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Outcry as consultants on tram deal paid £140,000 bonuses
Paul Hutcheon - Sunday Herald - 28th November 2010

It was supposed to be the contract that would bring a world-class tram network to Edinburgh.

The deal between Transport Initiatives Edinburgh (TIE) – the body set up by the city council to oversee the project – and a private-sector consortium was even hailed as value-for-money.

Liberal Democrat council leader Jenny Dawe was “delighted” with the deal. The then TIE chairman Willie Gallagher said his team had driven a “hard bargain”.

Two years on, the dream of re-introducing trams to Edinburgh has turned into a nightmare. Relations have broken down between TIE and the main contractor, costs have shot up, and the project is stalled.

The Sunday Herald can now reveal another disturbing aspect of the way TIE handled one of the most controversial transport projects in decades.

As well as relying on external consultants to help with key aspects of the so-called InfraCo contract – the key deal underpinning the project – TIE let the same experts share a £140,000 bonus pot for their work.

Overall, TIE has said it paid nearly £250,000 in bonuses to seven consultants for their advice on contractual and other issues.

The scandal of bonuses to consultants is directly linked to a deal struck two years ago by TIE. Although none of the consultants directly contributed to the “chaos” that has since ensued, they did accrue huge amounts of public money from their work.

In May 2008, TIE signed off the InfraCo contract with Bilfinger Berger and Siemens (the BBS consortium), which was to deliver a tram line between Edinburgh airport and the Granton area of the city. Spanish firm CAF, a tram manufacturer, was the third part of the consortium.

Bilfinger had responsibility for laying the track, Siemens focused on systems integration and electrification, while CAF was to supply trams.

But since the deal, the consortium has demanded extra funds, construction of the line has faced long delays, and Princes Street has become a regular eyesore.

All the while, senior figures in both Bilfinger Berger and TIE have grown increasingly frustrated with each other. The problems reached their nadir earlier this month when TIE chair David Mackay quit amid another row with the German firm.

“Bilfinger Berger were a delinquent contractor who scented a victim, who probably greatly underbid and would use the contract to make life extremely difficult for the city. And they have done exactly that,” he said.

Relations with the main contractor are now so low TIE is considering terminating the contract.

But the Sunday Herald has found the council-owned body paid big bonuses to consultants who worked on the InfraCo contract.

Matthew Crosse, TIE’s “project director” at the time of the deal, received £370,000 in consultancy fees from 2007 and 2009 paid to his firm, Strategic Lines.

Part of that was a £30,550 bonus. His LinkedIn biography states his assignment at TIE included negotiating “competitive contracts”. Alastair Richards, whose job was to work on the design of the trams with CAF, 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.

However, 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 revelations raise questions about why a publicly-funded body needed to pay consultants bonuses.

This newspaper asked Scottish Enterprise, VisitScotland, Highlands and Islands Enterprise and Transport Scotland – all of which have spent significant sums on consultants – if they pay bonuses to outside experts. None said they did.

SNP MSP Shirley-Ann Somerville, a tram project critic, said: “Paying any kind of bonus to anyone involved in the Bilfinger Berger contract is unacceptable. That contract has brought the project to a standstill. Exposing the half-a-million paid in bonuses to TIE’s staff has brought a welcome end to internal bonus payments, but continuing to pay bonuses to tram consultants when the work is simply not being done defeats the purpose.”

Charlie Gordon, Labour’s transport spokesman, said: “I’ve never heard of bonuses being paid to consultants in the public sector. It does seem extraordinary. It is also obvious the contract involving Bilfinger has proved to be difficult.”

A TIE spokesman said: “It is normal practice for bonuses to be paid upon the sign-off or closure of a substantial piece of work on major construction projects.”

Timeline of Edinburgh Tram Project
March 2006:
Legislation passed to reintroduce a tram network to Edinburgh. Delivery body is TIE, an arms-length company owned by Edinburgh City Council.
June 2007:
Parliament votes to continue tram scheme, but caps contribution from the public purse.
October 2007:
Edinburgh City Council approves final business case for the project.
May 2008:
Final contracts are awarded to a consortium including Bilfinger Berger, Siemens and CAF. The contract is worth a total of £512 million.
November 2008:
TIE executive chairman Willie Gallagher stands down.
February 2009:
Work on Princes Street stops due to contractual disagreements.
April 2009:
The tram loop connecting Granton and Newhaven is ditched by TIE.
August 2009:
TIE begins legal proceedings against the consortium over delays to the project.
June 2010:
Fears grow that the cost of the project is going to rise to at least £600m.
November 2010:
TIE chair David Mackay quits, describing Bilfinger Berger as a “delinquent contractor”.
December 2010:
Edinburgh City Council expecting report from TIE on future of contract with the consortium.

See also:
Edinburgh trams chief leaves troubled project
Edinburgh tram route to be cut as cost spirals
Threat of legal action against ex-trams boss
More delays feared after tram 'judge' backs foreign contractors
Fire us if we're not up to the job, says trams chief
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