Memorandum submitted by Tropus Limited
ON THE
MANAGEMENT OF
THE WEMBLEY
STADIUM PROJECT
Note: (a) The views in this memorandum are those
of Tropus (as hereinafter defined) and are provided in good faith
based on the knowledge, belief and professional opinion of such.
The views expressed should not be attributed to any other party
and are given without any guarantee or warranty on their accuracy
or with a view to any liability attached to Tropus as a consequence
of the same.
(b) The views in this memorandum are also intended
as a comment on what, in our opinion, is the departure from "best
practice" in relation to a competitive procurement exercise,
in particular, where the client has endeavoured to use a fair
competitive exercise.
INTRODUCTION
Tropus (which expression shall mean "Tropus
Limited") provided project management services on the Wembley
Stadium project from November 1997 until August 2001, initially
for the English National Stadium Trust and then for Wembley National
Stadium Limited (WNSL), a wholly owned subsidiary of the Football
Association (FA). Francis McPeake, who is a Director of Tropus,
was involved full time in the project between these dates. David
Hudson, as Managing Director and then Chairman of Tropus, was
involved throughout at a strategic level and in overseeing the
services provided by Tropus. From March 1999, three other project
management staff members of Tropus were engaged full time in providing
project management support services.
During the early part of the commission the
company was known as McBains Limited and the company changed its
name to Tropus Limited in September 2000. Notwithstanding this
fact, this memorandum uses the current name for the company's
activities throughout the commission.
Tropus is part of the Guildhouse Group and provides
professional services in connection with property and construction,
mainly in project management but also architectural, quantity
surveying and facilities management services. The business as
McBains (a partnership) dates back to 1926 and was converted to
a corporate structure in 1995 and became part of the Guildhouse
Group in 2000. Its clients are in both the public and private
sectors and projects include retail, residential, health, education,
office and leisure schemes. The Guildhouse Group is also involved,
through other subsidiaries, in property investment and development.
David Hudson has been a partner/shareholder in the business since
1984, became MD in 1995 and Chairman in 1999. Francis McPeake
originally trained with McBains and then, after several years
working in property development and construction and running his
own construction management and building contracting businesses,
he re-joined McBains in 1997 and became a Director in 1999.
On 9 May 2001, Tropus was informed that, at
a WNSL board meeting on 2 May, a decision had been made to "suspend/terminate
all consultancy contracts pending review of the project by the
Football Association and the working party to be set up by the
Government". As there was no suspension provision in our
contract we were given three months notice of termination of our
contract, ending on 19 August 2001. It was, however, made clear
to us by WNSL that if the project was re-activated in its then
form we could expect to be re-appointed to continue to provide
project management services.
In this memorandum the expression "Senior
Management Team" refers to the executive directors of WNSL.
The term "Project Management Team" refers to Gary Hunt
and the four full time managers from Tropus.
BACKGROUND
During the course of the project we, Tropus,
were concerned with various elements of the management of the
project including the way the procurement process was managed,
the accuracy of information provided to the Board and some decisions
at senior management level. These concerns were repeatedly raised
by Tropus with the senior management of WNSL.
In the light of what we considered to be inadequate
responses to our concerns and to our real concern of the possibility
that the entire project might be aborted, we met with senior personnel
within the FA on 13 July 2001 to inform them of our concerns and
to put forward our professional opinion on how the project viability
could be improved. We expressed the view that the cost of the
project could be reduced by £50 to £100 million.
The FA representatives asked us to write to
the Chairman of WNSL telling him that we had concerns and, at
a meeting with him and an FA representative on 19 July, we were
asked and volunteered to prepare a report setting out these concerns.
The final draft of this report (marked third draft) titled Report
on Management Practices was delivered to WNSL and the FA on
or about 2 August on a confidential basis with provision for strictly
limited distribution. Gary Hunt, a full time employee of WNSL
who had also expressed concerns about the management to senior
managers within WNSL, contributed to the report. The report was
not intended to be critical of any party and made no accusations
of illegal or unlawful acts and was intended (by Tropus, at least)
to identify what needed to be done if the project was to be carried
forward successfully.
The initial reaction of the FA and WNSL Board
members we met was one of appreciation and relief. It was made
clear to us that they considered that they had not been kept fully
informed by the WNSL Senior Management Team of the circumstances
which had led to the National Stadium Project being in the parlous
state it was then in. We were asked to meet with the Patrick Carter
Review Team, which we did on two occasions, and to be as frank
and open with Patrick Carter as Tropus had been with the FA.
Since the formal completion of our work on the
project there has been very little communication with either the
FA or WNSL. We believe that as a matter of courtesy, at least,
we should have been kept informed of matters relating to our report.
A de-briefing meeting was held on 17 January 2002 to inform us
of the findings of the James report but we found this meeting
unsatisfactory as we were neither informed in any detail of the
findings of the James report nor could we agree that the actions
taken since our report fully dealt with the issues raised. At
that meeting we were told that there was no reason why we should
not be re-engaged as, indeed, had (we believe) all of the other
consultants. We expressed our ongoing concern that, given the
criticisms of the management aired both in the Carter report and
the House of Commons, our professional reputation might be damaged
by people reaching the conclusion that such criticism was directed
at us. It was stated that we were not being criticised but offered
no support in making that publicly clear. It is clear to us that
the FA's attitude towards us dramatically changed from about the
beginning of September 2001 but we have had no explanation for
that change in attitude.
TROPUS' CONCERNS
It became increasingly clear from early in 1999
that the project was not being managed in a way that we would
have expected in that the processes and procedures did not follow
those that we would expect to see on any significant project and
particularly a major project such as this. We had established
a structure and procedures that would have enabled the day-to-day
project management to be carried out by the Project Management
Team under the strategic direction of the Senior Management Team.
The WNSL structure (a non-executive Board, a chairman and four
executive directors) was developed along business management lines
rather than project lines and, given that an early part of the
project was always going to be the closure of the on-going business,
may not have been, in our opinion, appropriate. The Senior Management
Team consequently became heavily involved in the project management.
It did not follow what in our professional opinion would be the
usual and necessary project procedures.
This opened the project to unnecessary dangers
but arguably this could have been balanced by other management
benefits. More directly damaging to the project, in our professional
view, were the irregularities in the construction procurement
and decisions made in regard thereto. However, we were not party
to discussions at board level and, therefore, it was only in the
latter stages of the project that we formed the opinion that the
Board was not perhaps being kept fully apprised, and this opinion
was confirmed at our first meeting with the FA.
We approached the FA in July 2001 in order to
provide it with sufficient information to enable it to consider
the management structure and systems and to improve the project
viability. It is disappointing to us, therefore, that despite
the findings of the James report they have not, in our opinion
based upon the information we have been given, fully addressed
the issues we raised in our Report and in subsequent correspondence.
We set out below the issues and concerns that
we have raised.
Management Structure
During the setting up of the project a Management
Structure was developed, documented and put in place which sought
to define the roles and responsibilities of the WNSL Project Team
and its relationships vis-a"-vis other WNSL departments
and external parties. This Management Structure recognised the
agreed procurement route, programme and interests of third parties
/ External Project Stakeholders and had been submitted to and
accepted by the WNSL Board.
This Structure was, however, abandoned in 1999
and, in our opinion, no recognisable alternative structure put
in its place. Management tasks were allocated, as far as we were
aware, on an ad-hoc basis to team members, and to our knowledge,
often involving significant duplication of effort and confused
deliverables.
Following representation by Gary Hunt and Francis
McPeake a responsibilities matrix was drawn up but was never put
into practice properly and, therefore, never addressed the problem.
In our view, the consequence was that individuals
within the Project Management Team were not allowed to manage
roles and tasks effectively, with agreed strategies being changed
without consultation. This led to poor utilisation of capabilities
and low morale of Project Management Team, frequent duplication
of effort, and a failure to work as an effective team. It also
meant that consultants and third parties were often unclear as
to which Project Manager they should be reporting to/liasing with
on certain issues they were dealing with.
We were aware that the JP Morgan/Chase Due Diligence
Teams expressed concerns regarding the Project Management Team
structure and lack of clear demarcation of responsibilities. We
believe, they expressed serious misgivings about the Project Management
Team's ability to deliver the Project.
Project Execution Plan
In the early stages of the project a Project
Execution Plan (PEP) was set by Gary Hunt and the Tropus Team
governing the Project strategy, organisation, control, protection
and approvals procedures. Such a document is usually a Client's
Primary Control Document but as this project developed the PEP
was not developed along with it and the formal protocols set out
therein were not enforced.
We believe, that the JP Morgan/Chase Due Diligence
Teams were looking for evidence of, and adherence to the PEP as
part of their review. They expected to see a PEP as an essential
control document on a Project of this magnitude. We do not know
whether their concerns were allayed on this matter.
Lottery Funding Agreement
Until mid-1999, we understand that the Project
was compliant with the terms and conditions of the Lottery Funding
Agreement (LFA) and these were reflected in the Consultant Agreements
and Project Execution Plan. Regular liaison meetings were held
with Sport England and their advisors to keep them informed of
the progress of the Project. No known areas of concern were reported.
Thereafter, we believe, there were a number of breaches to the
terms and conditions of LFA and we became aware of what might
be described, in our view, as a cavalier attitude towards the
importance of the LFA and the involvement of Sport England. Regular
meetings with Sport England were unilaterally stopped with, in
our view, a very dismissive attitude being adopted toward Sport
England and the LFA.
Construction Procurement
Strategy
A recommended procurement strategy was put forward
by David Hudson at the end of 1997 and, after further discussion
with the shortlisted Design Team Consultants (circa 20 firms)
and with major contractors, it was put forward and adopted by
the Board. The strategy recognised the Project constraints and
complied with the requirements of the LFA.
The strategy separated the project into three:
(a) Demolition and enabling works (to be
tendered as a lump sum contract);
(b) Shell and Core (to be tendered as a lump
sum on a detail and construct contract); and
(c) Fit Out: (to be let as one or more lump
sum contracts with the option to negotiate it (them) with the
Main Contractor undertaking the Shell and Core Works).
Multiplex (MPX) approached WNSL in the early
part of May 1999 and an initial meeting was held with them on
26 May 1999. There then followed a proposal from MPX dated 21
June 1999, the essence of which was to make an early appointment
of them as Preferred Contractor and to have an "open book"
tendering process with them measured against an agreed cost plan
with 100 per cent of the tendered sub-contract package savings
reverting to WNSL and for a fixed per cent fee of two per cent.
The bond being offered at this time was a 100 per cent Performance
Bond.
On the face of it the MPX proposals appeared
very attractive and a decision was taken to pursue this approach
as an option. We concurred with the view that the MPX offer was
attractive, but we cautioned that it may not be delivered in the
final analysis and may be a means by MPX to secure a preferred
status with a hardening of the position once they were in a strong
negotiating position. In late July 1999, we were asked to review
the procurement strategy to facilitate the early appointment of
a Preferred Contractor. As part of that review we sought the views
of the heads of the Design Team Disciplines and these were taken
into account in the report submitted to WNSL in August 1999. The
recommendations Tropus made were designed to safeguard WNSL's
negotiating position whilst maintaining a genuine competitive
process, but they were largely ignored without seeking further
clarification and without explanation being given.
In order to test whether other contractors would
be willing to submit proposals on a similar basis to those put
forward by MPX, several UK and European contractors were asked
to submit their own proposals for the construction of the stadium
in a letter from WNSL dated 14 July 1999. We understand that the
appointed quantity surveyor (QS) was not consulted in the drafting
of this letter, which we regard as highly unusual given that the
QS is tasked with managing the costs through the procurement and
contract processes. Moreover, the basis of the proposals requested
of the other contractors was, we understand, significantly different
from that being offered by MPX. The Project Management Team raised
this concern and the short-listed contractors were invited to
submit revised proposals under cover of a WNSL letter dated 10
November 1999.
It was at this time that the joint venture was
formed between Bovis and Multiplex (BMX).
On 13 September 1999 a Construction Procurement
report was produced to update the WNSL Board on progress but in
our view the report is misleading. The report says: "9.00
A full audit trail of submissions and responses is in existence
to demonstrate the above and an independent review of the procurement
process has been undertaken by David Hudson of McBains".
David Hudson produced the report making recommendations
on procurement as mentioned above, but WNSL did not provide him
with the submissions or any documents submitted by the tenderers
nor seek his views on the procurement actions to date as may be
implied. He did not "review the procurement process".
Compliance
The invitation to make submissions suggested
that non-compliant submissions would not be looked at favourably.
In the event only two submissions were received, neither of which
was compliant. Nonetheless, following receipt of BMX's proposals,
negotiations were commenced and WNSL's negotiating team comprised
Gary Hunt (of WNSL), Francis McPeake and Hugh Kimbell (from Tropus).
In those discussions it was apparent that BMX were aware of information
and documents that had not been provided generally to the tenderers.
We are of the opinion that the tenderers were discouraged from
submitting non-compliant proposals and were told that non-compliant
tenders would not be considered with the result several tenderers
did not submit a proposal at all. We do not believe that BMX received
the same level of discouragement and despite the BMX tender being
non-compliant, the negotiations were progressed.
We made our views known to the Senior Management
Team that BMX were being given preferential treatment during this
period and that this might be raised by others acting on behalf
of Sport England as well as the construction industry itself.
This issue was regarded as sufficiently serious that David Hudson,
upon learning of this, immediately sought a meeting with WNSL's
Chief Executive to express concern at, what we felt was a departure
from best practice and, in our opinion, an unfairness in the competition.
Immediately prior to the meeting David Hudson spoke with the partner
responsible for the project at the project QS, Franklin and Andrews
to discuss the issue. He was similarly unhappy with what was happening
and said that according to his sources there were "rumours
of mal-practice in the marketplace" although neither he nor
Tropus were making any allegations. David Hudson informed the
Chief Executive of these comments. The Chief Executive reassured
him that if the outcome were unsatisfactory then the project would
be tendered as set out in the original procurement strategy. He
also took the opportunity to ask David Hudson to tell Gary Hunt
that, if he did not stop questioning the management of the project
he would lose his job.
Following two weeks of negotiations between
the WNSL Negotiating Team and BMX, the WNSL Team formally reported
to the WNSL Senior Management that, despite intense negotiations,
it was not considered that sufficient common ground had been achieved
to continue with the detailed negotiations with BMX due to BMX's
stance on non-compliant issues. The Negotiating team were, therefore,
very surprised when, on 14 February 2000, a recommendation went
to the Board to appoint BMX as the Preferred Contractor.
The minutes of the Board meeting of 14 February
2000 under Item 3, Contractor's Selection states:
"The Board's agreement was conditional on
the form of the construction contract being on an open book basis
with savings accruing to WNSL". This requirement was never
accepted by BMX and appears to have been abandoned as being a
requirement of MPX following their appointment in September 2000.
We do not know whether the Board's approval to this change was
ever given.
BMX maintained their non-compliant stance throughout
the Preferred Contractor Period, which was even extended despite
the fact, in our view at least, that an acceptable construction
contract was unlikely to be agreed. We believe that the true extent
of the differences between WNSL and BMX may not have been fully
communicated to the Board.
At the BMX start up meeting on 6th March 2000,
the client Budget Book was made available to BMX to look at. We,
in our experience, found this action to be quite extraordinary
and reported the fact to the Finance Director.
MPX Appointment
BMX was dismissed as Preferred Contractor in
August 2000 and MPX, on its own, appointed in September 2000.
This appointment was, in our opinion and experience, on less onerous
and well-defined terms than the original appointment and we believe
that the other short-listed Contractors may well have submitted
competitive bids had they been given the same opportunity. It
appeared to us that the appointment of MPX, so soon after the
termination of BMX's appointment, was hasty.
On 1 September a Multiplex Director wrote a
two-and-a-half page letter to the WNSL Chief Executive, offering
to build the stadium for a Guaranteed Maximum Price (GMP) of £326
million and asking that the letter was signed to signify acceptance.
We believe that an officer of WNSL was involved in the drafting
of the letter. The letter was signed by the Chief Executive (dated
1 September), accepting the offer "subject to board approval".
No other rider, such as "subject to contract" or "not
intended to create a legally binding agreement" or "Heads
of Terms", was added to the letter. We also believe, that,
as should have been the case, no legal advice was taken at this
point.
The first time we saw this letter was the day
after the Chief Executive had signed it when it was presented
as an agreed Heads of Terms. Gary Hunt and Francis McPeake immediately
expressed the view that they considered that this letter might
well constitute more than a simple Heads of Terms and might have
contractual status because there was nothing stating the contrary
intention in the letter, but there was clear offer and acceptance.
Francis McPeake advised that WNSL's lawyers, Masons, should be
consulted on the letter immediately to seek clarification on this
point. As mentioned above, we believe that the lawyers were not
consulted before the letter was put to the Board for approval.
We understand that Gary Hunt advised the Senior
Management team that the Project Management Team were concerned
about the status of the letter as drafted and that the Board should
be advised to hold its approval pending legal advice on its status.
We believe that without taking appropriate advice the letter was
put in front of the Board as only Heads of Terms and was approved
as such. We understand that MPX were soon thereafter informed
of the Board's approval without further qualification.
As a further effort to mitigate the effect of
the letter, we advised that it would be unsafe to make any payments
to MPX under the letter which might be construed as "Consideration"
and, therefore, strengthen its contractual nature. This advice
was ignored and on-account payments were made to MPX.
In our professional experience, we find it remarkable
that this two-and-a-half page letter (with five pages of attachments)
was signed on behalf of WNSL without appropriate legal advice
being taken and that it was presented for board approval when
there was any question mark regarding its legal status.
The consequence of this action could be a potential
claim from MPX should their appointment be terminated. A figure
of £12.6 million has been put forward by MPX as the extent
of its potential claim. This threat produces a disadvantaged negotiating
position for WNSL when trying to negotiate the details of the
construction contract.
A major concern that we had at the time regarding
the appointment of MPX is that the GMP referred to in this letter
was not based upon an agreed set of Employer's Requirements as,
at that time, they had not been completed. The basis of the MPX
figure was a Franklin and Andrews Cost Plan, which represented
an earlier design, circa June 2000. The Employer's Requirements
continued to be refined and were not actually formally issued
to MPX until 17 November 2000, and this led to an attempt by MPX
to increase the GMP.
Following the MPX appointment in September 2000
through a series of correspondence between MPX and the WNSL, with
MPX offering to change from a GMP type arrangement to a lump sum
arrangement. Again little consideration appears to have been given
to the programme and budget considerations, the drivers that led
to the original strategy, and without further reference to us
or, we believe, to the Board for approval to the change. Such
a change eliminates one of the main reasons for the desire to
involve MPX, namely that they would operate an "open book"
with all savings accruing to WNSL.
Negotiations Outcome
Single point negotiations have been conducted
with BMX or MPX since February 2000 and our belief in August 2001
was that WNSL were likely to face the prospect of paying a premium
on the out turn cost.
We believe, MPX (and BMX before them) have been
able to take advantage of their exclusive position in respect
of client changes and negotiate the price upward without providing
WNSL with any real savings from their commercial knowledge, nor
any reductions in risk allowances consequent on an increased level
of detailed information or from their expertise on buildability.
Significant preferred contractor costs had been
incurred to August 2001 (fees payable to BMX/MPX), with the added
threat of the MPX claim of £12.6 milion, with no tangible
benefit to WNSL. It is our professional view, that the involvement
of a preferred contractor was both premature and has worked against
WNSL interests.
Despite the extensive negotiations by August
2001 WNSL had still not received a compliant bid from MPX on acceptable
contract terms, although the price had risen from £326 million
to £360 million and was heading above £400 million.
Three major concerns which Tropus raised were:
(i) The lack of justification given for MPX's
increase in margin from two per cent (originally offered) to three
per cent (representing £3 million extra).
(ii) The increase in bonus which MPX can
earn through early completion from £200,000 per week in its
1 September 2000 offer to the August 2001 level of £350,000
per week.
(iii) The cost included for damages insurance
by MPX, which has always been considered by WNSL's own advisors
as being excessive.
In our professional opinion, MPX were consistently
being given a "less than robust" exercise in the negotiations
and have never demonstrated the normal objective explanation of
figures as they were presented. Tropus did not consider in August
last year that the MPX construction cost offer had been properly
interrogated.
Similarly, we believe that negotiations with
potential sub-contractors have not been conducted in WNSL's best
interests. For example, at a meeting on 17 February 2000 a sub-contactor
was told that the Project was "theirs" without ever
having submitted any form of competitive bid and then subsequently,
and not unsurprisingly, they returned a bid £15 million over
budget.
BUDGETARY CONTROL
The original construction budget was set at
£185 million in discussion with the then Trust and Sport
England. This figure was discussed with all short-listed consultants
and other industry figures and was considered to provide a reasonable
budget for an 81,600-seat world-class stadium.
This budget was reduced to £140 million
(June 1998) and a Cardiff-type scheme was produced and costed
by the Design Team in response to this new budget. The designs
produced by the Design Teams were, however, considered inappropriate
by WNSL Board due to the lack of back-of-house and other facilities
and the budget restriction was lifted from all future design options
from September 1998.
Thereafter, the WNSL Senior Management Team
never established a realistic budget and as a consequence the
Consultants have never really been held accountable for designing
a stadium within strict cost parameters. Rather the designs that
developed were costed and the estimates accepted.
DESIGN MANAGEMENT
The consultant team's appointments were set
up with the architect, World Stadium Team (WST), identified as
Lead Design Consultant with clear co-ordination and communication
responsibilities, and with the intention that normal design management
procedures would be followed, reporting to the Project Management
team. In the event, these design management procedures across
the consultant disciplines were not rigorously pursued by WNSL
and this led, in our professional view, to a breakdown in co-ordinated
information flow.
No one individual within the Project Management
Team was tasked with monitoring the consultant's appointments
and performance (as we believe there should have). WNSL did not
insist on the performance of some of the specific duties set out
in the consultants" Scopes of Services including, for example,
the Schedule of Deliverables.
The lack of the effective design management
on behalf of WNSL (which would have meant deliverables being monitored
against the Master Programme and budget) led to design consultants
not being controlled in the achievement of outputs and making
numerous claims for additional fees.
The Employer's Requirement's document, which
is a key document in communicating the client's design, specification
and other information, remained, as late as August 2001, an uncoordinated
set of information and led WNSL's legal advisors (Masons) to register
their concern with the level of comfort to be drawn from the design
documentation.
CLIENT BRIEF
The functional requirements of the new stadium
were established at the outset following extensive consultation
with all Project Stakeholders.
As the design progressed there was little or
no further reference to the Project Stakeholders and at times
the design developed in conflict with the operational requirements
of the new stadium. There was significant redesign between the
September 2000 Agreement with MPX and the production of the Employer's
Requirements in November 2000 and this led to a number of difficulties
between WNSL and MPX and the absence of a "compliant bid"
even after nine months of detailed negotiations. All of this has
also given rise to substantial fee claims from the consultants.
RISK MANAGEMENT
PROCEDURES
Risk management processes initiated by the Project
Management Team and procedures outlined and signed up to by all
parties as a "must have".
The risk management continued to be operated
by the Project Management Team but it appeared that the Senior
Management Team ignored the reported outputs.
A legitimate way to handle risk is to pass risks
to another party better able to handle them, and in particular,
the contractor. We found it most surprising that the WNSL Risk
Register was handed to BMX early on in its involvement. Instead
of forming its own view on the project risks, BMX reproduced the
WNSL list as a series of exclusions to their offer, so that the
objective of passing risk to the contractor was, in our professional
opinion, not achieved.
The Project Management Team reported the risk
exposure through the Budget Book until issue No 6 when it was
assessed at circa £22 million. The Project Management Team
was then instructed not to include the provision in future reports
although the Project Management Team expressed concerns about
this course of action. This directive was further confirmed at
an internal PM Team meeting on 18 July 2000.
PROGRAMME MANAGEMENT
Detailed programmes were prepared by the Project
Management team but they were not effectively used as a management
tool. For example, a Programme was produced early in early 1999
showing a projected start on site in September 2000 (Prog. Rev
l) with completion October 2003. A statement was than made by
WNSL, without reference to the Consultant Teams or the Project
Management Team and which was not supported by a detailed programme,
that a start on site date of March 2000 could be achieved.
We believe that there was tendency on the part
of WNSL to expect programmes to reflect what was intuitively believed
rather than the programmes inform a sensible decision making process.
The result was a failure to accept and promote a realistic programme,
which everyone could buy into and become accountable for.
The Project Management Team's programme indicated
that an appropriate construction period was 37 months, including
a sensible amount of float. WNSL accepted MPX's 39-month programme.
This might be regarded as a prudent level of float (although this
was not our view) but had added significance when a bonus arrangement
was but in place whereby MPX are paid additional monies to better
this programme. By mid 2001 MPX had a target programme of 34 months
and a five-month allowance for risks on site. There is, therefore,
a large potential bonus, we believe capped at £4.2 million
payable to MPX for completing ahead of the 39-month programme.
When the demolition package was tendered a programme
was offered 12 weeks shorter than that included in either the
WNSL or MPX programme. It was our expressed view that the savings
arising out of this reduced period (ie a saving on the MPX preliminaries)
should be to the WNSL benefit but as far as we are aware this
was not pursued by WNSL.
VALUE MANAGEMENT
PROCEDURES
At the outset value management (VM) procedures
and processes were established and a Value Management Facilitator
appointed. All of the consultant appointments made provision for
value management reviews to be held at key stages. The first VM
Workshop was held in July 1998 but the Value Management session
was inappropriately changed by WNSL to a cost reduction session
and no further Value Management discussions were held.
In our view the scheme has never been properly
Value Managed. For example, this process would have, inter alia,
questioned the inclusion of the hotel, commercial offices and
banqueting facilities. These were only seriously questioned in
the middle of 2001 after some £22 million had been spent
on professional fees.
It would be unusual, in our view, particularly
on a scheme of this size, if properly conducted Value Management
did not produce significant benefits to the scheme. On this basis,
it is reasonable to conclude that optimum value has not been achieved
on the Project.
We are aware that the Board called for a number
of Option Studies to be carried out circa November 2000. Initially,
Gary Hunt and Sean Andrews (from the Tropus team) were invited
to the first meeting to explore the options. On the agenda was
the reduction / exclusion of the hotel, office and banqueting
space and Gary Hunt and Sean Andrews expressed the view that the
exclusion of these elements would achieve significant savings.
The reporting on these cost issues was taken away from the Project
Management Team and after that initial meeting neither Gary Hunt
nor Sean Andrews were invited to attend further meetings to explore
the Options. The Project Management Team was also not consulted
further on the Option Studies subsequently carried out in April
2001.
Tropus was given sight of the Option Study dated
19 December 2000 after it had been presented to the Board and
could not understand the apparent lack of savings being suggested
by the omission of the hotel, office space and Visitor Attraction
as Option two. The figures did not concur with our own view on
the savings that were achievable.
It became apparent that the FA and the Government
were looking to reduce the cost of the scheme considerably at
the beginning of May 2001. The Project Management Team suggested
that it should investigate again whether the scheme could be rationalised
to achieve substantial savings and suggested that a sum in the
order of £100 million was achievable. The Project Management
Team were advised that it was not required. Again, we could not
understand this attitude given the state of the project.
On its own initiative, the Project Management
Team carried out it's own Option Study and on 18 May 2001 Gary
Hunt and Sean Andrews presented it to the Finance Director who,
we believed, would be in a position to take it direct to the FA.
Although the initial reaction appeared favourable, we believe
the appraisal was not discussed at the time with other WNSL Directors
or the FA.
The Senior Management Team looked at a further
option in late May 2001 and at a meeting on 29 May 2001, Hugh
Kimbell (from Tropus) was asked to provide cost information in
support of a conclusion that the rationalisation of the scheme
was not viable. He expressed concern regarding the manner in which
the figures were being calculated and it was left that the WNSL
Finance Team would look into the figures further. No further input
was requested of Hugh into the Option Study after this meeting.
We formed the view that the true potential for
improving the viability was not being communicated to the Board
and the FA and it was this that led to the first meeting with
the FA on 19 July. The initial appraisal work that had been presented
to The Finance Director was expanded into a formal Tropus report
entitled Preliminary Proposals to Improve Viability, July
2001.
LAND PURCHASE
AGREEMENT AND
WEMBLEY LONDON
LIMITED (WLL)
The land was purchased from Wembley London Limited
but at the time of entering contracts the precise land requirement
was not yet known. Therefore, the contract stipulated the transfer
of the land upon which the existing stadium stood plus a further
crescent of land, with the proviso that any part of this crescent
which was not required for the new stadium would revert to WLL.
In breach of the spirit of the agreement (but not the letter of
it) the design team were instructed to place the boundary of the
stadium on the outer extreme of the crescent, thereby insuring
the maximum land take.
This had three consequences. First, it damaged
the relationship with WLL, which in turn had later consequences.
Secondly, it dictated a stadium building, which was potentially
larger, and therefore more expensive, than it needed to be. The
Design Team has never carried out a detailed analysis but in our
view at the maximum point the stadium boundary was in the order
of 10 metres further out than it needed to be. This represents
a very significant cost addition. Thirdly, it left no room for
working space or access and egress which added to complications
in design.
The breakdown of the relationship with WLL led
to them to be unwilling to grant any further concessions with
regard to the land, which in turn led to more expensive design
than might otherwise have been possible. Of particular note was
the issue of the siting of the western foundation base to the
arch, which was initially located on WLL land. Francis McPeake
received a copy of a letter from Mott MacDonald dated 31 March
2000 to the WNSL confirming an instruction that they could proceed
with the design on the basis that the arch foundation would be
an isolated base some 15 x 20m on WLL land. Francis McPeake advised
WNSL on 3 April 2000 that he considered that this would fall outside
of the Transfer Agreement and that advice should be sought from
Masons on this point and agreement obtained from Wembley. This
advice was not taken up at the time and some nine months later,
when WLL consent was not forthcoming, the design had to be reworked.
The abortive design fees alone were in excess of £100k.
POST AUGUST
2001
Since our involvement came to an end in August
2001, we cooperated fully with the investigation by David James/Berwin
Leighton Paisner into the issues raised by us. We have not been
given any detail as to the findings of the investigation except
that it confirms the accuracy of our report.
In the light of this we have been somewhat bemused
by the dramatic change in attitude toward us by the FA. Even more
disturbing in our view was the dismissal of Gary Hunt, who had
contributed to our Report. It is appears to us that his dismissal
which may have been a result of "whistle-blowing". This
view is supported by the fact that, as far as we are aware, all
of the parties involved in the project when it was suspended (other
than board members) have been re-engaged except Tropus.
In September 2001, the existence of our report
had become known. In the report we had made it clear that, due
to circumstances that were well understood by the FA, we had not
been able to access all of the relevant files to provide all of
the supporting documentation. After providing the report we suggested
to the FA and WNSL all files should be secured. We do not believe
this was done.
We have on several occasions, both orally and
in writing, expressed our concern to the FA and WNSL that the
actions taken do not seem to us to have addressed the issues and
have asked for fuller explanation. We have not received any further
explanation.
CONCLUSION
This memorandum summarises the issues raised
with the FA and WNSL in July 2001 and which were included in the
report prepared and submitted by us in August 2001. Neither this
memorandum nor the report were intended to be an exhaustive analysis
of all management issues and decisions. The focus was on what
we perceived were significant problem areas, which needed remedial
action; we did not attempt to deal at all with what might be regarded
as positive elements of the project.
20 May 2002
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