I welcome colleagues, the press and the public to the 31st meeting of the Finance Committee in 2004 and I remind members to switch off all mobile phones and pagers. We have received no apologies. I intend to conclude item 1 by 10.15 at the latest; we have witnesses arriving from throughout the country so we need to stick to that timing.
Thank you, convener. Robert Brown has been unavoidably delayed on his journey from Glasgow, but I hope that he will be able to join us soon. I will therefore keep my opening remarks brief. Members will have in front of them the letter dated 25 November from the Presiding Officer to the convener, and I will mention the key points. First, we remain on target to come in within the overall cost that has been reported, which is £430.5 million. Obviously, we have moved into the building since our previous meeting and work continues apace on snagging and defects resolution. The key focus for Paul Curran's team, beyond the pursuit of snagging and completion of the landscaping, is work to conclude resolution of packages—that is the key work that lies ahead.
Thank you. I invite questions from members.
My question relates to the letter from Margo MacDonald. I share some of her reservations about the composition of the post-completion advisory group, which is a bit like the prison guards becoming officers in the escape committee. The same people who were involved in overseeing the catastrophic increases in the price of the building are apparently to be in charge of making sure that the post-completion phase is tidied up. Is that appropriate?
I start by completely rejecting the analogy. I do not think that there is any comparison to be made with escape committees. It may help the committee if I explain the process that we went through. There is an executive line of command up to the Scottish Parliamentary Corporate Body, which is the legal client. Ultimately, only the corporate body can take decisions on the settlement of packages and it has had to examine how it informs itself in relation to those decisions. That is an important first point to make. There is an executive line of advice, with Paul Curran as our senior professional. He has a lot of experience on the project and to support him in his work we brought in a claims specialist project manager, who is new to the project. In addition, Paul Curran has the benefit of independent expert legal advice from Shepherd and Wedderburn Ltd. We have strong advice and a blend of experience on the project, which is essential. There is no way that the detailed work that is necessary to resolve packages can be done without an intimate knowledge of the project. We recognise the need to bring in new people and new expertise, and that is what we have done at that level.
Do you think that you have enough independence on your committee to make judgments on matters such as whether particular contractors took too long to do particular parts of the work or whether they charged too much? Are you not perhaps erring on the side of having too many people who are too close to the project?
That is a fair question, and I have given careful thought to the matter. We should bear it in mind that for the most part the process of dealing with package contractors is detailed. Bovis Lend Lease Ltd and Davis Langdon & Everest, the cost consultants, have a contractual role to play in advising us on it. You have identified exactly the sort of questions that we ask. We need to ask whether claims are fair, whether a contractor needed to spend so much time on a package and whether any delays that a contractor may have caused had an impact on other contractors. The experience of people who have been involved with the project is matched by the presence of fresh eyes. The person who will give our key advice, a chap called John Boultwood, is new to the project. We have independent expert legal advice from Shepherd and Wedderburn, which has not been close to the project. Such people bring a fresh eye to this issue.
I welcome Robert Brown to the meeting.
I apologise for coming in late and missing the first bit of questioning. I was delayed by half an hour, as a train was cancelled at the other end of the line.
I have a question on a completely different matter—the fact that we have people climbing around on the roof of the building. What is our position if someone who has access to the roof of the building either has an accident or causes an accident to a member of the public? I am aware of cases in which owners of buildings have been sued because children have climbed on the roof and fallen through. Are we protected if there is an accident in the event of the sort of thing that is happening this morning?
Paul Curran may want to comment on this issue. Clearly, during design and construction and before occupation of the building we had to pass stringent health and safety tests. Those tests considered issues such as how safe the building is and whether a member of the public could inadvertently fall off anything. When someone deliberately puts themselves in a position of danger—as is the case this morning—effectively the matter is handed over to the police, who talk to the people involved. That is what has happened today. We rely on the police to advise us on the best way in which to deal with such people, not to endanger life unnecessarily but to ensure that we can go about our normal business. In the design of exits and entrances and of the landscaping, we were very mindful of health and safety issues.
It is necessary to incorporate in the design mechanisms to prevent people from injuring themselves. Such issues are covered by building regulations and the Construction (Design and Management) Regulation 1994. If during the operation of the building people are allowed on to the roof to carry out maintenance, for example, and fall off, it is necessary to examine whether those people were properly trained and the usual issues with which the Health and Safety Executive is involved. We must consider the causes of the accident and whether we have taken reasonable steps to prevent it. That is a difficult judgment to make when we are not dealing with a specific incident.
It is a little worrying if members of the public can get on to the roof and into a position where they may be in danger. Today we are dealing with a pressure group. However, children may seek to copy the group, having seen what it has done. How easy would it be for youngsters to emulate this sort of activity, to get on to the roof and possibly to put themselves in a position of danger?
After this incident is resolved—it is in the hands of the police—I will ask our security team to produce a report on it, in case there are lessons that we need to learn. The point is to strike a balance. This is an open, accessible building and we have had thousands of visitors. We want to make it easy for people to visit the building. However, we would be concerned if it transpired that access is too easy and children are able inadvertently to put themselves in a position of danger—you make a good point. I will ask our security team to produce a report on how the incident happened and whether there are lessons that we can learn. If we can do something that does not compromise the openness of the building, I will move quickly to take action on that front. When an adult deliberately puts themselves in danger, as is the case here, it is not possible to prevent that. The group involved has managed to climb buildings that are much harder to access than the Parliament, including bridges. However, the member makes a fair point and I will follow it through.
It is good to be back, albeit temporarily.
Before the witnesses respond, I make clear that the Auditor General's report is a matter for the Audit Committee. I understand that the issue is still live. It is not for the Finance Committee to encroach on terrain that is properly within the remit of the Audit Committee. However, it is appropriate for the witnesses to be asked to respond in relation to the post-completion issues that we are discussing today.
Thank you for that clarification, convener. As you say, the Auditor General's report has been considered by the Audit Committee, which has signalled that we should move on.
The principal reason for raising the matter and for quoting from the Auditor General's report is to establish whether you accept that the criticism is valid in general. You have replied that you do not accept that, which seems to me to put into stark relief the argument that those who are responsible for giving advice about whether claims should be pursued cannot be those who deny criticism from the Auditor General. It has been pointed out that Mr Grice, Mr Ferguson and Mr Curran have been involved throughout the whole, or most, of the project. If they have been involved in taking decisions in the past on matters about which the Auditor General has said that there were significant failings and an issue arises that relates to their failures during their work in determining whether a claim should be made or pursued, each will have an unavoidable conflict of interest.
You are sailing very close to the wind, Mr Ewing. I will be blunt. There is an Audit Committee process that deals with evidence from the Auditor General and that matter is under review by the Audit Committee. Further work is to be done. It is not for you to interpret or infer how that work will be concluded, and it is certainly not reasonable for you to talk about failure on the part of witnesses in such an ill-considered way. I ask you to moderate your language.
It is just like old times, convener. I referred not to my opinion but to the Auditor General's criticism. I am not going to go into details—
I ask you to concentrate on the issue that is before the committee, which is the post-completion advisory group. You asked to come to the meeting to ask questions about that.
Indeed, it is precisely—
In that case, please stop talking about the Auditor General's report, which is a matter for the Audit Committee, and direct your questions to specific issues relating to the post-completion advisory group.
I think that Mr Grice mentioned that the Audit Committee has decided to move on. If we cannot ask about the matter here—
You are invalidating your presence here. If you want to question the Audit Committee's handling of a matter that is under its jurisdiction, you should go to the Audit Committee to do so. You should not come to the Finance Committee to do that.
I may do so, but if—
I will give you one more opportunity to ask about the post-completion advisory group.
It is precisely because this work has a direct relevance to the post-completion—
I do not want an explanation. I want a question on the post-completion advisory group, please, Mr Ewing.
The question is, should people who are members of the post-completion advisory group and who have specific responsibility for deciding whether to recommend that claims should be pursued be people who have not played a part in the project and have not been criticised in the past by no less a figure than the Auditor General? Would that not be an insurance policy against the fiasco that has happened in the past being matched by a fiasco in the future? Mr Eggleston and Mr Boultwood are two members of the group, but would it not be better for a new team to come in to work on the recommendations on which claims should be pursued rather than for the committee to receive information from people who were involved?
I have given a full explanation to Mr Brocklebank which, I hope, covers the points that have been made.
Obviously, I come to the matter after a bit of a gap, so I am not quite as familiar with everything that has gone on as others are. I am not sure whether I am paraphrasing what Fergus Ewing has asked, but I think that he is saying that if claims that we are making stem from problems that the people whom we are claiming against say were due at least partly to our failures, our claims will be weakened. Am I right in thinking that that would apply regardless of who is on which committee, as the corporate body is the client?
From my dealings with Paul Curran and others who have had a lot of experience, I know that that is exactly what happens. A process of negotiation is involved. Of course contractors will seek to challenge claims that we make. It is normal and to be expected that they will say that the client wanted a change and that things were not their fault. I understand that that happens with every project and this project will be no different. You are right. That is a fair and normal process. I do not think that who settles the claims matters because, as you say, it is a client-contractor issue. That is exactly the process that we will have to go through.
I would like to pursue the issue slightly. You say that the mechanism that you put in place will be fully auditable. However, audits tend to take place well after the event, as we have seen. I suppose that the degree of transparency of the criteria against which decisions will be made and the role of individuals in reaching those decisions are an issue for the Finance Committee. Much hinges on Mr Eggleston's role. It would be helpful if you would spell out what that role is and clarify whether it is as an individual who has greater independence than others have rather than simply as one member of a committee. As I have suggested, perhaps the criteria against which decisions are to be made in dealing with and identifying claims could be spelled out a bit more.
I would be happy to write to the committee with more details about how the group will work. On your other point, that material exists, and, in effect, it describes our negotiating position. Therefore, it would not be appropriate to put anything on that front in the public domain at this juncture simply because that would give away our negotiating position. How the committee wishes to have such information is a matter for it to decide.
That would be helpful and would to some extent provide a safeguard in respect of how the process works.
I have one more supplementary question. I suppose that there is another concern. Where a claim is disputed, the people who are claiming—that is, members of the corporate body—might think that there was a slight failure on their part as well as a failure on the part of others, and therefore might fear pursuing a claim that would expose their own failings. I suspect that we need reassurance that all claims will be pursued regardless of whether doing so might expose people to unfortunate comments.
That is a fair point. I assure the committee that we will pursue value for money. We have been given clear advice and I repeat that we are bringing in to guide us a claims specialist who has no connection with the project. We also have independent legal advice.
Has the claims specialist been set targets and objectives, and will he be remunerated by results?
Initially, the claims specialist will analyse the overall position. At the moment, we are looking at specific areas and packages and setting the targets. Many of the packages are straightforward and can be settled relatively quickly, but others—those that have contributed to the delay of the project and which relate to the design—are more interesting. Those are the targets that the claims specialist will be set.
I have previous experience of bringing in external specialists to press down on debt that got out of control in companies, and it strikes me that there might be an opportunity to set a specific target and unleash someone to claw back a certain sum and get a commercial advantage from it. In other words, that would make the individual somewhat hungrier than he would otherwise be.
We have to remember the contractual responsibilities. The initial responsibility is for Bovis and DLE to agree the final accounts that incorporate an element of claim. Once DLE has made a recommendation to us to settle, we will carry out the final analysis and that is when the claims consultant would come on board.
I will leave that as a residual thought.
That relates back to the initial allocation of the risk register, when there was an allocation against design and time reserve. One was a best-case scenario and the other was a worst-case scenario, so that is where the element changed. There is a difference in the figures because it was not a straight percentage contingency.
So the £9 million exists in extremis if we need it?
Yes, it is part of the £430.5 million.
In that case, I have a final, minor point. In making the adjustments that are shown on the right-hand side of the financial schedule from the contingency reserve and factoring them into the summary on the left-hand side of the schedule, I notice that the £405,000 for VAT, which is risk drawn down from landscaping reserve, does not appear in the summary schedule, whereas the £0.17 million does.
That is the balance between the return to contingency, which is the £1.1 million, and the movement from contingency to the reserve, which is £1.75 million, so the balance is the £75,000 because the contingency figure includes VAT.
I hear the words, but they do not make sense to me.
That information is hard to take in—would it be helpful if we dropped the committee a note to explain it?
Let us clear that one up offline. I am dreading next week when we go through efficiencies and Jim Mather sorts out the spreadsheets for everybody.
I take great pleasure in welcoming back the usual suspects—I mean that in the nicest possible way—and I congratulate them on the outcome of their project. We have a magnificent building and I have been highly impressed by the lack of snagging problems that we seem to have run into—although you might have been covering those up unbeknown to the general public.
First of all, thank you for your kind remarks. People can tell that I have been coming to the committee for too long. It would not be wise for me to speculate, however appealing a get-out-of-jail card appears to be.
As long as we all remember that we heard it here first.
It is quite early to comment on that. Perhaps by the time that we are next in front of the committee, when we will have settled five or 10 packages, we will start to see a trend emerging. I take a strong, personal interest in that and I ask Paul Curran about it every time I see him. So far, there is no alarming trend. As Paul Curran said, it is likely that we will settle the more straightforward packages first; perhaps, when we have settled a quarter of the packages, we will start to see a trend and I will be able to give a firmer answer to your question.
There seems to be a tremendous amount of interest in the building from the general public. What attendance figures do you have to date?
Last week we went through the 120,000 visitor mark, which is already twice as many as we had in a year up the road on the Mound. What is very encouraging is the high positive response rate from those people, not only to the building but to the process—to what they see in the chamber and in committees. As we go along, we must learn fast about seat allocation and how to give visitors the best engagement with the Parliament, whether they just want a quick look at the building or they are a committee witness.
Are any legal proceedings under way?
No.
How many cases have taken place?
No formal legal proceedings—other than an adjudication—have taken place.
So no cases have taken place.
No.
Therefore, the mediation process is being followed for many packages.
I do not want to go too far, but we received a telling piece of advice from John Boultwood, who is the claims specialist, about the value-for-money issues of how claims are settled. In broad terms, to move from the left-hand axis towards the right is to go closer to legal action, and moving further to the right is extremely expensive. That does not mean that we never go there—we always reserve that right—but those are value-for-money terms, which even include processes such as mediation and adjudication.
I understand absolutely the desire for value for money, which is right, but the question is whether you receive advice that the cost of pursuing legal action is greater than the cost whose recovery is sought.
That is the fundamental advice that is received at each stage.
How will that process be audited? Are you saying that any contractor to the corporate body can do a very bad job as long as it thinks that the value of its contract will be below the threshold of the potential cost of the legal process?
That undoubtedly does not describe the process that we are following. The corporate body relies on advice—legal and otherwise—on the matter, but we have made it extremely clear that we will recover public money stringently. We will settle what is validly and legitimately due, because that is right and correct for contractors who have undertaken work for us. However, by the same token, every pound beyond that will be a prisoner. I do not disguise the fact that judgments have to be made but, as Paul Grice said, it would be unhelpful to go too far in the direction that the question pursues.
With respect, your emphasis is different from Paul Grice's. He just agreed that the balance involves setting the advice that you receive about the cost of the legal process against the amount whose recovery is sought. Before, he said that that process would be externally audited, but it cannot be if it rests on the judgment of corporate body members.
No—I am sorry; perhaps I was not clear enough. At every stage in each case, one must examine the costs, the risk and the likelihood of outcomes. That is why one has expert advice. There will be a proper audit trail, so that the auditors and the Audit Committee can ask afterwards whether the corporate body, the chief executive and the team did their job properly and followed due process. In each case, we will consider what is in the Parliament's best interests, which will include examining performance against a contract.
We are reaching the end of our allotted time.
May I ask another question?
Very quickly.
I appreciate that.
This is your fifth question.
Will you help me with a couple of lines in the accounts that have been settled to date? I was struck by the figures for roads—I assume that those are the roads outside the public foyer—which are nearly 20 per cent out between the cost plan and the final settlement. The reason for that is given as unforeseen ground conditions, yet there was a road beforehand and there is a road now.
The reference is to roads in the Holyrood park area, where Queen's Drive was realigned and new roundabouts were installed at the end of the landscape tails next to Salisbury crags. Those roads were completed about three years ago.
As we have said, most people who see the building are extremely impressed, but the occasional gloomy soul says that the bamboo outside will go black and that the concrete blocks will react with one another and fall to pieces. We hope that that is unfounded, but I am a little concerned about the length of the post-completion period. What financial contingencies have been made to deal with longer-term issues that may arise from the design? I am not implying that the concrete blocks will fall apart, but one or two people say that that will happen.
The contractual specification is of one year after practical completion in which to remedy defects. During that period, we hold a 3 per cent retention against all the trade package contractors and the design team, to cover the cost of making good any defects. At the end of that period, the architect will undertake an analysis that signs off the building and says that contractors have made good all defects that were apparent at that time. By then, the building should be in a good state. Should any defects appear after that period, the Parliament is covered under common law and can still pursue the architects on design issues and the contractors on poor workmanship, because emergent defects are covered under the law on latent defects.
I requested and received from Jim Fairclough this morning a breakdown, for which I am grateful, of the additional moneys in the Presiding Officer's report that total £3.5 million. In that £3.5 million is an additional £1.75 million for Bovis Lend Lease staff costs. What is that for? Why was it not foreseen?
The costs were covered as part of the design and time reserve contingency. The sums are for staff into 2005, who will deal not with construction, but with settling claims and closing out packages. The whole amount relates directly to cost and people on site—it is not a fee.
Why was the sum not foreseeable? We have known for a long time about everything that you just described.
We must be clear that the numbers are provisional. They are the allocations and the transfer from contingency to the risk reserve. The numbers are the starting point for negotiation downwards.
I am grateful for your response, but it did not really answer my question about why the matter was not foreseen. It seems that Christmas comes early for Bovis Lend Lease.
Alasdair Morgan will ask a supplementary question on the matter.
Paul Curran talked about time that is spent on dealing with claims. Bovis is the managing contractor. Are we paying Bovis staff to stay on to deal with claims that we are making against the company or the people whom it should have been supervising?
Perhaps "claims" is the wrong word; we are talking about the settlement of final accounts. The final cost of every trade package must be settled. Some packages will involve claims for extensions of time, prolongation and disruption, which is part of the normal contractual procedure that must be followed when there have been delays such as we have experienced. We employ Bovis to do that on our behalf, so as part of its contract Bovis must consider each claim that trade package contractors submit and ascertain whether the claim is properly substantiated. Bovis negotiates on our behalf—we are not talking about Bovis claims.
The convener's briefing that I was given says that in the unlikely event that no questions are asked about the independence of the post-completion advisory group, I should ask such questions myself to cover Margo MacDonald's point. I think that we have dealt with all the issues, so I thank the witnesses for attending. I suspend the meeting for a couple of minutes to allow for the changeover of witnesses.
Meeting suspended.
On resuming—