Tram Inquiry: Princes Street row was used to ‘bring city to its knees’

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Edinburgh would have been “the laughing stock of Scotland, if not the world” had a dispute over the Princes Street tram works – in which workers downed tools for several months – not been resolved.

Former TIE chairman David Mackay told the tram inquiry he had “no doubt” that Princes Street was used by the construction consortium as a tactic to bring the city to its knees.

An Edinburgh tram

An Edinburgh tram

Mr Mackay, who was chairman from November 2008 until his resignation in 2010, was giving evidence as the inquiry, chaired by Lord Hardie, yesterday began its twelfth week of public hearings.

He was asked about the Princes Street dispute, which arose in 2008 and involved construction consortium Infraco – made up of Bilfinger Berger and Siemens – asking for more money.

He said: “Princes Street is the most important street in Edinburgh, if not in Scotland. To have it closed for any period of time was an obvious huge pressure on TIE to agree to all sorts of things. I believe the Princes Street tactics by Infraco were appalling.”

READ MORE: Millions could have been saved on tramline ‘if one-year pause had been ordered’

A resolution was eventually agreed which allowed works to progress, with Mr Mackay telling the inquiry he was told by John Swinney to “get it sorted”.

However, Mr Mackay admitted he was “very unhappy” about having to come to the one-off agreement, saying he felt it was “unjustified”.

He went on: “We had a contract and I was disappointed that we had stepped outside of the contract.

“But the pressure was enormous and I have to accept now it was the right thing to do at that stage.

“Edinburgh was at a standstill. Retailers were going crazy, tourists were going crazy.”

The inquiry has heard conflicting accounts regarding the nature of the Princes Street dispute, with the consortium previously claiming it was caused by TIE reneging on a gentleman’s agreement.

However, TIE officials on the other hand have accused the consortium of using the street to hold them “to ransom”.

Mr Mackay continued: “I mustn’t beat around the bush here. I have absolutely no doubt that Princes Street was a tactic, a tactic to bring Edinburgh, TIE and CEC [City of Edinburgh Council] to our knees – and it almost worked.”

He said if the issue with the consortium had not been resolved, Edinburgh would have been the “laughing stock of Edinburgh, if not the world”.

The inquiry into the botched works is looking to examine why the project escalated in cost from an initial £375 million to the final £776m, and was delivered three years late on a truncated route.

Mr Mackay also described his concern about information being leaked both to the press and the construction consortium.

He said TIE was often asked to have a look at draft papers going out to the council and that they suggested “some quite heavy editing” due to a fear of confidential information being exposed to Infraco and others.

The inquiry heard TIE did not want information on how the project’s risk allowance had been allocated to be made public, with Mr Mackay saying to do so would have been “suicidal”.

He explained: “Everyone knew there was a risk allowance which had been quantified. What was not in the public eye was how that risk was allocated.

“I think it would have been absolutely crazy for any business to put that level of detail into an open forum. I’m not talking about the board, I’m talking about an open forum.”

Mr Mackay was also asked by inquiry counsel Jonathan Lake about TIE’s bonus structure, and whether or not it put pressure on employees to conclude the tram contract by a certain date.

READ MORE: Tram construction firm ‘considered pulling out days before signing contract’

The inquiry heard Mr Mackay was “not particularly a fan of the bonus structure” and that he later went on to dismantle it following the sudden departure of TIE boss Willie Gallagher in November 2008.

Pressed by Mr Lake on the subject, he said he had “no direct evidence” that the bonus scheme had an impact on any individual’s desire to close the contract. However, he said he was not happy about the way the scheme had been set and was measured.

“I thought it should be dealt with by a remuneration committee, and those involved in bonuses should have no part in the decision-making process.

“It wasn’t challenging enough, and there wasn’t enough independent supervision of it.”

When it came to awarding bonuses, Mr Mackay explained he had asked the remuneration committee to consider only paying half in cash and banking the rest in an effort to make the staff member stay.

Asked if there was a problem with people leaving, he said: “Yes, there was a growing turnover of staff. It was a very difficult project, lots of pressure, constant pressure and quite simply, tram specialists were able to find jobs elsewhere which were very much easier.”

Mr Mackay was also asked about evidence provided earlier by Andrew Fitchie, who was seconded to TIE from law firm DLA Piper. Mr Fitchie said he had told officials at TIE in early December 2007 that the Infraco contract would cost significantly more than the price offered by the contractors.

He said he advised TIE on how provisions negotiated in Schedule Part 4 of the contract would allow the contractors to demand more money when there were changes.

But Mr Mackay said he was not aware of such information, adding: “If Mr Fitchie had said that to me, I would be able to tell you that. He did not say that to me.” Under cross-examination from Roddy Dunlop, for DLA Piper, Mr Mackay accepted that prior to contract close in May 2008 he was not as involved in TIE’s day-to-day activities. This became the case later, but he agreed at the time Mr Fitchie would likely have been reporting to others.

The inquiry also heard Mr Mackay had at one stage hoped to make Siemens – rather than Bilfinger Berger – the project’s primary contractor and that he had tried to “manoeuvre a gap” between the two.

He said: “I had a very strong impression that Siemens were unhappy with Bilfinger. I think we got very close to it. Unfortunately, a chap called Michael Flynn was badly hurt in a car accident and that abruptly halted the situation.

“I also think Bilfinger were getting a bit fed up with the whole scenario, and may well have been happy to get out.”

He said he formed this view of Bilfinger in late 2008.

The inquiry continues.