Friday, 2 September 2011

Trams: Here we go again

The story so far.  In 2008 Edinburgh Council signed a fixed price contract for £512m to deliver a tram from the Airport to Newhaven (including moving the underground utilities).  The qualification was that the cost was 95% fixed.  Indeed, the £512m included extra payments to the contractor to bring the risk down to 5%. 

Well,  here we are in 2011 and Edinburgh has today approved a tram from the Airport to St Andrews Square at an estimated cost of £776m .  The report on which today's decision is based makes it clear that this time there are no such guarantees that £776m will be the final figure.

Let me summarise my position.

First, I supported (and still support) the principle of trams.  Edinburgh is a growing city with both resident population and visitor numbers increasing. Improvements in our transport infrastructure are to be welcomed.  Trams improve efficiency where there are large numbers of people to be moved.  (There was a record of almost 1 million passengers through Edinburgh airport in July).

Second, I have supported the project.  There are however, three key issues which bring us to the current position.
  1. It is widely accepted that the contract governing the project is full of holes and in the disputes over its implementation, the Council has been on the wrong side of many of the judgements.  The contract is widely regarded as a liability.  
  2. The project management has been a disaster (the delivery arm Transport Initiatives Edinburgh is already all but closed down).  
  3. The project has suffered from a lack of leadership.  Councillors were unable to maintain effective oversight and a divided administration sent the wrong signals
With the current figure of £776m to take the tram to St Andrew Square only, there is not even a '95% guarantee' that costs will not escalate further.  So what to do?

On offer have been three broad options.  The first is the current decision to plough on to St Andrews Square. The second is to get out of the contract (broadly in agreement with the contractor) after delivery of the line to Haymarket (about 60% of the full line distance).  The third is to terminate the contract with a view to total cancellation or re procurement.  This would have been subject to negotiation.

Last week in the final vote I voted for the Haymarket option because it offered, with little risk, a clean end to the contractual disputes and ownership of a working asset.  Comparisons of revenue losses for that option against predicted revenue profits for the the St Andrews Square option suffered from a problem with the credibility of the figures.  In any case that annual deficit, had it materialised, needs to be considered against the very considerable uncertainties of the costs of the St Andrews Square option which still seems too much like a blank cheque. And the extensive borrowing that entails.

Today I voted for negotiation for termination of the contract.  Certainly there are unknowns with what that figure would be after negotiation.  But they are likely to be a much lower figure than the current course to St Andrews Square with all its uncertainties.

Actually, I hope I was wrong and that a line from the Airport to St Andrews Square is up and running in short order for less than £776m.  But the history of the project and the evidence before us now doesn't look promising.  

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