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Select Committee on Culture, Media and Sport Minutes of Evidence


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



 
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