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Edinburgh Trams Interim Report

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Edinburgh Trams Interim Report Edinburgh trams Interim report Prepared for the Auditor General for Scotland and the Accounts Commission February 2011 Auditor General for Scotland The Auditor General for Scotland is the Parliament’s watchdog for ensuring propriety and value for money in the spending of public funds. He is responsible for investigating whether public spending bodies achieve the best possible value for money and adhere to the highest standards of financial management. He is independent and not subject to the control of any member of the Scottish Government or the Parliament. The Auditor General is responsible for securing the audit of the Scottish Government and most other public sector bodies except local authorities and fire and police boards. The following bodies fall within the remit of the Auditor General: • directorates of the Scottish Government • government agencies, eg the Scottish Prison Service, Historic Scotland • NHS bodies • further education colleges • Scottish Water • NDPBs and others, eg Scottish Enterprise. The Accounts Commission The Accounts Commission is a statutory, independent body which, through the audit process, assists local authorities in Scotland to achieve the highest standards of financial stewardship and the economic, efficient and effective use of their resources. The Commission has four main responsibilities: • securing the external audit, including the audit of Best Value and Community Planning • following up issues of concern identified through the audit, to ensure satisfactory resolutions • carrying out national performance studies to improve economy, efficiency and effectiveness in local government • issuing an annual direction to local authorities which sets out the range of performance information they are required to publish. The Commission secures the audit of 32 councils and 45 joint boards and committees (including police and fire and rescue services). Audit Scotland is a statutory body set up in April 2000 under the Public Finance and Accountability (Scotland) Act 2000. It provides services to the Auditor General for Scotland and the Accounts Commission. Together they ensure that the Scottish Government and public sector bodies in Scotland are held to account for the proper, efficient and effective use of public funds. Contents Summary 2 Phase 1a has cost £402 million to the end of December 2010 and is This report 2 unlikely to be delivered within the The Edinburgh trams project 3 current funding limit 23 Key messages 4 CEC and tie are now considering different options for taking the The project’s costs to date 4 project forward 27 Key issues for the project 6 Part 3. Project governance Part 1. Introduction 8 arrangements 29 The Auditor General’s 2007 report Key messages 29 on the trams project 8 Transport Edinburgh Ltd is The Edinburgh trams project has a responsible for strategic and other number of objectives 10 material decisions affecting the project 30 The Scottish Government agreed to provide a maximum of £500 million The Tram Project Board continues towards Phase 1a 11 to be the project’s main governance body responsible for overseeing the Part 2. Progress and costs work of tie 32 to date 12 Council officials exercise oversight Key messages 12 of the project through an internal planning group 36 tie’s procurement strategy was intended to transfer risks to the The project’s progress and risks are private sector 12 reported regularly 37 The original plan to have trams Appendix 1. Project timeline 39 operational by summer 2011 will not be achieved 15 Appendix 2. Main parties involved in the project 41 1 Summary This report 1. The Edinburgh trams project is currently the fourth largest public capital project in Scotland. During the period since the City of Edinburgh Council (CEC) gave its approval to the project’s final business case in December 2007, there has been significant media attention given to it with concerns raised about cost over-runs and delivery delays.1 In October 2010, the Auditor General and the Accounts Commission decided that an audit report should be produced to provide an update on the project’s progress and to consider issues for the future. It is intended to be an interim report which might lead to further audit work and another report at a later date. 2. The decision to produce this report follows a previous report which the Auditor General published in June 2007 reviewing the arrangements in place for estimating the costs and managing the Edinburgh trams project and the Edinburgh Airport Rail Link. At that time, both projects were still at a relatively early stage. In the case of the Edinburgh trams project some utilities diversion works had commenced but major contracts for the construction of infrastructure and tram vehicles had yet to be awarded. While the project was approaching a critical phase, the City of Edinburgh Council (CEC) had yet to approve the final business case. 3. This report is a factual commentary which builds on work completed for the 2009/10 annual audits of Transport Scotland and CEC. The report is augmented where necessary by further analysis of the project’s progress and costs (most of which is based on information already in the public domain) and interviews with key parties such as Transport Initiatives Edinburgh (tie), the company originally established by CEC in May 2002 with responsibility for delivering the project.2 4. There is currently a very public contractual dispute between tie and the Bilfinger Berger Siemens consortium (BBS). It would be inappropriate for us to make any comments that may be regarded as prejudging any issue of fact or law that might be perceived to have a bearing on that dispute, or its progression or resolution. We did not interview any contractor as part of the report’s preparation and no inference is to be drawn from the inclusion in this report of views expressed by tie. The report does not include a detailed review of the various works contracts which are in place. We do not express any opinion on the project’s management, the cause or cost of time overruns or the 1 The biggest three projects are the construction of a new £1.7 billion to £2.3 billion Forth Crossing, a new £842 million South Glasgow Hospital and the £692 million M74 Completion project. The Scottish Parliament approved the Bill for the new Forth Crossing and the final business case for the Southern General Hospital in December 2010. The M74 Completion is due to open in June 2011. 2 CEC transferred ownership of tie to Transport Edinburgh Limited, another CEC owned company, in August 2009. See Part 3 of this report. 2 performance of any of the contractors involved. In particular, we have not examined in detail the form of contract or contractor performance relating to infrastructure construction. The Edinburgh trams project 5. CEC established tie as a wholly owned subsidiary in May 2002 to conduct investigations into how best to deliver CEC’s local transport strategy, including the desirability of building one or more tram lines in Edinburgh. Following consideration of three options, the then Scottish Executive announced its support for the construction of a northern tram loop connecting Granton and Leith to the city centre and a western tram line from Edinburgh Airport to the city centre. Bills to construct these lines received Royal Assent in spring 2006. 6. The Edinburgh trams project is intended to support and promote a growing local economy and create a healthy, safe and sustainable environment for Edinburgh. The project is being taken forward in stages. Phase 1a consists of a tram line connecting Leith Waterfront to Edinburgh Airport. Phase 1b consisted of a tram line between Roseburn and Granton Square but this was postponed in April 2009 due to the economic downturn. CEC has not indicated when construction of Phase 1b might commence. 7. The Scottish Government, via Transport Scotland, committed up to £500 million to Phase 1a. The grant agreement between Scottish Ministers and CEC required CEC to provide evidence that it had approved a final business case showing that the capital cost would not exceed £545 million; that the project would deliver more benefits than it costs; and that the tram network would not require any ongoing subsidy once trams become operational. CEC approved the final business case, which confirmed these conditions were achievable, in December 2007 and provided the required evidence to Ministers. The balance of funding is expected to come from CEC, most of it from developer contributions and capital receipts. 8. Construction of Phase 1a includes a number of different stages and contracts: • Project design including design drawings for all infrastructure and associated land purchase and traffic regulation requirements • Utilities diversion works and other enabling works, such as construction of a park and ride at Ingliston, which were intended to take place before tramlines and other infrastructure was installed • Infrastructure construction including tramlines, a tram depot, overhead power lines, ticketing machines and passenger shelters 3 • Construction of 27 tram vehicles. 9. CEC’s governance arrangements for the project are intended to allow the work of tie to be subject to scrutiny while keeping all elected members informed of the project’s progress. They also reflect the planned future role of another council owned company, Transport Edinburgh Ltd (TEL), in providing integrated tram and bus services. TEL is now responsible for strategic and other material decisions affecting the project subject to delegated limits. The Tram Project Board, as a formal sub-committee of TEL, continues to be the project’s main governance body. Key messages The project’s progress to date • The original plan to have trams operational by summer 2011 will not be achieved. Utilities work is now 97 per cent complete and good progress is being made with the delivery of tram vehicles.
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