There was undoubtedly a breakdown in the relationship between the contracting parties. If I may, I will resist the temptation to categorise the breakdown in the relationship as the cause of the delays; I think that it was more a symptom of the delays.
What did we do? Initially, we received regular updates from CMAL on progress, which was a condition of the voted loan. CMAL initially indicated that it had some concerns and that there was some slippage to the programme, but we were initially confident that the mitigation that CMAL had in place to manage those concerns was adequate. That is described in the network strategy group updates that have been published on our website. The mitigation included regular escalation meetings with the contractor and its own on-site monitoring.
Around February 2017, CMAL wrote to us indicating that it had concerns that the delays to delivery were beyond those that would be permissible under the contract. CMAL wrote directly to ministers on that occasion. At that point, we convened a meeting of the parties to understand what the underlying issues were. Those are well rehearsed, but I can go into them if that would be helpful.
Transport Scotland sought to bring the parties together to incentivise them to work constructively. In that context, we were not acting as an extrajudicial dispute resolution mechanism or decision maker; we were seeking to encourage the parties to work constructively in their client-contractor relationship. Both parties had obtained independent advice in relation to the cause of the delays, and we encouraged them to share that advice with each other, which they did, but there was no reconciled view on the cause or on proposals to move matters forward.
11:45
As I have indicated to Mr Lyle, we sought assurances from CMAL that it was acting as a responsible client to the extent that it could, exercising flexibility in relation to its approvals and ensuring that approvals through the iterative design process were happening timeously. We saw no evidence at that point of Ferguson’s engaging the contract mechanisms that existed in the event that that was not happening.
We encouraged CMAL to consider what flexibility it had as a responsible client in relation to milestones under the contract to assist with Ferguson’s cash-flow issues to the extent that it could. That was undertaken in the summer of 2017—I am sorry to be vague about it, but I can confirm the date. There was a revised milestone payment schedule, which was tied to clear performance delivery mechanisms, to assist with Ferguson’s cash flow. We were unable to accede to all of Ferguson’s requests in that respect, but I am satisfied that CMAL did what it could to achieve the right balance between flexibility and risk.
I am sorry that this is not a concise answer. We encouraged the parties to consider alternative dispute resolution mechanisms, which are clearly set out in the contract. There was the option of mediation, but the parties could not agree on an appropriate mediator or on the process to be applied.
There is a process for expert determination. CMAL took the view that the quantum of the claim, which at that point was around £66 million, exceeded that which would be appropriate for reference to expert determination. I think that that was a reasonable view, and I know that it was informed by CMAL’s independent legal advice. We encouraged—that is the wrong word—but we were clear that the next stage, if there was a contract dispute, would be through the contractual mechanisms in the Court of Session. However, that was not forthcoming from Ferguson’s, as the contractor.
What else did we do? In the absence of a formal dispute resolution mechanism, we sought to shift the focus from what had gone wrong to a more forward-looking approach, which involved asking, “How do we get this back on track? Are there reasonable steps that we can take to bring this back on programme while minimising delay?” Commodore Luke van Beek was engaged in the context of a commercial loan to Ferguson’s, independently of us. We sought his input and asked whether he had any feedback. He made some proposals, none of which was appropriate to take forward, but that was still useful in that we could satisfy ourselves that we had done everything that we could to incentivise and facilitate Ferguson’s performance under the contract.
I am sorry that that was not a brief answer.