Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 168 - 179)



  Chairman: Thank you very much. I have got two opening statements to make. The first opening statement is the one that you now hear before all theatrical performances, namely, please turn off your mobile phones. If any mobile phone goes off during this session I will probably have it destroyed. Secondly, I want to refer to the material that we have seen before we have had this evidence session. The Committee has reviewed all the relevant documents in this matter including reports from both Tropus Limited and the consequent review by David James and Berwin Leighton Paisner. I should make clear that we have seen the full versions of these documents, with all deletions reinstated, but we will not refer to material that was deleted in this session. That means that we have decided, as a matter of principle, not to create a situation in which we would refer adversely to the roles of individuals in any of these matters. So the concern of Mr Ken Bates in The Guardian today can be allayed on that matter. We have decided, after much discussion, to require from WNSL the thorough and authoritative review by David James and BLP for publication by us—albeit with some deletions on the grounds of commercial confidence and other sensitivities. We agreed those deletions. We did not require a copy of the Tropus report for publication but rather we asked Tropus Limited to submit a memorandum setting out their concerns. We are grateful to Tropus for supplying that and that will be published. Last week the Committee took evidence from both David James and WNSL in private—again to protect commercial confidences. The Committee will consider whether to publish that evidence in due course after following established practice in offering the witnesses the opportunity to indicate which passages they would ask to be withheld in order to protect commercial sensitivities. I am very grateful to Mr Hudson and Mr McPeake for coming here today to answer questions, and I am going to call on Mr Doran to open the questions.

Mr Doran

  168. Thank you very much, Chair. You were at the heart of the Wembley project for four years as consultants and you felt it appropriate to produce a report, which the Chairman has referred to. I will not refer to that report but I will refer to the memorandum you have submitted to the Committee. You paint a very worrying picture, you refer to a "cavalier attitude" and there is a suggestion of "arrogance" and multiple failures of corporate governance. In your memorandum, when you discussed the background, you go so far as to say ". . . our real concern of the possibility that the entire project might be aborted . . ." Can you explain why you felt the situation had got so serious that that statement was justified?
  (Mr Hudson) I think it is a matter of public record, of course, that in April 2001 Mr Crozier approached the Government and that led to the Carter report which made it quite clear that the project was in jeopardy. In our view, it was at least partly in jeopardy because of the escalation of costs and what we believed was the situation that options that were available to the project were not being put forward to, as far as we could ascertain, the FA and, possibly, to the Board. You must bear in mind that we were not party to board minutes or board meetings, so we could not be certain throughout the project what was being said. I think, looking at the David James report, which I have seen for the first time in the last 24 hours, it is quite clear that there were a lot of things that were not being said to the Board. We put forward a proposal which we thought would save substantial sums of money, in the order to £50 million to £100 million, for the project. This was the sort of money that was being talked about as a shortfall in terms of funding. Clearly, the message that we had put to senior officers of WNSL had not been put forward, it would appear, so I chose to go straight to Adam Crozier to inform him that there were options that would substantially reduce the cost of the project and, therefore, could possibly save it.

  169. Could you spell out for us what you saw as the main difficulties and the main problems in the project?
  (Mr Hudson) The main difficulties in terms of the design of the stadium was the incorporation of the hotel (that was not viable because there was a restrictive covenant by the Hilton on the scheme, therefore, it was difficult to understand why that remained in the scheme), offices that were clearly not viable, and a large open banqueting space which seemed to be inappropriate at the time.

  170. By dealing with these problems you reckoned that up to £100 million could be saved on the project?
  (Mr Hudson) Partly those problems. Also, we felt that the pricing from the contractor that was being put forward was higher than you would get in a competitive environment. We felt that by a combination of rationalising the design and re-instigating the competitive process between £50 million and £100 million could be saved.

  171. You raised also the question of the appointment of the main contractors and you had serious concerns there. Can you say what those concerns were?
  (Mr Hudson) I did a report on the procurement way back in 1997 which was adopted by the Board, which divided the project into three and the main contract to be let on a detail and construct a form of design and build, procurement. In 1999 this procurement was changed in an attempt to get on board a preferred contractor early on. I did a revised report pointing out what the problems would be and how that best could be controlled. What actually happened, however, was that Multiplex approached—I do not know quite how it came about, to be honest, but there was clearly discussion between WNSL and Multiplex and an offer put forward by them which, on the face of it, appeared very attractive. It was felt, I think by most people, that it would not be matched by the UK industry, although we did caution that this may just be an attempt to get a foot in the door, as it were, and, once in the door, to manipulate a better situation. That is exactly what did happen. The competition that was put in place was clearly not fair, in our opinion, and we stated that—

  172. That is quite a serious allegation you make.
  (Mr Hudson) It was not a fair competition. To begin with, the documentation sent out in first instance did not involve the professional team or quantity surveyor (QS) at all, as I understand it. That is a very unusual situation, because normally, of course, he is the person charged with controlling costs through the processes and, it would be unusual if, during the procurement process, which is fundamental to controlling the entire project, the QS does not have an input. It also went out on a basis which was not compatible with the original Multiplex offer and, therefore, was not achieving the comparison that was being sought between a UK or a European market offer versus the Multiplex offer.


  173. Can I just follow that up? Could you say, categorically, whether, in your view, in the appointment of a contractor best practice was followed?
  (Mr Hudson) Absolutely not.

  174. Secondly, can you say whether, in your view, in the appointment of a contractor, one or other of potential contractors was put on the inside track to the detriment of other contractors?
  (Mr Hudson) I believe that there was preferential treatment given to one of the two contractors.

  175. Having answered those two questions in the way you have, could you say whether the action taken which you have specified was in conformity with what Sport England could have expected under the Lottery Funding Agreement?
  (Mr Hudson) No, Sport England called for either following European Community public procurement procedures (OJEC), if required (and legal advice was sought and the advice was that we did not need to follow OJEC procedures), or the alternative was that there needed to be a fully competitive process. I do not think that the process that was conducted was a fully competitive process.

Mr Doran

  176. The detail of all of that is well set out in your memorandum, and you suggest also that there were consequences in terms of the costs which the project will now face. Can you go into that in a little bit more detail?
  (Mr Hudson) Going back to the point at which Bovis Multiplex were first appointed as contractor, there was a two-week negotiating period to try and iron out the non-compliance issues. That two-week period failed to do that, and the recommendation from the sub-committee that conducted that negotiation was that we should not proceed with single negotiations. The reason for that recommendation being made was because if in the best circumstances, where there is still a potential competitive situation, you cannot reach agreement on non-compliance issues, at that point it becomes increasingly unlikely that once a contractor is preferred you will reach agreement. So it was rather surprising to us, that recommendation having been made, that I think within a fortnight Bovis Multiplex were appointed as preferred contractors.

  177. Can you say anything about the consequences for costs?
  (Mr Hudson) The consequences for costs are that if a contractor adopts an attitude where—as most naturally will because it is in their commercial interests—they want to push the price up, if you do not have a very robust negotiation and some real threat that if a satisfactory conclusion is not reached then a new competitive process would be introduced, then you are bound to get an escalation of costs. In our opinion, the costs escalated to a level way beyond the costs that you would get in a competitive process.


  178. Can I just ask one question consequent on that? From what you have seen, could you say whether or not any of the contractors, including or not including the successful contractor, padded their costs?
  (Mr McPeake) I think it is always difficult to know whether costs are padded. You can only determine that by being given access to the make-up of those figures, so it is not something to which you can categorically say yes or no to. What I would say, as somebody who was involved in the early discussions with Bovis Multiplex when they had been selected as the potential preferred contractor, is that we took part in a workshop involving three or four of us where we looked in detail at a number of aspects of the Bovis Multiplex bid and, in the first instance, it is probably fair to say that they submitted a bid which, whilst it was non-compliant, I would suggest they played down the non-compliance issues. What became evident during the course of the 20 weeks or so that we entered into a preferred contractor period was that the number of issues with which they had problems escalated; so from starting with several issues in early February 2000, by the time the decision was taken it was clear that we were not going to reach agreement with Bovis Multiplex because it was a comprehensive list. Therefore, that concerned me and it was on that basis that when we concluded our initial two-week assessment of their bid on Chelsea I wrote a minute which said that I personally did not think there was sufficient common ground to continue the detailed negotiations with Multiplex at that time.

  179. What about the inclusion of holidays in projected costs?
  (Mr Hudson) I think you are perhaps referring to the programme?

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