Rural Economy and Connectivity Committee

Meeting date: Wednesday, December 14, 2016

Official Report 530KB pdf

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Major Transport Infrastructure Projects (Update)

The second agenda item is an evidence session with the Cabinet Secretary for Economy, Jobs and Fair Work, in which he will provide an update on major transport infrastructure projects, initiatives and developments within his portfolio. I welcome the cabinet secretary to the meeting. I also welcome Michelle Rennie, director of major transport infrastructure projects at Transport Scotland, and Graham Porteous, head of special projects at Transport Scotland.

I invite the cabinet secretary to make an opening statement.

I thank the committee for the chance to give it an update on the major transport projects portfolio.

It has been a busy time for those projects, including the Queensferry crossing, in recent months, with significant works undertaken in all the projects. As you have heard, the Queensferry crossing is on schedule to open in May 2017, the usual caveat having been given about weather. Significant milestones have already been reached, including the closure of the south and north decks in October and November respectively. Construction of the north and south approach roads is nearing completion, and the centre tower deck fan was recognised as the longest free-standing balanced cantilever structure in the world by Guinness World Records. That record lasted for a few days—the bridge lost that accolade after it was connected up.

I will update the committee with more detail on the other major transport projects that are under way. Design work is well under way on the 11 road schemes that make up the 80 miles of the A9 dualling project, which is one of the biggest transport infrastructure projects in Scotland’s history. We have already invested more than £89.4 million in a £3 billion programme of work; £3 billion is the figure that we have used, although as the project comprises 11 different schemes that can only be an estimate at this stage. It is important that I get that on the record. That is what we anticipate will be the ballpark figure for the cost of the project. Work has taken place since the announcement of the project in December 2011, including recent ground investigation work, which is critical in helping to inform the design process.

Residents of the villages of Kindallachan, Guay and Dowally have been campaigning against the proposed options for dualling, on the grounds that it will have negative impacts on the villages and on their properties. Online and offline options have been thoroughly considered and strong public opinion has been expressed about both. The preferred route was made public this week—the online option was chosen—and Transport Scotland has written to the online and offline campaign groups to inform them of the decision and has published the assessment reports online. Residents in Dunkeld are currently in discussion with Transport Scotland about a co-creative process to capture community input in the route options assessment.

Construction is also well under way on the £35 million A9 dualling Kincraig to Dalraddy project, which is on schedule to open in summer 2017. Traffic is already using the southbound carriageway and work is under way to upgrade the existing road.

The dualling of the A96 between Scotland’s most northern cities is a significant undertaking that requires careful in-depth planning and design to ensure that we deliver the right scheme—one that helps to tackle congestion while providing better journey time reliability and road safety for all. The dualling will help to tackle congestion in towns along the route, reduce journey times, improve journey time reliability and improve road safety for all users. I am sure that the committee is aware of the particular challenge on the existing route, which is the different categories of traffic that use the route and the conflicts that arise.

The packages of preliminary engineering and strategic environmental assessment work that we have completed are the first step in developing a robust plan to improve connectivity between Inverness and Aberdeen and demonstrate our commitment to investing in that strategically important route. In May 2015, the outcome of the preliminary work was presented to more than 2,000 members of the public at a series of exhibitions along the A96 corridor between Forres and Aberdeen. The next design phase—east of Nairn to Aberdeen—is split into three sections: the western, central and eastern sections. More detailed route options assessment work is now under way on the western section between Hardmuir and east of Fochabers.

Transport Scotland has also completed the development and assessment of the preferred option for the 31km A96 dualling Inverness to Nairn project, including the Nairn bypass section. On 29 November, it published draft orders on the scheme for formal comment. The objection period runs for nine weeks—it was extended from six weeks to account for the festive holidays, and ends on 31 January. Further progress on the scheme will depend on the level and nature of comments—and objections, if any are received—on the draft orders.

The contract for the M8/M73/M74 motorway improvements projects was awarded to the Scottish Roads Partnership on 20 February 2014 and the main contract works commenced immediately thereafter. The new and improved roads are scheduled to open during spring 2017. As we move into the final stages of that project, the focus is shifting to completing structures, particularly the Raith underpass. It is necessary to connect the new offline infrastructure, which is now complete, with the existing online route network. Although a significant amount of traffic management has already been implemented across the project, more is planned, and there will inevitably be some delay and disruption, as there has been already, as the project progresses to completion.

I have heard some of the comments of committee members in relation to the committee’s visit to the Queensferry crossing. The M8 bundle is equally impressive. I have not discussed this with officials, but if the committee wanted one, I am sure that a visit could be arranged. I am going up in a plane on Friday to have an aerial look at the project. It is a light plane—there is not a lot of expense involved—and we will post the pictures that will be taken from the plane.

There is a huge amount of interest in the project. It is an extremely impressive project that includes the achievement that, for the first time, the main road between Edinburgh and Glasgow will be motorway for its entire length. There will also be a completely new Raith junction. It is entirely up to the committee if it wishes to take up my offer.

11:00  

We are continuing to progress with the design and development of a number of schemes including the A90/A937 Laurencekirk junction improvement, in which I know Mr Rumbles has a particular interest. I am happy to answer questions on that. There is also the A90/A96 Haudagain junction improvement.

Following completion of the statutory process for the A737 Dalry bypass, in July four bidders were invited to participate in the competition for the main works. Work is scheduled to commence before the end of the delivery 2016-17 financial year .

The Aberdeen western peripheral route/Balmedie to Tipperty project is the largest road project in the UK currently. It has been more than 50 years in coming; we actually started work on the route almost exactly two years ago, on 12 December 2014. Good progress has been made during 2016 on the 58km site as a whole. Phase 1 of the project, at Aberdeen airport, opened in August this year, ahead of the contractor’s planned autumn target, and is already bringing benefits to the local area.

As I am sure a number of members will be aware, road users are seeing a lot of activity on existing trunk roads, particularly on the A90, where new traffic management measures have recently been put in place at Charlestown. I visited the site at the end of last month, and was generally pleased to see good progress being made, with sections of the new road already having been laid.

The majority of the project’s earthworks have been completed, with the exception of some key local sections, particularly on the Balmedie to Tipperty section. As I indicated in my letter to the committee, some issues have arisen with the delivery of the Balmedie to Tipperty section of the project. I will say a bit more about that.

Following the positive Supreme Court ruling in October 2012, the Scottish Government indicated an outline programme for the whole project to be delivered in spring 2018. The main project contractor, Aberdeen Roads Ltd, subsequently proposed opening the Balmedie to Tipperty section in spring 2017. It also proposed opening the Craibstone junction in autumn 2016; as I have said, that was completed ahead of schedule.

We consider that the proposal for Balmedie to Tipperty was challenging but achievable, and it would obviously have been welcome if it had been realised. However, last month, the contractor confirmed to Transport Scotland that it was no longer planning or able to open the Balmedie to Tipperty section in spring 2017. The timescale is no longer considered viable because the contractor has not completed key earthworks in the area whose completion was expected prior to the current winter period. Committee members will appreciate that certain construction processes are sequential, as you will have heard in relation to the Queensferry crossing, and that various critical works—such as drainage works, road foundation works and the realignment of some local roads—are dependent on the completion of earthworks before they can be undertaken.

The intended completion of certain key earthworks on the Balmedie to Tipperty section after winter has a consequential impact on the overall programme for that section. Committee members will appreciate that undertaking earthworks during the winter period can give rise to certain risks, including, in particular, environmental risks around the control of run-off from the site and risks to weather-susceptible materials. Indeed, as the committee will recall, members raised a number of concerns last year about some of the contractor’s activities during the winter period. Those concerns were primarily about water run-off from the site and the impact on water quality and local watercourses.

It is worth highlighting that, following the concerns that were raised by committee members—including you, convener—the contractor undertook positive mitigation work with other key agencies throughout 2016. That included the introduction of temporary measures such as the use of water treatment apparatus and ponds.

In order to mitigate the effects of winter working this year, the contractor plans to keep earthworks to a minimum. The contractor had been undertaking extensive earthworks across the site into October this year, but that was scaled back with the onset of the winter season.

As part of the Scottish Government’s continuing scrutiny of the AWPR/Balmedie to Tipperty project, I have put in place detailed governance arrangements, which are overseen at the top level by a project board involving Transport Scotland, the Scottish Futures Trust and the funding partners at Aberdeen City Council and Aberdeenshire Council.

On a day-to-day level, Transport Scotland closely monitors the project through a set of well-established and robust project management procedures that have stood the test of time. They include regular attendance on site by Transport Scotland officials and detailed reporting from the contractor to Transport Scotland’s project technical advisers and on-site representatives.

Since I received the Balmedie to Tipperty notification in November, my officials and their technical advisers have interrogated the contractor’s explanation of its position, taking into account its working methods and stated assessment of the current position, particularly in respect of earthworks. My officials and their advisers have confirmed that, in the circumstances, they concur with the view that the works on that section will not be complete by spring 2017.

I highlight for the committee’s benefit that the project contractor does not receive payments for sections of the project until they are available and open to traffic. However, throughout 2017, road users will start to see the benefits of the project in addition to those at the Craibstone junction, as new local roads and slip roads begin to open to traffic.

As with all major projects, I will continue to monitor and scrutinise the project closely. I remain firmly committed its delivery, with all the benefits that that will bring. Notwithstanding the developments in relation to the Balmedie to Tipperty section, I expect the contractor—an international consortium of construction companies with a great deal of experience—to deliver the project in winter 2017-18.

As committee members will appreciate, weather can be a factor that influences the programme for major civil engineering projects such as the AWPR. It is therefore difficult to give very specific dates. That being the case, I clarify that the roads are scheduled to open to traffic in winter 2017-18, when we will see the AWPR/Balmedie to Tipperty project provide significant benefits to the people of the north-east.

Again, I thank the committee for the opportunity to provide today’s update. I will answer any questions that members may have.

Thank you, cabinet secretary. I will struggle to get through the Conveners Group the costs of the committee going up in a light aircraft to view the M8 with you. We may have to decline that offer and use a more traditional form of transport. I am sure that the committee will consider that.

You have opened up a wide discussion covering areas of interest to various members. I urge members to keep their questions as short and focused as possible. I also ask you, cabinet secretary, to keep your answers as short and focused as possible.

My questions are about the delay to the Balmedie to Tipperty section, which is obviously very disappointing for the thousands of people who travel that road every day. I, too, travel that way very regularly. There may be some delay over the winter, but why has that resulted in a knock-on effect of the road being delayed by nine months to a year? I can understand that some delay might be caused if the earthworks cannot be done over winter, but why is that leading to almost a year of delay? That seems excessive.

As I mentioned, we expected the work to finish within the terms of the main contract—as we set out, by the start of spring 2018. Then the contractor brought its bid forward and said that it could finish earlier. Of course we were delighted to hear that. I stick to the fact that the work is expected to finish by the end of the contract, but it is possible that the contractor will finish substantially before then.

The reason for the knock-on effect that you describe is the sequential nature of the works, particularly the earthworks. Those works will restart after winter. Michelle Rennie or Graham Porteous can advise the committee on the practical reasons for that, but if the earthworks in key areas have not been completed before winter, that sets the project back, because other things that would have been done during the winter period cannot be done.

As the cabinet secretary has said, the reason is that the operations are sequential. We need to get the earthworks out of the way before we can start the road construction and because the area is now not available until the earthworks are complete, there will be a period of about six months—depending on how quickly spring comes to that part of Scotland this year—before we can restart construction.

Have you absolutely ruled out any earthworks over winter? The weather conditions right now are not bad and soil conditions are reasonable. We might get an open winter and two or three weeks of hard frost, which would be ideal for earthworks. Have you ruled out taking a more pragmatic approach and working away as long as you can? I am not suggesting that people should be working in very poor conditions, which would create problems, but as long as conditions are okay, why are we not moving ahead?

I agree that the weather is unexpectedly mild, but I am not sure how easy it is for the contractor to reverse the decision that it has taken and to be opportunistic in taking the weather into account. Michelle Rennie might be able to answer that.

The contractor took the decision on the basis of its experience last winter, when it tried to undertake earthworks during the winter and had a number of difficulties that ended up causing environmental problems. The contractor has tried to take a responsible approach this year and has decided that delay is the best approach.

You were told by the contractor on 9 November that it was having issues with completing the project. Two of my colleagues were at the Public Audit and Post-legislative Scrutiny Committee on 24 November and specifically asked Transport Scotland officials whether there was any delay. They were told that everything was on track and on schedule. Suddenly, a couple of weeks later, we hear that we are facing a delay of nine to 12 months. What is going on? Why were my colleagues given the wrong information just a couple of weeks back?

Perhaps Michelle Rennie can answer for the Transport Scotland officials but, as I laid out in my statement, the process that we follow—and this is true of many projects—is that if a contractor says to us that there is a timescale issue or some other issue, we do not simply accept it and, until we have agreed it, we do not go along with the contractor deciding what it intends to do. A substantial amount of interrogation was carried out on what the contractor said. Some of the issues that you have raised were interrogated to determine whether it was still possible to achieve the timescale. There have been instances when we have managed to convince a contractor to alter its views, or when we have been able to provide it with further assistance. Therefore, until Transport Scotland agrees with the contractor that the project will not proceed as scheduled, the position is that it is on schedule.

I was not involved in the evidence session that you referred to. Perhaps Michelle Rennie has more to say.

I think that it was stated at that meeting that, overall, the project was running to schedule. That was and remains the case. A section of the project is now running late—as Mr Brown said, we initially found that out on 9 November. Because it is a large and complex project, a lot of investigation had to take place into what impact that late running might have, whether we could bring any mitigations to bear and whether the contractor had taken the correct decision. We needed some time before we were in a position to tell you about the delay.

What impact will the delay have on the overall cost of the project? Who bears the cost of the delay: the taxpayer or the contractor?

As I said in my opening statement, the contractor is paid only when the road is opened—that is how such contracts work. We do not pay anything until that point, so, for the period that elapses between the projected opening date of spring 2017, as notified by the contractor, and whenever the road opens, there will be no payments to the contractor for the road. The contractor that completed the Craibstone junction early has now received a payment because the road is being used. For the Balmedie to Tipperty section, which is a discrete section of the AWPR project, and for the overall project, payment is made only once people can use the roads. That means that the contractor is forgoing payment in the meantime.

When the road eventually opens, will there be an extra payment to the contractor because of the delay or will it fulfil the contract at the original price?

The only payments that we make for the completion of the roads are those that are set out in the contract. I think that they are called unitary charge payments, and contractors are eligible to start receiving them only when a road is completed and in use.

11:15  

There are obvious advantages for the purchaser—the Government—in having a fixed-price contract, but equally there can be disadvantages for the contractor, particularly if the Government applies pressure to speed things up against what the contractor wants to do. There might be additional costs associated with that for the contractor, which will be of no interest to the Government.

I wonder whether you have pressured the contractor—in a reasonable, proper way, because you have contractual timetables as well as contractual costs—in a way that has increased costs for it. Just how vigorous have we been with the contractor in making sure that it is living up to the timetable that it has suggested, which is much better than the one that the Government was originally looking for?

If we go back into the history of the project, it is clear that people in the north-east have been waiting for elements of it for the best part of 50 years. There were protracted legal processes through different tiers of the legal system that provided further delay. As soon as the Supreme Court issued the final legal judgment, we undertook what is probably the fastest procurement process that has ever been undertaken for a project of this scale. I remind the committee that this is at present the largest roads project in the UK.

As you said, it was the contractor that came forward with the earlier date, so the pressure has come from the other side—the Government has not applied pressure in that respect. We said at the time that the completion date would be spring 2018. The contractor, in a competitive bidding process, came back with an earlier finish overall and with staged completion dates. If pressure has been put on the contract, it has come from the contractor itself. Yes, we have interrogated and pressured the contractor—to go back to the previous question—when we have been advised that it did not think that it could get one section completed by the date that it had given. However, the pressure that the contractor will feel in order to get the different elements of the project completed is a pressure that it has imposed on itself. It put that timescale into its bid—we had simply given it the overall date of spring 2018.

I would like to ask one other question. You might be rather disappointed—as I am—at the relatively short notice of what is a significant change to the contractor’s original proposed date. In my experience of major projects in software—not in civil engineering—we always operated a rule of four. In other words, if you were delaying by a month, you had to give four months’ notice. In this case, we are looking at a delay of six months at least, and possibly more. Perhaps you will agree with me and have your officials speak to the contractor about giving much earlier notice, perhaps based on the rule of four, of any changes in the schedule. There is a reason for that rule. If you have that amount of scheduled notice of changes in the timetable, you have some options in how you reconstruct things. If you get close to the delay, you essentially have a take-it-or-leave-it situation, which is not generally very satisfactory behaviour on the part of the contractor.

That is a very fair point. According to your rule of four, the contractor would have had to give us notice of a six-month delay on the day the contract started. I have tried to explain that the delay of six months—or longer, as committee members have pointed out—is a result of the sequential nature of the project and of the nature of the winter intervention that has prevented the work, but you make a fair point.

We want to have as much advance notice as possible, as we wanted for the Queensferry crossing. This contract has been taken forward remarkably quickly, and that produces its own pressures for the contractor, but it is a fair point and the officials have now heard it.

You keep saying that the project is proceeding quickly. However, to go back along the timeline, in the second session of Parliament—I remember it well, because I was in Parliament at the time—Jack McConnell announced that the Scottish Executive was going ahead with the project. There was then a change of Government in 2007. There was, as you referred to, some legal action over the southern leg, but there was no legal action over the northern leg. The controversy was simply about whether the southern leg would go through Culter and Milltimber or Milltimber and Bieldside—that was it. You could have proceeded immediately when the Government came into power, but you did not.

There are lots of reasons for delay, but I took the second last paragraph of your letter with a pinch of salt. It says:

“The Scottish Government has pursued the AWPR/B-T project with vigour throughout its development. It was a considerable success to be able to begin the construction phase in 2015.”

From my perspective, we should have started the project immediately in 2007. Why did the Government decide that it would not proceed until all the legal processes were finished with the southern leg?

Before you answer, cabinet secretary, I remind members politely that a brief question will get a succinct answer. I very much take the point that Mike Rumbles is making about history, but the shorter we keep things, the more I will be able to get everyone in. A lot of people with questions are stacking up.

Cabinet secretary, can you give us a brief response?

There had been 50 years of waiting and eight years of a previous Administration during which the construction was not started.

I completely disagree with Mike Rumbles on the legal process. The legal process prevented the start of the project. We acted extremely quickly on the project and I am proud of the actions that the Scottish Government is undertaking. The project remains immensely popular. People see the work that is on-going and they anticipate the benefits. Of course, though, I regret that we are not able to get completion of one section as quickly as we would like.

I hope that that is brief enough, convener.

Can you summarise something? I am a little confused. There was a briefing on 24 November that said that everything was on time and on budget. However, at that stage the Scottish Government knew that it would not be on time, because it had been warned on 9 November. There was also a briefing by the contractor to Aberdeen City Council on 2 November, saying that everything was on time and on budget, even though it knew that that was not the case. Was that a wise move?

With respect, convener, perhaps that question goes back to the point that Peter Chapman raised. On 2 November, we had not been told by the contractor. I was not part of the Public Audit and Post-legislative Scrutiny Committee’s evidence session, but I think that it is true to say that the point that was made there was that the overall contract was on—I do not know, because I was not there.

I will repeat what I said before. Until we have been notified and have interrogated the notification, we do not accept that the project will be delayed. That is why I have come before the committee to answer these questions at the earliest opportunity.

I think that the difficulty that people will have is that the word “overall” slipped in when you talked about it. People are always more wary when it comes to delays.

Peter Chapman made a point about soil conditions. The contractor has had the ability to work on site and programme a visit. Brief investigations with the Met Office suggest that the rainfall in September was 36 per cent of the average total of the past 30 years. In October it was 87 per cent, in November it was 75 per cent and in December it was 15 per cent. Those are all perfect earth-moving conditions, or at least nothing out of the ordinary. Has the contractor been as diligent as it could have been in undertaking the work when it was supposed to have been doing it?

It is for the contractor to evidence those kinds of assertions about the weather. I point out, however, that storm Desmond happened during the construction of this part of the project, and that produced challenges across the UK. In addition, there were exceptional weather patterns prior to the ones that you mentioned.

I did not slip in the word “overall” and I qualified what I said by saying that I was not party to the evidence that was given. According to what Michelle Rennie said just now, the answer that was given to the committee was about the overall project. I am not saying that I know that; I am just saying that that is what I am hearing.

This is true of all projects: until we are notified, we do not simply accept that there will be a delay. We challenge such things, and that is what we have done in this instance.

Richard Lyle has a small question.

Cabinet secretary, can you confirm that the M8, M73 and M74 project is a fixed-price contract?

I thank you for the work that you are currently carrying out and the help that you are giving me. I was invited by Humza Yousaf on a personal visit. I found it informative and I encourage other members to go along and see the work that is being carried out in that area in my constituency.

Yes, it is a fixed-price contract.

For the convener’s benefit, I should clarify that my invitation to committee member earlier was not to come up in the plane; it was simply to visit the project. As Richard Lyle has said, he was impressed by the work that is going on. He is not the only one—a number of other people who are affected by the project have also been impressed. If members of the committee want to visit, we will facilitate that.

I am disappointed to hear about the aeroplane.

I am not sure that I am that disappointed.

Cabinet secretary, earlier, you said that there would be no additional costs to the Scottish Government as a result of the delay to the AWPR. Is the contractor subject to any penalties in that regard?

Not in that regard. The specific penalty is the fact that it will not receive any money because the road is not available for use.

When will each stage of the project be ready and open for use? Will there be further delays to different stages, or is the delay that we are discussing the only one?

The three deadlines that were specified in the contractor’s bid concerned the Craibstone junction, which was scheduled to open in autumn 2016 but opened early, in August; the Balmedie to Tipperty route, which we have discussed; and, beyond that, the overall timescale for the contract. I have also mentioned the fact that different elements—perhaps smaller elements, such as certain slip roads and smaller junctions—that were not specified when the bid was made will also be available to the public in advance of the completion of the project. The overall completion of the project will be in the winter of 2017-18.

The M8, M73 and M74 all go through my constituency. The project is hugely impressive. I know because I drive around the area, but I believe that committee members would be hugely impressed if they were to go and see it for themselves.

The financial aspects of the AWPR have been touched on already, but I would like further clarification. If the contractor is taking longer than it planned to, it will have equipment that will be sitting on site over the winter, wages that it did not expect to have to pay and so on. Do all those costs have to be met by the contractor?

Yes, all this is done at the contractor’s own risk. Of course, the contractor would have expected that plant and personnel to be on site in any event, but it would have expected them to be more productive than they are able to be over the winter period. The contractor would have expected to start receiving income for that section in the spring of next year. It will not now receive that income, but it still bears the costs of completing the work.

I take your point that the cost is the delay in payment. However, as Rhoda Grant suggested, would it be worth having bonuses or fines if people are quicker or slower, or would that just complicate the contract?

The professionals who are involved in the matter might be best placed to answer that question but, before I let Michelle Rennie do that, I will just say that there must be a balance and flexibility in every contract. If you seek to be more prescriptive, that can introduce more risks into the project.

The contracts for the AWPR and the M8 are both non-profit-distributing contracts. The principles of those contracts are mandated across all Government projects. The contracts seek to balance the risks and the benefits of the projects. The intention of the procurement period was to try to get a better understanding of each bidder’s apparent risks and to see where the risks were best placed and what costs were associated with them. The process of trying to understand that better went on for a considerable number of months, and we then invited contractors to submit a tender in which they identified dates by which we thought that they would be able to deliver at a cost that is proportionate to what they intended to deliver. In essence, applying additional penalties would be likely to increase the contractor’s risk and have a potential value-for-money impact on the public purse.

11:30  

In effect, if the contractors thought that there was a 20 per cent risk of a penalty, they would add that on to the cost to cover themselves. Would there also be a danger that they would delay the completion date so that they would be more likely to meet it? I am talking about when they put in the tender.

They would certainly try to cap off their risk. They will seek to take a responsible attitude to risk for their own organisation and will try to come up with something that is achievable. If there are penalties, there is always the potential that they will play it safe.

It occurs to me that this delay might be a cost saving for the contractor. If, as Peter Chapman suggested, the contractor had people and machinery on site and went with the weather, there would be a cost if the weather changed and it was not able to use them. However, by stopping altogether, it does not have to pay people and it does not have the machinery hire costs. The way in which the contract has been written and the contractor’s approach is saving the contractor money, rather than running the risk of accruing more costs if the weather is not helpful.

We do not have an open-book form of contract, so we do not have access to what money is going in and out of the contractor’s organisation. Nowadays, contractors operate a much more flexible approach. It is not as though they will hire someone who will come on site for six months regardless of what happens with the weather or other circumstances. In most cases, the contractor will be able to redeploy the majority of the resource to other activities elsewhere in the site. The situation is not one in which there are a lot of people and plant, which the contractor is or is not paying for, standing there for six months.

It is also true to say that the contractor will have taken on borrowing from various institutions and will have to service that. The income that contractors get from a road being open is extremely important to their financial wellbeing. The fact that they will not be paid is a major incentive. If they deliberately sought to extend the contract for other reasons, they would also be taking a reputational risk

Rhoda Grant made an interesting point. If the contractor decides that it is going to delay and that is approved, it takes the equipment off hire so that it is not faced with any risk or costs, which means that it is dispersing its costs or putting them back to a later point in the project by delaying them. The benefit to the contractor of putting up its hands and saying that it is going to do the work later is that there does not seem to be a penalty from the Government and the risk to the contractor is minimised. It does not have the costs and it does not need the money until you pay it. That is the point that Rhoda Grant was making, but I do not think that Michelle Rennie has quite answered it. Do you want to come back on that?

Not many contractors would tell you that they do not need the money that is likely to come as a result of completing a section of work. This is a big project, so we are talking about substantial moneys. The organisations are facing substantial risks and such decisions will not be taken lightly by anybody.

Our technical advisers have confirmed that the contractor worked well into October. There are only a few weeks of earthworks left to be done and, had that work been finished, the contractor would have been able to continue through the winter period. However, the contractor was just not able to complete the earthworks in time, despite its staff’s best efforts. The contractor is also conscious of the environmental problems that it had last winter and did not want to get itself into that position again.

Before Peter Chapman comes in again, I have an observation on that point, which is that because it is not an open-book contract, you do not know whether the contractor is paying the subcontractors on the completion of the job or piecemeal. The pressure on the main contractor will be less if it is piecemeal.

I still have not had a clear explanation why, if a couple of months’ working time is lost over the winter—and we may not lose any—that puts the whole project back by almost a year. In theory, that should put it back by two months. You said that there is a lot of consequential work, but, if we get the earthworks done, the contractor can get stuck into the consequential work, and that puts you back by two months. Where do the other nine, 10, 12 months come in? I just do not get it.

First, I do not think it is inevitable that it will be nine, 10 or 12 months. The intention is that the contractor will crack on with work as soon as possible after any delay.

Secondly, it will not be a loss of two months over the winter; it will be longer than that and that adds to the time at the other end. The consequential works cannot be started until the winter period is finished and the earthworks are completed. Obviously, they cannot start the foundations for the road until the earthworks have been completed. That is the sequential nature of it.

I will come back to the point that you made, convener. If, when the contract was let, there had been an incentive for the contractor to down tools and stop working over a six-month period, the contract would not have included terms to allow it to complete sections of the road earlier. That is in the contract because the contractor can make money from early completion. That is its incentive.

As Michelle Rennie said, if we were to go to a different kind of contract, under which we were able to impose penalties, that would be factored into the bids.

Those are the checks and balances that we have in this type of contract. Do you want to add to that, Michelle?

I will leave that point there, because I accept that contractors will hedge penalties in the overall price.

Gail Ross has a question on a slightly different issue.

Cabinet secretary, you said that the project is being delivered by the NPD model. We have heard about the delay to the completion date, and Stewart Stevenson touched on the changes in scheduling. The challenges at the moment are particular to this project, but do they have wider implications for the management of projects being delivered through the NPD model, and what lessons can be learned?

I will give two answers to that. First, the nature of the contracts that are let and how they can be improved should always be kept under review. The intention in relation to NPD is that the risk is transferred to the contractor; that is what we have sought to achieve. As has been suggested by members’ questions, there are different models that can be followed.

Secondly, the NPD model itself has been brought into question by the new guidance that has been issued in the form of the European system of accounts 2010—ESA10—from Eurostat and the European Commission. That has meant that we have had to make changes. For example, this contract is now allocated to the public sector, where previously it was not. Further guidance is coming out from Eurostat, although that is partially bound up with whether we remain within the EU.

We regularly review the nature of the contracts and the contract model that we have. Work is on-going to make sure that we have the best available model. The NPD model was developed because we felt that the previous public-private partnership contracts had often given rise to unjustifiable profits and the NPD model seeks to cap those profits and share them among charities.

Cabinet secretary, as there are no more specific questions on the delay, I will move on to slightly wider issues within your portfolio. Stewart Stevenson will start.

This is a broad question about how all our major projects inform our future decision making. What processes does Transport Scotland in particular and perhaps the minister, too, have for learning lessons so that every project we come to we do a little bit better than the previous one?

My project management guru is a guy called Fred P Brooks, who retired a few months ago, at the age of 85. He talks about making an omelette: you are promised it in two minutes; if it is not set in two minutes, you either eat it raw or you wait. There are lessons there about whether two minutes is the right answer. The same applies here. How do we deal with that?

In general terms, we do try to learn lessons, which are different for each project. Some projects have been allocated to the public sector and have been undertaken in a different way. You will know as well as I do about the different nature of the Queensferry crossing contract and how that came about because of pressures of time. We do learn and we do review how we conduct projects. I mentioned one aspect in relation to NPD.

If you look around the north-east, there was the Bridge of Don project—it was not carried out by us but, from memory, was delayed by weather. We looked at what happened with that and other projects. A number of projects in the UK have been very substantially delayed, so we have looked at them in order to avoid the same pitfalls.

In general, we have a very good track record. When we get something right, we should learn from that, too. We learned lessons from the M74 project, which was hugely challenging in engineering terms as it is largely an elevated motorway, and from the M80 project, which Stewart Stevenson was involved in. We even learn from railway projects such as the Airdrie to Bathgate line, the Borders line and the Stirling-Alloa-Kincardine rail link, which tend to be more challenging, although we have less direct control with those. The Stirling-Alloa-Kincardine project is a good example: it started off at a price of £6 million, at least for the Stirling to Alloa part, but it ended up at £83 million. That was before my time. That was largely to do with the background of a very fragmented rail industry, which caused all sorts of problems.

We seek to learn from what we have done before and work is always on-going to ensure that we do that for the finance side and for the project management side.

I will just make the observation that at one stage the cost for the Alloa line was £91 million, but we managed to claw it back.

What has delayed the AWPR, in particular, has been planning issues and getting the road orders through the process, even though, as minister, I split it into three bits because the objection was to one bit.

I am mindful that the minister is pushed for time and that there are a lot of questions stacking up. I think that we have moved on from the AWPR. Do you have a specific question?

It is specific to that. I want to know whether there is any intention on the Government’s part to look at how the planning operation works and how we can make decisions faster, while properly respecting the rights of objectors. The AWPR was three years in the system before we got a decision and that, to an observer, seems extraordinarily long.

I can confirm that it is extremely frustrating but, at the same time, the different levels of judicial review are there to protect the rights of individuals. It was very frustrating for all the reasons that the member will know. We look at those things to see how we can ensure that the process is as quick as possible in the future, but they largely involve the protection of rights of groups or individuals, which we want to continue with.

The committee will shortly look at a petition relating to the junction improvement at Laurencekirk and we now come to two questions on that work. Mike Rumbles will ask the first one and Mairi Evans the second. It would be particularly helpful to the committee to receive an undertaking from you regarding the junction; if you can work that into your answer to help us with the petition, I am sure that the committee would be grateful.

I understand about delays, the legal process and so on, but I was very disappointed by the letter of 24 November that the committee received from the Minister for Transport and the Islands in which he laid out the work programme and said that work will not begin until 2021 at the very earliest. The minister said that it will take three years for the Government to identify a preferred junction layout—that has nothing to do with protests or road orders—and another year to develop the preferred option. I cannot understand why the Government will be working on it for four years, which is before the two years that will be needed for the draft orders and everything else. People do not understand why it will take the Scottish Government so long—that is my main point.

Once again, there is a long and protracted history to that, which Mike Rumbles will know well enough. It has fallen to this Government to undertake some of the mitigation works regarding the risks at the junction. We have undertaken those works and they have proved to be successful. However, for reasons that Mike Rumbles will be aware of, the campaigners feel that those works are insufficient.

We have looked at the issue over a number of years and it largely falls in the area of the transport minister, who is involved. The on-going design and assessment process is programmed to be completed in 2018—that is as specific a date as I have just now—and development of the detailed assessment of the preferred option will follow that, culminating in the publication of the draft orders in 2019.

Mike Russell will know even better than me the complications around that junction—the question of which end to place the grade-separated junction, for example. Further, for a number of years, the issue was bound up with issues relating to development, but I think that we have cut across that now by saying that we will go ahead with the project. However, these projects take time and, if you want to do them in the right way, especially with regard to a complicated junction, you must spend time at the early stages doing the necessary design work.

Michelle Rennie can say more about that.

11:45  

For the benefit of the Official Report, I note that the cabinet secretary meant to refer to Mike Rumbles, not Mike Russell.

I apologise.

Significant work is already under way on the Laurencekirk junction in terms of developing design options. We need to consider all the options before we get to a preferred route. In considering all the options, there is quite a lot of technical work, site investigations, consultation with various landowners and so on that must be gone through if we are to arrive at the correct conclusion. To ensure that we are able to get through the necessary statutory processes successfully, we need to ensure that we have been through all that in the proper way and have given everything due consideration. That will take us to 2018. At that point, we will be in a position to develop the preferred route, once that has been identified. The intention is that we will publish draft orders in 2019 and, subject to there being no objection to those orders, we can then start construction in 2021, at the earliest.

I will follow on from Mike Rumbles’s question, because that information is not clear to people—I have certainly had a lot of constituents contact me about it since we had the information from the transport minister. It is important to outline the exact process and why the process takes the time that it does, because that is not understood by a lot of people. That is the information that we need to hear. We must have it all laid out.

Do you feel that the cabinet secretary has laid out that information now?

I intend to ask the cabinet secretary about the issue later on this afternoon, too—I will just give you a heads up on that, cabinet secretary. It would be useful if the Government could write to the committee to set out the timeline between now and 2021 and outline the different timescales.

I entirely agree. That would be very helpful, particularly with regard to the three-year period—this year, next year and 2018.

Cabinet secretary, I will summarise what has been said by saying that it would be helpful to have that information in writing, because it would help us to consider the petition, which has been around in various guises for a considerable time. It is only fair that we get the petitioners the information that they desire and get some clear guidelines on when the project can be completed.

I would like to leave the issue of that particular junction at the moment. I have a question on the A9. Cabinet secretary, I think that you suggested that the overall costs, as programmed, were around £3 billion. You said that that was split into various sections. What percentage leeway, plus or minus, had you allowed within that £3 billion figure for the overall costs? Will it be exactly £3 billion or less or more?

The point that I was trying to make is that we are nine years away from the completion of the A9 and 14 years away from the completion of the A96. Those projects are broken down into discrete projects—I think that I mentioned that there are 11 projects in relation to the A9—and all that we have been able to do in response to requests for information about costs is give a ballpark figure of £3 billion. That is because we do not know what is going to happen to inflation or what will happen with regard to future projects. All that I am saying is that it is fair that we are clear about that at this stage, as I think that we have been. The cost will be determined by a series of contracts that are let.

On the AWPR, the M8 bundle and the Queensferry crossing, we received extremely keen prices. If we can have that again in future, that might well result in a reduction in the £3 billion figure. If that is not the case—because of Brexit or inflation, which we are beginning to see creep up—the situation could be different. The £3 billion figure is a guesstimate that we have had to make at the very start of the project to give some guidance to people.

I understand your answer, cabinet secretary, but it is important for the committee to keep an eye on the costs and be informed as early as possible when you see things changing. The committee thinks that the Parliament is not thankful of receiving information that is then countermanded, perhaps as a result of an earlier meeting.

I have a further question on the A9. It is a long stretch of road across one of the most beautiful parts of Scotland—I would say that—and safety is an issue. What thoughts do you have about the fact that there are no on-road services—you have to turn off to reach them—on the A9? Is that a safety issue that should be considered as the development goes on or will you leave things as they are?

We must always be open to such things. Representations have been made by heavy goods vehicle drivers’ organisations in the past for on-road services. The services that have been introduced previously have been in response to local demand. It is also the case that, if drivers cannot access services on the road, they will go into the local community, which can be quite important to that community. We always consider those matters.

As you say, convener, it is a long road. You mentioned safety, but I am not sure whether the key reasons for the situation are safety reasons. I will check that out further and write back to the committee. It is perfectly possible to have an online services junction, which can be very safe. That allows me to mention the fact that the average speed cameras have dramatically improved the road’s safety record. Those cameras were bitterly opposed by a number of people, but they have had a major effect on the safety of the road. At the same time as introducing cameras on the single carriageway sections, we have increased the speed limit for HGVs, which has helped to reduce frustration. I would be happy to come back to you on the issue of services on line, convener, if that would be beneficial.

It would also be helpful for the committee if you came back with the accident prevention figures relating to the cameras that you mentioned.

I heard the magic words “Dalry bypass” in your opening statement and although they might not be as exciting or interesting to other members, they caused me to say “Hallelujah!” to myself. The people of North Ayrshire have been waiting to hear those words for quite a while. Please feel free to respond to my question in writing if you do not have all the answers today, cabinet secretary, but can you tell us when that work will start, how long it will last, what the expected completion date is and what the overall cost of the project will be?

I should say that I gave an undertaking to come back to the committee with answers to two previous points and those may come back from the transport minister, as this is really his project, too. Michelle Rennie can answer some of your questions just now, Mr Greene.

The procurement of Dalry bypass is well under way and we hope to have that process finished in the spring. We will start work on site immediately thereafter. We have not yet finalised the construction period because that is something that we discuss with bidders through the procurement period. We are expecting it to be in the order of two years.

Can I confirm that you estimate work to start in spring 2017 for a period of two years?

We will start some preparatory work in the spring and the main contract work will start in the summer.

Do you have an estimate of the overall value of that project?

We will be able to finalise that once we award the contract.

Are there any other questions?

We have been told that the road building programme is substantial, which I contrast with the relatively modest rail improvements that are proposed for the north. Has any research been done on modal shift that you can share with the committee? At the moment, it is much more attractive to take the train between Aberdeen and Inverness, because it is much quicker than the road. There will be consequences down the line if that situation changes, and likewise with the Highland main line. I invite everyone to come and see the lengthy stretches of single track in the Highlands that greatly inhibit the use of public transport.

Has any work been done on modal shift, particularly to reduce goods vehicle numbers? There is a view that, rather than the A9 being dualled, dualling and electrifying the Highland main line could take 250 to 300 HGVs a day off the road. If the proposal to increase the speed limit to 50mph is implemented, road haulage will be given a further competitive advantage of half an hour over carriage by rail. I am interested to know whether work has been done on that and what the cumulative implications of all the significant road improvements and new roads are for our climate change targets.

Work has been done, but it would perhaps be best if my colleague Humza Yousaf responded on the latest work. I do not want to pass the buck, but he is the transport minister.

By and large, the roads projects that I have described will achieve the objective of all of Scotland’s cities being connected by either a dual carriageway or a motorway. Most modern developed economies would seek such a basic requirement.

On John Finnie’s points, £180 million—in fact, it is now substantially more than that—has been committed to upgrading the Inverness to Aberdeen rail line, which potentially includes two new stations. A new station has been completed north of Inverness. There is the Airdrie to Bathgate line, and the Borders railway has taken trains into a new part of Scotland for them—or certainly one that has not seen them for 40 or 50 years. We have invested substantially. In fact, I think—I will confirm this in writing—that the amount that we are spending on rail exceeds what we are spending on roads.

On John Finnie’s perfectly reasonable point about HGVs, we had a pilot of what was called the whisky train, which took whisky products from Moray to try to alleviate the pressure there. A lot of that work was done through the strategic transport projects review, which I am happy to furnish the committee with if it does not have that already. Perhaps I could ask my colleague Humza Yousaf to come back to the committee on the specific points that John Finnie raised, in addition to the answer that I have given.

That would be helpful. You mentioned a station north of Inverness, which I presume is Conon Bridge. A modest investment would improve the inefficient rail network north of Inverness—the far north line. Do you accept the perception that, with regard to major infrastructure, the rich get richer and the poor get poorer? We have heard from Audit Scotland that the road network is not being properly maintained. As you said, the upgrades that are taking place are concentrated on joining the cities, whereas little is happening in the north-west and the west Highlands. I have asked questions about the modal shift implications of that. There has been a modest upgrade of the A82. Do you accept that all the eggs seem to be in the basket of that triangle?

No—not from the Government’s point of view. The Government is responsible only for trunk roads, and some of the roads that you describe are local roads.

I am familiar with the rail line north of Inverness. My family are from Brora and lived right by the railway as it goes through the village. Local authorities are responsible for 94 or 95 per cent of all the roads in Scotland; we have just the trunk roads.

On the A82, we are providing improvements. We waited 30 years for the project at Pulpit rock, which has now been completed. That was a really challenging engineering project. Another project involves the stretch from Tarbet to Inverarnan. By mentioning those projects, I am straying into Humza Yousaf’s territory, which, having been a transport minister, I do not want to do. Again, I would be happy to provide information or to ask Humza Yousaf to come back on the points that John Finnie raises.

The cabinet secretary will perhaps recall the opening of the new freight yard in Inverness, which took hundreds of goods vehicles off the A9. They were dry goods, but there is an equally large opportunity for fresh goods. Is the Government contemplating any work that might help to get fresh goods on to the railway network, too, and reduce further the freight on the trunk road network?

Again, I will ask Humza Yousaf to come back to the committee on that point. John Finnie made a point about investing in the capacity and efficiency of the rail network. If we can achieve that, rail freight will become more attractive.

Stewart Stevenson will know that there are rolling stock challenges, which relate not to the locomotives but to the carriages. We cannot do everything at once, but the more we can improve the efficiency and speed of the railways, as we have sought to do, the more chance there is for them to take on additional goods.

I will ask Humza Yousaf to add that to his growing list of things to come back to the committee on.

12:00  

I will go straight to my point, which is about the relationship between the AWPR contractors and the local farmers whose land the road goes through. I wrote to you on the issue a few weeks ago and it has not gone away; indeed, it is getting worse. There was a wish for the road to be a success, but the good will between the farming community and the contractor is rapidly disappearing.

The contractor is taking access where it should not, and getting compensation seems to be a long and tortuous process. That seems to be souring relationships and you need to sort that out. It should be a far simpler process to get compensation when it is clearly due.

Cabinet secretary, that is a constituency issue, and I encourage you to correspond directly with Peter Chapman on it. A general point and observation are that it would be helpful if the process could be looked at and simplified for contracts that are drawn up in the future.

I would like to leave the point there. Before we wrap up the session, would you like to add anything as a result of the discussion?

Not really, other than to thank the committee for allowing me to come and give an update at relatively short notice. I will try to make sure that we do not miss anybody’s points and will come back on the matters that relate to my portfolio or through Humza Yousaf.

I undertake to look again at the issue that Peter Chapman—and other members—have raised. I have one small point on compensation, which is that the processes are often statutory. They involve the payment of taxpayers’ money, which we have to be careful about.

I know that there have been frustrations. I have visited businesses that are close to the new road and discussed similar issues. We will look into that again and come back to Peter Chapman.

On the committee’s behalf, I thank the cabinet secretary for his time and wish him well in his aeroplane next week. It would be more appropriate for an ex-marine to be on foot, but I take it that you will be in an aeroplane.

You have been asked to come back to the committee on a list of things. I add to that a request for you to provide a written update on the completion of the A9, A96, M8, M73 and M74 improvement projects, so that we can predict the opening times and have information on any milestones that would help the committee to gauge progress, which will allow us to monitor whether the projects are being delivered within the timescale. The clerks will write to you directly about that.

I briefly suspend the meeting to allow the witnesses to leave.

12:02 Meeting suspended.  

12:03 On resuming—