Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 180 - 199)



  180. Yes, absolutely.
  (Mr Hudson) We had put forward a detailed analysis, a detailed programme, which suggested that a legitimate contract period would be 37 months, which would include a reasonable allowance for "float". We actually, in turn, were criticised that that was too long a period and it could be built quicker. I would not disagree that there was certainly potential that contractors could come forward with shorter periods. It was surprising, therefore, that a programme of 39 months was accepted as being the Bovis Multiplex period, but that was actually made up of a 34-month contract with five months for holiday. What made that even more remarkable, of course, was that there was a bonus payable for completing ahead of time. The consequence was for the potential of a £4.2 million bonus payable for completing ahead of 39 months. Had 39 months been a realistic programme that would have been a legitimate thing to do. However, if it is an already inflated programme it seems to me another level of profit for the contractor which is not justified.

Mr Doran

  181. So it is your conclusion that by adopting the procedures which it did WNSL have opened themselves up to, perhaps, considerable extra costs on this contract?
  (Mr Hudson) In our professional opinion that is the case.

  182. I know that other colleagues want to come in, but I have just one final question to you: it has been suggested to us by a number of sources that the reason why you produced your report is because your contract had been terminated and, if you like, there was a certain amount of motivation on your part to criticise the scheme. Would you like the opportunity to say something about that?
  (Mr Hudson) Yes, I would. Of course there was a motivation to do something about it. Our contract had been terminated and the project seemed to be in a parlous state. However, it is also true that all of the consultants had been stood down; we were not in any way exceptional. We were informed in early May that, as was well-publicised at the time, the project was going to be put on hold, and we fully understood that they would not want to carry on spending money when they were reviewing whether the project was going to happen at all. In fact, at that time, there was every indication that if the project started up we would have been re-appointed, and personal letters were written to my staff saying just that, and that the senior management team expected to be in contact if and when the project started up. So, although, yes, we had received notice that our contract was being terminated, there was nothing unusual and we were certainly not being singled out. We had no reason to believe that if the job went ahead we would not be reappointed. Our concern was if the job went ahead without the management processes being put right, then—even having solved the financial problem—there would still be a fundamental problem in getting this thing built. In fact, we said to the FA and WNSL that we would not be prepared to continue with the project unless the management issues were addressed.

  183. I think you have now seen the James report, and certainly my interpretation of it is that it totally vindicates the position that your company has taken.
  (Mr Hudson) I was very surprised not to have been given more feedback on what the James report has said until I read it yesterday. I have to say I think it paints a picture which certainly, as far as we knew, was worse than we knew, although maybe not worse than we suspected.
  (Mr McPeake) Can I just add something? Whilst the report was written in July last year, it was really a summary of the concerns we had raised over the preceding 18 months. In point of fact, we went to a number of officers at WNSL as early as mid- to late-June 1999 raising some concerns along the lines outlined in the report. Whilst they were written up for the first time in July/August 2001, it certainly was not the first time they were raised.

  Michael Fabricant: I am going to return, in a moment, to the Lottery Funding Agreement, but I want to follow a line of question which Frank Doran was just talking to you about, and it refers to the management of the project while you were there. The Chairman mentioned The Guardian in his opening remarks this morning, and in The Guardian Mr Ken Bates, who was in charge of the project while you were there, says that his lawyers will be present in the Committee room today and he says that your report is totally one-sided and biased.

  Chairman: If Mr Bates' lawyers are present, would they be kind enough to raise their hands, please? (Hand raised at the back of the room) Thank you.

Michael Fabricant

  184. So they are present. Of course, I can assure you and the lawyers that you are protected by Parliamentary privilege and you cannot be sued. I just wonder whether you would like to make any remarks regarding Ken Bates' involvement with the project whilst you were the consultants?
  (Mr Hudson) Our criticisms are directed at the senior management team because that is to whom we reported. We had relatively little involvement with Ken Bates directly. As I said earlier, we were not party to board meetings, board minutes or reports. So the extent to which Ken Bates was or was not involved in various decisions is difficult for us to say, and that is why the focus of our report is the senior management team, to whom we reported.

  185. Thank you. Let us return to the Lottery Funding Agreement. In answer to a question from the Chairman you felt that the Lottery Funding Agreement had been breached; you felt that there were not robust negotiations. Do you think that Sport England were at fault here in not maintaining the position that they should have done in order to protect the interests of public money—Lottery money?
  (Mr McPeake) Can I answer that, perhaps, on the basis that I had a number of meetings with Sport England in the early days when we were securing the appointment of consultants and, latterly, when we were placing the early demolition contract or seeking tenders on that. Our philosophy when I first became involved, in December 1997, was that the only money that we were receiving to fund the early days of the project was that received from Sport England and, therefore, the rules, if you like, by which we had to operate were those dictated in the Lottery Funding Agreement itself. So we were at pains to involve Sport England pretty much in every aspect of the process. With that in mind they were attending meetings at our offices at Wembley, probably, initially once a month and sometimes, as and when, more frequently than that. So we really worked on the basis that the more information they had the easier it would be for them to see what was going on and satisfy themselves as to the process. I think what became apparent as the project went on was that instead of Sport England being involved in a consultative process, and perhaps giving their views as to their interpretation of the Lottery Funding Agreement, they became recipients of decisions that had already, at least, been explored at great length before they were even informed. Therefore, I think Sport England were put in the position where they were receiving news that perhaps they had a legitimate right to say they had an opinion on before the decision was taken, but it was presented to them as a fait accompli. So I think Sport England were put in a very difficult position.

  186. At any time did Sport England say that these faits accompli were not suitable or appropriate and that the management structure was not structured and the management techniques should be changed in order that they should be involved in the decision-making process?
  (Mr McPeake) They did not make those comments known to me. Sport England had their own professional advisers who were monitoring the compliance of the project against the Lottery Funding Agreement. Whether they had reports given to them by their own advisers is a question you may wish to direct to them.


  187. Until we saw the documents that have been available to this Committee for just over a week, the impression that we had was that the only circumstance in which the £120 million Sport England paid over (to whomever they paid it over) could be returned would be if the stadium went ahead without it being convertible to athletics, or being a dual purpose stadium. However, from what you have said in replies to me and in replies to Mr Fabricant, quite apart from that circumstance, which is not clear now, at this stage, it would appear that there have been breaches of the Lottery Funding Agreement, and it could be said that Sport England have been far from vigilant in dealing with those breaches of the Lottery Funding Agreement. In today's House of Commons Hansard the Secretary of State gives a reply to Kate Hoey MP, with regard to the fact that WNSL in its latest arrangements decided to reduce the number of seats at the projected Wembley Stadium from 75,000 to 71,200 in order to accommodate more premium seats and, therefore, make more money towards the funding of the project. We are told in the reply from the Secretary of State that the change to the number of general public seats would be incorporated as a amendment to the Lottery Funding Agreement. You said in reply to Mr Fabricant that the role of Sport England in the circumstances you describe was consultative. Could it not be argued, in the light of this, namely that WNSL altered radically the seating arrangements for their own financial gain and Sport England simply assent to that, that the relationship is not so much consultative in this circumstance as collusive?
  (Mr Hudson) I do not think we can respond to that because it is not something with which we have been involved.

Michael Fabricant

  188. When you felt that Sport England were, perhaps, not monitoring or, perhaps, were left somewhat late in the day making decisions—or not even making decisions but having to comply with decisions already made—did you at any time write formally to Sport England and make the point known that in your view Sport England were not monitoring the performance of the agreement?
  (Mr McPeake) We never wrote to Sport England independently of WNSL's own senior management team. We had, as is the nature of these things, fairly candid discussions with Sport England's own technical advisers because they, not surprisingly, queried some things which were occurring, with ourselves, as if to suggest that we might be able to give them the answers they were looking for, and of course we could not. We certainly expressed some concerns to Sport England's technical advisers about the whole adherence to the Lottery Funding Agreement itself. Whether those were passed on to Sport England I do not know.

  189. We will follow that up with Sport England when they come to us. Can I ask you, finally, this: the £120 million of public money was passed over and we now know, in answer to the question from Kate Hoey, that this is more public money for fewer public seats. The question now arises, at what point do you feel that Sport England were not only losing control of the whole issue but that costs were escalating, because £120 million came in that perhaps might not be in a position to be repaid? At any time did you feel the £120 million could not be repaid if the project did not go ahead?
  (Mr McPeake) That is not something we were involved with, so I could not comment on that.
  (Mr Hudson) I have always held the view that the problem was that the £120 million was used to buy the land. I know valuations were done but I do not know the basis of those valuations. However, it does seem to me that if a stadium is not built at Wembley and it becomes a development site, I would have thought that a valuation for alternative use—and I would have thought industrial would be the most likely use—would not reach anything like the sort of value that was paid for the land. Therefore, there would be a very large shortfall and, presumably, unless money came from elsewhere, the Lottery Funding money could not be repaid.

  190. This is a very important point. If the project does not go ahead—and no doubt we all hope that it will go ahead—you are saying there would be a very serious shortfall. I am going to ask you to hazard a guess. Would that be over 50 per cent of the value of the land you think would not be recoverable?
  (Mr Hudson) As I have said, valuation is not our expertise, so I could not answer how much, but my gut feeling from dealing with property issues is that it would be very substantial. I cannot really say more than that. I think you would need to get a valuation on alternative use to determine what the shortfall would be.

  Michael Fabricant: That is something, Chairman, I think we will follow up with other witnesses.


  191. If I could just get this clarified: my understanding—but my understanding may be totally erroneous—is that of the £106 million of Lottery money that was paid over for the land, perhaps the land with a stadium is worth around half of that and the land without a stadium is practically worthless. Have I got that wrong?
  (Mr Hudson) I am not an expert in valuation so I could not tell you whether those figures are accurate. I would have thought, yes, it would be worth very much less without a stadium. They were buying a business, so that created a value. That business is no longer there. Alternative uses would certainly be likely to have very different values. I think the site is about 24 acres, so one would not expect it to come up to anything like £106 million.

Derek Wyatt

  192. Good morning. You say in your memorandum that a cavalier and dismissive attitude was adopted towards Sport England's involvement in the project. Can I ask why, instead of handing over £106 million, it was not handed over a third, a third and a third, or a half and a half? Why was all the money handed over, since it was dependent, in the end, on the FA—in whatever guise—raising £400-£500 million extra?
  (Mr McPeake) The terms of the Lottery Funding Agreement are not something that we were involved with. So I cannot answer that question.

  193. What is your normal practice? I went to your website last night, although it has not been updated since 14 September 2000 (which is your problem, not mine) but you have 15 project clients on your website. So what is the norm, then, that you would be involved in in these sorts of projects? Is it the norm to pay 100 per cent up front?
  (Mr Hudson) No, I think it was an entirely exceptional situation that it was paid up front.

  194. It was exceptional, but who made that decision?
  (Mr Hudson) I do not know.

  195. Have you analysed how many contractors involved in Chelsea Village were also involved initially in Wembley?
  (Mr Hudson) Have we analysed how many?

  196. Yes.
  (Mr Hudson) I know that Bovis had been involved in Chelsea Village and I know that Multiplex built the West Stand at Stamford Bridge. I do not know if there are any other contractors. I think the contractor that built at least one of the stands is no longer trading.

  197. The lawyers and accountants that were used—they were not the same?
  (Mr McPeake) The traffic consultants were the same company that advised on Chelsea, to my knowledge. I cannot recall any others.
  (Mr Hudson) There was a lawyer brought in, temporarily, to replace Masons' own. They were not?
  (Mr McPeake) No.

  198. I am just trying to work out where the Government stands in all this. If you did not get all the minutes of the meetings, were the Government always represented—not Sport England but a government official from the Department of Culture, Media and Sport—at joint board meetings?
  (Mr Hudson) We do not know. We were not party to those meetings or the minutes and would not know who was there.

  199. I notice that The Evening Standard say they have a clean copy of Tropus. Was that supplied by your company?
  (Mr Hudson) It was.

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