Q81 Kitty Ussher: When you answered my questions previously you said that you now had a developed economic methodology for assessing the benefits of transport infrastructure. To clarify, is it that guidance that you have used in 2001 of the chart on page 20?
Mr Rowlands: No.
Q82 Kitty Ussher: So since then?
Mr Rowlands: If I had answered your question in 2001 I would have answered it differently.
Q83 Kitty Ussher: Is it therefore possible to revisit the cost-benefit analysis done in 2001 using this new tool that you now have and perhaps coming up with an updated Departmental assessment of the value for money?
Mr Rowlands: That is what we propose to do. What we propose to do once this second section is open and you can see what the actual increase in ridership is and you have a clearer view of what is happening at Stratford, King's Cross and so on, is do a complete write-up of the project, so we re-visit the costs and the benefits, and we can finally establish as best you can the out-turn position. We want to re-visit it in terms of lessons to be learnt for the handling of other projects, some of which the NAO itself has drawn out in the report. We would probably want to re-visit quietly and hide in a drawer in case of FOI some of the internal Departmental handling of all of this as well because there are lessons to be learnt.
Q84 Kitty Ussher: That is interesting. When do you propose to do that?
Mr Rowlands: I do not think we can realistically do it-I think we can start the work-I am speculating now-at the end of 2006 into 2007, but I think it is not until then that you can realistically expect to produce a rounded analysis of what we finally got.
Q85 Kitty Ussher: For the record now, you are saying that if you had had the tools available in 2001 that you have now, your decision on value for money and cost-benefit analysis may have been slightly different particularly in terms of the regeneration aspects.
Mr Rowlands: I think the analysis would have been better developed. I am not saying the decision would have been different. I think the better-developed analysis would have supported well the decision that was taken in 2001.
Q86 Kitty Ussher: You have mentioned that you might want to re-visit your Department's handling of the whole issue. Do you think your Department has handled it well?
Mr Rowlands: If I am allowed to say so, this is a huge project and immensely complicated. There was a sad history of major infrastructure projects in this country going completely belly-up. This has had its problems, but I think it has been, in the round, well handled, including if I may say so by people in my own Department in terms of particularly the various crises that have riven it, from London and Continental coming in in 1997 asking for another billion pounds from the Government through to-we rather foolishly thought we had put Railtrack's balance sheet behind the project at one stage and that disappeared-
Q87 Chairman: You are getting softer and softer. Can you try and raise the volume?
Mr Rowlands: In the round it was well handled, but there are lessons to be learnt.
Q88 Mr Davidson: The estimates from Booz Allen Hamilton seem to have been quite well laid out in the beginning. Was their fee accuracy-related?
Mr Fuhr: No, there was not, and it would be quite difficult to do that because it would have to be done in retrospect; you would have to see what the out-turn was and then try to claim back if you thought it was wrong. The best way to discipline consultants who do not deliver well is not to employ them again.
Q89 Mr Davidson: That is an interesting point. Booz Allen Hamilton were wildly out in their first estimates, so you punished them by giving them another contract; and now, as I understand it, you have given them a third contract! Explain to me how the system of penalties works.
Mr Rowlands: If I may say so, the people who were originally wildly out were called British Rail and SNCF, whose original forecasts for this railway were hugely bigger than the numbers we are now looking at. It is true that Booz Allen have struggled to produce totally accurate forecasts, I think for the reasons that Mr Holden and I have tried to explain; but it does reflect the difficulty of forecasting ridership and revenues from brand-new infrastructure where you have got no analogues to look to. Again, going back to lessons learnt, next time-and I am sure there will be some kind of next time-we need to look much more substantially at the downside risks and what will drive this project under water.
Q90 Mr Davidson: The defence of Booz Allen Hamilton is, first of all, that somebody else did it worse, which does not seem to me to be entirely valid; and then they struggled to produce an accurate so-and-so-that presumably is what you are paying them for, to produce an accurate result. The idea that all this is very difficult and we should be thankful for anything we get at all does not seem to me to have the correct rigour applied to it. I do not entirely accept the point about trying to recover a fee in arrears because presumably part of the fee could be withheld if necessary in order to see how accurate they are? Quite clearly, the estimates here were quite drastically out for somebody who is selling expertise in forecasting. To get their forecasts wrong-it would not be so bad if you just picked somebody off the street and asked them to dissect a chicken and examine the innards-but these people are actually marketing themselves as being able to forecast the future accurately, and getting it wrong.
Mr Rowlands: We are satisfied that Booz Allen did the best professional job they could do at particular points in time. If we did not believe that, we would not have re-hired them.