Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Memorandum submitted by Mr Ken Bates, former Chairman and Mr Bob Stubbs, former Chief Executive, Wembley National Stadium Limited


  I refer to your letters of 12 June addressed to Bob Stubbs and myself respectively inviting us to submit a memorandum to the Select Committee by the 14 June. We are grateful for the opportunity but it is regrettable that only two days have been allowed to provide a response from the shortness of the period to compare a response and to save repetition this letter is submitted as the consolidated response of myself and Bob Stubbs.

  The National Stadium project commenced in earnest in the spring of 1998 almost 12 months prior to the signing of the Lottery Funding Agreement in March 1999. Sport England awarded the England National Stadium Company a grant of approximately £3 million to cover the professional fees and other costs associated with the acquisition. It should also be understood that up to March 1999 the English National Stadium Development Company (ENSDC) acted independent of the FA. It was only in March 1999 that the ENSDC became a FA subsidiary and changed its name to Wembley National Stadium Ltd (WNSL).

  It was clear by the summer of 1998 that the Lottery Grant of £120 million would be expended on the acquisition of the stadium, circa £110 million including fees with the balance being applied towards the initial design costs—this effectively meant that all other costs, including the construction contract would be funded through commercial loans and FA support. The ratio between public and private funding was approximately 1:4 and is now 1:6. The result of this situation was quite clear to all involved namely:

    —  the project was a commercial project;

    —  post the initial acquisition phase it was WNSL/FA and only WNSL/FA who would benefit or suffer from the decisions made by WNSL; and

    —  the Lottery Funding Agreement would be critical to setting the basis of the operations of WNSL.

  The Lottery Funding Agreement was clear that public sector procurement procedures were not required to be followed and in relation to the construction procurement a competition process should be undertaken. There was no mention of best practice. Sport England were fully aware of the procurement process being followed by WNSL and to our knowledge never raised any concerns. It is therefore clear that Sport England viewed WNSL as acting within the terms of the Lottery Funding Agreement. In fact at the Select Committee meeting in March 2001 Sport England confirmed that no breaches of the Lottery Funding Agreement had occurred and I understand that this is still the position.

  Tropus within their report have made a number of allegations in relation to non compliance with the Lottery Funding Agreement. It is clear that the Tropus position is not consistent with the Sport England position.

  It may at this point be as well to explain the actual role of Tropus. At a very early point a decision was made to provide a project management internally. This was achieved through the recruitment of a Director and a Deputy Director of Construction as permanent employees. To support these staff, staff were seconded to WNSL from Tropus. The relationship with Tropus was the supplier of temporary staff. Tropus were paid on an hourly basis for supplying staff. Tropus had no professional responsibility at all to WNSL, they were not providing professional advice merely hired labour. At an early point Tropus did provide professional advice in relation to construction procurement. This advice proved to be so flawed that Sport England at one point indicated that if WNSL continued to follow the advice provided by Tropus then they would cease to make any further grant payments.

  As this point is so fundamental to the Tropus position I wish to reiterate the true position. Tropus were not providing any professional advice, their staff were working at a junior level and had limited knowledge of the affairs of WNSL. They were in no position to be able to comment on many of the points in their report.

  The Tropus report completely ignores the fact that WNSL had a full range of advisors who were engaged to provide the advice on many of the matters to which Tropus refer. Their advisors were appointed through a competitive process prior to March 1999. In particular advice was taken on almost a continuous basis from Franklin and Andrews, WNSL's cost consultant. Both myself and Bob Stubbs were fully aware that WNSL had to comply with the Terms of the Lottery Funding Agreement and achieve value for money. It is interesting to note that on both it would appear that objectives were achieved.

  Franklin and Andrews agreed that the contract sum was competitive and we understand that a subsequent independent review undertaken by Cyril Sweet reached the same conclusion.

  Tropus and David James have also referred to potential conflicts of interests. These were identified at an early point by Bob Stubbs who made sure that appropriate measures were put in place to avoid any possible allegation. In my case on at least two occasions I declared my previous relationships with Bovis and Multiplex.

  At the end of the day the relationship with Bovis/Multiplex was terminated unilaterally by WNSL. If there was favourable treatment given to Bovis/Multiplex Tropus need to explain why the relationship was terminated unilaterally by WNSL.

  Once the relationship with Bovis/Multiplex was terminated it was WNSL's intention to return to the market. At that point Multiplex, acting on its own, approached WNSL and made a provisional offer to agree the contract on the basis previously rejected by Bovis/Multiplex. For a period of approximately three weeks negotiations took place with Multiplex. Franklin and Andrews were involved in the negotiations and prior to the heads of terms being agreed in September 2000 Franklin and Andrews confirmed that there would be no commercial advantage to be gained by WNSL exposing the opportunity to the market.

  It must be remembered that WNSL had previously approached 12 major contractors and only Bovis/Multiplex were willing to consider a guaranteed maximum price contract at the value indicated by WNSL. The contracting market was well aware of the problems experienced by Laings at Cardiff, a reported loss of circa £50 million. There was little if any appetite in the market for a construction contract on the terms set by WNSL.

*  *  *

  Note: The Committee declined to publish the remainder of this letter.

13 June 2002

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