Q81 Chairman: Sir Brian, I forbid you for the rest of this hearing, or indeed in any other hearing before us, to use that phrase "20/20 hindsight".
Sir Brian Bender: I am so instructed, Chairman.
Q82 Mr Bacon: Sir Brian, has it occurred to you that if you were not sitting where you are today defending the Department's role in this you could be limbering up for the Rural Payments Agency on which the NAO have published a Report today? Are you not a happy man?
Sir Brian Bender: I am very conscious that the NAO have published their Report today and I have been following the matter closely since I left Defra.
Q83 Mr Bacon: With equal distance?
Sir Brian Bender: I do not think it is appropriate to be drawn on that.
Q84 Mr Bacon: I will confine myself to the NPL. I was listening to your answers to Mr Touhig earlier, and indeed to the Chairman's very first question, because you described a situation where you were not sitting back, where you were trying to help. On the contrary, from what has been suggested, you were highly involved in trying to put it to the contractors what it was that they should be doing, but you described a situation where you were dancing round the heads of pins to try and not step over some mythical line so that you did not end up with the design risk, and what you ended up with was something that was deeply sub-optimal, something that in many ways failed to deliver. The National Audit Office Report says on page 6 that it did not secure value for money, and you ended up with the design risk. When it says in 2.18, "Forcing resolution of its concerns over the design would mean that the Department would be taking back some of the risk . . . ", so essentially you had entered into an arrangement where it was the case that you had serious concerns and you were not able, because of the arrangement you had entered into, to force resolution of those design concerns, were you?
Sir Brian Bender: As you were speaking I re-read the passage on page 6. We did not achieve, as the NAO says, full value for money in the short to medium term.5
Q85MrBacon: But you protected the downside, yes. I should have included that.5 Note by witness: I would have gone on to complete the quote from the NAO Report; that the Department did protect its downside position.
Sir Brian Bender: If I may say, given what turned out to be such a complex project, and given some of the problems that arise in project management in the construction or indeed the IT area, I would not belittle that achievement.
Q86 Mr Bacon: No, no, protecting the downside is important and I do accept that. Coming back to the Chairman's question at the beginning about complexity, if it is complex then surely to goodness the people who are going to be engaged by you to do something need to have a very deep understanding of what it is that you want them to do and, what is more, you need to be sure that they have got that understanding, and yet there were you, on the cusp of helping, doing what you could to help, reaching over to help without actually stepping over the line where you could have given the most help you could, and I bet there are people inside the laboratories who would love to have said, "You need to do this, this and this", but who were not allowed to, which comes back to the Chairman's question about complexity. We saw with the Libra project in the magistrates' courts, and that kind of product actually was not particularly complex, frankly, but the NAO concluded, as did we, that that type of IT project should not be done with PFI. Given the very high technical specification, one in which you, the Department, did not know until after you had signed the contract that some of your requirements would need leading edge engineering, which is itself an astonishing thing: you signed a contract without having that knowledge, is it not the case that perhaps, as the Chairman said, this type of project of this complexity makes it unsuitable for PFI?
Sir Brian Bender: I find that very difficult to answer and I will try not to use the words I was instructed not to use by the Chairman a few minutes ago. There was no reason to believe at the time the contract was being signed that there was going to be such difficulty about these particular laboratories. After all, as was discussed earlier, the requirements were being achieved, albeit on a smaller scale and with less reliability, in the old buildings and therefore there was no reason to believe that it was impossible. The American Institute was producing something similar and we were dealing with contractors who had a very good track record in high technology laboratories. The other point I would repeat is that, had we not gone down the PFI road with all the difficulties we had, but had gone by traditional procurement methods, we would not have had the capital to have ended up with a single facility. We would have had piecemeal development with much more disruption to the ongoing science.
Q87 Mr Bacon: Why was the construction of the buildings commenced before you could know what the footprint ought to be when important elements of the mechanical engineering were not yet made clear?
Mr Dawes: There were a number of things that were done before the contract sign. There was clearance of some of the old buildings in the preparation of the site, which I think is, as I understand it, not unusual.
The extent to which there was new build was very limited and was literally about a month before the contract sign. It was limited to some piling, I think, in the first phase, so it was quite limited. The other pre-contract expenditure was that we paid up front something like £1.8 million in advance design fees which we would recover if the contract had not been signed. That was the extent of the up-front payments, if you like, or the construction up front. Could I just come back to the last point that Sir Brian was dealing with? I think it is also interesting to note thatat about the same time as the PFI project was being built Laing, under a direct contract with the Department, not part of PFI, was building a radiation dosimetry measurement facility which had a very similar specification to the close control rooms, plus or minus 0.1, and that works; there are no problems. It was built on time and on cost. That, I think, is an indication that the engineering is there, it is available in the market. ffies, I think category two is a different kettle of fish possibly, but with regard to the fundamental principles of delivering plus or minus 0.1 control, the technology is available.
Q88 Mr Bacon: Mr Ewer, why did Laing sign the design and build contract if there were concerns inside the company about the output specification?
Mr Ewer: At the time the contract was signed the company did not, I believe, have those concerns. There should have been concerns. I think there were failings in the company to rigorously test our competence and the competence of our subcontractors in this area, but at the time it was signed it was probably on the border between naivety and arrogance by building people who feel they have done everything that has been thrown at them so far so they can do anything. They did not test it. It was not tested rigorously enough and the management processes within our organisation were not sufficient to put down that challenge. There were failings on our part but I do not believe those who signed thought, "It will not work".
Q89 Mr Bacon: Your liability cap was set at £31 million, was it not?
Mr Ewer: On termination.
Q90 Mr Bacon: Why was it as low as that?
Mr Ewer: That is what was negotiated. In these projects a liability cap is negotiated. We would at that time have regarded that as quite high by normal standards for a fixed price design and build project. The margin that is made on these projects, if they are successful, is very thin.
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5 Note by withness: I would have gone on to complete the quote from the NAO Report; that the Department did protect its downside position.