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Haymarket

Princes St tramworks – more to come <em>Picture: Richard Webb</em>

Princes St tramworks – more to come Picture: Richard Webb

By John Knox

The baffled contractors for the Edinburgh trams are now working out how they will complete the line to St Andrew Square for a mere £776 million.

The white-collared executives at Bilfinger Berger headquarters back in Germany must be ruing the day they ever took on this contract. It has been plagued by problems from the start – vagaries in the initial agreement, disputes, delays, technical difficulties, unforeseen extra work, simple bungling, incompetent middlemen, a divided and confused council, a hostile government and an angry public.

But has there ever been a large public works project that has gone smoothly? When the original railway lines were built in the 19th century there were constant delays and disputes. The tram projects across England in the 1980s and 1990s – in Manchester, Nottingham, Birmingham, Newcastle, Sheffield – took 10 to 15 years to build and were subject to alterations, disputes and financial crises before they finally proved a success. The much vaunted system in Dublin was three times over budget. And yet all of these transport systems are now the boast of their citizens and have been extended or are being extended.

It was all a question of keeping one’s nerve. And this Edinburgh council has finally managed to do, though the councillors have behaved badly along the way. How, for instance, did they ever manage to vote for the madcap option of halting the line at Haymarket? The Labour and Conservative councillors who pushed this through must have been attending a tea party in Wonderland.

The economists were telling them that very few people would want to use a line from the airport that stopped short of the city centre. It would make a loss of £4m a year. And where would the terminus and turnaround area be? And how much extra would that cost?

The Conservatives went further at the final vote and wanted the whole project abandoned. This is after £440m has already been spent. Mind you, the ruling Liberal Democrats had been drinking something peculiar too when they claimed that the cost of cancellation would be £750m – give or take the odd £100m. This must have included not just the money spent already but also the cost of buying out the construction contracts and putting the underground pipes back where they were – a little too much tidying up and somewhat disingenuous.

As for the SNP, their opposition to the trams has always been a little suspicious. It does not easily square with their ambition for Scotland as a modern, well public-serviced nation. Did they really want to leave the capital city without a vibrant city centre and without the transport capacity to expand? Edinburgh would be left as the only major city in Britain without either an underground or overground rail system.

I suspect the SNP’s opposition was all a populist ploy to take advantage of the temporary frustration with the trams in Edinburgh itself and to appeal to people in other parts of Scotland who felt that “posh Edinburgh” was getting too much of the national cake. In the end, though, the SNP saw sense and realised the only thing to do was finish the line to St Andrew Square, whatever the cost.

John Swinney, the finance secretary, finally brought people to their senses by threatening to withhold the £72m the government still had to pay as its share of the cost. That allowed the council – in the SNP’s favourite phrase – to think again.

Now it’s up to Bilfinger Berger and the other contractors to get on with the job and finish the line by, say, 2016. They have three major embankments to build. Then they need to lay most of the track, re-lay the botched section along Princes Street, build a terminus at York Place, install signalling and CCTV and arrange for the Lord Provost to cut the tape.

The council for its part needs to take out a loan for £231m – paying roughly £15m a year for the next 30 years. It needs to stop arguing with the contractors. And it needs to hold on to the vision that the line between the airport and St Andrew Square is only the beginning of a network of trams that will stretch to Newhaven and Granton on the north side of the city and to the new hospital at Little France and Musselburgh in the south and east. Then Edinburgh will be able to grow gracefully, with quick and easy access to the city centre from prosperous villages on its outskirts where property prices – and council tax revenues – will be rising nicely in the years ahead.

And as the works begin again, the investigations and the lesson-learning can begin, too. Lesson one: do not employ TIE, Transport Initiatives Edinburgh, and their expensive executives. They have very nearly ruined this project. Lesson two: for big transport projects use the experts at Transport Scotland, and here the Scottish government was at fault for not offering this assistance.

Lesson three: make sure the original contracts are clear about who bears the risk of unforeseen difficulties – it should, of course, be the council. Lesson four: do not have lengthy disputes with your contractors – disagreements should be settled while work continues because delays just cause costs to rise.

Lesson five: do not enter into confidentiality agreements, but let your disputes take place in the open air. Lesson six: be patient and understanding. These public works projects are difficult, take time and are expensive. Lesson seven: try to be responsible democrats. Political parties should not give in to every passing frustration in the press or from the public.

And finally, lesson eight: try to take pride in the project. It is creating jobs at a time of recession and it is building something for the long-term benefit of the city.

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<em>Picture: Xiengyod</em>

Picture: Xiengyod

By James Browne

It was probably the worst, least decision – so to speak. A few days ago, the City of Edinburgh Council decided to continue building the tram line – but to stop it at Haymarket.

The councillors had three options in front of them: to cancel the project, to take it to Haymarket, or to carry on with the plan to run the trams to St Andrew Square. The result was a political compromise which made no economic sense, at least in terms of running a tram service that would ever break even.

That decision is back in the melting pot after the first minister, Alex Salmond, warned that the Scottish government might withhold around £60 million. That’s what remains of the £500m grant given to the project by Holyrood. Now the floundering project is back before the council after the lord provost confirmed there would be a special meeting convened on Friday morning.

There had already been some speculation about last week’s decision. Work was already scheduled to restart on Princes Street next month, paid for by Bilfinger Berger, the main contractor. There was also the question of what had been agreed during the protracted period of mediation. Would a change to the terms of this – by cutting back on the route – alter the willingness of the consortium to continue with the project?

The economics of the decision, at least in part, also seemed to fly in the face of reason. The city would no longer have to borrow the extra £231m to fund the service into the centre of town, saving something like £15m a year in interest charges. But, instead, it guaranteed the creation of the ultimate white elephant.

Yes, the tram would run from the airport to Haymarket – but how many tourists would want to take a tram part of the way into Edinburgh, only to have to change to a bus or train to complete the last part of their journey? Some projections have suggested that the route could, as a result, lose as much as £4m a year.

Edinburgh Chamber of Commerce has already described the decision as “bonkers”, and there has been outrage among city centre traders who face yet more disruption. Princes Street was closed to traffic for almost a year to allow tram lines to be laid. But if trams now stop at Haymarket, this section won’t be needed and it may well have to close again to allow the lines to be lifted unless a phase two is envisaged at some time in the future.

The company which until now has been in charge of building the tram network, TIE (now effectively being wound up), had gone out of its way to accommodate the objections of businesses along the route. There have been suggestions that this was, in part, one of the reasons why the project has taken so long. However, it has emerged that the £25m which businesses in the city centre would have paid would now be lost were the service to be cut short at Haymarket. Around £5 million has already been received and would have to be repaid, with the remaining £20 million being written off.

If the last tranche of government money is withheld, the economic case for restricting the line will be thrown into turmoil once again. Could it be that the case for continuing to St Andrew Square, via Princes Street, would once again be preferable? Last week’s decision was supposed to be final. It could not be revisited for 12 months unless there was a material change in circumstances. The first minister’s announcement may represent such a change.

Speaking to BBC Scotland, the council transport convenor, Gordon Mackenzie, said that his own party (the Liberal Democrats) clearly thought cutting to route at Haymarket “…was the wrong option last time and with the costs likely to increase and a considerable question mark over the funding, we’re even more convinced that St Andrew Square is the better option.

“The big question is what do other parties think? I think the people of Edinburgh want us to act like grown-ups – to have a serious look at this. Nobody liked the Haymarket option. There was outrage in Edinburgh and elsewhere with it, so, I hope other parties will look at it afresh and come to a different conclusion.”

Friday’s meeting could also discuss the possibility of allowing a new consortium to take over the scheme. There have been reports that the Canadian train manufacturer, Bombardier, and the operator of the Paris Metro, RATP, are “still interested” in taking on the project despite a similar offer having been rejected in July. They believe they could control the spiralling costs of the troubled development.

Unlike the existing consortium, BSC (Bilfinger Berger, Siemens and CAF), which is being paid up-front, the new group has offered to finance the deal itself and only be paid when the trams were running. It also offered to take on the risk should there be any further problems with construction. In addition, any delays in completing the project and then not operating trams according to timetable would lead to a cut in payments.

However attractive that may be, councillors will need to take other factors into account – not least the cost of extricating the city from the existing contract. Friday’s meeting is likely to be fraught. Labour and Conservative members looked rather pleased with themselves last week when they voted through the shortened line. They will feel a lot less comfortable now.

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<em>Picture: Xiengyod</em>

Picture: Xiengyod

By James Browne

It was probably the worst, least decision – so to speak. A few days ago, the City of Edinburgh Council decided to continue building the tram line – but to stop it at Haymarket.

The councillors had three options in front of them: to cancel the project, to take it to Haymarket, or to carry on with the plan to run the trams to St Andrew Square. The result was a political compromise which made no economic sense, at least in terms of running a tram service that would ever break even.

That decision is back in the melting pot after the first minister, Alex Salmond, warned that the Scottish government might withhold around £60 million. That’s what remains of the £500m grant given to the project by Holyrood. Now the floundering project is back before the council after the lord provost confirmed there would be a special meeting convened on Friday morning.

There had already been some speculation about last week’s decision. Work was already scheduled to restart on Princes Street next month, paid for by Bilfinger Berger, the main contractor. There was also the question of what had been agreed during the protracted period of mediation. Would a change to the terms of this – by cutting back on the route – alter the willingness of the consortium to continue with the project?

The economics of the decision, at least in part, also seemed to fly in the face of reason. The city would no longer have to borrow the extra £231m to fund the service into the centre of town, saving something like £15m a year in interest charges. But, instead, it guaranteed the creation of the ultimate white elephant.

Yes, the tram would run from the airport to Haymarket – but how many tourists would want to take a tram part of the way into Edinburgh, only to have to change to a bus or train to complete the last part of their journey? Some projections have suggested that the route could, as a result, lose as much as £4m a year.

Edinburgh Chamber of Commerce has already described the decision as “bonkers”, and there has been outrage among city centre traders who face yet more disruption. Princes Street was closed to traffic for almost a year to allow tram lines to be laid. But if trams now stop at Haymarket, this section won’t be needed and it may well have to close again to allow the lines to be lifted unless a phase two is envisaged at some time in the future.

The company which until now has been in charge of building the tram network, TIE (now effectively being wound up), had gone out of its way to accommodate the objections of businesses along the route. There have been suggestions that this was, in part, one of the reasons why the project has taken so long. However, it has emerged that the £25m which businesses in the city centre would have paid would now be lost were the service to be cut short at Haymarket. Around £5 million has already been received and would have to be repaid, with the remaining £20 million being written off.

If the last tranche of government money is withheld, the economic case for restricting the line will be thrown into turmoil once again. Could it be that the case for continuing to St Andrew Square, via Princes Street, would once again be preferable? Last week’s decision was supposed to be final. It could not be revisited for 12 months unless there was a material change in circumstances. The first minister’s announcement may represent such a change.

Speaking to BBC Scotland, the council transport convenor, Gordon Mackenzie, said that his own party (the Liberal Democrats) clearly thought cutting to route at Haymarket “…was the wrong option last time and with the costs likely to increase and a considerable question mark over the funding, we’re even more convinced that St Andrew Square is the better option.

“The big question is what do other parties think? I think the people of Edinburgh want us to act like grown-ups – to have a serious look at this. Nobody liked the Haymarket option. There was outrage in Edinburgh and elsewhere with it, so, I hope other parties will look at it afresh and come to a different conclusion.”

Friday’s meeting could also discuss the possibility of allowing a new consortium to take over the scheme. There have been reports that the Canadian train manufacturer, Bombardier, and the operator of the Paris Metro, RATP, are “still interested” in taking on the project despite a similar offer having been rejected in July. They believe they could control the spiralling costs of the troubled development.

Unlike the existing consortium, BSC (Bilfinger Berger, Siemens and CAF), which is being paid up-front, the new group has offered to finance the deal itself and only be paid when the trams were running. It also offered to take on the risk should there be any further problems with construction. In addition, any delays in completing the project and then not operating trams according to timetable would lead to a cut in payments.

However attractive that may be, councillors will need to take other factors into account – not least the cost of extricating the city from the existing contract. Friday’s meeting is likely to be fraught. Labour and Conservative members looked rather pleased with themselves last week when they voted through the shortened line. They will feel a lot less comfortable now.

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Edinburgh tram excavations, 2009 <em>Picture: Anthony O'Neil</em>

Edinburgh tram excavations, 2009 Picture: Anthony O'Neil


Two days ago, John Knox wrote a piece arguing that the troubled Edinburgh trams project ought to continue, and making reference to John Carson, who will be standing for election to the Edinburgh council later this summer. Mr Carson now offers his response.

While Mr Knox is of course entitled to his views on the Edinburgh trams, some of his assumptions and assertions about my campaign for a seat on City of Edinburgh Council (CEC) require to be corrected.

Mr Knox mentions my previous employment at Network Rail. I was initially their director of regulation and business planning and latterly director of maintenance, a record of which I am proud and which has given me a unique insight into the practicalities and complexities of major projects.

He is right that I have no objection to trams in principle. My objection has been the incompetent way in which the Edinburgh project has been conducted, which prompted me to observe three years ago that the £545 million project would end up costing over £1 billion and be years over deadline.

I don’t claim this as a great feat of prophecy. Any councillor who had read the briefing note produced by Transport Initiatives Edinburgh (tie) on the signing of the infrastructure contract could have reached the same conclusion. The note clearly stated that there was a “variation clause” in the contract to cover changes in design, sequence and ground conditions. But the document also said that 100 per cent of the risk had been sold to the contractor and that 95 per cent of the price was fixed.

In these glaringly contradictory terms lie the seeds of the current disaster. The fact that Transport Scotland approved a project built on this contractual absurdity says much about their competence as financial managers of the grant to the project.

Mr Knox is right to suspect that SNP does not want to stop the trams, for all that party’s strenuous positioning on the issue. The nationalists have had many opportunities to pull the plug, since voting to approve the botched contracts that have put CEC on the road to ruin. The SNP deputy leader in Edinburgh, councillor Steve Cardownie, appears to have been too addicted to the benefits of office to have done more than bluster.

As to the sums involved, even the enormous figures that Mr Knox throws around in such cavalier fashion are conjectural. It is impossible to get a straight answer from CEC. Truth has been in scarce supply over the years of tie’s mismanagement. The sums Mr Knox mentions are grossly ill-defined. What does all this expenditure represent? Is it money spent to date and/or committed? Does it or should it include the further sums proffered by Mr Knox due to be claimed by the contractors? This week we are told by veteran Liberal Democrat ex-MP John Barrett that the utilities cost is to rise to over £100m – a two-and-a-half time increase – but is this included?

Mr Knox’s assumptions on how much more will be needed to complete the project are equally vague. He seems to rely on what “councillors have been assured” to make his points. He forgets that, until very recently, the people making the assurances were mendaciously briefing that the project was “on time and on budget”, and that the 800 or so claims submitted by the contractors were merely a symptom of their delinquency.

I can assure Mr Knox that the contractors have given fixed prices to exit the project and to build to Haymarket, but insurmountable problems with fibre optic cables that could take a further 18 months of closures stops them doing so for St Andrew Square.

On the basis of a reported cost of £700m to build the tramline from the airport to St Andrew Square, the cost per metre of the project will have increased by an order of five since 2003. tie planned lines that extended to Newbridge with a loop to Granton. To claim, as Mr Knox does, that the project is short of only £200m to “complete” demonstrates a total lack of understanding of the issues involved.

There have been successful UK tram systems where the risk was sold down to PFI (private finance initiative) owner-operators. Mr Knox fails to mention Sheffield, where their trams system was sold to Stagecoach for £1. Suffice to say these UK projects were all better run than tie’s has been. In their conceit, tie decided that they were best placed to take this risk, a decision for which Edinburgh has paid dearly.

The much-hyped 30 June meeting has already been considerably undermined by the press – and, with no substantive figures likely to be produced, any report will result yet again in a delayed decision. The current Lib Dem administration is borrowed to the hilt, with no surpluses and a likelihood of large ongoing subsidies required if the line is built to St Andrew Square, funding the excess is proving impossible.

Mr Knox should also know that a low growth, delayed development scenario (less severe than current recession) in the final business case (section 9.101) forecast ongoing losses on a combined bus and tram operation growing to £60m by 2031.

It is important to stress that the role of the SNP government in this farce has not been totally flushed out. Their grant of £500m was based on rules set by government “delivery” arm Transport Scotland, which should have guaranteed that public money would only be spent on defined and demonstrable achievements of project milestones. Clearly this has not been done. It was Transport Scotland which was also responsible to finance secretary, John Swinney, for approving such fundamentally flawed construction contracts. The elephant in the room is the reluctance of the SNP government to rule on the concessionary fare issue as, without this major concession, trams are doomed.

My manifesto for election to CEC will make a case for the project to be stopped and the existing works mothballed. This will allow decision-makers to take stock, and get rid of tie and the current contractors.

If there is to be “a fairly easy choice” on spending in excess £200m, let it be used to offset the £247m of cuts between 2009 and 2019 planned by this current administration and maintain standards in our nurseries, day centres, schools, sport facilities and refuse collections.

In a difficult economic climate, it would be good management for the council to determine local priorities and protect them against the ravages of budget cuts, not jeopardise them further by the commitment of unquantified money to deliver a piece of non-viable tramline.

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