Q31 Mr Touhig: My impression yesterday was that you are very fortunate to have such a committed and professional staff who are making up for the shortcomings of the management of the whole project. If we can turn to page 21, paragraph 2.4, "The Department identified concerns about the design at several stages", at the bottom of that it says, "The [evaluation] team concluded that neither bidder"-Laser or Osborne-"had demonstrated specifically how it would meet the stringent temperature controls required in some of the laboratory spaces". We saw that raised yesterday. "The team suggested that a single laboratory should be selected and the bidders asked to work up their designs. The Department did not follow up the idea." Why is that, Sir Brian?
Sir Brian Bender: I think with 20/20 hindsight that is one of the things we would probably do differently, but, at that point in time, given the potential cost and/or delay, or indeed the risk of competing contractors walking away, and given the confidence that we were developing, as I mentioned earlier to the Chairman, it did not seem a necessary thing to do.
Q32 Mr Touhig: But your evaluation team recommended it.
Mr Dawes: At this point in time, yes, there were concerns, but the designs that were included in the best and final offer from Laser showed that some of the suggestions that were coming through from our advisers were being incorporated in the designs. It was only later, I think, when the actual pilot was built-and they did build a pilot-that unfortunately the designs that were incorporated in the pilot did not reflect the designs which we had seen during the discussion at the at the BAFO stage, the best and final offer stage. The other thing that happened, of course, was that the pilot was being tested in parallel at the same time that the facility was being built, so you had a difficulty in changing course. At least, I assume that is what happened.
Q33 Mr Touhig: The Report goes on in paragraph 2.5 to say, "The bid evaluation team also considered that Laser had underestimated how tough meeting the most stringent temperature control requirements wouldbe and had not made sufficient space available in its design for the machinery needed to maintain the specified environmental conditions. However, the Department did not demand from Laser detailed plans for addressing these concerns." It is somewhat negative again.
Mr Dawes: I think the whole point of PFI is about risk transfer. We can make the observations, if you like, about concerns that our advisers had with the design but ultimately it isfor the contractor todecide how to build the facility and to deliver the output specifications. If we had stepped in and dictated how the designs ought to be carried through we would have accepted design risk.
Q34 MrTouhig: It is a bit like Pontius Pilate though, is it not, washing your hands of it? If you look at 2.8 in the Report on page 22, it tells us that although there were concerns you really felt that "the financial and reputational consequences of failure would discipline Laser and JLC Ltd", but it did not, did it?
Sir Brian Bender: If I may say so, I think again there is some hindsight coming in here. At the time we were very concerned not to transfer the risk back to us and therefore we were determined to stick to output specifications. As I explained in a reply to Mr Leigh earlier, by the time of contract signature our earlier doubts about the partnership's ability to deliver this had largely been dissipated. Therefore, the question was how much confidence we had moving forward, but to step in in the way you were suggesting would have seriously risked us taking the design risk upon ourselves and therefore the consequences of that.
Q35 MrTouhig: What are you doing now, Sir Brian? You are taking the design risk on yourself and putting it right.
Sir Brian Bender: We have taken it upon ourselves.
Mr Dawes: Just coming back to when the build was happening, as soon as we knew that there were difficulties coming out of the results from the pilot we offered, and I think they accepted, advice from our own engineers as to how to resolve these issues, so we did at that stage step in and take some positive action. That in itself was difficult because of the problem of taking design responsibility, so we had to be careful in doing that. We felt at the time that we were doing what we responsibly ought to do to try and help the contractor along.
Sir Brian Bender: We have taken the design risk back now because at the point of termination it was no longer a PFI.
Q36 Mr Touhig: Several times, Sir Brian, you have used the phrase "with hindsight", and I agree that the perfect view of the world is the one looking back, but again, if you look at paragraph 2.6 of the Report on page 22, it says, "After the Department had appointed Laser as preferred bidder, reservations about its understanding of the project's requirements remained. In early 1998, the Department was of the view that some of Laser's proposed mechanical and electrical solutions would not deliver the specified performance." That is not hindsight. That was telling you then.
Sir Brian Bender: And at the time we were spotting this and, as Mr Dawes has said, we were therefore giving additional engineering advice and support to Laser, including from a company, I think it was called HDR1, that had been involved in the building of the American Institute. If you are getting the impression from the document that we were just standing back saying, "Here are the specifications; get on with it", that was not what we were doing. We were giving as much support as we felt we prudently could.
Q37 Mr Touhig: You are challenging 2.8, are you? You do not agree with 2.8?
Sir Brian Bender: No. I am saying that the impression is that we were doing absolutely nothing. Of course, I agree with the Report, but the impression from this period of questioning is that we were standing back. We were working as closely as we could with Laser, including giving them engineering advice, and indeed access to the advice from this company HDR to help them solve the problem, but without stepping over the line and accepting the design risk.
Q38 Mr Touhig: What does your Secretary of State say about all this?
Sir Brian Bender: My current Secretary of State?
Q39 Mr Touhig: No, the Secretary of State at the time.
Sir Brian Bender: No doubt submissions were put to him.
Mr Dawes: There were obviously some concerns about the progress of the job as it went along and there were reviews, quite clearly, of progress, how we were getting on, whether we were doing the right things.
Q40 Mr Touhig: The Secretary of State signed the contract on 31 July 1998. That was Mr Mandelson. He took up the job four days before. What did you tell him-he had been in the job four days-about what he was signing?
Mr Dawes: I am afraid I cannot answer that.
Sir Brian Bender: If the Committee would like a note in terms of what ministers were told at a particular time we can of course provide that.2
______________________________________________________________________________________
1 Note by witness: In early 1998 the Department's principal engineering advisors were Hulley & Kirkwood, although Laser and its engineers were offered access to HDR at a visit to NIST in spring 1998. HDR's involvement in the project on-site started in the summer 1999.
2 Ev 14