Q91 Greg Clark: Mr Fuhr, I do not know whether you were joking in saying that the best way to discipline consultants is not to re-hire them if they get it wrong, but they got it wrong and I do not understand the basis on which they were re-hired. Did they go through a competition for the second and third times they were commissioned?
Mr Fuhr: There was originally a competition.
Q92 Greg Clark: The second and third times?
Mr Fuhr: I cannot tell you from memory whether there was a competition or whether there was a continuation of the original contract. Any consultant who is producing forecasts will produce a range, and there will be a view which you have to take within that range about where the future is likely to pan out.
Greg Clark: It was below that.
Mr Fuhr: Some of the forecasts that were produced in 1998, which were the original LCR forecasts, were very substantially higher, based on original BR and SNCF figures. The figures that were produced by Booz Allen Hamilton at the time were substantially below that, but could not take account of some of the market forces which intervened, like the low-cost airlines and some of the perturbations which we were talking about earlier.
Greg Clark: I am concerned, Chairman, in terms of the rigour of processes, when, by Mr Fuhr's own admission, a consultant gets it wrong, it should at least be looked at again; and there is no recollection at least that at the second and third times of re-hiring there was even a competition to look to see if anyone could make a better case to get it accurate.
Q93 Chairman: There are further questions we would like to ask about the effect of the taxpayer- related cost overruns, but I understand you prefer that we ask those in private.
Mr Rowlands: That would be helpful.
Chairman: Because it is commercially confidential we can agree to that. We will now move to private session and I would request all members of the press and public to leave.
Q94 Chairman: Tell us about the effects of the contract and how much more the Department has lent LCR.
Mr Rowlands: *** In terms of what does this mean to the Department and behind us to the taxpayer, there is no immediate cost to the Department. This additional cost is met by LCR. What it will do is bring forward the date on which they are likely to have access to the access charge loan agreement that I touched on earlier when I talked about re-forecasting the current position. It is not simply about one of the Eurostar's best forecasts now for revenue and passengers, but we also need to feed in the additional cost in the project to re-calculate when LCR is likely to access the access charge level agreement.
Q95 Chairman: Mr Holden, what is your latest estimate for the cost overrun?
Mr Holden: We believe it will be in the order of £*** million.
Q96 Chairman: £*** million. The figure I was given by the NAO was £***, but let us not quibble over £*** million. You said in 2001 and earlier on there would only be a small chance of the target construction cost being exceeded, is that correct?
Mr Holden: Yes.
Q97 Chairman: What has gone wrong?
Mr Holden: As I explained earlier, over half that increase, in excess of £*** million, I think, has been explained by the inflation factor which we were not aware of in 2001. In fact in 2001, the period leading up to that-
Q98 Chairman: It still begs the question how you could have been so confident in 2001. You must have foreseen that some of these difficulties, uncertainties or inflationary pressures might have arisen?
Mr Holden: We had no reason at that time to anticipate the additional inflationary pressures we have incurred. Clearly, there have been things which we assumed and have come right, and there are other things we have not. There are things that we assumed which have not taken place and there have been cost savings. To specifically identify individual amounts is extremely difficult. That is why we have contingencies. Unfortunately, on Section 2 it has proved not to be quite sufficient, but on a project-let us remind ourselves of over £5 billion-that remains on time and within, if you exclude inflation, less than four percentage points above the original estimates 10 years ago, that is an incredible achievement for a project of this size and complexity. We should be very proud of that fact.
Q99 Chairman: ***
Mr Holden: ***
Q100 Chairman: ***
Mr Rowlands: ***