1 Thursday, 23 November 2017 2 (9.30 am) 3 (Proceedings delayed) 4 (9.35 am) 5 CHAIR OF THE INQUIRY: Mr Lake. 6 MR LAKE: My Lord, the first witness this morning is 7 Ian Laing, who, as you can see, is with us by means of 8 videolink. 9 MR IAN LAING (sworn) 10 (Evidence given via videolink) 11 CHAIR OF THE INQUIRY: Good morning, Mr Laing. Or probably 12 good evening as far as you are concerned. 13 Mr Laing, you're going to be asked some questions by 14 Counsel to the Inquiry, Mr Lake. As you will 15 appreciate, if you simply listen to the questions and 16 answer as directly as possible. If you can keep 17 a measured pace for the sake of the shorthand writers 18 who have to keep up with you. 19 Examination by MR LAKE 20 MR LAKE: Mr Laing, can I first just start by checking what 21 documents you have available to you. I think you now 22 have a folder with hard copy prints of the documents 23 referred to in your questions and answers; am I correct? 24 A. You are correct, Mr Lake. I have them in date order. 25 Q. What I would like to do, however, at the start is look 1 1 at the two versions of the question and answers you 2 provided. The first one, for purposes of those of us in 3 the Inquiry room, has reference TRI00000088_C. 4 I don't know, Mr Laing, if you have that available 5 to you by means of that reference, do you? 6 A. I don't, Mr Lake, I'm afraid. 7 Q. Do you have a statement prepared -- question and answer 8 prepared by you and signed on the final page with the 9 date of 30 June 2017? 10 A. I do. 11 Q. Then also for the purposes of those of us in the Inquiry 12 room, if you could look at reference TRI00000184. Is 13 that a three-page further set of answers with questions 14 that's been signed by you and dated on the final page, 15 22 November 2017? 16 A. That is correct. 17 Q. Are you content that those two sets of questions and 18 answers be accepted as your evidence for the purposes of 19 this Inquiry? 20 A. I am. 21 Q. I would like to ask you some additional questions. We 22 have heard evidence at the Inquiry about an agreement 23 reached by clients at Wiesbaden in December 2007. 24 I think you said in your answers that you were not at 25 that meeting; is that correct? 2 1 A. That is correct, I was not at that meeting. 2 Q. Can you recall when you were told about that agreement? 3 A. My first recollection of being aware of that 4 agreement -- I'm not aware of the date, Mr Lake, but it 5 was certainly after it was signed, and I was sitting in 6 a meeting room at DLA's offices in Edinburgh, and I was 7 provided with a copy by my client at that point. 8 I can't tell you the date, I'm afraid. 9 Q. Now, we -- 10 A. I think I said in my evidence, Mr Lake, that -- in my 11 written evidence from yesterday that that would have 12 been certainly obviously after it was prepared, but 13 before a document of 4 February 2008. So there's 14 a five-week window there, and I must have received it at 15 some point in that window. 16 Q. Just to see if it's possible to narrow it down at all, 17 you have referred there to the draft of Schedule Part 4 18 that was sent out by you on 4 February. You make 19 reference to that in your statement? 20 A. I think it was sent by Scott McFadzen, but yes, there 21 was a version sent out on 4 February. 22 Q. You're correct. It was sent out by Scott McFadzen to 23 people at tie and yourself on 4 February? 24 A. Correct. 25 Q. Had you had the Wiesbaden Agreement some time before 3 1 that or was it provided to you only for the purposes of 2 preparing the document sent out on 4 February? 3 A. I don't recall, Mr Lake. I suspect it was provided to 4 me for the purpose of preparing that draft. 5 Q. Prior to the Wiesbaden Agreement, to what extent had 6 work been done to complete Part 4 of the Schedule to the 7 Infraco contract? 8 A. To my recollection, none at all. 9 Q. Were you made aware of what the understanding was after 10 Wiesbaden as to how Part 4 would be completed? For 11 example, who would prepare the first draft? 12 A. As I -- no, I have no recollection of a conversation 13 where I was instructed in that way, but as I said in my 14 evidence from yesterday, I clearly drafted the version 15 that was attached to Scott McFadzen's email of 16 4 February, as I recognise the style of the document. 17 Q. I'll come to that version in a moment, but I'm just 18 trying to look at things in broadly chronological order, 19 which is the same order they are in, in the questions 20 and answers? 21 A. Of course. 22 Q. What I would like to start with is a document sent out 23 on 16 January. If we could have on the screens here 24 document CEC01447268. Is that reference sufficient for 25 you to find it, Mr Laing, or do you need other 4 1 information to find it? 2 A. I think I would need other information. A date would be 3 helpful. 4 Q. This is 16 January 2008, an email from Bob Dawson to 5 Scott McFadzen and Michael Flynn. 6 A. I have that email. Unfortunately my papers do not have 7 the attachment to that. 8 Q. We can see that it refers to an attachment. Could we 9 look, for the purposes of the screens in the Inquiry, at 10 document reference CEC01447269. 11 Now, what we can see, and I know that you can't, 12 Mr Laing, is a document which is just headed "Schedule 4 13 CONTRACT PRICE ANALYSIS". At the foot of the page it 14 says sheet 1 of 19. Do you have any means of 15 identifying that within the papers that you have, or 16 access to an electronic version of this file? 17 A. I don't, Mr Lake. I apologise. 18 Q. My Lord, I think there's going to be a difficulty 19 arising here because I'm going to need to refer to 20 attachments which are not part of the emails. We are 21 going to get into very immediate difficulty. 22 I mistakenly assumed that Mr Laing had access to things 23 by means of the doc ID reference, for example in the 24 electronic files, and I can immediately see that it's 25 not practical -- 5 1 A. I have all the other attachments, I think. It's that 2 one, Mr Laing, that I don't appear to have. 3 Q. Is it just that one? 4 A. It's just that one. 5 Q. If you could bear with me a minute, Mr Laing. 6 Do you have access to email, Mr Laing? 7 A. I do. 8 Q. I wonder if we can arrange for that to be emailed to 9 you. I think the Inquiry will have a note of your email 10 address. 11 A. If not, I can provide it. 12 Q. Excuse me. I think we have another technical issue 13 emerging here. 14 MS FORSTER: My Lord, I wonder if we could email the 15 document to him. 16 MR LAKE: My Lord, Ms Forster, if that was possible to do 17 that, it might get through more quickly. Could that be 18 done while we sit here? 19 MS FORSTER: Yes, I think it can be done. 20 CHAIR OF THE INQUIRY: Did you hear that, Mr Laing? I think 21 there's going to be an attempt to email you with the 22 document. 23 A. Thank you, my Lord. I did manage to hear that. 24 MR LAKE: What I'll do is I will move on to use the time. 25 Perhaps if that email comes through in the next minute 6 1 or so, you can let me know. 2 A. I will do. 3 Q. If we could look at the document that was then the 4 correspondence that took place on 4 February. If we 5 could look at document CEC01448377. 6 A. I have that, Mr Lake. 7 Q. We see this is an email that was sent out by 8 Scott McFadzen, sent to personnel at tie and copied to 9 yourself, indicating that it was providing a response 10 with a version of Part 4 of the Schedule as drafted by 11 you; is that correct? 12 A. That's correct. 13 Q. Pardon me, I'm running ahead of myself. If we just wait 14 for it to come to screen here. 15 It's CEC01448377. 16 We are not getting much luck here either. 17 We will go straight to the attachment to that email, 18 please. It's document CEC01448378. 19 Do you have here the draft -- what we should be 20 looking at is the draft here of Schedule 4 -- Part 4 -- 21 start again. 22 It is described here as Schedule 4 Part 1 to the 23 Infraco contract, and it was a draft that you had 24 prepared and was sent out under cover of your letter -- 25 under the email, pardon me, of 4 February; is that 7 1 correct? 2 A. That is correct, Mr Lake. 3 Q. If we could look forward in this, please, to page 2. 4 A. Yes. 5 Q. We see a number of Base Case Assumptions. 6 A. Yes. 7 Q. Now, although it's covered in a little in your 8 supplementary statement, could you explain what your 9 purpose was in including Base Case Assumptions? 10 A. The purpose of all of the Base Case Assumptions was 11 twofold in essence. One was to reflect the risk 12 allocation that Bilfinger Berger and its joint venture 13 partners were willing to accept in relation to the 14 contract and the contract price, and the second element 15 of that, as I said in my supplementary statement, would 16 have been to reflect elements of the Wiesbaden 17 Agreement. 18 Q. Now, I think -- we'll come back to it later when the 19 email comes through, but no assumptions had been 20 included in the draft that was sent to you by tie. Was 21 there any discussion as to the use of assumptions prior 22 to you including them in this draft? 23 A. Not with tie that I'm aware of, no. 24 Q. I think it's fair to say those assumptions changed or 25 were developed over time to a significant extent. 8 1 A. That is correct. 2 Q. But if we look at the moment at the assumption we see on 3 page 2, under (a)(ii), towards the top of the screen? 4 A. Yes. 5 Q. We see that, if I read from letter (a), but read short, 6 that the design prepared by the SDS provider will, (ii): 7 "Not, in terms of design principle, shape, form 8 and/or specification, be amended from the Base Date 9 Design Information." 10 Now, you have noted in your statement that that 11 particular wording was lifted from the Wiesbaden 12 Agreement. I think that's correct, isn't it? 13 A. That's correct. It's obviously been adjusted a little, 14 but those words are certainly lifted from the Wiesbaden 15 Agreement. 16 Q. I think in the Wiesbaden Agreement, it was stated that 17 normal design development would be included in the 18 price, but those words were used for the purposes of 19 defining normal design development. 20 Here you're using them to define a situation in 21 which there will be an entitlement to vary the price. 22 A. That's correct. 23 Q. Was there any discussion of that change prior to you 24 using -- making that change? 25 A. There will have been a discussion certainly with the 9 1 consortium members. I'm afraid I don't recall the 2 specifics of that discussion. 3 I think the logic of the approach was simply to 4 ensure that there was clarity as regards what was 5 included or excluded, and one can either approach that 6 based on what is included or -- obviously what is 7 excluded. 8 It seemed to me that the best way -- it would have 9 seemed to me that the best way was to look at what was 10 excluded. 11 Mr Lake, if I may help, I seem to have that email 12 now if that is helpful to you. 13 Q. If possible then, could we look at what I assume will be 14 the attachment to that email. On the Inquiry screens 15 here we have CEC01447269. 16 A. It's just taking a moment to load on the system here, 17 Mr Lake. I apologise. It is a large PDF document. It 18 may take a minute. 19 Mr Lake, if it would be convenient to you, if I may 20 just leave the room for 30 seconds and try to print it 21 off at my desk, that may be quicker. 22 Q. Yes, we're fine if you do that. 23 CHAIR OF THE INQUIRY: By all means. 24 A. I'll be back. (Pause) 25 Apologies, Mr Lake, I have that document now. 10 1 Q. Thank you, Mr Laing. Just to check we are looking at 2 the same thing, it should be a document, on the front 3 sheet it says "Schedule 4", underneath that, in block 4 capitals, "CONTRACT PRICE ANALYSIS". Towards the foot 5 of the page, sheet 1 of 19. Is that what you have? 6 A. Yes, that's what I have. 7 Q. Could we look at the second page of that? 8 A. Yes. 9 Q. We just see a contents page with a number of different 10 clauses setting up the scope; is that correct? 11 A. That is correct. 12 Q. And the third page. We see here a heading -- 13 A. "Introduction". 14 Q. "Introduction", and it says: 15 "The majority of the Infraco Construction Price is 16 on a 'fixed and firm' lump sum basis and not subject to 17 variation unless changed pursuant to one of the 18 following clauses." 19 Then we see a list of six clauses given thereafter. 20 Do you see that? 21 A. I see that. 22 Q. It then notes: 23 "However certain items are not 'fixed and firm' or 24 alternatively are conditional upon certain criteria 25 being fulfilled. This Schedule sets out the various 11 1 categories of items that will be subject to change, 2 together with a mechanism for adjustment." 3 Do you see that? 4 A. I see that. 5 Q. What I just want to look is rather than read through the 6 text of it, just to look at the headings of the various 7 sections hereafter, to identify the various matters that 8 were considered by the agreement. We have got, under 9 section 2, is provisional sums. Section 3, over the 10 following page, provisional quantities. Section 4, 11 identified value engineering, and section 5, further 12 value engineering. Section 6, identified tie changes 13 required under third party agreements. And if we go 14 over the page, section 7 is transfer of MUDFA scope. 15 Section 8, ground conditions. Schedule 9, schedules of 16 rates. 17 On page 6 we have -- 18 A. I see that, yes. 19 Q. Construction price analysis, phase 1b and final account 20 requirements. 21 A. Yes. 22 Q. Now, that would give you an indication of what tie 23 understood the scope of this agreement as being; is that 24 fair to say? 25 A. That is fair to say. 12 1 Q. Now, without -- I'll start again. 2 Is it fair to say that when we come to the draft 3 that was sent out on 4 February that we looked at just 4 a minute ago, it has quite a different scope for Part 4 5 of the Schedule? 6 A. That is correct. 7 Q. So when you had your draft, the impression is that you 8 really didn't start with the tie draft at all. You 9 started afresh. 10 A. Indeed, that would appear to be the case. There is 11 little similarity between the two. 12 Q. Now, if the Inquiry were to hear evidence that the tie 13 draft started with the exchange of -- with the Wiesbaden 14 Agreement, what was your starting point for the Schedule 15 Part 4? 16 A. The Wiesbaden Agreement will have been part of the 17 starting point to Schedule Part 4. It's referred to 18 within the Schedule, and a number of the Base Case 19 Assumptions can be tracked back in one way or another to 20 Wiesbaden, although perhaps refined in language. 21 It's clear, however, that a number of other Base 22 Case Assumptions have been introduced in the draft that 23 I prepared, and that will almost certainly have come 24 from the technical team for the consortium. They are 25 mainly technical matters on which I would not have any 13 1 ability to input. So I can only assume that they came 2 from the technical team. 3 Q. I think the Wiesbaden Agreement itself doesn't contain 4 any assumptions. Was that your understanding? 5 A. That is my understanding. Clearly there are elements 6 within the Wiesbaden Agreement that are then reflected 7 in these assumptions. So in that respect they are 8 translated. 9 Q. Would you accept that even your first draft of the 10 Schedule Part 4 innovates quite markedly upon the 11 Wiesbaden Agreement? 12 A. Yes, I would accept that. 13 Q. Thereafter, from your first draft onwards, to what 14 extent did you understand the Wiesbaden Agreement was 15 relevant to the development of the terms of Part 4 of 16 the Schedule? 17 A. The Wiesbaden Agreement -- and this is not recollection, 18 I'm afraid, Mr Lake, but more putting together the 19 various documents and supposition, the Wiesbaden 20 Agreement clearly is a record of agreements reached by 21 the principals at a point in time. 22 A number of things can have happened in that regard. 23 The language of the Wiesbaden Agreement certainly is 24 imprecise as one often finds in such documents. The 25 legal teams were not involved in Wiesbaden, and 14 1 therefore I would have felt it entirely appropriate 2 to -- to interpret that in a way which gave greater 3 certainty. 4 But I have no recollection in particular of going 5 back to the Wiesbaden Agreement from time to time and 6 seeing it as something that we had to adhere to on an 7 ongoing basis, not least because the factual 8 circumstances were continually changing throughout the 9 negotiation of Schedule 4. 10 Q. Thank you very much. 11 Could I ask you now look at a different document. 12 For the purposes of those of us in Edinburgh, it's 13 reference CEC01448752. 14 A. Could you possibly help me identify that, Mr Lake, by 15 the date? 16 Q. What we have got, it's an email, it should be at the top 17 of it, from Richard Walker to Geoff Gilbert with a date 18 on it of 12 February. 19 A. I have that, yes. 20 CHAIR OF THE INQUIRY: Just before you were asked about 21 that, Mr Laing, you said that the legal teams or 22 representatives weren't present at Wiesbaden. We have 23 heard that the principal lawyer for Bilfinger, the 24 in-house lawyer, was present. Do you know if the 25 Wiesbaden Agreement was drafted by Bilfinger or by 15 1 someone else? 2 A. I don't know how it was -- how it was drafted, my Lord, 3 I'm afraid. 4 CHAIR OF THE INQUIRY: Thank you. 5 MR LAKE: This is an email, I don't know if you've 6 identified it now, from Mr Walker to Mr Gilbert, dated 7 12 February 2008. 8 A. Yes. 9 Q. Do you have that? What we can see is that -- actually, 10 if we go further down the page and look at the email 11 that led to it, there's an email from Bob Dawson to 12 Richard Walker dated 11 February. 13 A. I do. 14 Q. What Mr Dawson says is: 15 "Further to the voicemail messages that I left on 16 your office telephone and mobile, we need to confirm 17 arrangements for going through the balance of your 18 points on Schedule 4." 19 If we look at the response to that further up, it 20 was to the effect that: 21 "Geoff, last Thursday we signed a document where we 22 committed to holding our price. Schedule 4 was clearly 23 dealt with, why is Bob trying to re engage? The matter 24 is closed." 25 I think you say in your written answers that the 16 1 reference to signing a document, that was probably a 2 reference to what was known as the Rutland Square 3 Agreement? 4 A. Yes. That seems to be correct from the dates. 5 Q. Although this was being sent on out 12 February, was it 6 the case that the Schedule Part 4 continued to develop 7 thereafter, throughout the remainder of February and 8 through into March? 9 A. Yes. 10 Q. Were you told why -- was it ever said to you that there 11 should be no further development of Schedule Part 4 12 after the Rutland Square Agreement? 13 A. No. 14 Q. Okay. Could we then look, please, at a further email. 15 This one is from you to Geoff Gilbert, Andrew Fitchie 16 and Bob Dawson and has a date of 22 February. 17 A. Yes, I have that. 18 Q. What you say there is: 19 "Geoff" -- 20 CHAIR OF THE INQUIRY: What's the reference? 21 MR LAKE: It's CEC01449876. 22 If we look at the upper half of the screen here, 23 what we have is an email that's from you, Mr Laing, to 24 Geoff Gilbert, Andrew Fitchie and Bob Dawson and you 25 have dated it 22 February 2008. Do you see that? 17 1 A. Yes, I have that. 2 Q. I think you note here that you're sending out a mark-up 3 of Schedule 4 issued subject to your client's 4 instructions. Do you see that also? 5 A. Yes, I see that. 6 Q. Are you able to look at the attachment to that, please? 7 It's got a reference, for the purposes of those of us 8 here, of CEC01449877. 9 A. Yes, I have that. 10 Q. Just to check we are all looking at the same thing, do 11 you have a document which has the heading, "SCHEDULE FOUR", 12 and in bold underneath it, "PRICING", and in the top 13 right-hand corner: 14 "Schedule 4 - pricing (issued to BBS 15 19 February 2008)". 16 Is that what you have? 17 A. Yes. 18 Q. Could you look at page 11 of this, please, and turn to 19 that in the Inquiry room as well. 20 A. Yes. 21 Q. There's text here beginning on the third line with the 22 words, "we are not clear". In the version that we have, 23 it is coloured blue, as if it's a mark-up. Do you have 24 a colour version, Mr Laing? 25 A. I don't, but I can see it's a mark-up. 18 1 Q. Would that be a mark-up prepared by you or by Pinsents? 2 A. Again, looking at the language, I would assume that was 3 me. 4 Q. You say: 5 "We are not clear why the drafting proposed by BBS 6 hasn't been adopted here. Clause 80 contains 7 a procedure which in practice is unlikely to be 8 appropriate for pricing assumptions. The reason is that 9 clause 80 envisages a change mechanism and agreement as 10 to the price of the change prior to the change being 11 implemented. This, in turn, envisages that there may be 12 circumstances where the change is then withdrawn. That 13 would not be an option for a notified departure. If the 14 concern is to link the valuation to the methodology set 15 out in clause 80, the intention of the BBS drafting was 16 to capture this principle. We will also require 17 a discussion as to payment for actual costs as they are 18 incurred in the event that there is a dispute as to the 19 value of the impact of the notified departure. As has 20 been discussed previously, BBS cannot assume the cash 21 flow risk on notified departures." 22 Now, this appears to indicate at quite an early 23 stage here we have concerns as to how Notified 24 Departures were to be priced or the value of them was to 25 be agreed. Is that a fair comment? 19 1 A. Not -- not so much how they would be priced. More -- 2 more the issue was that Clause 80 and the mechanism of 3 Clause 80 of the Infraco contract envisaged 4 a circumstance, as noted there, that tie could withdraw 5 a change if the price that they received wasn't to their 6 liking. 7 The difficulty with a Notified Departure, if one 8 comes across, for example, a soft spot or a void, it 9 must be dealt with in order to allow the works to 10 proceed. Therefore, it has to -- it had in my view to 11 appear in this way. 12 As regards pricing, the concern I think that's being 13 referred to here is not so much how the price may be 14 arrived at or agreed, more that the time it would take 15 for the -- to do that whilst works were ongoing and who 16 was bearing cash flow risk during the time it would take 17 for that procedure to be gone through. 18 Q. I think you continued to have an involvement with the 19 contract and the works in the period of the works 20 actually being carried out. Am I correct? 21 A. A very limited amount, to be honest, Mr Lake. My 22 involvement largely ended with the signing of the 23 contract, and colleagues within my firm assisted 24 thereafter. I did have some limited ongoing 25 involvement. Obviously I left the UK in early 2009. 20 1 Q. Were you aware that issues did in fact arise under the 2 contract about the agreement of estimates for carrying 3 out of works that were considered to be Notified 4 Departures, and the need to use the Clause 80 procedure? 5 A. I was aware. But only second-hand. 6 Q. Now, that tends to indicate that the concerns you had 7 here were never resolved. Was it a deliberate decision 8 on your part or on the part of your clients to accept 9 the position that existed in relation to Clause 80 that 10 you note here? 11 A. As regards the cash flow risk issue, I can only assume, 12 as it does not, from memory, appear later, that the 13 consortium did decide to accept the cash flow risk. As 14 regards the need to address circumstances where tie 15 could not withdraw a change, I think that was adequately 16 addressed through the drafting, and ultimately how the 17 Notified Departure mechanism appeared in Schedule 4 as 18 concluded. 19 Q. Do you recall discussions about how the Clause 80 20 mechanisms for agreeing the value of changes would be 21 applied in practice? 22 A. I don't. 23 Q. I should say, when I say discussion, I mean with tie, 24 not with your client. 25 A. I don't, Mr Lake. The reason for that, to explain, is 21 1 that there were a number of ongoing parallel work 2 streams. Around the February/March time I was focusing 3 my attention on Schedule 4. It seemed to me to be 4 a priority document from the consortium's point of view. 5 My colleague Suzanne Moir was engaged in continued 6 discussions as regards the drafting of the Infraco 7 contract itself, and we did liaise, as regards the 8 relationship between Clause 80 and Schedule 4, but I did 9 not sit in the meetings with tie to discuss that. 10 Q. Could we look, please, at your -- the first of the two 11 question and answer documents you provided. It's the 12 one with the date of 30 June. I would like to look at 13 question 10, please. 14 For the purposes of the Inquiry, that's page 5 of 15 the -- this is a statement. It was reference 16 TRI00000088_C. It's page 5 of that, please. 17 If you could look at the answer to question 10. 18 A. Yes. 19 Q. The question that has been posed to you in relation to 20 the fact that it was to be a meeting to decide what was 21 meant by normal design development, why did this matter, 22 and in response to it you said: 23 "The need to consider what amounted to 'normal 24 design development' was so that both parties had clarity 25 on the degree of design development which was included 22 1 in the price, and what was excluded." 2 I just want to be clear about this, what your 3 understanding was about the role of normal design 4 development and what was included in the price. Why did 5 it matter? 6 A. It mattered -- sorry to repeat -- I don't mean to repeat 7 simply what I said in my statement. It mattered clearly 8 because the parties needed to have a clear understanding 9 of -- of what was normal in that context. 10 I remember a number of times, at least in general 11 terms I remember, asking technical people what was 12 normal design development, and I don't remember ever 13 getting an entirely consistent answer, and so it seemed 14 to me important that there was a consistent view, and it 15 was clearly defined so that the parties knew where the 16 line was. 17 Obviously the term "normal design development" was 18 something referred to in the Wiesbaden Agreement, and 19 I don't know if that answers your question, Mr Lake. 20 Q. If I could jump forward a moment and look at a document 21 with reference, in the Inquiry, it's CEC01545414. For 22 you, Mr Laing, it's an email from your colleague, 23 Suzanne Moir to Bob Dawson, Geoff Gilbert and 24 Andrew Fitchie, dated 13 March 2008. 25 A. Yes, I have that. 23 1 Q. What Suzanne Moir says is: 2 "Bob, this document contains the "legal" drafting as 3 discussed yesterday." 4 If we could look at the attachment to that, the 5 reference for the screens in the Inquiry room is 6 CEC01545415. 7 I'm hoping what you will have, Mr Laing, is 8 a document with the heading, "Schedule 4 PRICING", and 9 in the top right-hand corner, it looks like something, 10 63.ntv.doc, and some text crossed out next to it. Is 11 that what you have? 12 A. Yes, I have that, yes. 13 Q. What I would like to do is go to page 2 of this, and we 14 can see "SCHEDULE FOUR PRICING", and the contents laid out. 15 Then if we go to page 4, we see a heading, "GENERALLY", 16 and at clause 1.1, beginning: 17 "The Construction Works Price is detailed in 18 Appendix A to this Schedule 4." 19 Do you see that also? 20 A. Yes, I see that. 21 Q. What happens here, although this was sent out by 22 Pinsents, this has gone back to the version of the 23 document first sent out by tie, and isn't a mark-up of 24 the version that you sent out in February, 4 February. 25 It appears as if two different drafts of this 24 1 agreement are being used while you are trying to 2 negotiate its terms. Is that what was happening? 3 A. That is certainly as it appears, Mr Lake. 4 I'm afraid I can't help as regards whether that was 5 intended or accidental. I don't remember particularly 6 the version that is there that we're looking at. But it 7 certainly does appear that there are two competing 8 versions after that point. 9 Q. If we could look also at page 9 of this agreement. This 10 is clause 3.3. If you could look at the upper half of 11 the screen here, it is: 12 "The Assumptions in pricing of the Construction 13 Works Price are (a) design." 14 The first bullet point is: 15 "The Infraco Construction Works Price includes for 16 any impact thereon arising from the normal development 17 and completion of designs based on the design intent for 18 the scheme as represented by Base Date Design 19 Information." 20 If we read forward to the fourth bullet point it is: 21 "That the Design Prepared by the SDS Provider will 22 not: 23 "in terms of design principle, shape and/or 24 specification be materially amended from the drawings 25 forming the Infraco Proposals." 25 1 Then there is text in brackets. 2 Now, we've got in the first bullet point a reference 3 to normal development and completion of designs and in 4 the later bullet point, a statement that it shall not 5 change in terms of design principle, et cetera. 6 Now, at the time, can you recall how these two were 7 intended to relate to one another? 8 A. I can't remember at the time, Mr Lake, no. 9 Q. It might be said that if there was to be the -- if 10 primacy was given to the later assumption in terms of -- 11 there would be no change in terms of design principle, 12 et cetera, it rather deprives the question of normal 13 development and completion of designs of any effect. 14 Would you agree? 15 A. I wouldn't agree or disagree, Mr Lake. I think that's 16 a technical question that an engineer could answer. 17 Certainly what amounted to normal development, 18 normal design development was something, I think, you 19 can see through the drafts that -- that I was concerned 20 about in order to understand what the parties meant by 21 it, and what technically it meant by it. 22 But as the lawyer advising the client, I don't think 23 I would be in a position to know if that had the effect 24 that you suggest. 25 Q. If I put it another way, from reading these drafts and 26 1 what you've said so far, and the concern about normal 2 design development, was your view that normal design 3 development as a generality would all be included within 4 the construction price? 5 A. I can't recall what I thought at the time, but I would 6 answer the question by saying with reference to the 7 Wiesbaden Agreement, I think the answer is no. 8 The Wiesbaden Agreement -- and we can go back and 9 look at it, I guess -- I think says that the price -- 10 sorry, apologies. Maybe I'm wrong there. There is 11 a reference to normal design development in that 12 document. 13 Q. Do you have a copy of the Wiesbaden Agreement available 14 to you? 15 A. I do, yes. I do. 16 Q. Could we have it on the screens here, please, then. 17 It's reference CEC02085660. 18 If you go on the Inquiry screens to page 5, what 19 I would like you to do, Mr Laing, if you can, is look at 20 clause 3.3 of the agreement, which is on page 3 of the 21 paper version? 22 A. Yes. 23 Q. Now, what -- 24 A. I have that, thank you, Mr Lake. 25 Q. It's stated by way of an inclusion that: 27 1 "The BBS price for civils works includes for any 2 impact on construction cost arising from the normal 3 development and completion of designs based on the 4 design intent for the scheme as represented by the 5 design information drawings issued to BBS up to and 6 including the design information drop on 7 25 November 2007." 8 We see all that. Do you see that, Mr Laing? 9 A. Yes. 10 Q. That's stated as something that is included within the 11 price. But if we go over to the following page -- 12 A. That ... 13 Q. Sorry, Mr Laing, I didn't catch that? 14 A. I was agreeing with you, Mr Lake. 15 Q. If on the Inquiry screens we could go forward to page 5 16 of the digital version -- it's page 7 of the digital 17 version, which is page 4 of the paper version. We see 18 a proviso to the clause: 19 "For the avoidance of doubt normal development and 20 completion of designs means the evolution of design 21 through the stages of preliminary to construction stage 22 and excludes changes of design principle, shape and form 23 and outline specification." 24 Do you see that? 25 A. I see that. 28 1 Q. Now, in the Wiesbaden Agreement that wording operates to 2 define what is normal design development. Would you 3 agree? 4 A. I would agree. 5 Q. And normal design development is something which is 6 specifically included within the price? 7 A. That is correct, although, of course, normal development 8 of design excludes changes in design principle, shape, 9 form and outline specification. 10 Q. Indeed. Then if we could go back to the version of 11 Schedule Part 4 we were looking at a moment ago, with 12 reference CEC01545415, for your purposes, Mr Laing, 13 that's the one attached to the email of 13 March 2008 14 from Suzanne Moir? 15 A. Yes. 16 Q. If we could all look at page 9 of that, so we see 17 clause 3.3. 18 If we could scroll down a little bit so we can see 19 the top. 20 Now we can see that we have the normal development 21 of completion of designs in the first bullet point, and 22 the question of design principle, et cetera, in 23 a different bullet point, so that the relationship 24 between them is less clear. Would you agree? 25 A. I would agree. 29 1 Q. If we go forward to a much later version of the 2 agreement, if you could try looking at -- it will be an 3 email from Stewart McGarrity to Alastair Richards of 4 TEL, which I think has been provided to you. It's dated 5 2 April 2008. It has further in the chain another email 6 from you. 7 A. Yes. I have that. 8 Q. If you read down the chain to see that the email from 9 you to yourself, Philip Hecht of DLA Piper, Steve Bell 10 and others, dated 2 April. Do you see that? 11 For the purposes of the Inquiry, it's reference 12 CEC01423746. 13 A. Yes, I have that, Mr Lake. 14 Q. We are just catching up here a little. I have gone 15 ahead and left the electronic versions behind. 16 Enlarge it and go to the lower half of the page. 17 Scroll down a little. 18 We can see it's an email from you, Ian Laing, to 19 yourself and others. It's dated 2 April, and the text 20 of the email is: 21 "Please find attached the latest draft of Schedule 4 22 for discussion (and hopefully final resolution) 23 tomorrow." 24 Do you see that? 25 A. I see that. 30 1 Q. What I would like to do then is look at the attachment 2 to that. It will have a reference for Inquiry purposes 3 of CEC01423747. 4 Do we have here a document that's headed "Schedule 4 5 PRICING" and underneath that it has a key which 6 identifies the meaning of text highlighted in yellow and 7 the text highlighted in green. Do you have that, 8 Mr Laing? 9 A. Yes, I have that, yes. 10 Q. What I would like to do is move forward to page 7 of 11 both the electronic version and the paper version. We 12 can enlarge the upper part of the page here and look at 13 clause 3.4. We see in largely its final form, Pricing 14 Assumption Number 1 is now: 15 "The design prepared by the SDS Provider will not 16 (other than amendments arising from the normal 17 development and completion of designs): 18 In terms of design principle, shape, form and/or 19 specification be amended from the drawings forming the 20 Base Date Design Information ..." 21 You go forward then to find a proviso that: 22 "For the avoidance of doubt normal development and 23 completion of designs means the evolution of design 24 through the stages of preliminary to construction stage 25 and excludes changes of design principle, shape and form 31 1 and outline specification." 2 Now, what I want to look at is the relationship 3 between normal development of design and the requirement 4 that there be no change of design principle, et cetera. 5 I think we agreed when we looked at the previous 6 draft that it was slightly unclear how the two of them 7 would relate to one another. Do you recall that? 8 A. I do. 9 Q. When we come to look at this, do you think the 10 relationship between those two concepts has changed or 11 been clarified? 12 A. I think ultimately the drafting is reasonably clear. It 13 is inelegant, for sure, and, as is the nature with 14 negotiated documents, that is often the case. 15 Obviously there is a repetition to some extent of 16 the wording one sees in 1.1, and for the avoidance of 17 doubt, wording at the end of Pricing Assumption 1. 18 But I think the avoidance of doubt wording is 19 necessary in order to capture the concept of what normal 20 design development excludes, and the reason for that is 21 the bracketed wording at the beginning of the Pricing 22 Assumption. The effect of the wording other than 23 amendments arising from normal design -- sorry, normal 24 development completion design could be to bring within 25 the price changes in -- sorry, I'm just trying to read 32 1 this now -- in principle, shape, form and/or 2 specification of the design. 3 So I think it's inelegant, but I think the 4 relationship is clear enough. 5 Q. Just if we can break it down a little, if we just look 6 at the initial part of the clause and ignore the text in 7 brackets for the moment, the first assumption is that: 8 "The design prepared by the SDS Provider will 9 not ... in terms of design principle ... be amended from 10 the drawings forming the Base Date Design Information." 11 That might be said to be the core of this 12 assumption; would you agree? 13 A. I agree. 14 Q. You then -- sorry, I interrupted you? 15 A. I was simply agreeing, Mr Lake. 16 Q. You then add a qualification to that: 17 "... (other than amendments arising from the normal 18 development and completion of designs)." 19 Would you agree that's intended as a qualification 20 to that general prohibition? 21 A. I would. 22 Q. So now the role of normal development and completion of 23 designs has been changed to an exemption from 24 a prohibition, rather than an inclusion; would you agree 25 with that? 33 1 A. I would. 2 Q. Now, in terms of wanting to know the scope of that 3 exemption or exclusion, ie what is meant by normal 4 development and completion of designs, you have to look 5 at the text after 1.3, don't you? 6 A. You do. 7 Q. That tells you that normal design and development -- 8 normal development and completion of designs does not 9 include changes of design principle et cetera? 10 A. That's correct. 11 Q. So what that means is if you start with your 12 prohibition, you think there has been a change of design 13 principle, et cetera, so it infringes the prohibition, 14 you might want to see if you can apply the saving 15 provision in the brackets. Would that be what you might 16 do? 17 A. Yes. 18 Q. When you discover the saving provision in brackets, you 19 will find it always means that whenever there is 20 a change of design principle, et cetera, it's not normal 21 development and completion of designs. Would you agree? 22 A. That is correct. 23 Q. In short the text in brackets is completely redundant, 24 isn't it? 25 A. It is. 34 1 Q. So really, by the time we get to this version of the 2 draft, normal development and completion of designs is, 3 on a literal reading of this, irrelevant to the 4 operation of the clause? 5 A. Unless there is a difference, a technical difference 6 between -- and I can't answer that, Mr Lake -- between 7 what normal development is and changes to design 8 principle, shape, form and/or specification. 9 Q. But -- 10 A. It may be -- apologies, Mr Lake. It may be that there 11 are changes that don't fall within that test. That 12 might be said to be normal design development. 13 Q. But are we not told by the legal drafting after 14 paragraph 1.3 that normal development and completion of 15 designs cannot, as a matter of agreement, include 16 changes of design principle, et cetera? 17 A. Yes. But there may be other -- there may be other ways 18 in which the design development doesn't fall within that 19 test. That's a technical matter, Mr Lake, and this was 20 a document, you will understand, that was being 21 negotiated between a technical and legal team together. 22 Q. But the proviso as to normal design development is only 23 intended to apply, is only relevant, where there has 24 been a change of design principle, shape, form and/or 25 specification; is that not correct? When we're looking 35 1 at subparagraph 1.1, I should say. 2 A. Sorry, could you repeat that, Mr Lake? I didn't follow. 3 Q. The proviso in brackets, insofar as it applies to 4 paragraph 1.1, could only be relevant where there was 5 a change of design principle and it's defined that 6 that's precisely the situation where it cannot apply 7 also. 8 A. I'm not sure I follow, Mr Lake. I still read the 9 document, rightly or wrongly, as indicating that there 10 are -- there is the possibility of a development of 11 design which is not a change in the design principle, 12 shape, form and/or specification that would not be 13 caught by this Pricing Assumption. 14 Q. So looking at something that's caught by 1.1, how might 15 that -- how might normal design -- normal development 16 and completion of designs operate to stop that being 17 a Notified Departure? Just 1.1. 18 A. I can't answer that, Mr Lake. As I've said, that is 19 a technical question, and this was a document which was 20 prepared by a combined technical and legal team. 21 Q. So what did you understand the technical input would be 22 in relation to that? 23 A. In relation to the drafting, Mr Lake? 24 Q. No, what technical information would you require in 25 order to make sense of that and determine when it would 36 1 apply? Would you simply be asking what was normal 2 design development and completion? 3 A. Maybe, yes. 4 Q. What I would like to do is if we could look at the 5 second of the two sets of questions and answers you 6 provided, within the Inquiry that's the document with 7 the reference that ends 184, if that makes it easy. 8 If we could look at the third page of this -- if we 9 could go back, pardon me, to the previous page to get 10 the context for this. I would like to look at the text 11 that's in answer to question 14 in the right-hand 12 column, starting with the second paragraph there. It's: 13 "The reference to 'normal design development' does 14 not appear to have been omitted in the document I have 15 been provided with. The wording has been moved within 16 the body of the draft but has not been altered. Looking 17 at the draft, we (by which I mean Bilfinger Berger, me 18 and the Siemens team) appear to have had two key 19 concerns in relation to Notified Departure Number 1, 20 namely (1) the reference to the 'design intent of the 21 scheme' as being part of the test for 'normal design 22 development', which looking at it now appears to be 23 imprecise and so I am sure that will have been my view 24 at the time, and (2) the reference to 'design principle, 25 shape, form and/or specification'. I do recall some 37 1 unease within the Bilfinger Berger technical team that 2 this did not exclude all the risks that it needed to. 3 In particular, I recall that Scott McFadzen was 4 concerned that this did not cover the scope of the works 5 and he was keen to include that." 6 My question was, I just wanted to understand what 7 you meant there by the scope of the works when referring 8 to Mr McFadzen's concern. 9 A. My -- my recollection is somewhat hazy, Mr Lake, 10 a question in Scott's mind would have been whether, if 11 one is looking at a change to the base document, a set 12 of drawings, and one is testing whether there has been 13 a change to those, if there was a new element of works 14 introduced to -- an altogether new element of works 15 introduced by a new design, whether that could be said 16 to be a change or a development of that design as it was 17 entirely new. 18 Q. That was a concern as far as you recall he expressed to 19 you at the time? 20 A. Yes. 21 Q. I want to come back then to, if I can, to look at the 22 email we looked at one moment ago. The first email on 23 the chain is the one from Stewart McGarrity to 24 Alastair Richards dated 2 April, but it's forwarding an 25 email from you, Mr Laing, also dated 2 April. 38 1 For the purposes of the Inquiry, it's reference 2 CEC01423746. 3 Could we look, please, in the electronic version at 4 page 3. What I'm looking for, Mr Laing, is the part of 5 the chain that's an email from you to Philip Hecht and 6 Steven Bell and others dated 26 March 2008. 7 For the purposes of the electronic version -- 8 A. I have that. 9 Q. This is spanning a page on the electronic version. If 10 you could just look at the foot of the previous page, 11 we'll see, just so we can identify it in the Inquiry 12 room, an email from you dated 26 March, timed at 16.23 13 to Philip Hecht and others. I take it you have that 14 also, Mr Laing? 15 A. I do. 16 Q. What you say there, if you go over the page on the 17 electronic version, is: 18 "As we discussed earlier today, the Design Delivery 19 Programme that will be V28. The Pricing Assumption in 20 Schedule 4 of the Infraco Contract assumes that the 21 Design Delivery Programme will not change from V26. It 22 follows that there is the possibility that there will be 23 an immediate Notified Departure on contract execution. 24 Given the unusual position that we are in, please can 25 you confirm that this is understood and agreed by tie." 39 1 Now, if there was to be a change in the Design 2 Delivery Programme from V26 to V28, it's not really 3 a matter that the -- there's a possibility that there 4 would be an immediate Notified Departure. There would 5 be an immediate Notified Departure, wouldn't there? 6 A. Strictly speaking, yes, Mr Lake. If I may amplify 7 though, in order for a contractor in those circumstances 8 to intimate a Notified Departure, it would obviously 9 have to have a financial impact. 10 The question of whether it has a financial impact 11 obviously is only answered on an analysis of the new 12 version of the design programme. That is what I meant. 13 Q. I understand. 14 A. But obviously in terms of triggering a Notified 15 Departure, I've written, yes, it would. 16 Q. You have said in your written answers that you 17 understood that some of the Pricing Assumptions would 18 not be correct, and therefore there would be scope for 19 generating Notified Departures. Have I understood that 20 correctly? 21 A. You have. 22 Q. Are you able to recall now which Pricing Assumptions 23 were in your mind at the time as ones that would not 24 hold true? 25 A. At the time I think I had two -- two Notified Departures 40 1 that I thought would cause a risk of immediate 2 notification following execution of the contract. 3 The first obviously is this change in the Design 4 Delivery Programme. The second, and I do recall it, was 5 the question of whether the SDS design as prepared met 6 the Employer's Requirements. And there was an ongoing 7 exercise, which I believe was called an alignment 8 workshop or something similar, where there was 9 a recognition of a need to work further to bring the SDS 10 design into line with the Employer's Requirements. 11 That exercise, as I recall, was ongoing at the 12 execution of the contract, and therefore there was 13 a risk that that would trigger a Notified Departure. 14 There's no others that I recall from the time. 15 Q. If we look back to the email chain, and we look to the 16 next email in time, that's the one higher up in the 17 chain, on page 2 of the electronic version in the 18 Inquiry room, it's an email again from you, Mr Laing. 19 This time it's to yourself, Philip Hecht and others, but 20 dated 31 March 2008, timed at 10.20. 21 Do you have that? 22 A. I do. 23 Q. We can see comments addressed to Steven/Jim: 24 "Please can you let me have confirmation that the 25 position on the Notified Departure in relation to the 41 1 Design Delivery Programme is understood and agreed by 2 tie." 3 I take it from that that you hadn't had a response 4 to your earlier email? 5 A. I have reloaded my inbox from around that time and 6 checked, and I have no record of receiving a response to 7 either the initial email or that chaser email. 8 Q. Why did you send these emails? What were you hoping to 9 achieve by putting tie and DLA on notice in this way? 10 A. I think, and I still think it to this day, one of the 11 risks, the greatest risks when one is approaching 12 complex and long-term procurement, is that the parties 13 enter into it without a common understanding. 14 Obviously also in the context of any procurement, 15 the idea that a contractor will sign a contract and 16 immediately make a claim is not one that might give rise 17 to good relations, and good relations are important over 18 a long procurement period. 19 I suspect what I was trying to do was ensure that if 20 that claim was made, it would have been a clear 21 expectation of it. Therefore there would be no adverse 22 reaction to it, and it wouldn't affect the relationship 23 between the parties. 24 Q. You explained helpfully already you didn't get a 25 response to either of your emails seeking clarification 42 1 about the Notified Departure, including the one on 2 31 March. But as we work through this chain earlier, 3 we'd seen that on 2 April, if you go back to page 1 of 4 this, both versions, we already looked at it. On 5 2 April you sent out a further draft of Schedule 4. Do 6 you see that? 7 A. Yes. 8 Q. If we could just look at that draft once again, it's 9 reference CEC01423747. What I would like to do this 10 time is look at page 5 in both the paper and the 11 electronic version, and clause 3.2, if we could enlarge 12 that. 13 That says: 14 "It is accepted by tie that certain Pricing 15 Assumptions have been necessary and these are listed and 16 defined in Section 3.4 below. The Parties acknowledge 17 that certain of these Pricing Assumptions may result in 18 the notification of a Notified Departure immediately 19 following execution of this Agreement. This arises as 20 a consequence of the need to fix the Contract Price 21 against a developing factual background. In order to 22 fix the Contract Price at the date of this Agreement, 23 certain Pricing Assumptions represent factual statements 24 that the Parties acknowledge to represent facts and 25 circumstances that are not consistent with the actual 43 1 facts and circumstances that apply. For the avoidance 2 of doubt, the commercial intention of the Parties is 3 that in such circumstances the Notified Departure 4 mechanism will apply." 5 Now, would you agree that that's quite an unusual 6 clause to see in a contract? 7 A. I would. 8 Q. Have you ever included it in another contract? 9 A. I have not. 10 Q. Why did you include it in this one? 11 A. There are, I think, two reasons. One is a firm 12 recollection. The other is really piecing together the 13 chain of events. 14 The firm recollection first was a conversation with 15 a partner of mine in relation to a recent decision of 16 the Scottish courts on a case called, as I recall, EMCOR 17 Drake & Scull v Edinburgh Royal Joint Venture, which was 18 considering qualifications and design qualifications 19 made by a tenderer in a bid which qualifications were 20 incorporated, and my memory is a little hazy, but 21 incorporated in the contract, but interpreted against 22 the contractor. 23 We had a concern and wanted to be clear that we 24 weren't going to fall foul of the logic within that 25 case. 44 1 The second, which is more a question of piecing 2 together the facts, is I suspect I didn't get a response 3 from tie in relation to those emails, and therefore 4 I was taking one of the few courses that was left to me 5 and put it in the contract so that it was plainly there 6 for everybody to see. 7 Q. Was there a concern on your part and that of your 8 clients that these -- the view that these Notified 9 Departures might become a substantial issue because 10 large sums of money were being claimed once the contract 11 work started? 12 A. I can't speak for my clients on that, Mr Lake. I don't 13 recall a discussion around numbers of claims or 14 valuation of them. 15 I don't remember having a particular concern that 16 this would lead to, frankly, the kind of issues that 17 eventually materialised. 18 I do remember having a concern that we had an 19 unusually large number of qualifications to the price, 20 and that the parties needed to understand clearly what 21 the consequences of that would be. 22 Q. But going so far as to get an express acknowledgment 23 that the facts and circumstances may not be consistent 24 with actual facts and circumstances, and the intention 25 is that in such circumstances, the Notified Departure 45 1 mechanism will apply. Was there a concern that if large 2 claims started to come in, the view would be taken this 3 couldn't have been what the parties intended? 4 A. Yes. 5 Q. Just for the avoidance of doubt, to be quite clear, were 6 you aware or did you have an inkling even that it was 7 likely that large claims would be generated by the 8 Notified Departure mechanism? 9 A. I was not aware of that, no. 10 Q. Did this clause 3.2 or the emails that preceded it give 11 rise to discussions that you had, that you personally 12 had, with either the legal advisers at DLA or the people 13 at tie? 14 A. Not that I recall, Mr Lake. 15 Q. Thank you very much, Mr Laing. 16 A. Not that specific wording, anyway. 17 Q. I don't mean, sorry, just about specific wording. 18 I mean about the whole issue as to the likelihood of 19 claims arising from inaccurate Pricing Assumptions. 20 A. I had discussions with -- or I recall a discussion where 21 it was -- where I had confidence that tie at least 22 understood there were a significant number of potential 23 avenues for increase in price and time, and therefore at 24 least understood the effect of Schedule 4. 25 I had a separate conversation with Andrew Fitchie, 46 1 very close to execution of the contract, which gave me 2 confidence that he understood, and in turn that CEC 3 understood, what the effect of the draft was. 4 Q. Just dealing with some issues arising out of that, what 5 was said to you -- can you remember approximately even 6 what was said to you -- that gave you confidence that 7 CEC understood the effect of the draft? 8 A. I recall -- as you can imagine, Mr Lake, there are in 9 events like this, ten years ago, some things that stick 10 in your mind more than others, and this is one. 11 I can't remember the precise date, but a number of 12 days, literally days, before execution of the contract, 13 there was a public hearing of Edinburgh District 14 Council, and there was a report given in that public 15 meeting in relation to the tram project. I didn't 16 attend that meeting. I believe it was a short report. 17 It was attended by one of our trainees, and the report 18 came back to me as regards what was said. 19 My recollection of my understanding at the time was 20 that the Council had been told in the public meeting, 21 although I'm sure that's a matter of record, that the 22 contract was nearing finalisation and it was a lump sum 23 fixed price contract. 24 As matters had developed at that time, and although 25 I can understand that phrase, I think there was 47 1 a risk -- I thought there was a risk that that may be 2 misunderstood. 3 I spoke one to one with Andrew Fitchie. I expressed 4 concern about the report to the Council, and I expressed 5 concern as to what Edinburgh District Council knew as 6 regards the mechanism within the contract. 7 Andrew was always a polite man, but it sticks in my 8 memory because he was somewhat irritated by my enquiry. 9 He essentially told me it was none of my business what 10 the Council were being advised by their legal advisers, 11 and in any event certainly as they didn't know exactly 12 how the contract worked, and I left it at that. 13 Q. The earlier part of the answer a little while ago was 14 that you had confidence that tie at least understood 15 there were a significant number of potential avenues for 16 increase in price and time. And therefore tie at least 17 understood the effect of Schedule 4. 18 Who was it -- 19 A. Perhaps, if I may -- sorry. 20 Q. No, do you want to clarify something? 21 A. (inaudible) answer your question. 22 Q. Is there something that you want to clarify? 23 A. Yes, please. Sorry. The delay is difficult. 24 Q. It is. 25 A. Perhaps as a corporate body, if I may rephrase that, 48 1 tie -- I can't say what tie knew or didn't know. 2 What I can -- what I definitely recall, and again 3 it's one of those things that sticks in one's mind 4 because it's a phrase that was particularly memorable, 5 was again reasonably close, I think, to close of the 6 contract, was Jim McEwan, who was one of the senior 7 people within tie responsible for negotiation, 8 commenting that the contract had more holes than 9 a teabag, and that they knew fine well that it did. 10 That phrase, as you can imagine, sticks in my mind. 11 Q. You anticipated the question I was about to ask you, 12 which is although you refer to tie having knowledge, tie 13 is obviously a collection of individuals, and I was 14 wondering which individuals you considered had knowledge 15 about the significant number of potential avenues for 16 increase in price. 17 You have mentioned Mr McEwan. Were there others, 18 particular individuals with whom you'd had discussions, 19 or of whom you were aware had the knowledge? 20 A. Not in a similar way, Mr Lake, but bluntly, anybody 21 engaged within the negotiations of Schedule 4 ought to 22 have known that the impact of the Schedule gave rise to 23 potential for greater money and more time being awarded 24 to the contractor. 25 Clearly my email intimating the possibility of one 49 1 of the Notified Departures, as it's introduced in -- the 2 email refers to "as we discussed", and I'm perfectly 3 sure that those attending those meetings will have 4 understood, by which it would, in my memory, have been 5 Jim McEwan, Steven Bell, and Geoff Gilbert. 6 Q. Did you ever hear anyone saying to tie what the 7 additional cost under the contract was likely to be? 8 A. No, I did not. 9 Q. Did you have any discussion with Mr Fitchie as to what 10 the additional cost under the contract might be likely 11 to be? 12 A. No, I did not. 13 MR LAKE: Thank you, Mr Laing. 14 My Lord, I've got no further questions for Mr Laing. 15 CHAIR OF THE INQUIRY: I don't know if there are any -- 16 I don't think there is any comments. 17 MR DUNLOP QC: My Lord, there's a very short series of 18 follow-up questions on the import of Wiesbaden that 19 I would welcome the opportunity of asking. No more than 20 five minutes. 21 CHAIR OF THE INQUIRY: Very well. Anyone else? 22 MR FAIRLEY: I wonder, my Lord, if I might consult with my 23 instructing solicitor. There was a point that I may 24 wish to raise, but I may not. I can do that while 25 Mr Dunlop is asking his questions. 50 1 Examination by MR DUNLOP QC 2 MR DUNLOP QC: Mr Laing, good evening to you. You mentioned 3 a short while ago the EMCOR Drake & Scull case. 4 Am I right in understanding that that was a decision of 5 Lord Drummond Young in which there had been a dispute, 6 amongst other things, a dispute as to what a contract 7 meant regarding the extent to which parties were bound 8 by drawings in a tender package? 9 A. That is my recollection, Mr Dunlop. 10 As I said in my response, the drafting -- I think 11 I said the drafting of that particular clause was 12 something I consulted with my partners about, and those 13 who were more familiar with that case, having been 14 involved in it, as I recall. 15 Q. The question of the extent to which parties might be 16 bound by drawings in this particular case would 17 obviously have been a point of some concern and 18 something that needed to be clarified? 19 A. That is logical, yes. 20 Q. Then thinking about Wiesbaden, am I right to understand 21 that while the language needed to be sorted, Wiesbaden 22 indicated the view as to what BBS were prepared to 23 accept in terms of risk? 24 A. I think that -- as I said, Mr Dunlop, I wasn't there. 25 That is a perfectly sensible and logical interpretation 51 1 of Wiesbaden, yes. 2 Q. In his evidence, Mr Walker was very clear that he was 3 prepared to accept certain aspects, but was very 4 dogmatic as to what he was and wasn't prepared to accept 5 in terms of risk. 6 Does that accord with your recollection at the time? 7 A. It does. 8 Q. Am I right in understanding that following Wiesbaden, 9 there was no alteration in Mr Walker's position as to 10 what risks he was prepared that BBS should accept? 11 A. Yes, I think that is fair. I cannot think of him 12 changing his view as he went through the negotiation. 13 Q. Finally, am I right in understanding that as we track 14 through the changes and wording post Wiesbaden, while 15 the language changes, am I right to understand that 16 there is no concession on the question of risk adverse 17 to the interests of BBS? 18 A. Correct. 19 MR DUNLOP QC: I'm obliged. 20 I'm obliged, my Lord. 21 CHAIR OF THE INQUIRY: Mr Fairley? 22 MR FAIRLEY: No, my Lord, I don't need to ask any questions. 23 CHAIR OF THE INQUIRY: Thank you very much, Mr Laing. We 24 are very grateful for your co-operation in this 25 videolink. 52 1 A. Thank you, my Lord. 2 CHAIR OF THE INQUIRY: You're technically still under your 3 citation. It would be possible to recall you if 4 anything arises. Hopefully that won't be necessary, but 5 in the meantime, thank you very much, and enjoy the rest 6 of your evening. 7 A. Thank you very much. 8 (The witness withdrew) 9 CHAIR OF THE INQUIRY: We will adjourn to enable the 10 equipment to be restored. We will resume again, 11 I think, at 11.15. 12 (10.57 am) 13 (A short break) 14 (11.17 am) 15 MR NEIL RENILSON (continued) 16 Examination by MR LAKE (continued) 17 CHAIR OF THE INQUIRY: Mr Renilson, sorry we are a bit later 18 than we anticipated. There were some technical 19 difficulties at the beginning with the videolink. 20 You're still under oath. 21 MR LAKE: Mr Renilson, when I was questioning you yesterday 22 afternoon, one of the issues that arose was whether or 23 not there were changes to be made to your statement. 24 A. I don't have a paper copy of the statement that was here 25 yesterday. (Pause) 53 1 Okay, thank you. Sorry, yes. 2 Q. Did you have a chance to look at a copy last night? 3 A. I did. 4 Q. Did you discover there were things you felt it would be 5 appropriate to change? 6 A. Well, yes. Certainly things I would wish to, yes. 7 Q. Do you have a record of what they are or -- 8 A. Yes. I would say that there's over 100 pages of it, and 9 I by no means went through the whole thing. 10 Q. If you have the statement on screen, I should say, just 11 to make it easier to start with, we are looking at the 12 version with the amendment marked on to it, which is 13 TRI00000176. 14 A. Yes. 15 Q. Could you tell me, which is the first correction that 16 you -- 17 A. Well, I would like to go to paragraph 255 to start with, 18 please. 19 Q. That is on page 79? 20 A. Sounds right. 21 Q. It starts at the foot of the page. 22 A. Right. Yes. 23 Now, there's a reference there to a document -- yes. 24 Now, I see that's -- that was not on. This red mark at 25 the side was not on -- until I'd been using the version 54 1 I sent, not this version with -- that's been corrected, 2 where it picks up that the -- the document reference was 3 incorrect. 4 So that's already been picked up. 5 In which case can we just scroll down to the next 6 part of 255. 7 Okay. That document 79774, could we go to that 8 document? 9 Q. Could you call that up, please. 10 A. And to page 40 of that document. 11 Q. What is the issue that arises here? 12 A. Now, the issue here, this is -- if I remember correctly, 13 the signature sheet from a meeting on 13 May. The top 14 signature of somebody Campbell, countersigned by 15 Gill Lindsay, is dated 12 May. Scrolling down, there's 16 then my signature dated 13 May, and also the signature 17 of Bill Campbell. 18 If we can then scroll to page 44, exactly -- very 19 similar signature by Gill Lindsay and on this occasion 20 on behalf of tie, it's Willie Gallagher and Kenneth Hogg 21 who have signed it, although they haven't dated it. 22 Now, having looked at 80738 and having looked at 23 this document, and also having looked at 0129240 -- 24 sorry, 01289420, which also is a meeting that took place 25 the same day, I have a problem here in that neither 55 1 Mr Hogg nor Mr Campbell were present at these meetings. 2 Any of the meetings that day, as far as I can see. 3 There's no indication that they were on the premises. 4 I just wonder if somewhere along the lines, some -- 5 some stuff, some documents have become misplaced. 6 Now, at that point all I would say is I do not think 7 it would be helpful if I went through a forensic 8 examination looking for -- coming across things where 9 there are inconsistencies and things that aren't. 10 So to enable things to move forward, I would -- 11 Q. Could I assist here. Could you look, please, in this 12 document. You referred firstly to page 40. If we go 13 back to see the one we were looking at. 14 A. Yes. 15 Q. Above the signatures in the testing clause, we see: 16 "In witness whereof this Agreement consisting of 17 this and the preceding 15 pages." 18 Do you see that? 19 A. Yes. 20 Q. Sure enough, if we scroll down to the foot of the page, 21 this is page 16. 22 A. Mm-hm. 23 Q. If we go back through 16 pages to page 25, so going back 24 15 pages, to find page 1, we see this isn't a minute of 25 a meeting. This is an agreement that was signed between 56 1 the City of Edinburgh Council and Transport Edinburgh 2 Limited. 3 So those signatures -- do you understand those 4 signatures are not bearing to be signatures of a record 5 of a meeting, they are signatures of an agreement which 6 may or may not have taken place at that meeting. Do you 7 understand? 8 A. I understand the point you make. But those signatures 9 are dated 13 May. 10 Q. Indeed. 12 and 13 May. 11 A. All right, sorry. I'm not disputing 12th with the two 12 CEC signatures. 13 I am happy to take the evidence that has been 14 submitted in terms of my original statement, my amended 15 statement, and the amendments, as being whatever the 16 word is, as being my evidence. I don't need to pursue 17 this any further. 18 Q. Okay. 19 Now, I still want to ask you a few additional 20 questions about what's contained in your statement. 21 What I would firstly like to do -- 22 A. Sorry. May I -- things were a bit disconnected 23 yesterday afternoon with the breakdown in the machinery 24 and so on. 25 There was one question that Mr Lake asked me which 57 1 I failed to answer properly. 2 Q. Which question was that? 3 A. Well, it was with regard to the CERT project. Would it 4 be possible for me to provide what I would deem 5 a satisfactory answer to that question before we 6 proceed? 7 Q. Before we go any further, I would like to understand 8 what question in relation to the CERT project is it to 9 which you would like to provide an answer? 10 A. You were asking me about the behaviour of Lothian Buses 11 vis-a-vis the award of the CERT contract to First Bus. 12 You repeatedly asked me versions basically of 13 a question which said: had Lothian Buses -- you seemed 14 to be implying that Lothian Buses had acted improperly 15 by taking a robust commercial response to the prospect 16 of new competition from FirstGroup in that area; and 17 with the implication that because the impact of that 18 robust competitive response had been that FirstGroup had 19 then decided not to proceed with the project, CEC had 20 been unable to get somebody else to proceed with the 21 project, the project fell, and CEC lost a substantial 22 amount of money, a number of millions of pounds; that in 23 some way this was wrong or inappropriate. And I wish to 24 clarify there that my understanding is, and always has 25 been, that the primary responsibility of a company 58 1 director is to protect the interests of that company. 2 Yes, it has responsibilities towards its 3 shareholder. Indeed -- and in the case of Lothian Buses 4 at that time, it had a major shareholder of 91 per cent 5 of the shares which was CEC. 6 But on the paper wraps stone principle, the 7 responsibility to the company trumps the responsibility 8 to the shareholder. I'm not a lawyer. I don't know the 9 Companies Act off by heart, but that's obviously advice 10 I had been given over the years, certainly up until 11 2008. I'm not aware if things had changed then. 12 Therefore, the position that my predecessors took 13 and I continued with was that our primary responsibility 14 under the Companies Act was to protect Lothian Buses. 15 If as a by-product of that City of Edinburgh Council 16 were damaged financially or suffered financially, that 17 was an unfortunate by-product, but my responsibility 18 under the Companies Act, my primary responsibility was 19 to protect the business and interests of Lothian Buses, 20 not to protect the business or to protect the interests 21 of my primary shareholder; and therefore we took the 22 action we did and no doubt whatsoever in my mind, or the 23 mind of the rest of the Board at that time, that that 24 was -- and the previous Board, because this was ongoing 25 when I arrived, was the correct course of action. 59 1 Yes, primary shareholder suffered, but it was not 2 the wrong thing to do. It was exactly the right thing 3 to do. 4 Q. We have your answer to that. 5 Could you look, please, then at page 6 of your 6 statement, at paragraph 22. 7 Enlarge paragraph 22? 8 A. Yes. 9 Q. At the start of that, you can see we considered this 10 yesterday: 11 "After the CERT project collapsed there was a lack 12 of trust in government of CEC's ability to deliver 13 transport projects, and of their being entrusted with another 14 project as they had failed to deliver on past projects." 15 Now, can we just be clear, from what you're saying 16 about the collapse of the CERT project, that was caused 17 by the reaction of Lothian Buses to it? 18 A. Yes. By the reaction of Lothian Buses specifically to 19 the award of the operating contract to First Bus. 20 Q. So the failure was more attributable to that than any 21 particular aspect of CEC's ability to deliver projects? 22 A. No. I would read that the failure was due to the 23 palpably inappropriate strategy that CEC followed of 24 awarding a contract for a business that would damage one 25 of their own 91 per cent owned companies to its primary 60 1 competitor. 2 If CEC had chosen, as they did, to award that 3 contract to FirstGroup, then that was effectively on 4 their own head be it. 5 Q. Right. Now, can we just, following that through, 6 I think you said yesterday that had it been awarded to 7 someone other than First Bus, there wouldn't have been 8 concern on the part of Lothian Buses? 9 A. No, that's not what I said. 10 Q. Do we understand that anyone then that was doing that 11 project would have drawn the same response from 12 Lothian Buses? 13 A. That's not what I said yesterday. 14 Q. Can you tell me which it is? 15 A. I will tell you what I said yesterday. I said that the 16 prospect of a remote bus company that did not exist in 17 Edinburgh, did not have a presence in Edinburgh, taking 18 on the CERT project, would be unwelcome. It would not 19 be viewed, however, with the same concern, the same -- 20 anything like the same level of concern as FirstGroup 21 taking it on. 22 I will explain why if you wish. 23 Q. No, what I would like you to do is just answer the 24 question, which is: would the reaction of Lothian Buses 25 have been the same if it was someone other than First Bus 61 1 had been awarded CERT? 2 A. It would not have been the same. It would have been 3 similar, but by no means the same. 4 Q. So the only thing you consider that could be said that 5 CEC had done wrong, was awarding it to the principal 6 competitor of Lothian Buses? 7 A. At that point -- 8 Q. Could you answer my question, please. 9 A. It's not a yes or no question, I'm afraid. 10 Q. I think you will find it is. I will ask it again so you 11 can be sure. 12 The question is: would the reaction of Lothian Buses 13 have been the same -- pardon me, wrong question. 14 So the only thing that could be said that CEC had 15 done wrong was awarding the CERT contract to the 16 principal competitor of Lothian Buses? 17 A. No, that's not correct. 18 Q. What caused CERT to fail was when First Bus walked away 19 in light of the Lothian Buses response. Am I correct? 20 A. Yes. 21 Q. So essentially the problem, what CEC might be said to 22 have done wrong, was failing to accommodate or comply 23 with the wishes of Lothian Buses? 24 A. No. 25 Q. Lothian Buses gave a demonstration of their power to 62 1 scupper a City Council transport scheme? 2 A. No. 3 Q. Could we look, please, at page 9 of your statement. 4 I would like to look at the paragraph at the top of the 5 page here, above the heading "My role"? 6 A. Yes. 7 Q. What I'm interested in reading is from the sixth line of 8 this. I think I will have to read the whole thing to 9 get the context for the reference to those periods. If 10 we go to the previous page to pick up the start of 11 paragraph 31. It begins: 12 "One concern about a number of externally recruited 13 tie staff was that they had endured periods of 14 unemployment and were highly motivated to keep their 15 jobs. The tram scheme was frequently, even from the 16 early days, under threat. It was always an issue at 17 both local and Scottish elections. There was always the 18 belief amongst tie employees that the project could be 19 cancelled and they would lose their jobs. That 20 situation led to a number of things, including making 21 sure in the run up to elections that there was no bad 22 news. During those periods, delays, overspends and 23 problems were diligently suppressed from politicians and 24 the media, sometimes for six or nine months." 25 Firstly, take note of that. You're talking about 63 1 information was deliberately suppressed. 2 A. Yes. 3 Q. What information do you consider was suppressed? 4 A. The general state of the project. I think I've listed 5 them there. Delays, overspends and problems. 6 Q. When you talk about overspends, are you talking about 7 actual expenditure or projections of expenditure? 8 A. Projected. 9 Q. So basically we're just talking about estimates of cost? 10 A. Estimates of the future cost of the project. 11 Q. Which delays are you referring to there? 12 A. Delays in the progress of the project. 13 Q. Now, which elections are you referring to? 14 A. This was fairly early on. It would be difficult for me 15 to put a precise time on it, but it was certainly during 16 the period when tie were still in Verity House and we 17 had the Board meetings in Verity House, before they 18 moved to Citypoint. So this was after Hanover Street 19 and before Citypoint. 20 Q. Which elections are you referring to? 21 A. Now, the Council elections were 1999 and then they would 22 have been 2004. I think the Scottish Parliament 23 elections and the Council elections coincided at that 24 point. So if that is correct, I'm talking about the 25 run-up to the 2004 Council and Scottish Parliament 64 1 elections in May 2004. If I've got my year wrong, 2 then -- I can't have got my year wrong because it 3 wouldn't have been as early as May 2003. It must have 4 been May 2004. 5 Q. So we're talking about the period there, even at the 6 stage of trying to get the Bills through Parliament, at 7 an early stage? 8 A. Correct. Absolutely. It was early stage stuff. 9 Ewan Brown was still the Chairman. 10 Q. Could we look at page 23 of your statement. 11 Could we look at paragraph 83. You say: 12 "A clear example of bad news being suppressed was 13 the GBP375 million cost figure. That was being stuck to 14 for nine months after tie knew the final cost was going 15 to be way in excess of that figure. As soon as the 16 election was out of the way that news came out very 17 quickly." 18 Which GBP375 million cost figure are you referring 19 to there? 20 A. Yes. This is exactly the same point as you raised 21 earlier. This is an amplification that occurs later on. 22 At that point in time, and, as I say, let's -- 23 unless you can correct me, we will say this is the 24 May 2004 elections, then what I'm saying is that the 375 25 cost figure was stuck to from, let's say, late autumn 65 1 2003. Well, no, late 2003 until mid-2004. Ie the 2 election in May. 3 And that 375 cost figure was the original figure 4 that was meant to include construction of what became 5 line 1a, line 1b, the section from Granton to Newhaven, 6 and the line from Newbridge -- sorry, from -- from, 7 from, from -- Ingliston Park and ride stop to Newbridge. 8 Q. What I'm interested in is you say -- let's go back to 9 your statement -- nine months after tie knew the final 10 cost was going to be way in excess of that figure? 11 A. Yes. 12 Q. When did you say that tie knew the final cost was going 13 to be way in excess of that figure? 14 A. I've said nine months there. I might have actually been 15 strictly more accurate to say six/nine months. Clearly 16 I cannot put at this length of time we're talking -- 17 where are we? 18 Q. Can I just be clear -- 19 A. 14 years ago. 20 Q. I'm not interested in whether it was six or nine months. 21 What I'm interested is when do you say that tie knew the 22 final cost was going to be different? 23 A. Six months, say, before the May 2004 election. In other 24 words, late 2003. 25 Q. Okay. Going on now to page -- go back to page 9 of your 66 1 statement, please. 2 A. Yes. 3 Q. Paragraph 36 at the foot of the page. 4 A. Yes. 5 Q. You note here that you had concerns about tie's 6 reporting: 7 "... including, in particular, whether information 8 was always fully and accurately reported." 9 Reporting to whom? 10 A. May I read the rest of that paragraph, please. 11 Q. Of course. It starts: 12 "There were a number of close calls when the project 13 came close to being cancelled. It received considerable 14 negative publicity in the local media, and there was 15 a groundswell of negativity amongst the population and 16 the electorate. Anybody who did not show blind faith in 17 what was being promoted was viewed as being negative and 18 against the project, rather than being viewed as having, 19 perhaps, something to contribute and that perhaps not 20 everything was being done as well as it could have 21 been." 22 A. Can we go back to the point you were actually asking the 23 question about? 24 Q. My question, just to remind you, was: reporting to whom? 25 A. Can you put that bit back on the screen for me. 67 1 Q. Can you go to the previous page and enlarge 2 paragraph 36. 3 A. Right. This is really a sentence on its own. 4 Occasions would occur -- occasions would occur when 5 I would be talking to somebody, possibly a councillor -- 6 Q. Mr Renilson, can I interrupt, because I don't want this 7 evidence to take an awful lot longer than it has to. 8 I'm not interested in why you had concerns yet. What 9 I'm interested in at the moment, my question is, you say 10 you had concerns about tie's reporting; my question 11 is: reporting to whom? 12 A. Politicians. 13 Q. At what stage were you concerned about the reporting to 14 politicians? 15 A. I think in this section we are talking mid -- mid 16 project. Shall we say maybe 4, 5, 6. 17 Q. 2004, 2005, 2006? 18 CHAIR OF THE INQUIRY: When you say politician, do you mean 19 local or national or both? 20 A. If they were -- yes, local, and possibly when we use the 21 term "national", I would mean national politicians, but 22 with an Edinburgh constituency, who I had cause to be 23 having meetings or discussions with. In other words, 24 MPs or MSPs, but primarily -- yes, MPs or MSPs. 25 Primarily councillors. 68 1 MR LAKE: What did you consider was not being reported at 2 that moment or was not being reported accurately at that 3 stage? 4 A. I cannot accurately record -- recall precise issues that 5 long ago. All I can say is that instances arose where 6 I said: well, such and such, such and such; that's not 7 what I was told, that's not what I picked up. That's 8 all. 9 Q. Was that people were saying to you: that's not what 10 I was told. 11 A. That's not what I'd been -- that's not what I had heard. 12 That's not what I had been told. 13 I would have to say that certainly in the case of 14 the MP/MSP category, they had no direct contact from tie 15 anyway. So what they were receiving was second-hand via 16 whoever, the Council, Transport Scotland. 17 Q. Can we look at page 23 of your statement, please. Could 18 we enlarge paragraph 81. What you said there is: 19 "There was a desire in tie to not let it be known 20 when things had gone wrong, as it would attract media 21 attention and increase the chance of the project ending 22 and job losses. I believe it resulted in staff not 23 highlighting problems internally. No news is good 24 news." 25 Now, is there a particular time period to which this 69 1 concern relates? 2 A. It pretty much related across the whole time of the 3 project. It varied in intensity though, and, as 4 I mentioned before, in the run-up to elections things 5 became very tense. 6 It's legitimate -- this is not necessarily 7 illegitimate. It's quite legitimate to try and manage 8 your media, and latterly tie were getting -- or the tram 9 project was getting such a pasting that they quite 10 rightly wanted to try and damage limit. 11 Q. When you say latterly there, what stage of the project 12 are you talking about there, latterly they were getting 13 a pasting? 14 A. I left the project at the beginning of 2009. The 15 pastings got more and more intense as time went on. 16 I would say any time after late 2005, the media was 17 negative. And it just got more and more negative as 18 time progressed. 19 Q. You say it resulted in staff not highlighting problems 20 internally. So what I'm trying to understand is what 21 sort of staff, what role do those staff perform and to 22 whom are they not reporting internally or not 23 highlighting internally? 24 A. I think your question relates to the second sentence in 25 isolation, because the first sentence is a statement in 70 1 isolation and the two, although interrelated -- I think 2 there was definitely a situation on occasions where 3 something might not -- might not have been good news, 4 and that was -- the individual staff might have thought, 5 or the two or three staff involved, might have 6 thought: let's sit on that for a moment and see if we 7 can find a work around, a way in which we can try and 8 sort this out, so that it doesn't immediately pass on 9 the bad news. Inevitably, if they weren't, then it 10 would have to be passed on. But -- 11 Q. Is that -- 12 A. I was just going to say, but that process of delay 13 sometimes was perhaps not the best course of action. 14 CHAIR OF THE INQUIRY: I think the question was: which 15 category of staff, what functions were these staff 16 performing, and to whom were they not reporting bad 17 news? 18 A. I would have said primarily commercial, and -- 19 commercial and engineering. I had no evidence 20 whatsoever that that happened in financial. And the 21 question of whom, their superiors. 22 MR LAKE: Who do you mean by superiors, what level in the 23 company. 24 A. It depends entirely on who the staff were. Middle -- 25 lower ranking staff to middle managers, middle managers 71 1 to higher managers. 2 Q. How much involvement did you have in those matters, 3 those tiers of tie to be able to understand what was 4 going on? 5 A. I -- I should -- I worked in tie's offices most of the 6 time. Inevitably you would be dealing with a phalanx in 7 my TEL role, people right across the spectrum. So 8 sometimes I would be sorting out engineering matter with 9 the engineers, financial with the financial people, 10 et cetera. And it was large open plan offices and it 11 was inevitable that in the process of sitting with 12 somebody for half an hour or whatever, they would take 13 phone calls. Other people would come and discuss 14 things, and you just picked things up, and, you know, 15 I'm not quoting an exact example, but the principle of 16 you're there, the phone rings, he picks it up. It's 17 clearly, you know: oh dear, oh no, oh, right, okay, 18 don't mention that and try and see what we can do to 19 sort it out; sort of conversation that you -- you are 20 sort of party to. 21 And that sort of thing happened. 22 Q. Could we look at the following page, page 24. 23 A. Yes. 24 Q. And enlarge paragraph 85. 25 A. Thank you. 72 1 Q. You say here: 2 "The Government Gateway Reviews, Audit Scotland and 3 Transport Scotland were also 'managed' by tie. tie were 4 conscious that there were potential problems that might 5 result in delay, reduction or cancellation of the tram 6 scheme and did their best to ensure that the Office of 7 Government Commerce, Audit Scotland and 8 Transport Scotland were told what they wanted to hear. 9 Information, facts, figures and timescales were 10 massaged." 11 A. Yes. 12 Q. My first question: what was your involvement in the 13 Gateway Reviews dealing with Audit Scotland and dealing 14 with Transport Scotland? 15 A. I was involved in all the three Gateway Reviews. I was 16 part of the team that met with the Gateway Review 17 people. These -- these meetings were arranged some time 18 in advance. I think there were four participants, from 19 the OGC, and there was consistency between them in that 20 pretty much the same people came on each of the three 21 occasions. 22 Q. So when you were dealing with the Office of Government 23 Commerce carrying out their various reviews, were you 24 aware that information, facts, figures and timescales 25 were being massaged to provide to them? 73 1 A. Yes, because there were pre-meetings held. It was 2 decided who would go and meet them. It was a formal 3 meeting. There would be four of them in a room and 4 maybe six of us. Those six people would be advised 5 a couple of weeks beforehand. There would be a couple 6 of pre-meetings. 7 I can't remember if we were actually given like 8 advance notice of the questions or the areas of 9 discussion. We may have been. But certainly there were 10 pre-meetings held, a couple of pre-meetings, two, maybe 11 three, before the meetings with OGC took place, and the 12 meetings with the OGC weren't just a one-hour meeting. 13 They lasted a -- they were spread over a couple of days. 14 And everything was gone through as to what we have 15 to tell them -- well, what they want to know, and this 16 is -- this is what we'll say, and you'll say that bit 17 and you cover that bit, and that sort of thing. 18 So that's what I mean -- that's how I was involved, 19 quite intimately. 20 Q. Were you content that information, facts and figures and 21 timescales going to the OGC were being massaged as part 22 of that -- as you were part of that process, were you 23 content with it? 24 A. I don't think at any time were they given wildly 25 misleading information. Had they been, I wouldn't have 74 1 been content. 2 CHAIR OF THE INQUIRY: I think the question was: were you 3 content that information, facts and figures and 4 timescales going to the OGC were being massaged? 5 A. I went with it because it was of modest level. 6 CHAIR OF THE INQUIRY: Does that mean you were content? 7 A. Yes. I allowed it to happen. Therefore by definition. 8 CHAIR OF THE INQUIRY: Well, it would help if you gave 9 direct answers. We will get through this more quickly 10 to the benefit of everyone, including yourself. 11 A. Okay. 12 MR LAKE: Were you involved in dealings with Audit Scotland? 13 A. I cannot -- I cannot remember specifics. 14 Q. What is the basis for your conclusion or your view that 15 Audit Scotland were managed by tie, or that the 16 information going to them was massaged? 17 A. It's what I picked up, just the impression I got. I may 18 have been involved in the meetings. I cannot remember. 19 Q. What do you mean when you say an impression you picked 20 up? 21 A. If there was -- if there was a culture of ensuring that 22 bodies such as 1, 2 and 3, information given to them was 23 checked before it went and reviewed, et cetera, then it 24 would apply to all those three bodies. 25 Clearly I was aware in the case of OGC. In the case 75 1 of Transport Scotland, I cannot immediately bring to 2 mind specifics, but there would have been, and I'm sure 3 there were in the case of Audit Scotland. But it's 4 a long, long time ago. But that was the basic culture, 5 is what I'm trying to say. 6 Q. And you participated in that culture, didn't you? 7 A. I was part of it, and I was a moderating influence. 8 Q. Well, if you -- it would have been open to you, if you 9 felt something was going wrong, or something was 10 improper, to have spoken to representatives from any of 11 those three bodies? 12 A. Yes. 13 Q. But you didn't? 14 A. No. 15 Q. So you participated in the culture about which you 16 express dissatisfaction; is that fair? 17 A. Yes. Would you like me to answer why? 18 Q. No. 19 A. Thank you. 20 Q. I think, from reading through your statement in general, 21 it would be fair to say there is a concern that you have 22 from the actions and separating the operator of the tram 23 scheme from the delivery company. In the broadest 24 terms, is that fairly put? 25 A. Sorry, could you repeat the question? 76 1 Q. You have a concern as to the decision to separate the 2 operator of the trams from the delivery company, having 3 two separate entities, tie and TEL. 4 A. Oh, I have concerns, yes. It was to my mind not the 5 right thing -- not -- 6 Q. What I want to try and understand is what problems did 7 that give rise to in practical or concrete terms? 8 A. We were where we were. tie had been created first with 9 a specific single function, to deliver transport 10 projects, and as far as we were concerned, the tram. 11 TEL did not come along until some time later. So on 12 the basis of we are where we are, the system was 13 modified and tie was -- TEL was added in. 14 Had we been starting at that point with a clean 15 sheet of paper, we would have had one body that did 16 both. 17 Q. Can I just focus back on my question, please. What I'm 18 looking for is: can you identify any practical or 19 concrete problems that arose as a result of having one 20 company as operator and one company as delivery? 21 A. Only -- only from the administration point of view that 22 inevitably it led to duplication and also in some 23 people's minds confusion as to quite who was who and who 24 did what. 25 Q. Who was who? What did tie do? 77 1 A. tie's role, as regards the tram project, was to procure 2 the tram. Their job was to obtain prices for the 3 delivery of the project, and secure contractors to 4 deliver the project. So -- oh, and also to originally 5 obtain the parliamentary powers. 6 So their job was purely to effectively arrange for 7 the design and build of the project using outside 8 contractors. 9 Q. What was the role of TEL? 10 A. The role of TEL was twofold. If I may just say, and as 11 regards tie, the day the tram became operational, 12 effectively tie had no further role. They walked away. 13 TEL similarly had two phases. During the design 14 build phase, TEL's job was to ensure that what was being 15 designed and what was being built was what was required 16 or what was deemed best to provide an appropriate 17 tramway that could operate at break-even or better, 18 deliver a BCR of 1 plus, and thereby effectively to give 19 the design parameters from a commercial point of view to 20 tie. 21 tie would then, with their subcontractors, design 22 and build the hardware. 23 Once the tram became operational, TEL would assume 24 operational control of the tram and it would fit into 25 the TEL portfolio of transport operations in the same 78 1 way that it's actually worked out. You have Transport 2 Edinburgh with Lothian Buses and Edinburgh tram. 3 Q. In particular, what role, if any, did TEL have in 4 relation to the construction of the tram network? 5 A. In defining -- when you say the construction of the tram 6 network, do you mean the definition of the tram network 7 or the construction of -- 8 Q. The construction. 9 A. No direct role in the construction, other than that we 10 specified what we wanted and where we wanted it. We 11 want the tram stops there, there and there. We want -- 12 we're going to need this power feeds here, here and 13 here. We're -- et cetera. How -- where we would need 14 turn backs, where we could turn trams short. So you 15 would want to design it so that you didn't have to run 16 every tram from one terminus to the other. 17 If Princes Street was closed for Hogmanay or 18 whatever, marathons, you need to be able to turn the 19 trams at Haymarket. And also at York Place. All that 20 sort of operational stuff. 21 So there you are, tie. Here is the track layout. 22 And then tie's job was to go off and have it designed 23 and built. 24 Q. What was the role then of the Tram Project Board? 25 A. The Tram Project Board represented really where the hard 79 1 work was done. It drew people from tie and from TEL, 2 and it was really where the fundamental decisions and 3 the day-to-day hard work was done. 4 tie and TEL both had people on their Board -- 5 non-execs on the Board of tie, who lived in England and 6 came up for a Board meeting once a month. It was not 7 appropriate for them to spend huge amounts of time 8 getting into the minutiae of it, ditto TEL. 9 So the Tram Project Board drew on the people who 10 were really in both organisations, and outwith, with CEC 11 too, and Transport Scotland, when they were involved, 12 and the Tram Project Board -- Tram Project Board role 13 was really to make it happen, to drive it forward, using 14 resource pulled in from all quarters. 15 Q. If we look back at your statement, please, and go to 16 page 42. 17 A. Yes. 18 Q. If we could enlarge paragraphs 134 and 135. In 134 you 19 note: 20 "The only oversight TEL exercised over the Tram 21 Project Board prior to May 2008 was in as much as some TEL 22 directors and staff sat on the Tram Project Board." 23 A. Mm-hm. 24 Q. If I just pause there, did the position change after 25 May 2008, contract signature? 80 1 A. Yes. Sorry, was there a question there? 2 CHAIR OF THE INQUIRY: The question was: did the position 3 change after May 2008, after the contract signature? 4 A. It may well have changed in governance terms. In terms 5 of the effect on the ground, no. 6 Q. What do you mean, it may well have changed in governance 7 terms? 8 A. Graeme Bissett used to produce all the governance papers 9 et cetera. And following contract close it may well 10 have been necessary -- I don't know, not my area -- for 11 the governance arrangements to change. 12 But to answer the question, the Tram Project Board 13 continued to function as effectively where it happened 14 in terms of making the tram happen. 15 Q. Could we look at the start of paragraph 135. You note 16 there: 17 "TEL had no involvement or responsibility for the 18 actual construction of the tramway, that was tie's 19 responsibility." 20 A. Yes. 21 Q. Is that a summary of what you've said to me a little 22 while ago? 23 A. Yes. TEL -- I'm having a house built. I decide where 24 I want the rooms, the doors, the windows. tie, you 25 build it for me. I didn't -- you know, they were the 81 1 builder. I was the specifier. 2 Q. Could we look, please, at a document. It's CEC01395434. 3 We can see here this is the front page of a document 4 with the title, "Edinburgh Tram Network Final Business 5 Case Version 2", and a date of 7 December 2007? 6 A. Yes. 7 Q. You will be familiar with this document, I take it? 8 A. It certainly looks very familiar. 9 Q. Could we look, please, at page 90. 10 A. Yes. 11 Q. Sorry, I've got the wrong page, my apologies. Could we 12 go to page 92, and enlarge paragraph 6.45. We see here 13 noted in the Final Business Case: 14 "The Tram Project Board maintains its role as the 15 pivotal oversight body in the governance structure. The 16 TPB is established as a formal sub-committee of TEL with 17 full delegated authority through its Operating Agreement 18 to execute the project in line with the proposed remit 19 set out in Section 6.32. In summary, the Tram Project 20 Board has full delegated authority to take the actions 21 needed to deliver the project to the agreed standards of 22 cost, programme and quality. The Tram Project Board 23 also exercises authority over project design matters 24 which significantly affect prospective service quality, 25 physical presentation or have material impact on other 82 1 aspects of activity in the city." 2 A. Mm-hm. 3 Q. Now, would you agree that that tends to put -- without 4 any doubt, it puts the Tram Project Board as being at 5 the heart of the governance of the tram? 6 A. Yes. 7 Q. The Tram Project Board is clearly stated to be 8 a sub-committee of TEL? 9 A. Yes. 10 Q. So really it was TEL seemed ultimately to have the 11 responsibility for these matters through its 12 sub-committee, the Tram Project Board? 13 A. In -- in that context, that's exactly what the 14 governance says, yes. But I say, in reality, it was the 15 Tram Project Board that did the work. Whether the Tram 16 Project Board was a formal sub-committee of TEL was, as 17 I say, a governance issue. 18 It had the full delegated authority, as it says. 19 Ultimately, the authority was -- was City of Edinburgh 20 Council as project sponsor, but yes. 21 Q. But you were the Chief Executive Officer of TEL at this 22 time? 23 A. Correct. 24 Q. It seems almost to be a matter of which you were not 25 aware that it was TEL, through its Board sub-committee, 83 1 which was described as pivotal oversight body in 2 relation to this project? 3 A. I was aware that the governance frequently -- the 4 governance arrangements changed a number of times. 5 Q. This is the Final Business Case. I take it you'd had 6 a hand in approving the Final Business Case? 7 A. Yes. But we might even find my signature on the back of 8 it. 9 The governance issues were dealt with in the case of 10 TEL by the -- primarily by the Finance Director and the 11 Chairman. David Mackay had a particular interest in 12 governance, and was quite good at it, and the Finance 13 Director equally, it was his specialist subject. 14 Although I was the CEO, I was happy to leave governance 15 to the Chairman, by and large, to -- the governance to 16 the Chairman and the Finance Director, and they would 17 brief me as required while I got on with making the tram 18 happen, if I could. 19 Q. Could we look at page 94 of this document, please. The 20 upper part of the page. 21 A. Yes. 22 Q. You can see the heading "6.4. Governance structure for 23 Construction period"? 24 A. Yes. 25 Q. Right at the very top, "CEC including tram 84 1 sub-Committee", and in the same box with them, you can 2 see TEL? 3 A. Yes. 4 Q. Beneath that you can see the Tram Project Board, and 5 beneath that, in turn, a number of what are presumably 6 intended as sub-committees? 7 A. Yes. 8 Q. They have reports from various people below them, 9 various disciplines below them, all running through the 10 Tram Project Director; do you see that? 11 A. Yes. 12 Q. Now, the one organisation that's not referred to here as 13 the governance structure for the construction period is 14 tie? 15 A. Yes. 16 Q. Were you aware of that? 17 A. It may not be named, but clearly all those boxes down 18 the bottom, every function in those boxes is a tie 19 function, and indeed the Tram Project Director is a tie 20 person. 21 Q. They are an employee of tie? 22 A. They were all either employees or contractors contracted 23 in by tie. So everything from Tram Project Director and 24 below are tie -- yes, fundamentally they are -- they are 25 tie projects and people. 85 1 The only thing I'm slightly unsure of is the box, 2 "Operational Planning". 3 Now -- 4 Q. I don't need to go into that at the moment. 5 A. Sorry, okay. 6 Q. Talking about tie employees, how many employees did TEL 7 have at this time? 8 A. None. In my time, TEL had no employees. 9 Q. So did that not cause a problem with TEL discharging the 10 functions placed on it in terms of the final business 11 plan? 12 A. TEL drew what resources it required from elsewhere. It 13 drew staff and funds and facilities from CEC, from tie, 14 from Lothian Buses. 15 Where we did have people who worked for -- who were 16 outsiders who were brought in full time, and I can only 17 think of one, he was put on the Lothian Buses payroll. 18 Q. So if you had these people who were all employees of 19 other companies, does that not suggest the mere fact 20 that someone is an employee of another company, other 21 entity, doesn't make any difference to the actual 22 governance structure which puts TEL and the Tram Project 23 Board at the top? 24 A. I'm not sure -- I'll answer what I think is the 25 question. If I haven't picked it up right, I apologise. 86 1 All the people were seeking to deliver the tram 2 project. Whether they were employees of tie, TEL, City 3 of Edinburgh Council, consultants, contractors, 4 whatever, who was actually paying their wages was 5 largely immaterial. This is what we are going to do. 6 This is how we're going to get on with it. 7 Was that the question? If not, I'm sorry. Ask it 8 again. 9 Q. When I referred you to this diagram earlier you pointed 10 out that the Tram Project Director and other people who 11 discharged the functions known here would be tie 12 employees. 13 A. Below that, but if you look up above -- 14 Q. Could you let me finish, just so we understand the 15 question. 16 A. Below that, yes, but I do have a caveat that I'm not -- 17 CHAIR OF THE INQUIRY: Mr Renilson, could you wait. 18 A. Sorry? 19 CHAIR OF THE INQUIRY: Mr Lake asked you to wait because he 20 was going to go on and explain his question. 21 MR LAKE: tie discharged all its functions or most of its 22 functions through employees of other companies or 23 entities; I understand that's what you've told us. 24 A. tie or TEL? 25 Q. Sorry, TEL, pardon me. TEL discharged its functions 87 1 through employees of other companies and entities. 2 A. Yes. 3 Q. So the mere -- and the fact that they were employees of 4 other entities didn't change the fact that they were TEL 5 functions that were being discharged? 6 A. Yes. 7 Q. So the fact that the people who would, say, be involved 8 in financial management, health and safety, or 9 operational planning were employees of tie, doesn't have 10 any bearing on the fact that in terms of governance 11 these were all TEL functions, they were all the 12 responsibility of TEL, does it? 13 A. I'm -- I'm not following your question. I'm sorry. 14 Please ask it again. 15 Q. We will look at a different page then. Could we go to 16 page 91, enlarge paragraph 6.38. We can see what it 17 says here is: 18 "It is also envisaged that certain of the Elected 19 Members of the tie Board and its independent NXDs 20 [non-executive directors] will join (if not already 21 members) the TEL Board or the Tram Project Board 22 (including specific sub-Committees) to ensure 23 consistency of approach and to utilise relevant 24 experience productively. The re-deployment of the 25 Elected Members and the independent NXDs will reflect: 88 1 i. The emphasis of the TEL Board on oversight 2 (on behalf of the Council) of matters of significance to 3 the Elected Members in relation to project delivery and 4 preparation for integrated operations; and 5 ii. The emphasis of the TPB on delivery of the 6 tram system to programme and budget and the preparation 7 for integrated operations." 8 So although it initially describes the transfer of 9 directors, what we do see is an emphasis here that it is 10 to be TEL who have oversight of the project on behalf of 11 the Council? 12 A. Yes. 13 Q. Now, as Chief Executive, were you involved in directing 14 TEL as to how to provide effective oversight of the 15 project on behalf of the Council? 16 A. This is an extract from the Business Case. This is not 17 necessarily the governance arrangements that were in 18 place as at December 2007. Am I correct? 19 Q. We can take a look at those just now, if you wish. 20 Go firstly to document USB00000006. 21 We see this is a pack of papers for the Tram Project 22 Board? 23 A. Sure. 24 Q. For a meeting that was to take place in September 2007. 25 Do you see that? 89 1 A. Yes. 2 Q. Could we look, please, at page 32 within that. We see 3 this is a draft paper put forward to that Board meeting. 4 A. Mm-hm. 5 Q. If we look at the paragraph that begins "The fulcrum". 6 A. Mm-hm. 7 Q. Rather than use the word "pivot", they have elected to 8 use the word "fulcrum" here, and it says: 9 "The fulcrum of the existing governance structure is 10 the Tram Project Board and this key aspect is sustained. 11 Formally, the Tram Project Board reports through its 12 Chairman to the TEL Board and exercises powers delegated 13 to it by the Council through TEL." 14 Was that the position as you understood it? 15 A. The existing governance. So this is as at mid-2007. 16 Q. Yes. 17 A. Tram Project Board ... 18 I would say, yes, that's -- yes. 19 Q. So the Tram Project Board gets its powers from TEL. You 20 are clear about that? 21 A. I -- the Tram Project Board to my mind got its powers 22 from tie, TEL, CEC. It was the body entrusted to make 23 it happen. 24 The actual detail of the governance structure was 25 not my specialty, and to be honest, as long -- my job 90 1 was to make the thing happen. Senior responsible 2 officer, I think the words they use there. 3 Q. Look at the fourth line onwards in that paragraph. It 4 notes: 5 "The Project Senior Responsible Owner (SRO) has 6 delegated authority from the Tram Project Board and this 7 authority is mirrored in the authority given to the Tram 8 Project Director, in turn delegated on day to day 9 matters to the senior members of his tram project team." 10 It's correct to say that you were the Project Senior 11 Responsible Owner at this time, weren't you? 12 A. Yes. 13 Q. What are the functions of a Senior Responsible Owner? 14 A. As I saw them, my function was to use my best endeavours 15 to make the project happen. To make -- make it happen. 16 To drive it forward. 17 Q. And you had that role -- part of the reason it came to 18 you was because you had the position of Chief Executive 19 Officer of TEL? 20 A. I would be the guy left holding the baby when the thing 21 was finished. That's essentially why I was SRO, because 22 I had to be comfortable that what was specified and 23 built was what I needed. 24 Q. And you were the Chief Executive Officer of the company 25 that was charged in terms of the governance with having 91 1 the -- being the Council's principal oversight body? 2 A. Yes. 3 Q. How did you go about ensuring that you had sufficient 4 oversight over all that was happening? 5 A. We had -- well, we had regular Board meetings of both 6 tie and TEL. I attended the tie Board meeting. 7 I wasn't a Director of tie. I was a Director and 8 attended the TEL Board meeting, and over and above all 9 the Tram Project Board, and the reports given by all the 10 various parts of the organisation, every month, to -- 11 certainly to the Tram Project Board, and also to 12 a lesser degree the tie Board and TEL Board. As it says 13 there, the Tram Project Board was whatever the words 14 were. 15 The main driving force or whatever. 16 Q. If -- 17 A. And the Board papers were very -- the Board papers, 18 reports and presentations were how I kept abreast of 19 what was happening, and moved forward on issues where 20 I felt I needed to move. 21 Q. Could we look forward two pages to page 34 of this 22 document, please, and enlarge the lower half. You will 23 see there is a paragraph that begins "In overall terms 24 therefore", and it's got two subparagraphs noting: 25 "The emphasis of the TEL Board on oversight (on 92 1 behalf of the Council) of matters of significance to the 2 Elected Members in relation to project delivery and 3 preparation for integrated operations; and 4 2. The emphasis of the Tram Project Board on 5 delivery of the tram system to programme and budget and 6 the preparation for integrated operations." 7 That's the same wording we saw in the Final Business 8 Case. 9 A. If you say so, yes. 10 Q. If we look to the following page, page 35, if we look 11 under the heading "TPB and its sub-Committees", it says: 12 "The Tram Project Board maintains its role as the 13 pivotal oversight body in the governance structure. The 14 Tram Project Board is established as a formal 15 sub-Committee of TEL with full delegated authority 16 through its Operating Agreement to execute the project 17 in line with the proposed remit set out in Appendix 4." 18 So once again we see the same wording has finally 19 found its way through to the Final Business Case. 20 A. Yes. 21 Q. If we go to the papers of the following meeting, that 22 will be reference CEC01357124. 23 For convenience -- we can see these are the papers 24 for the meeting on 31 October 2007 of the Tram Project 25 Board? 93 1 A. Yes. 2 Q. If we jump forward to page 13, the Project Director's 3 report, and enlarge the lower part of the page, do we 4 see there noted under the heading "Governance" that: 5 "A paper on the governance structure for the 6 construction period was presented and discussed at the 7 Tram Project Board of 26 September. A slightly revised 8 version was agreed at the Tram Project Board of 9 15 October and incorporated in the Final Business Case 10 version 1." 11 A. Mm-hm. 12 Q. Now, can we go back to the slightly later version of the 13 Business Case version 2, which is December, whereas 14 version 1 was October. That's document reference 15 CEC01395434. 16 We were looking at page 91. 17 We had been looking at paragraph 6.38. 18 Now, it's when we were looking at this, and I was 19 asking you about the subparagraph 1, the emphasis of the 20 TEL Board on oversight, you suggested that this was just 21 the Business Case and perhaps not what the governance -- 22 had actually been agreed. Would you accept now that 23 that does accurately reflect the governance that was put 24 in place? 25 A. Yes, I didn't say it wasn't. I was just asking you if 94 1 that was what was in place at the time. We've -- sorry. 2 Yes, if that's what it says, that's what it says. 3 Q. Now, you've previously referred to the fact that you 4 thought that the Tram Project Board was getting 5 authority jointly from tie, TEL and the Council. 6 A. Yes. 7 Q. But when we look at the contemporaneous documents, it 8 seemed that in fact the Tram Project Board was 9 specifically a sub-committee of TEL. Do you accept 10 that? 11 A. Yes. 12 Q. Is it fair to say that the way the company was -- TEL, 13 affairs of TEL were conducted in practice was not one 14 which particularly adhered to the letter of the 15 governance structures? 16 A. Correct. 17 Q. Did you discuss with people that it wasn't being 18 conducted in accordance with the governance structure? 19 A. Not particularly, no. 20 Q. Did you not think that was something that might matter? 21 A. No. I felt that what mattered was that there were 22 appropriate arrangements in place to make sure that that 23 which needed to be supervised was supervised. Whether 24 it was one body or another body, this was about making 25 it happen. 95 1 Q. Was -- if you were not aware that TEL had been the body 2 charged with oversight, is it likely to be the case that 3 other members -- other Board members of TEL were not 4 aware that that was the company charged by the Council 5 with oversight? 6 A. If I have said I wasn't aware, then I have misled you. 7 I was aware. I didn't attach great significance to it. 8 Q. Would it be fair to say the remainder of the TEL Board 9 would not have attracted great significance to it if the 10 Chief Executive Officer did not? 11 A. I cannot speak for every member of the TEL Board. I do 12 not even know -- the membership changed as people came 13 and people went. But certainly there was not a great 14 focus on -- on the -- on the formalities of the 15 governance procedure. 16 Graeme Bissett was very largely the guy in charge of 17 governance. He sat in a desk in the corner by the fire 18 escape and when a new governance structure was required, 19 he would disappear out of circulation for a week, come 20 back with something. It would be presented to the Board 21 meeting. This ticks the appropriate governance boxes. 22 Right, okay, carry on. 23 That's how it was largely viewed. It was something 24 that had to be done to keep the administration in place. 25 Governance. It was not something that -- whenever 96 1 a question came up, we thought, now, which bit of 2 governance covers this? It was: does that need doing; 3 do it. 4 Q. When you say it was necessary to keep the administration 5 in place -- 6 A. The administration in order. 7 Q. The administration within the companies? 8 A. The administration of the whole project, and the various 9 constituents. tie, TEL, TPB, CEC, Transport Scotland. 10 Q. If no particular regard was being had to the governance 11 structures produced by Mr Bissett, was it really being 12 successful in keeping the administration in place and in 13 order? 14 A. You would really have to ask other people that. My view 15 was that the governance structures that Graeme produced 16 that were then discussed at the Project Board or the 17 company boards and were usually adopted with few, if any 18 changes, they seemed to -- bear in mind, CEC, they were 19 on these Boards as well. They were party to these 20 governance structures. Donald McGougan, et cetera. 21 Yes. You know, they clearly had the support of people 22 more specialised in that area than I. And if the 23 Finance Director of CEC, the Director of City 24 Development, et cetera, David Mackay, Graeme Bissett 25 were okay with it, that was okay by me. 97 1 Q. If the Council were being provided with, for example, 2 a Final Business Case which narrated what the governance 3 would be during the construction period, it's reasonable 4 to suppose, isn't it, that the Council would anticipate 5 that that governance structure was actually being 6 implemented and adhered to? 7 A. I'm sorry, could you repeat that? 8 Q. If the Council are sent a Final Business Case which 9 details the governance structure, it's reasonable to 10 suppose that the Council would assume that it was being 11 adhered to? 12 A. Well, yes, if it was in the Business Case, it said this 13 is what's happening, then that is what was happening, 14 yes. 15 Q. And if you weren't adhering to it, that means the 16 Council hadn't been given the correct information about 17 what was in fact happening? 18 A. The Council were part -- as I have said, the Council 19 were part of the whole thing. Their senior officers, 20 their committee conveners, sat on these Boards. If they 21 were unhappy, they would have said so. 22 Q. Were you -- 23 A. Senior -- you know, senior -- seriously senior officers 24 and politicians. They were fully involved. 25 Q. Were you happy with the terms of the Final Business 98 1 Case? 2 A. The answer to that is that I acquiesced. 3 Q. Could you explain what you mean by you acquiesced? 4 A. I was going to cover this earlier when you were talking 5 about -- when we were talking about the OGC, 6 Transport Scotland, Audit Scotland, but you didn't let. 7 It's the same basic principle that applies to if you 8 didn't -- if you weren't comfortable with something, 9 Final Business Case, if you weren't completely bought 10 into it, Final Business Case, signing the contracts, 11 even, it runs right through the whole thing; why didn't 12 you stand up and say? Why didn't you do something? 13 If we go back to when the project first gained 14 traction, there was GBP500 million of government money 15 given. The message from Donald Anderson at the time 16 that we had was -- or -- after the 500 million was 17 confirmed, was: right, we have to -- we have to do this, 18 Neil; we have to make this happen; it might not be our 19 preferred course of action, it might not be your 20 preferred course of action, but we have 500 million of 21 government money on offer to the city; we have to take 22 it; we cannot -- it would be politically suicidal or 23 whatever to actually turn round and say: no, we don't 24 want it. 25 I know some of the other parties took a similar 99 1 view. There was no opposition to that. 2 So we need to -- we need to make this happen, we 3 need to have a tramway; and from that point on it was 4 very clear that there was going to be a tram and that 5 the money would be used. 6 At first it didn't particularly bother me. As time 7 progressed, I started to have more qualms. 8 And I rationalised it with myself and allowed myself to 9 sleep at night by adopting the Schindler strategy. 10 I could have done Trudi Craggs or Rebecca Andrew, 11 stood up, made my point and been moved, because that was 12 inconvenient, not wanted: don't want to hear that, out 13 you go. 14 I didn't wish to be excluded. I thought I could do 15 a lot more good by staying there and mitigating the 16 effects as best I could, by arguing when it was 17 appropriate against things, by lobbying, by speaking to 18 people, to try and ensure that what the city got was the 19 best possible tramway we could. We were going to have 20 a tramway. That was a given now. So what was the point 21 in a futile display of -- a fruitless, futile and 22 pointless display which would result almost certainly in 23 my being side-lined, moved back to Lothian Buses: just 24 get on with running your buses, son. Meanwhile, the 25 tram would be built with not enough tram stops, the 100 1 overhead wires would be so low that you couldn't run 2 open-top tour buses because they require them to be 3 a certain height, et cetera. 4 The best I could do for myself, for the city -- 5 sorry, not for myself, for the best I could do for the 6 city, and for the city's transport network and for the 7 Council, in my view, was to do my best to come up, to 8 exert the influence I could, to mitigate the worst 9 excesses that occurred in certain areas. 10 That's how I slept with myself at night. 11 Q. What were the problems -- 12 CHAIR OF THE INQUIRY: Before we go on to the problems, 13 Mr Lake, what was the answer to the question? You say 14 that you acquiesced in the Final Business Case. Does 15 that mean that you weren't happy with it and you went 16 along with it for the reason -- for the reasons that 17 you've explained at considerable length? 18 A. Yes. 19 MR LAKE: Perhaps we can just look at paragraph 6.32 on the 20 page we were on of the Final Business Case at the 21 moment. 22 Under the heading, "Roles of TEL and tie Boards", it 23 says: 24 "The TEL Board is focused on its overall 25 responsibility to deliver an integrated tram and bus 101 1 network for Edinburgh on behalf of CEC. It will make 2 formal recommendations to CEC on key aspects of the 3 project and matters which have a political dimension." 4 You were the Chief Executive of the company charged 5 with that responsibility of making recommendations to 6 the Council on key aspects of the project, weren't you? 7 A. Yes. 8 Q. If we go briefly to page 24 of this document, and 9 enlarge paragraph 1.110, it notes: 10 "The responsibility for delivering this document was 11 given to the Tram Project Board by CEC through TEL. It 12 is these organisations who now have the responsibility 13 of concluding on the way forward for the project, based 14 on the evidence presented in this Business Case." 15 That once again underlines the key role being 16 discharged by TEL. 17 A. Yes. 18 Q. Now if anyone had qualms and should be in a position to 19 express those to the Council, was that not you as the 20 Chief Executive of the company charged with that 21 responsibility? 22 A. Yes, and I know what would have happened if I had stood 23 up. 24 Q. In terms of you being removed? 25 A. That really didn't bother me. It was not that. It was 102 1 the fact that then the thing would go ahead without 2 any -- well, with very little control. 3 I had sufficient power and gravitas in the 4 organisation, the larger organisation, to be able to 5 almost require things to happen. If I was removed, 6 then, yes, things would be done that would result in 7 a dramatically inferior tram project -- tramline at the 8 end of the day because it would then have become 9 cost-cutting by TEL. 10 Q. Can I suggest to you that what you're saying amounts to 11 this: that it was more important that you be in the 12 project than that the Council be given a view on what 13 you saw the problems as being? 14 A. No. There is an element of truth in what you say, but 15 Donald Anderson, I met him regularly. Tom Aitchison, 16 I met regularly. Donald McGougan. These people were 17 all well aware that I had concerns. I was unhappy. If 18 we go right back to where this started, we are having 19 a tram. We're going to have a tram. We have to do the 20 best we can. 21 And get something good out of this. 22 Q. How did you make your concerns known to Donald McGougan 23 and Donald Anderson? 24 CHAIR OF THE INQUIRY: And Tom Aitchison. 25 A. Right, okay. Tom Aitchison and I would meet regularly. 103 1 Not frequently, but regularly for an update. When I say 2 not frequently, maybe quarterly. 3 Additionally, I would be in phone contact and so on 4 regularly, particularly about specific issues. 5 Tom was well aware of -- that I was, how shall we 6 put it, critical in many ways of the project, but 7 committed to delivering it as best I could. 8 You can pretty much carbon copy that answer for 9 Donald McGougan, except that I saw more of Donald 10 because he was at Board meetings monthly as well, 11 and I also had occasion to see him about finances a lot 12 of the time. 13 Donald Anderson -- it wasn't just Donald Anderson. 14 Andrew Burns, the Convener of Transport of the day, and 15 the key interested councillors as well. Again, it was 16 in -- by way of one-to-one discussion. 17 I think I covered this in my statement. 18 Q. What then the Council were faced with was on the one 19 hand one-to-one discussions of the nature you have 20 described, where you say you expressed concerns. They 21 had that on the one hand. 22 On the other hand, they had the formal documents 23 being issued by TEL such as the Business Case, saying 24 ready to proceed. 25 Now, was it not incumbent upon you, if you had the 104 1 concerns, to make them plain in some way in a written 2 form or to qualify the Business Case, rather than allow 3 the company of which you were Chief Executive to give 4 advice to the Council that all was well? 5 A. No. If Oskar Schindler had followed that policy, 1,200 6 people would have burnt in the gas ovens. Because he 7 chose to follow a different policy, the policy 8 I followed, 1,200 people survived. 9 If he had followed the policy you are suggesting, he 10 would have been taken out and shot. 11 CHAIR OF THE INQUIRY: Mr Renilson, we're concerned with the 12 Edinburgh Tram Inquiry and not with Oskar Schindler. So 13 can you try to concentrate on the question. 14 A. The principle is exactly the same. The answer to your 15 question is no. 16 MR LAKE: Can we look at page 164 of the Business Case. 17 Can we enlarge paragraph 10.36. 18 This is just to identify that within the Final 19 Business Case, a figure you're probably familiar with, 20 the final cost estimate for phase 1a is 21 GBP498.1 million. 22 A. Yes. 23 Q. Once again, you allowed that estimate to go forward to 24 the Council? 25 A. I was part of an organisation and committees that did, 105 1 yes. 2 Q. In your statement, if we take a look at this for 3 a moment, please, at page 66, could we enlarge 4 paragraph 204, please. 5 A. Yes. 6 Q. We see here you set out: 7 "Regarding the issue of GBP498 million I remember 8 very clearly attending a heavyweight meeting in one of 9 the rooms at Citypoint in 2007. I recall there were no 10 politicians present, but that David Mackay and 11 Willie Gallagher amongst others were there. I recall 12 that the latest cost advice was somewhere well above 13 GBP500 million, GBP530 million - GBP540 million or 14 thereabouts. I recall Willie Gallagher saying words to 15 the effect of we can't possibly put that out because 16 that sounds like an absolutely huge increase. Let's 17 take it down, let's make it, say, GBP480 million. That 18 figure doesn't sound nearly so bad, it starts with 19 a four. Someone said that he could not do that and his 20 response was, watch me, well, all right, not 21 GBP480 million. What we are saying is we need to have 22 something that starts with four. GBP499 million is too 23 bloody obvious, let's make it GBP498 million. 24 A discussion ensued. That's where the GBP498 million 25 came from. This was not Gallagher acting alone, most 106 1 of those present either agreed, or acquiesced." 2 I presume you would include yourself in that? 3 A. Correct. 4 Q. I have to suggest to you that what the position was at 5 that meeting was that there were a range of costs 6 available, running from somewhere down to about 7 GBP480 million all the way up to GBP530 million. And it 8 was necessary to exercise judgement on various factors to 9 determine which figure within the range should be put 10 forward. 11 A. Absolutely. 12 Q. It was a question of trying to decide, rather than 13 taking the top end figure, say GBP530 million, where it 14 would be put, and there was a collective exercise of 15 judgement? 16 A. Correct. 17 Q. That came to be that the correct figure was 18 GBP498 million? 19 A. Correct. 20 Q. And it wasn't a situation that we just want to squeeze 21 it down beneath GBP500 million? 22 A. Yes. Well, it wasn't just that situation. It was 23 important. It was deemed important by all present that 24 the figure started with a 4. Well, as verbalised by 25 Willie. But it was where do we settle? It could have 107 1 been, as you say -- I can't remember the specific 2 figures, but quite possibly somewhere between 480 and 3 530. 4 Q. Could I jump back, please, to page 70 of your statement. 5 A. Yes. 6 Q. In fact, initially if we go to page 69 for context. On 7 page 69 we will see we have got a heading of Final 8 Business Case. In paragraph 216 you say: 9 "I am aware that in December 2006 the draft Final 10 Business Case was presented to Council as myself and 11 others in TEL had involvement in its drafting and 12 approval." 13 If we jump over the page then to look at 14 paragraph 218, and enlarge that, it says: 15 "The TEL Board may well have suspected the civil 16 engineering and utilities figures were not right, we 17 were not in a position to challenge them. We had lots 18 of other things to be doing that were our direct 19 responsibilities and considered that if that was what 20 they were saying, then it was their responsibility." 21 The first question: was it not in fact the 22 responsibility of TEL to finalise -- 23 A. Sorry -- 24 Q. -- the Business Case? 25 A. No, because at that point in time we're talking about 108 1 late 2006. The governance arrangements had not changed 2 in the manner in which you described, and TEL was not 3 responsible for tie, so to speak. 4 Q. But in terms of which body actually had the authority 5 for preparing the Draft Final Business Case, what was 6 TEL's role in that, in December 2006? 7 A. Can you go back to the previous page, please? 8 Q. Certainly. Could we look at the previous page. 9 A. Yes. Draft final ... okay. I understand what's said at 10 216, yes. What was the question? 11 Q. My question is: what role did TEL have in approving the 12 Draft Final Business Case? 13 A. Approving it. Well, TEL were happy that it be passed on 14 up the line to the Council. But TEL were not -- at that 15 point my recollection is that the governance 16 arrangements did not have TEL sat above tie. At that 17 time TEL's approval merely meant that TEL was 18 comfortable that what was in there was going to result 19 in the best -- the best tram we could get. 20 Q. Could you look, please, with me at another document. 21 Could we look, please, at CEC01821403. 22 You will recognise this as the Draft Final Business 23 Case from November 2006. I think I said December 24 earlier by mistake. 25 A. Okay, yes, sure. 109 1 Q. Can we look at page 20 of this, please. If we could 2 enlarge paragraph 1.91. We see that what was noted was: 3 "The responsibility for delivering this document was 4 given to the Tram Project Board by the City of Edinburgh 5 Council through Transport Edinburgh Limited and by 6 Transport Scotland. It is these organisations who now 7 have the responsibility of concluding on the way forward 8 for the project ..." 9 Is that not making it plain that Transport Edinburgh 10 Limited did have a role in relation to the Draft Final 11 Business Case even at this stage? 12 A. Sorry, can you remove -- can you remove the enlargement 13 so I can read above it? Conclusion, thank you. 14 Can I just read the whole -- 15 Q. Can we enlarge the lower half of the page to make it 16 easier. 17 A. Thank you. (Pause) 18 Thank you. Can you now ask me the question? 19 CHAIR OF THE INQUIRY: The question was: does the document 20 not make it plain that Transport Edinburgh Limited had 21 a role in relation to the Draft Final Business Case even 22 at that stage? 23 A. Yes. 24 CHAIR OF THE INQUIRY: It's a pretty simple question, 25 Mr Renilson. And if you look at the section -- 110 1 A. I have answered it, yes. 2 CHAIR OF THE INQUIRY: Well, I'm just wondering why it took 3 you so long. 4 A. I wanted to read the whole three paragraphs, I'm sorry. 5 CHAIR OF THE INQUIRY: If you just listen to the questions 6 and answer them as directly as possible. 7 MR LAKE: Could -- 8 A. I will try. 9 Q. Could we go back to your statement, please. 10 A. Yes. I'm just concerned that I give as full and honest 11 and accurate an answer as I can. 12 CHAIR OF THE INQUIRY: We don't want anything other than 13 honesty and accuracy. 14 A. Exactly. And I would like -- 15 CHAIR OF THE INQUIRY: Let's not get into a discussion, 16 Mr Renilson. 17 MR LAKE: Could we look at the following page, back to 18 page 70, please, and enlarge paragraph 218. This is the 19 one we looked at earlier: 20 "The TEL Board may well have suspected the civil 21 engineering and utilities figures were not right, we 22 were not in a position to challenge them. We had lots 23 of other things to be doing that were our direct 24 responsibilities and considered that if that was what 25 they were saying, then it was their responsibility." 111 1 Now, firstly, when you say "they were saying", who 2 are you referring to there? 3 A. I'm reluctant to say this paragraph in isolation. I'm 4 not sure what time it relates to. But if that -- the 5 "they" is almost certainly tie. 6 Q. Let's just provide context. We went there before, but 7 we will go back there, so there's no doubt. 8 If we look at the previous page. 9 A. Right. I understand. 10 Q. We see we have got Final Business Case, and you refer in 11 216 to the Draft Final Business Case, which is 12 December 2006, and the following paragraph, you refer to 13 the Final Business Case in December 2007. Then when we 14 come back to 218, you are talking about what TEL may 15 have suspected. So it could be either, I suppose, 16 November 2006 or December 2007. 17 A. Okay. It really doesn't matter. 18 Q. Who were you referring to when you say "if that was what 19 they were saying"? 20 A. Tie. 21 Q. Now, we've just seen that in relation to either of the 22 versions of the Business Case that it was in fact TEL 23 who had the responsibility for it; do you agree? 24 A. Yes. 25 Q. So what do you mean when you say: 112 1 "We had lots of other things to be doing that were 2 our direct responsibilities ..." 3 Did that not include the business cases? 4 A. TEL, as you pointed out earlier, had no staff and no 5 budget. TEL drew its resources from elsewhere. 6 Therefore TEL was not in a position to go and check 7 tie's figures. 8 To put in a team of -- a team of engineering 9 auditors. 10 So we took what tie supplied us with, interrogated 11 it, and accepted it. 12 Q. Who interrogated -- 13 A. That was "they". 14 Q. Who interrogated it? 15 A. TEL. TEL Board. TEL Board may have suspected, but we 16 were not in a position to challenge them. We had no 17 resource. We had nothing. 18 Q. I don't understand, on the one hand, you can say they 19 interrogated the matter. On the other hand you say they 20 weren't in a position to challenge it. Did they or 21 didn't they? 22 A. We asked questions. 23 Q. So if what you're saying that tie was hampered by a lack 24 of any staff, would it be fair to say that TEL was 25 able -- I will put it the other way round. 113 1 TEL was unable to perform any effective oversight 2 function of what was put forward? 3 A. Because of the interrelationship of the companies, 4 I think Willie Gallagher was on the TEL Board. He was 5 also IC tie. 6 So when he was at TEL, he was -- we would 7 say: Willie, is this right? 8 Q. Do you regard that as an effective oversight function? 9 A. Yes. 10 Q. Really? 11 A. No. Well, it didn't just have to be Willie. We could 12 have asked Stewart McGarrity if the finance was right or 13 whatever. 14 The people were the ones -- the people at TEL, 15 sitting on the TEL Board, many of them were also 16 intimately involved and held positions with tie. TEL -- 17 Q. Who do you mean by that? Who was sitting on the 18 TEL Board that you think had an intimate position with 19 tie that would have been relevant to oversight? 20 A. Without being presented with a list of who was on the 21 TEL Board at that time, but certainly Gallagher. 22 Mackay -- Mackay was on the -- I'm not sure if he was 23 actually on the tie Board. There was Stewart McGarrity. 24 There was Graeme Bissett. People like that. 25 Q. So these are all people from tie as well? 114 1 A. They were people from the group. Some of them were tie, 2 some were TEL, some were both. 3 Q. These were all people who were within tie as well? 4 A. They were all involved in tie, yes. 5 Q. So essentially the oversight by TEL consisted of asking 6 people from tie whether they were happy with the 7 document being put forward? 8 A. That's -- that is -- that's a somewhat cynical view of 9 it, but yes. 10 Q. If we come to the point that you say the TEL Board may 11 well have suspected that civil engineering and utilities 12 figures were not right, I assume there you're referring 13 to members of the TEL Board who weren't also part of 14 tie? 15 A. Yes. 16 Q. Now, was there a suspicion, when you say "may well have 17 suspected", did they or didn't? 18 A. I cannot recall. That's why I have said "may". 19 Q. So it's speculation? 20 A. May. 21 Q. Speculation? 22 A. May. 23 Q. Is that speculation? 24 A. Informed speculation. 25 Q. What informed it? 115 1 A. My memory. 2 Q. Sorry? 3 A. My memory. I believe that was the case. 4 Q. No, I'm talking about whether or not the people on the 5 Board -- I can leave that matter there. 6 I would like to go to a different matter. If we go 7 to page 58 of your statement. 8 A. Yes. 9 Q. If we could enlarge paragraph 179. 10 A. Yes. 11 Q. You open the paragraph by saying: 12 "There was considerable concern in late 2007 about 13 the level of design which had been completed as tie 14 moved towards contract close. We appeared to be heading 15 towards contract close with an awful lot of loose ends 16 and unfinished design business, and would be signing 17 contract completion on the basis of substantially 18 incomplete design. There was some discussion about 19 delaying the tendering until the design work was more 20 complete, but the rush to get out to tender, get prices 21 in and contracts signed overcame the more cautious 22 approach being advocated by some." 23 A. Yes. 24 Q. Now, what pressure was there not to pause at that time? 25 A. The pressure -- the pressure was -- there was concerns 116 1 as follows. And these all amounted to pressure: that if 2 we paused, the price would go up. If there was 3 a project pause, then -- if there was a project pause 4 for design and MUDFA to be completed, it wasn't going to 5 be a project pause of a week or two. We are talking 6 about a year or something. 7 And that the price would go up and the project would 8 become seriously unaffordable. 9 So there was a pressure there to see if we can work 10 around these issues and move ahead as we moved towards 11 contract close. 12 There was -- there was the pressure as well of the 13 media and public pressure, which was just relentless in 14 its build-up and had been, I think, as I mentioned 15 earlier, from mid-2005 onward. All -- if we paused the 16 project, then we were highly likely to lose a lot of 17 the -- well, it was quite possible we would lose key 18 staff from tie. It was pressure from -- yes -- and 19 those and other sources. 20 Q. Was there a concern that funding for the project would 21 be withdrawn? 22 A. I don't think there was concern that funding would be 23 withdrawn. The concern was that the funding would be 24 inadequate because the price would go up. I think the 25 fear was, if we paused this thing, we'll maybe never get 117 1 it started again. 2 Q. How much importance was placed on having the design 3 complete by the time the contracts were concluded? 4 A. Different people placed different levels of importance 5 on that. 6 Q. Who placed the greatest importance on it? 7 A. Those people with previous experience of major 8 construction problem -- projects. 9 Q. And the least? 10 A. I am not being fatuous when I say, or not trying to be 11 that, the people with least experience. You know. The 12 people who really knew about construction were the 13 people who were really wound up about it. 14 Q. Who were they in terms of names, can you recall? 15 A. I think to be fair there were some finance people 16 involved as well, because Stewart McGarrity, although he 17 was finance, had been involved in building the airport 18 in Hong Kong. So he knew about that sort of thing. 19 The Project Director and people like -- well, 20 Steven Bell, who -- people who had had significant 21 experience of major civil engineering projects. To be 22 fair, Willie Gallagher was pretty switched on about that 23 as well. Whereas somebody like Bill Campbell, no. 24 MR LAKE: My Lord, I'm about to move on to another chapter. 25 And if we are going to take a break ... 118 1 CHAIR OF THE INQUIRY: We will adjourn for lunch and resume 2 again at 2 o'clock. 3 (1.00 pm) 4 (The short adjournment) 5 (2.00 pm) 6 CHAIR OF THE INQUIRY: Good afternoon. I am satisfied that 7 Mr Renilson is no longer fit to give evidence today. So 8 we will adjourn his evidence to a date to be afterwards 9 fixed. 10 MR LAKE: My Lord, as the next witness is to be Mr Burt, and 11 it's proposed that my colleague Mr McClelland will take 12 his evidence, I would seek leave to just withdraw. 13 MR ROBERT BURT (sworn) 14 CHAIR OF THE INQUIRY: You are going to be asked some 15 questions, initially at least, by Counsel to the 16 Inquiry, Mr McClelland. If you just listen to the 17 question and answer it as clearly as possible, speak 18 into the microphone so everyone can hear you, and also 19 speak at a measured pace so that the shorthand writers 20 can record what you say. 21 Examination by MR MCCLELLAND 22 MR MCCLELLAND: Can you please state your full name. 23 A. Robert Elliot Burt. 24 Q. Can we please have up on screen document TRI00000146. 25 I think, Mr Burt, you should have a paper copy of that 119 1 document sitting in front of you? 2 A. I do. 3 Q. Can you confirm that these are the written answers that 4 you have supplied in response to questions asked of you 5 by the Inquiry? 6 A. Yes, they appear to be so, yes. 7 Q. Now that you're under oath, can you confirm that your 8 answers are complete and truthful and that you are 9 content they should stand as your evidence to the 10 Inquiry? 11 A. Yes, I can. 12 Q. Is there anything in them at all that you no longer 13 think accurate or would like to clarify? 14 A. No. 15 Q. We will take these answers as read, but we have a few 16 follow-up questions for you. 17 First of all, just to put your evidence in context 18 today, briefly on your qualifications and experience, 19 you're a chartered surveyor; is that correct? 20 A. Correct. 21 Q. And you have an LLM in construction law? 22 A. Correct. 23 Q. Your CV says, I think, that you have 28 years' 24 experience in the construction industry. Just in broad 25 terms, what is the nature of that experience? 120 1 A. My initial -- after qualifying as a quantity surveyor, 2 I spent three years in private practice, and then seven 3 years in contracting. Thereafter I joined a firm of 4 construction contract consultants, and have been working 5 in the Dispute Resolution field for 21 years now. 6 Q. Your CV also says that you have a specialisation in 7 quantum and delay analysis for building and engineering 8 projects. 9 Can you just give us some indication of the 10 experience that you have in that field, please? 11 A. Certainly. I have acted as expert witness in a number 12 of matters in adjudication, arbitration and also 13 litigation in relation to delay and quantum matters, on 14 a number of different and disparate type of projects, 15 construction, engineering and building and civil 16 engineering as well projects. 17 Q. And the delay analysis work that you did on the tram 18 project, was that broadly consistent with the work you'd 19 done in the past? 20 A. Yes, indeed. 21 Q. Now, in 2009 and 2010, you and your colleague, 22 Mr McAlister, at Acutus, gave consultancy advice to tie 23 in relation to delay on the tram project; is that 24 correct? 25 A. That's correct. 121 1 Q. We heard from Mr McAlister yesterday that in relation to 2 delay on the Infraco contract, he did the bulk of the 3 analysis work on that, but that you did some of it too; 4 is that correct? 5 A. That's correct. 6 Q. Could you have document CEC00330652, please. 7 We see here that this is a report entitled "Report 8 on investigations into delays incurred to certain 9 elements of the Infraco Works in relation to the 10 Edinburgh Tram Project", and that it was prepared by you 11 with a John Hughes. It's dated 25 June 2010. Do we see 12 that? 13 A. Yes, I can. 14 Q. We also see on the cover that the report was prepared 15 under the instruction and direction of Susan Clark, the 16 Deputy Project Director of tie; is that correct? 17 A. That's correct. 18 Q. Can I just ask, Mr Burt, did you at any time have 19 contact with or provide advice to the City of Edinburgh 20 Council? 21 A. No. It was always through tie. 22 Q. Now, in overview, what was the scope of this report? 23 A. We were asked to consider the delays on the Infraco 24 contract, and one of the answers to the questions that 25 I have in front of me kind of sets out the scope of the 122 1 remit. So if I may, I'll just paraphrase that, if 2 that's okay. 3 We were asked to have a look at, as far as possible, 4 the key matters which had caused or were causing delay 5 to the elements under investigation, to identify areas 6 of concurrent delay, and just how significant those 7 particular areas were; and to express our current 8 opinion on the extent of tie's liability in respect of 9 delay to each element of the works. 10 Q. Thank you. If we could turn, please, to page 7 of that 11 report. Sorry, it's the report which is CEC00330652, 12 paragraph 1.2.1. I'll just read that: 13 "On 3 March 2010 Acutus provided an initial view on 14 potential tie liability for delay to the Infraco Works ... 15 A subsequent meeting was held on 10 March 2010 between 16 tie and Acutus to discuss those initial conclusions. At 17 that meeting it was agreed that a further process of 18 investigation would be undertaken by Acutus. Those 19 investigations were to focus on certain 'prioritised' 20 elements of the Infraco Works which were jointly 21 identified as being likely to be critical to overall 22 progress and completion. 27 'elements' were selected 23 out of a total of 80 sections/areas which together form 24 the Infraco Works." 25 Can you just explain why, after the first report 123 1 you'd given, it had been decided that further 2 investigation was needed? 3 A. The -- the report I think you are referring to is 4 3 March 2010, which was actually just a very brief 5 email, and therefore having carried out that very 6 initial and brief exercise, it was agreed that further 7 forensic investigation should be carried out. 8 Q. You explained in that paragraph of your report that the 9 investigation was to focus on certain work areas. Can 10 you just explain the basis on which they were chosen? 11 A. Yes. We would have reviewed the different work areas 12 across the project with tie's project managers and the 13 Project Director, and also Susan Clark. To try and 14 understand, as best we could, the most important areas 15 that were problematic and causing difficulty, and 16 perceived to be causing delay. 17 So we identified 27 elements from the initial list, 18 and focused the investigations on those 27, although it 19 ended up as 26. 20 Q. Thank you. 21 So the 27 areas that were selected, were these all 22 of the areas that at that time were subject to delays? 23 A. No, not at all. They were just perceived to be the most 24 important, and the most significant in terms of delay. 25 Q. You referred there to 27 elements out of a total of 80. 124 1 Just on the simple basis of arithmetic there, is it fair 2 to view your analysis as relating to about one-third of 3 the project? 4 A. Yes, it is, albeit that we tried to identify what were 5 the most important ones. 6 Q. So far as you knew, were there any areas that were of 7 importance to delay on the project that were not covered 8 by your work? 9 A. No. No, because we were careful with the project 10 managers to try and identify the most significant ones. 11 Q. Yesterday we looked at a report that your colleague, 12 Mr McAlister, had done, which in part described some 13 work that Acutus had done with tie in collecting 14 evidence of delay. 15 If we could just bring that up, please, the document 16 reference is CEC00583955. If we could go to page 34 of 17 that report, please, I'm just going to read out parts of 18 this, Mr Burt, and then I'll ask you a question at the 19 end. 20 7.2.2: 21 "In September 2009 tie directed Acutus to assist its 22 project team in the execution of a delay attribution 23 exercise ..." 24 In 7.2.3: 25 "Acutus proposed and agreed with tie the format of 125 1 this exercise. It involved collating all relevant 2 information and evidence from tie's various systems and 3 records and grouping it in an orderly manner set against 4 a time-line. A Gantt chart schedule was created for each 5 principal element of the Infraco Works." 6 In 7.2.4: 7 "There are currently 80 of these charts to cover the 8 scope of the Infraco infrastructure works. Acutus 9 prepared the first draft of each of these and then 10 passed them to tie for the addition of more detailed 11 information, allocation of liability, and sense 12 checking." 13 Then 7.2.5: 14 "When each schedule has been fully populated and 15 sense checked, it will be possible to examine the full 16 data set for that particular element and; filter out the 17 minutiae; isolate delaying factors that have been 18 subsumed by other matters; and identify where dominant 19 cause and criticality actually lie." 20 Then just over the page, please, to 7.2.6: 21 "At the end of 2009, Acutus had produced all 80 22 chart templates and passed these to tie. tie staff, 23 assisted by Acutus, had developed these further and 24 populated them with available data." 25 Now, that exercise that's described in these 126 1 paragraphs, were you involved in that? 2 A. Not that I recall. I believe Iain McAlister and 3 John Hughes would have worked on those particular 4 schedules at that time. 5 Q. Mr McAlister's recollection was he didn't do it, but it 6 might have been you. 7 A. Right. Okay. As far as I recall -- I do understand and 8 recall these concurrency charts being discussed, but 9 I don't think I got involved in the detail until a bit 10 later. 11 Q. Okay. 12 A. I could check my diary records to find out, but I don't 13 think I was involved at that stage. 14 Q. I think you mentioned a third colleague in your answer. 15 Was it Mr Hughes? 16 A. John Hughes, yes. 17 Q. Is it possible that Mr Hughes was the one who was 18 responsible for that exercise? 19 A. He would probably be responsible for the detail. He 20 would be under direction of either Mr McAlister or 21 myself. So either Mr McAlister or myself would have 22 directed that exercise. 23 Q. Were you familiar with the exercise that was described 24 there? 25 A. Yes. I was familiar with the term "concurrency charts" 127 1 and the broad content of what that would include. 2 Q. In these passages that we've just read, there was 3 reference to 80 of these charts being prepared. Does 4 that figure of 80 correlate to the 80 areas that you 5 referred to in your report that we looked at a moment 6 ago? 7 A. I would expect so, yes. 8 Q. So should we understand from that that there was one 9 chart for each of the 27 areas that you studied for your 10 report? 11 A. Yes. 12 Q. As a basis for the delay analysis that you carried out 13 in your report, how complete and helpful was the 14 information that tie had gathered? 15 A. The information at the time, early 2010 through to 16 June 2010, was still at that point incomplete. I think 17 that's probably apparent from the report of 18 25 June 2010. There was a lot of information that was 19 not available at that time, and therefore we used 20 whatever information we could, but there was comments in 21 the report to explain that we hadn't had an opportunity 22 to corroborate the information or in fact to tie up 23 loose ends where there was a gap in the information. 24 Q. Were you concerned about the quality and quantity of 25 information that was made available to you at that time? 128 1 A. Concerned would be perhaps too strong a phrase, but it 2 was something that we had to note that we were working 3 with a limited set of data and the report actually that 4 we produced in June 2010 went into detail as far as 5 recommendations for bettering the information that might 6 be available if further exercises were carried out. 7 Q. We will come to look at those provisions a bit later on. 8 If we go back a page in the report that's on screen, 9 please, to paragraph 7.2.5, what was said there about 10 the expected outcome of this exercise of gathering 11 evidence is that once the schedule has been fully 12 populated and sense checked, it will be possible to 13 examine the full data set for that particular element, 14 filter out the minutiae, isolate delaying factors that 15 have been subsumed by other matters, and identify where 16 dominant cause and criticality actually lie. 17 By the time of your report in 2010, to what extent 18 had that objective been achieved in the evidence that 19 had been gathered? 20 A. It certainly wasn't fully populated and fully sense 21 checked. As you will be able to tell from the contents 22 of the June 2010 report, we were given sets of -- or 23 data and discussed a lot of detail with the tie project 24 managers, but no, there was not a full set of data 25 available by June 2010. 129 1 Q. If we could return then to your report, which was 2 CEC00330652. We're on page 7. Paragraph 1.2.3. It 3 reads: 4 "Each element was given a priority level code 5 depending on the then perceived level of importance in 6 respect of progress and delay to the relevant Sections 7 and Sectional Completion Dates. Those prioritised 8 elements are set out in the table below." 9 Now, we can see in that part of the table, which 10 actually carries on into the next page, these are all 11 priority level 1, and some of the others are priority 12 level 2. 13 Can you just explain a little bit more about how 14 that priority level was chosen, please? 15 A. Yes. Again, it would be with -- through discussion with 16 the tie project managers in particular as to the areas 17 of the works that were falling behind in progress more 18 than others. So priority 1 would be further in delay 19 than priority 2 areas would be, and therefore we 20 initially concentrated on the priority 1s, and I think 21 we did what -- the other priority 2s with the exception 22 of one. 23 Q. So was this essentially based on tie's own impressions 24 of where the critical delays were occurring? 25 A. It would be a combination of tie's impressions of where 130 1 the critical delays were occurring, but also there would 2 be input from -- internally in Acutus as well, 3 particularly, probably, I would expect, Iain McAlister, 4 as far as which areas to focus on. The on-street 5 sections were particularly problematic. And so there 6 was a lot of focus on those. 7 Q. If we can, would you please have this page of the 8 report, together with the next page up on screen 9 together, just so we can see the whole table. 10 You mentioned a moment ago that the on-street 11 sections were particularly problematic. If we just run 12 through that list in the table, do we see there that all 13 of the intermediate sections, beginning with 1, are they 14 essentially part of the on-street section? 15 A. Yes. Yes. 1a, b and c. 16 Q. On the following page, all of the sections beginning 17 with a 5, are those all the off-street section? 18 A. Yes. 19 Q. Is it correct that in relation to the off-street 20 section, the problematic areas were in large part, if 21 not entirely, structures? 22 A. Yes. Yes, they would be. 23 Q. If we can just highlight the -- sorry, stick to the page 24 that's on the right, please, and look at 25 paragraph 1.2.4, just reading that: 131 1 "The main objectives of this exercise were to 2 identify, as far as possible within the time and from 3 the records available: 4 (a) the key matters which had caused or were 5 causing delay to the elements under investigation, 6 including delay to commencement, progress and projected 7 completion; 8 (b) to identify areas of concurrent delay and 9 express a view on the significance of same; 10 (c) to express our current opinion on the extent of 11 tie liability in respect of delay to each element and 12 from those elements the likely liability in respect of 13 the sectional completion dates; and 14 (d) to identify any areas of further investigation 15 (including possible audits of Infraco's files) which may 16 be required." 17 I think that description is consistent with the 18 explanation that you gave us just a moment ago. 19 Mr McAlister explained yesterday that his work in 20 analysing delay was typically done in response to 21 extension of time claims that the consortium had made, 22 and that to some extent the scope of his work was 23 dictated by the scope of the claim that had been made. 24 Your report was not responding to any particular 25 claim; is that correct? 132 1 A. Correct. 2 Q. And the impression one gets is that it was intended to 3 form a more holistic view of the factors causing delay 4 across the whole of the project. Is that a fair 5 summary? 6 A. It is, yes. 7 Q. But nonetheless, the report would only be a snapshot of 8 delay as at its date; is that correct? 9 A. Correct. 10 Q. You refer in that paragraph that is still up on screen, 11 1.2.4, to reaching a view as far as possible within the 12 time and from the records available. 13 I think you've already addressed the question of the 14 limitations on the records at the time. But to what 15 extent was time a constraint on your work? 16 A. We were asked to respond to prepare an initial view, and 17 an estimate, effectively, rather than carrying out 18 a fully detailed forensic exercise. 19 It was to inform tie as to areas of liability. So 20 it wasn't an instruction to carry out a fully forensic 21 detailed analysis of even the 27 areas. It was to 22 get -- an overview is perhaps too strong a word, but it 23 was just endeavouring to understand where the key 24 problem areas were, and what our initial thoughts and 25 estimates were in respect of those areas. 133 1 Q. Were you subject to a time limit that was tighter than 2 you would have preferred? 3 A. For a fully detailed forensic analysis, absolutely. But 4 that was not the terms of the instruction, and therefore 5 we did what we could in the timescale that we were 6 looking at. 7 So yes, it wasn't -- it wasn't ever supposed to be 8 a fully detailed forensic analysis. 9 Q. Thank you. 10 In subparagraph (d) of that passage, there's 11 a reference to "further investigation (including 12 possible audits of Infraco's files)". Why was that 13 suggested? 14 A. There -- as we went through the investigations, there 15 was concern about the time taken for design to be 16 finalised, and that information effectively rested in 17 the hands of Infraco as opposed -- other than dates, 18 knowing when design packages were issued. We could see 19 that there were lapses in time and delays in packages 20 being issued, or then being subsequently revised. So we 21 could identify time periods, but we couldn't identify 22 the reason for either the slippage for the initial work 23 package, issued for construction package detail, or 24 alternatively we couldn't establish the cause of 25 subsequent revisions. 134 1 So that -- the main way in which to obtain that 2 information would be through audit of Infraco files. 3 Q. Thank you. Just one more general point. You explained 4 that this report wasn't intended to be a fully detailed 5 analysis of everything, and it was more of an overview 6 to give tie an indication of the reasons for delay. 7 Just to put that in context, I think you've 8 explained in your written answers that this was a report 9 which had itself required around 800 hours of work; is 10 that correct? 11 A. Yes, but it was about 400 hours of my time and I think 12 about the same for my colleague, John Hughes. That's 13 equivalent to about ten weeks of time, and therefore 14 about a day and a half per area that was identified. 15 So it was a quick -- relatively quick exercise. 16 Q. It's maybe an unfair question, but if you'd followed it 17 through to the level of the detailed analysis, what 18 would those 800 hours have become? 19 A. Many, many more. It took the 800 hours or 10 weeks for 20 two people to identify initial -- let's say initial 21 dates and information and questions that arose that were 22 not bottomed out. To undertake a fully detailed 23 forensic exercise, it would depend what you find in that 24 that is very difficult to estimate, but I could easily 25 see a year, even just for the 27 if it had to be done 135 1 properly, particularly if it was expert witness level 2 detail, where we would have to be able to talk to all of 3 the detail. 4 It would be a very lengthy process. 5 Q. Thank you. 6 CHAIR OF THE INQUIRY: When you say at least a year, are you 7 still talking about two people doing it for a year, 8 or ... 9 A. Again, that would depend on what we found and how much 10 investigation had to be done. You could put more 11 resources on it and perhaps shorten the exercise, but it 12 really does depend. It's often very difficult to gauge, 13 not knowing how much information in terms of 14 documentation that you have to go through. So again, 15 it's a very broad estimate. It could be a year for two 16 or three people or it could be nine months for four 17 people. It really is very difficult to gauge until you 18 get into the detail. 19 MR MCCLELLAND: Would it be fair to say that if that 20 exercise was carried out while the project was under 21 way, the factors influencing delay would themselves be 22 changing as you progress with your work? 23 A. Absolutely. Critical paths, critical activities will 24 change as the project moves on, and if another event 25 arises, such that the critical path changes and has to 136 1 be investigated, and the impact has to be investigated, 2 then yes, it is a very fluid exercise. Often we'll be 3 doing retrospective exercises rather than something on 4 a project which is live. Not necessarily unusual to be 5 working in a live project, but sometimes it's cleaner if 6 it's done when the project is finished and, you know, 7 there's nothing else is moving, if you like, in terms of 8 data and activities. 9 Q. It may be helpful, before we look in detail at some 10 aspects of your report, just to get an idea of the 11 conclusions that you'd reached. 12 If we could go to page 4, please. This is your 13 executive summary. If we could just look at 14 paragraph 2, please. I'll read that: 15 "The investigations carried out to date indicate 16 that both parties to the Infraco Contract bear some 17 responsibility for the delays incurred. There is also 18 the potential the SDS has contributed to those delays." 19 Just pausing there, the reference to SDS, does that 20 suggest that you had identified delays in the production 21 of design? 22 A. Yes, many of the appendices would indicate delays to the 23 first issue of IFC packages for certain structures and 24 then indeed later revisions. Therefore we would -- as 25 I explained earlier, we could identify time periods of 137 1 slippage. However, we couldn't necessarily identify the 2 cause of that slippage. 3 Q. You referred there to IFC. By that, just for the 4 record, do you mean issued for construction drawings? 5 A. Yes. 6 Q. Then if you look down at paragraph 5 in your executive 7 summary, reading from that: 8 "For each of the Sectional Completion Dates we note 9 the following in respect of our current estimate of 10 liability for delay." 11 Then there's a table. Could I ask you, please, 12 Mr Burt, just to give us a brief explanation of the 13 table? 14 A. Yes. There are six columns, all numbered, and in the 15 first column we have Sectional Completion Date, Sections 16 A, B, C and D. There is then an overall projected delay 17 for each of those sections; Sections A and B are both 18 listed as 57 weeks, sections C and D are 61 weeks. 19 We then, in columns 3, 4 and 5, referred to where we 20 thought the estimated tie culpability in both the lower 21 and upper limit might lie, along with column 5, which 22 was an estimate of Infraco culpability. 23 Q. Thank you. So we see from the figures there that in 24 relation to work Sections A and B, your view was that 25 there was shared culpability for the delay, with a range 138 1 for tie that's slightly longer than the range for 2 Infraco; is that correct? 3 A. Correct. 4 Q. But in relation to work Sections C and D, your view was 5 that all of the delay that had been identified was tie's 6 responsibility? 7 A. At section level, that was the finding at that point, 8 yes. 9 Q. Can I just be clear that by using the word "culpable", 10 do you mean that it was your view that under the 11 provisions of the Infraco contract, tie bore the risk of 12 that particular delay? 13 A. Yes. 14 Q. Could we look briefly, please, over the page. So that's 15 page 5, paragraph 7: 16 "tie culpability for delays to the Section C date is 17 in all probability estimated to be the full period of 18 the projected delay of 61 weeks forecast by the most 19 recent mitigation exercise." 20 You refer there to the most recent mitigation 21 exercise. What was that? 22 A. It was an exercise that my colleague, Mr McAlister, had 23 been carrying out in terms of or in relation to the 24 Infraco's most recent programme submission, which 25 I believe was revision 3, and issue 3, I think it was, 139 1 where he had taken a programme and worked through the 2 programme to try and establish whether areas of 3 mitigation could be achieved, such that the completion 4 date would be brought back and therefore lessening the 5 period of projected delay to completion. 6 Q. That proposed mitigation, was that something that had 7 been agreed with the consortium or was it unagreed? 8 A. It was unagreed. The comments on the previous page in 9 the report under the table that we were referring to 10 earlier, and also paragraphs within the report, make it 11 quite clear that such, particularly acceleration 12 measures, would have to be agreed with Infraco. The 13 objective was mainly to see what could be done subject 14 obviously to agreement between the parties. 15 Q. I think it's fair to acknowledge that the extent of 16 Infraco's obligation to mitigate delay on the one hand 17 or accelerate to avoid delay on the other, that was 18 a matter of contention between the parties? 19 A. Yes, it was, and in actual fact during the period that 20 this report was drafted, and issued, there was the MUDFA 21 Revision 8 adjudication which was ongoing with Mr Howie 22 as the adjudicator, and those issues did come up. 23 Q. I think it's also fair to say that in broad terms, 24 Mr Howie preferred the Infraco's approach to mitigation 25 over the one that was being proposed by tie? 140 1 A. Yes. Certainly -- I wasn't too heavily involved in that 2 particular adjudication. I understand that he did 3 prefer the JV's position in terms of acceleration, but 4 he also found that the JV's analysis was based on 5 unmitigated delays, and therefore that was one of the 6 reasons why he found that in sections -- I think it's B, 7 C and D, there was no award of extension of time. 8 Q. It may not matter greatly, but was a reason for 9 Mr Howie's decision in relation to Sections B, C and D 10 his view about whether a designated work area was the 11 same as an intermediate section? 12 A. Yes, it came down to the argument about mitigation as 13 far as I recall. 14 Q. Now, just reading on from paragraph 7: 15 "This assumes that the Infraco's interpretation of 16 how extension of time for Notified Departures (late 17 completion of MUDFA works) is not supported by the 18 Adjudicator in the 'MUDFA Revision 8 Estimate' dispute 19 decision. If it is, tie's potential liability for delay 20 could be much higher (potentially circa 100 weeks). 21 This is also likely to give rise to a tie liability for 22 project level prolongation costs." 23 The point you are making there about the MUDFA 8 24 adjudication, can you just clarify what your point is 25 there? 141 1 A. I think it's in relation to the point we were discussing 2 earlier, in relation to mitigation and acceleration, 3 where if the adjudicator had found completely in favour 4 of the JV, then their method of analysis and their 5 method of programming analysis, including in relation to 6 the designated work areas, would have generated a very 7 significant period of extension of time that would be 8 possible for Infraco to receive. 9 One clarification is that the time periods of the 10 MUDFA Rev 8 adjudication as far as MUDFA delays was 11 concerned, that was in relation to MUDFA data as at -- 12 I think it was March 2009, whereas the analysis in the 13 particular report we're looking at at the moment was 14 around April 2010. So the time periods in Mr Howie's 15 adjudication were not necessarily the same as covered by 16 the current review. 17 Q. Put short, and probably at the highest level, the 18 difference of view between the parties about the 19 appropriate method of analysis of delay under the 20 Infraco contract had a significant impact on the extent 21 to which tie would be liable for delay or not. 22 A. Yes, indeed. Certainly in relation to MUDFA Rev 8 23 analysis, which I think was INTC 429. By the time 24 Infraco re-evaluated their assessment, which I think was 25 INTC 536, they had assessed, I think, 66 weeks of delay 142 1 down to MUDFA delays. 2 So it would appear, certainly my understanding is 3 that the method of analysis that they adopted subsequent 4 to Mr Howie's decision was different than the method of 5 analysis they adopted in the MUDFA Rev 8 adjudication. 6 Q. Thank you. If we can just read down to paragraph 9, 7 please: 8 "In this regard, at intermediate and sub-section level in 9 particular, there is considerable evidence of Infraco 10 culpability for delay in the various elements within 11 Sections 2, 5 and 7. This is highlighted within 12 'Appendix (i) attached. It is stressed that whilst this 13 may not translate into a disallowable period of 14 extension of time for the Section C date, it does/should 15 preclude both Infraco and its sub-contractors from an 16 entitlement to recovery of the prolongation costs 17 incurred during those periods of culpable delay." 18 Just in broad terms, what in your view was the 19 reason why the consortium were responsible for delay? 20 A. That would depend on the specific area that we were 21 looking at, the various 26 areas that were the subject 22 of the report. Issues such as lack of progress or late 23 start, slow progress on particular structures, issues 24 like that, while maybe not affecting the Section C 25 completion date, had the potential to affect the 143 1 prolongation cost, if you like, for specific structures, 2 particularly in relation to where Infraco would 3 subcontract the work out to other contractors. Where 4 Infraco may have been responsible or liable for some of 5 the delay to those structures, then the thought was that 6 that would not entitle them to recover, let's say, 7 structure specific prolongation costs in those terms. 8 Q. You referred earlier to a shortage of information in 9 relation to delay in particular -- in relation to 10 design. 11 When you express a view in this paragraph that there 12 was Infraco culpability for delay, was that something 13 which had been bottomed out or was that something in 14 relation to which further information was still needed? 15 A. I think in most areas, and probably all of the 26 16 structures, there was further information that would be 17 required before firming up on any of the periods of 18 delay that were estimated at that time, and that was the 19 terminology that was used. It was an initial exercise 20 with estimated periods. 21 Q. Okay. We've already heard from you about the lack of 22 information in relation to certain design issues. If we 23 could have a look, please, at your written answers, 24 which are at TRI00000146. If we look first of all at 25 page 5. 144 1 In answer to question 9, if we could just go to the 2 second paragraph there, and about five lines down, 3 there's a sentence that begins "The contractual 4 responsibility". Do you have that? 5 A. Yes. 6 Q. "The contractual responsibility for those events also 7 had to be understood. By way of example, there were 8 many factors which had to be considered in analysing 9 each of the areas involved in the report dated 10 25 June 2010." 11 That's the one we've just been looking at: 12 "Issues arising included questions as to the reasons 13 for delay in construction drawing issue which we found 14 difficult to establish; increased programme durations 15 included in the Infraco programmes which were not 16 explained; subcontractor procurement timescales; design 17 check processes and the like. All of those factors 18 contributed to the factual matrix for each area and had 19 the potential to influence responsibility for, and the 20 period of, delay to the areas under consideration." 21 We see there the point that you made about lack of 22 information in relation to certain design issues. 23 A. Yes. 24 Q. Then just reading down in your answer to question 10: 25 "Clearly the MUDFA delays in various areas were 145 1 significant to the project overall and would have caused 2 significant periods of delay. However, the question of 3 the actual measure of that delay remained a significant 4 difference between the parties. Delays to design issue 5 (IFC) also appeared to be a material factor." 6 Then again, if we could look at page 28, please, and 7 your answer to question 81: 8 "A number of factors contributed to this exercise 9 not reaching definitive conclusions." 10 I should just say, by "this exercise", I think 11 that's a reference to the report we have just been 12 looking at: 13 "Those included (i) it was known that further 14 information was required in relation to document 15 (design) issues dates and the reasons for the delay in 16 issue; (ii) the time within which the exercise was to be 17 carried out meant that information provided to us had to 18 be taken at face value without being fully verified; 19 (iii) schedules for the IFC/INTC processes had to be 20 developed further by tie personnel; (iv) audits were 21 required to establish the cause of various matters; (v) 22 contractual matters required clarification." 23 Now, I think actually all of that is essentially 24 consistent with the explanation that you've been giving 25 us earlier. 146 1 How significant a factor affecting your analysis of 2 delay was the absence of information about designs? 3 A. At that stage it was important because we needed to 4 understand why there had been such a delay in a number 5 of instances to the first IFC and then subsequent IFCs. 6 To a large extent it would have run concurrently 7 with a lot of the MUDFA delays in any event, but it was 8 an area of particular concern, both when we were 9 reviewing the dates that -- when we were comparing 10 planned with actual dates against construction 11 requirements and so on, but also it was explained to us 12 by tie project managers that there was in their mind 13 something amiss with the design process. 14 So it was a significant question, one that we just 15 can't answer. So yes, it was -- it was quite 16 significant. 17 Q. Thank you. 18 I think in your report, if we could just look at 19 your report again, please, which is CEC00330652, at 20 page 4, we see, I think, that you made recommendations 21 for further investigations. 22 If we just look at paragraph 3 there, please: 23 "These investigations have identified a number of 24 key areas of further investigation and/or audit which 25 are required in order to more accurately establish the 147 1 precise measure of each party's culpability. As 2 a consequence, a number of recommendations have been 3 made within the main body of this report in relation to 4 matters such as (i) the reasons for delays to IFC 5 package issue dates (both original and revised 6 packages); (ii) the dates when the Infraco Design was 7 issued to SDS; (iii) the INTC process; and (iv) Infraco 8 sub-contractor procurement. Items (i) and (ii) above are 9 key areas of uncertainty where delays have occurred but 10 the reasons for same are uncertain." 11 I think in relation to point (i), you've covered 12 that, but in relation to point (ii), which was the dates 13 when the Infraco design was issued to SDS, can you just 14 explain that, please? 15 A. Yes. The Infraco would have a design input into the 16 project and into the works, as well as SDS, and the two 17 would have to interact at certain points and one 18 possible reason for IFCs being late or changed is 19 something in relation to the Infraco design. 20 I say something because we didn't have the detail of 21 why things were taking longer. So it was a line of 22 enquiries that we thought was necessary, but we didn't 23 have that information, and it may have had an influence 24 on IFC issues. 25 Q. Did you have any idea of the broad nature of BSC's input 148 1 into the design being done by SDS, what sort of matters 2 it might cover? 3 A. SDS were obviously the system design service provider, 4 with BSC, I believe, being responsible for the civils 5 design. And therefore there would be an interaction 6 between the two such that I don't think we would be in 7 a position or I -- SDS would be in a position to 8 finalise their design until they knew what the civils 9 design was as well, and therefore the two have close 10 interaction. 11 Q. Sorry, did you say civils design or service? 12 A. Civils design. 13 Q. Civils design? 14 A. Yes. 15 Q. I think we'd heard from Mr McAlister yesterday that 16 civils design was being done by SDS, but that the 17 Infraco might have been doing the design for the 18 electrical and mechanical part. Does that seem correct? 19 A. That possibly is correct, yes. 20 Q. If you don't know, I won't ask you to speculate about 21 it. 22 If we could look, please, at page 11 of your report. 23 Now, in this section, Mr Burt, you make some 24 recommendations for further investigations. If we could 25 just look quickly at 2.1.1: 149 1 "The investigations and analysis focused on the 2 following key headings which were highlighted as being 3 consistently significant in terms of progress and 4 delays. Those headings are: 5 A. The "Issue for Construction drawings" ... 6 B. The "Infraco Notice of tie Change" process. 7 C. The progress and completion of the MUDFA 8 works ..." 9 And then D, E and F, you list some other matters. 10 Of that list, which do you regard as being the most 11 significant to delay? 12 A. Certainly in relation to section level, and particularly 13 Sections C and D, the most significant at that point in 14 time would be the MUDFA works and utility works. 15 Q. If we look down at the bottom of the page, at 2.2, where 16 the heading is "IFC process", I'll just read 2.2.1: 17 "A key issue identified in a number of instances was 18 the availability of design such that the works could 19 commence or progress could be maintained. Matters such 20 as late release of the IFC by the date identified in the 21 Programme or a material breach by SDS in performance of 22 its obligations are Compensation Events under the 23 Infraco Contract. Those matters may ["may" being 24 underlined] give Infraco an entitlement to additional 25 time and payment but only where they have been 150 1 established as the direct cause of delay to the 2 Works ..." 3 Reading on: 4 "It is therefore important to identify and 5 establish, as far as possible, whether any such 6 Compensation Events were "... the direct cause of delay 7 in achievement of the issue of a Certificate of 8 Sectional Completion ..."." 9 Then 2.2.2: 10 "In addition, questions surrounding Infraco's 11 management (or otherwise) of SDS and the IFC process 12 generally were also raised by tie during the current 13 exercise. That, together with the provisions of 14 Clause 19.19 ..." 15 Which, as you note in footnote 6, limits tie's 16 liability for compensation events in certain 17 circumstances related to failures on the part of 18 Infraco: 19 "tie's liability for delays in respect of tie 20 Changes and third party approval delays render it 21 essential that the 'cause' of any delay to the IFCs be 22 established (as distinct from merely identifying that 23 a delay in IFC issue has occurred)." 24 There is one more passage that I'll read out, 25 Mr Burt, and then I'll have some questions for you. At 151 1 2.2.4: 2 "It is apparent however, that certain further 3 information is required in order to establish, with 4 a greater degree of certainty, the culpability for any 5 such delay in IFC issue. That further information is 6 not presently available, as further explained below. 7 (a) 'Cause' of delays to Initial IFC: the "SDS 8 Approvals tracker" monitors only the issue of, and delays 9 in respect of, the first IFC for each 'package'. It does 10 not, however, specifically identify the cause of that 11 delay. Potential 'cause' of delay may include one or 12 more of the following: 13 i. late issue by SDS (in its simplest form 14 a compensation event under 65(t) - which may in turn 15 permit the application of clause 65.12.2); 16 ii. a material breach by SDS (again in its 17 simplest form a compensation event under 65(u) - which 18 may in turn permit the application of clause 65.13); 19 iii. a failure of Infraco to provide the Infraco 20 Design to SDS in accordance with the Consents Programme 21 and Schedule Part 14 (clause 19.19 refers); 22 iv. a tie Change; 23 v. a failure of Infraco in respect of its 24 management of SDS or another breach by Infraco (eg 25 failure to properly manage the CEC/Network Rail 152 1 interface); and/or 2 vi. a requirement of CEC/NR for which tie will 3 bear responsibility. 4 No doubt there are a number of other potential 5 causes of delay not identified above. However, until 6 further details are available it is not possible (in the 7 majority of instances) to establish with any certainty 8 the cause of and culpability for delay in the issue of 9 the IFCs." 10 Now, if we just pause there, this appears to be an 11 attempt to summarise, at least some of the Infraco 12 contract provisions relevant when determining which 13 party carried the risk of delay in the issue of 14 construction drawings. Is that correct? 15 A. Correct. 16 Q. What was your understanding of the manner in which the 17 Infraco contract allocated responsibility for design 18 delay between the parties? 19 A. I think broadly, if SDS was in delay of itself, then 20 that would be a tie responsibility. If, however, there 21 were issues in relation to Infraco affecting the time 22 periods for the issue of that design, then Infraco may 23 have liability in that respect for the period that they 24 caused a particular delay. 25 Q. Did the fact that there was a range of potentially 153 1 relevant contract provisions complicate your task in 2 analysing delay? 3 A. What we did there was identify what we thought were the 4 significant ones, but all we knew was that IFC packages 5 were late or revised. We had no information to tell us 6 what the cause of that was. Therefore, it was something 7 that we couldn't allocate with any certainty. 8 Q. Put it this way. Did that range of different 9 contractual provisions which were of potential relevance 10 to allocating responsibility for design delay affect the 11 amount of information that you needed or the detail of 12 the information that you needed if you were to do that 13 properly? 14 A. I expect, yes, it would. But initially we wanted to 15 understand the reasons for the time period -- the time 16 slippage in the IFC issue. 17 Q. Yes. So that's perhaps step one: understand why the 18 delay has happened and then worry about who bears the 19 risk of it? 20 A. Well, then try and understand who would bear the risk. 21 Q. If we compare it to the other main factor in project 22 delay, being the delay in the utilities works, and when 23 it came to assessing the impact on the Infraco programme 24 of these two different types of delay, was one or other 25 of them easier to analyse than the other? 154 1 A. Do you mean between MUDFA and design? 2 Q. Yes, utilities on the one hand and design on the other. 3 A. Yes, as far as I understand it, MUDFA is the 4 responsibility of tie, as far as we understood it at the 5 time, and therefore where MUDFA delays were causing or 6 utilities delays were causing the delay, that would be 7 clear -- more clearly a tie issue. 8 However, until we understood the cause of the 9 late -- all we saw was IFC packages being late, not 10 necessarily the cause. 11 Q. Thank you. 12 Compared with other projects of which you've 13 analysed delay, were the provisions of the Infraco 14 contract which allocated responsibility for delay in the 15 design any more or less complicated than you would 16 normally see? 17 A. Perhaps slightly more complicated just because the 18 employer bore some risk, it appeared, for the 19 performance of a designer who had been already novated 20 to the contractor. So I think that does complicate it 21 more than ordinarily would be the case with standard 22 design and build contracts. 23 Q. In the passage that we have just read, which identifies 24 contract provisions relevant to design delay, there 25 wasn't, I don't think, any reference to Schedule Part 4 155 1 of the Infraco contract. Were you familiar with that 2 schedule and in particular the list of Pricing 3 Assumptions it contained? 4 A. Yes, I was aware of it, yes. 5 Q. Were you familiar with the concept of a Notified 6 Departure that if any of those Pricing Assumptions 7 proved to be false, the Infraco might be entitled to 8 claim an extension of time or additional cost? 9 A. Yes. 10 Q. Now, some of the Pricing Assumptions related to the 11 design programme; is that correct? 12 A. From recollection, I would -- I think so, but I would 13 have to review the schedule again. 14 Q. It's not intended to be a memory test, Mr Burt, so we'll 15 bring up Schedule Part 4, which is USB00000032. If we 16 just go to page 6 of that, please. This is in the 17 middle of the list of Pricing Assumptions. We have 18 Pricing Assumption 2 reads: 19 "Design delivery by the SDS Provider has been 20 aligned with the Infraco construction delivery programme 21 as set out in Schedule Part 15." 22 And Pricing Assumption 4: 23 "That the Design Delivery Programme as defined in 24 SDS Agreement is the same as the programme set out in 25 Schedule Part 15." 156 1 If we just look briefly at clause 3.5, which is at 2 page 9: 3 "The Contract Price has been fixed on the basis of 4 inter alia the Base Case Assumptions noted herein. If 5 now or at any time the facts or circumstances differ in 6 any way from the Base Case Assumptions (or any part of 7 them) such Notified Departure will be deemed to be 8 a mandatory tie Change requiring a change to the 9 Employer's Requirements and/or the Infraco Proposals or 10 otherwise requiring the Infraco to take account of the 11 Notified Departure in the Contract Price and/or programme ..." 12 In your work analysing delay, when considering who 13 carried the risk of delay in the design, had you taken 14 account of these provisions? 15 A. I think we used a rather loose term in the list of 16 contract provisions to do with tie change, and I think 17 that would fall under that there. We were aware of 18 those provisions, but as far as responsibility for the 19 delay in issue of IFC packages, we were not able to 20 conclude in -- you know, culpability on the part of 21 either party because we weren't sure what the cause was. 22 Q. Just in relation to the Pricing Assumptions there about 23 the design programme, had you formed any view about the 24 extent to which they left any responsibility for delayed 25 design with the consortium? 157 1 A. There was a question, I don't think we landed on any 2 particular conclusion on it, as to whether if there was 3 a lack of management by Infraco in relation to SDS, 4 whether that would have been something that would not 5 have excused Infraco for any of those particular time 6 periods. But it was an area that had to be further 7 reviewed and certainly we wouldn't, without speaking to 8 tie's legal team, decide who was responsible. It would 9 be a matter for discussion. 10 Q. So you'd identified one aspect where the consortium 11 might retain or might be argued to retain responsibility 12 for delay in the design. Were there any others that you 13 had in mind? 14 A. Not that I can recall, unless -- one instance that we 15 talked about is obviously where perhaps Infraco were 16 slow to provide their design to SDS. That would 17 probably fall under the management of SDS. 18 But other than that, no. No -- I think that was the 19 extent of it. But again, it's -- I would need to 20 refresh my memory about all the -- 21 Q. You are referring there in the point you just made to 22 the input that the Infraco companies needed to have to 23 SDS to allow them to complete their design? 24 A. Yes. 25 Q. I think you said that this was a point which -- you 158 1 never reached the point of having to come to a concluded 2 view on any of this; is that correct? 3 A. We didn't have the data to even establish whether there 4 was delay on the part of Infraco providing their design 5 to SDS such that it caused the problem with the IFC 6 dates. The information wasn't there. We were just left 7 with questions. Time periods that had slipped and 8 questions as to what the reason for that slippage was. 9 Q. Yes. So I take it that it would follow from that answer 10 that this point about the extent to which the consortium 11 carried responsibility for delayed design was never 12 tested in any dispute resolution forum? 13 A. Certainly not to my knowledge. 14 Q. Bear with me just a moment, Mr Burt. (Pause) 15 Sorry about that, I managed to -- I was looking for 16 the paragraph reference in the wrong document, which 17 confused me. 18 If we could look at your report, please, which is 19 CEC00330652, at page 14, please. 20 At 2.3 the heading there is INTC "Process". Is that 21 a reference to the change procedure laid down in the 22 Infraco contract? 23 A. Yes, that's the intention. 24 Q. Was it thought that there was delay associated with that 25 process? 159 1 A. I think there was -- just it was an area for us to 2 review time periods and response periods in relation to 3 that INTC process. 4 My recollection -- I would need to go through each 5 of the individual appendices to see if there was any 6 issues that were raised in relation to that. 7 Q. The fact it's covered in your report suggests that it 8 was identified as an area of relevance to the question 9 of delay? 10 A. It was an area of investigation, yes. 11 Q. If we just read out from 2.3.1: 12 "A number of issues arise in respect of the INTC 13 process. We have summarised those issues below together 14 with notes on any interim assumptions made in respect of 15 same. 16 a) INTC Master List: Recommendation - tie may wish 17 to consider maintaining a central master INTC schedule 18 which monitors the various components of the INTC 19 process. That master list is likely to save time in the 20 future locating the relevant details surrounding 21 individual INTCs. 22 b) INTCs included in the current analysis: we have 23 relied on the tie project managers to highlight the key 24 INTCs which have affected commencement, progress and 25 delays to individual structures. A separate exercise is 160 1 also underway by the tie commercial team, where the 2 current INTC master list is being populated with the 3 relevant data. When complete, the master list will 4 facilitate identification of all INTC’s applicable to 5 specific individual areas or structures, thus permitting 6 a more comprehensive analysis to be undertaken. That 7 exercise however is not yet complete." 8 If we just go back to the previous page, where the 9 paragraph had referred to the various components of the 10 INTC process, and I think you list those in footnote 8. 11 I don't need to read them out, but you can see them for 12 yourself. 13 Can you recall how you had identified all of these 14 individual components about which information was 15 needed? 16 A. Sorry, can you just repeat the question? I didn't quite 17 catch. 18 Q. Do you see footnote 8 on that page? As I understand it, 19 that lists the various components of the INTC process in 20 relation to which you thought tie needed to gather 21 information. Is that correct? 22 A. Yes, correct. 23 Q. How had you identified each of those components? 24 A. We would have read the contract in relation to that 25 process. 161 1 Q. Yes. So I think perhaps anyone who had read the 2 contract could identify that these components were part 3 of the process? 4 A. Yes. 5 Q. Was it surprising to you that tie had not already at its 6 own initiative gathered that information together? 7 A. From memory, what they had was a brief INTC schedule 8 without necessarily all of the various components in. 9 What we would call a master list there, with columns for 10 the different stages. 11 So I think they had a master list, but without the 12 detail that we would normally collate if we were doing 13 that particular exercise. 14 CHAIR OF THE INQUIRY: Was it more like a tracker that they 15 had? They could follow where they were with each INTC 16 to see -- 17 A. That was the intention with the proposal at footnote 8. 18 From memory, there was a list with probably numbers and 19 just a description, but the reason for including the 20 footnote 8 would be that there wasn't then the various 21 components to show where they were, and time periods 22 between different actions and so on. So it was really 23 just to make a more comprehensive list of the various 24 stages that were involved in the INTC process. 25 CHAIR OF THE INQUIRY: Mr McClelland asked you if you were 162 1 surprised that they didn't have that already. Would 2 that not be a standard thing that you would expect? 3 A. It does depend on who was preparing the list. I'm 4 working on a project at the moment where we have the 5 same type of issue where some information is included in 6 a list of compensation events, but we would have 7 prepared it more comprehensively ourselves. So it's 8 something that -- it depends who is compiling the list. 9 There is no standard process, but it's just something 10 that we would recommend adopting. I wouldn't say that 11 there was a normal way to do it, but more comprehensive 12 for us, the better, and that's really what we have 13 recommended here in relation to IFCs as well as INTCs. 14 CHAIR OF THE INQUIRY: Generally, the more comprehensive the 15 records you keep, the easier it should be to deal with 16 those. 17 A. Absolutely. When we become involved in projects, then 18 that is something that we do emphasise with clients, 19 that the more records they have, the easier it is to 20 understand particularly retrospectively what has 21 happened. 22 CHAIR OF THE INQUIRY: Is this a convenient point? 23 MR MCCLELLAND: Yes. I'm happy to stop here if that's 24 convenient. 25 CHAIR OF THE INQUIRY: We will have a break for about 163 1 15 minutes for the shorthand writers. You can get a cup 2 of tea or coffee, and we will resume again at 3.30. 3 (3.15 pm) 4 (A short break) 5 (3.32 pm) 6 CHAIR OF THE INQUIRY: You're still under oath, Mr Burt. 7 Yes, Mr McClelland. 8 MR MCCLELLAND: Thank you, my Lord. 9 Could you go, please, to page 16 of your report. 10 The heading down at the bottom of that page, "MUDFA 11 and/or other utility works". I'm just going to read 12 that paragraph 2.4.1: 13 "Information regarding completion or projected 14 completion of MUDFA or other utility works was obtained 15 from two principal sources, being (i) information 16 obtained from tie project management personnel and (ii) 17 the marked-up photographs of the various sections 18 produced by tie at periodic intervals. 19 "Recommendation: that tie maintains a central 20 database of MUDFA/utility commencement/completion dates 21 (that information has proven difficult to extract)." 22 Can you explain what you meant by "difficult to 23 extract"? 24 A. Yes. Basically we were struggling to get accurate dates 25 of commencement and completion dates for utilities in 164 1 certain areas. 2 CHAIR OF THE INQUIRY: Was this another example of the 3 record-keeping by tie? 4 A. I would say so, yes. Yes. 5 CHAIR OF THE INQUIRY: Did you consider it to be adequate? 6 A. I think the fact that we found it difficult to get dates 7 readily and were using photographs would indicate that 8 it wasn't quite adequate. 9 MR MCCLELLAND: This is fairly basic level information, 10 isn't it? We're talking here about commencement and 11 completion dates of work. 12 A. Yes. Yes, it is. 13 Q. Do you agree with me that it's a fairly basic level 14 information? 15 A. Yes, it is basic level, yes. 16 Q. Your report was being written in mid-2010; is that 17 correct? 18 A. Yes, June 2010. Yes. 19 Q. So the project had been under way for two years by then, 20 and that there were issues around delay with the MUDFA 21 works had been well known for most of that period; do 22 you agree with that? 23 A. Yes. Yes, I do. 24 Q. Did it surprise you that information like that wasn't 25 more readily accessible from tie? 165 1 A. I expect it would have done at the time, and the fact 2 that we were suggesting that there was a central 3 database meant that there wasn't one, and therefore 4 extraction of information becomes a lot more difficult, 5 time-consuming and sometimes uncertain. 6 Q. You also provided tie with advice on claims made by 7 Carillion under the MUDFA contract; is that correct? 8 A. Correct. 9 Q. There was a shortage of information in relation to those 10 claims too; is that correct? 11 A. Yes, but different type of information. 12 Q. Okay. If you would just like to explain what the 13 information was that was lacking in those? 14 A. The claims that were put forward by Carillion were in 15 relation to effectively -- it was mainly disruption 16 costs that they were claiming in relation to utility 17 diversions. In order to substantiate a claim in 18 relation to disruption, I would expect to see labour and 19 plant returns, invoices and that sort of thing; and that 20 sort of information, to the level of detail required to 21 substantiate a disruption claim, is ordinarily held by 22 the contractor and not by the employer. Hence the 23 reason, I think, the absence of information in relation 24 to the Carillion disruption claims. 25 It's a different category of information. It's 166 1 certainly a different level, and not information that 2 the employer or their project managers or supervisors 3 would ordinarily hold, because they couldn't collate 4 that information. They actually would not have access 5 or the time to collate that. So it is a different class 6 or category of information. 7 Q. Thank you. 8 If we could look, please, at your written answers, 9 which are at TRI00000146, and page 13, please. Question 10 29. Just the first paragraph there: 11 "It is relevant to note in the first instance that 12 detailed record keeping is ordinarily a function of the 13 Contractor carrying out the relevant works. It would 14 therefore be expected that the Contractor when making 15 a claim for additional payment under the contract would 16 and should produce the appropriate records to 17 demonstrate its case." 18 That's point that you just made. Then there's 19 a sentence beginning "However": 20 "However, in instances where it is expected that 21 commercial/contractual disputes are likely to arise, 22 then we would always advise Employers to maintain as 23 detailed records as its resources permit. This is 24 simply a practical step to ensure that the Employer can 25 either verify or rebut contractor's claims as/when the 167 1 need arises." 2 You actually make the same comment later on at 3 page 24, if we could go there, please, at question 69. 4 We just see there, about halfway through that first 5 paragraph in your answer, we see the same answer, that 6 you would always advise employers to maintain detailed 7 records and so on. 8 Without intending any disrespect to the advice that 9 you gave, Mr Burt, that's simply common sense, isn't it? 10 A. It certainly is in claims situations, yes. 11 Q. Yet tie hadn't managed, in relation to the Infraco and 12 the MUDFA contracts, as we've just seen, to do that for 13 themselves? 14 A. Certainly in the instances that we found that we were 15 struggling to extract information, that would be the 16 case. 17 Q. If we look briefly at another document, which is 18 CEC01315172. This is the Operating Agreement between 19 City of Edinburgh Council and tie. If we can just go to 20 page 16, please. 21 We see there in paragraph 3 one of the services that 22 tie were to supply to the Council in relation to the 23 tram project, which is to: 24 "Provide efficient and effective project management 25 services for the Project including cost, financial 168 1 programme, risk, contract and change management." 2 So the point is that tie weren't simply the 3 employers under the Infraco contract. They were also 4 providing a project management service. 5 In your experience, to what extent do those 6 performing a professional project management role 7 require advice of the sort you gave to tie about what 8 records to keep, especially in relation to claims for 9 extension of time and associated costs? 10 A. My experience is that we generally will give that sort 11 of advice to most clients, including project managers. 12 It's -- I think the nature of our business and the level 13 of information that we need, as I mentioned earlier, 14 there's a project I'm working on just now and we're 15 having to explain to people how to keep more detailed 16 records. 17 Generally, the only -- the only reason they're 18 needed is usually when there is a dispute. People don't 19 necessarily go into construction projects expecting 20 a dispute. But my experience is probably most clients 21 that I am engaged by, particularly on live projects, 22 there is a general comment that they should keep more 23 records and expand the records. 24 Q. Does that apply too to the sort of companies given 25 project management responsibilities on projects of the 169 1 scale and value, perhaps complexity, of the tram 2 project? 3 A. I would have to say -- I can't make a general comment, 4 but I would have to say my experience is even working 5 for contractors who, as we talked about with Carillion, 6 need to keep really detailed records, we often -- most 7 often find, certainly I have found in my last 21 years, 8 that detailed record-keeping can always be bettered. 9 So in this instance, yes, it could be bettered as 10 well. 11 Q. Thank you. 12 If we could return to your report, please, which is 13 CEC00330652. Just a brief point at page 17. There's 14 a heading there at 2.5.1, "Sub-contractor procurement". 15 Then down at the bottom of the page, three lines up from 16 the bottom, you say: 17 "Please note however that our initial conclusions in 18 respect of the prioritised elements indicate that 19 sub-contractor procurement process was not a significant 20 obstacle to commencement or progress." 21 Now, in other documents the Inquiry has seen, there 22 were complaints by tie that delays by the consortium in 23 mobilising their subcontractors was a cause of delay. 24 Is that the point that you're referring to there? 25 A. I wasn't aware of that particular point that tie had 170 1 made, but the point that I'm making there is in the 2 areas that we looked at, I think procurement may have 3 been better, and sometimes, as I mentioned in the 4 paragraph above, there was the use of letters of intent, 5 which is always fraught with difficulties. I think 6 a number of the subcontracts that we saw actually had 7 caps on value under the letters of intent, which is not 8 unusual, and it can cause problems in the situations 9 that we saw. Because of other overriding factors, in 10 these particular instances, it didn't seem to us to 11 cause a major -- a major issue. 12 Q. Thank you. 13 If we could go, please, to page 28. This is dealing 14 with conclusions in relation to Sections C and D. If we 15 move forward to page 29, please, paragraph 4.2.2. Just 16 reading there: 17 "From the attached, it is evident that the dominant 18 delays to commencement (and completion) on intermediate 19 sections 1A, 1B and 1C remain with the utility 20 completions in each of those areas. The extent of those 21 delays renders this Section the dominant sequence of 22 activities which continue to drive Sectional Completion 23 Date 'C'." 24 So in short, utility diversions in these on-street 25 sections was in your view the dominant cause of delay on 171 1 the project? 2 A. Yes, and the paragraph at the end of that -- the 3 sentence at the end of that paragraph confirms even 4 through mitigation, it was still -- that at that time 5 was showing us the dominant cause. 6 Q. Thank you. Then briefly moving forward to page -- we 7 see that Section 4.3 is dealing with Section 5 of the 8 works, which I think is the section from Haymarket to 9 the depot. Is that your recollection? 10 A. Yes. 11 Q. Then if we go to the next page, please, at 4.3.2: 12 "The analysis of the above confirms that at Project 13 level the delays incurred in this section of the works 14 (although significant) are subsumed by the more 15 extensive delays incurred within Section 1." 16 4.3.3: 17 "That said, analysis of those Section 5 elements, 18 clearly identify considerable periods of concurrent 19 delay at an intermediate section level. Infraco 20 culpability throughout this section is significant. tie 21 culpability is also present." 22 Then we just note in passing, 4.4.2: 23 "Similar comments apply here in relation to 24 Section 7 ..." 25 Which I think is the stretch from the depot to the 172 1 airport: 2 "... as are made at paragraphs 4.3.2 to 4.3.5 3 above." 4 Then drawing this together, if we go to page 34, 5 please, at 4.7.2: 6 "In the present circumstances, we consider that the 7 magnitude of the early and ongoing delays to the MUDFA 8 and utility works renders arguments about concurrent 9 (critical) delay more difficult to prosecute. This is 10 particularly relevant to the respective delays evident 11 in and between Section 1 and Sections 5 and 7. Whilst 12 there is clearly Infraco culpable delay within Sections 13 5 and 7, the project critical path remains firmly fixed 14 within Section 1 (intermediate sections 1A, 1B and 1C in 15 particular are currently seen to be driving the 16 Sectional Completion Date to 11 May 2012)." 17 So in short, Mr Burt, in comparing the different 18 causes of delay, you were looking at them both and 19 coming to a view on dominance; is that correct? 20 A. Yes. 21 Q. As far as you know, was that the approach taken by the 22 consortium when they advanced their extension of time 23 claims? 24 A. I would expect that it was, yes. I don't think there 25 was any -- well, I'm not aware of any difference within 173 1 tie about the importance or dominance of utilities. 2 There was more a concern, as I understand it, about the 3 way in which the JV's or Infraco's claims were put 4 forward, but certainly from our analysis, utilities were 5 at that point in time showing to be the dominant factor 6 delaying completion. 7 Q. Okay, thank you. 8 Just two brief matters to finish, Mr Burt. 9 In 2010 tie served Remediable Termination Notices 10 under the Infraco contract on BSC. Do you recall that? 11 A. I recall a process of the Remediable Termination 12 Notices, yes. 13 Q. I think you were appointed by tie to help gather 14 evidence in support of those notices; is that correct? 15 A. That's correct. 16 Q. If we could just look at your written answers, please, 17 at page 40, just the first paragraph of your answer to 18 question 120: 19 "The underlying objective was to collect, collate 20 and assemble the contemporaneous evidence to support the 21 RTN issued; and to prepare a narrative to set out and 22 explain the principles, details and effect of the 23 Remediable Termination Notice." 24 Can we take from your answer there that prior to 25 your instruction, that work had not been done? 174 1 A. It's certainly not been done by ourselves. As I recall, 2 I think it was middle of November 2010 when we were 3 asked to assist with that process. So we had not been 4 involved in that process prior to that date. 5 Q. Okay. I think just to clarify, in your answer, if we go 6 to page 41, just below the italicised text, you say 7 there: 8 "This work ..." 9 That's your work on the remediable termination 10 notices: 11 "... commenced immediately upon the settlement 12 reached with Carillion at the MUDFA mediation held on 13 10 November 2011. This continued through until 14 mid-March 2011 ..." 15 Is there an error there in the date of the Carillion 16 MUDFA mediation? 17 A. Apologies, yes. That should be 2010. 18 Q. 2010, thank you. 19 A. Yes. 20 Q. Now, we understand that the Remediable Termination 21 Notices were dated between 9 August and 12 October 2010. 22 So it would appear from those dates that your work in 23 gathering evidence didn't begin until after the notices 24 had been served; is that correct? 25 A. Yes, most definitely we were not involved until 175 1 10 November 2010. 2 Q. What was your understanding of the extent to which tie 3 had investigated the grounds for these notices being 4 served prior to sending them in? 5 A. I am not aware of what extent of investigations they 6 carried out. 7 Q. But given the nature of your role, if tie had carried 8 out investigations of any substance, would you expect 9 them to have made available to you the results of those 10 investigations? 11 A. Yes. 12 Q. Did they do that? 13 A. Not that I recall. I recall we had meetings with the 14 solicitors where we started down the route of going 15 through the different headings that I list out in that 16 answer. There would be discussions about the issues, 17 but I don't recall having been handed any packages of 18 information in relation to each, no. 19 Q. Thank you. Just one final point, Mr Burt. At page 43 20 of your written answers, in response to question 125, 21 just the first paragraph there: 22 "A draft report was issued by my colleague, 23 Iain McAlister, on 4 March 2011 in relation to INTC 536. 24 This was reissued on 31 March 2011." 25 Now, we looked at that report with Mr McAlister 176 1 yesterday, and I just wonder if you can clarify for us, 2 when you say that the report was issued on that date, on 3 4 March 2011, are you able to confirm whether it was 4 sent to tie on that date? 5 A. To be honest, I would need to check my records. It says 6 a draft report. I'm not sure who else we would issue it 7 to. I would need to check emails, but I have obviously 8 read there that a draft report was issued there on 9 4 March. 10 Q. Is that something you could perhaps check for us and 11 revert to somebody in the Inquiry office? 12 A. Certainly. Yes, I will do that in the morning. 13 MR MCCLELLAND: Thank you very much. I certainly have no 14 questions for you. 15 CHAIR OF THE INQUIRY: Just on that last point, it would be 16 enough if you sent in a letter confirming. 17 A. Certainly. 18 CHAIR OF THE INQUIRY: Are there any other questions? Well, 19 thank you very much, Mr Burt. That concludes your 20 evidence. Technically -- well, not technically, you are 21 still under citation and you could be recalled if 22 anything arose. If that happens, someone from the 23 Inquiry will get in touch. Hopefully it won't. But 24 thank you in the meantime for your attendance today. 25 A. Thank you. 177 1 (The witness withdrew) 2 CHAIR OF THE INQUIRY: That concludes the evidence today. 3 We will adjourn until Tuesday at 9.30. 4 (3.55 pm) 5 (The hearing adjourned until Tuesday, 28 November 2017 at 6 9.30 am) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 178 1 INDEX 2 PAGE 3 MR IAN LAING (sworn) .................................1 4 5 Examination by MR LAKE ........................1 6 7 Examination by MR DUNLOP QC ..................51 8 9 MR NEIL RENILSON (continued) ........................53 10 11 Examination by MR LAKE (continued) ...........53 12 13 MR ROBERT BURT (sworn) .............................119 14 15 Examination by MR MCCLELLAND ................119 16 17 18 19 20 21 22 23 24 25 179