Finance Committee, 04 Apr 2000

Meeting date: Tuesday, April 4, 2000

Official Report 117KB pdf

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Scottish Parliament Building (Reporter)

The first item on the agenda is a report by Ken Macintosh, who is the Finance Committee's reporter on the new Scottish Parliament building. Members should all have a copy of the letter to Sir David Steel from Ken, which describes Ken's remit as reporter. Ken has pointed out that his remit is fairly tight and relates solely to the way in which any changing costs in the Holyrood budget might impact on the Scottish consolidated fund.

In a moment I will ask Ken to give his short report, but first I would like to draw members' attention to a briefing for MSPs on the Holyrood building that will take place at the Holyrood site at 1 o'clock today. A bus will leave the parliamentary headquarters at 12.45 pm.

I would like to stress that this is an interim or preliminary report; the bulk of my work is still to be done. As members would expect, everybody on the Holyrood project whom I have approached so far has agreed to talk, but full meetings will not be arranged until after Easter. The pressure on everybody's time following the publication of the Spencely report has meant that I have had only the briefest of conversations with the Minister for Finance and the leader of the project team, Barbara Doig. Part of my brief is to keep the committee informed of any recent developments, such as the report of the Scottish Parliamentary Corporate Body, so I thought it appropriate to give the committee an update this morning.

The Spencely report makes a number of points on the cost of the Holyrood project. I am sure that members have all had a chance to examine the report in detail, but I would like to highlight some of the comments in it. Mr Spencely plots the rise in projected costs of the new Parliament building through 10 cost reports from December 1997 to February 2000. In section 4.5, he concludes that the total project budget in February 2000 was £230 million. In section 8, he says that that figure could be brought down to £195 million by reducing the scope of the project. He emphasises that all the figures are estimates, and that the client—the corporate body on behalf of the Scottish Parliament—has not yet finalised or approved the design. In section 4.3.8, Mr Spencely points out that

"the Project design is less settled than it was in March 1999"

and that

"the estimate for the basic construction cost is less reliable than it was in May 1999."

In section 5.4, he says that it is

"clearly imperative that the Brief is frozen now and that the Design Team proceeds immediately to produce a Scheme Design including a cost plan to a Brief and a budget approved by the Client."

At the briefing sessions that followed the publication of his report, Mr Spencely was reluctant to add much to the report. In particular, he would not comment on the budget process under which the estimated cost rose from £50 million to £230 million. However, two further points in his report are worth noting. First, in section 9.4, he makes a number of recommendations on how to improve the overall management of the project. Secondly, in section 9.3.2, he makes this point:

"That the Client's expectations for time and cost were not being met has been known within the Project Team for nine months at least."

When I spoke to Barbara Doig—the leader of the project team—she highlighted the same point. The contracting system under which the project is being built, and which was commended in the Spencely report as the best option, does not give a running total of the estimated costs. The project team can always give an accurate figure for expenditure to date—which is £21 million—but there is no grand total. In Mrs Doig's words, what we have to work with are

"estimated costs, based on a moving snapshot of design."

What are the implications for other budgets? As I said, I was able to have only a brief conversation with the Minister for Finance. He stressed that all money that was spent on the Parliament would have to be approved by Parliament through the normal budget process. The implications for other budgets and other departments are still unclear. Money for the Scottish Parliamentary Corporate Body does not come out of any other department's budget—it has its own heading in the budget. The assumption must be that, beyond this year's allocation of some £90 million, the money will have to be found through the spending review.

However, it is clear that no one at civil service level in the Scottish Executive has direct and on-going responsibility for the Holyrood project. That is unsatisfactory and should be corrected. One of Mr Spencely's key recommendations—in section 9.4.20—was either to have a specialist member to push the project along, or to set up a project progressing committee. The SPCB is meeting today and any recommendations that it makes or that the committee makes will be dependent on the outcome of tomorrow's debate in Parliament. If the project goes ahead and if the idea of a progressing committee is adopted, somebody from the Scottish Executive should sit on that committee.

A number of questions must be asked about the cost of further delaying the project. Barbara Doig has given me a note on the project's progress so far, which I have circulated to members of the committee. I draw members' attention to the second last point, which says that

"if work is suspended on site for 3 months so that everything stops there would be a further one year to the completion date and up to £10 million additional costs will be incurred because of standing down contractors, site costs and fees."

In section 11.5, Mr Spencely also estimates the cost of cancellation of the project, and says that it would lead to a debit of between £16 million and £30 million. On changing the site, he says in section 6.6.2:

"Time would be lost and this would cost money."

That is my interim report—as I said, it is very much a preliminary report and I have drawn no conclusions. The committee's decision will depend on the outcome of tomorrow's debate and it would be daft to presume what that outcome will be. However, my recommendation—if the project goes ahead—is that the Executive should be represented on the progressing committee.

Thank you for that concise but accurate report on where the project stands. Obviously, a range of issues around this project will be discussed this week, but do members wish to comment now?

I would like to take the reporter back to his conversation with the Minister for Finance, Jack McConnell. You reported that Mr McConnell's view is that SPCB spending in no way affects any other part of the budget.

He did not say that it did not affect any other part of the budget. The cost of the new Parliament building is a matter for the SPCB, and the funding comes out of the budget that has to go through Parliament. He did not say that it would not affect—

It sounded from what you said as if Mr McConnell thought that there was some other scheme.

No—absolutely not. I am sorry. I did not mean to mislead members.

No—that is fine. Did Mr McConnell indicate where the money from the normal returns that will have to be made—whether from nominal rent or whatever else and which are standard in Government buildings—would go?

I must stress that my conversation with Mr McConnell was very brief. I will sit down after Easter with civil servants and, I hope, the Minister for Finance. When I spoke to the minister, I wanted only his initial reactions to the headline points in the Spencely report. After Easter, I will be happy to ask him more detailed questions, such as the one that you have asked.

What did you ask Mr McConnell to go away and look for?

I beg your pardon?

Did you give Mr McConnell a steer on what you want him to come back with?

No, I said I would speak to him properly after the Easter recess.

I have some questions about Barbara Doig's note. On the first point, how can she describe the situation as "normal"? A quadrupling of the budget seems highly unusual. I am not sure what she refers to in her fifth point and I find the seventh point odd—"£10 million additional costs" would not be additional to the cancellation costs if the three-month period were followed by cancellation. That is not made clear. Nor is it clear why there would be a one-year rather than a three-month delay in completion consequent on a three-month suspension. A report to the reporter to this committee should have more detail.

Will you explain why you want a member of the Executive to be on the SPCB progressing committee?

I received Barbara Doig's note only this morning. As you can see, it is not presented as a document to the full Finance Committee, but I thought that rather than keep it to myself it would be helpful to circulate it to committee members. It is Mrs Doig's view and I have not had the chance to ask her any questions on it. I will do so when I speak to her after the Easter recess.

I was disturbed to find that the Scottish Executive does not have a civil servant monitoring the costs of the new Parliament. It is an important matter. I intend to ask how costs were able to rise undetected—or seemingly undetected—over the past year. It is important for the Scottish Executive to keep an eye on it—it is not something purely for the SPCB, since the money will come out of the Scottish block. We should offer the Executive the opportunity to arrange for a civil servant to keep an accurate and up-to-date note of the costs.

I have been struck by how the design and costing are separate processes. The process of moving the design along may be satisfactory but the process for updating us on costs is not and needs close examination and improvement.

With press speculation and the First Minister's response to questions, it was unclear at question time last week what is going to happen with the future financing of the project. Will you be able to find out more about the structure of future financing for your next report?

I will make a point of doing so. I will look most closely at the budgeting. As I said, so far I have found it far from satisfactory.

I apologise if this was covered before I came in. It seems that the project has grown but no one has asked about the cost of every square metre that is added on by MSPs and others who want extras. It is unbelievable that no one asked that question—that nine months down the track the SPCB seemingly had no idea that if the size of the building increased, so might the cost. What does that say about the SPCB's ability to scrutinise the project? It gives little confidence that the project can be brought under control under current management arrangements.

I made a couple of comments on those points earlier. At this stage I do not think that it is helpful to draw conclusions about current management of the project other than to say that there are serious flaws in the cost reporting. Barbara Doig explained that the only way tabs can be kept on costs as the project develops is to take a snapshot of the design as it has evolved and make an estimate. There is no report of cost at each stage of the design process. The contracting process in use has been recommended as establishing best value for money. I think Spencely makes that point. Establishing a lump sum for which the building should be built is not necessarily the way to get value for money. However, the system means no running total is kept, and that is not satisfactory.

In relation to comments made by John Spencely and possibly by Mrs Doig, do we have any record of changes that, according to the press, MSPs have demanded? Do we know what they were, who made the changes and who agreed to them? None of us has been asked about the specification for the working building. Has Mr Macintosh managed to get any information on that from Mrs Doig?

I am not sure that that question is properly directed to Mr Macintosh.

I ask it because we are looking at the effects on the budget. We need to know what has changed since the beginning. If part of that, as is claimed in the press, is demands from MSPs for additions, I would like to know who made the demands, what was demanded and who authorised them.

It is relevant but I did not want to duplicate Mr Spencely's work, so I waited to see what he had to say. I will not look at the architecture as such but I will ask questions about anything with implications for costs. Page 16 of the Spencely report gives a chronology of the project and highlights a number of points. At paragraph 3.9, after mentioning the Parliament's agreeing the motion on 17 June 1999, it says:

"The Scheme Design was never approved by the Client but the Design Team was instructed to proceed with detailed design in July 1999."

Paragraph 3.11 says:

"In November 1999 the Design Team was instructed by the Client to implement some of the potential design changes identified in the value engineering exercise".

Paragraph 3.12 says:

"In February 2000 the Design Team reported on the changes to the design necessary to accommodate the additional staff."

I said at the beginning that John Spencely had highlighted that. I want to know whether we can identify where the changes came from and why. The addition to the budget does not appear to have had any basis in the Parliament.

I cannot find it at the moment, but the only significant comment in the Spencely report is on the redesign of the chamber. That may have been in the SPCB's comments.

It was.

I will examine that issue. I am well aware of my brief to look at the costs and cost implications. I will also liaise with the Auditor General to look at past decisions. We should be able to answer that point.

Ken suggested that the committee might want to make a recommendation.

It depends on whether the Parliament building gets the go-ahead in tomorrow's debate, which I do not think we should presume.

In that case, does the committee want to make a decision or should we leave it until the next meeting?

We will not meet again until after the Easter recess. The SPCB is in charge of the project. At this stage we might ask it to note my report and our discussion rather than make any formal recommendation. I am quite relaxed about whether we make a formal recommendation, but I do think that the Scottish Executive and the Parliament should be keeping a close eye on running costs. We need someone who keeps the bottom line in mind as the process continues because so far there has not been any such person.

I suggest that we write to the SPCB telling it about our discussion and suggesting that it note what we have said about monitoring costs.

I do not think we can make that recommendation. We are talking about future management and the Executive's responsibility—if any—for it. That is not an issue for this committee; we are looking at the outcomes and why the budget varied in the first place.

At this stage, I suggest that we ask it to note our discussion—it does not have to be a recommendation.

It is obvious that the SPCB needs to be alert to the total cost, but given that Mr Spencely has said that he is uncertain about the cost and that the cost is less certain than it was a year ago and that since then it has already risen, what does that say about the cost we have at the moment? It is all very messy. You can draw our discussion to the SPCB's attention, but I do not think that the committee has a considered view yet. A lot more work needs to be done before we can think about recommending anything to anyone.

In that case, unless any member differs, we will make no formal recommendation at the moment but we will hope that the SPCB notes our discussion.