Examination of witnesses (Questions 120
- 139)
WEDNESDAY 4 MARCH 1998
PROFESSOR JOHN
KREBS, MR
COLIN READ
and MR JOHN
HANSFORD
120. I have to say it looks a mess to me
and I can see how things got progressively worse as a result.
I am aware that I am probably pushing at my time. I want to talk
about the fees overrun, Figure 12 on Page 33, and turn to the
actual costs rather than the management of the process. Over the
page, Page 34, Figure 12. Now that shows the fee estimate at the
start of this was £4.3 million. It shows the outturn fees
paid were £8.6 million. This very much looks like the consultant
tail wagging the Council dog here, does it not? They are just
taking the money and doubling their fees because they can get
away with it because of the mess we have just been discussing
and the lack of management control.
(Professor Krebs) I agree that there should have
been tighter control and there is in the present arrangements
that we have
121. We agree that if there had been tighter
control we would not have been spending some £4 million extra,
if we had been doing things then that we know now.
(Professor Krebs) I do not know what the exact
difference in numbers would have been but certainly it would be
done on a fixed fee basis now. It is hard to know what the fixed
fee would have been had we done it on that basis then. I should
also say do not forget that we have deducted liquidated damages
and that could in principle be used to recover some of the fee.
122. There is a potential that some of that
£8.6 million will be coming back. Do we know when that might
be?
(Mr Hansford) In a sense some of that number has
already been recovered because the Council has in its possession
£2 million of liquidated damages and some of that money represents
additional consultancy costs as a direct result of the overrun
in time so in a sense one needs to net that off although I cannot
say precisely what that figure will be.
123. Will that figure compensate for the
amount spent on legal advisors for the forthcoming writ? How much
are we spending on legal advisors now to cover our backs?
(Mr Hansford) Since we appointed our legal advisors
in 1994 our expenditure is around £50,000.
124. You have spent £50,000 to date
but if it does go to court we will be expecting to spend considerably
more. What is the estimate? What is your capped figure for spend
on legal fees when Wimpey decide to take you to court?
(Mr Hansford) This is very difficult to say.
125. One of the lessons from the past is
we have to have some idea of what we might be spending.
(Mr Hansford) It is impossible to say what the
strategy of Wimpey would be. Our defence would be governed by
their strategy and that could be a very short or a very long process.
We have to have protection provided by our legal advisors and
we have got structures in place to do that. Until we know what
Wimpey's action will be—it may be there will be no significant
action against NERC—it is an impossible question to answer.
Mr Hope: I wonder
if we could ask for a note to come to the Committee about legal
costs already incurred and those incurred in the future.[3]
I have to say that my summary of the position here is that commonplace
practices were completely absent in the way the Council has operated
in the past and you have been totally unable to explain why that
happened. You have described what happened but I still have not
grasped what was going on in the organisation at the time that
would have allowed that to happen. The result is that we have
had a construction which may be 42 per cent overspent, it may
possibly not meet all the users' needs, and it was completed 22
months late. For me that is not a very impressive performance.
Mr Davies
126. Welcome again. Obviously my colleagues
have gone through a great deal of details and I will not be going
through all that again. Can I just ask some simple questions to
start with just in terms of the experience of the Council. In
previous project management what was the size of the largest budget
you had handled before and was that built on time to budget?
(Mr Read) If I can try to answer that, sir. In
the last two to three decades NERC has built a number of large
laboratory-type facilities. We built a new centre for the British
Antarctic Survey in Cambridge. I do not have the exact construction
figure available, but that would be fairly meaningless because
it was in the late 1970s and we could offer to give the Committee
a figure for that cost.
127. If we are talking about £50 million
here, what was the cost of that?
(Mr Read) It was a centre that accommodates 300
or so people. It is a mixture of office and laboratory accommodation
so it is on a smaller scale but nevertheless it was a relatively
complex building.
128. Were there problems with that? Did
you achieve the budget on that? Was there an overrun? Was there
a tendering process? Were there design consents?
(Mr Read) There was certainly a tendering process.
That has always been our practice in construction projects. There
were some relatively minor technical problems with the building
when it was finished. I believe there were some problems with
air-conditioning and such like. I do not have the exact figures
available but it was not significantly over budget or over time.
129. So there was not a lot of learning
experience from that that you applied to this project quite self-evidently.
Can I ask you about the political machinery of the Council itself.
We had a run-down of 14 members and a non-executive chairman—I
think seven academics and seven users, of which three were from
the public sector and four from the private sector. We also know
that we had eight independent reviews plus Treasury guidance to
suggest that we should have professional project management which
was consistently resisted. Can you give us some insight into how
that decision was made in terms of the dynamics of the meeting?
Was that because of the overpowering nature of a couple of members
who had commercial backgrounds and big egos? How was this working?
It seems very remarkable this should be resisted.
(Professor Krebs) Could I preface my answer by
saying that the model of the Council which I described with 14
members— seven users, seven academics—is as it is
now. I am not quite sure of the constitution of the Council in
the early 1990s. In answer to the last part of your question,
there were two Council members who had business experience who
were given special responsibility by the then chairman and chief
executive—the post at that time of chairman and chief executive
was one post. They were given special responsibility to advise
him and the Council on the appropriate way forward. I think the
answer to your question is that there were two individuals who
had particularly important influence.
130. Who were consistently resisting project
management in the normal way? That is right, is it?
(Professor Krebs) Yes.
131. Can you give us some idea of what their
commercial background was? You could name them even.
(Professor Krebs) Shall I name them?
132. Yes, I think that is all right.
(Professor Krebs) They were Lord Chorley and Gwilym
Roberts.
133. What are their backgrounds?[4]
(Professor Krebs) Gwilym Roberts
is in engineering, as far as I know.
(Mr Read) Yes. To the best of my knowledge, Lord
Chorley was associated with Coopers & Lybrand. We might have
to check that.
(Professor Krebs) Could I follow that up with
a written comment just to confirm that?
134. Yes, that would be helpful. What I
am interested in is, if there is consistent resistance to have
normal project management, was there any continuity of project
management from the Council which essential rested in a couple
of the members which consistently over time was in some sense
project management? Or would I be right to say it was hot and
cold, whenever people could turn up and everything was moving
around in a meandering way? Perhaps you do not know.
(Professor Krebs) I think I cannot really answer
that detailed question about the dynamics of the Council at that
time. I do not know if Mr Read has anything to add?
(Mr Read) The only thing I could add, because
I was an official who attended some of those Council meetings,
there certainly was a lot of healthy scepticism amongst Council
members about this project. It was not given an easy ride. They
were asking quite probing questions and they were taking reports
from the two members we have just mentioned, who were reporting
back to the full Council with their views on how this project
was proceeding.
135. So they were asking probing questions
but we have a project, as I understand it at least, where in the
first instance there was only one concept—and you mentioned
an iterative process which implies in some senses there was firstly
one concept as opposed to a range of ideas to pick up but secondly
there was an iterative process, although it sounds like an evolving
process—but one where people are moving around and there
is a lack of clarity and vision as to what the actual product
at the end of the day would be. Am I right to say there was a
changing brief which again gave rise to uncertainty and perhaps
cost over-runs in terms of construction and planning?
(Professor Krebs) I think the changing brief element
was during the design phase. Once the construction was started,
then the brief remained stable. Could I just go back because my
colleagues have clarified a certain point I made and actually
I want to correct myself. Gwilym Roberts and Lord Chorley did
in fact recommend to Council that an independent project manager
should be appointed.
136. They did?
(Professor Krebs) But subsequently they agreed
to the view that appointing an agent to help provide professional
advice would serve the purpose. That was the decision in Table
15, I think it is, that is referred to under the March 1992 row.
137. So it was they, leading figures in
some senses, who also had this propensity to change their minds,
which again muddied the waters. I am getting the picture of a
sort of rudderless control over this which did not in that process
put forward project management.
(Professor Krebs) Chairman, could I follow that
up in writing just to confirm that I have the facts about that
history of the Council exactly right?[5]
Chairman: That would
be helpful.
Mr Davies
138. You did point out, and people have
already mentioned this, that the Council was concerned to use
architects they had previously used and I asked about previous
projects. It seems to me that using architects you had used before
would be very, very limiting in terms of the size of this project.
Again in terms of the credibility of the people on the Council
presumably these people who were taking a leading role were, as
all of them were, very happy to use architects who had no real
experience of a project of this size simply on the basis they
knew them?
(Professor Krebs) I would like to ask my colleagues
if I may, Chairman, to comment on the size of the projects which
Culpin Partnership were previously involved in. Were they involved
in the Cambridge building?
(Mr Read) Yes, Culpin Partnership were the architects
for the Cambridge building which I have already mentioned, which
was a mixed building of offices and laboratories, so they had
some experience of this type of construction but not of this scale
of construction. They were also the architects for the Research
Councils' headquarters at Swindon, which is a large office complex
but it has no laboratory component.
139. Is it reasonable to say that the confidence
of the Council actually rested on personal relationships between
architects whom they had the familiarity of knowing, rather than
a professional approach to tender in the market place for companies
who had relevant knowledge in the area of projects of this size
and complexity? Is that reasonable? It seems to me reasonable,
anyway.
(Professor Krebs) Could Mr Hansford comment?
(Mr Hansford) There were three firms invited to
bid, as identified in Figure 20. The contract was awarded to Culpins,
they had done good work for us in the past, and it was very much
down to their track record and their professionalism. I just wanted
to allay any feelings that there may have been some personal relationships
here, which were——
3 Note by Witness: To date Council has incurred
legal costs of £53,400. Future costs, although impossible
to forecast as they will depend on action taken by Wimpey, will
be kept under constant review and tight control. Back
4
Note by Witness: Mr D Gwilym Roberts relevant business
experience included: Chairman Acer Group 1987-92; Partner and
Senior Partner in John Taylor & Sons 1947-90; member of the
second Severn Crossing Technical Adjudication Panel 1991-97; co
author Civil Engineering Procedure 3rd edition 1979. Lord Chorley
was employed by Coopers & Lybrand from 1955 and was a partner
1967-89; Visiting Professor of Management Science at Imperial
College 1979-82. Back
5
Note by Witness: Mr Roberts and Lord Chorley were Council
members and were asked by Chairman of Council (the Accounting
Officer) to review the project. They reported to the Project Board
in February 1991 and April 1992. At the latter meeting their view
was that there needed to be a project manager independent of the
Design team. Although that could be someone from Council's staff
there was no one with the necessary qualifications and experience.
After discussion at the Project Board it was agreed that the existing
project management arrangements would be sufficient if supported
by the appointment of an Employer's Agent. That appointment was
made in January 1993. Back
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