Memorandum submitted by Mr Ken Bates,
former Chairman and Mr Bob Stubbs, former Chief Executive, Wembley
National Stadium Limited
WEMBLEY NATIONAL STADIUM
I refer to your letters of 12 June addressed
to Bob Stubbs and myself respectively inviting us to submit a
memorandum to the Select Committee by the 14 June. We are grateful
for the opportunity but it is regrettable that only two days have
been allowed to provide a response from the shortness of the period
to compare a response and to save repetition this letter is submitted
as the consolidated response of myself and Bob Stubbs.
The National Stadium project commenced in earnest
in the spring of 1998 almost 12 months prior to the signing of
the Lottery Funding Agreement in March 1999. Sport England awarded
the England National Stadium Company a grant of approximately
£3 million to cover the professional fees and other costs
associated with the acquisition. It should also be understood
that up to March 1999 the English National Stadium Development
Company (ENSDC) acted independent of the FA. It was only in March
1999 that the ENSDC became a FA subsidiary and changed its name
to Wembley National Stadium Ltd (WNSL).
It was clear by the summer of 1998 that the
Lottery Grant of £120 million would be expended on the acquisition
of the stadium, circa £110 million including fees with the
balance being applied towards the initial design coststhis
effectively meant that all other costs, including the construction
contract would be funded through commercial loans and FA support.
The ratio between public and private funding was approximately
1:4 and is now 1:6. The result of this situation was quite clear
to all involved namely:
the project was a commercial project;
post the initial acquisition phase
it was WNSL/FA and only WNSL/FA who would benefit or suffer from
the decisions made by WNSL; and
the Lottery Funding Agreement would
be critical to setting the basis of the operations of WNSL.
The Lottery Funding Agreement was clear that
public sector procurement procedures were not required to be followed
and in relation to the construction procurement a competition
process should be undertaken. There was no mention of best practice.
Sport England were fully aware of the procurement process being
followed by WNSL and to our knowledge never raised any concerns.
It is therefore clear that Sport England viewed WNSL as acting
within the terms of the Lottery Funding Agreement. In fact at
the Select Committee meeting in March 2001 Sport England confirmed
that no breaches of the Lottery Funding Agreement had occurred
and I understand that this is still the position.
Tropus within their report have made a number
of allegations in relation to non compliance with the Lottery
Funding Agreement. It is clear that the Tropus position is not
consistent with the Sport England position.
It may at this point be as well to explain the
actual role of Tropus. At a very early point a decision was made
to provide a project management internally. This was achieved
through the recruitment of a Director and a Deputy Director of
Construction as permanent employees. To support these staff, staff
were seconded to WNSL from Tropus. The relationship with Tropus
was the supplier of temporary staff. Tropus were paid on an hourly
basis for supplying staff. Tropus had no professional responsibility
at all to WNSL, they were not providing professional advice merely
hired labour. At an early point Tropus did provide professional
advice in relation to construction procurement. This advice proved
to be so flawed that Sport England at one point indicated that
if WNSL continued to follow the advice provided by Tropus then
they would cease to make any further grant payments.
As this point is so fundamental to the Tropus
position I wish to reiterate the true position. Tropus were not
providing any professional advice, their staff were working at
a junior level and had limited knowledge of the affairs of WNSL.
They were in no position to be able to comment on many of the
points in their report.
The Tropus report completely ignores the fact
that WNSL had a full range of advisors who were engaged to provide
the advice on many of the matters to which Tropus refer. Their
advisors were appointed through a competitive process prior to
March 1999. In particular advice was taken on almost a continuous
basis from Franklin and Andrews, WNSL's cost consultant. Both
myself and Bob Stubbs were fully aware that WNSL had to comply
with the Terms of the Lottery Funding Agreement and achieve value
for money. It is interesting to note that on both it would appear
that objectives were achieved.
Franklin and Andrews agreed that the contract
sum was competitive and we understand that a subsequent independent
review undertaken by Cyril Sweet reached the same conclusion.
Tropus and David James have also referred to
potential conflicts of interests. These were identified at an
early point by Bob Stubbs who made sure that appropriate measures
were put in place to avoid any possible allegation. In my case
on at least two occasions I declared my previous relationships
with Bovis and Multiplex.
At the end of the day the relationship with
Bovis/Multiplex was terminated unilaterally by WNSL. If there
was favourable treatment given to Bovis/Multiplex Tropus need
to explain why the relationship was terminated unilaterally by
Once the relationship with Bovis/Multiplex was
terminated it was WNSL's intention to return to the market. At
that point Multiplex, acting on its own, approached WNSL and made
a provisional offer to agree the contract on the basis previously
rejected by Bovis/Multiplex. For a period of approximately three
weeks negotiations took place with Multiplex. Franklin and Andrews
were involved in the negotiations and prior to the heads of terms
being agreed in September 2000 Franklin and Andrews confirmed
that there would be no commercial advantage to be gained by WNSL
exposing the opportunity to the market.
It must be remembered that WNSL had previously
approached 12 major contractors and only Bovis/Multiplex were
willing to consider a guaranteed maximum price contract at the
value indicated by WNSL. The contracting market was well aware
of the problems experienced by Laings at Cardiff, a reported loss
of circa £50 million. There was little if any appetite in
the market for a construction contract on the terms set by WNSL.
* * *
Note: The Committee declined to publish
the remainder of this letter.
13 June 2002