TAXPAYERS will be hit with a £1.3 million bill to scrap the firm that is responsible for managing Edinburgh’s tram project, it was revealed today.
Councillors were today set to approve plans to wind down TIE, the council’s “arms length” company that has been in charge of the project since 2002, as they also vote on the future of the project.
And it has emerged that the city council, which will take direct control of the troubled project alongside private advisers Turner & Townsend (T&T), is facing the massive bill as a result of voluntary redundancy deals offered to staff at TIE.
It has also been revealed that T&T is set to take on legal liability for the project – and could be sued by the council if it shows negligence during management of the project.
But the cost of bringing in the international consultancy firm is still not known by council chiefs.
The £1.3m bill includes pay-offs for 30 members of staff at TIE, although details of the severance deal for former TIE chief executive Richard Jeffrey are still being withheld by TIE bosses.
Staff will be paid off and receive one month’s pay for every year, with most having worked for three or four years.
The cost of running TIE itself has been around £1.5m a year for its 60 staff, office premises, IT costs and telecoms. The overall “project management” cost so far, which includes consultancy fees and legal costs, now stands at £79.6m. Dave Anderson, director of city development at the council, said: “The review of project governance is ongoing and as part of this we are looking at cost savings that can be achieved over the remaining life of the project.
“The restructure of TIE and decisions around support for project management will both come with cost savings and a more streamlined approach to managing the delivery of trams for Edinburgh.”
The offices of TIE at City Point in Haymarket are to close, with the remaining 30 staff being transferred to an office at Edinburgh Park. Once a deal is agreed for T&T to take over the project, the remaining staff are expected to either be transferred to T&T or offered redundancy.
Councillor Steve Cardownie, deputy leader of the city council and leader of the anti-tram SNP group, said: “I do not take any joy in people losing their jobs, particularly those lower down the ladder who are only trying to do an honest day’s work. It is the decision-makers on the board that should be brought to book.
“This [winding down of TIE] was inevitable and it could be argued that it should have happened a lot sooner but hasn’t.
“We do not like to see public money squandered and it has been squandered since day one of this project and has continued to be squandered
“But I am sure that the people that want to see the end of the project will be pleased to see the reins being taken over by another company.”
Councillor Lesley Hinds, transport spokeswoman for the Labour group on the council, criticised the cost of winding down TIE. She said: “For it to be £1.3m, it seems like a very high cost for the public to have to pick up.”
It remains unclear what the future holds for current TIE chairman Vic Emery, who was only appointed in January, although he could be given a role within a new “joint project forum” when TIE is wound down. T&T is currently reviewing the project with a view to identifying what fee it thinks is required to become project manager, but the cost of the firm doing this is not yet known – although it is anticipated that it will be less than the £1.5m-a-year cost of TIE.
One senior council source said: “What we are doing by introducing an external project manager is that organisation becomes liable for delivering the project on behalf of the council.
“They will have responsibility for project management and, potentially, could be sued if they get things wrong.
“The nature of the contract we would have with them is they will be required to provide professional indemnity so that, if anything goes wrong as a result of their negligence, we can go after them from a legal perspective.
“They are used to big projects like this and that is part of why they are being brought in. Big projects are inherently risky and they have the expertise.”
The Evening News has also learned that privatisation of the whole line has not been ruled out in future, especially if it will provide a means to develop the line beyond St Andrew Square.
A number of approaches are said to have already been made to the city council by private firms that want to complete the project, but the authority is not able to negotiate until the project is completed to the city centre.
The council source said: “If we deliver to St Andrew Square/York Place, we then have an infrastructure asset with a value of over a couple of hundred million pounds and a revenue stream.
“We can then look at whether we can use that asset to refinance the project.
“If you look at other tram systems, Stagecoach took over Sheffield when it was in trouble.
“I’m not suggesting that we go down that route in Edinburgh but we will have an asset and a revenue stream and, in any business, if you have that it puts you in a strong refinancing position.”