Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by Sport England


  In light of press speculation in recent days concerning progress towards the development of the national stadium at Wembley, and the Culture, Media and Sport Committee's oral evidence sessions on Tuesday 21 May, Sport England has prepared this memorandum to assist the Committee in its deliberations. The memorandum addresses the following topics:

    —  Current Status of the Project.

    —  The Sport England Lottery Fund Grant.

    —  Sport England Project Monitoring.

    —  Athletics compatibility at Wembley.


  Since the publication of Patrick Carter's interim report, and the Secretary of State's statement to Parliament of 19 December 2001, there has been substantial progress towards the development of the English National Stadium at Wembley.

  Patrick Carter's report now provides the broad framework for the delivery of the project. Substantial progress has been made towards the achievement of the conditions laid down by the Secretary of State in respect of Government funding, and also in relation to the achievement of key milestone targets within the Lottery Funding Agreement. This includes:

    —  Design—there is an agreed and detailed stadium design. We commissioned sports architects Sport Concepts to review the project's design. Their review confirms that the stadium design complies with the technical brief established by the Lottery Funding Agreement.

    —  Athletics—an independent technical review, conducted by Citex, has concluded that the existing stadium design will have the capability to stage athletics, and that it complies with the IAAF requirements for a World Athletics Championship. The design approach demonstrates that the athletics deck solution is substantially cheaper and quicker to install than envisaged in 1999.

    —  Planning—the project has secured planning consent, and funding has been identified to ensure that the transport infrastructure is upgraded.

    —  Construction—a construction contract has been agreed, which provides for the transfer of cost and time risks to the contractor. A comprehensive technical review has been conducted for Sport England by cost consultants Citex and architects Sport Concepts. The review concludes that the contract is robust, with appropriate controls over quality, cost and programme. Together with the DCMS and the London Development Agency, we have made a series of recommendations related to these issues, which are now being taken forward with WNSL in preparation for financial close.

    —  Value for Money—an independent study by Cyril Sweett Ltd has concluded that the project represents value for money when compared to current market expectations and other benchmarked stadia around the world.

    —  Gateway Review—the Office of Government Commerce has concluded that the project is well resourced, well managed, and viable, and that it should proceed to contractual completion.

    —  Corporate Governance—a comprehensive review of corporate governance arrangements has been completed. There is an agreed framework in relation to the delivery of the project and the protection of the public interest. In addition, a new WNSL Board has been appointed with experience in construction, finance and marketing to lead the project as it enters the construction phase.

    —  Business Planning—a comprehensive business plan has been prepared and tested via a process of due diligence. The plan addresses the key issues identified by Patrick Carter (in his December 2001 interim report) as critical to the success of the project, and it provides a robust basis to secure financing for the project.

    —  Financing—an offer has been received, in principle, to finance the project. Funding for the project is identified, and the FA as project sponsor has approved the funding strategy and its commitments towards the project.

  This position has been reached by the forging of a strong partnership between the key stakeholders (the FA, Wembley National Stadium Limited, Sport England, Government and London Development Agency), with shared objectives, and clarity of roles and responsibilities in relation to project delivery, financing, accountability and monitoring.

  We firmly believe that the factors for success are in place. There is a need now for continued commitment to ensure that the key contracts are put in place over the coming weeks, as detailed plans and Heads of Terms are translated into long form legal agreements in the period up to contractual and financial completion. Sport England will continue to work positively with all stakeholders to secure a successful outcome, and to secure the ongoing protection of Lottery funds.


  In light of recent press speculation and deliberations of the CMS Committee, it is important to clarify the events that led to, and then followed, publication of the David James/BLP report:

    —  Tropus were employed by WNSL as project management contractors, from 1997 to 2001.

    —  In August 2001, Tropus alerted WNSL and the FA to a number of concerns regarding the management of the project prior to September 2000. As a result, Sir Rodney Walker (WNSL Chairman) commissioned Tropus to prepare a report for the WNSL board on these issues.

    —  The Tropus report was considered by the WNSL Board in September 2001. The Board considered that an independent investigation should be undertaken, and commissioned David James to investigate the issues raised by Tropus. He was supported by solicitors Berwin Leighton Paisner, and embarked on a thorough and detailed investigation over several months.

    —  The James/BLP report was presented to the WNSL Board in mid-December 2001. The report concluded:

      —  There was no evidence of impropriety by WNSL, or its employees in respect of the procurement process or other matters.

      —  The procurement of the main construction contract did not follow principles of best practice.

      —  The report recommended that an independent study be commissioned to ascertain whether the project represented value for money.

    —  The James/BLP reports were considered in detail by the Secretary of State, DCMS, Patrick Carter and Sport England prior to the decision to proceed with the project on 19 December 2001. In approving the proposal to proceed in accordance with Patrick Carter's report, the Secretary of State recommended that a number of conditions should be satisfied prior to a final commitment in respect of Government funding. These were:

      —  A value for money study must be commissioned to determine whether the contract price represented VFM when assessed against other stadia and current market expectations.

      —  All papers related to the project should be made available to the Comptroller and Auditor General at the National Audit Office.

      —  A review of the corporate governance arrangements related to the project must be carried out.

      —  Firm financing commitments should be secured.

  The Secretary of State announced on 7 May 2002 that there had been substantial progress towards meeting these "tests".

  We believe that the process of investigation, review and decision-making has been rigorous, with a clear understanding by all key stakeholders of the requirements for achieving a successful outcome, and establishing controls appropriate for a project in receipt of public funds.


  We summarise below the basis upon which the Lottery Grant was awarded, and the thorough, comprehensive steps taken by the Council to ensure that the grant was made in compliance with the relevant Acts of Parliament and Directions applicable to the distribution of Lottery funds, as issued by the Secretary of State.

  The Council of Sport England awarded a grant for the project on 2 November 1998. The terms and conditions applicable to the grant are set out in the Lottery Funding Agreement dated 12 January 1999. The Council awarded the grant following a year long bidding process reviewing 5 geographical locations in England and 35 sites in London. It did so on the following basis:

    —  The Statutory Framework—the framework for the award of the grant under the Lottery Funding Agreement was the financial directions issued by the Secretary of State on 11 November 1998. Detailed legal advice was received to ensure that the grant award and the Lottery Funding Agreement complied with the Directions. The DCMS was kept fully informed of, and supported, this process. In response to the Select Committee's most recent report on these issues (Unpicking the Lock, published on 13 November 2001), the DCMS confirmed its view that the grant had been awarded appropriately.

    —  Planning Status—an assessment of the planning issues involved was undertaken, concluding the prospect of securing planning consent. Three factors were particularly relevant:

      —  An existing 80,000-seat stadium was on site and in use.

      —  The local planning authority was supportive. As a key member of the Wembley bid consortium, it had stated that no onerous conditions were likely to be placed upon the project.

      —  The planning policy framework was supportive of the redevelopment of the site for stadium use.

    —  Stadium Business Valuation—WNSL were required to provide an independent, professional and detailed valuation of the site and the existing stadium business as part of the grant application. They commissioned a report from Coopers and Lybrand, which assessed the financial performance of the stadium business, and its future business plan. This confirmed that the price negotiated by WNSL for the stadium business was appropriate and within the range of values that should be expected. A key factor underpinning the financial viability of the stadium business was (and remains) the contracted commitment of the FA's events. It was therefore a requirement of Sport England that the FA enter into a 20 year agreement to stage its events at the stadium, which could not be changed without Sport England's consent. This agreement was completed and signed at the same time as the Lottery Funding Agreement—12 January 1999.

    —  Independent Assessment—the Council commissioned independent financial advice from financial advisors Grant Thornton, to review the application prior to the commitment of grant aid. This included a comprehensive review of the valuation report, and a review of project viability based upon the business plan and funding strategy submitted with the application.

    —  Protection of the grant—the project has now secured planning consent, initially on 1 June 2000, with a further consent on 20 March 2002, reflecting design changes agreed during the Carter review process. However, should it have failed to do so, then the Lottery Funding Agreement is clear—the grant would have to be repaid. In order to provide a mechanism to enforce repayment of grant, Sport England secured a first charge over the stadium site and the stadium business. This security remains in force, and will not be relinquished until financing has been secured—ie the point at which a committed project has been achieved.

  Sport England's Council conducted a thorough appraisal of the project prior to the award of grant, in full consultation with government. It received expert advice in respect of legal issues, planning, viability, and the valuation of the site, and it secured a commitment in relation to grant repayment, backed up by first ranking security. We believe this demonstrates a thorough, responsible approach to ensure the protection of public funds, and to provide a robust framework for the development of the project.


The Monitoring Process

  We established and have maintained a monitoring regime to review progress against the requirements of the Lottery Funding Agreement, consistent with the financial directions applicable to the project. This includes:

    —  The establishment of a dedicated multi-disciplinary team to oversee the Council's funding programmes for major capital projects.

    —  The retention of expert advisors in respect of legal and contractual issues, cost and procurement, design development, internal audit, and finance.

    —  Regular reporting to the Council's Audit Committee, the Sport England Lottery Panel and the Council.

    —  Regular meetings with the DCMS.

  We are now close to securing a significant step forward, with the commitment of the project in accordance with our original objective of developing a three sport national stadium in accordance with the brief established within the Lottery Funding Agreement. We are satisfied that our monitoring process has played a significant role in helping us to achieve this objective.


  Our monitoring process has included the following steps:

    —  We conducted a thorough review of the project prior to the award of grant by the Council.

    —  We were closely involved in the development of the brief, and played a key role in the process to select the design team for the project. Our recent review confirms that the design complies with the brief established by the Council within the Lottery Funding Agreement.

    —  We reviewed the development of the planning proposals, and have been a member of the Wembley Task Force in its consideration of the wider regeneration and infrastructure issues. Planning consent has been secured and funding for infrastructure improvements has been identified.

    —  We have recently reviewed the design in respect of compliance with IAAF requirements for athletics and the cost/benefit issues as compared with earlier proposals. The design complies with athletics requirements.

    —  We have completed, in consultation with DCMS, and with advice from the National Audit Office in respect of methodology, a review of corporate governance procedures. Appropriate governance arrangements are in place, agreed by all stakeholders. This includes a comprehensive procurement manual, the establishment of key board committees to co-ordinate risk management, oversee the construction process, and monitor governance arrangements, and a requirement to report to stakeholders regularly on public interest issues.

    —  The Lottery Funding Agreement includes a series of milestone targets to be achieved by WNSL. This has enabled the Council to monitor progress against the plan and to consider appropriate action when milestones have not been met. There has been a significant delay, and the Council has considered carefully requests for extension of time. The Council has taken into account on each occasion the status of proposals for the development of the project, and the need to ensure that the grant remains protected. We believe that the progress made to establish the framework for success through the review process justifies the Council's decisions to extend the milestones on each occasion.

Construction Procurement

    —  In the light of the James/BLP report, there has been a particular focus on the procurement of the main construction contract.

  We appointed cost consultants Citex as project monitors of the procurement process. Citex reviewed progress on a regular basis, including meetings with WNSL, and access to papers and reports related to the procurement process. We also attended the board meetings of WNSL as observers.

  The following points summarise the monitoring process:

    —  We received WNSL's procurement strategy in May 1999. This did not meet our requirements—we were not convinced that the procurement route proposed was appropriate for the project and that multi-package would be acceptable to commercial lenders. Consequently, the 15 June 1999 milestone was not met to our satisfaction, and we informed WNSL that we would be withholding grant payments.

    —  We continued to monitor developments throughout 1999 in relation to the procurement strategy and the tendering process. Grant payments re-commenced in January 2000, following consideration of two factors.

    —  WNSL were in process of finalising the appointment of a bank to raise finance for the project, which would, in our view, provide a key input into monitoring of the procurement process to ensure its bankability.

    —  We were aware that WNSL had re-tendered the project on a single package basis.

    —  We continued to monitor developments throughout 2000, up to the point where the Chase Manhattan syndication process failed in December 2000. It is worth considering the state of the project at that time. The project was surrounded by controversy and poor publicity following the decision by the Secretary of State to withdraw athletics from the project in December 1999. Relationships between the key stakeholders in the project deteriorated. Roles and responsibilities had become confused, and it was unclear on what basis the project would proceed in relation to a proposed repayment of £20 million of the Lottery grant. Patrick Carter's report refers to the government's role at this stage as being ambiguous.

    —  The process related to this issue dragged on through the summer of 2000 with considerable confusion as to what had been agreed between the Government and the FA in the relation to a repayment of grant. Agreement was eventually reached in September 2000. The committee has reviewed these issues on a number of occasions. This made the ongoing process of monitoring extraordinarily difficult. It was against this background of confusion, and lack of clarity that the events reported in the James/BLP report prior to September 2000 were played out.

    —  The Chase syndication failed in December 2000, at which point the project entered a series of further reviews, first by the FA, and then subsequently from June 2001 by Patrick Carter.

The Carter Review

  Alongside the Carter review, we requested project monitors Citex to review the process to date, and along with architects Sport Concepts, to consider options for the project. We were keen to make a positive contribution to the Carter Review, to provide the basis for a viable project, and to ensure that the Lottery grant remained protected.

  We discussed the options at length with the Carter review team and with WNSL, in order to determine the best way forward. A number of conclusions were reached:

    —  Changes to the stadium design would need to be considered against the impact on the business plan. The stadium needed the capacity to generate sufficient revenues to support debt to finance it.

    —  A number of design changes were made consistent with the business plan. Re-design from first principles did not achieve a more viable project.

    —  The option of re-tendering was not proven as a means of achieving additional savings.

    —  The Patrick Carter review team evaluated all options and the outcome of this work is reflected in Patrick Carter's report of December 2001. We fully support his conclusions and recommendations, and the decision to proceed with the project at Wembley, based upon the existing design approach.

    —  We support the James BLP report recommendations. The value for money study represented a robust, objective method of assessing whether value for money had been achieved. It has demonstrated that the project is value for money.

Current Position

  We are satisfied that the project should proceed given:

    —  Value for money has been independently established by Cyril Sweett Ltd.

    —  The BLP report concludes that there is no evidence of impropriety.

    —  Appropriate corporate governance changes have now been put in place at WNSL.

    —  Stakeholders share a common objective to develop the project, with clarity of roles and responsibilities, and a strong partnership approach. This contrasts strongly with the 1999-2000 period.

Future Monitoring Arrangements

  The first task is to ensure that the project is assessed against the milestone targets set out in the Lottery Funding Agreement prior to financial close. This work is approaching completion. Our Council and Audit Committee are reviewing progress on a regular basis, and we are co-ordinating our work with other stakeholders.

  We have reviewed our monitoring requirements for the project for the next phase. We are working with the London Development Agency and DCMS as additional public sector funders, to ensure appropriate co-ordination between us. We have jointly asked the Office of Government Commerce to advise on accountability and monitoring issues.


  At the request of the Secretary of State, we commissioned a detailed technical analysis of the stadium design to determine its suitability for athletics. Independent cost consultants Citex and architects Sport Concepts conducted this review. We published their study report on 8 May.

  The conclusions of the report are summarised below:

    —  The design complies with the technical requirements described in the Lottery Funding Agreement and the IAAF requirements for the World Athletics Championships. The stadium is therefore capable of hosting major athletics events.

    —  The deck solution, based upon a modular steel as opposed to concrete structure, is substantially cheaper to construct—from £18 million in 1999 to £12 million in 2002

    —  The installation time has been significantly reduced—from 26 weeks to 11 weeks.

    —  The report confirms that the sightlines, and viewing distances, are excellent for athletics as well as football and rugby league.

    —  There are suitable sites for the development of warm up facilities. The London Borough of Brent has set out the basis upon which sites will be made available in the event of a successful bid for an athletics event.

  In addition, the Lottery Funding Agreement secures the use of the stadium for athletics on a cost only basis.

  We are pleased with the positive outcome to the athletics study. It confirms that the original purpose for which the grant was awarded—a national stadium for three sports—has been achieved.

  It also allows the project to proceed as the Committee recommended in its report "Unpicking the Lock" of 13 November 2001 "the Government should consider seriously whether there is a last opportunity to return to the original strategy of a national stadium at Wembley for football, rugby and major athletics events. Without this it seems clear that there will be no venue for athletics in London capable of staging the World Championships, or the Olympics, and therefore little prospect of attracting these events to the capital for the foreseeable future. We recognise that this would be a bold and controversial step involving significant consultation and negotiation with all relevant bodies".


  Sport England has welcomed this Committee's consistent support and endorsement for the development a national stadium for football, athletics and rugby at Wembley incorporating the platform design.

  The critical factors for the success of the project are in place and the objective of developing a three-sport stadium at Wembley remains on track. WNSL are on the verge of developing a world-class stadium compliant with the Lottery Funding Agreement in all material respects—that will deliver substantial benefits for sport, and have a significant positive impact on regeneration.

  It is essential that the key stakeholders continue to drive forward the project to secure financial and contractual closure over the coming weeks. We urge the Committee to recognise these efforts and give wholehearted backing to the project at this critical stage.

  We will be happy to answer further questions in person during our evidence session.

20 May 2002

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