Tram firm reneged on ‘gentleman’s agreement’ it’s claimed

Tram works in Edinburgh. Picture: Jane Barlow
Tram works in Edinburgh. Picture: Jane Barlow
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Tram works in Princes Street ground to a halt because council firm TIE reneged on a gentleman’s agreement, the head of the construction consortium has claimed.

Richard Walker, who was managing director of Bilfinger Berger UK, said a dispute arose as soon as the contract for the project had been signed in May 2008, with the consortium claiming it was entitled to an extra payment.

He said the strict terms of the contract meant work should not start on a piece of work until the cost was agreed.

But he told the tram inquiry he reached a “gentleman’s agreement” with the then TIE boss Willie Gallagher to start work on Leith Walk despite the dispute and the money would be paid later.

Mr Walker said: “Willie Gallagher said TIE could not be seen to be increasing the duration and the price of the contract when no work had physically been carried out. We shook hands on it and he agreed.”

But he said Mr Gallagher resigned before any money was paid. “David Mackay stepped in as interim chief executive and basically told us ‘not a penny more’.”

Mr Walker said he then had no alternative but to stick to the letter of the contract - and when a dispute arose over Princes Street, Bilfinger refused to start work there - and it was halted for months.

“We told Mr Mackay that we now had to work strictly in accordance with the terms of the contract. I had looked Mr Gallagher in the eye and shaken hands on something which his party then reneged on.”

Mr Walker brought his own evidence to the inquiry - a draft letter he found in his records which he never sent, but which underlined his concerns about the project immediately before the contract was signed.

The inquiry has heard repeatedly that the provisions of the contract meant it was almost inevitable that as soon as it was signed the contractors would be able to make claims for changes that had to be made and the price would go up.

Mr Walker told the inquiry: “I had concerns that if the council were fully aware of what was going on I could not envisage how they would enter into a contract. I had a conversation with Willie Gallagher and I asked him: ‘Can you give me an undertaking that the council are fully aware of what is going on?’”

He said Mr Gallagher had assured him the council was fully aware. But he had decided to draft a letter to Mr Gallagher pressing the point.

But Mr Walker said his boss, Joachim Enenkel, told him he should not send the letter. “My chief executive felt it overstepped the mark.”

Mr Walker said TIE had repeatedly pressed for a fixed price to cover all the risks and he had said they could do it for £1 billion.

He said he had never believed TIE’s procurement timetable was realistic and he had told them so.

Mr Walker also said: “I thought the designer, Parsons Brinckerhoff, was treating the whole thing as a training exercise for graduates, not as a project which would actually be constructed.”