Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 240 - 259)



  240. You have a clear 24 acres and, as I say, my understanding and the Committee's understanding is that round about £30 million would be an appropriate price for that. There is another seven acres which you seem to have purchased which has a restriction and you must start construction before a date in December of this year, otherwise it reverts. Given that you have paid £103 million for a business and you are left with land which may be worth around the £30 million but I accept that an alternative use might provide a higher price, why did you accept a restriction of that sort?
  (Mr Cunnah) The restriction relating to the seven acres?

  241. Why are you having to return seven acres of land that you have already paid a fairly inflated price for?
  (Mr Cunnah) The seven acres was provided to ensure that there was sufficient land to build the stadium at a time when the design of the stadium had not been finalised. Now that the design has been finalised the land indeed will be needed and will not be returned to Wembley plc. It was a solution at the time which allowed two negotiating parties to determine the size of land when it was uncertain.

  242. You say it will not be returned, but it will only not be returned if you start work before December.
  (Mr Cunnah) That is correct.

  243. And you have still got to negotiate the situation with the bank. I know that you are fairly advanced in these negotiations but there is not a 100 per cent guarantee until the cheque is in the bank, is there?
  (Mr Cunnah) That is correct.

  244. The question then that we have to look at, given that our priority is the protection of the public funds, is what protection is there for those public funds? If this project does not go ahead £120 million has been given to WNSL and its predecessor and we are sitting on land which may be worth only £30 million, indeed less than that, given that seven acres of it has to go back to the original owners.
  (Mr Cunnah) The security over the Lottery money related to the business that is at Wembley and therefore we would work with our stakeholders, Sport England and the Government, to review what the options were related to that business before we came to any conclusions.

  245. If you do not get the money from the bank you are seven acres short for your design, so presumably you will have to go back to the drawing board even if there is a prospect of building it at Wembley. Meanwhile the public purse loses £90 million or thereabouts.
  (Mr Cunnah) That is why we would review it with our prime stakeholders. One of the possible conclusions could be a loss of value but there are many options that we would look at before then to make sure that we did protect the public money as far as we could.

  246. But then you may not have any scope for options because if I understand the Lottery Funding Agreement you are already in breach in a number of aspects of that but there has been a certain amount of latitude allowed by Sport England. Your position would collapse completely, would it not, if Sport England simply demanded its money back?
  (Mr Cunnah) We have been in partnership with Sport England and have worked very closely with them to most carefully manage these difficult issues that arise in a project of this nature.

  247. Can I move on to a different area? You heard the discussions with Tropus on the procurement contract. I am a little confused about the way in which that contract was actually negotiated, particularly given the advice we have that the Lottery Funding Agreement requires European public procurement practices to be implemented in the contract.[2] It is quite clear from what we have heard from the Tropus report and read in the James report and the legal report which accompanied that that you did not apply European public procurement practice and both reports make it clear that you did not even apply best practices in this area. Can you say a little bit about why you did not comply with the Lottery Funding Agreement?

  (Mr Maslin) Perhaps I could start. First of all, we took advice at the time from Masons.

  248. Who are Masons?
  (Mr Maslin) Masons are our construction and property lawyers. Basically they confirmed to us that in these circumstances OJEC procedures were not required and therefore we did not have to tender into a more open environment.

  249. Sorry to interrupt you, but my understanding of the Lottery Funding Agreement is that that is a contract between WNSL and Sport England.
  (Mr Maslin) That is correct.

  250. And so is this not a breach of contract?
  (Mr Maslin) No. If I may continue, as you say, one of the requirements in the Lottery Funding Agreement is to make sure that we had a competitive tendering process and that is clear.

  251. At European public procurement levels?
  (Mr Maslin) It says "a competitive tendering process". Our advice was that we did not have to employ European measures in that sense. The advice that we got from Tropus in May 1999 was very much along the lines of looking at this project in three packages in terms of demolition and, while the demolition is going on, looking at the shell and core and looking at the fit-out in separate parcels. At the time, and that is rather than, let us say, going for a fixed price lump sum turnkey contract, Sport England themselves looked at that strategy and, given their concerns that this would not be bankable, they in fact stopped the remainder of the Lottery funds, which were due to WNSL, coming to us, so the initial procurement strategy that had been raised by Tropus was not accepted by Sport England on the basis that it would not be bankable. Subsequently, given our conversations with the banks, they absolutely looked for a fixed price lump sum turnkey contract.

  252. Can I be clear then because, as I say, the Committee's understanding was that the Lottery Funding Agreement requires that European public procurement standards are adopted? Are you saying that you received advice and that this whole situation was discussed and negotiated with Sport England and that they—
  (Mr Maslin) Yes, it was.

  253. And that they allowed you to proceed on the basis on which you proceeded?
  (Mr Maslin) Well, as you say, the LFA does say that we do have to follow OJEC if it is appropriate. Our advice very clearly from Masons was that in these circumstances it was not appropriate and not necessary.

  254. Was that a position you negotiated with Sport England?
  (Mr Maslin) We discussed it with Sport England at the time.

  255. No, not discussed; negotiated and received firm agreement.
  (Mr Maslin) Firm agreement with Sport England on that basis.

  256. So if requested by the Committee you could produce correspondence which confirmed that position?
  (Mr Maslin) I will have to check my records.

  257. Given the criticisms that David James has made of the whole procurement process, you are saying that that process was approved by Sport England?
  (Mr Maslin) No. What I am saying is that at that time the initial procurement strategy recommended to us was not approved by Sport England because they did not think it was going to be bankable. We then moved to a fixed price lump sum turnkey contract which we offered to the market in July 1999, which was a process and a procurement strategy that was approved by Sport England because it delivered committed funding. To be clear again, in the Lottery Funding Agreement we needed committed funding for 100 per cent of the whole of the project before we could demolish the building.

  258. I am sorry to press you on this, but it is quite important. David James has shown a lot of deficiencies in the process and you are saying, if I read you clearly, that that is despite the fact that there were these obvious deficiencies. They were obvious to Tropus, they were obvious to David James and they were obvious to the legal team that you employed, that that process was negotiated, discussed and approved by Sport England? The contracting process which has been so heavily criticised was not undertaken by WNSL on its own initiative in ignorance by Sport England?
  (Mr Maslin) It was certainly driven by WNSL, absolutely. There were significant—


  259. Let me interrupt you. If Frank will allow me to put it in capsule form, did Sport England know what was going on?
  (Mr Maslin) Sport England were aware of the competitive tendering process that was launched on 14 July where we went out to the market on a fixed sum turnkey project basis.

2   Footnote by witness: The obligation on WNSL under the Lottery Funding Agreement (LFA) was (a) to comply with all relevant law to the extent applicable (including European Union procurement legislation), and (b) where WNSL was properly advised that European Union procurement legislation did not apply to the award of a particular contract, to adopt commercial competitive tendering procedures. There was no obligation under the LFA to obtain consent from Sport England if European Union procurement standards were not to be followed where WNSL had obtained legal advice that these standards were not applicable. WNSL obtained advice to this effect from Masons on 29 March 1999. This letter was available to Sport England as part of its regular process of reviewing documents and a copy was provided to Sport England on 27 September 1999. Back

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