Cost of trams was ‘fiction’ as it could change by next day

PRICING agreements for the Edinburgh trams project may have been ‘fiction’ because officials knew they could change the day after they were signed off, an inquiry heard.

The suggestion came from Lord Hardie, chairman of the Edinburgh Tram Inquiry, as he heard evidence from Steven Bell, former tram project director for Transport Initiatives Edinburgh (TIE).

The inquiry is trying to establish how and why it was completed at an inflated cost of £1billion and three years behind schedule.

Mr Bell was quizzed on documents which outlined pricing agreements made by council-owned, arm’s length company TIE.

Part of an agreement on ‘pricing assumptions’ was highlighted and read aloud to Mr Bell. It said: ‘The parties acknowledge that certain of these pricing assumptions may result in the notification of a notified departure immediately following execution of this agreement.

‘This arises as a consequence of the need to fix the contract price against a developing factual background.’

Crucially, it went on: ‘In order to fix the contract price at the date of this agreement, certain pricing assumptions represent factual statements that the parties acknowledge represent facts and circumstances that are not consistent with the actual facts and circumstances that apply.’

This essentially admits that pricing assumptions were not tied to the on-the-ground reality of the project, which was still in flux.

Mr Bell admitted: ‘It’s not a standard clause. I’ve principally come across it in relation to the tram project.’

But he was quickly taken to task by Lord Hardie, who said: ‘In these circumstances the price is a fiction? Is the price a fiction in those circumstances, if you alight on a price which you acknowledge the day after the contract won’t apply?’

Mr Bell said: ‘I don’t believe it’s a fiction. There were certain elements that were not complete in the design and this approach allowed us to be firm on the items that were clear and to take cognisance of areas that weren’t.’

Lord Hardie continued: ‘But if I had come along to you on the day of the contract signing and said, “Right, what’s the cost then?”, what would you have said?’

‘It’s acknowledged here that it’s based on circumstances that don’t exist. So what’s the price? If I want to know, is it £100million, £200million, you can’t tell me, can you? You can see there are certain prices on the basis they’re fixed, but that might change.’

Mr Bell replied: ‘It’s fixed in terms of the elements that are clear from the documentation, and has to be read in conjunction with the commitment from the contractor to achieve the employer’s requirements, and there are a number of areas that were not fixed and we agreed a mechanism by which we would value them.’

But Lord Hardie said: ‘There’s a price based on certain elements, but as of today’s date, when I’ve signed it, there’s an immediate uplift. So if the people of Edinburgh or the council came to you and said, “We need to know what the price is”, you wouldn’t have been able to tell them, would you? Apart from this formula that you keep repeating.’

Mr Bell said: ‘The contract was not set as a guaranteed maximum price form of contract. If it had been, you could use that number.’

In 2012, it was revealed that Mr Bell had received £87,000 in compensation when TIE was shut down the previous year.

The inquiry continues.