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Chapter 7: Design Following Novation and Contract Close

Design Following Novation and Contract Close

7.1 At the time of contract close in May 2008, the programme for design was such that the final design package would be submitted within seven months by January 2009 (the “amended design date”) [letter dated 6 May 2009 from Mr Reynolds of Parsons Brinckerhoff (“PB”) to Bilfinger Berger, Siemens and CAF (“BSC”), PBH00003626]. The anticipated date for the completion of the design package was in stark contrast to the original plan that, prior to the award of the infrastructure contract (“Infraco contract”), design would be complete to the extent of securing all prior consents and approvals, leaving Infraco to finalise the design by incorporating into it the details of the equipment, components and services required for the Edinburgh Tram Network. As matters developed, even the amended design date was not met and it took much longer to complete the design. This can be seen from the terms of the letter mentioned above and from consideration of the following sample of minutes of meetings and progress reports.

  • Bilfinger Berger’s (“BB’s”) internal project report for November 2008 noted that progress in finalising approvals and consents for track and highway drawings by PB had been poor and was threatening to delay the commencement of works in Princes Street in January 2009 [BFB00112174, page 0005, paragraph 1.3.1].
  • BB’s internal monthly report for August 2009 noted that production of civil and buildings drawings in accordance with the original design was 86 per cent complete [BFB00112250, page 0005, paragraph 1.3.1].
  • By December 2009, BB’s internal monthly report noted that PB was seeking to achieve completion of the design in spring 2010 [BFB00112194, page 0005, paragraph 1.3.1].
  • The progress report by PB dated 15 January 2010 noted that from a total of 114 Issued for Construction (“IFC”) design packages, 102 (90 per cent) had been delivered [BFB00004338, page 0028, paragraph 4]. Four months later, the position had barely advanced. BB’s internal monthly report for May 2010 noted that the design programme was 91 per cent complete and that it was aimed to be complete in June/July 2010 [BFB00112199, page 0005, paragraph 1.3.1].
  • BB’s internal monthly report for October 2010 noted that design was 98.2 per cent complete and that the completion of design was delayed due to “informatives” not being closed out and “the constant unwillingness by the authorities (tie, CEC, BAA [the British Airports Authority] etc) to approve the submitted design” [BFB00112204, page 0005, paragraph 1.3.1]. The process referred to as “informatives” and the difficulty in getting approvals are considered in paragraphs 7.9 and 7.10 below.

7.2 The position outlined in the October 2010 report remained until the mediation at Mar Hall in 2011.

7.3 As with the position prior to contract close, it was not a single factor that caused the delay. The principal ones that emerged in the evidence were as follows.

Piecemeal design and consents/approvals

7.4 Except to the extent that they were modified by the Novation Agreement, the terms of the existing System Design Services contract (“SDS contract”) continued to apply between PB and BSC post-novation. One important modification was made to the requirement to obtain consents for the works as designed. As was noted in paragraph 6.8 of Chapter 6 (Design (to May 2008)), the SDS contract imposed an obligation on PB to obtain at its own expense whatever consents were required to carry out the works [CEC00839054, page 0029, clause 5.1]. “Consents” is defined in the SDS contract as follows:

“without limitation all permissions, consents, approvals, non-objections, certificates, permits, licences, agreements, statutory agreements and authorisations, Planning Permissions, traffic regulation orders, building fixing agreements, building control approvals, building warrants, and all other necessary consents and agreements from the Approval Bodies, or any Relevant Authority, any other relevant third parties whether required by Law or the Tram Legislation or under contract” [ibid, page 0008].

7.5 As was explained in paragraph 6.8 of Chapter 6 (Design (to May 2008)), the effect of clause 4.8 of the SDS contract was that whenever any Approval Body withheld its consent to the design, PB, at its own expense, had to amend the design even where the Approval Body had changed its requirements after the design had been prepared on the basis of its earlier requirements. The Novation Agreement amended this absolute obligation imposed upon PB such that PB was not liable for the cost of amendments required by any Approval Body where the requirements were:

  • inconsistent with or in addition to the Infraco Proposals or the Employer’s Requirements;
  • not reasonable given the nature of the Approval Body; or
  • not reasonably foreseeable within the context of the lnfraco Proposals or the Employer’s Requirements.

7.6 If any of the above exceptions applied, the amendment would be deemed to be a Client Change, resulting in the expense associated with it being the liability of Transport Initiatives Edinburgh Limited (“tie”) [CEC01370880, Part 1, page 0020, Schedule of Amendments to the SDS Agreement clause 4.8]. Moreover, the Novation Agreement noted that any changes to design required as a result of the development workshops to be undertaken to determine the development of the Infraco civils proposals and any consequential amendment to the design were to be treated as a tie Change Order for which PB was entitled to be paid [ibid, Part 1, pages 0007–0008, clauses 4.7–4.8].

7.7 Despite the modification of PB’s absolute liability to incur the cost of any amendments to the design to secure the necessary consents, the obligation to carry out the work required to obtain any necessary consents continued to fall on PB. The evidence was that, throughout the period after contract award, there was a substantial backlog in the process of getting these approvals.

  • A progress report by PB dated 8 May 2009 noted that, out of a total of 220 planning and technical approvals, 187 had been approved (85 per cent), with 92 per cent of planning approvals granted and 79 per cent of technical approvals granted. It was noted that:

“The remaining outstanding approvals are either to be approved immanently [sic], or have been subject to re-prioritisation and long-standing changes, which has caused the original dates to slide significantly.” [BFB00004354, page 0005, paragraph 3.1.]

In terms of delivery of the designs, from a total of 115 IFC design packages, 100 (87 per cent) had been delivered [ibid, pages 0004–0005 and 0021, paragraph 4].

  • By September 2009, out of a total of 231 planning and technical approvals sought, 202 had been approved (88 per cent), with 92 per cent of planning approvals granted and 84 per cent of technical approvals granted. From a total of 114 IFC design packages, 101 (89 per cent) had been delivered. Again, it was noted that the remaining outstanding packages were being finalised, that they had been subject to changes and/or delays due to resolution of changes and that several IFC drawings already submitted would require to be updated in line with the emerging changes. It was noted also that there were conflicts between the utilities IFC design and the approved infrastructure design [BFB00004358, pages 0005–0006 and 0022, paragraph 4].
  • The progress report by PB dated 15 January 2010 disclosed that there had been barely any change; out of a total of 229 planning and technical approvals, 204 had been approved (89 per cent), with 93 per cent of planning approvals and 85 per cent of technical approvals having been granted [BFB00004338, page 0006, paragraph 3.1].
  • What progress appeared to have been made was undermined by the progress report by PB for June 2010. It disclosed a position that had worsened. It said that out of a total of 259 planning and technical approvals sought by then, only 203 (fewer than in the previous report) had been approved, with 87 per cent of planning approvals granted and 72 per cent of technical approvals granted. The number of IFC packages delivered had risen by seven from the figure in September 2009 to 108 [BFB00004342, pages 0005–0006, paragraph 3.1 and 0031, paragraph 4].

7.8 Although it is correct to note that by the dates of the above reports very much the majority of approvals had been given, this must be seen against the background that the original intent was that the design was to be completed – and therefore the approvals given – by the time of contract award.

7.9 When it was decided to dispense with the review by Technical Support Services of the designs provided by PB, it was the intention that PB would submit design in fully complete and self-assured packages (with design interdependencies already checked). These were referred to as Design Assurance Statement Packages. However, in each package of design there were always one or more outstanding items. These outstanding items were referred to as “informatives”. A Project Assurance Review for City of Edinburgh Council (“CEC”) prepared by Mr Poulton in July 2010 described what was done as follows.

“Where there was missing information, or individual issues which could not be resolved, approval was granted on the understanding that the missing information would need to be submitted, and approved, prior to commencement of construction. This outstanding information was designated ‘Informative’, in line with the Planning process, and this action was taken to allow the rest of the package to proceed to the next review stage, i.e. the Informative process only came into existence because the designs and design submissions were incomplete or in some instances inadequate.” [CEC02086414, page 0020.]

7.10 These outstanding items meant that design was produced and submitted in a “piecemeal” fashion and that meant that tie and CEC were not able to review and approve design in the most efficient and timely manner [for the frustration to which that gave rise, see the emails by Mr Glazebrook dated 30 April and 28 May 2009: TIE00037854; TIE00502629].

Changes

7.11 In addition to, but connected with, the requirement to get approvals and consents before design was finalised, it was necessary to address the various changes that were required both as part of that process and otherwise. A progress report by BSC (which reports were sent to tie) for the period to 13 September 2008 noted that:

“BSC is continuing to inform tie of the delays or potential delays regarding prior and technical approvals due to numerous design changes from CEC during the consultation stage.

“It is of great concern that after the extended period of informal consultation new comments are received at this stage which will, in many cases impact on the IFC dates and will require change instructions to be issued for the design to be amended. The informal consultation process, intended to avoid this problem, can not be considered successful.” [CEC01154352, Part 1, page 0015, paragraph 4.2.1.2.]

7.12 In relation to technical approvals for roads, the report noted that the number of comments received from CEC was a “real problem”, and it gave an example of more than 1,200 comments (running to 70 pages) having been received in relation to sub-sections 1C1 and 1C3 [ibid]. Similar concerns were expressed in the BSC progress report for the period to 8 November 2008 [CEC01169379, Part 1, page 0010, paragraph 4.1.1.2], and in a claims document by PB’s sub-contractor, Halcrow, in November 2009. Mr Chandler explained that PB had chosen Halcrow as its main sub-contractor because it had a strong local presence in Edinburgh and their approvals and consents team were very familiar with the requirements of CEC [PHT00000020, page 10]. In its claims document Halcrow stated that CEC had made thousands of comments on roads design submissions, which was far beyond what Halcrow could have anticipated given its experience in other projects, and that

“[e]ach close-out letter from CEC is accompanied by further schedules of comments including new comments not previously raised at the technical approval stage” [BFB00095827, page 0011 (see also page 0004)].

7.13 Addressing the comments would lead to changes which would in turn require updates to the planning approvals [progress report by PB dated 8 May 2009, BFB00004354, page 0006]. This is turn would require amendment to and approval of IFC drawings where these had been prepared on the basis of earlier approvals.

7.14 CEC was not the only party generating changes, however. A report to CEC’s Internal Planning Group on 27 July 2009 included a table in which it was noted that tie
had admitted that between 40 per cent and 80 per cent of changes and delay were down to it [CEC00688908, page 0005]. Mr David Anderson was asked about this entry by the Inquiry in his written evidence, and he replied:

“There was criticism about the responses given by tie to information requested by Council Officers and about tie not having been open enough on their responsibility for delays and changes to design.” [TRI00000108_C, page 0066, paragraph 77.]

7.15 An idea of the scope of the changes to the design and the problems that resulted from this is apparent from the following.

  • A progress report by PB dated 8 May 2009 noted that 182 design changes had been identified, with £1.5 million worth of change instruction having been issued to PB. Approximately £1.7 million worth of changes had yet to be instructed. [BFB00004354, page 0004, paragraph 2.1.2.].
  • A letter from Mr Reynolds of PB to BSC, dated 6 May 2009, referred to in paragraph 7.1 above [PBH00003626], claimed that the scope of work that PB was being required to perform under the SDS contract was significantly different from that envisaged at novation as a result of changes that were still being made. He said that, as a result, it was not possible to define the end of Phase III – the completion of the design deliverables under the original SDS contract.
  • A progress report by PB dated 29 September 2009 noted that 215 design changes had been identified, with £2.4 million worth of change instruction having been issued to PB. It was, again, noted that various changes being instructed as part of the approvals process would also require updates to several IFC drawings that had already been submitted for approval. [BFB00004358, pages 0004–0006 and 0022, paragraph 4.]
  • The progress report by PB for June 2010 noted that 263 design changes had been identified, with £3.1 million worth of change instruction having been issued to PB. It noted that the outstanding IFC packages had been subject to change and/or delays to resolve comments and that several IFC drawings already submitted would require to be updated to accommodate emerging changes [BFB00004342, pages 0005 and 0031, paragraph 4]. This was a feature of the iterative approach taken to design preparation.

Siemens design

7.16 Although prior to novation, as between tie and BSC, the responsibility for design lay with tie, that responsibility concerned only the civil engineering and construction works necessary to construct the track. It was always intended that after contract close the designs for the overhead line equipment (“OLE”) and track systems would be carried out by the contractor within Infraco having the expertise in this regard, namely Siemens plc (“Siemens”). The initial design for track and roads had been carried out before contract close, but after that date Siemens had to prepare its design of OLE and track systems. The ongoing critical delay to Siemens’ progress of design was due to lack of access, arising from ongoing MUDFA delays. However, in the preparation of the designs for OLE and track systems, it became necessary in parts to revise the designs already completed to accommodate Siemens’ proposals. In the view taken by BSC of where the responsibilities lay, such revision required agreement by tie of any cost implications. Obviously, this could not take place until Siemens produced its design. This complex structure was made worse because Siemens was late in producing its designs that would require tie’s agreement of any cost implications. The monthly project reports from BB in the latter part of 2008 noted that BB and Siemens were mobilising additional design resources in an attempt to recover the delay [BFB00112170, page 0005, paragraph 1.3.1]. This was also apparent in Mr Reynolds’ email dated 30 October 2008, which noted, among several issues, the absence of Siemens’ design for trackform and OLE and the low volume of activity on BSC design development. The latter concern was exacerbated because the lack of activity by BSC included instances of designs that had previously been granted approval conditional upon design completion by BSC. Once the designs had been developed by BSC they also required to go through the approval process [CEC01149381].

7.17 The problems continued into 2009. BB’s internal monthly report for January 2009 noted that some progress in finalising approvals and consents for track and highway drawings had been achieved by the design of civil works enhancements to suit Siemens’ proposals (notably for a ground improvement layer under the track), but that duct and OLE foundation designs had been delayed by Siemens’
late design finalisation and protracted negotiations with tie over payment for the design work. It noted that additional resources were in place to address the significant design interface workload required [BFB00112178, page 0005, paragraph 1.3.1]. In February 2009, it was noted that the work was in progress [BFB00112183, page 0005, paragraph 1.3.1] and in March they were close to finalisation [BFB00112188, page 0005, paragraph 1.3.1]. BB’s internal monthly report for May 2009 noted that civil drawings, revised to incorporate Siemens’ design were further delayed by poor performance by PB and the late provision of information by Siemens. The fact that these criticisms appeared in the contemporaneous internal reports of Siemens’ consortium partner was significant. Although the Inquiry only recovered these reports at a late stage following court proceedings they were made available to all core participants, including Siemens. Siemens made no request to lead evidence in rebuttal of the contents of these reports that commented adversely on delays by Siemens in producing designs.

Addressing misalignment

7.18 As noted in Chapter 6 (Design (to May 2008)), even before the contracts were signed it became apparent that there was a “misalignment” between the System Design Services (“SDS”) design, the Employer’s Requirements and BBS’s civils proposals. This had arisen as a result of changes made to the requirements by tie in 2007 while the tendering and contract negotiations process was under way. While Mr Nolan said that misalignment was something that he had encountered in other contracts [TRI00000114_C, pages 0018–0019, paragraph 44], I consider that until the resolution of the misalignment it would be likely to lead to confusion and disputes during the works as to what obligations had been undertaken. The Novation Agreement stated that workshops to address this would be held after contract close [CEC01370880, Part 1, page 0007, paragraph 4.7]. Mr Chandler said that it was intended that they be held within eight weeks but this date was not met, and that it took four to five months for some of the workshops to be held [PHT00000020, page 89]. He considered that, as programme manager, it was tie’s responsibility to ensure that they took place on time. Even when they were held, they did not resolve all the issues. The misalignment was still outstanding a year later and was one of the matters considered in the informal mediation between tie and BSC in June 2009 after the Princes Street dispute [see tie position paper, CEC00951734].

7.19 The changes arising from the workshops when they were held are summarised in a schedule produced by PB [BFB00095824]. The effect was that change notifications were issued by BBS between January and September 2009 as a result of the following workshops:

  • trackform;
  • roads construction;
  • overhead line equipment;
  • tram stops; and
  • sub-stations.

7.20 From the above it is immediately apparent that this meant that the misalignment led to changes being made more than a year after the contract was signed. Yet further changes flowing from the workshops were made between January and April 2010 in relation to the following:

  • earthing and bonding;
  • special trackform construction at shallow-depth obstructions; and
  • Cathedral Lane sub-station.

7.21 While these issues were being resolved, the designs relating to them could not be finalised and this led to delay.

7.22 Although BB’s internal monthly reports discussed in paragraph 7.17 above mentioned the ground improvement layer at the instance of Siemens, it omits any reference to PB in that regard. PB’s design was always based upon a fundamental assumption that a reinforced concrete slab was required under the trackform. The justification for that was based upon its experience in other cities of finding voids under the road pavement caused by historical damage to drains resulting in materials around the drain being washed away over the course of time. The risk was that over a period of time (perhaps several years) the high load of the tram passing over the trackform and the associated vibration through the trackform into the pavement underneath could cause the trackform to collapse. PB was responsible for the formation up to the underside of the trackform and would have been responsible for any collapse. Accordingly, its design before contract close included the reinforced concrete slab that PB always maintained was necessary despite pressure from tie over a prolonged period to change its opinion. In contrast, the Infraco offer was based upon shaving the existing pavement and putting a very thin trackform over the top. This was an example of the misalignment at contract close between the SDS design and the civils proposals of the Infraco offer that was accepted by tie. Mr Chandler, of PB, discussed this issue in his evidence [PHT00000020, pages 14, 56–61 and 65]. I accepted his evidence in that regard. Had tie required contractors to submit their tender on the basis of designs developed from Employer’s Requirements and had not permitted Infraco to submit its tender based upon a different design without consulting PB about any implications of such change there would have been no need for Siemens to insist upon the need for a ground improvement layer.

Disputes concerning payment for changes and effects of novation

7.23 As I have noted in Chapter 5 on the procurement strategy for the Edinburgh Tram project (the “project”), it was part of that strategy that when the Infraco contract and Tramco contract were signed, the SDS contract would be novated to the consortium made up of the Infraco contractors. It was referred to in the various versions of the Business Case and the SDS contract contained provisions requiring PB to agree to novation (if asked to do so by tie) when a contractor was appointed to carry out the infrastructure works.

7.24 Novation is a process whereby, with the agreement of all parties, all rights and obligations under a contract are transferred from one party to another. Commonly, the agreement for novation will state that the relationship between the provider of goods and services and the “new” client will be regulated by – and be taken always to have been regulated by – the existing contract and that, as between the existing parties to the contract, that contract shall be regarded as at an end. This means that the parties to the original contract no longer have rights against, or obligations owed to, each other and the new party stands in the shoes of the party that has been released from its obligations. It is up to the parties to determine how their relationship(s) should be structured, and it may differ from what I have just described, but in the Tram project it followed that outline. This meant that not only would the contractual relations concerning design in the period following novation be between PB and BSC; it would be as if this had always been the case. The only rights and obligations that tie would have in relation to design would be against BSC.

7.25 Novation is quite common in large construction contracts in which the contract(s) with the professionals, such as architects and engineers comprising the design team and who are engaged at an early stage, are transferred to the contractor who is appointed later to carry out the works. It avoids a situation in which, if something goes wrong and if the client seeks to make a claim in relation to it, the designer claims that the problem was caused by the contractor responsible for construction and the contractor claims that it was caused by the designer. If all the obligations are owed by one party, the client can claim against that party and leave it to the contractor and the designer to resolve matters between them based on their contract.

7.26 The reason that the contracts for the Tram project were not structured from the outset so that the designer was in a contract with the contractor and that contractor undertook all obligations (including design) to tie is that it was intended that the design services be carried out long before tie was in a position to appoint the contractor. While it would have been possible to have appointed a single contractor or consortium of contractors from the outset to do all the works, it was considered that this would not lead to the most competitive pricing and would mean that a final decision as to the infrastructure contractor would have to be taken at a much earlier stage. In my view, no criticism arises from the intention to adopt an approach of novating an existing SDS contract at the point that the Infraco contract was signed, but it does appear that the practical consequences were not thought through in the situation that existed in May 2008.

7.27 The difficulties that arose with, and out of, novation of the SDS contract related to the fact that the design was behind schedule when the Infraco contract was awarded. The intention had been that by that time the design would be completed and all the consents and approvals obtained. As Mr Chandler explained:

“We knew to understand what the implications of being novated into that contractor were going to be, given that at the time we had originally agreed to enter into a contract which involved novation at a point, we had expected that we would have completed the design, it would all have been approved by that point, and it was only going to be the introduction of the contractor’s preferred equipment supply that would change that design.

“The civils elements should really have been completed, the roads, the structures, the rail design, up to the point of component selection. What we were doing after novation originally we had understood to be the finalisation, selection of the tram shelters, the specific ones that the contractor was procuring, and replacing those with our generic shelter, details that we had previously identified. That was what we had expected to be doing after novation. In reality there was going to be a lot of additional design to be completed or finalised due to the delay with the approvals and consents. The critical issues were still potentially unresolved so we needed to understand what the impact on us and the contractor was going to be after novation.” [TRI00000027_C, pages 0129–0130, paragraphs 531–532.]

7.28 As was noted in Chapter 6 (Design (to May 2008)), the position in May 2008 was very different in many respects. The extent to which input was required from PB after this date is apparent from the fact that it was paid £14,117,112 by BSC in relation to services provided between SDS novation in May 2008 and the completion of the project [WED00000623]. That payment was based upon a draft final account that included the following claims as well as other payments and allowances for a contra charge:

  • £7,962,617 in relation to design core scope and design change;
  • £1,054,688 in relation to construction support;
  • £3,294,237 in relation to extended construction support;
  • £1,069,517 for design support;
  • £459,643 for design completion; and
  • £907,593 for prolongation [WED00000622].

7.29 The payments for construction support, extended construction support and design support appear to me to include work additional to the services to be provided by PB under the SDS contract. That view is consistent with Mr Reynolds’ references in an internal email dated 19 April 2008 to PB’s involvement in five work streams after novation [PBH00018332]. These included a new scope of work to deliver detailed construction support services mainly to BB as the consortium partner that was responsible for civil engineering and another new scope of work to deliver management services to Siemens, the consortium partner that was responsible for the design and installation of systems, in order to integrate its designs with the SDS design and to obtain consents and approvals. It is not the position that all of the additional charge represents additional work and for a fair comparison of payments made with the original SDS price, some people might argue that the cost of such additional work should be excluded. However, even if the figures for construction support, extended construction support and design support are excluded for that purpose the payments made in respect of design core scope and design change, for design completion and for prolongation exceeded £9.3 million, representing an increase of approximately 40 per cent of the SDS contract price of £23,329,853. If the excluded sums are included the total payment of £14.1 million represents an increase of approximately 60 per cent of the SDS contract price.

7.30 The problems that would arise as a result of novation when the design was so incomplete are another reason why it was not appropriate to press ahead and award the contract in May 2008. I consider that decision more fully in Chapter 12 (Contract Close).

7.31 Design work was still required in relation to the Multi-Utilities Diversion Framework Agreement (“MUDFA”) works. As these works were not in general to be undertaken by the Infraco contractors, it was not appropriate that the design be carried out by PB as part of its contract with BSC. For tie to have a contractual right to have the works carried out by PB, a separate agreement had to be concluded between them for these services. Special arrangements were also required to pay for outstanding road designs and to pay for ongoing work required to remedy the misalignment between the Employer’s Requirements, the SDS design and the Contractor’s Proposals from BBS. This is considered later at paragraphs 7.35–7.45.

7.32 Even in relation to the core element of design of the infrastructure works, there was some unhappiness that novation was to take place when the design was so incomplete. It meant that at, the time of novation, work was still outstanding which it had originally been intended would be carried out while tie was in control. Mr Chandler advocated the postponement of novation until the design was nearer completion but, as noted in Chapter 12 (Contract Close), there was a marked reluctance within tie to do anything that would further delay award of the Infraco contract. One result was that following novation of the SDS contract, when PB was employed by BSC rather than tie, the loss of direct dealings and direct contractual obligations meant that tie lost both visibility and control over the design process. In an email dated 11 December 2008 Mr Sharp noted that

“since we novated SDS we haven’t had a good grip on design production versus programme” [TIE00248531, page 0001].

7.33 Mr Bell gave evidence that, after SDS novation, “it took longer to get to the root of any particular issues or problems, be they tie, CEC or Infraco, SDS related”
[PHT00000025, page 31]. He also stated:

“After May 2008, responsibility for progressing the design passed to the contractor and so the reasons for continued slippage in that period were opaque to TIE.” [TRI00000267, page 0008.]

7.34 This ought not to have been a surprise, but it does not seem to have been considered prior to novation.

7.35 In addition to the issue of control, there was an issue concerning payment, which was linked to the principal dispute between tie and BSC. It concerned where the liability lay to complete the designs following contract award and to pay for any increase in construction costs inherent in those completed designs. If the argument being adopted by tie was correct, BSC would not be entitled to any additional payment for the work required to develop the designs from the Base Date Design Information (“BDDI”) mentioned in the Infraco contract to the IFC stage. PB would be required to have significant input in relation to this development and, naturally, would want to be paid for it under the novated contract. BSC, on the other hand, did not want to instruct PB to undertake that work and incur any liability to pay for it unless and until it was comfortable that tie would pay it for it. As Mr Chandler noted, Schedule Part 4 (“SP4”) (of the Infraco contract) was drafted as though the design was complete and that payment would only be made to BSC for Notified Departures as defined in that contract [TRI00000027_C, page 0130, paragraph 533]. This created a situation in which BSC was not instructing PB to carry out the necessary work and the production of detailed drawings for structures and other areas affected by client changes was held up [BFB00112190, page 0005, paragraph 1.3.1].

7.36 The continual slippage in design is apparent from the fact that Version 51 of the SDS programme was provided to BSC on 23 November 2009 [recorded in PB progress report for January 2010, BFB00004338, page 0005, paragraph 2.3], whereas in May 2008, when the Novation Agreement was signed, version 31 was current [Close Report, CEC01338853, page 0007, paragraph 2.2]. In late 2009, BB considered what steps might be taken to improve the position in relation to completion of design. This was motivated at least in part by concerns as to its own position if the outcome of the dispute as to where responsibility lay for completion of the design went against it. As a result of this, a Memorandum of Understanding (“MoU”) between PB and BBS was prepared. Mr Ochoa, Change Manager at BB, sought advice from Pinsent Masons, solicitors for BB, in relation to it. An email dated 9 December 2009 from Ms Moir, of Pinsent Masons, noted that she understood that the purpose of the MoU was to get agreement from PB to an acceleration of the design programme, to which it would sign up in exchange for payment of additional sums. She noted in her email:

“This is required because Infraco believe SDS may have a successful defence in relation to any claim under the SDS Agreement for late delivery of the design – as a result of BB/Siemens failure to provide design information, carry out the CIDR [Consortium Interdisciplinary Review] etc in time and in accordance with the current design programme. This could result in Infraco being exposed under the Infraco Contract if as a result of the OSSA [On-Street Supplemental Agreement] or success in the Adjudications, tie instructs or Infraco become obliged to proceed with the works – for which there is no design at this time as a result of Infraco failures as set out above. However, Infraco also believes that SDS is culpable for some of the delay – but intend to deal with this issue ‘after the fact’ given the potential exposure as a result of the design being incomplete and the need to have SDS ‘on side’ to assist with future ND [Notified Departure] claims.” [CEC00328711, page 0002; TRI00000011, page 0013.]

7.37 Mr Foerder also explained that while BBS considered that its interpretation of the contract was correct there were initially no adjudication decisions to support it, and there was a risk to BBS that, if its interpretation of the contract was found to be wrong, it might find itself in a position of receiving an instruction to commence works but would not be able to do so because of incomplete design [PHT00000044, pages 85–87].

7.38 The steps taken by BB to address the problem were part of what was referred to as the Civil Design Completion Programme. The PB progress report from November 2009 noted that, at BSC’s request, it had submitted a proposal to provide additional staff to resource the programme, which was intended to achieve earlier closeout [BFB00004337, page 0004, paragraph 2.1]. It identified works that BSC was to instruct PB to carry out and recorded that BSC would pay 100 per cent of the costs of some and 75 per cent of the costs of others. In relation to the latter group, BSC would seek the whole amount from tie and PB would assist them in this. If BSC were successful in recovering all the cost from tie, it would make a balancing payment to PB so that it had been paid the whole cost of the works [ibid, page 0005, paragraph 2.1.2].

7.39 The November report said that the signing of an MoU incorporating the proposal was imminent. It was still recorded as being imminent in the progress report two months later, in January 2010 [BFB00004338, page 0005, paragraph 2.3]. In fact, rather than a non-binding MoU, on 25 February 2010 the parties signed a binding Minute of Agreement addressing the issue [TRI00000011]. This was expressly without prejudice to the terms of the SDS Agreement, and its purpose was recorded in clause 18 to be

“solely to allow BBUK to mitigate its loss in respect of the late delivery of the design, by means of an extra incentivisation payment to the SDS Provider as per Appendix 5, to compensate SDS for an additional amount of design coordination resources” [ibid, page 0003].

7.40 The Report set out time limits for provision of information by Siemens and PB [ibid, page 0002, clause 4 and page 0005, appendix 1] and provided for payment for works which tie had not accepted were changes. BSC would pay for such works as outlined in paragraph 7.38.

7.41 Mr Foerder gave evidence that BB entered into the agreement with PB

“to unlock the situation because tie was refusing to accept the design changes … Because we couldn’t get approvals on the Notified Departures from tie … nothing could progress. SDS was not willing to put more commercial risk to themselves. So we decided that we take that burden, to enable them to progress the design, and get cost reimbursement through the consortium.” [PHT00000044, page 83.]

7.42 In his oral evidence, Mr Walker put the matter more succinctly in saying that the purpose was

“[t]o incentivise the designer to have adequate resource immediately available at our beck and call” [PHT00000035, page 147].

7.43 Mr Foerder said that the agreement

“was a way to get the design progressed by SDS with commitment from our side to reimburse the cost” [PHT00000044, page 86].

7.44 He also recognised that, in relation to the dispute concerning changes from the BDDI design to the IFC design, assistance from PB was necessary. He said:

“to enable us to identify Notified Departures properly, we needed the assistance of SDS, because they actually identified what is different and why the differences occurred between what was originally provided and what was finally coming out … You needed also a description [of] why and what [had] changed, and there we needed the assistance of SDS.” [ibid, pages 89–90.]

7.45 In my view the agreement was a pragmatic solution to the problem that had arisen whereby delays in design were caused by the underlying dispute between tie
and BSC (as to which party was to bear the risks arising from design development and completion). The agreement also, of course, addressed BB’s concerns that it might be held liable for design delay if it was proved wrong in its interpretation of the Infraco contract. Although it engendered suspicion from tie – which may have been fuelled by the fact that it was not provided with a copy of the agreement when it requested it – there was nothing improper about it.

Grinding to a halt, Mar Hall mediation and beyond

7.46 As discussed in Chapter 19 (Mediation and Settlement), by late 2010 the project was in crisis. By letter dated 29 September 2010, BSC advised tie that it would no longer undertake certain “goodwill works”, ie works associated with the list of Infraco Notices of tie Change (“INTCs”) enclosed with the letter in respect of which there was no tie Change Order or agreed estimate [TIE00409574]. Mr Foerder gave evidence that design had been progressed up until that time, but that it then slowed down

“because from October 2010 to the mediation, not much happened really, apart for the preparation for the mediation” [PHT00000044, page 162].

7.47 Even as work on the infrastructure works ground to a halt, the problems with design remained. A progress report by PB dated 25 January 2011 noted that 303 design changes had been identified, with £3.28 million worth of change instructions having been issued to PB. Out of a total of 269 planning and technical approvals that would be needed to complete the design, only 219 (81 per cent) had been approved [BFB00004350, pages 0004–0007]. In addition, even where approvals had been obtained, there were problems. A paper produced by Mr Conway, of CEC, for
Dame Sue Bruce on 9 March 2011 noted, in relation to planning approvals, that:

“There are areas where the current design does not match the Planning consents obtained. This is generally because the design has changed since approval was sought, and it is necessary to align those changes and for Infraco to obtain consent for those changes.” [CEC02087162, page 0002.]

7.48 At the Mar Hall mediation in March 2011, an agreement was reached to settle the dispute between the parties. Certain Key Points of Principle were initially agreed, which were then developed into more detailed Heads of Terms [both documents are contained in CEC02084685]. The Key Points of Principle included:

“9. CEC Planning Approvals – 3 weeks for CEC to confirm acceptance of outstanding issues on Technical and Planning Informatives.

10. Substantive cultural shift in the behaviour of all Parties including interaction, co-location and empowerment.” [ibid, page 0001.]

7.49 The Heads of Terms included the following provision:

“11. Design and Approvals

11.1 CEC shall procure that CEC Roads Department shall meet with Infraco and its designers in order to agree and resolve all outstanding, Technical Informatives and critical issues with the design within 1 month of the date of execution of the Heads of Terms.

11.2 CEC shall procure that CEC Planning Department shall notify Infraco of all outstanding issues which preclude discharge of Planning Informatives within 3 weeks of the date of execution of the Heads of Terms.

11.3 Infraco shall ‘self-certify’ the civils and systems technical Design and tie shall have no right or obligation to review and/or approve the civils and systems Design.

11.4 Any remaining unresolved issues in respect of Approvals shall be dealt with at a meeting of senior representatives from CEC and Infraco on 7 April 2011.

11.5 The parties shall work together to ensure that the statutory approvals for the On-Street Works are obtained before 1 September 2011.” [ibid, page 0005.]

7.50 Immediately following the mediation, nine full-time and two part-time CEC staff were relocated to work within BSC Tram project offices as a new way of working with a view to speeding up the process. Notwithstanding the scope of the agreement reached in the mediation, the intention was, subject to certain exclusions, to complete all consents and approvals required for the route all the way to Newhaven by 30 April 2011, but to give priority to the stretch from the Airport to St Andrew Square [CEC02087166, page 0001]. The new approach bore fruit to a remarkable degree. An email dated 5 April 2011 from Mr Conway reported that the number of open technical approvals comments had reduced from 2,782 on 24 March 2011 to 85 by 5 April 2011 [CEC02083973, Part 2, page 0118]. Mr Glazebrook said that he was aware of Mr Conway’s having galvanised and enlarged the CEC team to address and close out the outstanding issues and, while he was not personally involved in the resolution of the open technical approvals noted in Mr Conway’s email, he considered that

“when people engage and collaborate, this is exactly the sort of dramatically beneficial result that ensues” [PHT00000015, page 30].

7.51 It is notable that while the CEC comments presented a problem when they were made to – and the responsibility for dealing with them rested with – tie, they were resolved when CEC had to deal with them itself. It appears that CEC having direct responsibility resulted in there being a willingness and resolve on its part to collaborate to resolve them.

7.52 Mr Weatherley, of Turner & Townsend, gave evidence that when his firm was instructed by CEC as project manager after Mar Hall, several design issues remained outstanding, including:

  • the design of public realm works;
  • tram and carriageway alignment in York Place;
  • the Cathedral Lane sub-station;
  • on-street works traffic modelling;
  • the Edinburgh Gateway retaining wall; and
  • Scottish Water legacy works north of York Place.

7.53 All these matters (and other design issues) were resolved in regular design meetings involving all interested parties. Mr Weatherley explained that there were occasions when works adjacent to utilities had to be re-designed because of the presence of those utilities, and the need for that re-design did hold up the construction programme. Nonetheless, he said that apart from this he was unaware of any examples in which the lack of design delayed the construction [PHT00000046, pages 63–64].

7.54 Mr David Anderson, of CEC, considered that the responsibility for progress not having been made earlier rested with the “programme director” within tie
[PHT00000043, pages 191–192]. I accept Mr Anderson’s evidence that the responsibility lay with the programme director. There was some confusion in the evidence as to who was the programme director bearing such responsibility. Mr Anderson clearly considered that Mr Bell held that position at the appropriate time [ibid, page 182]. Although her evidence about her various roles was confusing, I am able to conclude that Ms Clark was Programme Director from August 2006 and that at some point before contract close she became Delivery Director, retaining her responsibilities for the overall programme of the project [PHT00000025, pages 101–106]. On 30 October 2007, with the agreement of the tie executive team and the tie Board, Mr Gallagher introduced organisational changes [CEC01441488] that appointed Mr Bell as Tram Project Director (“TPD”) (Designate) for the construction phase of the project. He was to work in parallel with the existing TPD (Mr Crosse) who was responsible for procurement to financial close on 28 January 2008, when Mr Bell would become TPD. Mr Bell confirmed that he undertook his new role from the end of October 2007 or within a few weeks of that date, and that he and Mr Crosse “were running in parallel during the first month or so in 2008” [PHT00000024, page 21]. I have assumed that that delay beyond January was because of the delay in reaching financial close. Mr Gallagher’s document confirmed that Mr Bell would have other responsibilities in “fully” managing various teams, including the programme team led by Ms Clark. Mr Bell confirmed that he had acted on that basis [ibid]. On the basis of the above evidence it appears that Mr Bell had ultimate responsibility for programme management after 30 October 2007 and still had that responsibility at contract close. I agree with Mr Anderson that responsibility for progress not having been made earlier rested with Mr Bell.

7.55 Mr David Anderson also said that following the mediation there was a noticeable improvement in Infraco’s rate of successful submission of satisfactory design work. He considered that this was due in part to more effective joint working and the co-location of key staff [TRI00000108_C, page 0008]. Mr Sharp considered that the rapid progress could only be achieved because BSC had carried out the drawings before the mediation but had held them back until a settlement was achieved. He accepted, however, that this was based partly on speculation [PHT00000015, pages 176–181]; and it was denied by Mr Foerder [PHT00000044, pages 161–162], who attributed the improvement to the cultural change mentioned below. Other witnesses from PB and BB disputed the suggestion that there had been a deliberate tactic not to resolve CEC comments or progress design before Mar Hall and, instead, gave evidence of a change in culture after the Mar Hall settlement agreement – in particular, on the part of CEC. Mr Reynolds said that after Mar Hall, “there was a cultural change to design acceptance” [PHT00000019, page 155]. Mr Chandler’s evidence was to the same effect, and he considered that if the approach after the mediation had been present from the outset, resolution of a lot of the problems that had dogged the project could have been achieved sooner [TRI00000027_C, page 0172, paragraph 704]. Mr Foerder stated:

“It was hands on and suddenly worked.

“With all the parties working in a collaborative approach, the remaining problems were overcome. This worked very well. If the will had been present earlier, it could have worked earlier.” [TRI00000095_C, page 0091, paragraphs 274–275.]

7.56 I accept that the cultural change after mediation resulted in a co-operative approach that was more conducive to progress than the confrontational approach that existed before Mar Hall. I do not have material that would enable me to reach a conclusion that before Mar Hall BSC withheld co-operation deliberately as a tactic. I do, however, accept Mr Sharp’s view that the deal done at Mar Hall meant that BSC had a clear commercial interest that matters be resolved, as failure to resolve them became its problem [PHT00000015, pages 180–181].

7.57 The change wrought in 2011 demonstrated that the difficulties and delays were not inherent in the project; with appropriate management of the issues and structures for dealing with them, they were quickly resolved. I do not consider that anything that happened in the mediation or in 2011 meant that the structure and approach could not have been adopted before then. Had this been done, I agree with the views of the witnesses that many of the problems could have been resolved. The notable exception is the difficulties arising from the dispute as to who was responsible for the design. This could not be addressed as a matter of how the work was done; it required a fundamental re-drawing of contract duties and rights. The agreement at Mar Hall removed that as an issue and, while it had remained, the dispute as to who was to carry out the design and who bore the liability to pay for that work would inevitably have cast a shadow over the design process.

Responsibility for the situation

7.58 Predictably, witnesses who gave evidence about the problems laid the blame for the situation at the door of other parties. From within tie, Mr Sharp was critical of CEC’s failure to have a constant view of what it wanted. He considered that this was the biggest cause of delay until August 2008. After that date he considered that PB bore responsibility for failing to get design correct after the award of the Infraco contract and for failing to co-ordinate the design properly [ibid, pages 158–159]. He considered also that there were still some issues where people did not make up their minds about the design option that was required. Although CEC and tie continued to cause some delay in that regard, he considered that these bodies caused less delay after the award of the Infraco contract than previously. He also considered that BSC was not taking a particularly active management of PB. In that regard he was unsure whether BSC was not exercising strong management or whether it was but PB was nonetheless under-performing. tie had asked BSC for evidence of strong management but it was not provided to tie. It seems to me that in either event the responsibility lay with BSC. Mr Sharp considered that: “It suited them for the design to not progress as rapidly as it could.” [ibid, pages 169–171.]

7.59 In early 2010, tie carried out an audit of the design processes under BSC’s control. It focused on particular areas in which there had been changes in design. A draft of the conclusions of this report [CEC00338516, page 0002] found that there was little evidence that BSC had properly managed the design process and no evidence that BSC had paid serious attention to “best value” design solutions. These conclusions were repeated in the final version of the report [CEC00544638]. However, I do not place reliance on the conclusions of this audit. It was undertaken as part of the efforts to put pressure on BSC in the context of the contractual disputes [see, e.g., Project Director’s Report, included with Tram Project Board (“TPB”) Agenda and Papers for the meeting on 13 January 2010, CEC00473005, page 0012, and Mr Jeffery TRI00000097_C, page 0012, paragraph 71]. Further, there was some question as to whether clause 104 of the Infraco contract, under which tie purported to conduct the audit, entitled it to do so, and this led to a refusal on the part of BSC to co-operate.

7.60 Mr Fraser of CEC considered that delay arose from a failing of PB in providing incomplete and non-integrated designs without general arrangement drawings to pull them together [PHT00000004, pages 193–194]. He defended the number of comments from CEC, saying that it had been simply carrying out its statutory duty to ensure compliance with standards and that the number of comments reflected the inadequacy of the design submissions [TRI00000096_C, pages 0006–0007 and 0066; PHT00000004, pages 192–193]. In relation to the problem that outstanding matters prevented completion of design packages, he considered that that simply reflected the complex, interdependent and iterative nature of the design process of the project and that there was no “short cut” through that process [ibid, pages 196–197 and 199]. I consider that although this may be true, it nonetheless leads to the conclusion either that, in view of the process for completion of designs that had been put in place, the time allotted for their approval was inadequate, particularly as it involved obtaining the agreement of interested third parties, or that CEC could not accommodate the allotted timescale.

7.61 Mr David Anderson, of CEC, considered that the delay in completing design after financial close was due to a combination of a failure on the part of BSC to manage the design process and failures within tie as well as the need to obtain third-party approvals [TRI00000108_C, pages 0093 and 0101]. In relation to the failures within tie, he considered that at SDS novation insufficient attention was paid to providing incentives for success and penalties for failure in completing design. Delays in completing satisfactory designs meant that BSC took longer to complete the contract and could benefit from Notified Departures and extension of time claims. However, in his statement, he said that from the information made available to him, he understood that the main cause of delay was PB’s not having completed satisfactory designs for which instructions and information had been issued by tie [ibid, pages 0008–0009]. In his oral evidence he was more guarded and said:

“it was never entirely clear where the problems with design lay, whether it was the failure of tie to issue instructions, whether it was the failure of SDS to produce the designs and … the failure of BBS to manage SDS in producing the designs … the failure of BB to produce estimates, or whether it was the failure of the planning service to expedite approvals, or indeed building control or highways” [PHT00000043, pages 131–132].

7.62 From within PB, Mr Chandler considered that “the main issue that caused the delay on the scheme was the lack of positive decision making and leadership” [TRI00000027_C, pages 0172–0173, paragraph 707]. He was of the view that there was a fundamental inability to lock down the design and develop it through to IFC status.

“We were continuously changing the design because of the various different outstanding decisions that were required to be made and they were outside of our gift … the efforts that were put in to try and accommodate those and to go around the design loop several times; it was astonishing really just how much additional design work was undertaken and how that prolonged the scheme.” [ibid, page 0174, paragraph 711.]

7.63 He considered that the biggest challenge to PB was obtaining decisions from third parties who were not operating to the same timescales that the project required [ibid, page 177, paragraph 726]. He was also critical of the high number of comments from CEC, and considered that:

“It was largely as a result of the CEC comments, particularly around the roads submissions, that resulted in the continued programme slippage.” [ibid, page 0162, paragraph 659.]

7.64 He was of the view that the delay after financial close in completing design and obtaining consents and approvals resulted from a number of factors, namely: the misalignment between the SDS design based upon the Employer’s Requirements and the design upon which BBS had based its offer; BBS’s assumption that some of the design principles would change; and its assumption that it would be able to introduce value engineering (“VE”) opportunities, particularly with structures and trackform. PB had grave doubts that the VE opportunities would be acceptable to the approval bodies or even technically feasible because of PB’s detailed knowledge of the infrastructure. Significantly, he was also of the view that the dispute between tie and BSC in respect of which party was to bear the risks arising from design development was a “significant” factor in the delays that arose in completing design, and that PB had not anticipated that that matter would get so “bogged down” [PHT00000020, pages 85–88].

7.65 From the standpoint of BSC, Mr Walker considered that the continued slippage in design after the award of the Infraco contract was due to inexperienced designers in PB, an apparent unwillingness by PB to resource the work properly and the fact that

“the design was in such disarray that the designer was almost overwhelmed when trying to complete the design in the time that we required” [TRI00000072_C, page 0041, paragraph 83].

7.66 He also referred to delays resulting from the need for third-party approvals [ibid, pages 0041–0042, paragraph 83] and the dispute between tie and BSC. He referred to the issue of entitlement to payment under the contracts and said that PB needed an instruction from BSC to undertake additional design work; BSC was not in a position to instruct PB until BSC had, in turn, received an instruction from tie to undertake that work (with tie being reluctant to give such an instruction, given its view that BSC was responsible under the Infraco contract for normal design development and completion) [PHT00000035, pages 141–142]. As noted in paragraph 7.39 above, this was addressed by the Minute of Agreement.

7.67 Mr Foerder considered that any delays on the part of BSC were not, as he put it, a dominant factor in the delay [PHT00000044, pages 87–88]. By way of high-level reasons for the problems, he referred to CEC and third-party approvals, uninstructed design changes and conflicting requirements due to misalignment [TRI00000118, pages 0054–0062, paragraphs 10.15–10.44; PHT00000044, page 88]. By way of more detail, he referred to the following.

  • The disagreement over which party required to pay for design changes [ibid, pages 68–69] and the fact that tie was unwilling to issue a tie Change Notice for changes required following design misalignment workshops [ibid, page 73].
  • Outstanding third-party approvals and consents.
  • The “immense” number of comments made by CEC on submitted design.
  • A very cumbersome design approval process (requiring approval of design by both tie and CEC).
  • tie’s mismanagement of the design approval process (there having been, for example, more than 300 design changes after the award of the Infraco contract, the majority of which were instructed by CEC or tie, as a result of, for example, third-party agreements or betterment and preferential engineering by CEC).
  • Third-party agreements (ie delay or inability by tie/CEC to obtain agreement with third parties for the design at certain key locations).
  • Changes and delays caused by undiverted utilities [ibid, pages 65–77].

7.68 He considered that PB had delivered a reasonable service in the circumstances [TRI00000095_C, pages 0028, 0041 and 0072, paragraphs 87, 128 and 214; PHT00000044, page 78].

7.69 Some of the witnesses, however, were more candid in admitting the failures within their own organisations. As I noted in Chapter 6 (Design (to May 2008)), Mr Chandler and Mr Reynolds accepted that there had been shortcomings in the performance of PB (paragraph 6.133). Mr Glazebrook was critical of tie and CEC. He gave evidence that

“in any situation where substantially things haven’t changed in terms of processes, procedures, attitudes, organisational arrangements, it’s inevitable that the problems that occurred before will continue” [PHT00000015, page 20].

7.70 He considered that the duplication of roles and meddling in design within tie became worse after financial close as a result of additional teams being created (ie a project management team and a financial/cost management team) [PHT00000014, pages 127–129]. He also stated that

“up to the point I left [in 2011], it was certainly still in my recollection exceptionally difficult to get input from CEC at the right point to avoid rework and wastage of time and resource” [ibid, page 148].

7.71 I accepted Mr Glazebrook’s comments. There had been a consistent pattern of delay in achieving design prior to contract close. Nothing had been done at close to revise the various working patterns and structures or to address the areas where the delays had occurred, and there was therefore no reason to expect that there would be any improvement in this regard. In view of the problems that existed with design at contract close, tie ought to have undertaken an examination of the causes of the problems and sought to remedy them. Instead it appears from minutes of the tie Board and the TPB that they were content to place all the blame on PB. In 2007, when leading up to the intended contract close in December, the minutes of meetings of the TPB and the tie Board refer to “underperformance”, poor performance and failings by PB [papers for meeting of TPB on 23 January 2007, CEC01360998, pages 0002–0003 and 0009; papers for TPB Meeting 20 February 2007, CEC00689788, pages 0005–0006; papers for meeting on 12 July 2007, CEC01565576, page 0006; minutes of tie Board meeting 27 August 2007, CEC01271486, page 0006; minutes of meeting of tie on 24 September 2007, TIE00147433, page 0003]. For completeness, however, it should be noted that Mr Glazebrook considered that at least part of the blame lay with BSC. He said:

“Infraco changed many designs apparently to suit their own design and risk agenda. This resulted in further time and cost escalation.” [PHT00000015, page 23.]

7.72 He explained that this related to structures in the off-street section. His reference to BSC’s motivation was based upon an impression that he gained from others [ibid, pages 23–24].

7.73 Another factor to be considered is the outcome of the claim for additional payment by PB from tie under the Novation Agreement. By letter dated 20 October 2010, PB applied to tie for payment of £973,214 of the £1 million incentivisation sum agreed at the time of SDS novation in May 2008 [BFB00095830; BFB00095829]. The accompanying application sought payment on the basis that 57 deliverables had been delivered on time (£508,928); 52 deliverables had been delivered without fault on the part of PB (£464,285); and just three deliverables had been delayed due to PB (-£26,785) [ibid]. Mr Chandler gave evidence that while there was some debate in relation to whether some of the deliverables for which payment was claimed had been delayed because of fault on the part of PB, in the event, the vast majority of the deliverables claimed for were accepted and paid, resulting in approximately £800,000 of the £1 million incentivisation sum being paid [PHT00000020, pages 104–105]. In my view, this is indicative of a lack of significant culpability on the part of PB.

Conclusions

7.74 As I noted in Chapter 6 (Design (to May 2008)), one of the causes of delay in the design prior to award of the Infraco contract was the failure by tie to manage the design process properly. However, even once the management role was no longer tie’s the delay continued, and this indicates that there were other causes. As with the position before signing the Infraco contract, there was not a single cause for the delay in completing designs and the blame does not lie with a single party. It is useful, in light of the discussion above of the issues that arose, to consider the position of each party in turn.

Parsons Brinckerhoff

7.75 PB did not produce complete and integrated design packages for review and approval, and there continued to be concerns in relation to the quality of some of the design submissions and some resourcing and co-ordination issues on its part. The fact that the designs were not being produced in complete packages exacerbated the problems with obtaining approvals. Although these were failings on the part of PB and contributed to the delay, I do not consider that they are the dominant cause.

BSC

7.76 BSC bears responsibility for the delay in provision of the Siemens design and the changes that resulted from that. As the management of PB was its responsibility following novation, it bears responsibility for the problems there also, although this must be seen in the light of the effect of the dispute as to liability for completion of designs and the relatively minor weight that this has when considering causes of the problems at this stage.

CEC

7.77 I consider that CEC bears some responsibility in this period just as it did before contract close. CEC continued to fail to work in a collaborative manner to resolve design issues swiftly and with clarity or to provide a focus on enabling the project to proceed smoothly. The lateness and sheer volume of the comments were bound to cause delay and expense, and it is very surprising that it was allowed to continue unchecked. I accept that as a public body with statutory responsibilities it would be inappropriate or even unlawful for it to fetter its discretion. The change that came about after the Mar Hall mediation, however, is striking. There is no suggestion that CEC ignored or in any way compromised its obligations in that period, and yet matters were dealt with in a wholly different way. The impression that I have is that prior to the agreement at mediation each department or section of CEC had been focusing only on what the ideal position would be for its own particular responsibilities. In effect, CEC commented with a number of voices rather than a single, considered voice. The decisions made by local authorities in relation to consents etc. are usually matters that require some judgement, which involves balancing different – and sometimes competing – issues before reaching a single concluded view; they are not black-and-white. As such, it would have been legitimate to take into account when giving comments the overriding CEC view that there should be a tram system and that it would bring benefit to the city. Had there been someone with responsibility to oversee and co-ordinate the response from CEC to the many requests for approvals and consents, I think it likely that the responses would have been more proportionate, focused and reasonable. Without this, in carrying out its work, PB in effect had to meet the requirements of multiple masters with divergent interests.

tie

7.78 tie
accepted responsibility for a large proportion of the changes and delays. It bears responsibility for permitting the situation to arise in which the Employer’s Requirements, the SDS design and the BSC proposals were not in alignment and therefore for the delays that arose from the work required to remedy it. In so far as the contract mechanisms for completion of and approval of design led to delay, tie, as the party responsible for drafting the contracts, must bear responsibility for that also.

7.79 All the above were made worse, however, by the dispute that arose between tie and BSC as to which party was to bear the risks under the Infraco contract arising from the development and completion of design and the concerns about whether PB would be paid for work. This was one of the main factors in this period. As I consider elsewhere,[14]
the responsibility for that situation rests with tie and, in particular, the persons responsible for negotiation of the terms of SP4. This is a further example of the problems caused by that contract drafting.

Footnote

14. Chapter 11 (Contract Negotiations) and Chapter 12 (Contract Close). ↵

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