Examination of witnesses (Questions 40
- 59)
WEDNESDAY 4 MARCH 1998
PROFESSOR JOHN
KREBS, MR
COLIN READ
and MR JOHN
HANSFORD
40. Do you accept all of them?
(Professor Krebs) Yes.
Maria Eagle: Thank
you, Chairman.
Mr Campbell
41. Professor, one of the interesting things
about sitting on this Committee is that we often have the benefit
of hindsight and can identify the cost of where decisions have
not been made appropriately, but we must not run away from the
fact that people are paid large sums of money to have a degree
of foresight, although one is not asking you to predict the future
exactly. If I could take you back to the question of the project
manager and in a moment look at Figure 19 which lists the benefits
of having a project manager? You have suggested to us that the
Council took the decision to take a lead role based on the success
of other projects that you have, but this was a different project,
was it not?
(Professor Krebs) Yes.
42. The Report says that it was a new type
of facility which you and other people had no experience of building.
It was your largest ever capital construction project. The Council
was inexperienced, as far as this was concerned. Why did they
insist on taking a lead role?
(Professor Krebs) It is difficult for me to answer
that in detail, as I am not au fait with the history at
that time. As I understand it, Chairman, the view of the Council
was that with the appointment of a consultant team and with responsibility
for carrying out the construction lying with the contractor, with
Wimpey, there was sufficient control of risk.
43. Time and again, whether the Treasury
said that or not (and we will probably see that from the note
they are going to send up, whatever the advice from the Treasury)
time and time again you were getting advice from the beginning
of the project and through the project of how it would be beneficial
to have a project manager. In February 1991, Touche Ross told
you that. In August 1991, Clarke Bond Partnership told you that.
In March 1992 and again in December 1993 the Rose Project Services
advised you that. In April 1992 your own governing body told you
to get a project manager. The Council persistent and consistently
rejected their advice.
(Professor Krebs) Yes. Can I clarify, Chairman,
that the governing body is the same as the Council, so when you
say—and this applied to an earlier question—"the
Council (sic) advised but the Council rejected",
it is the same group of individuals.
44. So they had come to that conclusion?
(Professor Krebs) They discussed it and came to
that conclusion. The Council in fact had on it a number of experts
from the private sector who were given special responsibility
for making recommendations to the Council on this issue, and their
recommendation was what swayed Council not to accept the external
advice.
(Mr Hansford) In the reference in April 1992,
if you look at the comments on the right hand side, the last sentence
says, it was "... agreed that in-house management would be
sufficient if supported by part-time external expertise. As a
result the Council appointed an Employer's Agent for the project
in January 1993." So that action was put in place and that
was the Council's decision.
45. Eventually it was put in place, but
if we go back to the idea of a project manager you were being
advised by people who knew about this, and the estimate is that
you could have got a project manager for about £225,000.
I understand one of the organisations actually offered to do the
job I think for another £100,000. Even if you had taken that
figure, it would have been very good value for money, would it
not?
(Professor Krebs) I accept that.
46. Thank you. Let us go back to the architects.
Am I right that your architects were working for you for a period
of five years before you got them to check their costs and the
costs of the project?
(Professor Krebs) Could you help me with which
paragraph we are talking about?
47. I quote from the summary: "It was
over five years after the Council had appointed an architect before
they began to monitor regularly fees expenditure against the budget."
So you had architects working for five years before you monitored
the fees?
(Professor Krebs) Sorry, could you help me with
which paragraph you are pointing to? I am not quite sure which
one it is.
48. I can do except it is in the summary
with which we were provided, so I am afraid at this precise moment
I cannot do that. Would you agree with that statement, that it
was over five years before you began to monitor the fees of the
architects? Is that statement correct?
(Mr Hansford) It is 4.24.
49. Thank you.
(Professor Krebs) Yes, I agree it was only in
September 1994 that the Council started to monitor the fees regularly
against its budget.
50. So you had been looking at them before
but not systematically and not regularly?
(Professor Krebs) Yes.
51. The people you appointed to be your
quantity surveyors were EC Harris and you appointed them without
competition. Is that, with hindsight, appropriate?
(Professor Krebs) That would not be our current
practice.
52. It was your practice at the time.
(Professor Krebs) It was our practice at the time
and it would be appropriate to appoint with competition.
53. Can I ask about another aspect of your
practice at the time and that is you paid contractors in advance
of the work being completed. Was that usual?
(Professor Krebs) May I ask Mr Read to comment
on that please.
(Mr Read) Yes I think the point you are referring
to is the profile of payments for this contract. We used a standard
form of contract, GC works 1, edition 3, which was a standard
Property Holdings contract. In that contract there is a model
for profiling payments for this type of project. In the pre-contract
negotiations with Wimpey we made some variations to that model.
They were not very large variations but they were sufficient in
the event to mean in that the very early stages of the project
we appear to have been paying Wimpey slightly ahead of the value
of the work that was actually completed on site.
54. Is that standard practice?
(Mr Read) No that is absolutely not standard practice.
The idea is that you get the profile as closely as possible to
match the works on site.
55. Was that standard practice at the time
in other private sector building contracts?
(Mr Read) No, standard practice would be to pay
the contractor as value appeared on the site and that is what
we intended to do.
56. It would not be your practice now to
do that?
(Mr Read) I think we would look much more closely
at that sort of profile these days before we agreed it with the
contractor.
57. Thank you. If I could ask you for a
second about the extra £5 million budget which you have suggested
is not really part of the overall budget. You talk about relocation
costs of staff. My reading says that that comes to just over £4
million. That is a lot of money, is it not, for relocating staff?
(Mr Read) Yes.
58. Where were you relocating them from?
(Mr Read) There were two groups, some coming from
Godalming in Surrey, that was from the Institute of Oceanographic
Sciences, and the other group coming from the Barry in South Wales.
That was the staff of our research vessel service.
59. How many people are we talking about
in total?
(Mr Hansford) The complement of the two institutions
were over 400 but of those, I am speaking from memory, I believe
around 60 per cent of them actually moved at the time so we are
talking about 220/230 people were actually relocated.
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