Examination of Witnesses (Questions 200
- 220)
TUESDAY 21 MAY 2002
MR DAVID
HUDSON AND
MR FRANCIS
MCPEAKE
200. Sir Rodney Walker says, in his letter to
us, which will go into the public domain, that you raised concerns
about management processes. He says they are of little or no relevance,
it is about management style. Would you like to respond to his
comment?
(Mr Hudson) Yes. I do find that rather remarkable,
given the evidence we put forward and, even more so, given the
evidence that I now see in the David James/Berwin Leighton Paisner
report. If a matter of style is that we believe in putting in
processes and procedures and an alternative style is that you
have none, then, yes, it is a matter of style. Our issue was that
having set the project up to have a proper project execution plan
which should have been developed as the project itself developed
and to have proper processes and controls, those processes and
controls were largely ignored; instead of having a properly structured
project management team the project management team were asked
to perform on a purely task-oriented basis almost on a day-by-day
instruction. So there was no responsibility for delivering elements
of the project as we believe there should have been. If that is
merely a matter of management style, I think it is an inappropriate
use of that expression, because what it is all about is having
proper procedures. I would agree there are other ways of doing
it and had something else been put in place to what we originally
set up then we would have had no complaints, but what happened
was that there was nothing put in its place that had any real
effect. There was no budget put in place against which the design
team were asked to design, so they designed, as it were, to meet
the brief and then the designs were costed and those costings
accepted.
Chairman
201. I would like to return to the question
about the value of the land and the property, because the Clerk
has now provided me with a response that WNSL gave us after we
had a private meeting last Thursday. I wanted some information
about that—regarding the value of the land. Forgive me if
it is several sentences but I would like to read them out to you.
"The property and fixed assets were purchased by WNSL from
Wembley plc for £103 million." That, of course, was
tax-payers' money through the Lottery. "This included £93.7
million for the property and fixed assets, although the value
of the property was not set out separately within the sale and
purchase agreement. WNSL have used the chartered surveyor and
related property specialist partnership to apportion the values
of land and buildings. The land is included in the accounts at
a value of £64.5 million, the buildings have since been written
off." So £40 million of public money has been written
off—ie £103 million of our money was handed over by
Sport England for property which is now included in WNSL's accounts
at £64.5 million. Do you regard that as an appropriate use
of public funds?
(Mr Hudson) It would not appear so, but I am not an
expert in the use of public funds.
Mr Bryant: Neither is WNSL!
Alan Keen
202. I do not know whether this question has
any importance at all, but reading through the report Bovis was
involved and then they were not involved. Could you explain why
they withdrew? Did they withdraw voluntarily?
(Mr McPeake) What happened was that Bovis Multiplex
were appointed as the preferred contractor as they were then entitled,
and I think, initially, for a period of 20 weeks. The intention
was that during that 20 weeks the WNSL's team would seek to agree
the basis of the contract with Bovis Multiplex by which, at the
end of that process, there would be a Guaranteed Maximum Price
for the new stadium. At the start of that process there was a
letter which basically said that it was WNSL's intention (and
this was something which Bovis Multiplex accepted in the appointment
letter) that there was a budget of £316 million and that
during this 20-week period Bovis Multiplex would seek to agree
the GMP within that figure, alongside agreement on the contractual
terms and refining the design in order to support that figure.
What actually happened at the end of that process was that, from
my understanding, Bovis Multiplex were unable to confirm that
they could build the stadium for that price. As a consequence
of that it was decided that under the terms of the appointment
letter—the preferred contractor appointment letter—WNSL
had a right then to terminate that agreement. The events that
unfolded after that are a little bit more vague, but it was after
that point in time that Multiplex, very soon thereafter, became
appointed as the new preferred contractor.
203. Did Bovis withdraw?
(Mr McPeake) No, my understanding is that WNSL actually
wrote to Bovis advising them that they were no longer required
as the preferred contractor.
Mr Bryant
204. Do you think that the processes that you
have outlined, where you see the problems, are just cavalier or
corrupt?
(Mr Hudson) We have seen no evidence of corruption.
205. The big cheque was on 15 March 1999 for
£103 million from Sport England. Do you think the fact that
that money came seemingly so easily encouraged WNSL to behave
in the cavalier fashion that you have outlined? In other words,
do you think that the cavalier attitude sort of cascaded down
from Sport England to WNSL?
(Mr Hudson) I do not know whether it cascaded down
but I think it is inevitable that if somebody has a financial
hold over you then you are bound to behave in a way that ensures
that the next tranche is coming. Of course, that is why these
things are normally done that way. Having had the large sum there
might have been a perception that there was less of a need to
adopt other than a cavalier attitude.
206. You say that you first raised with officers
of WNSL some of your concerns in June 1999. It is now nearly June
2002, which is three years, during which you have been worrying
about these issues. Who do you think, during that process, has
known of your concerns in the wider public and in Government?
(Mr Hudson) Our concerns were raised within WNSL.
It would not have been our job to raise them more widely. From
my perspective, it was a difficult decision to even go and see
the FA because the normal process would be that we were reporting
to a client, namely WNSL, and it was to the senior management
team and chief executive that the concerns were raised and to
the human resources directors and to the finance director.
207. How distinct did you find, in your dealings,
the FA and WNSL to be?
(Mr Hudson) Quite distinct.
208. Though the FA has how many members on the
board of WNSL? Two, is it?
(Mr Hudson) I do not know. I never knew exactly what
the constituency of the board was. As I say, we were not party
to the board or the minutes.
209. Final question: do you think that the concerns
that you brought up three years ago—which is, to some degree,
past history—have all been rectified so that the Wembley
Stadium that many of us and the Committee hope will now come to
be is being laid on solid foundations?
(Mr Hudson) I have not been satisfied and reassured
that that is the case. It would seem to me remarkable that given
the terrible management and procurement processes that went on
with this project you happen to end up with a project that represents
very good value for money. I know there has been a value-for-money
study prepared. I do not know whether it is that I have a different
definition of the phrase "value-for-money" than the
study that apparently supported where the project is today, but
it seems to me that WNSL got itself into a position where it had
to go forward with the contract that was in place because of dangers.
210. Is not the danger, as Michael Fabricant
pointed out earlier, that if we do not go ahead then value-for-money
for the Lottery player will be practically nil, because we would
have lost £120 million?
(Mr Hudson) I think today, because time has now run
out, that may well be the case, but it was not the case when we
first approached the FA in July of last year.
(Mr McPeake) I think there is another question as
well, and that is ought Wembley to proceed at any price? If the
answer to that is no, then that is your answer.
John Thurso
211. The James/BLP report offers some exceptionally
severe criticism of the levels of corporate governance within
WNSL. It also says that these were raised as a result of comments,
I think, in your report. Reading your memorandum I do not see
any particular reference to that, and I wondered if you would
like to make any comment on that?
(Mr Hudson) In reference to our report?
212. Corporate governance by WNSL.
(Mr Hudson) I think, again, we had limited information
about the corporate governance issues because we were not party,
as I said, to board minutes. There was something that, in fact,
for example, I saw only relatively recently and only shortly before
we prepared the report, which was a report prepared for the board
in 1999, which said that I had carried out a review of the procurement
process. That, in my opinion, was misleading; I did not carry
out a review of the process, I prepared a report about recommendations
on how to go forward. I was never given any of the documentation
personally to review and to make comment on the processes that
had been gone through and had no input on the processes reviewed
at all. Therefore, to tell the board that I had conducted this
review was misleading.
213. So that the reports that you were making
to the executive management and the reports that the executive
management were making to the whole board did not actually marry
up?
(Mr Hudson) I have only learned much of that from
reading David James' report yesterday.
Chairman
214. I am sorry, John. I was so absorbed in
your questions that I was chasing up one or two of the bits that
I want to follow up. I was trying to make sure from the Clerk
that what I was going to quote I could quote with propriety. He
tells me I can, so I am going to quote. In the David James report,
David James says: "The process adopted by WNSL is unlikely
to satisfy "best practice" standards as usually deemed
necessary in any project involving Government or Lottery funding;"
He goes on: "The process by which the tender was offered
and the contract negotiated does not follow best practice and
the WNSL Board may feel it appropriate to accept a strong measure
of criticism for their failure to oversee this responsibility
correctly. . . . Propriety is an issue which it is difficult to
demonstrate in the absence of evidence either positive or negative.
. . . Accordingly, I conclude there is an unavoidable element
of risk which cannot be disassociated from the contract as negotiated.
. . . There is no evidence of any criminality or impropriety having
occurred to date in this matter but there is no means by which
all questions of propriety can be eliminated to the extent that
the contract would ever be regarded as 100 per cent `safe'."
I may as well say now, to sum-up the point, that what WNSL or
the FA get up to on their own money is no concern whatever of
mine or indeed of this Select Committee's. The issue throughout
has been whether there is a breach of the Lottery Funding Agreement
which is made clear by, I would have thought, what Mr James says
in his report. Here again, we come back to what is the issue for
this Select Committee: namely the deployment of public money by
Sport England. In the light of what Mr James says, could I ask
you whether you believe that that deployment of public money has
been appropriate?
(Mr Hudson) I think that had the project been properly
handled and, as it could have been, in my professional opinion,
on site and under construction by now, then I do not think there
would have been a wrong use of public money because it was for
a much-needed national stadium for this country. From where we
sit now it does seem that the viability of the project enables
a certain amount of money, as in all projects, to be spent based
on viability. The fact that there was £120 million given
towards that viability means there is more scope, as it were,
to accept possibly higher prices than would otherwise be possible.
Therefore, that may well be the reason why they were determined
to get someone on board at what we, as professionals, considered
to be a higher than competitive price rather than drive the price
right down to the lowest sensible price and value-for-money price
that they could achieve.
215. I can understand their motives, Mr Hudson,
and I do not in any way decry their motives—if it is available
why not use it and why not rely on it? The question is whether
Sport England ought to have agreed to be part of that when it
must have been aware of breaches of the Lottery Funding Agreement.
After all, you as outsiders were more aware of breaches; they
were the guardians of the Lottery Funding Agreement.
(Mr Hudson) I think at the time we were insiders,
really. I do not think we can add very much because I think it
is a matter for Sport England.
Miss Kirkbride
216. Going back a little earlier to the answer
you gave to Alan Keen, you said the Guaranteed Maximum Price of
the Bovis Multiplex stadium was £319 million. Can you tell
us what the new Guaranteed Maximum Price is of the MPX stadium?
(Mr Hudson) It is actually the Guaranteed Maximum
Price. No, we have not been party to the discussions since August
of last year.
217. So we cannot know what the new price is?
(Mr Hudson) No.
218. During the course of your evidence you
have made quite serious charges about the awarding of the contract.
Given that you think that there was preferment in the awarding
of the contract, can you elucidate as to why that might have been—what
your own opinion is on why that action was taken?
(Mr Hudson) I think that would be speculation. I do
not know why it would have been. All we can say is that it was
a very unusual way to proceed and in our professional opinion
it was not in the best interests of WNSL.
219. Then the issue remains as to whether or
not the banks would be forwarding the money to proceed on the
basis of the contract that there is. Is there anything you would
like to say about that and the viability of the project as you
see it in terms of the banks lending the money?
(Mr Hudson) We are not party to the viability and
have not been involved, so I cannot answer that.
Chairman
220. Gentlemen, I would like to thank you very
much indeed. Your evidence has been very valuable and, obviously,
will be taken into account when we compile our report. Thank you.
(Mr Hudson) Thank you very much for the opportunity
to talk to you
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