Examination of witnesses (Questions 140
- 154)
WEDNESDAY 4 MARCH 1998
PROFESSOR JOHN
KREBS, MR
COLIN READ
and MR JOHN
HANSFORD
140. I did not mean pecuniary, I just meant
there is a sort of comfort in knowing people whom you have worked
with. That is not a professional approach but it is understandable
in small business activity. This asset is supposed to last something
like 125 years. Can I ask why there was no attempt to do a lifetime
evaluation of this asset? It says in paragraph 2.27 words to that
effect. Secondly, while you are thinking about that, if it is
supposed to last 125 years how long is the warranty? One year?
What guarantees have we, given we have spent all this money on
this project, that some of the 12 gases referred to by Mr Leslie
will not start escaping, mixing up and blowing up, or whatever
they do?
(Professor Krebs) The answer to the second part
of the question is that the design warranty is for 12 years.
141. So 10 per cent of the projected lifetime.
(Professor Krebs) Yes. The question about a life
cycle analysis—I accept that the Council did not commission
a life cycle analysis although we did commission reports on key
elements to do with energy provision and the use of construction
materials. Of course in our used guidelines it is standard practice
to commission a full life cycle analysis.
142. So you have got a 12-year guarantee
on everything.
(Professor Krebs) On design.
143. On bits and pieces. That is no more
than you would expect if you had got your roof repaired? That
is a rhetorical question. I notice that you have got these consultant
and various people involved in making decisions but they do not
seem to have proper responsibilities for time delays and cost
overruns and you have got leading members of the Council who make
these decisions who do not have effective management, they face
no sanctions and no liabilities in a situation where an organisation
continues to make decisions against a backdrop of lost taxpayers'
money. Do not you think there is a problem here that there are
no checks and balances and accountability in the way this is meandering
forward and what do you suggest should happen in the future about
that?
(Professor Krebs) I think with regard to a project
of this sort in the future, and indeed at present, the NERC would
appoint an independent project manager with responsibility for
delivering the project on time and on budget. With regard to the
responsibilities of the Executive and of the Council, of course
ultimately the accounting officer, in this case myself, carries
the responsibility for the Council's budget.
144. Finally just a small question. I notice
the contractors were paid in advance of their work. Why was that?
Is it not normal to do some work and monitor it, quality check,
and move on? In terms of controls I think one of my colleagues
mentioned that there were something like only 260 controls on
1,900 instructions.
(Professor Krebs) Yes, the question about the
payment profile was one that we did touch on earlier. Perhaps
I can ask Mr Read to just rehearse that point.
(Mr Read) Yes, we negotiated a payment profile
with Wimpey at the outset before we placed the contract. That
was perfectly normal procedure and we followed reasonably closely,
although not exactly, the recommended profile in the standard
contract document we were using. The basis of this contract was
that you agree a payment profile and you agree a programme of
work and as long as milestones are reached at particular points
in the programme that triggers the payment. As it happens if you
actually valued the work on site during early stages of the contract
the payments were running a little ahead of that value. Later
in the project they were running correspondingly higher than that
value.[6]
That was not intentional, that was how it happened and we would
perhaps be a little more rigorous in agreeing a payment profile
in a future contract.
Mr Love
145. Good afternoon, Professor Krebs. I
will not prolong your anguish much longer. I have only got a couple
of very brief questions. I think by way of the introduction I
should reaffirm what has been said around this table this afternoon
which is the seriousness with which we judge the way this project
has been handled and I am sure that you will take that message
away with you this afternoon. My first question is in relation
to the £5 million or so which you spent which was not actually
charged to the project. I think it appears in Figure 11 on Page
29. Can I just ask you why you felt it was not necessary to include
that when it is quite clearly related to the project and in projects
that have been completed or are in process at the moment is this
a common feature of the way you handle projects of this nature?
(Professor Krebs) Chairman, if I may just clarify.
I think there may be a slight lack of clarity in what I said earlier.
It is not that we did not include the £4 million staff relocation
costs in part of the original project, it is just that the budget
described in Figure 10 does not include in the column that ends
with £48.9 this £5 million figure. If you want to include
it in there then it would come into the outturn. So you either
include it with the original estimate and in the outturn or you
treat it as a separate item. It was simply referring to the cross-reference
between 11 and 10. Clearly when the Council made the decision
to build the Southampton Oceanography Centre they knew they would
have to invest in staff relocation costs and that was built into
the cost calculation. It was merely a technical point about the
relationship between Figure 11 and Figure 10.
146. I take your point that perhaps it is
a technical point and it is not important but is it not a little
indicative of the way that this whole project was managed? Is
it not slightly, if I can use the colloquial phrase, sloppy not
to include what was clearly a project cost within the overall
budget and work to the full budget rather than have two separate
budgets and make it appear as if there was a lesser cost? There
is no need to comment on that. Can we be reassured that in your
normal way of handling a project of this nature now that you will
include all the costs related to the project within your overall
budget?
(Professor Krebs) You can be reassured.
147. Can I turn to Figure 5 for my second
question. I was intrigued by the comment made by the Treasury
but I wanted to ask you first of all in relation to Figure 5,
do you believe, looking back with hindsight, that you have got
the best balance of functions within the Oceanography Centre that
you could have got for the money you expended?
(Professor Krebs) I would need to think have hard
about what alternative balance of functions one might wish to
achieve. What I can say with confidence is in terms of the core
objectives of providing scientific facilities for research and
teaching, the centre very largely reached its original objective.
If you want a specific case where I think something could have
been done better, it would have been desirable to have a larger
lecture theatre. It is a very large centre and it does not have
a very large lecture theatre. There is a case for saying that
the functionality of the building would have been better with
a larger lecture theatre. But the core scientific, teaching and
research objectives were uppermost in working through Figure 5.
148. It struck me in exactly the same way
as it struck my other colleagues the way it is presented in Figure
5, and you can correct me if I am wrong, that the only criteria
you operated to as you moved from stage C down to the agreed tender
was simply reducing it as a matter of cost saving. What I would
like to hear from you is some criteria used that still allowed
you, as costs had to be pared back, to maintain the best balance
of function within the building.
(Professor Krebs) I would reiterate that the priority
was to enable the scientists to carry out their scientific research
effectively and for the teaching of undergraduates and postgraduates
to be carried out effectively. It is science led. Although it
looks as though some of the items in Figure 5 relate to science,
they indeed do like the plankton tower that was already referred
to, the science that is involved in the study of the plankton
is being carried out in another way. We were absolutely rigorous
in determining that the scientific capability of the centre would
not be damaged by the cuts.
149. It says somewhere within the Report,
I cannot find the immediate paragraph, that you did not set priorities
and criteria for the functions within the building explicitly.
Is that something you do now with projects that you are undertaking?
(Professor Krebs) Yes, it is part of our new guidelines.
150. Can I then move on and I will ask you
the question first and perhaps I will ask it of the Treasury.
Is the mechanism by which you went through this from stage C,
in other words building up, if you like, the gold-plated Oceanographic
Centre and then pinning it down to your budget, is that a system
you still use? Would you do that on a current project?
(Professor Krebs) No, I would not do that in a
current project.
151. What of the good practice contained
in here would you still include?
(Professor Krebs) I would follow our current guidelines
in which I would appoint a project manager. In fact we have a
project going on at the moment where I have implemented this,
I have appointed a project manager, it is a fixed fee basis for
consultants, I have a senior person in the organisation as project
sponsor, we benchmark, we use competitive tender and I also collect
performance indicators on a regular basis to measure our performance
in managing and delivering projects that involve capital investment.
Mr Hansford provides those to me on a regular basis.
152. Can I ask the Treasury: my understanding
of what you said earlier was that you felt there was some merit
in building up the gold-plated service in order that you could
bring back to the standard of the budget. Perhaps you could explain
that in more detail?
(Mr Martin) I am sorry, if I did not explain myself
well. I was saying that I regarded in a purchasing process a component
whereby somebody challenges the initial specifications as built
up by the users as good practice, because past experience has
shown there is often a tendency on the part of the users to over-specify
and to gold-plate. So I am simply saying that as part of good
practice in purchasing, that process of challenge between the
users on the part of either the project manager or the project
sponsor is good practice.
153. Can I ask you whether you have adopted
that practice? Do you critically look at the user profiles which
are given to you when you are drawing up the project?
(Professor Krebs) Yes, we do.
154. And that is part and parcel of your
project?
(Professor Krebs) Yes.
Chairman: Professor
Krebs, I think everything has been covered in some detail by all
the Committee members today, I therefore do not have any additional
requests for you. You have a couple of notes to provide. The Committee
would be grateful if you could provide those as rapidly as possible,
consistent with our provisions. It simply remains for me to thank
you for your evidence and indeed that of your two colleagues.
Thank you very much.
6 Note by Witness: Later in the project they
were, in fact, running correspondingly behind that value, not
higher as stated. Back
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