Examination of witnesses (Questions 80
- 99)
WEDNESDAY 4 MARCH 1998
PROFESSOR JOHN
KREBS, MR
COLIN READ
and MR JOHN
HANSFORD
80. Well, we know it should not have happened
and you said that in your answer to a colleague earlier when we
were talking about the over-run. It is a 39 per cent over-run,
if my crude arithmetic is about right, on architects' fees alone,
so they are getting a 39 per cent uplift on the agreement there,
they are busting the rules in every direction, they are spending
the taxpayers' money, you do not even know about it, you have
no system of reporting to tell you it is going on, how could it
have arisen? I do not think it is enough to tell me it should
not have happened, we all know it should not have happened, how
did it come to pass?
(Professor Krebs) I can certainly say it would
not happen now, that is not the system——
81. I can understand that. Professor, you
and your colleagues are giving a very good impression of three
honest men squirming with embarrassment at what is, by the standards
of this Committee, a fairly average cock-up but nonetheless a
very embarrassing situation. Let us try some specific questions.
Paragraph 4.8. Why was no allowance made for risk in the project?
(Professor Krebs) There was a contingency set
in the final contract for the projects. The contingency was a
small one, it was considered at the time to be sufficient given
the degree of design development which had gone on before the
contract was let.
82. But when the budget was set the allowance
was not there in anything like sufficient provision. Let me ask
you to move on to 4.14. Why was there no provision for design
development as the project goes on? What we have seen here is
a sorry tale of something getting totally out of hand, the architects
authorising changes at every turn, your Council not having a clue
what was going on, occasional meetings when there was no doubt
panic and consternation and a decision to cut the spec, hence
no large auditorium and all those other things we saw in that
first table to which I alluded when I started speaking.
(Professor Krebs) If I may clarify, the cuts to
the specification were before the contract was let. When the contract
was let, a very considerable amount of design development had
been undertaken and the construction company, Wimpey, in looking
at the specification accepted that as a brief for the build.
83. Why do you suppose, if I may move you
on to 4.16, there was such a large gap between the estimates for
the mechanical and electrical services and the lowest tender?
Why was there such an unrealistic position adopted? I suspect,
Professor, that nobody from the start had any sort of grip on
what a project of this size really entails. But if you can tell
me otherwise I am happy to be corrected. Before the Chairman stops
me I am going to move on to another area but can you answer that?
(Professor Krebs) I am not sure exactly what your
question is. Is your question whether more detailed design development
should have been done on the M&E?
84. It is as I stated, why was there such
a large gap between the lowest tender and the estimate in that
budget for the M&E services? How could there have been such
a large variation between what anyone was prepared to estimate
in their tender and what you actually put in your budget? In other
words, did your budget bear any resemblance to the real world?
(Professor Krebs) Might I just ask my colleague?
85. Of course.
(Professor Krebs) The method of calculation of
the budget was a standard procedure but it has a high variance.
86. You will be relieved to know I am coming
to the end of my questions. I want to ask two more and one will
be an uncomfortable one. So far as the surveyors are concerned
and the one of the three architects firms that was chosen, is
there anybody on the Council who has now or did have at any stage
any kind of commercial relationship with people from either of
those firms?
(Professor Krebs) I think the answer is no.
87. Chairman, may I ask that that be checked?
(Professor Krebs) I am happy to follow that up
in writing.[2]
88. My final question turns to paragraphs
5.11 onwards. The NAO Report tells us there was no project plan,
no defined responsibilities, no project handbook. In 5.34 we are
told that the Council has learned lessons and you have suggested
that yourself in your evidence. Can you answer me this, Professor,
why should the Council ever be placed in charge of such a project
again to squander taxpayers' money in this fashion?
(Professor Krebs) I think if the Council is undertaking
similar projects or smaller projects that involve capital investment
it should have guidelines and procedures in place that are robust
and will not lead to this situation. Under those conditions they
should be given responsibility for that kind of work.
Mr Leslie
89. I am interested in looking at the scale
of your cost overrun. You have mentioned before that you had a
small contingency set aside initially at the beginning of the
whole project. How small was that contingency? Two per cent, is
that right?
(Mr Hansford) It was a contingency on the constructions
contract and was two per cent of the value of that contract.
90. Why did you choose two per cent?
(Mr Hansford) That was the figure advised to us
by our professional consultant advisors.
91. Do you regard two per cent as a large
sum or a fairly limited amount?
(Mr Hansford) I am struggling to find the reference
but the Report comments on this that it was recognised as a tight
but nevertheless achievable contingency. I cannot find that particular
comment but I know it is in there somewhere.
92. It was not particularly achievable,
was it? What does two per cent imply to you? If you set a contingency
of two per cent if you overrun in any significant way what happens
to the project?
(Mr Hansford) Well, if one exceeds that contingency
one overspends.
93. Or you cut-back what you spend.
(Mr Hansford) There was a process in the history
of the project of cuts being made at times when there was evidence
that the project was in danger of overspending.
94. You could either overspend or cut-back
and pare the project down to size but you did not, you chose to
overspend.
(Mr Hansford) I think the history of the project
shows that when it became clear that costs were likely to exceed
budget action was taken to reduce the spec. That is clearly set
out in one of the figures that we have been looking at. So I believe
action was taken at the appropriate time to try and control the
project within the budget.
95. Most of the reasons why a lot of these
extra costs have come on have already been alluded to. In terms
of consultant fees they doubled from £4.3 to £8.6 million
and there was a variety of reasons for that. They were not initially
appointed in line with best practice, they did not have a fixed
relationship with the total overall cost of construction and there
were all these late design changes that came into place. The design
changes that you had in the process of this construction project
were not necessarily always to pare down the scheme to bring it
back into a manageable budget. They were just design changes that
came along as you developed the brief, were they not?
(Professor Krebs) I think a substantial part of
the delay in the pre-construction phase was to refine the design,
to minimise the risk. That is the point. It was not changes to
the design as much as refining the design.
96. Forgive me if I do not get the terms
correct because I have not actually seen this magnificent centre,
although I am sure it is very good but it is full of all sorts
of pipes and service channels throughout the building. In fact,
you manage to somehow channel 12 different gases to all your laboratories
around the building. Why do you need 12 gases? I am curious. You
are pumping these gases all around the building. I can imagine
you need oxygen and nitrogen and a few others, my chemistry is
very basic, but that is a very generous, luxurious building, is
it not?
(Professor Krebs) It relates to the kind of science
that is done in the building. We could get into a very technical
discussion about chemical oceanography and geochemistry.
97. I do not want to do that obviously!
But it was a very generous, ambitious project and the services,
of course, that you needed to put in place should have really
struck you at the beginning of the design phase and yet in terms
of putting in these chemical and electrical services and so on
you did not really incorporate them into the whole design until
very late in the day.
(Professor Krebs) I am not sure where the impression
comes from that the mechanical and electrical services were only
incorporated late on.
98. When did you appoint Building Design
Partnership, the services engineers who were the ones who put
in the services? You appointed them very late in the day, did
you not? I think paragraph 2.12 makes reference to that.
(Professor Krebs) Well, BDP were appointed in
March 1990 which was a considerable time ahead of letting the
contract for the construction.
99. But in terms of the outline design stage
it was fairly late in the day, was it not?
(Professor Krebs) It was after the users had developed
their specification requirements, then it went to the experts
to see how that could be implemented.
2 Note by Witness: As far as can be ascertained
no Members of Council have, or had, a commercial relationship
with the Consultants employed on the SOC project. Back
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