Live: Bosses from Balfour Beatty, Galliford Try and Aberdeen Roads Limited are being questioned by MSPs
From Balfour Beatty is major projects managing director Stephen Tarr (ST) and from Galliford Try’s construction and investment chief executive Bill Hocking (BH) and ARL director Brian Love (BL)You can watch back the full meeting at www.Scottishparliament.tv
04/12/18 Reverse order Timestamp format
Here's our latest story on the Aberdeen bypass
The rural economy and connectivity committee meeting is due to get underway at 9am. The members will be hearing evidence from Stephen Tarr from Balfour Beatty, Bill Hocking from Galliford Try and Brian Love from Aberdeen Roads Limited (ARL)
Following the meeting, Transport Secretary Michael Matheson will update the committee
The meeting is getting underway now.
Lewis McDonald and Mark McDonald are also present at the meeting.
The committee will hear evidence from the contractors shortly.
From Balfour Beatty is major projects managing director Stephen Tarr (ST) and from Galliford Try’s construction and investment chief executive Bill Hocking (BH) and ARL director Brian Love (BL)
The first question is from Richard Lyle
He's asking: how did the defects in the River Don crossing occur?
Stephen Tarr is providing an update
They have secured lender consent in the last 24 hours which paves the way for the southern stretch to open next week.
They're working to complete the works at the Don Crossing which they hope to open those works later this month.
The Southern Section includes Stonehaven to Charleston and Craibstone
ST: The issue at the Don crossing was unexpected, first arose in May
ST: It's a complete significant structure, 300 metres long.
ST: It's a post-tensioned structure, that's constructed incrementally in the air
ST: There's something like 75 structures that are cast and then post tensioned in place
ST: Each segment is about 3 metres along and 3 metres high - you can stand up inside the structure
ST: What became apparent when we were about to start the stressing work, there was some minor cracks that appeared on the underneath of the structure
ST: When this was observed we stopped the work to inspect it, which led to a series of investigations and we then destressed the bridge
ST: Intensive investigations were carried out to check the alignment of the ducts, their alignment is quite apparent - in some locations they were displaced causing unexpected pressure in the concrete around the ducts
ST: Sections of the deck were broken out to realign and recast the ducts and ultimately restress the structure
ST: The process took quite a period of time
ST: As of today all the stressing and grouting is complete
Richard Lyle: Who is responsible for the defect work, and what works are/is required to rectify these defects?
ST: The defects are fixed, the issue is around why the ducts weren't aligned
ST: We don't feel we tied the ducts down sufficiently during the concrete pouring process
ST: We have a similar bridge that cross the Dee (as part of AWPR) which went without any issues
ST: The Don bridge has vertical and horizontal curvature which complicated it
ST: Problem first identified in mid-may
He has been asked when the solution to the problem became apparent
ST: It took 6-8 weeks, due to the nature of the investigation works and a rolling sequence of investigation and repairs, we needed to make sure the repairs didn't affect the structure overall
He has now been asked when was the government notified
ST: The onsite engineers would have been aware of the issue in almost real-time, but they wouldn't have had the same understanding as we had
Edward Mountain: In May a problem was identified which would cause a substantial delay
ST: At the time we didn't know the full impact, we knew we had an issue in an particular area.
ST: The true impact was emerging as we built a better understanding of the situation
Stuart Stevenson: Was it Aberdeen City Council that was told, or were you also communicating with Transport Scotland?
Mike Rumbles: I'm interested in the contract, i want to follow the money, we were told it's a fixed price contract
Mike Rumbles: We were also told there would be no further cost because of the delays. You mentioned a contract variation, to me that means more money will be changing hands
Mike Rumbles: If this is a fixed price contract, how much more money are you receiving from the taxpayer
BL: Its a revenue finance structure, the government pays when its complete
BL: ARL are not paid any money until the road opens. 3 phases are open and money is flowing for those sections
BL: The government will make payments proportional to the section that will open next week
BL: Government pay annually to Aberdeen Roads Limited
Mike Rumbles: We have been told cost to taxpayer is £745m to build this road - i'm interested in this contract variation, are you receiving any more taxpayers money over and above the £745m
BL: The government only pay when sections are open. The government has paid less to date
The four phases have now been split into five
ST: This is what we mean by the contract variation
ST: No more taxpayers money
Edward Mountain: Are you getting extra money for the new phase
Mike Rumbles: The road from Stonehaven to Kingswells has been ready for two-three months, this included the section including the Don Bridge
BH: No secret we've experience some significant challenges, weather, carillion demise and utilities
BH: It's been mentioned we've some discussions to have with Transport Secretary
Mike Rumbles: Are you claiming more money over and above the £745m, you've also put in a claim to Scottish Government for more money, what is that?
BH: We have put in a claim to Transport Scotland where some issues, we believe the risk lies with Transport Scotland
Stuart Stevenson: I just want to understand the structure of the contract, is it structured like most contracts were basically the works are described in a schedule.
Stuart Stevenson: Is there a process in which works change in a schedule that there is a repricing involved
SS: Has there been changes to description of works?
BL: There's been a number of change orders and variations throughout the contract
BL: The value of those in the context of the project have been very modest
SS: Have there been any that reduce or increase the price?
BL: There have been changes both ways
BL: The claim to Scottish Government is on other matters
ST: One of the most significant issues has been the early works with the utility providers
ST: There are something like 300 utility paths that cross the scheme across 58km length
ST: The claim we have with Transport Scotland actually stems from delays, underperformance in relation to those utilities companies
ST: It's those delays that have disrupted the progress of the works, and those issues are at the heart of the claim
SS: Is the dispute how the contract allocates the responsibility for the utility diversions?
ST: I think the nature of the contact has been characterised transfers significant risk to the private sector
ST: There are obligations placed on contractor to work and manage the utility companies works
Edward Mountain: Can you confirm the timelines for the utility problems
ST: Some were completed on time, others were 18 months late
Issues were mentioned in March 2017
EM: Are you telling me the issues with Utilities were not complete in march 2017
BH: We had been working tirelessly to mitigate those delays
EM: In March 2017 were told the road will still open on time, which suggested the problems with utilities had been resolved
Peter Chapman: You've told us you don't get paid until sections are open, and that the Stonehaven section has been completed. Why has lender consent been such a difficult thing to achieve?
BH: There was no contractual mechanism to open that section - we couldn't have opened it without breaching the contract. Which is why we needed the variation to the contract to allow us to open that stretch.
Due to complexity BH says it takes a frustratingly long time
BH: We have a very strong vested interest in opening sections. Delays in opening this section has cost us £4 million odd
Jamie Greene: You said due to increased complexity and weather delays, your estimate of the final cost has increased by £20m. Will you absorb that cost, or will it be passed to Transport Scotland
BH: We have raised £150m to cover the costs of this project, the £20m is costs that will paid from our share of the contract
BH: The Don bridge cost, that's our cost
JG: You said balfour beatty, recognise an additional £23m loss on the AWPR project, can you update us on your estimated loss on the project
ST: There is no doubt, we have incurred, significant additional costs on this contract trying to mitigate the delays
ST: Had we not taken some of these measure, the road would have been delayed longer than it is. The significant costs are hundreds of millions and contributed to demise of Carrillion
ST: We have had to trade losses
ST: We had had to go dispose of assets to fund our share of losses on the contract
ST: The joint venture partners are hundreds of millions out of pocket on the work we have been doing on Aberdeen
ST: We have a claim, for a not insignificant sum that we are in discussions with Transport Scotland over
ST: Those discussions are continuing
JG: This committee has a duty, we were told that this project would cost £745m, the panel is saying there's hundreds of millions of overruns, but it's entirely unclear where the liability lies, and how much will rest on the public purse
ST: Regrettably i don't think I can answer the question in the way you would like
ST: All i can say is, its a material, serious financial situation we are in, there are some things that will be to our account, we carry risks,
ST: Where there is a legitimate risk that we feel that are retained by the public sector, the contract provides how they are addressed
ST: It's uncertain for us, we don't know the outcome of those discussions of those commercial discussions:
ST: It's not a very comfortable feeling on this side of the table
LM: Is the claim in 10s or millions of hundreds
ST: That's not something that i would want to answer here, because of the commercial nature of the discussions
LM: If i was to put to you that the total cost of the project is over £1billion?
ST: Yes, I think from what we've said, you could deduce those are the areas of the cost
LM: The contractors have been accused of holding the government to ransom
BH: Peter Truscott spoke in good faith when he spoke to the minister when he spoke to him on October 29
BH: So, what happened, what Peter was unaware of, over the weekend we'd had some issues with the Don bridge and those issues mean there was an undefined delay and until we could understand the nature of that and the impact, we couldn't send anything to the lenders
BH: As soon as we realised that was the issue we wrote to the minister to set the record straight
LM: Nonetheless, it's still taken a month to agree the contract variation
BH: Regrettably it takes longer than we would all like, we were going full steam to try to achieve that
BH: The government held firm on some issues we wanted to insert. On the 19th we received the ministers final stance, on the 20th our legal advisers reviewed the documents, on the 21st we resolved to send the documents to the lenders
EM: Michael Matheson's comment that the contractors had not been entirely straight on this matter is completely untrue?
BH: Yes, Peter spoke in good faith
Mark McDonald: I just want to get my head around the timelines
MM: The contract variations, that was first discussed in October?
BL: It was prior to that, the contract variation was proposed by the contractors
BL: The Lenders consented last night
BL: The variation came about when the Don problems manifested back in the Summer. It's a really complex contract structure
BL: The first part of that is a discussion between the key parties which was completed in October. The final part was agreement with the lenders. it's a spiders web of contracts
MM: In June, Balfour Beatty half year results, it states, part of AWPR open to public, with majority to be open by end of August, completion of the remaining bridge to be complete by Autumn
MM: In June, Balfour Beatty Chief executive was advising shareholders that a piece of work that was necessitated by a contract variation was expected in August
MM: Why were shareholders being advised that the section being open by end of August, when reality is taken three months longer
ST: At the time, we anticipated we would reach an agreement to open at the end of august. The actual physical structure, the certificate was submitted in August. The issue has been over formally getting an agreement over the terms
ST: On the bridge, we didn't know we were going to have the further problems in October
MM: You can understand when those comments were reported, they led to expectation, do you regret that there hasn't been better expectation management?
Mike Rumbles: A yes or no answer, very simple question, I want to know if you've been given any indication if your claims for more taxpayers money would be looked on more favourably if you would just look open the stretch
John Mason: How much impact did the collapse of Carillion have?
BH: From a practical perspective, it disrupted our operations. They were one third of the venture, providing one third of working capital and one third of the staff
BH: We had an obligation to continue the contract, we employed a vast majority of the Carillion staff, we believe we mitigated the affect of Carillion's involvency as best we could
JM: Once a section is opened, and the money starts flowing, does some of that money go to Carillion's liquidators?
BH: No, on insolvency they are excluded from the venture, which regrettably means they don't take their share of the losses
ST: It's an integrated team, it's one team delivering the whole of the works
Em: Them going bankrupt didn't affect the opening time
BH: Not significantly I wouldn't have said, we took on most of their staff in a couple of weeks of them going bust.
Maureen Watt: The majority of the road is in my constituency, we've talked about delays, but can I talk about Storm Frank. Did Storm Frank make you revisit any of the drainage around the works
BH: Not that i'm aware of, the bridge over the Dee would have been designed for a 100-year weather event
ST: It impacted our works, but we don't anticipate it affecting the design of the works
MW: A large number of my constituents have been affected by the road, where you have taken over pieces of land, can I urge you to make sure the handing it back, in the proper condition is done as quickly as possible.
BH: We will take that back to the site team and make sure that's done as soon as possible
ST: If there are any circumstances you've been made aware of, where we've not delivered on, we'd be happy to hear that
BH: Stonehaven to Craibstone and Charleston, by the end of next week, we're targetting before Christmas for the rest of the road. The final parts of the bridge could be impacted by weather.
JG: How would you characterise your relationship with the Scottish Government?
BL: It has been professional throughout - there's no secret there's been some challenges and some frank exchanges of views
BL: Dialogue has continued through and been professional throughout
JG: Realistically, how much comfort should the public take in your ability to have an going 30-year relationship with the Scottish Government
BH: In response to that, the remaining two parties have diligently, and honourable executed the project under difficult circumstances and next week we will hand over 57 odd km to the people over the north-east
BH: We are proud of what we have achieved
BH: Our exchanges with Transport Scotland have been professional
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Peter Chapman: Do you have concerns about the Scottish governments non-profit distributing model for financing these, would you be content to enter into a new contract under a similar regime?
BH: We may have to lick our wounds for a while, the model is fundamentally sounds, its used and schools with no issues, they are smaller
BH: I personally think the risk-reward balance is wrong,
BH: To put another scheme like this, i would personally be more risk-adverse, which would mean I wouldn't win the contract in the first place.
PC: There is still a lot of drainage works to be completed, can my farmer friends have confidence you will be around for long enough to make sure all these issues are sorted
BL: The projected date were working to just now is the main highway
BL: We're projecting March for those works. We've a 30-year concession to operate this road.
EM: My is going to be the final question
EM: On sub contractors you have used, the program cost £745m, and could cost over £1billion
EM: Can you give me a guarantee that the sub-contracts have done work in good faith will be paid in full
ST and BH: Yes, absolutely
EM: Thank you for coming and giving evidence this morning, it has been very interesting from our point of view this morning.