Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 200 - 220)



  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.


  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.


  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.


  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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