Sunday, June 26, 2011

Scottish practices

So, what are we to do with the news that the cost of the Edinburgh tram system is now going top £1 billion, by the time it is complete – if it ever is – more than double the starting estimate?

Originally, it was intended to run for twelve miles from Edinburgh Airport to Newhaven via central Edinburgh, including a stretch on Princes Street. The 23 stops on the route were to be served by a fleet of 27 low-floor trams. Now there is doubt that it will do even that.

However, even a truncated scheme will cost £773 million - £273 million more than the budget for the entire project - and the limited service then offered would not be viable. It would need a subsidy of some £4m a year: there is no prospect that the short route would ever make a profit. And scrapping the whole scheme entirely would still end up costing £750 million.

But the Scots are wearily familiar with this sort of thing. Another recent project was the M74 extension which began with an estimated cost of £245 million in 2001 and a completion date of 2008. The final cost, including land, came to £692 million, and the extension is finally due to open this week.

Such is the surreal nature of the project though, that the opening is accompanied by farcical ministerial assertions that it had come in "£15m to £20m under budget" and that it was opening "eight months early".

But behind the current disaster is a story little known outside Scotland, centering on the establishment in 2002 of a new body by Edinburgh Council, called TIE Ltd (Transport Initiatives Edinburgh), which was supposed to manage the project.

In 2009, the organisation acquired a new chief executive, Richard Jeffrey, who was to manage the project through the construction phase until operation. On 19 May, however, the media conveyed his abrupt announcement that he was leaving on 8 June, just as the news emerged that the City's main Princess was going to be closed for ten months while repeat roadworks were carried out - the street already having been closed in 2009 (pictured below) after an earlier contractural disaster.

This is the third chief executive to have departed. Yet, despite his lamentable performance, Jeffrey is expected to walk away with a year's salary, said to be £155,000, plus other benefits, leaving the Herald Scotland to complain that 72 percent of the construction work remains to be done, while only 38 percent of the budget is left. This confirms, it says, "that cheques have been written out in a wanton and cavalier fashion".

In the interim, TIE has spent £20m on hiring "consultants" to advise them on how to overspend. As well as pocketing huge fees, these people scooped massive bonuses, rent payments and expenses. Creating TIE also meant using a budget that was supposed to be for transport infrastructure is funding an elaborate tier of senior managers and directors.

Amongst the beneficiaries of the consultancy bonanza has been an umbrella outfit called InfraCo which, in addition to high level fees, shared a £140,000 bonus pot for their work. Overall, TIE has paid nearly £250,000 in bonuses to seven consultants for their advice on contractual and other issues.

These included Matthew Crosse, TIE's "project director" who received £370,000 in consultancy fees from 2007 and 2009 paid to his firm, Strategic Lines. Part of that was a £30,550 bonus for his work in negotiating "competitive contracts". Alastair Richards, whose job was to work on the design of the trams, got a £25,000 bonus.

Geoff Gilbert was the commercial director working on the InfraCo negotiations and another key contract. His firm, GGA, took home £230,000 in fees, of which £23,500 was bonuses. David Powell, a project manager on the same contract, was paid £124,124 through firm Linkplan Ltd for the tasks he carried out. £11,200 of that was a bonus.

But the biggest bonus of all went to the lawyer who advised the trams body on InfraCo. Andrew Fitchie, a partner at Edinburgh law firm DLA Piper, got a £50,000 bonus for work on the contract. DLA Piper received over £2 million for legal work for TIE.

Needless to say, the advisers' bonus bonanza was not restricted to the InfraCo contract. Jim McEwan, TIE's "business improvement director", was a consultant who worked primarily on the utility side of the project. His firm, RacReb Consulting Ltd, got £405,000 of taxpayers' money in fees between 2007 and 2010, of which £90,000 was bonuses.

Bob Dawson, head of procurement design, advised TIE on utility diversion. His consultancy, Acumetic, was paid £158,000, including an £18,500 performance-related bonus.

The fiasco has been watched from afar by Subrosa, who has branded the whole scheme a white elephant after TIE's chairman stepped down with immediate effect last November declaring parts of the project "hell on wheels".

Amongst other things, the TIE has become noted for outrageous junketing. April 2007 had seen £1,032 blown on a staff quiz night at a top class Edinburgh hotel and a year later bosses spent £880 on a staff party at another venue. Another £800 was spent in August 2008 on a "team event" in a bar, while £3,102 was found for a "board strategy day" in North Berwick.

In February last year, TIE used £1,630 of its budget for an "executive team away-day" at the Edinburgh International Climbing Arena and two months later it spent £2,648 on another one at the same location. It must have been very popular because three weeks later they were there again at a cost to the taxpayer of £4,017.

Richard Jeffrey, still then chief executive, said of the events: "As regards our team at Edinburgh Trams, they are the lifeblood of the organisation and investing in them means investing in the right people to manage what is a complex and difficult project".  God help us if he had invested in the "wrong" people.

And on top of all that, £29,549 was spent on foreign business trips by staff. Senior employees had travelled overseas on 29 occasions since 2007, unfortunately buying return tickets. Additionally, £68,000 was spent on membership of professional organisations since 2006.

We really know how to waste money, concludes Subrosa after another egregious failure came to light, cementing in the term "Scottish practices" to add to the Spanish (and Greek) variety.

The term can be used to describe wholesale looting of the public purse on grandiose schemes, enriching contractors, consultants and officials, without care or remorse. There seems to be awful lot of these practices around – and we haven't even started on the English practices.

For all their prattle, is there any politician in the land – or group of politicians - either side of the border, capable of stopping them? If not, what are politicians for?