Examination of Witnesses (Question Numbers
60-79)
DR ROGER
DIGGLE, MR
ROBIN SOUTHWELL,
MR SHAHID
MALIK MP, SIR
KEN KNIGHT
AND MS
SHONA DUNN
8 FEBRUARY 2010
Q60 Mr Betts: There is not a single
fire engine out there linked up to it, is there, operating on
a day-to-day basis?
Mr Malik: There is not. The go
live dates are not until mid 2011.
Q61 Mr Betts: What was the initial
date when the project started?
Mr Malik: We signed our contracts
with EADS in March 2007. Since then I think the Committee will
be aware that there have been two delays. In November 2008, there
was a nine month delay and in July 2009 there was a ten month
delay that I myself announced.
Q62 Mr Betts: Is the 2011 date now
guaranteed?
Mr Malik: For any minister, after
two delays, to give a 100 per cent guarantee would be rather foolish.
We are confident based on all the information that we have that
mid-2011 still is the date.
Q63 Mr Betts: Are the contractors
absolutely confident it is going to be up, running and working
without any more hitches?
Mr Southwell: We are committed
to delivering in accordance with what the Minister has just mentioned.
There is no reason, sitting here, that we do not believe we will
meet that commitment.
Q64 John Cummings: Are you saying
there have been no commitments to that in the past?
Mr Southwell: No, I am not saying
that.
Q65 John Cummings: What are you saying?
Mr Southwell: I am saying, in
answer to the question, my response which is we are committed
to delivering in accordance with what the Minister has just said
is the schedule.
Q66 Mr Betts: What is the contractual
commitment, because I understand the current contract that you
have does not go beyond March 2010. Is that right?
Mr Southwell: No. Our contractual
commitment is as the Minister has just mentioned, to be delivered
in accordance with the schedule mid-2011.
Q67 Mr Betts: Is it actually set
down in a new contract that has been signed by both parties though?
Mr Malik: Let me just make the
situation very clear. We have a draft schedule which indicates
to us that mid-2011 is the date by which FiReControl will go live.
We are currently looking at that schedule. We are going to finalise
it very shortly. All the indications are that 2011 will be achieved
and there are some very considerable reasons for having confidence
in that because there have been some drastic changes within EADS
and some significant changes within the CLG and CLG's capacity
which give us much more confidence. I will probably allow Shona,
with your permission Dr Starkey, to respond to that but we have
had some significant changes with new project directors, new commercial
directors, new heads of communication etc. That gives us confidence
on the capacity side of the CLG. There have been significant changes
on the side of EADS, including a new chief executive for the project
in the UK which gives more confidence.
Q68 Chair: Were any of you in post
at the start of this debacle? No?
Mr Southwell: I probably was in
the job at the start of this project.
Andrew George: 2007?
Q69 Chair: No; 2004.
Mr Southwell: I was probably just
starting the job around then.
Q70 Mr Betts: Is there a contract
in place at present which states that this project will finish
by mid-2011?
Ms Dunn: There are a number of
documents that were signed by EADS and by ourselves either in
the run up to or just after the July 2009 rescheduling. There
is a heads of terms agreement setting out the revised expectations
and there are two contract change notes which set out a number
of additional milestones and revised expectations, both in terms
of what is to be delivered and how the relationship between the
two organisations will work. That has not been fully taken through
to detailed changes in the underpinning contract as yet and that
will happen once the ongoing process of reviewing the revised
draft schedule that EADS have provided to us is complete.
Mr Malik: In a nutshell, the answer
is no, but we have a draft schedule which we are looking at. It
indicates a mid-2011 date which is the time period that we have
already announced. We are confident that we are going to bottom
that out and come to a conclusion over the next few days and perhaps
weeks.
Q71 Mr Betts: Presumably officials
have been negotiating this. If it was July when this revised schedule
and other revised documents were put to you and discussions began
between the contractors and yourselves, why in February—I
make that seven months later—has no revised contract been
signed? That is an awfully long time. We are talking about two
years from July 2009 to mid-2011. More than a quarter of that
time has gone by and no contract has yet been signed. Is this
another example of the problems that have beset the contract from
the beginning at official level?
Ms Dunn: The negotiation that
led up to the July 2009 delay was set down in the heads of terms
agreement and subsequently in the two contract change notes. The
reason that has then not flowed through to the contract is because
of the uncertainty that started to build post the July announcement
around whether EADS wished to stick with their original, main
subcontractor or whether they wanted to shift their main subcontractor.
We are now looking at a draft, revised schedule which takes account
of the implications of the shift of main subcontractor. Once we
have completed that process with EADS, we will be able to flow
those expectations through to the contract. The decision was taken
there was no point in flowing them through to the contract until
that issue was resolved.
Q72 Sir Paul Beresford: Was there
a contract first with the original subcontractor and, if so, what
was the deadline on that?
Ms Dunn: There is a contract that
does exist. I would have to go back and check. I do not want to
give you an inaccurate answer on that.
Mr Malik: We can write to you
on that[2].
Q73 Mr Betts: If there is not a contract
then and EADS fail to hit this new target of mid-2011, are there
any penalties that they have to pay?
Mr Malik: One of the improvements
that we have made is on the commercial contracts side. We have
carrots and sticks built into that now in a way that patently
did not exist in the past. We have key milestones and many more
milestones that EADS have to meet. Payment is on the basis of
meeting milestones. Where key milestones are missed, there are
penalties by way of liquidated damages. We are in a very different
position than we were in a year or so ago or perhaps even less.
Q74 Mr Betts: If you have not signed
the contract, surely none of those penalty payments or rewards
is—?
Mr Malik: We have agreements.
Q75 Mr Betts: Are they legally binding
agreements that actually mean something if they fail to hit the
deadlines?
Mr Malik: That is my understanding.
I am trying to paint a picture where—
Q76 Mr Betts: What do EADS think
about this? Do they agree that they are going to face penalties
if they do not hit the targets?
Mr Southwell: If it helps, we
are very comfortable with the situation, notwithstanding what
you are hearing. We are comfortable because firstly we are in
the process of delivering against the schedule which the Minister
mentioned, notwithstanding that we are in the final stages of
securing the documentation. There is no delay and there is no
confusion on our side as we move forward to seek to secure that
delivery. The second thing we mentioned, as the Minister alluded
to, is we have offered and agreed to put in place a regime whereby
if we are delayed beyond that we will take a commercial hit to
ensure that everyone is aware that we are serious that this will
happen. In the context of where we are now, nothing that we are
talking about is delaying us getting on with the job. We will
deliver this. We are committed to delivering this by mid-2011
and we will subsequently be prepared to pay damages associated
with any further delay.
Q77 Chair: If EADS are so terribly
satisfied with this, where is the delay in signing the thing that
was first negotiated in July 2009? Is it with the department?
Mr Malik: No. This is obviously
quite a complex matter. Do you want me to deal with the schedule
issue or do you want me to just explain?
Q78 Chair: We need to know why, if
everybody agrees with it, it was not signed.
Ms Dunn: There are a number of
issues in relation to the shift to Intergraph. There are potential
implications for various aspects of the schedule. We are working
with EADS to really get into the nitty-gritty of what those implications
are, to understand where additional risks are arising and where
those risks are falling. We are working together with EADS to
get a lot of very detailed information. This is an incredibly
complex schedule and complex plan. There are over 200 individual
lines within this and within each of those there are many, many
more. We need to understand in great detail the exact implications
before we can advise the Minister on whether or not he should
sign off on that. To answer the point about the penalties and
liquidated damages though, the penalties and liquidated damages
in the original contract and the penalties and liquidated damages
that we have agreed as part of the change control notes are absolutely
still extant. They are legally binding and we can call upon them.
Q79 Mr Betts: Have there been any
penalties and liquidated damages so far on the original contract?
Ms Dunn: Both around the November
2008 and July 2009 rescheduling there have been negotiated agreements
with EADS.
2 Additional information provided in FIRE 26A Back
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