Finance Committee, 23 Sep 2003

Meeting date: Tuesday, September 23, 2003

Official Report 290KB pdf

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Scottish Parliament Building Project (Commercial Confidentiality)

The second item on the agenda is a discussion about the letter from the Presiding Officer on issues of commercial confidentiality. If Robert Brown wants to make a brief opening statement, I am happy to let him.

This issue is more for Paul Grice who, as chief executive of the Parliament, has been closely involved in the matter.

I am really here to answer questions but I will make some brief opening remarks. Members will have in front of them the Presiding Officer's letter of 16 September, which sets out the position. I will not repeat the information that is in that letter.

Throughout the project, we have sought to strike a balance between providing information—by answering parliamentary questions, answering letters and organising site visits—and meeting the extraordinary demands of actually working on the project. We have had to have regard to commercial issues. At the end of the day, this is a commercial venture involving around 70 private companies. We have always been able to respond in detail to the many requests for information that we have received, with the exceptions of requests in three broad areas—information that relates to the tendering process; information that relates to contracts; and information on the specific case of Flour City Architectural Metals (UK) Ltd.

That is not to say that no information has been provided. We have explained processes and, for example, we put an unpriced copy of the Bovis contract in the Scottish Parliament information centre. As has been discussed at some length earlier in this meeting, we have put out information on the costs of the various trade packages. However, we have regarded ourselves as being bound by commercial confidentiality in the first two areas that I mentioned, and we have accepted the advice of lawyers that to reveal details on Flour City may undermine our position with respect to potential recovery. Legal advice has now confirmed that we are indeed bound by commercial confidentiality in respect of the tendering process, and the advice on Flour City has been reiterated. However, that advice made it clear that the corporate body could take a policy decision with respect to contract information. After receiving that advice, the corporate body decided to release priced copies of the consultants' contracts.

We acted in good faith in answering a number of queries by saying that we regarded ourselves as legally bound by commercial confidentiality. That position has now changed in some respects. As indicated in the Presiding Officer's letter, analysis is still under way that suggests that in a number of instances—although relatively few—the position may have changed. We will, of course, inform the Finance Committee of the results of that analysis and clarify the position wherever necessary. We are happy to answer questions.

What is the expected time scale for changing the answers to parliamentary questions that turned out to be incorrect?

We are keen to do, as far as is possible, a comprehensive if not exhaustive check of all information that will be given; that is taking time. I hope that it will take merely a matter of weeks and that we will finish it as soon as we can. In giving the information, we want to be as confident as we can that we have swept it all up. If we need to clarify any answers to bring that into line with the corporate body's policy, we will do so.

Will you do that on a piecemeal basis as issues arise, or will you release the corrected answers as a batch?

The corporate body has not yet taken a view on that. It will want to see the analysis first. If there is a relatively small number of corrected answers, which I hope is the case, that might point away from giving a general answer. Either way, we will want to ensure that all members of the committee, as well as any other members who are affected, have updated information.

I am sure that it would be helpful to members of the committee if we, as well as the member whose question had been answered incorrectly, were to receive the information.

I am happy to undertake to make that information available.

The revealing of contracts is a step in the right direction; it is very good indeed and the public will welcome it. Unfortunately commercial confidentiality of tenders puts a big question mark over the contracts that were accepted. How are the public to know that the contract was awarded, and the other tenders were rejected, using all the correct criteria? Unless we have that information, we cannot compare the contracts that were awarded with the tenders. We could possibly have built the place for half the price if some of the tenders had been accepted, but we will not know that until you publish the information.

There is no evidence or reason to suggest that that last claim is true. The job of the Auditor General and the Audit Committee is to examine those matters. The Auditor General has access to all the papers—as you know he has already produced two reports and will continue to examine the information. That is the proper way to get round the difficulty of commercial confidentiality while providing reassurance that the issues that John Swinburne quite properly raised are dealt with.

As witnesses will acknowledge, I have been pursuing for a long time a campaign for the release of information. On the argument that the approach that was pursued by the first Presiding Officer about commercial confidentiality was unfounded in law, I understand from the letter from the current Presiding Officer that the decision to adopt the approach that I have been advocating for some years was taken on the basis of fresh legal advice, and that incorrect answers will now be corrected. I am therefore delighted that the Presiding Officer is taking a fresh approach. However, I do not believe that that goes anywhere near far enough.

I have specific questions about Flour City. I want to get to the nub of whether specific documents will be brought into the public domain. We talked earlier about the contract with Bovis, which was entered into on 25 October and—I think—another date around the end of October. Will the letters of intent, which preceded the contract with Bovis, be put into the public domain?

I will need to take separate advice on that. The normal position is that letters of intent are in any event subsumed into contracts, but I am happy to check that.

We are trying to get at the truth. Wendy Alexander raised the point that if it is the case that the Parliament could have taken a course other than construction management, that would be a material and fundamental fact. At the moment we do not know, because the letters of intent have not been made public, even though we have been promised that a new approach will be taken. I hope that that will be pursued.

The Auditor General in his report of September 2000 reviewed the tender process through which Bovis got the contract. He told us in his report that Bovis was not the lowest bidder or the second lowest bidder, but the second highest bidder. He has refused to tell us—he argues, in my view dubiously, that he is prevented in law from doing so—what the bids were. I do not expect that any information can be divulged about a tender process while it is on-going—that would be ludicrous—but after it has finished, we are talking about public money. Will you tell us what Bovis's bid was and what were the other three bids? Why was the lowest bid, which I understand was from Alfred McAlpine Construction Ltd, not accepted? Will we get to know that information?

With respect, convener, a good bit of that will be examined by the two inquiries in one format or another. As we have always said, the full documents will be made available to those inquiries regardless of any legal issues or grey areas that need to be dealt with. Anything that is wanted by Lord Fraser or the Auditor General will be made available to them, as has always been the case. Paul Grice has said that all of the information will be put into the public domain at one go, including the price, the contractual stuff and the nuances of the letter of intent before that. To be quite honest, the committee should tell us after that is done whether any issues of concern remain. That will happen very shortly.

With respect, I asked a specific question to which I am entitled to have an answer, particularly when we are being told that there is a new approach of candour. Can you tell us now, or will you tell us when you have the information, what bid Bovis originally put in and what the other bids were?

The first general point is that I understand that the Auditor General has looked at all of that. That is his job—he examines the process. As you know, he has undertaken a specific examination of, and made observations on, the award of all the contracts. I gave evidence to the Audit Committee following the Auditor General's report. That committee made a report; we have been through that process—

No. The Auditor General has not made that information public—

But that is—

Hang on a second. With respect, convener, I am not getting an answer to a very simple question. I asked the same question of the Auditor General before the Audit Committee, but he did not give me an answer. I wrote to Lord Fraser to ask him a similar question on disclosure, but Lord Fraser responded in a letter that verged on being rude and accused me of having something called "apparent legal training"—I must have imagined the past 20 years of legal practice since the day that I got my degree.

Nobody is coming up with the truth. I am determined to get at the truth, but I think that the inquiry is heading for a whitewash. If we cannot even be told what the original bids that went in were, the people of Scotland will also agree that we are heading for a whitewash.

With respect, Fergus, we need to be clear about the role of the committee. I am very clear about that. Some issues that you have raised are undoubtedly issues that are ultimately for the Audit Committee. I presume that Lord Fraser's inquiry report will be dealt with by that committee, as will whatever is produced by the Auditor General. The issues that bear on our role are to do with monitoring of costs and specific contractual issues that might arise. However, I am not entirely clear that the question that you have asked is strictly germane to the interests of the Finance Committee. We need to be very cautious about that matter.

Will you give me guidance, then, convener? To whom should the question be addressed? I have asked Lord Fraser; I have asked the witnesses; I have asked the Auditor General. None of them has answered the question. I am afraid that that approach will not wash with the public, so I will continue banging on about the matter until somebody answers the question.

With respect, will Mr Grice tell us whether we will be informed by the SPCB what were the bids of Bovis and the other tenderers?

What I can say is that, yes, the information about the Bovis bid will be given, because that ended up in the contract. As I said earlier in answer to, I think, Mr Brocklebank, the copy of the priced contract will contain that information. As I said in my opening remarks, the legal advice that we have received confirms our previous position that the tendering process was commercially confidential. The judgment is that that is a legally binding relationship that the corporate body inherited—

If that is the case, why—

I am trying to answer your question.

The answer is no: when the corporate body makes available copies of the priced contract, it will not also make available other related tendering information because that information is regarded as being commercially confidential.

If that is the case—

If I may just finish, I will then answer any other questions—

You have not answered the question at all yet.

The function of the Auditor General was set up as part of the overall governance of the country. He gets access to all papers—nothing is withheld from him in this regard. He has, to my knowledge, seen all the tender information and he reports to Parliament and advises the Audit Committee. I personally gave evidence to that committee and took questions from it. There is a process. I am not saying that everybody has to like that process, but that is the process for providing scrutiny and assurance that such matters are dealt with properly.

If the Auditor General, having seen all the information that Fergus Ewing talks about, sees something that gives him concern—the same will apply to the Fraser inquiry—he has the right to ask those questions and they must be answered. That is the process. Whatever one's views are on it, it is the process that was established as part of the Scotland Act 1998, which established this Parliament. That is the system that we operate within.

Convener, would it be possible for this committee to suggest to the Audit Committee that it might be able to keep to the terms of the legal advice that was received by the corporate body by publishing the range of bids instead of disclosing and naming each individual bid for contracts by individual contractors? If the range of bids were published, we would be in a better position to judge value for money.

You will recall that the Gardiner & Theobald report, which was commissioned by the Auditor General but not published, gave rise to the Fraser inquiry, because I brought it to the attention of the First Minister and he agreed with the serious concern that was raised in the report that the main contractor—Bovis—had been dropped from the first round of tendering because of non-compliance. As I understand it, a non-compliant tenderer should be counted out. Having been dropped from the first round of tendering, Bovis was reintroduced and won the contract.

There is an area of concern and mystery, in terms of the public interest and public respect for how we conduct our business, that we should investigate. It is not the business of this committee—

Absolutely—that is the point that I was going to make.

It is for the Audit Committee. To short-cut things, if the committee agrees, we can suggest to the Audit Committee that that is what it should do.

It is not for this committee to suggest to the Audit Committee what it should do. It is clear that there is a separation of roles between the Finance Committee and the Audit Committee and that the responsibilities of the Audit Committee are clear. If issues emerge from our testimony that attract the interest of the Audit Committee, it is for that committee to pick them up. I am sure that the Audit Committee will examine in detail whatever emerges from the Fraser inquiry and anything that is produced in the Auditor General's report. I am absolutely clear that that is what will be done.

Would it be in order for us to call the Auditor General here so that we can question him directly?

That would not be appropriate—he reports to the Audit Committee. The matter is very specific.

Can we write to him?

We can write to him.

We are pleased to hear that at least some of the details of the contracts will be made publicly available and that we will be able to access them through the Scottish Parliament information centre. I note from the Presiding Officer's letter that that will apply to copies of the principal consultants' contracts. How many contracts will we get details of? Also, a lot of the problems with the increasing costs have arisen because changes have had to be made to contracts because of delays that were caused by, for example, the problems in the light well and contractors' not being able to work there at the same time as each other. I presume that those contracts have had to be renegotiated as time has gone on. Will the variations to the contracts be published and made available in SPICe?

The principal consultants are Bovis, Davis Langdon & Everest, EMBT/RMJM Ltd, RMJM Services and Ove Arup, and their contracts will be placed in SPICe. Those contracts do not necessarily need to be varied in the way that the contracts of package contractors have to be varied, for the reasons that we discussed earlier.

The reason why I was not able to bring them here today—I would have done so if I could—is that minutes of variation putting into effect the price caps are currently being negotiated. In other words, an agreement in principle has been reached and the lawyers on both sides are now looking at the details. When we have that, we will be able to present single documents with explanatory notes, giving not just the price information but other information as well. Those are the contracts that we will make available just as soon as we can. I hope that that will take no longer than a matter of weeks.

I understand that it is absolutely vital to have confidentiality during a tendering process, but I do not understand the lack of openness after the contract has been placed. I suggest that it would be strongly in the public interest to have openness at that point. Such openness would hone a current value-for-money mentality; it would also hone a future value-for-money mentality in the bidding contractors and make for sharper pencils as those bidding contractors proceeded. We could make openness a virtue. Perhaps we could make it a condition of placing a contract before the Parliament that, after the tendering process, the bid would be made public.

I take your point. I am always happy to consider confidentiality when the Parliament tenders for contracts. Looking back, however, when the companies tendered for the contracts, they did so with the understanding that they would have commercial confidentiality. Our legal advice is that it is not open to us to alter that subsequently, unless by some other agreement.

There is always a good debate to be had about the issues that Mr Mather raises and I accept his points. The SPCB feels the same way under the new Presiding Officer as it did previously: there are other issues that we cannot discuss now for practical reasons, because we have a team of people on site trying to build a building and, in answering the questions that we have already answered, we place a great burden on them. One needs to strike a balance. When the project is over, we might be able to make more information readily available; the SPCB will commit itself to considering that. I am happy to revisit Mr Mather's comments when we do not have the current burden.

Unfortunately, it often falls to the same few individuals who have the information to manage the project on site, and they are the people whom we can least afford to miss. Jeremy Purvis referred to having a strategy and a focus on closure—that is what those few people are doing. We have to decide whether they should be taken off the project to comb through historical papers. When the project is over, the SPCB will be willing to consider the matter. If, however, the legal position bars the SPCB from doing so, that is a problem. Nonetheless, we must examine that situation.

I agree that it might be worth re-examining the situation. As a former contractor, I can say that I would not have chosen not to bid if, on the basis of winning or losing the contract, my price would be published.

Jim Mather makes a good point. Apart from any other immediate considerations, the Parliament will be under the regime of the Freedom of Information (Scotland) Act 2002 in due course. Work is being done in my SPCB portfolio to consider questions about freedom of information. The practical issues that have arisen from the Holyrood contract offer a good drawing board example of the problems that can occur. At some point, we might want to consider the practice of different councils with regard to freedom of information. We might find that there is a variance of detail on what is made available and what is agreed. We must return to that broader point.

I return to the Presiding Officer's letter and the precise wording about the disclosure of tender documentation. The Presiding Officer wrote:

"the SPCB owes to tenderers under the tender documentation and the Scottish Parliament and Treasury Procurement Guidance an obligation of commercial confidentiality. Accordingly the legal advisers conclude that such an obligation is, and continues, to exist in respect of such documentation."

That is curious. It is stated not that the contract says that we must keep the tender details secret, but that a combination of the tender documentation plus Treasury guidance has somehow resulted in that conclusion. I am extremely anxious that the legal advice does not quite say what is represented in the letter. I simply cannot fathom why, after the tender process is over, those unsuccessful tenderers can have a legal entitlement, for all time coming, for that information to be kept secret. I am suspicious about that.

The only way that I can imagine of resolving the matter—I hope that the committee might agree to this—is to suggest that the SPCB share with members of the committee the legal advice so that we, too, might understand. If it is the case that the legal advice is crystal clear and that we can never be told, for legal reasons, what the unsuccessful bids for the main contract were, at least we would know that that was the precise legal position. Without that information, I am afraid that the argument will run and run.

I make the constructive suggestion that all the legal advice be made available to the Finance Committee. That would allow us to take matters forward. I say to Robert Brown and Paul Grice that the argument is not going to go away. In the end, there will be egg on the face of everybody who was associated with keeping the information from the public gaze.

The corporate body is not prepared to make the legal advice that pertains to this or any other matter available to the Finance Committee.

Have you asked?

It has been a matter of—

By definition, you could not have asked the corporate body. I have only just asked the question.

The matter has been discussed by the corporate body in a number of contexts, but more particularly in relation to this issue.

The matter is serious. The Finance Committee is asking you a question and you are saying that you will not go back to the corporate body for it to consider the matter. How much more arrogant could you get?

Let Robert Brown answer the question.

There are very good reasons for legal advice not being made available. There is a considerable parallel—in terms of the practical position on the ground and the way in which the matter will be dealt with under the Freedom of Information (Scotland) Act 2002—between the position of the corporate body vis-à-vis the Parliament and the position of the Executive in respect of Cabinet papers. There is a similarity in the way in which those matters are approached. A body that has to take legal decisions on the basis of advice is normally required to keep the advice confidential to itself.

The corporate body has made available to the committee the tenor and essence of the advice. In particular, the chief executive and the Presiding Officer have come to the committee with the agreement of the corporate body as soon as the issue became available and they made a decision on the matter. There is no question about the corporate body's commitment that the appropriate information is made available to the public or about our commitment to be as open as we possibly can. However, that does not apply to the legal advice that was given in confidence to the corporate body.

Perhaps you could respond to the question a bit further. Fergus Ewing made a point about the separation between the obligation that the SPCB owes to tenderers under the tender documentation and the obligation that the Scottish Parliament owes under Treasury procurement guidance. Is it possible to separate those two elements to see which part of the legal advice relates to one or the other?

Can I make a suggestion? I am struck by whether the decision that was made by the corporate body reflects the new tone that has been taken by the current Presiding Officer. I can see the difficulties that officers are having in anticipating what might be the attitude of the corporate body or the Presiding Officer to a set of circumstances that cannot be precisely anticipated.

I suggest that we write to the Presiding Officer—by implication we would be writing to the corporate body—saying that the one piece of information in which members are interested is the tender prices. We can ask for clarification on whether, if we cannot see the prices, that is because of contractual obligation or Treasury guidelines or whether it is a matter of judgment. The suggestion does not require us to see the legal advice. It is clear that the long-established pattern is that that advice is confidential to the corporate body. The letter would give the Presiding Officer and the corporate body the chance to reflect on the matter and also, if they so wish, to clarify the basis on which they are—or are not—comfortable with acceding to the request.

That is a helpful suggestion.

I, too, would like to say that it is helpful; it concentrates on the essence of what people are trying to get hold of. That is the important point.

This is probably where Robert Brown will duck for cover—I am coming to your rescue, Robert.

I endorse absolutely what Wendy Alexander said. I want to keep the suggestion on the table, however, that we ask for the range of contracts to be provided. That would enable us to make comparative judgments without knowing the names of the companies, as that would breach Treasury guidelines on confidentiality that are laid down to keep us out of jail.

I doubt very much whether the public, in whose name we are spending all the money, understand what is so commercially confidential about the prices that were submitted by the companies that took pigeon droppings off the roof. I presume that that contract went out to tender as well and I do not expect that any of us would judge it to be as serious as others—although the company that got the contract might think so.

We have to think about how the public will perceive things. The maximum amount of information must be given. Previously, information was given only on a need-to-know basis. We now need to know very much more. If the same legal advice holds for the contractor that took the pigeon droppings off the roof as holds for Bovis or anybody else, we will definitely need to investigate that area.

The information that Margo MacDonald refers to on cost figures for individual contracts has been given in my most recent letter to the Finance Committee. About three quarters of the contracts are covered there. It was explained that we are still waiting for agreement and consent on some of them, but we expect to be able to give the remaining information on contracts and prices to the committee within the next 10 days or a fortnight. To make it easier, we will put all the information together.

My point about the disclosure of tenders still holds. Some of the tenders are not for a huge amount of money, and some may appear to be less important than others, but the public will want to know why they cannot know about certain things. I presume that the same legal advice is given to you for all contracts, regardless of their price or how serious they may be in the scheme of things.

We would like to consider that point a little further, to see what information can be given. As Paul Grice has made clear, Lord Fraser and the Auditor General will have unfettered access to all such information. That is not at issue. However, the question of what can be made public is a bit of a tangle. We have to consider commercial agreements of one sort or another and we have to consider the practicalities. We would like to consider the extent to which information on tenders can be released, and an appropriate time scale for that.

I can't wait.

Nobody would dispute that there are areas of public interest. However, what is at issue is the balance between that public interest, the progress of the contracts and the practicalities of providing information. We have to consider the sheer amount of information as well as the legal issues involved. We undertake to come back to the committee on that.

I want to ask about the, if you like, over-bidders—over-bidders in most cases, that is—by which I mean the bidders who were not successful. The Auditor General has adopted a practice that is totally different from the one that Robert Brown has described. In his December 2002 report on Flour City, which followed my submissions to him in January that year and again later, the Auditor General revealed that the second bidder put in a bid of, I think, £7.2 million. Flour City's bid was £7.1 million—a tiny fraction less, interestingly enough. The Auditor General has revealed the identity of that other bidder; it is, I believe, in the public domain. Is the Parliament preventing the Auditor General from releasing information about the main tender? Is the Parliament happy that the Auditor General can, if he wishes, release information about the other bidders and the construction management tender?

That is for the Auditor General.

But is the Parliament happy? You are here to speak for the SPCB.

The Parliament does not seek to constrain the actions of the Auditor General in any way. That is the bottom line. Matters will be up to his discretion and his judgment. No doubt, he will require to take account of any relevant legal issues.

As we draw this evidence-taking session to a close, I think that we will take up my suggestion—which was significantly refined by Wendy Alexander—and add Margo MacDonald's point on banding. We will see whether we can exchange information. If you can clarify the SPCB's view on that matter, that would be helpful.

We would be delighted to take a further view. Our exchanges about what might be possible have been helpful and we will come back to the committee as soon as we can.

Fergus Ewing will ask a couple of questions about Flour City.

The Presiding Officer's letter says that further advice and opinion was sought on the Flour City matter. I want to ask a few detailed questions on that issue. First, was that further advice sought from the same external legal advisers as those who provided the previous advice, namely Messrs Shepherd and Wedderburn?

Yes.

Did they obtain counsel's opinion?

Not to my knowledge.

The advice is that the documents about Flour City should not be disclosed on the basis that doing so might prejudice options for recovery. Does that advice also say that it would be wrong to disclose copies of the documents? I quite understand that, on the best-evidence rule, original documents such as signed contracts might be required to be produced in court in any action and that they would therefore need to be kept, protected and preserved and not passed to just anyone. However, I do not understand why copies of those documents, which I have requested for quite a long time, should not be made available. Does your advice specifically say that those documents may not be copied and that the same conclusions apply to any copies as they do to the originals?

We have debated this matter for some time and I am afraid that I have nothing to add. The SPCB's position on Flour City remains as it was and as it has been discussed in committee. I cannot remember off the top of my head what the advice says about copies, but I can check that. However, I am able to say that the advisers have given clear advice, which they have repeated, that in their opinion it would not be in the Parliament's best interests to disclose the documents.

We should bear it in mind that the SPCB, as owner of the project, uniquely has a legal responsibility and must take judgments on the matter. The SPCB has received advice from Shepherd and Wedderburn to the effect that releasing information about Flour City might prejudice future recovery. The SPCB has taken that view and drawn a line in the sand on it; as the legal owner of the project, it is right for it to do so. I am happy to repeat the undertaking that I gave previously on the SPCB's behalf that, if there is any prospect of recovering any moneys that were lost as a result of Flour City, the SPCB as legal owner of the project and whose duty it is will take that action, regardless of the information that is put out at the moment.

It is important to stress that, although the SPCB has to make difficult judgments, it is right that it does so as the owner of the project. It has taken Shepherd and Wedderburn's advice and adopted that approach in the Parliament's interests. That is its clear position and I have received no indication that it has changed its mind on any previous questions about Flour City.

I will allow Fergus Ewing to ask one further question on this matter.

Everyone will accept that my question was very specific and clearly put and entitles me to an answer. I should also say that today is not the first time that I have asked this question; I have put it to the previous Presiding Officer and the current Presiding Officer. I have put it in writing more than once and raised it at meetings with the Presiding Officer. I am afraid that I deeply resent Mr Grice's refusal to answer a very simple question. I will not be giving the matter up. Personally, I find it hard to see how there is any legal impediment to disclosing these documents. I know for a fact that the chances of recovering any money from Flour City International under the guarantee are zilch, because its debts are probably approaching £100 million. The company has no assets, no employees, no contracts, no business—no nothing. It seems to me that the only people from whom we will recover the Flour City losses are the construction managers and possibly other members of the team. Finally, Mr Grice, has legal advice been obtained on the possibility of seeking money for the Flour City losses from the construction managers Bovis Lend Lease?

I am afraid that I have nothing further to add about Flour City, for the reasons that I have already outlined.

Not to answer MSPs' questions is fundamentally unacceptable. I certainly intend to pursue the matter.

On a positive note, I want to say that we have had a very thorough session on the Holyrood project. As we have agreed, we will communicate further in writing—[Interruption.] I say to John Swinburne that I am closing the meeting. We will communicate further with the SPCB in writing and seek further information. I hope that we will receive a speedy response to that letter. We also look forward to a further report that I presume will be brought out at the end of October.

The committee will move into private session to discuss the draft report on the Vulnerable Witnesses (Scotland) Bill.

I ask the official report, members of the press and public and those who are not members of the committee to leave the meeting.

Meeting continued in private until 12:31.