Select Committee on Public Accounts Minutes of Evidence



Examination of Witnesses (Questions 60-79)

SIR WILLIAM MCKAY KCB, MR ANDREW WALKER, MR MICHAEL BARRAM, MR HENRY WEBBER AND MR ANDREW MAKEPEACE

WEDNESDAY 15 MAY 2002

  60. So your own legal advisers, you have just told us, on the subject of the first appeal, informed you that you would not succeed?
  (Sir William McKay) We would not succeed in overturning the judgment on liability.

  61. Thank you very much. Can I move on to the appointment of Michael Hopkins and Partners to do a feasibility study for 25,000 to refurbish the existing buildings that were on this site. This is right back at the beginning of this project. Michael Hopkins and Partners then produced for free a plan to redevelop the whole site, without charge, but without competition. They were then appointed to do it. So what started off with them being awarded a contract for refurbishment for 25,000 fees ended up being a completely different contract for 13.1 million, and at no stage—at no stage—was it thought sensible to put that out to competitive tender. I find that absolutely staggering.
  (Sir William McKay) I can assist the Committee in an indirect way by saying that this happened before the House took responsibility, but I understand from a Written Answer that following the House's approval of, I think, a preliminary sketch plan, the Property Services Agency undertook a wide-ranging search to identify an architectural practice with the talent and expertise to undertake the development of this highly sensitive and technically difficult site, and there were interviews by the past President of the RIBA. There was a shortlist of suitable practices and fee bids submitted. The matter was put to the New Building Sub-Committee and they agreed the appointment by the Secretary of State of Michael Hopkins.

  62. Sir William, it is quite staggering, is it not, that you can appoint somebody for what is a comparatively small contract for 25,000, they then offer you a free piece of work, and we are suckered down the line to the tune of 13.1 million, without actually putting it out to tender? You said that an examination was done of who else might be able to do such work. Surely the best way to decide who else might be able to do such work is to put it out to commercial tender and let them come and inform you whether they can do this work?
  (Sir William McKay) Chairman, we are talking of a time before the House was directly responsible for this.

  63. I understand that, but you are here answering for your predecessors, are you not?
  (Sir William McKay) I cannot answer, I am afraid, Chairman, for my predecessors who were not in the service of the House but were in the service of the Crown.

  Chairman: I am told that is right.

  64. Sir William, does the same apply to Ove Arup who were Michael Hopkins' engineers for the initial study, because of course the DoE appointed them without competition as well, and ultimately another contract to execute without competition was also awarded to Ove Arup? I thought that was within your purview. Ove Arup were paid 3.2 million against a budget of 2 million, again without it going to commercial tender.
  (Sir William McKay) Again, I am given to understand that these appointments were made before we were responsible for the construction of the building, although I would not wish to say they were made without the knowledge of the appropriate authority of the House, because the New Building Sub-committee was consistently kept in the picture.

  65. Under the Kappa Report, Sir William, the design team's response times were said to be too long, the project team lacked leadership and the construction manager lacked expertise. Do you take the responsibility for that?
  (Sir William McKay) Changes were made at our behest to put this right in the construction management team.

  66. What is your estimate of the costs of them having gone wrong prior to them putting it right?
  (Sir William McKay) I am not sure that we made such an estimate, but we will attempt one, if you wish us to do so.[1]

  67. The Braithwaite II Report expressed serious concerns about the quality and governance and financial controls in the Parliamentary Works Directorate. Mr Barram, is that something you wish to respond to?
  (Sir William McKay) If I may, before Mr Barram does that, Chairman, I have already mentioned that structural changes (if that is the word I want) were made in the Works Department to separate provider and purchaser. That was what principally came out of Braithwaite II.

  68. Indeed. My question is rather as to why there were those concerns about the quality and governance and financial controls in the first place?
  (Sir William McKay) They came out of Braithwaite I which was the wider report on the governance of the House, which Michael Braithwaite did. Two streams—Braithwaite I and the desire in terms of Portcullis House to make changes—came together.

  69. The Legg-Bosworth Report talks about "poor procurement practices and serious mistakes in the handling of the contract". Would you care to address those?
  (Sir William McKay) The serious mistake was doubtless the one the responsibility for which we are not attempting to avoid, being the error in complying with the regulations. The Legg-Bosworth Report made other recommendations which we answered by the changes which were made in procurement responsibilities.

  70. Sir William, given all the reports and the court cases, the words which stand out are "unclear", "unfair", "unlawful", "guilty of misfeasance", "serious concerns about quality and governance", "lack of leadership", "lack of expertise", "serious mistakes in the handling of the contract". This is a disaster, is it not?
  (Sir William McKay) I could, Chairman, perhaps respond to that by saying that there are other quotations: "timetabling compares well for similar buildings", "creditable achievement on completion times", "creditable performance in restraining construction costs".

  71. Indeed, let us not trade quotations then, Sir William. Let me move on very briefly, because I only have two minutes left. First of all, there are construction costs of 141 million—I think I am talking of 1992 prices here. There are non-construction costs of 51 million—I am not clear whether it is 48 million or 51 million—and that is including the professional fees, the legal costs, the additional costs. That is a rather high proportion of fees and additional costs, would you not say, at well over 33/34 million?
  (Sir William McKay) I have mentioned our attempts to renegotiate fees where it made sense to do so. I have mentioned also the basis, which we think we can justify, on which the percentage fees were charged.

  72. Sir William, let me put it to you this way: let us take the million out and put a thousand in its place, if you were building a house for 141,000, and that was the construction cost of it, would you not be surprised to have to pay 51,000 to your architects and your lawyers to do so?
  (Sir William McKay) Not if it was a particularly difficult house built over a hole in the ground with a hole in the ground under that.

  73. Of course the hole of the ground does apply particularly to the construction costs. Have you ever travelled in the North West lift, the padded one, at the other side of the building? Can I recommend that you never do so when it is anywhere near lunch time or supper time because, I do not know whether you are aware, it is actually used as the means of conveying hot food from the kitchens up into the restaurant and as such, in any other building, I would have thought would contravene health and safety regulations because it is a passenger lift. Can you explain that anomaly to the Committee and also inform us as to whether the building is fully insured against any injury which might result to anyone travelling in the lift with hot food?
  (Sir William McKay) I can certainly guarantee that we will look into this problem and let you know what the answer might be. It sounds unusual. As to insurance, I think that in common with most government departments, we do not insure particularly. I do not think I would like to contemplate what might be the insurance premium in this building.[2]

 

Mr Rendel

  74. I should perhaps reveal to the Committee, as some of our witnesses already know, I was for a short time a member of the Accommodation and Works Committee back in 1997-98. I thought that might lead to some comments from fellow members of the Committee. Ignoring the land value of the site itself, do you know what the cost per square foot or square metre of this office is? The actual building?
  (Sir William McKay) We cannot quote it, Chairman. We will supply it, if we may.

  75. Do you also have an average value for other offices in Central London built at about this time? It would be interesting to be able to compare what this cost is per square metre and that of an ordinary office in Central London.
  (Sir William McKay) We could give that figure but, of course, you would understand we would be adding certain paragraphs about the uniqueness of this building.

  76. I fully accept that, and let me make the point straight away that I would not expect it to come out less but more, not least because I would also expect it to last a lot longer, which is half the point of the building, that it is due to last a lot longer than an average office building in Central London.
  (Sir William McKay) Our problem, Chairman, was, and it begins with the roof and goes through the whole building, that it has to last 120 years. Where would we find a building, at 30 year intervals, or whenever it is that you refurbish ordinary buildings, within the Division Bell area?

  77. Nobody is arguing that the decision to build a long-lasting building was not right, but I would still be interested in the cost per square metre of this building, given this is going to last a lot longer, with the cost per square metre of a shorter-lasting building somewhere in Central London.
  (Sir William McKay) We will supply it.[3]

  78. It seems to me, in a sense, the cost effective argument has to be made about this building, and I have no doubt you may well be able to say this building is more cost effective than a similar building in Central London, but I think we need the figures to show that. Can I then move on from that to the Harmon case, which obviously has raised a number of worries in the Committee. Appendix 4 makes it clear that Seele/Alvis appeared to offer a better, more cost effective scheme half way through the tendering process. If the other tenderers had at that point been told there was this alternative scheme available to them and had been asked to bid for that scheme as well, would that have avoided all this problem?
  (Sir William McKay) I think the problem arose, Chairman, because the B2 scheme, the one which we pursued, was commercially confidential and it was felt that we were unable to pass the good ideas of Seele-Alvis on to its competitors, and we had legal advice to that effect.

  79. Had you been able to, and I understand you could not for legal reasons, would that in practice have avoided the whole problem later on? In other words, is the difficulty that this commercial confidentiality put you into an impossible position which meant you could not actually take on the best scheme?
  (Sir William McKay) I think that is right, Chairman.

 


1   Ev 19, Appendix 1. Back

2   Ev 20, Appendix 1. Back

3   Ev 20, Appendix 1. Back

 
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