Finance Committee, 08 Oct 2002

Meeting date: Tuesday, October 8, 2002

Official Report 239KB pdf

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Scottish Parliament Building Project

Item 2 relates to the SPCB's quarterly report on the Scottish Parliament building project. Members might recall that, in June, having received advice from the Presiding Officer that the picture would be clearer at the present stage, we agreed to delay receipt of the report. This represents the third occasion on which we have considered such a report since the Parliament agreed to the provision of information by such means in June 2001.

I welcome Fergus Ewing, who has joined the meeting. Before I invite members to ask questions, I give Sarah Davidson or any of the other witnesses the opportunity to make a preliminary comment.

The Scottish Parliament building project is a controversial subject. The corporate body is well aware that there is considerable press and public interest in the likely eventual cost of the new Parliament building at Holyrood. It would be helpful to recap to the committee how we got to the current position on costs and parliamentary authority.

The Parliament inherited from Westminster the decisions on the site, the architects' conception, the scheme design and, most important, the contract method. The Government took those decisions prior to June 1999. Commentators have fastened on to a number of figures for the likely cost of the project, which were proposed in the early stages. As those figures were not site specific and did not relate to worked-up designs, they could not fairly be said to represent a realistic estimate.

When it inherited the project, the corporate body, with the sanction of the Parliament, made two significant changes. It instructed changes to the shape of the chamber and, more significant, increased substantially the physical size of the project to reflect our experiences of the Parliament in operation. That resulted in an estimated figure of £230.88 million, which was confirmed by John Spencely in his report of March 2000. Building on the work that the project team had at that time, he recommended certain cost reductions, which reduced the figure to £195 million. The Parliament approved that figure and the Holyrood progress group was established to improve the supervision of the project.

The sum of £195 million formed the base figure for the design project that we are building. On 13 June 2001, the corporate body reported that building-industry inflation in Edinburgh was adding at least 16 per cent to the costs of new contract packages and that the project was exposed to other, unquantifiable design and construction risks. The Parliament instructed that the project should be completed and that, although risks were to be managed rigorously, quality was not to be compromised. It required the SPCB to provide quarterly reports to the Finance Committee on progress in relation to inflation and materialisation of risk, to inform the committee's consideration of the annual budget act.

The current report follows the earlier reports of December 2001 and March 2002. The total costs in those reports were £261.6 million and £266.4 million respectively. In March, I warned the committee that the figure was the total figure as we saw it at the time, but that, until the project was finished, a substantial risk element remained.

On 20 June 2002, the Presiding Officer advised the committee in a letter that considerable uncertainties surrounded the contracts for the chamber's specialist glazing and the fitting out of the buildings, partly because the engineering drawings were proving highly complex and partly because of increased security—primarily bomb blast—requirements. The result is that our current total estimated project cost is £294.6 million, which represents an increase of £28.2 million since March.

It is difficult to identify the breakdown of the increase precisely, because the engineering design problems cause delays, which in turn add costs in other areas, such as scaffold hire and delays to other contractors. Building-industry inflation has added about £25 million to the initial figure of £195 million. The insolvency of Flour City UK has been responsible for about £3.5 million, bomb-blast work and consequential delays have amounted to about £30 million and the higher tender cost of the specialist glazing for the chamber has cost about £3 million. Delays other than those due to bomb-blast work have cost about £20 million. That figure takes account of the need to obtain a new contractor for the specialist glazing, which arose when the negotiations with the initial tender company failed and which is referred to in paragraph 9 of the report.

Those are the headline bits that make up the difference between the two figures but, as the committee will appreciate, the figure of £294.6 million still includes the remaining project risk of £47 million—our advisers anticipate that that is a realistic figure that is likely to be needed. The committee will also be aware that the SPCB and the progress group have been fairly rigorous in seeking sensible savings, but not at the cost of compromising the quality of the building. As Margo MacDonald said, there have been issues of the balance between the finishing levels and the subsequent contract maintenance costs that will be needed thereafter.

I began by commenting on the media interest in the cost of the project, much of which has centred on whether the project cost has reached £300 million. The SPCB fully understands the cost issue, which we have been concerned with throughout. There is also increasing recognition that the Parliament is likely to be a world-class building, which will be a centrepiece for the evolving democracy in Scotland and which, according to the projections that we have had, may attract about 700,000 visitors, making it the third most-visited building in Scotland. The editorial in The Herald on Saturday noted that it will provide "valuable economic spin-offs", and that not to proceed

"would have been a missed opportunity, a failure of ambition more worrying than the overspend is today."

The corporate body and the progress group are trustees for the Parliament, within the very difficult constraints of the contract management method that we inherited. Where the risks remaining with the Parliament, as client, have proved greater than anticipated for the reasons detailed, a number of them are substantially outwith our control, not least in security terms. They are an entirely legitimate worry, but they must be seen in that context.

That is all I have to say by way of introduction. I am happy to take questions.

Before I invite questions from members, I would like to seek clarification from Sarah Davidson about the distinction between paragraphs 3 and 4 of the report, which deal with inflation. Could you give us some information on that?

As the committee will recall, the initial cost plan was based, as is normal practice in construction, at a base year of 1998 prices. As Robert Brown said in his opening comments, it was therefore necessary to work out what one would expect the effects of inflation to add to that when coming to a pre-tender estimate. Because the figures on which the risk register is based were compiled within the previous six months or so, they do not have the same element for inflation and are therefore at real-terms prices. You do not need to look at the £47 million and then add an impact for inflation; that has already been calculated.

That is helpful. Thank you.

The risks involved are obviously of interest to some people. How many contracts were let on the same basis as the Flour City one, without indemnity?

The indemnity was not really the issue with Flour City.

What about the performance bond?

Yes—the performance bond.

I do not have those figures to hand, but I can let you have them.

Do you know how many contracts have gone through without any risk at all?

No risk has materialised from any of the contracts that have been let in terms of requiring to call in a performance bond or a parent company guarantee, other than in relation to Flour City.

Apart from the number, do you know what risks could accrue from the remaining contracts that have not yet been completed?

Inevitably, until any contract is finally complete, there is the potential for risk attached to it. A number of measures are used. Retentions of payments can be used if something goes wrong with a contract. Every piece of work that is paid for must be signed off by the construction manager and the architect before it is approved. Given where we are in the construction of the building, we are satisfied that we are not significantly at risk from contractors getting into trouble, but that is obviously carefully monitored as we go along.

Do you have an idea of the total value of those contracts?

If you mean the total value of the outstanding contracts that are to be completed, I am sorry but I do not have that figure to hand.

I mean all of them that were dealt with on the same basis as Flour City.

The total value of the contracts that have been let is the value of the total construction cost in the paper. I do not have a breakdown of the different types of contract to hand, but I can let the committee have that.

Could we have a note on that? It is a significant measure of risk management within the total contract.

I can certainly supply that.

Tom McCabe has a question that we put off earlier.

Appendix A lists items that have materialised from the risk register; the total is just over £13 million. One item, in connection with stone cladding, is almost £1 million. I would have thought that you either needed stone cladding or you did not. It now seems that you do, but was there a previous plan? What would the position have been had you not decided to clad that particular area, and what would the aesthetic finish have been?

The answer to that question is relevant to the previous question, as it relates to the outworkings of the Flour City insolvency and the figure of roughly £3.5 million, of which the committee is already aware. That figure reflects the increased costs as a result of having to retender packages that had previously been tendered through Flour City. A number of other items on that list are also relevant.

Does that also apply to the mullions and louvres at £500,000?

Yes.

There is an additional cost—a small sum in relative terms—of £21,500 for the reconstruction of Queensberry House. Do we now have a total figure for the reconstruction of Queensberry House?

We do not, but we are working on it at the moment in order to identify the total cost of Queensberry House, which we have always known was, in relative terms, not the best value for money. The implications of having to make the building structurally sound have been significant, so we are trying to come to a total cost for each of the components of the building. I hope that we can let the committee have those costs in our next report.

In his letter to me of 5 September, the Auditor General for Scotland said that there were serious deficiencies in connection with the selection, award and management of the Flour City contract. I would like to focus on just one of the various deficiencies that the Auditor General identified. He states:

"The letter of intent which was issued to FCAM on 26 January 2001 did not require the company to submit a Performance Bond, a requirement which had been notified to tenderers."

Further to Mr Davidson's question, am I right in saying that performance bonds were to have been obtained in 33 of the packages, but that in 16 cases no bond was obtained? Am I also right in saying that, of those 16 cases where no bond was obtained, eight packages have now been completed—and it is therefore hoped that there will be no claim—and eight are outstanding? Is it correct that there could therefore be a claim in respect of those eight packages, because they have not yet been completed?

I would like to ask either Sarah Davidson or Paul Grice to put that in context.

I shall deal with that. I do not have the exact figures to hand, but they sound broadly right. It is important to understand what a performance bond is. First, it comes at a cost. You have to pay for a performance bond. Secondly, the terms of a performance bond are very important, so they usually require an awful lot of negotiation, both with the company and with the surety provider—a worthwhile performance bond is difficult to get hold of.

The other point to make is that it is Bovis Lend Lease's job to recommend to us when a performance bond, or indeed a parent company guarantee, is needed. A performance bond is not normally made under an interim contract; it usually awaits a full trade contract. A performance bond is only one of a number of mechanisms, some of which Sarah Davidson has already alluded to, that are used to manage a contract. It is by no means the only way—indeed it is not even the main way—in which one would seek to manage a contract. There is an issue around performance bonds, which the corporate body is seized of and is pursuing at the moment. Performance bonds are not, in any sense, the entire safeguard against risk; they are simply one mechanism.

At the moment, trade contracts are in place on all the let contracts, which is an important reassurance to the committee.

Alasdair Morgan would like to ask a supplementary question before we come back to Fergus Ewing.

This may be a question that Mr Ewing was going to ask. He suggested that certain contracts had been let with performance bonds for which the performance bonds were not used. You said, Mr Grice, that asking for a performance bond puts up the cost, because you are effectively paying for the insurance.

Yes.

In cases in which the performance bond was not received, was the cost adjusted downwards to reflect that fact?

Yes. Where there was no performance bond, I would not expect to pay for one. I do not know whether a rebate on costs would be sought in every case where a performance bond was not secured or whether costs would simply not be incurred—I will have to check. A bond is usually about 1 per cent of contract value. I agree that if insurance is not taken out—a performance bond is simply an insurance policy—we would not expect to pay for it.

We would not expect to pay for it, but have we done so?

Sarah Davidson may be able to fill in the details on the issue—I am not familiar with all of them. I will be happy to check the situation and write to the committee.

We can check the details.

The committee would welcome that.

Is it true that the Auditor General for Scotland strongly advised you that performance bonds must be obtained in all the contracts where they were supposed to have been obtained but were not?

No, the Auditor General did not give that advice. To be more accurate, he asked where performance bonds were if Bovis had recommended them. He would be the first to say that one cannot generalise and that performance bonds must be considered case by case. If a performance bond is deemed to be required, we should pursue it, bearing in mind the difficulties that I have explained. It is not always straightforward to get a performance bond. He also accepted that if—originally or on reflection—a performance bond were judged not to be required, we would not need to pursue it. I think that that is closer to his advice.

What—

I apologise for interrupting you, Fergus, but Brian Adam has a supplementary question.

I will be corrected if I am wrong, but I understand that Bovis recommended that there should be performance bonds in 33 cases, but there were performance bonds in only 16 of them. Is that correct?

I would need to check the figures.

Broadly speaking, is that correct? I do not wish to make a point about absolute numbers, but is it correct to say that there have not been performance bonds in roughly half the cases?

There still are a number of outstanding performance bonds. The judgment has to be made as to whether it is worth continuing to pursue performance bonds, given that in all those cases, nothing materialised that has been a call on the bond. In other words, insurance has not been used.

Surely that calls into question the judgment of the project's professional managers. If they tell us that we need performance bonds, but there were performance bonds in only half the cases, something is not quite right. If the advantages in having performance bonds are offset by the fact that we cannot get beyond the letter of intent for performance bonds timeously to allow the project to proceed, that does not say much about Bovis's advice in the first place.

We should be cautious about how far we go down that line. The matter seems to be more properly one for the Audit Committee in due course. Suffice it to say that the corporate body insisted on a meeting with Robert Black, the Auditor General. We have gone through in considerable detail with him and officials a number of implications that members have discussed today. We are satisfied that full trade contracts are in place and that, where necessary, performance bonds have been followed through. As Paul Grice rightly said, those constitute part of the risk management on contracts against the background of the construction management method, which has been the source of many difficulties in managing the project.

You are almost saying that performance bonds are hardly worth the effort. If that is the case, why did we go down that route? Why did Bovis recommend that approach? Why did we fail to take that approach in 50 per cent of cases? Such questions are relevant and relate to managing overall costs. If we have failed in the fundamental technique that has been applied, there is a problem, especially as 10 per cent of total costs are in fees. I note that more than £40 million is to go on fees. A significant proportion of that amount will go to Bovis for managing the project, yet in 50 per cent of cases in which performance bonds were supposed to have been in place, they were not. Fortunately, that has not cost us much so far, except in respect of Flour City.

It is important to put the record straight about Flour City. We had a parent company guarantee. As you rightly say, the approach has cost us nothing in respect of the other cases. In the case of Flour City, a parent company guarantee was in place and the matter is currently under legal consideration.

As Robert Brown said, we have had discussions with the Auditor General. We are talking about audit matters. The corporate body takes such matters seriously. I have had a discussion with the Auditor General and there has been follow-up action. The corporate body has listened carefully to what the Auditor General has said and is pursuing all the cases vigorously.

The Finance Committee should not encroach on audit matters—we must maintain boundaries. Tom McCabe wants to clarify something.

It is important that we take proper aim. If Bovis, as our contractor, recommended performance bonds, it is up to the client whether to take that advice. It could be said that the client has exercised good judgment in that the expenditure was not incurred and that has so far not been detrimental to costs. I am sure that such decisions are taken in the private sector all the time and that people live or die by them. However, in the public sector, people are required to be more accountable and to explain management decisions. It would be helpful to have a better explanation of why sometimes a performance bond was taken up as a result of advice and why sometimes it was not. I am sure that there were good reasons for doing so, but we are talking about public money and an explanation would be helpful.

We are discussing a difficult issue, convener. Could we come back to the committee with something in writing? We could give some background to the issue.

Members would welcome that.

I have a brief question that touches on what Tom McCabe said. Could the report clarify who took decisions on a performance bond once Bovis recommended yes or no? It would clarify matters if we knew who was involved in taking such decisions on behalf of the client. If the corporate body took such decisions, that is fair enough, but if a decision was delegated, we need to know.

I can answer that question now. A decision would be taken by the project team on Bovis's advice. I do not mean literally that a decision would be taken by members of the corporate body personally. It would be delegated to the project team.

Thank you. That is helpful.

It should be clarified whether decisions were based on taking a risk or whether it took too long to negotiate a performance bond and activity was already well under way or completed before such a point was reached.

We can deal with that. In fairness, there is an element of both.

The committee can therefore expect a paper that highlights issues that have been raised. I apologise to Fergus Ewing for interrupting him earlier, but members were seeking clarification.

I never mind being interrupted by SNP colleagues. To put things simply, a performance bond is an insurance policy. It is sensible to take out an insurance policy at the beginning of the year before one's house is burned down or one crashes one's car, and it is obvious that that did not happen. I want to put matters in a wider context. Does any witness know whether other clients of Flour City International for other projects throughout the world are in the unhappy position that we find ourselves in—namely, that they do not have a performance bond? Do you have information on whether performance bonds had been obtained in other contracts on which Flour City defaulted? If so, how much has been paid?

I do not have that information, but Shepherd and Wedderburn, which is giving us expert legal advice on the pursuit of Flour City International, is using American agents to help to find that out. If the information is relevant, I am sure that Shepherd and Wedderburn will report it to the corporate body to help it to decide whether Flour City is worth pursuing and, if so, how to do so.

I appreciate that. Perhaps I could give Shepherd and Wedderburn a wee help. Some $70 million has been paid out by the bondholders, which includes a payment to the client for the Bronx city courthouse, where the bond was obtained under a letter of intent and the principal contractor was Bovis Lend Lease. How is it that just about every other client in the world receives a pay-out, but we end up without a performance bond? Do you agree that, as that is the case and because it was a requirement that was plainly notified to pre-tenderers, there is a strong prima facie case that Bovis should repay the taxpayers £700,000?

I do not want to go in that direction. As we have told the committee before, the reason why the contract with Flour City came to an end was that the performance bond could not be obtained, despite the fact that the parent company guarantee had been put in place. Had the performance bond been obtained and the matter been able to proceed, perhaps we would not have had to move in that direction. However, it was not and the protection of the Parliament required the termination of the contract on that basis.

At the previous meeting of the Finance Committee, I suggested that we should go after Bovis, as it had offered the advice on Flour City. We should be grateful to Fergus Ewing for the detailed investigation that he has undertaken.

As the corporate body is returning to the committee with a more transparent explanation of the way in which the decisions on performance bonds were arrived at, perhaps you could also explain what post-contract financial provision has been made for the replacement of defective components in what is going to be a very complex fit-out. We know that there is huge pressure to get the building completed and fit for occupation, with many other contracts depending on the entry date and the delivery date. We also know the pressure that exists on the construction industry in Edinburgh and that it will be difficult to recruit craftsmen of the consistent quality that you are looking for. Although I am not a professional in the industry, I would have thought that you would have to make provision for some inconsistency and unevenness in the quality of the fit-out. Has financial provision been made for that?

I will answer that question in two parts. There is a requirement on every contractor stipulating the quality of the work that they have to deliver. If work of that quality is not delivered—such things are checked daily and weekly by the construction manager and the architect—the work must be replaced at the expense of the contractor. That has happened in one or two cases, at the contractor's expense.

There are also different kinds of warranties. Although warranties are applied to the vast majority of the contracts, they are not applied to all. I do not have the details of the way in which those warranties work, but we could easily get those for the committee. The warranties provide, for a certain period after completion and occupation, for the emergence of the kinds of problems that are not immediately clear and which the contractor would be expected to remedy at their expense.

I am sorry to press this point, but it is important. You have said how difficult it has been to engineer the roof and ceiling. There are many other buildings in Edinburgh with imaginative and difficult-to-engineer ceilings, underneath which buckets are normally to be found on the floor. Therefore, it is reasonable to assume that there might be teething problems with such a complex piece of engineering and architecture. I would like to ensure that we have covered ourselves by making financial provision for such problems. If there could be some parallel to the gamble that was taken in relation to performance bonds, let us not take it with regard to the cover that we would get for the roof.

I do not have anything to add to what I said before. We expect the contractors to be responsible for such issues.

You also expected Flour City to cough up.

Let us move on to another theme. Paragraph 8 of the report makes vague reference to an estimate that puts the bomb-blast requirements in the region of £20 million to £30 million. How was that estimate arrived at and how were the requirements influenced by the events of 11 September? What kind of margins were created in that context?

For obvious reasons, security has been an issue from an early stage. However, the events of 11 September concentrated minds and added to the pressure for security. Sarah Davidson has the details.

Our past reports should have indicated the fact that we have become increasingly aware of the impact of bomb-blast requirements on the building. The architects and engineers have to design elements from the façade to the structure that can withstand a charge of the depth that is set out by the security services for a medium to high-risk building—that is how the Scottish Parliament is categorised. As has been said, it is a highly complex building that is designing components at the cutting edge of engineering. If someone wanted to design a blast-proof building, they would not start from here, but would put a bunker in the middle of the Meadows. However, as we have not done that, and given the fact that there are no hard and fast details concerning how a building should be designed to withstand such blasts, we have been involved in a constantly iterative process in discussion with the blast consultants.

Following the previous report that we made to the committee, we asked our cost adviser to return to all the packages that have been finalised or which are in the process of being finalised, to try to identify how much of the cost of each of those was likely to be attributable to the fact that the building has to be blast resistant. For example, he considered each of the windows and thought, "If we were buying this and it did not have to have extra reinforcements or bolts of a certain length, how much would it cost?" He then worked out the difference. That has been done for all packages that are affected by the bomb-blast requirements, and a figure of between £20 million and £30 million has been produced.

That figure relates simply to the hard material cost of purchasing those packages and does not take into account the iterative design process. For example, if a window looked as if it fitted the requirements, but taking it to North Yorkshire and blowing it up on the Ministry of Defence range showed that it did not, it would have to be redesigned. That component of delay has knock-on implications for many other packages and we estimate that it has added considerably more than £20 million to £30 million to the costs. Much of the cost of delays that is being reported to the committee now could be attributable to that component. We would not want to over-egg the pudding, but the iterative nature of the design process is a significant factor.

The security services have told us that although they have not changed any of their guidelines following 11 September—because the events of that day did not tell them much about the impact on a building of a blast—they have been led to encourage Government departments, via the Cabinet Office, to regard previous guidance as all the more mandatory and important because of the recognition of the risk that is posed to high-profile buildings.

I return to Miss Davidson's comments about glazing. There were difficulties before—some of which you have clarified for us in the past—with designing the glazing. Paragraph 9 of the report seems to indicate that the glazing is still an issue and I presume that the difficulties are compounded by the blast-proofing requirements. Bearing in mind the previous technical difficulties and the new blast-proofing requirements, where are we at with the designing of the glazing?

I understand that that is nearly complete and that what is being done at the moment is the design for manufacture rather than the design itself. I also understand, from what our blast consultant said to me last week, that there are no more blast issues concerning the glazing package and that it is now resolved.

All the issues concerning the membranes and seals have been resolved.

Yes. That is my understanding.

That is clear. Do you now know what the additional costs of the glazing package are?

You are referring to the specialist glazing package for the debating chamber.

Yes.

The final tender price will depend on the final programme, and that is not completely resolved yet. However, the latest report that I received indicated that the figures are within the total allowance that had been made for the glazing. In other words, it will not cost more than has been anticipated.

So, it will be within the £47 million risk package.

Yes.

I am a bit concerned about the £30 million, which is a huge sum. What consideration was given to whether the security specialists' advice should be accepted? They are always going to be in the business of making things as safe as possible. What estimate was made of the risk in Scotland of the kind of threat that they are protecting us against? I know that you are not going to tell us what the protection will be, as that would be giving away sensitive information. However, if such costs are incurred, one wonders whether another public building is ever going to be built again under these conditions.

You are right. Those are the kinds of questions that we have agonised over quite a lot recently.

Since devolution, for the purposes of security and the processes that people see when they come in the front door of Scottish Parliament or Scottish Executive buildings, Scotland has remained analogued to the Cabinet Office and Whitehall departments. That is therefore our source advice on security. It is guidance and is not mandatory. However, it has been made clear to us that any accountable officer who chose to take decisions that differed from that guidance would have to leave a very clear audit trail explaining why. In the discussions that we have had about that, we have not felt that the Parliament, the corporate body or the accountable officer would feel comfortable with that. However, we have been mindful of the costs of individual decisions and have looked at them very closely. There are still one or two outstanding decisions that we are considering strategically in order to decide whether we ought to accept the guidance.

As is always stressed to us, when we are building security into a building, we do not just have to take account of what might happen today or tomorrow; we have to take into account what might happen in 50 or 100 years. The advice of the security services is to err on the side of caution. It is a balanced judgment.

I have a quick question about paragraph 19 of the report, which reads:

"The figure of £5m identified previously equates broadly to a £10m ‘cost of completion' figure …"

I do not understand that. Could you explain?

That sentence has become detached from what it should have been sitting with.

As paragraphs 13 to 17 explain, in an earlier report to the committee we reported that our cost consultants had identified a sum of approximately £5 million that, given the programme at that time, might have to be spent on specific late acceleration measures such as round-the-clock working, double-shift working and environmental protection. Since that time, the anticipated occupation date has not changed, but there have been significant delays. That means that a lot more work has to be concertina-ed into a shorter period. That means that there will be more overlapping of contractors and more need for environmental provisions and late-shift working.

Through risk P, we are therefore advised and have advised the committee in the quarterly report that the figure of £5 million, which was previously identified as being likely to deal with that issue, has now become £10 million.

Earlier you mentioned that performance bonds were not the only way of dealing with risks. You suggested that retention of some of the money might be better. Have we done that in any cases? Are you in a position to tell us how much has been done?

Annex A to the report says that the additional cost for the Queensberry House scaffolding is £500,000. Are we buying the scaffolding or are we renting it?

There have been retentions. I do not have the details to hand but I can get them for the committee. That is a tool used by Bovis.

The figure for the scaffolding has come from the cost consultant. I do not know the details about how much longer the scaffolding was on the building, but the figure is almost wholly related to delays and requiring the scaffolding for longer. The scaffolding is highly complex because it has to protect the façade of the building. It is not just scaffolding; it is what they call a hairnet protection for limewashing the building. It is more than just scaffolding. I can get you the figures.

I pursue the question raised by Alasdair Morgan. The resolution of blast issues is mentioned in paragraph 8. You talk about works being done "to the required standard".

I appreciate that you cannot go into security issues. I will not be flippant by suggesting that many people find the Scottish Parliament building so unpopular that they would like to do something physically about it. However, the question must be asked: what sort of bomb will we be protected against? If we are serious about the topic, how on earth can you protect a building against an extremely powerful nuclear bomb? If you cannot, are we not wasting £20 million or £30 million? The public does not understand that. If we are not going to be protected against a particularly strong bomb, are we not just chucking away that money?

I do not think that that is a practical question. Presumably the project team has taken advice from security experts that is based on their specialist expertise and knowledge. The project team has had to respond to the advice that it has been given and turn it into a building programme. I do not think that it is for the project team or anyone else to speculate about the type of threat or the type of bomb.

I believe that it is directly relevant.

I do not think that it is.

With all due respect, £30 million is a considerable sum and if we cannot justify its expenditure to ourselves, how are we going to justify it to the people who pay our wages? It is a perfectly valid point and it could be added to the list of issues that are going to be made more transparent by the committee.

I have another couple of questions.

I am sorry but I do not want to leave that issue like that. We are not undertaking to come back on that specific point. I dare say that if someone drops a nuclear bomb on the building, that will do the trick. As the convener has rightly said, the decision was made based on security advice and I do not think that it is appropriate for us to go into further detail about that at this stage.

There is a dividing line here and we are running the risk of being flippant. I hope Mr Ewing is not suggesting that, in future, we should not build public buildings that would withstand the actions of individuals with evil intentions. We live in a different world that changes all the time. We have all seen horrendous acts in different parts of the world and it would be irresponsible if people who are engaged in major construction projects did not take account of those.

The dividing line is that the project team should be able to demonstrate to us that, whether the cost is £20 million or £30 million, it was incurred in making that building safer against blasts. That is all that the project team is required to do.

The project team would be in an invidious position if it received advice that it should spend whatever sum of money to protect the building against the things that happen in our world, and it rejected that advice. I do not think that MSPs or—I completely disagree with Mr Ewing—the general public of Scotland would be happy if the project team proceeded in that fashion.

I have one or two questions about the landscaping. There has been a lot of comment about the amount allocated to landscaping. Although I support making the best possible job of it, I am interested in how we arrived at the figure of £14 million. That is proportionately bigger than anything else that has been done in Scotland.

I will interrupt Margo to say that we have already asked for a report on that issue.

I want to ask for a specific item in that report.

How much will it cost to put the machinery in to keep the ducks and other wildfowl away? They live across the road from the building and any planner would have told you that they will probably go for their holidays to the pools that we will have around the forecourt of the Parliament. I am just interested in how much that planning mistake cost us.

I will give Sarah Davidson a break on this one. As I understand it, the pools have been designed specifically with that risk in mind. The pools are designed to be too shallow for ducks to swim on them. That is the technical explanation. That is a serious point but the more general point is that there was awareness that the pools could be misused by ducks and they have been designed with that in mind.

I will allow Margo one more question and then we must press on.

I return to the projections that have been made for the expenditure that is still to be incurred. If I am correct, there is £19.9 million outstanding in contracts that still have to be allocated for the later stages.

Still to be let, yes.

The report says that that figure is based on 1998 prices. Why is it based on prices that are five years out of date, particularly given what is happening in the construction industry?

That is just carrying on in the way in which the cost plan has always been compiled. Each package had a cost against it when it was originally broken up, and that was at 1998 prices. The £4.4 million in the table in paragraph 21 of the quarterly report should be added to that £19.9 million to give a realistic pre-tender estimate on those packages.

A statement that Robert Brown made earlier led me to think that the outstanding risk, which is shown as £47 million, was likely to be the actual cost—in other words, that the entire outstanding risk would be realised. Is that what you meant?

The figure is defined as risk, and that is what it is. The best information that we can give the committee is that it is likely that all or most of that sum will be needed.

That statement is slightly different from comments that were made in previous discussions about the risk register. The risk register referred to things that might or might not happen. You are now saying that those things will happen. If so, why are they still on the risk register? Why are they not included in the costs?

Between the previous reports and this one there has been a significant shift in the type of risk that exists. As Alasdair Morgan said, the previous risks were identified as what we call design and construction risks—the risk that when we go to the market to buy something, it will cost more than we expected or wanted to pay for it. However, until we had tenders on the table, we could not know whether those risks would materialise. We were uncertain about whether they would come to fruition.

The member is right to say that the term "risk" is perhaps not the most apt term to apply to the remaining risks. Those risks, which relate largely to the cost of delay, are based on a much firmer understanding of the impact on each contractor of delays that happen to their or to other packages and which incur claims from them. On our behalf, the cost consultant is able to make a well-informed calculation of what the current programme means for contractors. Unless some miracle happens and a few months appear where they do not currently exist, we know that the costs are fairly firm. Alasdair Morgan is right to say that there is a significant difference between the type of risk that existed before and the risk that now exists.

The report details acceleration measures without specifying their cost. What is the total cost of the acceleration measures? Is it possible that that money may be wasted and that the project may not be completed until 2004?

The acceleration measures that are referred to in the report are covered by the £10 million that appears in paragraph 19. The figure against the type of round-the-clock and double-shift working to which I referred is £10 million. As we say in paragraph 17, we have been advised by our cost consultant that, given the stage that the programme has reached, those costs will be incurred—whether they are incurred by remaining on site for longer or whether they are incurred by acceleration.

I asked about the completion date.

I intended to ask about that.

You are asking for additional funding of £28.2 million. Of that, £18.9 million will be required in 2003-04; the remaining £9.3 million will be required in the current financial year. Are you confident that the target handover date will be met?

In paragraph 10 we refer to outstanding information that is expected from the specialist glazing contractor. The most recent firm programme that the SPCB received from the construction manager envisaged building construction completion in April or May and occupation by the Parliament in September—as was discussed earlier. That was subject to Mero being able to provide the dates that were required in relation to specialist glazing.

It has been reported to us that most of the dates from Mero comply with the construction completion date. However, there are one or two outstanding dates about which Bovis is concerned. It is working closely with the specialist glazing contractor and the other contractors that would be affected to pull back those dates within the envelope for building handover. It is fair to say that there is still a degree of uncertainty about the handover date, because there are a few outstanding dates. Once we are certain of those and of any financial implications that they may have, we will report back to the committee.

It would be useful if in the next report you could provide us with an outline of the completion dates and the risk attached to those.

The SPCB is asking the committee to approve a budget line. We have just received information that suggests that a firm budget figure cannot be given. How do those two things sit together?

Because of the construction management method that is employed in this project, there has never been a firm budget figure. The most that we can say is that the figures are becoming firmer as time goes on. As Sarah Davidson explained, the type of risk to which the contract is now exposed relates mainly to delay, rather than to the design issues about which we were so concerned before.

But what you are saying is that there could be variation within the budget year that we are talking about, rather than the money being pushed forward to another year's call-down.

Sorry, to which budget year are you referring?

In common with everybody else who is asking for money as part of the budget process, you are asking for money now, for a specific period. Are you saying that there will be another round and that you will push any extra moneys that you may need into another year, or are you firm that what you are bidding for currently is sufficient to see you through the next financial year?

We have given you our best estimate of the cost and the years in which it will fall—2002-03 and 2003-04. Obviously, when we report back to the committee, which we will do as part of the next round, we will update the committee on that, but we are giving the committee the best estimate that we can at this time.

The submission is for us to comment on; that is its status at this point.

On behalf of committee members, I thank the witnesses for coming before us. We have given the issues a considerable amount of attention.

I suggest that we have a five-minute break.

Meeting suspended.

On resuming—