Finance Committee, 11 Feb 2003

Meeting date: Tuesday, February 11, 2003

Official Report 274KB pdf

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Holyrood Project

I welcome members of the press and public, and Mr Fergus Ewing and Ms Margo MacDonald, who have joined us for item 4.

We will consider a report from the progress group on the project. We will also take evidence from some officials and members: Paul Grice, who is the chief executive of the Parliament; Robert Brown, who is on the Scottish Parliamentary Corporate Body; John Home Robertson, who is the convener of the Holyrood progress group; and Sarah Davidson, who is the director of the Holyrood project team.

I will set today's session in context. As most people will know, the Finance Committee expressed some concern over the project following the stage 2 report to the Parliament. We decided to take additional evidence on the Holyrood project on 17 December. At that meeting, we received an assurance that there would be a further programme review during December and January and on 16 January we received a letter from the Presiding Officer that provided the information that the committee had sought, which was very welcome.

We have also received a letter from Robert Brown that attempts mainly to address some of the points that were raised by Mr Ewing and Ms MacDonald at that previous meeting. That letter is helpful and, together with the information in the Presiding Officer's letter, has gone some distance towards meeting the committee's concerns and has made a considerable contribution to defining costs and completion dates better. That is extremely welcome.

It is perhaps worth mentioning at this point that the quarterly report that the committee receives on the project would normally be due this month. However, for all intents and purposes, the information in the Presiding Officer's letter will suffice as a quarterly report on this occasion.

The convener has laid out the background, but it is probably worth reminding people that the December meeting was out of sync, as it were, because it came when we were awaiting the outcome of the risk review and so were not able to be as precise as we would have liked to be about the current state of play.

Members now have the other two letters on which we have touched, and I have taken the liberty of asking John Home Robertson, convener of the Holyrood progress group, to attend today. It is fair to say that John and his team have done a power of work on the day-to-day nitty-gritty of the project. Parliament is indebted to John, Linda Fabiani and Jamie Stone for carrying out what is not, in anybody's view, the most popular job in Parliament. It will be interesting to hear from them to give us a feel for things at the coalface.

We are now on the home straight with the Holyrood project, and the information in Sir David Steel's letter of 16 January on cost and programme is much more solid than was possible previously. I say that for three reasons. First, the corporate body and the progress group were encouraged by the positive tone of our meeting in mid-January with the construction manager. Nothing is certain on a unique project such as this, with a signature architect, a novel and creative design, the resultant need for individual design and manufacture of several components—the Finance Committee is aware of that—and particular issues that have arisen on blast-proofing work and the like. However, we now have much greater certainty on the final cost and timings than we were able to give while major issues remained outstanding.

Secondly, we have received the results of the programme review, which we told committee members about at our previous meeting, and which are detailed in Sir David Steel's letter. The review examined the outstanding risks and was followed by the cost consultant's review of the figures. Thirdly, we are past the stage of letting contracts, so there is a much higher degree of programme certainty, which correspondingly reduces risks and threats to anticipated cost. In the construction manager's words, construction completion is now anticipated for November 2003 with

"a very high degree of confidence".

On costs, we have explained on previous occasions the reasons for the increases as the project has developed. Those increases have developed over time for a variety of reasons, such as the overheating in the Edinburgh construction market and resultant higher tender prices, the fallout from the Flour City Architectural Metals (UK) Ltd collapse, the requirements of Historic Scotland and, more recently, the glazing design and bomb-blast issues. Now, the principal reason for pressure on costs is delay resulting from some of those things, which have a knock-on effect for the entire project due to the tight site and programme.

From the previous risk review of May 2002, and the provisional estimate of the costs of delay arising at that time, the estimated total project cost was £310.5 million when I last reported to the committee. We now estimate a figure of £324 million, and the Presiding Officer's letter deals with some of the reasons for that, which include some individual packages having come in above target, site running costs of £600,000 a month—a direct consequence of being on site longer—and, on top of that, consequential VAT and so on. I can say to the committee that the management arrangements that were put in place by the Scottish Parliamentary Corporate Body and the progress group have kept a tight grip on that, notwithstanding the delay that has resulted from those issues.

The interrelation between the detailed design information and the programme is obvious, which is why we have homed in on keeping firmly on top of many of the small but crucial pieces of design information that are needed to conclude the project. If the design information is in place, people can go on to manufacture and build. The more precise information on costs that we are able to give today is, broadly, not out of line with what was expected back in December.

The Scottish Parliamentary Corporate Body would like to discuss with the next Parliament's Finance Committee a suitable format for reporting for the last few months of the project. This is the last quarterly report before the dissolution of Parliament at the end of March. In the usual order of things, the next routine report would not be needed until May.

I like the idea of being on the home straight of a coalface.

I have read the committee's December proceedings, and I should like to emphasise that the progress group, as well as the corporate body, is asking many of the same questions that committee members are asking. We are concerned about delays and costs. Week in and week out, the progress group is striving for the best solutions—whether we achieve them or not is another matter. We have all inherited the project under a certain contract, according to a certain design on a certain site. It is in the interests of the whole Parliament to take the project through to completion as efficiently and as quickly as possible, which is what the progress group is trying to do.

I appreciate those comments.

At the previous meeting, the committee acknowledged that members of the SPCB and, in particular, of the progress group have a difficult task indeed. We are faced with a fait accompli with regard to the form of construction and many other aspects of the programme. However, members of the committee were increasingly concerned about moving targets, which reflects why some of the questions at the previous meeting seemed rather strident.

That is quite understandable.

The letter that we received spoke about the completion date of the project, and said that

"the majority of the complex … should be complete between the end of August … and the end of October."

The letter goes on to say that the chamber walls will not be complete by the end of October, but the building in its entirety will be handed over in November. There might be an explanation for that, but those dates seem to be quite close together.

I think that the boundary walls will not be completed, rather than the chamber walls.

The letter says that it is unlikely that the chamber walls and the boundary walls, which are two separate elements, will be complete by October.

Thank you. That is helpful.

You are saying that you are setting a target date between the end of August and the end of October, which is a fairly lengthy period. You are, however, suddenly able to move from that uncertainty to a position of confidence in which you can say that the whole shebang will be finished a month later. How, logically, does that work?

I will ask Sarah Davidson to deal with that. The project has many different elements, as you know.

The Parliament complex is made up of a number of buildings and progress on construction throughout the process has been from the west side to the east side. The project completion dates for the various parts of the complex have always been different. Therefore, the earliest parts of the complex that will be completed—the MSP block and Queensberry House—are intended to be entirely complete, to all intents and purposes, by late spring or early summer 2003.

In January, the project manager laid out for the Scottish Parliamentary Corporate Body and the progress group the dates on which he was confident that various parts of the complex would be complete. He is highly confident—about 90 per cent to 95 per cent confident—that he will deliver one bit at the end of August, the next bit at the end of September and the next bit at the end of October. He is confident that he can deliver the final part of the complex by the end of November. There is a rolling sequence of dates rather than a wide margin of error.

About which bits is he not highly confident, if any?

He is highly confident about the dates that he has given us as completion dates for each part of the complex from the end of May until the end of November. In other words, we have for the completion of each part a date about which he is highly confident.

I do not want to put words in his mouth or in yours, but are you saying that he is highly confident about everything?

He is highly confident about the dates that he has given us. He is as confident that he can deliver the debating chamber and the boundary walls at the end of November as he is that he can deliver the MSP block four or five months earlier than that.

The building will be handed over in its entirety in November 2003, but we are also talking about the earliest completion date. Are the dates that you are talking about the same as the dates on which the buildings will be ready for occupation? If not, when will the buildings be ready for occupation?

The construction completion date is when Bovis Lend Lease (Scotland) Ltd and the other contractors will be finished on the site. The place will have to be fitted out and tested after that.

The decision that will have to be made at that point is how we, as an organisation, move into the building. We had some discussion about this the last time I came before the committee. Everything—the equipment and so on—will be in place, but there is the question of how long we want to test the set-up for. Furthermore, we need to think of a way in which we can move the Parliament down the road with the minimum of disruption to parliamentary business.

We are considering various options for achieving that. Christmas and new year fall in the middle of the relevant period. After the election, when the situation is more certain, I propose to put a series of options to the Scottish Parliamentary Corporate Body. Those options will need to be discussed with the business managers, among others, because we will need to assess how we can fit parliamentary business around the move. That will determine when we sit in front of the Finance Committee down the road, rather than here.

If we have a clear run at it, the migration period might be four to six weeks. It might be done quickly, but it could take longer; that will depend on a variety of issues. We need to judge the moving-in period. I must stress the need to make time available to test systems, which is a key point. If we rush in before checking whether, for example, the sound system or the voting system work, there will be a risk of failures. We must make a judgment on that and the decision will be taken early in the new session of the Parliament.

We will be at the same stage of completion as could be expected if we were moving to a new house.

I think so.

Many of the systems to which Paul Grice referred will have been installed by the construction handover date. The client and their specialist consultants have access prior to the handover date to enable them to install broadcasting systems, sound systems and so on. The contract includes carpeting the whole place, for example. Given that parts of the complex will be finished quite a bit earlier than the handover date, the Parliament might well decide to move furniture in. The client's involvement in making the building fit for their purpose does not start on the handover date. However, the process of moving people from the present site to Holyrood cannot begin until we have responsibility for the building.

Your most optimistic estimate for the earliest date at which occupation would be possible is January 2004.

That would be my judgment. Although it is possible that it could be done just before Christmas, there are many things to weigh up. We need to consider how fast we would be prepared to move, what the parliamentary business will be at that time and whether we would want to move over Christmas and the new year. A move at that time raises many issues. It would be feasible to move in by January 2004. Although we might be able to move in a bit sooner, we might decide, because of parliamentary business, that we want a few more weeks beyond that.

We have to consider how we will get the public in and out and how the whole site will operate successfully. We have already reported to the committee that we expect hundreds of thousands of visitors a year to the new complex. We must be confident that we can manage those visitors as well as being able to manage normal parliamentary business. It would be a mistake to open for business before we were satisfied that we could handle that. We are considering those issues with the corporate body. A firm decision will be made in the new session, when we can discuss matters with business managers and the corporate body.

It would also be a mistake to give the impression that the building will be ready in November, given that, according to you, the earliest realistic date is Christmas.

I do not think that we have suggested that it will be ready by then.

The building will be fit to use only once it is kitted out and ready. The construction phase might well be complete by November—I will not dispute that—but I am concerned that the public might be misled by a suggestion that the building could be finished by October or November, even though it will not be ready for occupation until some time after that. Unless we give realistic dates and costs to the public, there will be further criticism. That is why I am asking questions.

I am equally concerned about the number of delays to the project, every one of which has been regretted. However, we should not move into the territory of ignoring the practicalities of life in such situations. Holyrood is a major complex. Our job is to determine when the building will be handed over to the parliamentary authorities and what they will do with it—that is what we are trying to establish.

In any major building project of this nature, the client has decisions to make. In major building projects, the client can often do that in private, but in a project such as a new Parliament building, those decisions are far from private. We need to distinguish between what contractors tell the corporate body and what the Parliament as an organisation decides to do to make the building usable. There is a significant difference.

I thought that I said that clearly in my introduction. I talked about construction and completion, as we have at recent meetings when that has been an issue. At our previous meeting, I explained in some detail the difference between the two, the gap of time and how that would be organised. There should be no public uncertainty.

In the interests of absolute clarity—there is still some uncertainty on our side about where we are at—I ask what the difference is between being "highly confident" and totally confident. What are the construction factors that your advisers have told you would make that difference? It is obvious that some uncertainty remains about the completion of construction. What variable might go off balance?

The central point is that we are past the major design and contract-letting risks, such as blast-proofing, with which we have had problems. The major risks are behind us. There are little risks, as with any project as it proceeds. For example, the weather might be horrible. All sorts of things might happen. The advice that we have is that the risks ahead of us are small and manageable and should not cause such difficulties as we had with earlier risks. Perhaps Sarah Davidson can give a flavour of the situation.

That is along the lines of what I would say. The process that we are following involves individual contractors either working through the final detailed design to get it ready for manufacture or, post-manufacture, addressing buildability and installation issues on site.

As Robert Brown said, the building is complex. Quite a lot of people there are doing things that are slightly different from what they have done before. Until every window is installed and every component is exactly in its place, an ever-decreasing risk that things will not go exactly according to plan is inevitable.

However, the construction manager has reassured the corporate body, the progress group and the project team that none of those issues poses problems that he considers to be intractable. He knows that he must crack the whip over the design team to produce the remaining information, and over the individual package managers to ensure that they progress issues. If all those things happen in the order in which he believes that they can happen, the project will be okay. However, even since Christmas, nine or 10 days of work on window installation have been lost because high winds prevented cranes from being moved. We hope that the weather will improve as the year continues and that it will pose less of a problem, although while such issues are outstanding, the possibility of delay remains.

I asked simply what factors are causing that little bit of lack of confidence. The weather could be one, but in general terms, you are talking about construction. The blocks, brickwork and beams are in. Are you talking about the commissioning of what is to be installed, such as artwork and kitchens?

Commissioning is not causing delay. Certainly, co-ordinating the final services provision with the building is important. When commissioning starts in such a project, it is not unusual to find at this stage some places that do not have cabling exactly where it is needed, but those are little wrinkles, rather than big problems.

Are those wrinkles built into the dates that you have given?

They are things that Bovis fully expects to happen, so they are encompassed in the dates for completion.

Another issue is the consequential costs of not entering the building at the predicted time. We rent the present buildings for committee chambers, parliamentary headquarters and the debating chamber. Until when will that lease be kept? Do we know the precise dates or do you have a let-out clause?

We have sufficient flexibility on all the contracts to accommodate the situation.

What are the £900,000 of migration costs in the current financial year for? Does that represent rental?

The cost is principally in staffing and other matters. Clearly, we must put in an enormous effort. Something like 70 service contracts, for example, have to be let at Holyrood; we must re-let all our service contracts.

We have always recognised that there would be what might be called a period of double running. Even at this distance, we must put much organisational effort into getting things ready for moving down the road and that effort will become more and more intense. During migration, there might be a period when we have two sites to manage, which is when the heavy cost will be incurred. The early cost is from the organisational effort, which we have costed in order to help us to understand it.

That cost is about £1 million. Is that for staff costs?

Yes; that has been our principal spending so far.

Therefore our staff, who may be temporary or contract—

All of those projects are co-ordinated by an implementation team that not only co-ordinates them, but links them to the building project. Of course, that has been quite a challenge. I have tried sometimes to release some of the experienced staff to help get projects right and backfill them, for example. In other cases we have kept the permanent staff on their existing jobs and brought in temporary staff—there has been a mixture. Sometimes it means drawing on contractors where we have call-off contracts to bring people in. We have done a range of things to give us the extra capacity to get over this hump of activity.

Do the builders move out at the end of November? Does the management of the building then move away to a large extent from the project management team that is building it? The management will then fall to you, because it is beginning to be run as the parliamentary complex.

That is a good way to express the situation.

Since December, an additional necessary £14 million has been identified as being required, of which £6.9 million relates to the increase in site running costs and fees. We have been told that the additional cost of running the site is about £100,000 a month. I presume that the bulk of the £6.9 million relates to fees. What are the total fees that are related to the project? What proportion of those costs go to the construction manager? Will the fees be restricted in the light of the criticism that Audit Scotland made about the construction manager in relation to Flour City?

I do not have a breakdown of fees to hand. We have given the global running total of fees to the committee in the past, and we can do so again.

Before the £6.9 million was mentioned, I recall that the total was £42 million. The increase in the running costs on the site is £100,000 a month, but not many months have been added; therefore, the bulk of that £6.9 million must be fees, unless there are other reasons.

It costs £600,000 a month to keep that site running.

It costs £600,000 a month? Even then, considering that there are still not many additional months, the bulk of the £6.9 million must be fees. In the light of the disappointment—I put that as mildly as I can—with the project management, it seems to me to be inappropriate that we reward failure by racking up the level of fees. What steps have been taken to restrict those fees, in particular in the light of the criticisms of the Auditor General for Scotland on the Flour City contract?

We are beginning to stray into areas on which I am reluctant to give detailed answers, particularly as we do not have the detailed figures available today. This is more of an audit issue for afterwards. The committee can rest assured that the Scottish Parliamentary Corporate Body, the progress group and our advisors are conscious of any legal issues that might arise from the project. They will do the necessary with regard to that, but it is not particularly helpful to pick over the bones of the project in the middle before we are actually finished with it, especially as we are trying to put the emphasis on finishing it and having everybody work together and all the rest of it.

It is reasonable for the committee to want to know what the fees are. It is a simple, straightforward question: what are the fees? Figures such as the £6.9 million have been packaged together for us, but I am asking you quite simply: how much of that figure is fees? How much of the £42 million on top of whatever proportion of the £6.9 million has gone to the construction manager? There is nothing inappropriate about that question, although I understand your reluctance to address any potential redress that you might seek from the construction manager. I also accept that you might not be able to answer the question at this point and that the Audit Committee might deal with the matter. However, the amount of money that is being paid to the construction manager in fees is relevant. You are accountable to the Parliament for spending the money and, as representatives of the public, we want to know how much you have spent on fees and, in particular, what the construction manager has received.

I believe that Ms Davidson said that she has already supplied those figures and that she is happy to update them. Will she do that at the earliest opportunity?

Yes.

I have a supplementary question, although I will perhaps not go down exactly the same route as Brian Adam did. The sentence in the letter of 16 January is technically simple—the £6.9 million is away. How many months of site running costs and what other elements are included in that £6.9 million?

When I get back to the committee with the global fee figure, I will confirm this, but I think that the six-month extension from May to November is included in the sum. The figure also includes two separate elements of fees, one of which is the fees that are payable under the individual agreements with each consultant. Those fees are constantly revisited with the consultants as the construction period lengthens and the construction cost increases—as the committee is aware, the fees are a percentage of the construction cost. The other element is fees for work done by consultants that is over and above the contractual work, which is time charged to the project. Sometimes architects or engineers do additional work that is not covered by the percentage fee agreement. I see no problem in breaking down that information and making it available to the committee when I come back with the global sum.

So the consultants get it both ways: if the price of the construction goes up, they get a percentage; and if they have to do extra work to justify whatever has caused the price to go up, they get more money for that, too.

That is the nature of the contract.

Okay, but I wanted to be clear about that—it is a win-win situation for the consultants.

As I understand it, the contract is not unusual. That is the normal way in which fees for architects and others are dealt with.

If the committee could suggest a way out of the situation, we would be interested.

I think that I joined the wrong profession.

Members might say that on an awful lot of occasions.

The important point is that it is not non-standard for professional fees to be linked to construction costs and for there to be a separate charge for work that is outwith the contract, which is termed day work.

In the letter of 5 February, the second paragraph under the heading "Capital Expenditure" mentions

"underspends of £1.3m on landscaping and £1.9m on IT refresh at the end of September".

Will you clarify which letter you are talking about?

The letter from 5 February.

It is from 6 February.

No, it is from 5 February.

Who is it from?

David Steel.

The letter from David Steel is from 16 January.

The letter that I have is from 5 February. It is about the SPCB's financial performance for the six months to 30 September 2002.

That letter is the SPCB's monthly report, on which we are not taking evidence at the moment.

I was going to ask about technical issues. I understand why the landscaping money is not being spent—that is a result of delays in other contract work—but have there been any changes to the IT exercise?

I do not think that the witnesses are prepared for questions on that letter. As it is not on the agenda, it is not fair to ask the witnesses about it.

If David Davidson writes to me about why the technical refresh has slipped, I will be more than happy to respond—there are reasons for that.

My question was also about changes to costings as a result of the slippage.

If David Davidson lets me know in writing, I will be happy to give a full reply.

It is unfair to spring questions on witnesses when they have not had prior notice.

To clarify, the letter refers to increased underspends. The sentence states:

"The reported underspends of £1.3m on landscaping and £1.9m on IT refresh at the end of September are forecast to increase to"

X and Y, which means that less is being spent.

That is either because we are spending less in total, or because the cost has slipped into next year.

We are into the territory of saving money, now.

It is end-year flexibility.

We are not spending more, anyway.

The letter of 16 January states:

"The budget for the landscaping scheme is of course separate from this total."

Will you please give us an update on the budget for landscaping, for which I understand that you are now responsible?

There has been no change in that budget.

So, it is still about £14 million.

Yes.

Ms MacDonald has been waiting for some time. I am sorry about that. Would you like to ask a question?

Do not worry, convener; it is always a pleasure.

Thank you very much. You have made my day.

I did not say that you were a pleasure; I said that it is always a pleasure.

Let us go back to something that was proving to be a bit of a mystery—the date by which we will be able to consider ourselves to be in and settled, with our feet under the desks and the information technology working. The two aspects are linked. Paul Grice said that there is a flexible arrangement with the Church of Scotland. What is the end date for that? By what date have you said to the Church of Scotland that we will definitely be out? That will give us a clue.

Also, how long have your IT contractors indicated they will need to test the building? That will be one of the problematic aspects of the move. It would not be advisable for us all to be running about in the building when it is being tested. I appreciate that testing is a difficult task, but time must have been allocated for it.

In addition, the contingency cost is still recorded as being £7.8 million. If the construction manager's advice is sound and so little slippage is to be expected in the packages that are still to be completed or let, will we get that £7.8 million back? It is quite a lot of money to have as a contingency fund if such an assurance is attached to the packages that we have just now.

My last question is on the fees. I do not think that it is good enough for the Finance Committee—which is responsible for looking after the bawbees—to say that there is no other way out of the contract because it was inherited, so we will have to pay fees upon fees and, if somebody makes a mistake, they will get paid for putting it right. In his report, Robert Black said that there should have been an examination of how the fees structure could be changed at that stage in the game. I presume that that is what he had in mind.

In fairness to the witnesses, I do not think that anyone said that when somebody makes a mistake, they will get paid for putting it right. It was not expressed in that way. However, I leave it to the officials to answer the question.

I ask Paul Grice to deal with the first couple of points, and Sarah Davidson will pick up on the other ones.

I, personally, have not been negotiating with the Church of Scotland, but I have not made any approach to it suggesting that it will not have the assembly hall back for next May. I hope that that is helpful to you.

Bingo!

I am not quite sure what else you would expect.

IT is being installed already and will be installed over a very long time. We will not wait until the building is finished to install the IT, although some of the looser pieces, such as the desktop equipment, will be plugged in afterwards. Margo MacDonald makes a valid point in saying that testing is important. That echoes the point that I made earlier. It is a matter of judgment. The longer that there is to test, the more likely it is that bugs will be ironed out. That is true for any building—I am sure that everyone here has moved into a new office before.

The new building will have possibly 1,000 users on site, plus hundreds of thousands of visitors. We have to be confident that the systems will work. Therefore, the migration will include a period of testing of all the systems. Some of the core IT systems will be in place before then, and where we can test before the building is ready to be handed over, we will do that. However, there is no better way of testing the systems than having members, staff and others try them out. That will form part of the migration plan.

I do not know whether there is much more that I can say about the fees. We have undertaken to write to the committee in the terms that Sarah Davidson has described. We will do that as quickly as we can. I ask Sarah to pick up on the contingency fund point.

The £7.8 million that has been identified for contingency is not envisaged as being required to deal with delays. The money that would be required for anticipated delays is allocated against individual packages. It would be too much to say that there is an expectation that that money will be spent, but it is anticipated that it will be required, given where the individual packages are at the moment.

The £7.8 million is an additional sum of money that has been identified to deal with daily problems that might arise on the site. Those are exactly the kinds of issue that we would hope and expect the construction manager to manage day by day. If that money is not required, it will not be spent.

However, it might be used for security if you have to stay there longer.

At the previous meeting on this issue in December, we did not have the benefit of the Auditor General's report. It was published separately at the end of last month and indicates his views on the Flour City matter. Some serious questions have to be asked, and I have given notice of them to Mr Grice and Ms Davidson. Indeed, I have had some correspondence with Mr Grice on the matter.

I acknowledge that the witnesses have done a lot of work. Although I do not agree with many of the decisions that have been taken, I have never indulged in name-calling or the like in respect of any of the people involved. As I say, I recognise the work load that they have had to undertake. As a result, it gives me no pleasure to raise these matters today, but they have been signalled by the Auditor General, and so we have a duty to raise them.

That is appreciated.

Paragraph 22 of the Auditor General's report says:

"The two interim contracts the Corporate Body awarded to Flour City in December 2000 and January 2001 had two unsatisfactory features … Both interim contracts were based on wording devised by the construction manager's legal advisors. But project management did not obtain advice from the Parliament's own legal directorate prior to issuing either interim contract, despite the construction manager's recommendation to this effect … The tender authorisation document approved in January 2001 specified the requirement for Flour City to provide both a performance bond and a parent company guarantee. However, while the second interim contract issued in January 2001 provided for Flour City to provide a parent company guarantee on request, it did not contain any requirement for a performance bond. This was a serious omission because, taken with Flour City's failure to deliver a performance bond under the full trade contract issued in August 2001, it left no simple remedy for the Corporate Body to recover part of the extra expense required to complete the contract."

In paragraph 25, the Auditor General goes on to state:

"On 25 January 2001 - the day just before the award of the second interim contract - Flour City sought agreement to an advance payment of £2 million of the contract sum. The request was not accepted. Although the request alerted project management and the construction manager to possible difficulties with Flour City's financial capacity, it was not until March 2001 that Flour City was asked to confirm that it was not ‘experiencing difficulties obtaining the usual level of credit required within the industry'."

There are more criticisms about the failure to obtain a thorough financial analysis of Flour City. Perhaps I can put the matter into simple terms and ask Mr Grice and Ms Davidson several questions. The first criticism that is made of Mr Grice as clerk of the Parliament and Ms Davidson as project director and head of the project team is that they were at fault in not obtaining legal advice, despite the fact that Bovis Lend Lease made a recommendation that—

On a point of order, convener. I think that we are getting into very difficult territory here. I am not entirely convinced that the terms of Mr Ewing's questions are the immediate business of the Finance Committee as opposed to that of the Audit Committee. I request guidance on the extent to which the Finance Committee will seek answers to the sort of questions that Mr Ewing is asking.

I will hear what Mr Ewing has to say and come back to you before anyone has the chance to answer.

Thank you, convener. We are here today because the public are concerned about the cost of the Parliament building. My aim is to try to recover £4 million of that money and to cut costs by that amount. I believe that mistakes were made that have resulted in the Parliament incurring an additional liability that is currently estimated at £3.85 million. I want that money to be recovered for the taxpayer. Mistakes are made by individuals—by me and by everyone else in the room. This is not a witch hunt or an exercise in seeking scalps. Instead, it is an exercise in recovering £4 million for the Scottish taxpayer, which is something that the Finance Committee is very directly concerned with.

My first question is, do Mr Grice and Ms Davidson accept that mistakes were made and that the Auditor General's findings are factually correct?

Before Mr Grice and Ms Davidson answer that, will they confirm whether they have received any legal advice on whether discussing such matters at this time would prejudice the Parliament's position in any recovery action that might be under way or that might take place in the future?

To be honest, we are in an awkward position. Robert Brown gave the committee an important assurance. I entirely respect Fergus Ewing's motives. Nobody would be happier than the corporate body or I would be to recover any moneys that are missing—Fergus Ewing is not the only person who would be happy about that. Indeed, the corporate body has a duty and a responsibility in that respect and we will pursue that duty where we can.

The area is complex. I would be extremely reluctant to say anything that might in any way prejudice the completion of the project or the future legal position, and there is a risk of doing so. There is no lawyer at my shoulder telling me that I must never talk about the matter, but the good advice that I have received is that we should focus on finishing the project. The Auditor General has been mentioned. I think that he shares the view that the best advice is to finish the project and so place ourselves in a position in which, if legal action is justified, we can take it effectively. That is the awkward position in which I find myself. We focus a lot on Flour City, but 70 or 80 contracts are running.

On the performance of the Holyrood project team, which includes me, I reassure the committee that the Auditor General's comments have been discussed at considerable length with the corporate body, to which I am accountable in the first place. Within that process, I think that there was discussion with the Auditor General himself. I think that the corporate body has explored all the issues to its satisfaction. To go beyond that would get us into some tricky areas. It would be unfortunate if Robert Brown or I said anything that would harm the project.

I am in the same position as you are, Mr Grice. I do not have a lawyer at my shoulder either, and I would prefer to adopt the precautionary principle. However, the information that is sought should be in the public domain at some point. You have been asked a perfectly legitimate question. The issue is whether this is the right time to ask it. Can you assure the committee that you fully expect that we will reach a point at which the answers to Mr Ewing's question can be given and can be placed in the public domain?

The issue is really about timing and the appropriate way of dealing with the matter. Mr Ewing has made a number of stark observations and has asked questions that need to be looked into. However, if I may say so, I think that they would be most satisfactorily looked into in retrospect, through the Parliament's audit procedures, rather than in the Finance Committee.

The parliamentary motion that set up the progress group and defined the relationships between the various bodies involved did not envisage a treble-accountability approach and that everything would be gone over at all levels. It envisaged that the Finance Committee should receive from the progress group through the corporate body information about

"inflation and the materialisation of risk in order to inform the committee's consideration of the annual Budget Bill."

That is the primary role of the Finance Committee. I accept that the role is difficult to pin down and that it is difficult to say where it stops.

The corporate body has no desire to withhold information, but we are genuinely concerned that issues are flowing over into areas that we find difficult while the contract remains on site. We do not want to be unhelpful to the committee, but the matter would be much better dealt with as an audit matter later, once we have finished the project, got the building operative and the Parliament is in the building, rather than when the project is on-going. Apart from anything else, people's eyes would otherwise be taken off the ball.

So you expect that information will be provided at some point that can answer Mr Ewing's questions.

Absolutely. I am certain that people will be crawling all over the project in great detail when it is finished—there are no two ways about that.

That includes us.

Absolutely.

I do not swallow the argument that we should not consider anything retrospectively and that we should only consider future matters, which seems to be what Robert Brown suggests. The Auditor General's report is already in the public domain, so if any legal action were to be prejudiced by the information, it has already been prejudiced. Can we give Mr Ewing a chance to rephrase his questions in such a way that the respondents might feel that their answers would not prejudice the outcome of any legal action?

That might be helpful to the committee. As Mr Ewing will acknowledge, he has lodged a large number of parliamentary questions on the matter and has written to the Presiding Officer and others. We have attempted to answer an awful lot of questions and have put an awful lot of information in the public domain. Mr Ewing had the good courtesy to write to me at the end of last week with two or three of his points. We will of course endeavour to answer anything that can be answered at this stage.

On the Auditor General, the contractual relationship is not between the Auditor General and all these people; it is between the corporate body and all these people. That is why the Auditor General is duty bound and free to make his comments. The difficulty is what the clients—the corporate body and its officers, such as I—say. What the Auditor General says does not necessarily prejudice anything. He makes observations. What the client—in this case, the corporate body—says and does is relevant for legal purposes.

I will clarify the audit process. As deputy convener of the Audit Committee, I discussed yesterday with that committee's convener its likely role in the Parliament project. We both came to the view that we had to see the building completed and accounts produced. However, we felt that the Audit Committee would not be tied merely to examining the numbers, but would also examine the management of the project—the outcomes and governance.

I assure the committee that it will almost certainly be suggested to the successor Audit Committee that it will need to do all those things. That is separate from today's consideration, but I say that for clarity.

Thank you very much.

Mr Ewing, I am coming to a conclusion. You have been assured that the information that you seek will come into the public domain, and Mr Davidson has told us about the Audit Committee's planned work. I am minded to suggest that it would be in the interests of the Parliament and any legal proceedings not to discuss the issue any further. However, Mr Morgan has made a suggestion to which you might wish to respond.

We are discussing a public document that the Auditor General published. I believe that it is unusual for the Auditor General to publish a separate report, but he did so under section 22 of the Public Finance and Accountability (Scotland) Act 2000. As Mr Morgan says, the information comprises not allegations that I am making, but the Auditor General's findings of fact in a carefully produced report.

I understand that Mr Grice, in a letter to me of 30 January, agrees that those findings of fact are correct. If that is the case, the question arises whether, because the clause that would have required and entitled us to obtain a performance bond for 15 per cent of the contract value, or £7.2 million, was missing from the contract, it could be argued that mistakes were made and, at the very least, an additional cost of £1.074 million was incurred.

If I cannot pursue the matter in the Parliament, what opportunities are there to raise it, given that Mr Davidson has said that the Audit Committee will not consider it in any detail until after 1 May? We cannot raise it with the Scottish Executive, because it is the Presiding Officer's responsibility. To raise the issues gives me no pleasure, but it seems to me that serious mistakes have been made, as the Auditor General indicated, and that the witnesses, Bovis Lend Lease or both are responsible for those mistakes. The public interest requires those matters to be debated, explored and investigated fully. I am afraid that I cannot say that I have had full and frank information from the Presiding Officer, which also gives me no pleasure.

I will leave the matter at that and move on to an entirely different area of questioning for Mr Brown and Mr Home Robertson.

We all want to see successful recovery of the £3.85 million from Flour City International. However, as I suspect both Mr Brown and Mr Home Robertson know, Flour City International has no employees, is not trading, was kicked off the NASDAQ, made a $17 million loss during its last trading quarter, had bonding agents pay out $70 million, never had any fixed assets, lost every contract it ever had, did not pay its employees and faces multiple insolvency in all its companies throughout the world. Therefore, it seems to be a reasonable proposition that the chances of making any recovery are zero.

If that is the case, I ask Mr Home Robertson as the convener of the progress group and Mr Brown as a member of the corporate body whether they think that we should be pursuing a recovery action on Bovis Lend Lease. As the construction manager, it was responsible for taking on the company—

I do not think that I want an answer to that question at the moment. It might cause prejudice. I do not think that the question is appropriate.

I will move on to another question then, if I may.

I understand that the corporate body has spent nearly £44,000 on obtaining legal advice on the prospect of recovery. Without asking the witnesses to say what the prospect of recovery is, is not that an awful lot of money to pay lawyers for what will almost certainly prove to be an abortive debt recovery? The information that I have previously provided in committee must indicate that the attempt is likely to be abortive.

Why have we spent £44,000 on what will prove to be the most expensive debt recovery in history? Why has no court action been raised against Flour City International? Finally, is either gentleman aware that Bovis Lend Lease is a creditor of at least one of the companies in the Flour City group? Do they not consider that a conflict of interest exists between the Scottish Parliament and the Flour City group of companies?

You are in danger of some kind of double standard, Mr Ewing. You have made it clear that you are keen to pursue some sort of recovery from people who have defaulted on the project. The very nature of pursuing that recovery will incur other expenditure. You are also a member of the legal profession and know that it is usually fairly expensive. You are in danger of facing both ways at once.

It is the first time that we have had free legal advice.

I never charged £44,000 for not recovering a debt. I might charge £100. The point is fairly serious. Why have we spent all that money and not raised a court action? Perhaps Mr Brown can tell us why a court action has not been raised. We have had advice from Shepherd and Wedderburn, and their American agents. Will there be a court action or not?

I am sorry to be difficult—I do not want to appear to be unhelpful in any sense of the word. As Mr Ewing is well aware, the corporate body has taken legal advice on the matter, is continuing to take legal advice and will pursue such remedies as are possible. That is really all I am prepared to say on the matter at this time.

I do not consider that you have been in any way unreasonable, Mr Brown.

I will raise one final point and then stop, because this is the final opportunity we have in the session to pursue these matters.

There are facts in the public domain and available on the internet that indicate that Flour City International is bust and has no assets or money. I obtained that information from public sources more than a year ago. Therefore, why are we spending £44,000 on a fruitless exercise? Do not the witnesses accept that there is information in the public domain that shows that Flour City International is not a company worth suing and that to do so would be to throw good money after bad?

Mr Ewing, you are making the same point. I have already said that I do not expect the people giving evidence to answer that.

I am not a lawyer but I recall telling the project group right at the outset that Flour City did not have any money so why not just go after Bovis. I think that you will find that in the Official Report.

I do not think that we should spend too much time today discussing whether the Finance Committee or the Audit Committee believes that that money was spent wisely. People outside the Parliament are concerned about the millions of pounds that we are talking about, and I am concerned about the politics. We have to try to explain to people what happened to the money and whether any of it can be recovered. I agree with Fergus Ewing on that point.

I go back to the third-last paragraph in Robert Brown's letter to the committee, which says:

"the Contract allows for the actual costs of a trade contractor delay or failure to be recovered unilaterally."

I appreciate that there will be reasons why the witnesses might not want to tell us just how much will be recovered unilaterally, but the Finance Committee might be interested in finding out whether any unilateral recovery is likely to take place, and whether it is likely to be in the bigger design or construction contracts—just a step for a hint about what we are likely to do.

We are not in the business of steps for a hint, but it would be appropriate for Mr Brown to assure us that where there is such a facility, the matter will be pursued vigorously.

The relationship between the various contractors, the construction manager, the client and others is hugely complex. We are taking all steps to minimise the cost of the building and to recover if there are legitimate claims open to us. That is common to building contracts generally. I hope that it does not need to be said that that is being done; it is being done.

I hope that the convener will indulge me in one final question about finance, as this is the last meeting on the subject. I assume that the modifications to the original design will impact on the operation of the working building. For example, very little light now enters through the wee windows of the MSP offices. I am informed that artificial light rather than daylight will now provide the bulk of the lighting. Have that and other design and construction changes had a measurable impact on the anticipated maintenance and running costs for the project?

It is my understanding that the balance of natural and artificial light has not changed in the MSPs' rooms. It was always envisaged that there would be a lot of natural light. In fact, from memory, a lot of natural light comes in, not through those windows but from the glazed corridor on the other side.

As with any new building, we are doing our best. We are trying to assess all the costs of running the new complex, as incorporated in our report to the Finance Committee on running costs. The minor changes to which you referred are unlikely to have an impact. Obviously, there are big issues associated with running a brand-new complex, and we are doing our best to estimate the costs, but I have not seen any link between them and late detail or design changes. The issues that count include cleaning, heating, lighting and running IT systems, and those fundamentals have been unchanged for some time. Actual usage will have an impact on our running costs—for example the number of visitors that we get. In my judgment, those factors are likely to be more significant.

I return to a couple of points that were made at the beginning of the session, because they could be misinterpreted, and we run a slight risk of suggesting that the new building will not be ready until some time into the new year. There are risks—the weather is a factor; the site is crowded, with about 1,000 people working on it; and the interfaces between different buildings, trades and contractors could cause problems. However, it is important to reiterate that both the Holyrood progress group and the SPCB have interrogated the construction manager closely and he has reported that, notwithstanding those risks, he has a high expectation—indeed, he is confident—that the building will be handed over, carpets down and paint dry, ready to begin the migration process in November.

It would be a pity if there were any suggestion from this session that we think that there are weasel words in that and that the building might not be ready until January or February. We are confident that it will be ready in November, and we are going to work to achieve that.

I do not think that the committee is of the view that there has been any material change to the information that was supplied previously.

It is also open to members of the Finance Committee to have a look round the building before the end of the parliamentary session, if they want to see what they are getting for the committee's money.

It is the taxpayers' money, of course.

We very much want to take up that invitation. Thank you for extending it, and for attending this afternoon.