Q161 Ian Swales: Okay. Well, there's another angle. My real question is: if we were flies on the wall in those rooms, would we have been hearing discussions about go or no-go, different forms of financing and different forms of project, or would we actually have been listening to a discussion of, "How we are going to justify the route we have already decided?"
Graham Dalton: As accounting officer, I was very clear, right the way through from when I took over in June 2008-I know my predecessor was, because I discussed it with him-that this was a procurement; a lot of work had gone into specifying and getting it right, and this was a very important procurement that a very important motorway has got to operate right. I was very clear that we needed to maintain a view on what it would cost to do it another way. These were genuine, "Do we go or stop?" decisions.
Q162 Chair: Can I just ask you a question about the actual contract, because it takes you back? The contract-the way in which you framed the invitations to tender-stopped any alternative being considered. Who advised you of that nutty way of having a contract, particularly when one of the people whom you asked to tender wanted to give you a hard-shoulder running alternative? Why on earth did you set yourself that framework? What you should care about is the outcome, namely that you wanted people to move faster and delays to be fewer. That's what you wanted. Telling them how to do it was absurd, particularly when one of your tenderers wanted to do a hard-shoulder running option.
Graham Dalton: I accept and I agree that that original notice in the Official Journal of the European Union should almost certainly have been worded more loosely.
Q163 Chair: Who did that?
Graham Dalton: That would have gone out with the agencies and the Departments.
Chair: Who was responsible for that? One of the consultants, presumably.
Ginny Clarke: The Highways Agency was responsible.
Q164 Chair: Who advised them?
Ginny Clarke: We had one or two advisers but the decision was the Highways Agency's.
Chair: Who? Who advised?
Ginny Clarke: At that stage-you will see on your list-we had Halcrow advising on procurement and we had PricewaterhouseCoopers advising on financial elements, but the decision about what went in the OJEU notice was solely from the Highways Agency.
Q165 Chair: The decision was based on advice you got from internal officials and external. I would have utterly no confidence in advice I got that limited my options so that I then went for a solution that we find it very difficult in the Committee to assess as a value-for-money solution.
Graham Dalton: We need to remember that we had already considered whether hard-shoulder running could be piloted on the M25.
Q166 Chair: Why was it excluded? That's what is so nutty. Why was it excluded?
Graham Dalton: The decision that was made at the time was that having looked at it carefully and decided this was not the place to pilot hard-shoulder running, had the OJEU notice been worded more widely- which I think would be a good thing to do and we put a lot of effort into doing that, and it is a lesson we have taken away-we would have still been at the question of okay, it allows us to do it, but would we still be prepared to go into what would have been a re-bid and a re-tender-
Q167 Chair: And you are still using the advice of those consultants?
Ginny Clarke: No. Can I just be clear, Chair? We might have had advice, but the decision about what went in that OJEU notice was for the Highways Agency and the Highways Agency made that decision in consultation with its parent Department.
Q168 Chair: I understand that. We should probably turn to advisers. You spent £80 million on advisers for this project, which was 7.5% of this absurd cost, against an average spend of 2.6%, usually, on advisers. It seems to me they gave you lousy advice and I accept you, in the end, took responsibility for the decision. What on earth were you doing spending this much money on advisers?
Graham Dalton: Can I just come on to the comparators first? As I think I said when we met a couple of weeks ago when we started getting into this, the 7.5% is a calculation against the two stages of widening, sections one and four. The contract that is being put together enables us to do works to, widen or improve the other two sections as well and enables the operations and renewals over the 30 years. The norm, which is capital investments of, say, £100 million to £200 million on a PFI, of 2.5% is the norm across all the range of PFIs. This is a PFI where, even if you just include the other two widenings-another £1 billion-the 7.5% starts to look like 3.75% just by that calculation, so there is a factor of percentages taken against a low capital figure.
This is an operational motorway. We don't just write something for a new facility, which gives fairly free reign to the PFI company on what they provide and output terms. We do specify, quite heavily, the performance that they have to give. We want them to take full responsibility for this network over 30 years. We have provided them with complete records, documents and drawings going back for the life of the scheme. To enable them to price it, we had already gone through the early stages of design. We have produced a reference design, and it was really important that we did that, because, while this is still widening, it is not the widening that has previously been done on motorways, because this was done within the land corridor. If you drive around the north-west section now, where the motorway goes under the Chiltern railway line, you will see that it is squeezed through under that viaduct. Had we gone for a conventional approach, we would have had to rebuild that viaduct. That would have added hundreds of millions into the scheme. We had to do the design work to test that we weren't going to be immediately hit with, "I'd love to do it, but it's not physically possible," or, "I need to take extra land," and then get into compulsory purchase and the rest of it. A lot of work has gone into its viability and into providing records.
Q169 Chair: Why consultants?
Graham Dalton: Because the Highways Agency, since it was set up, and also, in fact, its predecessor, when it was a departmental body, have contracted out since the early '80s.
Ginny Clarke: Since the early '80s, we have not done our own designs, so a chunk of this was about the design. I would separate them out, so the design is that bit that we always contract out. That is the model.
Q170 Chair: Is that value for money?
Ginny Clarke: Yes. We would otherwise have to employ all those people ourselves.