract, and in respect of a Notified Departure. It 4 follows that I accept also the JV's contention that the 5 averments made by tie in paragraph 5.18 of the Response 6 setting forth reasons why the JV's claim would fail 7 under clause 65 of the Infraco Contract are not of any 8 moment in this adjudication. I agree, too, for reasons 9 I explained in the section of my earlier Note dated 10 4 June under the heading, 'The Significance of 11 Clause 65', that the JV has not elected, and could not 12 have elected, to present a Notified Departure claim 13 under clause 65. Clause 80 and clause 65 are mutually 14 exclusive routes to a remedy for the JV, and so 15 a Notified Departure claim, being directed by sub-clause 16 80.24 to proceed under clause 80, cannot be the subject 17 of procedure under clause 65." 18 Is that correct? 19 A. That's exactly what it says, yes. 20 Q. I think the reason that this is important, Mr McAlister, 21 it picks up on something you said at the end, in 22 response to the last question which you were asked by 23 Counsel to the Inquiry, which is that it was Infraco's 24 position that under Clause 80, every event effectively 25 had to be looked at on its own merits. You looked at 113 1 the programme. You looked at the event. And then you 2 worked out whether that caused any delay. 3 The point that you make, I think it's a very valid 4 one, that if you allowed things to back up, and, if you 5 like, get out of control, it may become extremely 6 difficult to know overall what the overall impact of all 7 of these events together was. But effectively this is 8 what Clause 80 was directing should happen. 9 A. That's correct, yes. 10 Q. If we can look then to what Mr Howie decided in relation 11 to the approach to delay analysis, because I think 12 yesterday, Mr McAlister, you said that Mr Howie did not 13 agree with Infraco's approach to delay analysis? 14 A. That's correct, I think. 15 Q. If we could maybe look at page 12 of Mr Howie's 16 decision. I think you were taken to the third paragraph 17 on that page yesterday. Appendix D, starting Appendix 18 D. If we can blow that up and the paragraph below it as 19 well. What's said there is that: 20 "Appendix D was criticised by tie because it did not 21 provide a full retrospective delay analysis, showing the 22 effect of the Notified Departure, as opposed to other 23 causes, on the overall delay to the Works. In essence, 24 an objection not dissimilar to the familiar global claim 25 objection was being advanced. The JV replied to that 114 1 criticism by pointing out that the Estimate calls for 2 a Prospective analysis of the likely delay, and so, in 3 the nature of things, precluded any retrospective delay 4 analysis from which one could derive final and correct 5 answers to questions of causation, critical paths and so 6 forth. Therefore, argued the JV, the criticisms 7 advanced by tie in relation to these matters are 8 ill-founded." 9 I think you said yesterday you didn't agree that 10 what you had been doing was a retrospective analysis. 11 I think you've also said that you believed what 12 should happen is that the Infraco should be looking at 13 all other causes of potential delay as well, to 14 determine whether the Notified Departure being pursued, 15 in this case MUDFA, was truly the dominant cause of 16 delay; is that correct? 17 A. I -- I was talking about the need -- the -- the apparent 18 intent of the contract that the events, whether they be 19 tie changes or Notified Departures, are dealt with in 20 the order that they arise, and at the time. 21 Q. But in relation to this particular adjudication, was it 22 your opinion that you couldn't look at this one Notified 23 Departure in isolation; you had to look at other events 24 which were happening concurrently? 25 A. My approach to it was that the objective of the 115 1 assessment process was to establish causation, what was 2 the actual delay caused by the event that was being 3 promoted. 4 And that there were a large number of preceding 5 events and facts that were not being taken into account, 6 and therefore the assessment of the event that was being 7 promoted through the estimate was ignoring those 8 pre-existing events. 9 Q. I see. I wonder if we could then just look at the next 10 paragraph and see what the -- what Mr Howie determined 11 on this point. I think you were taken to this first 12 sentence yesterday, which was: 13 "On this question, I agree with the JV." 14 You weren't taken into anything further, but I would 15 like to just explore this a little bit further with you 16 because I think it's relevant to an issue we will come 17 on to later in terms of what Mr Howie determined. 18 What he did say was that: 19 "Clause 80 ..." 20 Which we have heard is the clause that he believes 21 should be pursued: 22 "... requires that the JV will, within 18 business 23 days of its receipt of a tie Notice of Change ... issue 24 an Estimate containing its reasonable opinion about, 25 inter alia, "any impact on the Programme and any 116 1 requirement for an extension of time". The Estimate is 2 also to show how it is proposed to mitigate the impact 3 of the "proposed tie Change" (sub-clause 80.4.8), and 4 sub-clause 80.7.4 speaks of the implement of the proposed 5 tie Change in the future sense. It is, it seems to me, 6 quite clear that even in the case of a mandatory tie 7 Change which cannot be withdrawn, the programming 8 analysis, and the agreement as to any necessary 9 extension of time to which sub-clause 80.9 looks forward, 10 is a prospective one, as the JV argues. It follows from 11 that that it will not be possible to determine an 12 ultimately correct critical path and it may be 13 difficult, if not impossible, to determine the dominancy 14 among concurrent causes, because actual events which 15 occur in the future and their effects will inevitably be 16 unknown. The description of the Appendix D exercise 17 advanced by tie, namely, that it is a "theoretical 18 exercise", may therefore be correct, but it is not 19 a valid criticism." 20 Then if we can go down that page, please, and look 21 at the top of the third sentence, just the first 22 sentence there -- the third paragraph at the bottom, and 23 the first sentence beginning "That which". What he said 24 was: 25 "That which the JV is called upon to prove, in my 117 1 opinion, is the effect on the contractual programme of 2 the falsification of the Base Case Assumptions which is 3 the foundation of the Notified Departure." 4 So, Mr McAlister, I think from this reading and 5 certainly my reading of Mr Howie's decision, he does 6 agree with Infraco's approach to delay analysis, and he 7 didn't agree with your approach to delay analysis; is 8 that correct? 9 A. No, I don't think it is. 10 Q. In what respect? 11 A. Well, in respect that I don't think he has criticised -- 12 if Appendix D is said to portray my analysis as being 13 a retrospective analysis, it is not for the very reason 14 that Mr Howie has explained -- it has to be a projection 15 forward. 16 Q. I understand that point, but I think what he's also 17 saying is you don't need to look at matters of dominancy 18 or concurrent causes. What he is saying at that first 19 sentence we just looked at is you look at the effect on 20 the contractual programme of the falsification of the 21 Base Case Assumption in relation to that estimate. 22 So what in effect he is saying is you don't need to 23 look at all the other events which might be having 24 a delay. 25 I appreciate that you don't agree with that, but 118 1 that is what his decision was, is it not? 2 A. I think that -- I was just trying to pick up on the 3 point you were making as you were reading through that 4 there. I think he was talking about the future events, 5 and the future criticality. In other words, the 6 prospective part of the analysis, looking forward. 7 I don't think he's necessarily saying that you 8 ignore what has happened in the past. 9 Q. I think -- 10 A. And I do recall at the hearing, there was a discussion 11 about the programme that you start from is a live 12 document, that it is routinely updated month by month. 13 So although you start with a programme at the beginning 14 of the contract, that programme evolves as events take 15 place. And that was certainly debated in front of or 16 discussed, should I say, in front of Mr Howie. 17 Q. That was discussed, I believe, but I don't think that's 18 the question that I'm really asking you at the moment, 19 and I do not think it relates particularly to this 20 issue. I think if we were to look elsewhere in this 21 decision, we would find that programme with a capital P 22 is a contract document which Infraco was both obliged 23 and bound to work to, and so effectively what Mr Howie 24 determined was that you took the current programme, you 25 input the Notified Departure, which had just happened, 119 1 in this case the updated MUDFA programme, that would 2 give you a result. Whether that was theoretical was 3 neither -- it wasn't the point. It was what the 4 contract here dictated. 5 Now, I do appreciate that at the end of the day, in 6 relation to Sections B, C and D, Infraco were not 7 successful here. And that was where I believe -- I'll 8 maybe put to you in a second why that was, but it was 9 not to do with Mr Howie not accepting the approach to 10 delay analysis in this regard. 11 I think what he determined -- 12 CHAIR OF THE INQUIRY: Ms Forster, I wonder if you could ask 13 a question. 14 MS FORSTER: Yes, I can. 15 If we can go in any event to a separate document. 16 I would like to take you to your answer to question 49 17 in your statement, which is TRI00000145_0021. (Pause) 18 It's actually his witness statement. TRI00000145. 19 If you've got that document, and if you go to page 21. 20 CHAIR OF THE INQUIRY: I think it's the underscore that's 21 causing problems. 22 MS FORSTER: Mr McAlister, this is your answer in relation 23 to the key conclusions of your report on INTC 536 which 24 we spent some time this morning looking at. Question 49 25 asked you to summarise the key conclusions of your 120 1 reports and the extent -- and to the extent you know, 2 and how those reports influenced CEC/tie's approach to 3 the mediation. 4 Then what you do is you include below your 5 conclusions to the report. 6 I wonder if we could blow up the whole of that 1.10, 7 conclusions, please: 8 If we could start firstly with 1.10.2. What you say 9 there is that in relation to the Infraco's approach to 10 INTC 536, you say at 1.10.2: 11 "It appears to be a claim incorrectly pursued under 12 Clause 80 of the Infraco Contract and as such, this may 13 provide ground for its rejection." 14 Mr McAlister, that may be your view, but it's 15 contrary to the decision of Mr Howie? 16 A. It's -- I don't think it's contrary to his decision, but 17 it's contrary to the reasons that he gave. Well, he 18 didn't consider this particular MUDFA dispute, but in 19 terms of this principle would apply to both, then it is 20 within his reasons, but not necessarily part of his 21 decision. 22 Q. It's within his reasons he determined that Notified 23 Departures, as the subsequent Notified Departure was 24 INTC 536, he determined that they must be pursued under 25 Clause 80; is that correct? 121 1 A. That was his opinion, or his reason, should I say. 2 Q. Then if we look at 1.10.3, it's stated there: 3 "The analysis within the INTC 536 Estimate is based 4 on inaccurate and unreliable information used in, and 5 produced from, an inappropriate method of delay 6 analysis. It does not evidence actual delay arising 7 from the later than planned completion of MUDFA Works 8 and other utilities diversions. Consequently, it does 9 not provide evidence to support the Infraco's claim." 10 Actually at 1.10.1 you also say that you consider 11 the analysis of delay contained within the INTC 536 12 estimate has not been prepared in accordance with the 13 Infraco contract and does not provide justification for 14 awarding an extension of time. 15 Now, again, I put it to you that those are your 16 conclusions but they are contrary to what Mr Howie 17 determined in the MUDFA 2 adjudication. 18 A. I don't think that they necessarily are. They are in 19 the sense of which clause of the contract should be 20 applicable, and that is a matter for the lawyers. But 21 in terms of the way that the analysis has been -- the 22 delay analysis has been carried out, I don't think that 23 it is contrary to what Mr Howie has stated in his 24 decision, or indeed in his reasons. 25 You mentioned earlier, as you were explaining what 122 1 you understood the contract required, that they should 2 start with the current programme. And that perhaps 3 summarises exactly the point that I'm making, that the 4 starting point for the analysis promoted by the 5 contractor was not the current programme. It was 6 a programme that pre-dated it by many months. It had 7 not been brought up to date, to the point of the event 8 that had to be assessed. And that that was the point 9 that I brought out in my reports and presented to 10 Mr Howie. 11 Exactly what made him decide in the end that the 12 Infraco had failed to prove its case in terms of its 13 claim for entitlement to extension of time under 14 Sections B, C and D, I cannot say for sure. I can't get 15 inside the man's head, but it would appear for one or 16 many reasons he decided that the award to be nil, and 17 not what was claimed by BSC. 18 Q. Do you recall in that adjudication the discussion about 19 designated working areas, and the fact that Infraco had 20 equated those with intermediate sections of the work? 21 CHAIR OF THE INQUIRY: Ms Forster, I'm wondering, how 22 am I going to determine what was discussed at the 23 adjudication? Are they submissions of law? 24 MS FORSTER: I can make it in closing submissions, my Lord. 25 CHAIR OF THE INQUIRY: Sorry? 123 1 MS FORSTER: I can make it in closing submissions, my Lord. 2 CHAIR OF THE INQUIRY: Yes, I think -- 3 MS FORSTER: There's just one final point that has come up 4 this morning which I think is relevant to this issue as 5 well. 6 If we could look at the email of 4 May, which you 7 sent to Fiona Dunn, which is TIE00899963. 8 If we could blow up the paragraph that begins 9 "Utility Delays". We have looked at this already, but 10 the sentence which jumped out at me -- the first two or 11 three sentences there: 12 "As you are aware, there have been many areas 13 affected by later than planned completion of utilities 14 diversions. The Infraco's approach to seeking 15 entitlement to extension of time is to analyse these 16 delays in isolation from all others. We do not agree 17 that this approach is correct, nor do tie's legal 18 advisers. That said, because we are dealing here with 19 a bespoke contract there remains the risk that the 20 Infraco's approach may find support from a third party 21 determiner." 22 Now, I'm going to put to you that there had already 23 been determination from a third party determiner here, 24 Mr Howie, and he agreed with Infraco's approach to 25 looking at things in isolation. 124 1 Do you agree with that? 2 A. No, I don't think so because if he did agree, he would 3 have awarded what the contractor had claimed. 4 Q. I'll leave that point for now, but I do disagree with 5 you on that point. 6 But if I was right -- 7 CHAIR OF THE INQUIRY: I don't think it matters whether you 8 agree or disagree with the witness. If you just ask the 9 questions. 10 MS FORSTER: I can. 11 Do you recall that the reason why Mr Howie did not 12 award the extension of time to Infraco was because 13 Infraco had wrongly equated designated working areas 14 with intermediate sections of the work, in effect that 15 Infraco were looking for too large a section of the work 16 to work in when -- which was affected by MUDFA delays? 17 I think he determined that they could have been working 18 in smaller sections. Do you recall that? 19 A. I do recall some reference to that in his decision. 20 Sorry, not his decision, in his reasons. His reasons do 21 run to -- perhaps you can correct me -- 20 or 40 pages, 22 but they are quite lengthy. 23 Q. 20 pages? 24 A. 20 pages. 25 Q. Thank you. What you're saying here in this sentence, 125 1 just to be clear, is that if tie's approach was found to 2 be wrong, then what you were analysing here was that it 3 would be -- the upper risk assessment would be due to 4 Infraco in terms of extension of time? 5 A. That was my estimate that I carried out as best I could 6 at that point in time. 7 MS FORSTER: Thank you, my Lord. I have no further 8 questions. 9 CHAIR OF THE INQUIRY: I don't think there are any other 10 questions. 11 Thank you very much, Mr McAlister. That's the end 12 of your evidence. Technically you're still under 13 citation. So you could be recalled. Hopefully that 14 won't be necessary. But if it does arise, someone from 15 the Inquiry will contact you and make arrangements. 16 Thank you very much for attending yesterday and 17 today. You are now free to go. 18 A. Thank you, my Lord. 19 (The witness withdrew) 20 CHAIR OF THE INQUIRY: The next witness is going to be taken 21 by Mr Lake. As it's just about lunchtime anyway, we can 22 adjourn for lunch and resume again at 2 o'clock. 23 (12.52 pm) 24 (The short adjournment) 25 (2.00 pm) 126 1 CHAIR OF THE INQUIRY: Mr Lake. 2 MR LAKE: Good afternoon, my Lord. The first witness this 3 afternoon is Sharon Fitzgerald. 4 DR SHARON FITZGERALD (affirmed) 5 CHAIR OF THE INQUIRY: You are going to be asked questions 6 initially at least by Counsel to the Inquiry, Mr Lake. 7 If you just listen to the question and answer it as 8 directly as possible. 9 If you also speak into the microphone so everyone 10 can hear what you're saying, and speak at a measured 11 pace so the shorthand writers can keep up with you. 12 A. Okay, thank you. 13 Examination by MR LAKE 14 MR LAKE: Could you state your full name, please. 15 A. My full name is Sharon Lesley Fitzgerald. 16 Q. I would like you to look at a document, please. It will 17 be on the screen. There's also a hard copy in front of 18 you. It's TRI00000036_C. 19 A. I can see the document. 20 Q. It should be the same document you have in hard copy and 21 then on the screen? 22 A. Yes. 23 Q. If you look at the hard copy, you should see that on the 24 last page of it, it has your signature. 25 A. Yes. 127 1 Q. Is that the question and answer sheet that you prepared 2 for the purposes of this Inquiry? 3 A. It is. 4 Q. Are you content that it be adopted as your evidence for 5 the purposes of this Inquiry? 6 A. Yes, I am. 7 Q. I would like to ask you a few questions of clarification 8 about the contents of that. If we could, please, look 9 first at page 6 of this. 10 If you could look at the lower half of the page on 11 screen? 12 A. Yes. 13 Q. The paragraph that's at the top of the screen begins: 14 "TIE was staffed by ..." 15 Then you give a number of details of the employees 16 it had? 17 A. Yes. 18 Q. Including people who had been previously at the Council? 19 A. Yes. 20 Q. You then go on to note that CEC had the legislative 21 powers for the project. CEC was using tie to assist it 22 in the delivery of those legislative powers. 23 "The funding from the Scottish Government came 24 through CEC." 25 A. Yes. 128 1 Q. "CEC was using its specially created entity (TIE) to 2 deliver the project. 3 For both myself and DLA, what we saw was that TIE 4 and CEC effectively had aligned interests in terms of 5 the delivery of the project. TIE was instructing us but 6 in turn TIE was being controlled by CEC. That is how we 7 became comfortable with that relationship." 8 It's in particular that last paragraph I would like 9 to ask you about. 10 Is it the preceding parts of this answer that led 11 you to the view that the Council and tie had aligned 12 interests? 13 A. It was more than just those paragraphs. 14 Q. What was it? 15 A. It was to do with the fact that CEC had created tie as 16 its wholly owned and controlled special purpose vehicle 17 for the purposes of delivering the tram project as well 18 as other projects involving City of Edinburgh Council. 19 Q. So that's referring to the fact it's a wholly owned 20 subsidiary? 21 A. Yes. 22 Q. That would obviously give the Council a measure of 23 control over the company? 24 A. Yes. 25 Q. But not total control over all the activities of the 129 1 company? 2 A. I would be concerned from a procurement perspective if 3 there was any element of what tie was doing that wasn't 4 being controlled by the Council. And this is where 5 I refer to -- I would refer to the Teckal case. 6 Q. You have referred to that in an answer to your 7 statement? 8 A. I have. 9 Q. If we -- go on to page 8, please. 10 I should say, for context, I should probably go to 11 page 7, just to identify the question. 12 At the foot of the page, the question that was posed 13 was: 14 "Was the effect of the second letter above ..." 15 That's an instruction letter to DLA from -- a letter 16 from DLA to the Council and tie: 17 "... that you proceeded on the assumption that the 18 interests of CEC were the same as those of tie at all 19 times? Did you at any time have any concerns that the 20 interests of tie and CEC may not be the same?" 21 If we go over the page to see your answer, you say: 22 "Yes, it had always been our assumption that the 23 interests of CEC were the same as those of tie at all 24 times. It had always been our assumption that we were 25 acting on this basis. That was for all of the reasons 130 1 which I have given earlier in terms of the relationship 2 between tie and CEC, ie parent and subsidiary. tie were 3 delivering the project on behalf of CEC. CEC had the 4 funding and the legislative powers which its delivery 5 company was assisting with. 6 I did not, at any time, have any concerns that the 7 interests of tie and CEC may not be the same. As far as 8 I was concerned, the relationship between tie and CEC, 9 as I understood it, was governed by the operating 10 agreement that they had between them and the governance 11 arrangements of the tie and TEL Boards." 12 If I could just pause there, am I correct in 13 understanding this as adding in other reasons why you 14 considered their interests were aligned, that is the 15 Operating Agreement and the fact that CEC had the 16 funding? 17 A. I think I had mentioned funding in the previous answer, 18 because in everything that tie was doing, it was funded 19 by the Council in terms of the tram project. 20 So if you were rendering an invoice to tie for our 21 legal services, that invoice in turn was paid by CEC. 22 tie didn't have its own funds. 23 But in terms of the Operating Agreement, I had 24 understood that to be the means by which parent and 25 subsidiary would operate together in terms of the 131 1 project. 2 Q. None of these things, an Operating Agreement, funding, 3 or sole ownership of the shares, could prevent the 4 management of a subsidiary starting to act in a way that 5 was contrary to the interests of the parents. Would you 6 accept that? 7 A. That's a possibility, yes. 8 Q. So in terms of the decisions being taken by the 9 management, and things that they pursued, was it 10 something you had an eye to, that it was possible that 11 the interests might diverge and conflicts might arise? 12 A. In all of the work that I did on the project, I didn't 13 see any examples of that. 14 For most of the time I was involved, there was very 15 little involvement of the Council, and we were of course 16 acting in accordance with the legal services agreement 17 that we had in place with tie, which had been the 18 subject of a public procurement in 2002, and we were 19 latterly then also acting in accordance with our duty of 20 care letter. 21 Q. You've mentioned acting in accordance with your 22 agreement with tie there. That's something that's 23 raised on page 7. If I could just go back to that, 24 please. 25 A. Yes. 132 1 Q. If we enlarge the centre of the page, look at 2 subparagraph (b) and the answer to that. (b) is: 3 "Were there ever occasions where DLA thought it 4 appropriate to raise matters with CEC directly, or 5 ensure that matters were brought to their attention?" 6 The response you have given is: 7 "There weren't ever any occasions where I thought it 8 was appropriate to raise matters with CEC directly or 9 ensure that matters were brought to their attention. 10 This was because I acted in accordance with the contract 11 with TIE and our duty of care letter. It wouldn't have 12 been appropriate for me to be acting in any way other 13 than in accordance with the protocol that had been 14 agreed with TIE." 15 Now, why is it that acting in accordance with the 16 contract with tie would mean that it was not appropriate 17 to raise the matter with the Council? 18 A. Because my -- my contract, my appointment, our 19 appointment as DLA, was with the -- was with tie. So it 20 would be very unusual to then be raising any issues 21 outside of that contractual relationship with another 22 party. 23 So inasmuch as those parties were related, our 24 reporting line was to tie. 25 Q. Were you made aware by Mr Fitchie that one of the 133 1 letters he had prepared to describe the relationship 2 between tie and other parties, described both the 3 Council and tie as joint clients of the firm? 4 A. Yes. 5 Q. Were you aware of that? 6 A. Yes, I'm aware of that letter. It was presented as part 7 of the evidence that was given to me. 8 Q. Were you aware of it in 2007? 9 A. I was aware of it in 2007, and I think that was back end 10 of 2007. 11 Q. Now, if both the Council and tie were joint clients, if 12 you felt the interests of one of the clients, the 13 Council, was to be disadvantaged, the mere fact you were 14 acting in accordance with the contract with the other 15 client wouldn't absolve you from a responsibility to 16 give notification, would it? 17 A. You will remember from that particular duty of care 18 letter that the duty of care and the joint client status 19 was expressed as being subject to various conditions 20 which are expressed in the letter. 21 It was really quite an unusual situation to have 22 been appointed by tie to carry out legal services in 23 2002, to be asked in 2005 to give a duty of care letter 24 that referred to the Council, and then in 2007 to be 25 giving a further letter. 134 1 That would have been nearly five years into our 2 relationship with tie, and of working on the project, 3 and you'll be aware from the letter that the letter of 4 course referred to the duty of care and the joint client 5 status as being retrospective back to December 2003. 6 So in terms of what we could commit -- excuse me -- 7 commit to in the terms of that letter, it was caveated 8 by the conditions that we expressed in the letter 9 itself. 10 Q. There was a condition that you would be entitled to 11 accept instructions from tie, and assume that those took 12 account of the interests of both parties? 13 A. I would like, if possible, to see the letter. 14 Q. Of course. Can we have on screen document CEC01711055. 15 There was a covering email, and I can provide that, 16 if you would find it of assistance to see the covering 17 email. But this was the attachment, said to be a draft 18 of a letter that Mr Fitchie proposed sending to the 19 Council to affirm our duty of care and the joint client 20 status. 21 Because it was a draft, that explains why it's 22 undated. 23 A. Yes. 24 Q. We can see in the third paragraph of the letter that: 25 "This letter reconfirms that as from 5 December 2003 135 1 onwards, DLA Piper Scotland LLP has owed and owes the 2 same contractual duty of care to CEC as owed to tie Limited 3 pursuant to clause G.3.1(a) of the General Conditions 4 governing the Appointment." 5 Just pausing there, that, as you have already noted, 6 was backdated to December 2003, an unusual situation? 7 A. Yes. 8 Q. It goes on to say: 9 "We acknowledge CEC as joint client with tie Limited on 10 the basis that ..." 11 There's really no doubt, at least from this time, 12 that CEC regarded as a client along with tie; is that 13 your understanding? 14 A. Sorry, could you repeat that. 15 Q. There's no doubt that at least from this time onward, 16 CEC were regarded as a client jointly with tie? 17 A. I think the -- this was certainly the position that was 18 expressed in a draft letter. 19 Q. Did you understand the position in reality to be 20 different? 21 A. I understood the position to be as expressed in the 22 letter, but subject to the paragraphs below. 23 Q. Looking at the first of those paragraphs, you say -- the 24 letter continues, on the basis that, and the first 25 numbered paragraph is: 136 1 "DLA Piper's primary responsibility has been to 2 advise tie Limited and DLA Piper may at all times and for 3 all purposes rely upon tie's instructions given to us 4 under the appointment as being identical to CEC's 5 instructions as if emanating from CEC itself and as 6 taking into account CEC's requirements, objectives and 7 best interests." 8 So that simplifies the question of who gives the 9 instructions so you don't end up with anything 10 conflicting? 11 A. Correct, and that had been the position that DLA had 12 been acting on for the previous five years. 13 Q. Then to note the further condition, paragraph 2: 14 "DLA Piper remains expressly authorised to receive 15 and seek all instructions (and any clarifications) under 16 the appointment from tie as Project manager and agent 17 for CEC. In the absence of specific written 18 instruction, DLA Piper has not been and is not under 19 obligation to advise CEC officers or members directly, 20 under exception that DLA Piper will brief CEC officers 21 at regular intervals as instructed by tie Limited, or as 22 required by CEC." 23 So it was open to CEC as a joint client to require 24 briefings from tie -- pardon me, from DLA; is that 25 correct? 137 1 A. Yes. 2 Q. The third paragraph enables DLA Piper to rely upon 3 expressions of satisfaction and presumptions arising out 4 of approval of the work being given by the Council, in 5 short? 6 A. Yes. 7 Q. 4 deals with the fact that the contractor duty of care 8 may not be assigned, and 5 deals with reciprocal 9 warranties, which I think is not something we are 10 concerned with here. In as much as we have 11 a restriction that DLA are entitled to rely on 12 instructions from tie as representing those of the 13 Council, that doesn't really deal with the question of 14 whether or not -- what DLA would be bound to do in the 15 event that DLA became concerned that there was 16 a conflict. Do you understand the difference? 17 A. I'm not sure that I follow you, Mr Lake. 18 Q. Put it this way. Even standing the terms of this 19 letter, if DLA became aware of a conflict between the 20 Council and tie, they wouldn't be entitled to ignore it? 21 A. And I have commented that indeed it would be my 22 professional responsibility to be reporting a conflict 23 if I became aware of such a conflict. 24 Q. We have finished with that document now. I just want to 25 ask you about the period in which tie decided not to use 138 1 the services of DLA in 2007. 2 A. Yes. 3 Q. Were you made aware why that had happened? 4 A. At the time it was explained to us as being a question 5 of cost, and tie wanting to create its own in-house 6 legal function. 7 So that -- that was what we were -- we were told in 8 terms of at that point. Whether that was entirely the 9 position, I don't know. 10 Q. Did you get that information direct from people within 11 tie or did that come via Mr Fitchie? 12 A. I think that came from -- from Andrew, rather than from 13 anyone at tie. 14 Q. Did Mr Fitchie make you aware who within tie was the 15 originator of this policy that DLA would be stood down? 16 A. I don't remember Andrew saying, but, you know, it would 17 be someone, I anticipate, like Willie, but that would be 18 speculation on my part. I don't know for sure. 19 Q. Now, when DLA were re-engaged, we have heard that 20 Mr Fitchie was taken on secondment? 21 A. Yes. 22 Q. I think he had been the partner, the lead partner on the 23 project. I take it he would be the partner to whom you 24 would have reported? 25 A. Yes, that's correct. 139 1 Q. What difference did it make when he went on secondment 2 to tie? 3 A. From -- for me, personally, Andrew was still the lead 4 partner for that -- for tie. He remained throughout 5 a partner of DLA Piper. 6 So from my perspective, Andrew was exclusively or 7 almost exclusively engaged for tie rather than working 8 for other clients. He was still in the office, although 9 did spend a lot of his time in tie's offices. 10 So I didn't see a legal distinction in terms of 11 Andrew before and after secondment. 12 Q. Putting the question very directly, from your point of 13 view, had he moved from adviser side to client side? 14 A. No. 15 Q. I want to turn now to the question of the procurement 16 strategy, and if you could go to page 28 of your 17 statement. There's question about the lessons that had 18 been learned from the Holyrood project. If we look at 19 the top of the page at part of your answer to this, you 20 say: 21 "A number of elements of the procurement strategy 22 for the tram project were developed on the basis of what 23 was said in that NAO report. This was where the 24 Partnerships UK team was effective. They brought 25 forward their experience of what was regarded as UK best 140 1 practice. Also, Andrew, at that time, had been involved 2 in another tram scheme in the UK. We further had the 3 experience of our Leeds team. We were building in 4 lessons from other tram schemes. The lessons we built 5 in, were, in essence, different to Holyrood because they 6 were all about the execution of tram schemes and the 7 construction of transport projects with interfaces 8 between vehicles and rail. Holyrood was different in 9 that it was an accommodation project." 10 I just want to ask you initially about the opening 11 words of that: 12 "A number of elements of the procurement strategy 13 for the tram project were developed on the basis of what 14 was said in that NAO report." 15 Can you recall what were the particular elements 16 that were based on the NAO report? 17 A. Okay, so the NAO reports, that's the National Audit 18 Office report, and it had summarised the experience of 19 different light rail projects in the UK. And so 20 examples of some of the recommendations of the report 21 referred to early operator involvement, early design and 22 also moving of the -- doing utilities diversions in 23 advance of the main construction contract being let. 24 Q. Further through that paragraph, just below the halfway 25 line, you said: 141 1 "We were building in lessons from other tram 2 schemes." 3 A. Yes. 4 Q. Can you identify and recall what other lessons you were 5 building in? 6 A. Similar to the National Audit Office report -- I'm 7 trying to think now of what I was meaning, but I think 8 the key thing that we'd learned from our other 9 colleagues was in terms of how risk was to be packaged 10 on the tram contracts. These weren't heavy rail 11 contracts. They were light rail schemes being procured 12 in an urban environment. So it was important to be 13 thinking about how risk would be managed in terms of the 14 construction works and the impact on the city during 15 those construction works. 16 I remember another issue was in relation to the 17 treatment of fare box revenue in the context of the 18 operator contract. 19 So apologies, I can't remember any more than that, 20 but we did have quite close contact with our Head of UK 21 Transport at the time, Nick Painter, and Nick had been 22 involved in projects such as Nottingham Tram Scheme, and 23 also the Sheffield Project as well, and then, as you 24 will know, we involved our colleague Iain Bowler in 25 terms of the vehicle procurement. 142 1 Q. Just, when you refer to vehicle procurement at the end, 2 you'd earlier referred to lessons that were learned in 3 relation to the tram contract, and I want to be clear, 4 was that the contract for the vehicles or the contract 5 for the engineering and infrastructure works? In 6 relation to which the risk -- 7 A. I suppose that's the interesting thing about the tram 8 projects, is that they involve elements of construction 9 and vehicles and operation. So a number of the schemes 10 in the UK had been PPP schemes. So they'd been 11 structured differently to how Edinburgh was ultimately 12 structured in terms of financing. 13 Q. You said at the start of your answer: 14 "... the key thing that we'd learned from our other 15 colleagues was in terms of how risk was to be packaged 16 on the tram contracts." 17 A. Yes. 18 Q. Was that all tram contracts or specifically the ones for 19 the vehicles? 20 A. Apologies. Loose language on my part, but by the tram 21 scheme, I'm meaning the full train set, so to speak, the 22 full tram set. So it's the interaction of all of these 23 contracts. 24 Q. Can you summarise for us what was the risk that had to 25 be learned about the way risk was packaged? 143 1 A. I think it was packaging it in such a way that the -- 2 risk for the public sector associated with the project 3 was being managed by the correct party in the contracts. 4 So in other words, there wasn't inappropriate passing of 5 risk to a private sector party who was bidding the 6 contract, and that on the basis that that private sector 7 party may in the first place be put off from bidding for 8 the project because the risk transfer was wrong, or if 9 they accepted the risk transfer, it could result in an 10 expensive, unaffordable contract. 11 So it was risk at its broadest sense in terms of the 12 impact that it would have on bidders, the impact on 13 pricing, and you might also say the impact on delivering 14 a successful project. 15 Q. Were you involved in discussions as to how risk should 16 be allocated under the infrastructure contract? 17 A. Yes, I was involved in some of those early sessions. So 18 I joined DLA in 2003, so that was just after the 19 pre-qualification stage for the Transdev operator 20 procurement, and at that stage there were discussions 21 ongoing in terms of procurement strategy for the Infraco 22 contract. 23 Q. What was your understanding as to the general approach 24 of how risk would be allocated under the infrastructure 25 contract? 144 1 A. The -- I remember being involved with colleagues from 2 Mott MacDonald, Faber Maunsell, now AECOM, tie, 3 Grant Thornton. We were looking at different models of 4 how the infrastructure contract could be procured, 5 and I do remember quite distinctly building in some of 6 the lessons that we all had, plus the PUK experience, 7 NAO report experience. 8 You will see this expression referred to in a number 9 of the documents in the project but it was trying to, to 10 some extent, to an appropriate extent, de-risk the 11 infrastructure contract by doing some of the utilities 12 works early, and by doing some of the design and 13 consents process early. 14 So there had been a view from the various reports 15 and a view from the team that on some of the PPP 16 schemes, there had been too much focus placed on all 17 risk going to the infrastructure contract. 18 Q. Now, in terms of those discussions about allocation of 19 risk and the risk strategy, you were clearly involved -- 20 Mr Fitchie and any other colleagues at DLA? 21 A. I think to some extent Iain would have been involved, 22 but I remember mainly it was Andrew and I attending 23 these sessions. 24 Q. You mentioned Partnerships UK. Were they attending 25 those sessions, providing assistance? 145 1 A. Yes. It was Martin Buck and James Papps. So we found, 2 certainly I think as a team, the experience of PUK, who 3 had been involved in a number of the projects, to be 4 invaluable in terms of informing lessons learned from 5 other schemes. 6 Q. Who was attending from tie? 7 A. At the -- in the early stages it would have been -- 8 mainly I can remember Alec Macaulay being there, and 9 also Lindsay Murphy, who was an ex Edinburgh Council 10 employee, and then latterly, as the strategy developed, 11 the tie representative was Ian Kendall. 12 Q. Dealing with this question of design risk, could I ask 13 you to look on in your statement, please, to page 35. 14 There's a question in -- if we look at the top of 15 the page, in subparagraph (a): 16 "Do you consider that the objectives of the 17 procurement strategy were met, including, in particular, 18 obtaining a fixed price INFRACO contract and 19 transferring design risk to the private sector?" 20 You respond by saying: 21 "I was not involved in the final negotiation of the 22 INFRACO contract. However, I understand from speaking 23 with Andrew Fitchie at the time that, the objective of 24 obtaining a fixed price INFRACO contract which 25 transferred design risk to the private sector was not 146 1 fully realised." 2 Now, when you say "at the time", what time are you 3 referring to? 4 A. I'm -- I'm speaking about when Andrew was negotiating 5 these contracts. So inasmuch as I wasn't involved in 6 the -- shall we say the front line activities on the 7 Infraco contract, I was still working on certain 8 schedules within the Infraco contract, also involved in 9 MUDFA. 10 So Andrew and I were speaking regularly about this 11 project, but then also about other day-to-day business 12 associated with the -- with our team in Edinburgh. 13 Q. So this would be prior to signature of the contract? 14 A. Yes. 15 Q. Did he say in what way he considered that the objective 16 had not fully been realised? 17 A. Yes. 18 Q. In what way had it not been realised? 19 A. It hadn't been realised -- and this is where I'm just 20 reporting what I was told by Andrew at the time, because 21 he had explained that a commercial deal had been done at 22 Wiesbaden, and the impact of the Wiesbaden deal was to 23 unpick various elements of the procurement strategy 24 which everyone had been working towards delivering for 25 a number of years. 147 1 So specifically, the fixed price element had 2 basically been eroded by the commercial deal that had 3 been struck. 4 Q. Did he say anything to you about whether or not design 5 risk had effectively been transferred? 6 A. That was -- that was what I understood to be the 7 Wiesbaden -- part of the Wiesbaden deal, was that the 8 Infraco contractor wasn't fully accepting design risk 9 post novation of Parsons Brinckerhoff. 10 So the way in which the procurement strategy had 11 been devised and the SDS contract had been devised was 12 that the Infraco bidders would be able to do -- carry 13 out due diligence on the design as a means of informing 14 their pricing, so that at the point of novation, the 15 Infraco contractor was presenting a fixed price because 16 he was aware of the design that had already been carried 17 out in respect of the contract -- in respect of the 18 project. 19 So what I understood from speaking to Andrew was 20 that there had been various caveats which had been 21 included in the Wiesbaden deal, which meant that if 22 there were changes to the design, then those would not 23 be changes that the Infraco contractor would bear. 24 Those would be changes that the client, tie, would need 25 to pay for. 148 1 Q. So if I've understood you correctly -- do correct me if 2 I am wrong -- the effect of that would be if there were 3 design changes, they would at least to an extent be at 4 the -- the cost of constructing according to the change 5 design would be at the expense of tie, rather than the 6 contractor? 7 A. Yes. That's correct. 8 Q. Were you aware at that time what the state of the design 9 was in general? 10 A. It was -- I knew from conversations with Andrew and also 11 from the contact that I had with the MUDFA team that 12 there were still delays in the -- there had been delays 13 in the design, and so I don't know at this point what 14 state the design was in, but I knew that the delay in 15 the design had had an impact, in terms of how the 16 Infraco contract was panning out in terms of risk. 17 Q. In terms of what you were saying was reported to you, 18 and I appreciate you weren't directly involved in the 19 negotiations, but what was reported to you, the price 20 was not wholly fixed, and bits of the design risk 21 remained with tie. 22 Now, both of those elements seem to be quite at odds 23 with the procurement strategy which had been hatched 24 several years before. Was that fair comment? 25 A. Yes. 149 1 Q. Now, in that tie were proposing to conclude a contract 2 on a basis which departed from the contract strategy, 3 was that not something that engaged the duty to notify 4 the Council that the interests were no longer aligned? 5 A. I understood from speaking with Andrew at the time that 6 those risks were being reflected in the documentation 7 that was being provided to the Council. So, for 8 example, the risk matrices. So my preparation for 9 today, I have looked at some of the letters that the 10 Inquiry has given to me, and I can see that in respect 11 of changes, that those changes are identified as -- 12 I can't remember -- apologies, I can't remember the 13 terminology now, but it's not a regular client change. 14 I don't know if it's a mandatory change -- 15 Q. A notified -- oh yes. 16 A. There's Notified Departures and mandatory changes, but 17 I saw those as being public sector risk under the risk 18 matrix, whereas under the original procurement strategy, 19 I wouldn't have expected any category of change other 20 than a genuine client change, rather than a -- this 21 seemed to be a different division of change arising out 22 of the position on the design. 23 Q. When you refer to -- you have looked at letters, were 24 these the advice letters provided by DLA at contract 25 close? That you're referring to? 150 1 A. Yes, I think these were the letters which were written 2 to Gill Lindsay. So there was a whole series of those 3 letters. 4 Q. Perhaps just to make it easier, if I could ask you to 5 look at document CEC01033532. 6 What we can see on screen now is the letter dated 7 12 May 2008. It runs from the firm, DLA Piper Scotland 8 LLP, and it goes to Gill Lindsay and Willie Gallagher. 9 Is that one of the letters you are referring to? 10 A. Yes. If that's one of the -- forgive me, I have been 11 looking at so much material. I saw a risk matrix which 12 I don't know if that was part of this bundle or if it 13 was part of another bundle. 14 Q. If I could ask you -- 15 A. Some information that Andrew had prepared, I think, at 16 the time. 17 Q. Just to check, look at CEC01347795. 18 You see this is a document with the DLA Piper 19 heading, titled "CONTRACTUAL ALLOCATION OF RISKS IN THE 20 DRAFT INFRACO CONTRACT As at 12 May 2008"? 21 A. Mm-hm. 22 Q. Is that the document, do you think, you're referring to? 23 A. If the risk transfer is shown in the way that I remember 24 it being, then this is the correct version of the -- of 25 the document. So forgive me. I can't remember if 151 1 it's -- if it's this particular version. 2 Q. You can accept from me, that as far as I'm aware, this 3 one dated 12 May, the day before the contract signature, 4 was the last available. But is this the form of the 5 document you are referring to? 6 A. Yes. 7 Q. Just a question of the version? 8 A. Yes. 9 Q. When you refer to the particular entries reflecting the 10 state of affairs, were there particular entries within 11 the table that were of concern to you in giving notice 12 to the Council of the question of price and transfer of 13 risk? 14 A. I haven't analysed the table from that perspective. I'm 15 very happy to do that in terms of each of the risks, but 16 for me, the big change was how design was to be treated 17 in the context of Parsons Brinckerhoff post novation. 18 So I haven't gone through each of the risks to 19 assess commercial impact. 20 Q. I won't ask you to do that just now. 21 A. I would be very happy to. 22 MR LAKE: I think we might consider whether that is 23 something we can ask you to do afterwards, rather than 24 sitting in a hearing context. 25 I have no further questions now, my Lord. 152 1 Questions by CHAIR OF THE INQUIRY 2 CHAIR OF THE INQUIRY: Could I ask about the representing 3 both tie and CEC. You didn't see any difficulty with 4 that, but there came a point where the Chief Executive 5 of CEC had to be satisfied with the contract that he was 6 going to authorise tie to sign. And he had to be 7 satisfied that it met various conditions of the Council. 8 Did you think that when you were acting for tie, it 9 would be sufficient for you also to say to 10 Edinburgh: it's all right to sign it. Did you think 11 that would be all right or did you think Edinburgh, 12 given that the Chief Executive had a separate 13 responsibility towards the Council, should have had 14 separate advice? 15 A. On terms of when we were appointed, it was 2002, and 16 what I found strange, my Lord, as I was saying earlier, 17 was the fact that in 2007, bearing in mind that there 18 had already been signatures of other high value 19 contracts, that this seemed to have been the first 20 instance where the Council was actually addressing the 21 fact that: perhaps we should have had independent 22 advice. 23 So what I would say is that we acted in accordance 24 with how we had been originally appointed, and we 25 extended -- I say extended -- that original appointment 153 1 by the duty of care letter which we entered into in 2 2005. 3 So as far as DLA were concerned, we weren't engaged 4 to be advising both tie and the Council. 5 When I've worked on other infrastructure projects, 6 it's been set out from the very start in terms of how 7 clients want to operate. So when I've worked with other 8 local authorities in Scotland, I worked side by side 9 with the Council's in-house team, and their function was 10 to be advising Council officers and members as to the 11 terms of what was being entered into. 12 When I've worked on projects such as 13 Queensferry Crossing, Scottish Government Legal 14 Directorate, they were quite happy to have that 15 advice -- the legal advice outsourced to DLA Piper. And 16 so I was reporting in that instance to officers within 17 Transport Scotland and to the Transport Scotland Board. 18 So I was very surprised when I've been shown some of 19 the correspondence by the Inquiry that there's been all 20 this sort of discussion behind the scenes in terms of 21 independent legal advice. This seems like an unusual 22 structure, et cetera, when I'm thinking: well, why 23 didn't someone address that within the Council when tie 24 was actually being set up? 25 So it's -- for me, it's just a very odd state of 154 1 affairs, as I say, five years into the project, that 2 we're suddenly seeing correspondence as we did on this 3 project. From our perspective at DLA, we were trying to 4 be helpful to both tie and the Council in terms of 5 signing the duty of care letter and, as we were 6 requested, providing reports to -- to, for example, 7 Gill Lindsay. 8 CHAIR OF THE INQUIRY: I can understand what you're saying, 9 but I think you mentioned that sometimes you had worked 10 in the public sector where the local authority in-house 11 lawyers or solicitors would take a view about the 12 documents as well and represent the local authority's 13 interests, as one might have expected somebody would 14 give the Chief Executive here advice from, say, the 15 Local Authority Legal Department. 16 But in the context of this contract, did you get any 17 impression as to whether the Local Authority Legal 18 Department were in fact reviewing the contract with 19 a view to deciding whether it complied with the 20 Council's instructions? 21 A. I suppose I don't -- being honest, my Lord, I don't know 22 what was happening behind the scenes in terms of what 23 was being done with the reports that we were giving. 24 I would have assumed that there would have been internal 25 briefing going on between the Council team and the -- 155 1 the senior officials in the Council. 2 CHAIR OF THE INQUIRY: I think the other thing that you 3 mentioned was when you were de-risking the -- or the 4 strategy was to de-risk the infrastructure contract by 5 doing some of the utility works and some of the design 6 and consents process early. 7 Did that strategy change? 8 A. In the time that I was involved in the project, my Lord, 9 the strategy was re-examined many times, and, you know, 10 at the point at which I wasn't involved day-to-day, that 11 still was the strategy. 12 From my perspective, I think the issue really was 13 that the strategy wasn't being administered in terms of 14 how the contracts were actually working in practice. So 15 there may have been a point where there should have been 16 some change in strategy, but I was always concerned that 17 any time when that was being proposed, that generally 18 what was coming through was a change that was actually 19 making the risk position worse for the public sector. 20 So -- but it's difficult for me to say because my 21 day-to-day in Infraco ended at the point really when 22 there were two bidders still in the competition. 23 CHAIR OF THE INQUIRY: When you say it wasn't being managed 24 properly, is that by tie or by someone else? 25 A. In my opinion, by -- by tie. Not everyone at tie, but 156 1 there were certain elements of certain contracts that 2 weren't being managed. 3 CHAIR OF THE INQUIRY: Can you give detail of that? Which 4 elements? 5 A. I would say particularly the design and the delivery of 6 the design, and, you know, from my perspective, at the 7 time we'd appointed or -- I say we, I beg your pardon -- 8 tie had appointed Parsons Brinckerhoff, they'd also 9 appointed Scott Wilson and Turner & Townsend to be 10 technical advisers. And so what perplexed me is that 11 after having gone to the length of procuring separate 12 technical advisers, those technical advisers weren't 13 involved consistently through the process to actually 14 support tie. 15 So instead there seemed to be just use of TSS, Scott 16 Wilson, Turner & Townsend, on more discrete items, and 17 then there were a number of different consultants who 18 came in, did small parts on -- on the job. Some of 19 those people weren't involved in the project for very 20 long. But there was no -- in my opinion, no consistency 21 of personnel managing the contracts. 22 So MUDFA, for example, the team that was involved in 23 the MUDFA procurement from tie, they -- they pretty much 24 left not long after the project -- the contract was 25 signed. 157 1 So it meant that there was no one who understands -- 2 who -- I beg your pardon, who understood how the 3 contract should operate actually being there and 4 thinking: okay, design is important, we need to make 5 sure the design is provided in time, we've agreed with 6 the utilities to do -- there was no -- from my 7 perspective, no continuity; and we did offer contract 8 training to the people who were administering the 9 contract, but for whatever reason, that wasn't taken up. 10 And whilst I did work with John Casserly, who was the 11 Commercial Director, very closely, John was one person 12 trying to manage what was in effect a very complex 13 contract, with very -- it felt like very little support. 14 CHAIR OF THE INQUIRY: Thank you very much. I don't think 15 there were any questions from anyone else. 16 Thank you very much. 17 MR MARTIN: My Lord, sorry, I do have questions in line with 18 the statement -- 19 CHAIR OF THE INQUIRY: Sorry, Mr Martin. 20 MR MARTIN: Not at all. I wonder if I could, just in line 21 with the application that I have made. 22 Examination by MR MARTIN 23 MR MARTIN: Dr Fitzgerald, could I direct you to page 17 of 24 your witness statement, please. 25 In the middle of that page, I don't think I need to 158 1 ask you about the question, you make the statement: 2 "I understood that fixed price was important to tie 3 and CEC because the project needed to be affordable. It 4 needed to represent value for money." 5 Now, at what point in time did you have that 6 understanding? 7 A. This was the -- the point at time -- in time when I was 8 involved in drafting and negotiating the Infraco 9 contract. 10 Q. Thank you. 11 Now, you identified there that it was important both 12 to tie and to CEC who, as you've discussed with my 13 learned friend, Mr Lake, were both clients of DLA. 14 A. I don't believe I did discuss that with Mr Lake. 15 I think the client of DLA was tie, and there was a draft 16 letter which we discussed earlier where it was proposed 17 that tie and CEC or DLA would treat tie and CEC as joint 18 client on the basis of the conditions expressed in that 19 letter. 20 Q. Were they each clients? 21 A. Not -- not as far as DLA were concerned. 22 Q. So which of the two was the client? 23 A. The client was tie, and we -- we had offered in our 24 letter of 2005 to owe a duty of care to the Council, and 25 in the draft from 2007, we had said that tie and CEC 159 1 would be joint client on the basis expressed in that 2 letter. 3 Q. I don't want to take time on this, but do you accept 4 that DLA owed a duty of care both to tie and to the 5 Council? 6 A. On the basis -- on the basis that we had signed up to in 7 2005. 8 Q. Yes. And obviously that was the situation as one got 9 closer to the finalisation and the ultimate execution of 10 the Infraco contract at the end of 2007? 11 A. That was a point that, whilst I was involved in other 12 tram business, I wasn't day-to-day on the front line 13 Infraco negotiations and the interface that Andrew was 14 having, for example, with Gill Lindsay of the Council. 15 Q. All right. Now, in your statement you have said that 16 the fixed price was important to tie and CEC. Who did 17 you understand to be the ultimate paymaster of the 18 project? 19 A. The ultimate paymaster was the Scottish Ministers, 20 with -- Scottish Ministers in terms of the grant that 21 was being made to City of Edinburgh Council. City of 22 Edinburgh Council, I believe, were making a contribution 23 to that grant, and it was a combination of the two 24 sources of funding that were being used to -- 25 effectively to pay for the -- pay the Infraco 160 1 contractor. 2 Q. So tie was not actually paying any of its own money? 3 A. Correct. 4 Q. The Scottish Ministers, Transport Scotland, and the 5 Council were actually paying for the project? 6 A. Yes, that had always been the basis on which the project 7 had been set up. 8 Q. So between tie and the Council, only the Council had an 9 ultimate financial responsibility for the project, 10 because, as we know, under the guarantee arrangements 11 that were executed, tie carried out the contract, but 12 the Council paid, as you say, along with a grant from 13 Transport Scotland? 14 A. Yes, and I have not seen the terms of that guarantee 15 from CEC, but I understand that's how it was structured. 16 Q. I certainly don't need to take you to that because in 17 general that is the position. 18 So was it not the case that when one was expressing 19 the importance of a fixed price contract to tie, and to 20 the Council, it was actually more important to the 21 Council than it was to tie? 22 A. I would have said that it was -- as I've said in my 23 statement, it was important to both parties because tie 24 wasn't an unrelated third party entity. It was part of 25 the Council. So in my mind the value that was being 161 1 delivered to -- of the project was -- was as important 2 to -- to both. 3 If the project hadn't been affordable, then the 4 project wouldn't have been -- the contracts wouldn't 5 have been signed. So it was important to all parties 6 that the contract was appropriately funded, value for 7 money. 8 Q. I'm not suggesting the contract was not important to 9 both. But the ultimate financial responsibility and the 10 only one of the two bodies with the financial resources 11 to pay for the contract lay with the Council, didn't it? 12 A. Yes, that's correct. 13 Q. So leaving aside the fact that the contract might never 14 have been signed at all, upon the assumption that there 15 was a contract which was going to be signed, the 16 ultimate responsibility lay with the Council, didn't it, 17 not with tie? 18 A. I'm sorry, apologies, I'm not sort of -- I didn't follow 19 your question. 20 Q. If the contract was signed, the ultimate financial 21 responsibility to pay under that contract lay with the 22 Council, didn't it? 23 A. It lay with the Council in terms of the guarantee which 24 the Council gave to the contractor. 25 Q. I mean, I may be wrong, but I don't think tie had any 162 1 substantial resources of its own at all? 2 A. No, it didn't. To my knowledge, it didn't. It was set 3 up by the Council for delivering this project. 4 Q. So can we agree that the statement on page 17 of your 5 witness statement that the fixed price was important to 6 tie and CEC ought to be qualified by accepting that it 7 was actually more important to the Council than it was 8 to tie? 9 A. In terms of -- and bearing in mind, Mr Martin, 10 I wasn't -- this is my view from the point at which 11 I was engaged in the Infraco drafting and negotiation; 12 and the statement that I've made there was a statement 13 which, you know, I would stand behind because the tie 14 people that I was in negotiations, or were part of the 15 negotiating team, were keen to be ensuring that what was 16 being proposed by the bidders was affordable and 17 represented value for money. 18 Q. Dr Fitzgerald, what is the answer to my question? Was 19 it not the case that the fixed price requirement or 20 desire was actually more important to the Council than 21 to tie? 22 A. I can't agree with what you're -- what you're saying. 23 From my perspective of the people that I was working 24 with at tie, price was just as important to them. 25 tie were -- they weren't a third party agent working 163 1 for the Council. They were part of the Council. You 2 know, in that they had been specially created by tie for 3 this project. 4 Q. I'll leave aside your answer to my previous question, 5 but upon the hypothesis that desire for a fixed price 6 contract was more important to the Council than to tie, 7 do you accept that that would give rise to a particular 8 duty of care to advise the Council, as distinct to 9 advising tie, of the consequences of anything which 10 might mean that the contract was not a fixed price 11 contract? 12 A. And from the research I've done, looking at these 13 documents, there was advice that was given to the 14 Council in terms of how these risk matrices were set up. 15 There were also -- I wasn't there, Mr Martin, so 16 I can't comment, but there would have been presentations 17 to the tie Board. The members of that Board included 18 members of the Council, and also members of 19 Transport Scotland, I think. Perhaps not at that time, 20 but there were earlier. But certainly there were 21 representatives from the Council. 22 Q. Is the answer to my question then yes, because you say 23 it was done? I know it wasn't done by you? 24 A. Yes. 25 Q. But there was -- it was accepted that there was 164 1 a particular responsibility to advise the Council in 2 relation to whether or not what had been achieved was 3 a fixed price contract; are you accepting that? 4 A. We were acting in accordance with our duty of care 5 letter, which was to advise where we had been requested 6 by the Council. Part of that was in delivering these 7 letters that you've seen, and so in terms of -- it's 8 very difficult because I didn't write these letters, but 9 what I'm reading in the letters, and maybe it's just 10 because I'm -- this is the field that I work in, but 11 I think that it's very clear that the risk matrix was 12 showing how the risk was sitting in the contract. 13 Q. Dr Fitzgerald, I don't want to take up any more time 14 with this than is necessary. I am not asking you about 15 what was actually done. I'm asking you questions, as 16 a solicitor, who was to some extent engaged in the 17 project at the time, who has made the statement in 18 a witness statement that I am relying upon, and the 19 question I'm asking you is: if it were the case that, as 20 the ultimate paymaster, a fixed price contract was more 21 important to the Council than it was to tie, then do you 22 accept that the duty of care accepted by DLA required 23 DLA to give that particular advice to the Council? 24 A. I don't accept what your hypothesis, Mr Martin. 25 Q. I know that, Dr Fitzgerald. Forgive me for 165 1 interrupting. I know you don't accept it. But from 2 that hypothesis, could you answer my question, please? 3 A. I think to answer the hypothesis involves -- I don't 4 know how to answer that question, Mr Martin. 5 Q. Well, I will leave the matter to the Inquiry. 6 Could I then ask you to look, please, at the 7 relevant and most critical part of the Infraco contract, 8 which is document USB00000032. This is Schedule Part 4. 9 A. Yes. 10 Q. In particular pages 5 and 6, if it were possible to have 11 both on the screen at the same time. 12 Thank you very much. 13 Now, we can see, under section 3.4, beginning in the 14 lower part of the page on the left, the Pricing 15 Assumptions. Is that right? 16 A. Yes. I've not reviewed this part of the contract. This 17 was drafted at a time which post-dated my involvement in 18 the project. So I have not actually read this before, 19 Mr Martin. 20 Q. You have not read it before? 21 A. No. 22 Q. All right. 23 A. So I think when I was involved in the project, I need to 24 check back with my records, but I believe that Schedule 25 Part 4 was blank. 166 1 Q. It was blank when you saw it? 2 A. Yes. When -- at the point at which I was involved in 3 the project. 4 Q. I was going to ask you in line with the application I've 5 made to the Inquiry about who was responsible for the 6 creation of largely these two pages or parts of these 7 two pages. May I take it that you don't know? 8 A. I don't know. All I can say is that the -- from my 9 discussion with Andrew at the time, I understood that 10 what was in this schedule was based on the commercial 11 deal which had been struck in Wiesbaden. 12 Q. So you were aware of these at the time, albeit you may 13 not have been involved in the drafting? 14 A. I was -- I was aware through Andrew telling me in 15 a telephone conversation. 16 Q. In paragraph 3.4, under the heading "Pricing 17 Assumptions", we can read: 18 "1. The Design prepared by the SDS Provider will 19 not (other than amendments arising from the normal 20 development and completion of designs) ..." 21 And then there are various qualifications. I'm 22 sorry, could you take that off because I do want to be 23 able to read on to the second page. 24 1.2 is be amended in certain respects. 1.3 is be 25 amended. 167 1 So in other words, the design would not be amended 2 other than amendments arising from the normal 3 development and completion of designs. 4 Then at the end of paragraph 1: 5 "For the avoidance of doubt normal development and 6 completion of designs means the evolution of design 7 through the stages of preliminary to construction stage 8 and excludes changes of design principle, shape and form 9 and outline specification." 10 Now, were you aware of that at the time, albeit in 11 the course of discussions with Mr Fitchie? 12 A. I wasn't aware of any of the detail of the drafting, 13 merely of the principles that had been -- that were 14 basically, from what Andrew was telling me, were 15 undermining the original procurement strategy in terms 16 of how design risk would be dealt with in terms of the 17 Infraco contract. 18 Q. So you were aware that the price ultimately was based on 19 certain Pricing Assumptions which were described within 20 the schedule, even if you didn't know the precise 21 details of what had been written down? 22 A. Yes, there were -- what -- what I might have described 23 as being fixed price was -- from what Andrew was telling 24 me, it had been qualified by the commercial discussions 25 that had happened at Wiesbaden. So apologies, I can't 168 1 really say any -- be any more specific than that. 2 I have not read this schedule. 3 Q. Look at the top of the page on the left. 3.2.1, please. 4 A. Yes. 5 Q. "It is accepted by tie that certain Pricing Assumptions 6 have been necessary and these are listed and defined in 7 Section 3.4 below." 8 Which we have just looked at, at least in part? 9 A. Yes. 10 Q. "The Parties acknowledge that certain of these Pricing 11 Assumptions may result in the notification of a Notified 12 Departure immediately following execution of this 13 Agreement. This arises as a consequence of the need to 14 fix the Contract Price against a developing factual 15 background. In order to fix the Contract Price at the 16 date of this Agreement, certain Pricing Assumptions 17 represent factual statements that the Parties 18 acknowledge represent facts and circumstances that are 19 not consistent with the actual facts and circumstances 20 that apply." 21 Now, viewing that as a solicitor, Dr Fitzgerald, 22 what does that final statement mean? 23 A. I need to read the whole thing again, Mr Martin. 24 CHAIR OF THE INQUIRY: Do you want it enlarged? 25 A. Yes, please. That would be very helpful, thank you. 169 1 (Pause) 2 Okay. Sorry, Mr Martin, what was your question 3 again? 4 MR MARTIN: The question relates to the final sentence which 5 I read. I'll take it in stages. 6 In order to fix the contract price as at the date of 7 this agreement, so in other words, it was for the 8 purpose of fixing the contract price. That is stated? 9 A. Yes. 10 Q. Is that right? 11 A. Yes. 12 Q. So the purpose is stated in clear words. It's to 13 provide this fixed contract price: 14 "... certain Pricing Assumptions represent factual 15 statements ..." 16 So there are factual statements being represented in 17 the Pricing Assumptions, that the parties acknowledge, 18 that includes tie, represent facts and statements "that 19 are not consistent with the actual facts and 20 [statements] that apply". 21 CHAIR OF THE INQUIRY: I think it's "facts and 22 circumstances". 23 MR MARTIN: Sorry, "facts and circumstances". What does 24 that mean? 25 A. It means that bearing in mind I don't have any factual 170 1 background in terms -- it means that the pricing has 2 been based on certain assumptions which the parties have 3 agreed to apply, but in reality there are other facts 4 and circumstances that reflect the reality, and if 5 the -- I mean, it's -- you know, I suppose reading it 6 through, it's basically -- you know, to my mind it's 7 just setting it up for the fact that a Notified 8 Departure will be triggered if what is acknowledged to 9 be the basis on which the price is fixed changes. 10 Q. I'm going to come to the Notified Departure just in 11 a few seconds, but concentrating on the sentence which 12 I have just read out, it is an agreement between the 13 parties, including tie, that certain statements of fact, 14 factual statements, included in the Pricing Assumptions 15 are not true. They are known not to be true. Perhaps 16 the word "true" is pejorative. They're known not to be 17 accurate. Known not to be consistent with the true 18 facts? 19 A. Mm-hm. 20 Q. Is that right? 21 A. I would use the language that was there, it's consistent 22 with the actual facts and circumstances. I think for 23 all of us understanding this, it would be useful to 24 understand what this was actually talking about, and so 25 forgive me, I can't give any background on what -- 171 1 Q. I'm not asking for background. I'm asking you about 2 what this is actually saying. 3 So in other words, the fixed price which you 4 acknowledged was important to both tie and the Council 5 was based in the contract in Schedule Part 4 upon 6 factual statements which were known by the parties at 7 the time to be incorrect. Is that correct? 8 A. And going back to the start of the clause, that was why 9 certain Pricing Assumptions have been necessary and they 10 are listed. So it was off the back of that 11 acknowledgment, which is on the face of the contract. 12 That's why there were Pricing Assumptions, and a trigger 13 which would apply -- if the Pricing Assumption was not 14 met, then that would trigger the Notified Departure 15 which was in effect a public sector risk. 16 Q. I understand all of that, Dr Fitzgerald. I'm not asking 17 you about that. 18 I'm asking you about the underlying statement in 19 this paragraph which is to the effect that the contract 20 price is to be based upon factual Pricing Assumptions 21 which are known to be incorrect. That is right, isn't 22 it? 23 A. I think it's known not to be consistent with actual 24 facts and circumstances. So -- 25 Q. Come on, Dr Fitzgerald. That means not correct. It 172 1 probably also means false and untrue. But let's just 2 say it means incorrect. Known to the parties. 3 A. I wouldn't be using that sort of language, Mr Martin, in 4 the context of a clause that's been set up by both 5 parties to acknowledge that these are the triggers for 6 a Notified Departure if a certain assumption isn't met. 7 Q. All right. 8 A. So I think that's an open acknowledgment of -- 9 Q. I'll leave your answer to that. 10 On the basis, however, that it is known that 11 different facts and circumstances will apply ultimately 12 to those which are stated in the Pricing Assumptions 13 upon which the contract price is fixed, that means 14 inevitably that a different price will ultimately have 15 to be paid, won't it? 16 A. If the Notified Departures are triggered. 17 Q. Well, indeed. That's the procedure. I was about to 18 say. And it's beyond doubt that that is the case, 19 because it is said that there will be an immediate 20 Notified Departure, and there may very well be other 21 Notified Departures. 22 A. Yes. 23 Q. So it is obvious from this clause that what was agreed 24 by reference to the Pricing Assumptions which were based 25 on incorrect facts and circumstances, it was inevitable 173 1 that the price would not be the contract price, wasn't 2 it? 3 A. I think from my understanding from what Andrew had 4 explained and the Wiesbaden deal and my earlier 5 comments, I think that's the presence of having Notified 6 Departures took this out of being a fixed price contract 7 with the risk being met by Infraco to being a contract 8 where a -- presence of a -- an occurrence of a Notified 9 Departure passed that risk to the public sector. 10 CHAIR OF THE INQUIRY: I think the question, Dr Fitzgerald, 11 was: wasn't it inevitable that the price would not be 12 the contract price? 13 A. In my opinion, yes, that was -- that's the effect of 14 this clause. 15 MR MARTIN: Thank you, my Lord. 16 Finally, then, Dr Fitzgerald, did that not give 17 rise, in your own mind as a solicitor, to a particular 18 duty to advise the ultimate paymaster, City of Edinburgh 19 Council, that that was the inevitable result of the 20 contract which they were going to authorise tie to enter 21 into, that in fact it was not a fixed price contract by 22 reference to the contract price stated in the documents 23 themselves; it was inevitably going to be a contract 24 with another unidentified and unidentifiable price? 25 MR DUNLOP QC: My Lord, I apologise for interrupting. This 174 1 witness is more than capable of looking after herself, 2 but my learned friend keeps asking questions which are 3 purely questions for his Lordship. The extent of any 4 duty of care is a matter of law, purely a question for 5 your Lordship, and we might as well ask any solicitor 6 that comes into the witness box to answer this question. 7 CHAIR OF THE INQUIRY: I appreciate your interest, 8 Mr Dunlop, but I think I'll let the question stand. 9 MR MARTIN: My Lord, I hope I don't have to repeat it, but 10 I am happy to have it answered and it was going to be my 11 final question. 12 A. I think, Mr Martin, as I said earlier, in terms of 13 the -- please bear with me, but I wasn't involved in 14 drafting all of the documentation. I didn't attend all 15 of the meetings. But there is a risk matrix which 16 clearly shows Notified Departures as being a public 17 sector risk. 18 MR MARTIN: My Lord, I'm much obliged. 19 CHAIR OF THE INQUIRY: I don't think there are any other 20 questions. 21 Dr Fitzgerald, that concludes your evidence today. 22 You're still under your citation, and it may be that you 23 may be required to come back again. If that happens, 24 the Inquiry will keep in touch. Hopefully it won't be 25 necessary. But thank you in the meantime for your 175 1 attendance today. 2 A. Thank you. 3 (The witness withdrew) 4 CHAIR OF THE INQUIRY: We will adjourn now until 3.30, 5 a short adjournment. 6 (3.20 pm) 7 (A short break) 8 (3.30 pm) 9 CHAIR OF THE INQUIRY: Mr Lake? 10 MR LAKE: My Lord, the next witness is Neil Renilson. 11 MR NEIL RENILSON (sworn) 12 CHAIR OF THE INQUIRY: You are going to be asked questions 13 in the first instance at least by Counsel to the 14 Inquiry, Mr Lake. 15 If you listen to the question and answer it as 16 directly as possible? 17 A. Yes. 18 CHAIR OF THE INQUIRY: And if you keep your voice up so that 19 everyone can hear, and speak at a measured pace so that 20 the shorthand writer can keep up with you. Do you 21 understand? 22 A. I do. 23 Examination by MR LAKE 24 MR LAKE: Mr Renilson, could you state your full name, 25 please. 176 1 A. Neil John Renilson. 2 Q. I would like you to look at a document with me. You 3 should have a hard copy, but it will also be shown on 4 the screen to your right. If we start by looking at 5 TRI00000068_C. 6 A. You say I should have that here on paper.? 7 Q. No. Do you see the document on screen? 8 A. Sorry. 9 Q. Do you have a copy of that document also available in 10 paper form to you? 11 A. Yes. 12 Q. Could you look in the paper form at the final page, 13 please. Towards the end. Does that bear your 14 signature? 15 A. Yes. 16 Q. Is that a witness statement that you provided for the 17 purposes of this Inquiry? 18 A. Yes. 19 Q. I would also like to you look at another two documents. 20 First of all, one that is TRI00000175. 21 Do you recognise this -- 22 A. Yes. 23 Q. -- as a list of amendments that you wish to make to your 24 statement? 25 A. Correct. 177 1 Q. We've understood it as meaning where text is in blue, it 2 is to be added to your statement and where you reproduce 3 text in red, that is text that you wish to have removed 4 from your statement; is that correct? 5 A. That's correct. 6 Q. I think if you could also look at TRI00000176. 7 I don't know if we need to look through this a few 8 pages, but did you provide a version of your statement 9 in which you had included the text that you wished to 10 add and also deleted the text you wished to remove? 11 A. Yes. The code that I have put on the top of that 12 document, SCIC, basically the last IC means in colour. 13 So within that document, that document comprises my 14 original with the additions and deletions incorporated 15 at the appropriate place in colour. 16 So -- 17 Q. So, for example, if we look at page 30 on the screen -- 18 A. Page 30. 19 Q. -- we see -- 20 A. Yes, that's it. 21 Q. -- an example of the additional text has been included 22 there? 23 A. Correct, fine. 24 Q. So if this includes all the changes made to your 25 statement, are you happy that this be adopted as the 178 1 evidence that you give to this Inquiry? 2 A. Part of it, yes. 3 Q. In addition, I have some questions for you in addition? 4 A. Yes, and in addition, might I say that the alterations 5 I made on 2 November version, I did not -- I did not go 6 through it (a) and deal with typos. I did not add in -- 7 I didn't wish to write -- rewrite the statement because 8 the original was over six months ago, and things have 9 come to mind, et cetera, in the intervening period. 10 So what I submitted on 2 November was just what 11 I deemed to be important. 12 There are other things, but they will probably, I'm 13 sure, come out under questioning. They're essentially 14 additional things. What's the word? Not clarification, 15 but amplification. That's the word. And secondly, the 16 way this statement was prepared at the time, I was 17 presented with -- regularly presented with documents and 18 asked questions. The documents weren't necessarily in 19 date order. So they were jumping about from place to 20 place, and my answers -- therefore the witness statement 21 doesn't read in time order. 22 But as a result of that, on re-reading it again in 23 more detail, I realised on a few occasions I appear to 24 have answered a question, thinking it referred to 25 a prior document that I'd been shown. So you may find 179 1 there are some -- in fact, there are a couple of 2 inconsistencies in my statement where I've answered the 3 question relating to the document I'd been shown 4 previously, which was similar. But again, they'll come 5 up. 6 Q. Let's deal with the things in stages. 7 First of all, the question of referring to the wrong 8 versions of documents. Are these things where what you 9 say in your statement you regard now as being 10 inaccurate? 11 A. I think in some cases I've perhaps given an answer that 12 was not relevant, let's put it like that. 13 Q. You see, there may be questions of things that are 14 additional, and there may be questions I ask you which 15 bring out additional stuff. What I would like to be 16 sure of at the outset is that we have a version of 17 a written statement that you are happy to accept under 18 oath as being your evidence to this Inquiry; that is, 19 you are satisfied with its accuracy and its 20 truthfulness? 21 A. Yes. 22 Q. So can I suggest that your evidence is not going to be 23 completed this afternoon. That is, I think, certain. 24 A. Oh dear. 25 Q. So what I would like you to do before you return to 180 1 complete your evidence is to look at this statement and 2 if there is anything that you consider is inaccurate, be 3 in a position to draw it to our attention when you 4 conclude your evidence? 5 A. Okay. 6 Q. Will you do that? 7 A. Yes, I will do that. I would add that nothing is 8 grossly inaccurate. You know, there's nothing that is 9 black and becomes white. 10 Q. I just want to be sure that the Inquiry has the best 11 evidence that you are able to provide. 12 A. Sure. 13 Q. So what I will do is normally I would ask you whether 14 you would adopt your statement as your evidence? 15 CHAIR OF THE INQUIRY: Are you chewing? 16 A. Yes. 17 CHAIR OF THE INQUIRY: Would you get rid of it, please? 18 A. Certainly. 19 MR LAKE: Normally I would ask you to adopt what is in your 20 statement as your evidence. I don't want to do that 21 just now while we know that there are things that are 22 inaccurate, but I'll return to that when you complete 23 your evidence. 24 A. Yes. 25 Q. What I would like to do at the moment is turn to page 6 181 1 of your statement, please. 2 A. Yes. 3 Q. Now, you've noted that -- if you look at the lower half 4 of the screen, please, paragraphs 23 and 24, 5 particularly 24, you have noted that tie is an arm's 6 length company owned by City of Edinburgh Council. 7 A. Mm-hm. 8 Q. tie did not run in the same way as a CEC Department 9 does. Its management and staff had more freedom to make 10 decisions and run the business as they wished than 11 Council and staff officers do? 12 A. Yes. 13 Q. Perhaps if it would also be convenient if I go back to 14 paragraph 22, if you could scroll down a little: 15 "After the CERT project collapsed there was a lack 16 of trust in government of CEC's ability to deliver 17 transport projects, and of their being entrusted with 18 another project as they had failed to deliver on past 19 projects. Sarah Boyack and Wendy Alexander were the 20 Scottish Transport Ministers at the time and they 21 insisted any future transport project which received 22 government funding would not be run by CEC directly. It 23 would have to be run more professionally and a special 24 purpose Council owned company, rather than Council 25 officers directly, was seen to be the way forward. 182 1 I was party to some of these discussions involving 2 politicians at both CEC and at Scottish National level." 3 Now, was that -- you were involved in discussions 4 relating to what you say is the requirement of the 5 Scottish Government that an arm's length company be 6 used? 7 A. Sorry, could you repeat the question? 8 Q. Were you involved in discussions with the Scottish 9 Government -- 10 A. Not the Scottish Government, no. 11 CHAIR OF THE INQUIRY: Please, Mr Renilson. Don't 12 over speak. One person has got to speak, and then stop, 13 and the other person has to start. Otherwise, the 14 shorthand writers cannot record what's happening. 15 A. Understood. 16 CHAIR OF THE INQUIRY: And it's important that we do record 17 your evidence which is given on oath. 18 MR LAKE: Were you involved in discussions with 19 representatives of the Scottish Government as to their 20 requirement that an arm's length company be used for the 21 tram project in Edinburgh? 22 A. Not representatives of the Scottish Government per se, 23 but with individual politicians is what my statement 24 says, and that was the case. 25 Q. They were acting as the Transport Minister at the time? 183 1 A. No. 2 Q. In what capacity were they speaking to you? 3 A. As members of the -- well, as councillors and members of 4 the Scottish Parliament. 5 Q. In what -- I'm trying to understand what capacity or 6 authority a MSP would have to insist that an arm's 7 length company be used rather than it being done by the 8 Council directly. 9 A. My recollection is that the message that was coming over 10 was that following the CERT project, where the project 11 had not been delivered, the project had been abandoned 12 part way after a sizeable amount of money, some 13 millions -- I think the figure of 10 sticks in my mind, 14 that there was a belief that they would -- they were 15 prepared to advance money to City of Edinburgh Council 16 for another transport project. But with the memory of 17 CERT fresh in their mind, and I believe that there had 18 been prior cases, that they do not have the faith in the 19 City of Edinburgh Council to deliver it. 20 Q. Who was prepared -- 21 A. And therefore if money was to be advanced to the 22 Council, they wanted it to the project to be run by 23 a body other than the Council. 24 CHAIR OF THE INQUIRY: If you just stop, we are not getting 25 the transcript. 184 1 There's some technical problem with the transcript. 2 We will adjourn until that gets sorted out. 3 (3.42 pm) 4 (A short break) 5 (4.05 pm) 6 CHAIR OF THE INQUIRY: I understand the equipment has been 7 fixed. You're still under oath, Mr Renilson. Mr Lake? 8 MR LAKE: Mr Renilson, we were asking questions about the 9 delivery vehicle and you were talking about the reasons 10 why there was a view that there should be a company, and 11 that was that, as you put it, they were not prepared -- 12 they were prepared to advance monies, but they had lost 13 faith in the City of Edinburgh Council. What I want to 14 ask you is what do you mean by "they" in that context? 15 A. Probably -- I'm casting my mind back. I couldn't say 16 specifically which MSP or MSPs I was speaking to. This 17 was not formal. This was just in the course of ordinary 18 conversation. 19 I suspect it was probably Sarah Boyack, who was 20 Edinburgh Central at the time, and who I had a fair bit 21 to do with. 22 So by "they", I assume she meant "the Scottish 23 Government" or Scottish Executive as it was at that 24 time. 25 Q. So this was someone representing what the position of 185 1 the Scottish Government was, the Scottish Executive, 2 that they weren't willing to provide the funds to -- 3 immediately to the company. They -- to the Council. It 4 was to go to an arm's length company? 5 A. I don't think the words "arm's length" were specifically 6 used, but the impression from the conversation was that 7 CEC have not delivered in the past on transport 8 projects, that will need to be done differently, not by 9 CEC in future. And this was in the course of 10 a conversation about no doubt many other 11 transport-related things in the city. 12 Q. Part of the reason you said they were disappointed was 13 the failure, as I understand, of the CERT project within 14 Edinburgh? 15 A. Central Edinburgh rapid transit, it stood for. 16 Q. That had failed in that the contractor appointed had 17 pulled out? 18 A. Correct. 19 Q. I think you note in your statement, one of the reasons 20 that they had pulled out was when Lothian Buses didn't 21 get awarded the contract, they chose to run a high 22 frequency competing bus service, which made it 23 uneconomic? 24 A. That is not -- can you refer me to which paragraph we're 25 at? 186 1 Q. Certainly. If we look at page 4 of your statement, 2 please? 3 A. Yes. 4 Q. If you could enlarge the upper half first of all. In 5 paragraph 14, you introduce the CERT project, and you 6 say: 7 "There was no tram project at the time of my arrival 8 at Lothian Buses in 1998. The project to create the 9 Central Edinburgh Rapid Transport scheme (CERT) was 10 on-going at that time. The project died in 2000 when the 11 successful contractor pulled out. The other companies 12 who had been on the CERT bidder shortlist were 13 approached, but none of them wanted to come back in. 14 Somewhere in the region of GBP10 million had been spent 15 on the project before it was abandoned." 16 I think that figure of GBP10 million was the one 17 that you have given earlier in your evidence this 18 afternoon? 19 A. Correct. In the question you gave me was that when 20 Lothian Buses had not won the CERT project, the CERT 21 tender. Lothian Buses did not tender, did not bid for 22 the CERT project. 23 So Lothian Buses did not win it, but Lothian Buses 24 had not bid for it. So they could not win it. 25 Q. Could we scroll down the page, please. You talk in 187 1 paragraph 16 about the fact that FirstGroup were being 2 awarded the contract? 3 A. Yes. 4 Q. As you say: 5 "That resulted in there potentially being new and 6 additional direct competition to Lothian Buses on many 7 routes. 8 Lothian Buses' reaction at that point, which was 9 before I got there, was not surprisingly negative. 10 Lothian Buses introduced revised services that followed 11 the route of CERT and ran those routes on high frequency 12 with new single deck buses. FirstGroup realised that 13 they were going to face significant competition and 14 walked away from CERT." 15 Do you stand by that? 16 A. Yes. 17 Q. So Lothian Buses acted in such a way as essentially to 18 sabotage CERT? 19 A. No. 20 Q. They wanted to prevent it taking place, did they not? 21 A. There were -- no. There were -- 22 Q. What was the reason why they wanted to run high 23 frequency single deck buses on the very route being 24 served by CERT? 25 A. Can I answer the first point? 188 1 This is saying that FirstGroup were awarded the 2 contract and Lothian Buses then took a certain course of 3 action. 4 My understanding is that if any of the other 5 tenderers had been awarded the contract, and I can't 6 remember who they were, but I know Stagecoach was 7 involved as one of the consortia, Lothian Buses would 8 have been far more relaxed, in that these were 9 operators -- for the sake of argument, let's say it was 10 National Express and Go-Ahead. These were operators who 11 did not have a significant presence in the Edinburgh 12 market at that time. 13 Therefore, if a firm with no presence, say Go-Ahead, 14 had appeared in the Edinburgh market operating CERT, 15 that would not have been welcome by Lothian Buses. But 16 it would not have been the potential sword of Damocles 17 that FirstGroup, who were already an active competitor 18 to Lothian in Edinburgh, and there had been a period of 19 substantially enhanced competition following 20 deregulation in 1986 through to -- I think this is 21 199 -- I can't remember, but anyway, for a prolonged 22 period of time, to have one's main, and indeed only, 23 competitor awarded the CERT contract was something that 24 the then Lothian Buses management were not prepared to 25 sit back and accept, being as they had been -- in 189 1 popular parlance, an ongoing bus war in Edinburgh for 2 some considerable time between Lothian and First. 3 So that's why the award to First was particularly 4 unwelcome to Lothian, whereas an award to the others 5 would have been unwelcome, but not a disaster. 6 Q. You explain in paragraph 105 of your statement, on 7 page 31, I don't think we particularly need to look at 8 it, that Lothian Buses had an 85 per cent market share 9 and the other 15 per cent was operate by First Bus. Is 10 that the position that -- you say that was the position 11 at 1998? 12 A. Paragraph 105? 13 Q. Yes. 14 A. That's not in my paragraph -- no, the paragraph numbers 15 are -- on the screen are different to what I have here. 16 I think what you're -- what's on my copy is 17 paragraph 104. Yes, that seems to be it. Let me just 18 have a quick read. (Pause) 19 Yes, that's correct. The start of that, when 20 I started it was approximately an 85/15 per cent market 21 share on services within the city itself. 22 Q. Was there any marked change between that and the time of 23 the introduction of the CERT scheme in 2000? 24 A. No. Not dramatic -- no dramatic change. 25 Q. As you have explained in your evidence this afternoon, 190 1 Lothian Buses was driven by the fact it was a competitor 2 that was to run -- their nearest direct competitor was 3 to run CERT? 4 A. Their only direct competitor. 5 Q. And therefore they took steps to prevent that 6 competition? 7 A. Not to prevent it. Lothian Buses took steps to protect 8 themselves from it. 9 Q. In what sense did running a high frequency route in 10 competition with CERT protect Lothian Buses? 11 A. Lothian Buses would -- mirrored, as best they could, the 12 CERT corridor. By providing an improved quality 13 service, higher frequency, better buses, then they were 14 protecting their market because when CERT, if CERT 15 arrived, when CERT arrived, it too would operate with 16 high quality frequent buses. 17 Q. This was intended -- 18 A. May I finish? 19 Q. Yes. 20 A. So Lothian Buses' line was to ensure that they were at 21 as small a competitive disadvantage compared to the 22 forthcoming CERT as possible by concentrating modern 23 high spec resource on to the corridors where CERT would 24 run. 25 Q. They did so with the intention of taking customers away 191 1 from First Bus and CERT? 2 A. They did so with the intention of minimising the number 3 of passengers who would transfer from Lothian to CERT. 4 At that point in time Lothian had a 100 per cent market 5 share on -- more or less 100 per cent market share on 6 what was the CERT corridor. So any passengers -- at the 7 moment all passengers were effectively Lothian 8 passengers. CERT would have taken passengers from 9 Lothian. So Lothian was merely reacting in such 10 a fashion to try and protect its market. 11 Q. So would you accept that Lothian Buses, if you said they 12 had 100 per cent share in that corridor, were 13 undoubtedly in a dominant market position there? 14 A. Absolutely. 15 Q. They used that market position to undermine the 16 competition that tried to get on to that route? 17 A. They used that position to try and insure that when that 18 competition arrived, its impact would be minimised. 19 Q. They used their position to try and undermine the 20 competition setting up on that route. 21 A. No. 22 Q. Very well, Mr Renilson. 23 Could we go, please, to page 5 of your statement and 24 look at paragraph 20. 25 What you say there is: 192 1 "When you treat your external advisers on the basis 2 that here is the answer we want, now go away and come up 3 with a report that reaches that conclusion, and just 4 remember who is paying you, there is probably not a lot 5 of point in engaging external advisers." 6 Now, in respect of which advisers do you consider 7 that was done by tie or TEL? 8 A. I don't think it was done by TEL at all. I was of the 9 opinion that that, which is obviously a sentiment, I'm 10 not quoting those words exactly, but that was 11 a sentiment that appeared to me to be applied in the 12 case of advisers producing the Business Case for the 13 tram. 14 Q. Which aspect of the Business Case? 15 A. Well, if you were calculating at that point a BCR, 16 benefit-cost ratio, an IRR or DCF for the project, you 17 required to put in revenue projections. 18 So you had on one side of the equation the cost, and 19 on another side the revenue. And to cover the costs, 20 the revenue had to reach a certain level. 21 So if the revenue didn't reach that level, you 22 didn't achieve the BCR, you didn't get the approval. 23 So fundamentally it was about projected revenues. 24 Q. Were there any other instances in relation to the 25 business cases that you were aware of? 193 1 A. No. 2 Q. The Business Case, that was a document that was provided 3 by the Tram Project Board to the Council; is that your 4 understanding? 5 A. This was right -- what I'm talking about happening 6 happened right at the very beginning, the genesis of the 7 project. I'm not even sure that the Tram Project Board 8 was in existence at that point. 9 Q. I think we have heard in evidence, the Inquiry has heard 10 in evidence, that there was a Draft Final Business Case 11 in November 2006, a Final Business Case in 12 November 2007, and earlier an interim outline Business 13 Case in 2005. Which of those business cases is the one 14 that concerns you, or was it all of them? 15 A. No. This was in relation -- the first one was your 16 Outline Business Case in 2005. 17 Q. It's referred to, I think, as the Interim Business Case? 18 A. Right. It was the first one that looked anything like 19 a Business Case. So that would have been in the run-up 20 to the preparation of the Interim Outline Business Case 21 some time in 2005, but this was almost certainly -- do 22 you know what time in 2005 that was? 23 Q. I can't give you a date -- 24 A. It was -- you know, it was way at the beginning. So it 25 was probably in 2004. 194 1 Q. Now, insofar as those business cases developed forward 2 until we had the Final Business Case in December 2007, 3 do the concerns you had about information being provided 4 by experts carry forward into those Business Cases? 5 A. To a -- on this issue of the revenue projections, to 6 a much lesser degree. 7 Q. Were you content with the revenue projections that were 8 stated in the Final Business Case? 9 A. They were optimistic. Now, when you're presenting 10 a revenue projection for something that doesn't exist, 11 and where there is no direct comparator, you have to 12 take a view. 13 If I could use, for example, the case of the revenue 14 projections for line 1b to Granton, those were 15 predicated entirely on the -- or virtually entirely on 16 the projected development at the waterfront at Granton 17 harbour at the old gas works site occurring. 18 So at the moment, if you started a tramway on day 1 19 at the very beginning, you would have virtually no 20 revenue because you were serving a derelict brownfield 21 site. 22 So what revenue projection are you going to put in? 23 You estimate it based on what you believe the housing 24 and the residence in that area will be at various points 25 in the -- in the future. 195 1 So in the case of that, was I satisfied that they 2 were? It's very much a question of how long was a piece 3 of string. 4 Had I been satisfied with them, and I wasn't grossly 5 unhappy with them, they would have turned out to be 6 completely wrong, because post Lehman Brothers/Royal 7 Bank/HBOS in September 2009 and -- September 2008 and 8 thereafter, none of that development happened. 9 So if line 1b had been built, to this day it would 10 be running up and down there with virtually no one on 11 it. 12 But with the best will in the world, the revenue 13 projections produced in 2006 and 2007 were as good as 14 you could on the assumption that the economic situation 15 and the development would continue as it had been. 16 So the answer is: was I comfortable with them? As 17 comfortable as anybody can be when you're fundamentally 18 groping in the dark for something that may or may not 19 happen. 20 Q. From starting from a position where you said the experts 21 were giving the answer that the Council said they 22 wanted, is it fair to say you have come all the way 23 round then to saying that the estimates actually 24 provided were as good as they could be? 25 A. No. 196 1 Q. What are you saying? Are the figures provided -- 2 A. I used the example -- 3 Q. Would you let me finish my question? 4 Were the figures that were provided by way of the 5 fare box revenues that were going to be included in the 6 Final Business Case in December 2007 as good as they 7 could be? 8 A. No. 9 Q. Were you happy nonetheless to endorse them and have them 10 put forward in the Final Business Case? 11 A. Yes. 12 Q. The Final Business Case was being delivered to the 13 Council. Do you understand that? 14 A. Yes. 15 Q. And it would be relied upon then for taking a decision 16 as to whether or not to go ahead with the project? 17 A. Yes. 18 Q. It was something that was also at least of interest to 19 the Scottish Government in terms of making available the 20 grant funding for the project. 21 A. Yes. 22 Q. Did you not consider it would be important to have an 23 accurate statement of these matters going forward? 24 A. Yes. 25 Q. But nonetheless you were content to allow a forecast to 197 1 go forward in which you did not have confidence? 2 A. I thought it was optimistic, but as I've said, that was 3 my view. The view of other people might have been that 4 it was correct, or that it was pessimistic. You are 5 taking a judgement call on something way out in the 6 future. 7 Q. So in terms of -- 8 A. I was merely one voice. 9 Q. In terms of your voice, your view, your responsibility, 10 were you happy to let things go which you weren't 11 confident in, simply because you felt other people were? 12 A. These things were not decided by any one person in 13 isolation. There was committees who decided on these 14 things. Different people held different views, 15 expressed different views, and -- these ideas coalesced 16 into what might be termed a mid-ground consensus. 17 On that basis I was happy that it went ahead with 18 figures that I thought were optimistic, but which the 19 mid -- mid-ground consensus from those involved was that 20 they were probably about right. And -- or reasonable. 21 And there were levels of confidence applied to this, so 22 the revenue projections were based on -- I can't 23 remember the exact percentages, but something to the 24 effect of a 25 per cent chance of happening, 25 a 50 per cent chance of happening and a 75 per cent 198 1 chance of happening. In other words, low, medium and 2 high, thereabouts. 3 So there is no right answer. There is no wrong 4 answer. And the example I gave of line 1b was an 5 extreme example. Clearly the situation on line 1a, 6 where you weren't totally reliant on development taking 7 place in what was currently undeveloped brownfield site, 8 then you had much more to go at, and you could be much 9 more confident about your revenue projections going down 10 Leith Walk, where there were clearly not an awful lot 11 happening in terms of change. The people that were 12 there would still be the people that would be there when 13 the tram opened. 14 MR LAKE: My Lord, I see we've reached 4 30. That would be 15 an appropriate time to take a break. 16 Now, tomorrow this morning evidence was scheduled to 17 be given by Ian Laing of Pinsent Masons. He is not in 18 this country. He's in the Far East. So the proposal 19 would be that his evidence would be taken by means of 20 videolink, and because it's necessary to arrange a time 21 for that, it's been provisionally arranged for 9.30 22 tomorrow morning. I don't envisage his evidence will 23 take a long time. I would have thought 30, perhaps 45 24 minutes would suffice. 25 So what I would seek is leave to interpose his 199 1 evidence first thing tomorrow morning, and then we could 2 resume straight after that with Mr Renilson's evidence, 3 and then we have Mr Burt also available in the 4 afternoon. As the various parties will be aware, on the 5 timetable it was also envisaged that Brandon Nolan would 6 be giving evidence tomorrow afternoon. I think that 7 will be difficult in the time that is available, and 8 arrangements have been made now to bring him -- to move 9 him to another day, I think probably 7 December, 10 although that's yet to be fully arranged, but there is 11 a slot in the timetable that's available there. And I'm 12 hoping we can use that. 13 CHAIR OF THE INQUIRY: So we'll adjourn until tomorrow 14 morning and take Mr Laing first, but you think he will 15 be half an hour or so? 16 MR LAKE: I do. 17 CHAIR OF THE INQUIRY: In that case, we will just -- 18 A. Excuse me. I cannot be here tomorrow morning. 19 CHAIR OF THE INQUIRY: You're under citation. You've got to 20 be here. So you will be here tomorrow at 9.45. You 21 will be aware from the notice that was served on you 22 that there are sanctions for failure to comply with the 23 citation. 24 (4.32 pm) 25 (The hearing adjourned until Thursday, 23 November 2017 at 200 1 9.30 am) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 201 1 INDEX 2 PAGE 3 MR IAIN MCALISTER (continued) ........................1 4 5 Examination by MR MCCLELLAND (continued) ......1 6 7 Examination by MS FORSTER ...................106 8 9 DR SHARON FITZGERALD (affirmed) ....................127 10 11 Examination by MR LAKE ......................127 12 13 Questions by CHAIR OF THE INQUIRY ...........153 14 15 Examination by MR MARTIN ....................158 16 17 MR NEIL RENILSON (sworn) ...........................176 18 19 Examination by MR LAKE ......................176 20 21 22 23 24 25 202