Memorandum submitted by the Football Association
INTRODUCTION
In December 2000 the syndication of the Wembley
project to the banks failed.
From December 2000 to April 2001 the WNSL board
and The FA reviewed the project to ascertain whether the FA could
take on the role of lead sponsor without any support.
In April 2001 it was decided by the FA board
that it could not take on the project entirely on its own and
that it would require other stakeholders to become involved. This
was due to the finances required, the relatively small size of
the "not for profit" FA and the risks involved given
our wider remit in supporting grass roots football.
In April 2001 the FA wrote to the then Secretary
of State Chris Smith requesting a "partnership" with
Government involving financial assistance.
In June 2001 Patrick Carter was appointed by
Government to conduct an independent review.
In December 2001 Patrick Carter published his
interim review which raised five key issues for operational credibility
going forward:
— That the project needed a strong,
credible sponsor and that this could only be the FA.
— That the Government's position on
the project had been seen to be interfering and ambiguous.
— There were concerns with regards
to the design and construction risk still in the project.
— That the project needed a strong
and credible board; and
— Any solution required strong, unified
and enduring commitment from the FA, Sport England and Government,
without the certainty of this the project would fail.
The FA would concur with Patrick Carter's view
of the key issues leading up to the failure of syndication in
December 2000.
WHAT HAS
CHANGED SINCE
SYNDICATION FAILED
IN DECEMBER
2000?
A clear business plan, supported by in-depth
market research, has been undertaken by WNSL and approved and
has been successfully through the banking due diligence programme.
Twenty/thirty-year agreements are now in place
from all the key event owners, which provides the ongoing content
to support the business plan.
There is now clearly defined support from the
FA and the other major stakeholders with clear commitments.
The project cost has been subject to rigorous
value engineering to ensure it supports the business plan at minimum
cost.
Terms have been agreed by WNSL for a fixed price
construction contract where any risk of cost or time over-run
is borne by the contractor. This includes the additional costs
associated with financing.
The construction contract has been subject to
a review by independent construction cost consultants which unequivocally
states that it provides value for money in itself and versus other
similar projects around the world.
A new board has been put in place composed of
individuals with the relevant experience to deliver the project
and the business plan.
The project has been subject to gateway review
by the Office of Government and Commerce which concluded that
it was well resourced, managed, viable and should proceed to contractual
completion.
There has been an independent review of the
proposed new athletics platform provision which is supported by
the IAAF and UK Athletics and is quicker, cheaper and technically
better than previous proposals.
The FA is committed to the concept of a National
Stadium, including Athletics. The concept is similar to that which
New York is proposing in its bid for 2012 Olympics and we look
forward to hosting Athletics events in the future.
In terms of financing WNSL have been working
with many firms within the banking community which ultimately
led to the selection of a preferred partner.
WNSL's preferred partner is WestLB and it has
a written offer of finance approved by the WestLB board, the outline
terms of which have been agreed in principle by the FA board who
are providing finance for the project.
WNSL's legal advisors, Allen & Overy, are
clearly advising them that in order to protect the project, and
all the private and public funding involved, they must embark
on their own robust process of due diligence on the detail of
this offer to provide best value to all parties prior to financial
close.
The FA board, separately advised, has also agreed
the financial assistance required for all other components of
the financing programme outside of the WestLB contract.
The Committee will understand that this project
is enormously difficult and complicated. The FA is committed to
doing all it reasonably can to enable WNSL to take contracts through
to long form legal agreements. This needs to be done within a
timescale that does not prejudice the validity of the terms of
the construction agreement.
TROPUS/DAVID
JAMES REPORTS
In August 2001 a company called Tropus (who
provided management resources on construction and development
for WNSL on the Wembley project) approached the FA with regards
to some concerns they had over the way the Wembley project had
been run in the period leading up to September 2000. The FA directed
them to the Chairman of WNSL.
The FA is aware that Tropus were requested by
WNSL to compile a report of all the issues they perceived which
should then be presented to the WNSL board, as the project was
their responsibility.
The document was given to Sir Rodney Walker
in August 2001.
The WNSL board acted swiftly and responsibly
to appoint David James and the lawyers, Berwin Leighton Paisner
to investigate.
The FA board has been informed that David James
did find that there were deficiencies in some areas, notably the
procurement of the construction contract, but very clearly identified
that there was no evidence of illegality or impropriety. He made
several recommendations to change procedures and corporate governance,
which have quickly been adopted by WNSL.
The FA understand that Mr James very carefully
considered the desirability of re-tendering the construction contract.
After due consideration, he concluded that, as there was no impropriety,
the main issue here was to achieve best value for money. He accepted
WNSL's assertion that the Multiplex contract represented the best
value for money that was achievable in the market and that there
was a severe risk to the project from lengthening the timetable
to allow for a re-tendering to occur. Most specifically, it would
not be possible to re-tender the construction contract and achieve
a start on site by the deadline of 31 December 2002. After this
date WNSL would lose access to key tracts of land necessary to
allow the contractors to build the stadium.
In December 2001, the Secretary of State received
a recommendation from Patrick Carter that the best option was
to continue with the scaled down Wembley and, after consulting
the National Audit office over the findings of David James, agreed
that the Wembley project should proceed subject to successfully
meeting the following tests:
(i) An independent value-for-money assessment
of the proposed contracts with Multiplex must be commissioned,
and conducted by an appropriate company with no previous or likely
future involvement in the project.
(ii) The relevant papers must be made available
to the Comptroller and Auditor General so that he can decide whether
to look further into the issues within WNSL.
(iii) Confirmation that corporate governance
changes will be made to achieve a management structure capable
of delivering a complex project within procedures acceptable to
the public sector.
(iv) Confirmation that financial support
is adequate and fully committed, after all relevant factors have
been taken into account in a process of due diligence.
(v) A detailed technical evaluation of the
proposals to host athletics must be commissioned by Sport England
to make certain that they fully meet the technical criteria of
the athletics governing body. Sport England will also prepare
a proper cost-benefit analysis comparing the new proposals with
those of 1999.
All of these tests have been substantially met.
In addition the Office of Government Commerce has performed a
"Gateway 3" review and declared that the project is
well managed, viable and ready to proceed to the contract stage.
CHANGES IN
LEADERSHIP AND
CORPORATE GOVERNANCE
Since December 2000, all of the recommendations
relating to corporate governance from Sport England's advisors
(PWC) and the Office of Government Commerce, as well as the guidance
from the National Audit office, have been put into place.
As a result of this work a new board has been
put in place by the FA and Sport England composed of individuals
with the relevant experience to deliver the project and the business
plan. Consequently Sir Rodney himself has stood down in order
that Michael Jeffries of WS Atkins plc can take over the Chairmanship
and bring to the project, the valuable benefit of his long experience
in the construction industry.
It should be noted that the Office of Government
Commerce gateway review concluded the project was now well resourced,
managed, viable and should proceed to contractual completion.
The FA is reassured by the involvement of the
Office of Government Commerce and is happy for WNSL to continue
to involve the OGC in the project on an ongoing basis in order
to continually review performance.
WNSL are also implementing the recommendations
of the Cyril Sweett report.
ALTERNATIVES TO
WEMBLEY
Through the detailed review of the project that
was carried out in partnership with the Government- nominated
Patrick Carter and his team, the FA did get the opportunity to
review all of the options appropriate to the building of new National
Stadium. The Birmingham bid team did an excellent job in pulling
together their proposition, so much so that it may be possible
that there exists a feeling that there is an "off the shelf"
solution ready to go at Birmingham. The FA concluded that this
is far from the case, and therefore WNSL have continued to progress
the current Wembley option as this appears to have the best chance
of providing best value to all stakeholders.
The position at Birmingham is as follows:
— The design is at an early outline
stage and there is no contractor in place.
— No final costings have been done,
nor can they be, until detailed drawings are prepared.
— There is no planning permission and
no certainty of planning permission on what is green belt land.
— No robust market research has been
done to support the business plan.
— The business plan has not been through
due diligence and, as the Carter review assessed, there is currently
a funding gap of between £43 million to £163 million
to be addressed.
— The return on investment is considered
to be half of that achievable at Wembley, as detailed in the Carter
report; and
— No financial institutions have been
approached to support the project, therefore there is no certainty
of success.
Given the current position on Wembley, the FA
believe that it would make no commercial sense to switch our attentions
to an alternative venue at this time. The substantive majority
of the finance necessary to construct the project is being raised
by WNSL in the private sector and requires a sound business plan
to support it.
The FA therefore conclude by agreeing with David
James' assertion that the best way to achieve value for the money
invested in the project, is to allow the project to be completed.
The FA has been satisfied that WNSL has acted responsibly at all
times since the allegations were made known to them. The remedial
action which has been undertaken now gives us a company which
is capable and ready to take this important project further. We,
at the FA, along with the other stakeholders will be providing
to WNSL, as much support as is possible, to make this happen.
CONCLUSION
The FA would like to thank all of the stakeholders
who have supported us over the last few months and contributed
to the progress and the position it is in today.
A huge amount of progress has been made, particularly
in the last few months, and all agree that we are now in the final
phase and have a real chance of success.
The FA would like to make it clear, that at
all times the Secretary of State and her team have challenged
all involved to improve and to deliver. Whilst they have been
supportive they have at all times provided an extremely robust
and independent point of view. They clearly want the project to
be a success but have constantly stressed the need to protect
the public funds involved.
The FA is grateful for the support of the Secretary
of State and her team and we are committed to successfully completing
the project.
Finally, it is worth revisiting the five key
operational issues, raised by Patrick Carter in December 2001,
which needed to be addressed in order for the project to succeed:
That the project needed a strong, credible sponsor
and that this could only be the FA.
The FA is clearly now the lead sponsor working
with our partners Sport England and Government to help WNSL deliver.
That the Government's position on the project
had been seen to be interfering and ambiguous.
The Government's and LDA's commitment is clear
and they have provided real support since the Carter review.
There were concerns with regards to the design
and construction risk still in the project.
Terms have been agreed for a fixed price construction
contract where any risk of cost or time over-run is borne by the
contractor.
That the project needed a strong and credible
board.
A new board has been put in place composed of
individuals with the relevant experience to deliver the project
and the business plan.
Any solution required strong, unified and enduring
commitment from the FA, Sport England and Government, without
the certainty of this the project would fail.
There is now clearly defined support from all
the major stakeholders with clear commitments.
16 May 2002
| 
