Oral evidence: Crossrail, HC 2127

Oral evidence, 15 May 2019.

Witnesses

Bernadette Kelly, Matthew Lodge, Tony Meggs, Mark Wild, Sir Terry Morgan and Andrew Wolstenholme.

Chair

Welcome to the Public Accounts Committee of Wednesday 15 May 2019. We are here today to look mainly at the Crossrail project, but we are also going to touch on some issues around High Speed 2, which I know the permanent secretary is aware of. This is the second time in just a couple of months that we have discussed what has gone on with the Crossrail programme after the delays were suddenly announced last summer. It was announced that it wasn’t going to open in December last year, as planned. I pay tribute to the National Audit Office for its quick work to enable us to do that hearing and for its subsequent work, and to the London Assembly, which has done an excellent report looking at this from a slightly different angle, but giving us some very useful information. Crossrail had always had a date to open of December 2018. There was a headlong rush for that, as the NAO Report highlights, but now we know that it is not that. I thank Crossrail Ltd and Tony Meggs, who hosted us on a visit to Tottenham Court Road station last week, where we saw some very interesting things. We are pleased that people were candid with us about what the issues were. We are going to go into that, but I want to start with the permanent secretary on HS2. Before I do that, Ms Kelly, I just want to introduce all the witnesses. It is a long panel today. We will be directing questions at you individually, so you are not all expected, or will not all be allowed, to answer every question; otherwise, we would be here for some days. We are not planning to do that. From my left to right, we have Matthew Lodge, who is the director of rail infrastructure south and Crossrail, and the senior responsible owner for Crossrail at the Department for Transport—welcome back. Bernadette Kelly is the permanent secretary at the Department for Transport. We then have Sir Terry Morgan, who was the chair of Crossrail Ltd until last August. I think that is when you stood down—no, last July.

Sir Terry Morgan

I actually resigned in December.

Chair

In December—forgive me. I am muddling up who resigned or left when. Andrew Wolstenholme is the former chief executive of Crossrail Ltd. He has appeared before this Committee before and has hosted us in previous times. He now works for BAE Systems in Barrow-in-Furness.

Andrew Wolstenholme

In London.

Chair

We might be seeing you with that hat on at some point as well. There is no rest, Mr Wolstenholme. Tony Meggs is the current chairman of Crossrail Ltd. Mark Wild is the chief executive officer of Crossrail Ltd. Both of them were in front of us in the last few weeks. Bernadette Kelly, can I just turn to you on the issues around HS2? Obviously, this Report throws up some potential challenges. Let me just get to some grassroots issues. You promised that you would publish an updated business case, including estimated scheme costs, as part of the spending review. We are hearing from a number of your colleagues that the spending review is uncertain—that is putting it politely—and we don’t know if we are going to be having one yet. Will you still be publishing a business case and costs for HS2, even if there isn't a spending review?

Bernadette Kelly

To my understanding, there is a spending review. We are certainly working on that basis.

Chair

Do you know when, then?

Bernadette Kelly

I am expecting it to happen in the autumn. We have received a letter—all Departments have received a letter from the Treasury in the last few days—setting out what they now want us to do. So all the signs are there that we are mobilising for a spending review being on the way.

Chair

Can I ask the Treasury Officer of Accounts? Do you have any further news on a spending review date?

Marius Gallaher

It is right that Departments have been asked to prepare for a spending review.

Chair

In the autumn? Is there any movement on what the autumn is?

Marius Gallaher

Not yet.

Chair

In civil service terms, that could take us into January, potentially.

Marius Gallaher

Yes.

Sir Geoffrey Clifton-Brown

That’s winter.

Chair

Well, we would say. I think the civil service’s autumn is a long period of time. You are working on the spending review. Does whether or not the spending review takes place make a difference to you working up the business case, and particularly the estimated scheme costs, for HS2?

Bernadette Kelly

What we have committed to doing in the next stage of this project is proceeding to notice to proceed. That is an important milestone in the governance and delivery of the project. That is also highly relevant.

Chair

That would be for phase 2a and 2b as well?

Bernadette Kelly

It is for the project as a whole, although it is particularly significant in terms of the authorisation it gives to HS2 to enter into contracts for phase 1. That is the particular significance of notice to proceed. We are working towards that at the end of the year. We expect it to coincide with a spending review. Obviously, all the logic would point to doing a revised business case and so on at that point, rolling up the notice to proceed decision with the outcome of the spending review. That would be the neatest and most logical way to do that.

Chair

It doesn’t always work neatly and logically. If it doesn’t, what is the plan?

Bernadette Kelly

Not all things do. That is the basis on which we are working. If there isn't a spending review, which isn't currently what I would expect, we will need to reflect on what we can put into the public domain at that point that gives a genuine sense of progress on where we are on the delivery of the project.

Chair

If there is not a spending review, is there a possibility of further delay to HS2?

Bernadette Kelly

I don’t think that the delivery of the project is dependent on the spending review. The question is, when is it sensible to put into the public domain revised business cases and so on? It is more sensible to do so, obviously, when you have gone through those significant moments of public spending and everything else.

Chair

You and your Ministers have pledged that there is no money for HS2?

Bernadette Kelly

Yes.

Chair

They have to work within the current envelope? Obviously, delays can increase costs. Does the “no more money” diktat remain, even if delays are a result of the Government decision being delayed?

Bernadette Kelly

The Government have been very clear that £55.7 billion is the allocated budget for this funding and that remains the case until and unless any other decision is taken, which it hasn’t been. That is absolutely a key parameter and I don’t see it changing in any way other than in a spending review, and quite probably not then.

Chair

Fine. So the money stays? That is the answer to the question? That’s fine.

Bernadette Kelly

I am not expecting that to change—

Chair

I am aware we have quite a lot of witnesses on Crossrail.

Bernadette Kelly

Having said that, I would just say that we clearly do recognise that this is a project that is now in delivery, and we need to be constantly assessing progress against delivery. I recognise also that whether or not there is a spending review, we need to make public where we are in terms of overall delivery of the project—

Chair

That brings me neatly on to the challenge that Mark Thurston as chief executive has already compromised on the speed—by at least 30 mph or kph; I’m not sure which measure he was using—and the reduction in the number of trains, which could reduce capacity. Is there a point at which HS2 stops being HS2, if they compromise too much to stay within the envelope? How are you watching that?

Bernadette Kelly

What Mark Thurston has said is that there are cost pressures. Frankly, it would be very surprising in any project of this sort if those didn’t exist. He is now working through how best to assess those.

Chair

We know that, Ms Kelly. What, in terms of your position—

Bernadette Kelly

I don’t recognise that decisions of the sort that you mention have been taken. I think the CEO set out the sort of options that he would need to consider.

Chair

Are there options that would be beyond the pale for the Department for Transport for this project to continue and still call itself HS2?

Bernadette Kelly

What we always have to do with any project of this sort is to look at the budget and the scope and consider how we ensure that we have a deliverable project. When you look at scope choices, you also have to consider whether changing the scope reduces the benefits more than it reduces or saves costs.

Chair

Which will feed into the business case?

Bernadette Kelly

Those are exactly the assessments that are currently being made about this project—the sensible steps that need to be taken to manage cost, the impact those steps will have on the benefits and whether we are still confident that this project has a solid BCR. It has a BCR of 2.3 on current parameters, which is pretty solid.

Chair

On the current parameters—

Bernadette Kelly

But we will certainly look at any decision to make sure that it protects the benefits of this project.

Chair

So both scope and potential delay could have a very big impact? This project is a complex web, isn’t it? For example—

Bernadette Kelly

It is. Any—

Chair

Let me just finish. On train purchases, if they do not know by a certain point how many trains they are going to run, as well as some of the other issues we are discussing, they will not know which trains to buy. When is the point of no return for decision making, in your mind? What sort of window is there? I am not asking for a precise date.

Bernadette Kelly

There are multiple decisions that you are describing, the interdependencies of which need to be managed by HS2 very carefully, such as decisions on the specification of the track versus the specification of the trains. Those are being actively managed at any given point throughout the life of the project. I cannot give you a single decision point on those things. What exists is a project plan that identifies where those decision points are, the interdependencies and what the sequencing of them needs to be.

Chair

Again, as the accounting officer for the Department, you must be looking closely at the business case to make sure that the BCR ratio that you talked about stays at a good level.

Bernadette Kelly

Correct.

Chair

Is there a point at which you would have concerns?

Bernadette Kelly

Clearly, if this project was getting close to no longer having a positive BCR, absolutely, as accounting officer, I would have concerns. As I say, given that it has a BCR of 2.3, I think you would have to see a very large increase in costs and a very large decrease in benefits to get to that point.

Chair

We just spoke about the interplays. The Crossrail report that we are looking at in our main session today raises serious issues about integration challenges.

Bernadette Kelly

It does, yes.

Chair

There must be many lessons that you will hopefully have learned from the NAO Report and will have been picking up before the NAO Report. What are the key lessons that you will take out of the Report that might make a difference to how HS2 is delivered?

Bernadette Kelly

I very much agree that there are a huge number of lessons from Crossrail that we need to take into HS2. As you know, and as I have written to you to share, we have done a very thorough piece of work on lessons learned. We have produced a report that has some 24 lessons in it, which we are now ensuring are embedded in all our projects. If I had to pick out the most significant lessons from that Crossrail report—I have thought about it a lot—I would pick out a number of practical ones and then a couple of more cultural and behavioural ones. An important lesson that we are thinking about constantly is the balance to be struck between the autonomy to give the delivery partner and the oversight that we as client and funder provide to that project, and also how you evolve that over the life cycle of the project. I think that is important. A really important series of lessons is how you ensure at all points in the project that you have a board that has the right skills and that provides the right level of challenge to the executive. Allan Cook, the current chair, is strengthening his board to make sure he has the skills around the table to enable him to do that. There is a really interesting question that needs to be resolved and that we need to think about going forward about whether you have, as it were, evidence-based ranges of opening dates for these sort of projects, with phasing options, as opposed to single dates. We have learned from Crossrail that a fixation on a single date, especially when it is set 10 or 15 years out, can actually drive cost and inefficiency and, in the end, delay. Early consideration of systems integration is a very important point, and we are thinking about that. The west coast partnership franchise competition, which is out there now, is intended to bring a shadow operator in early precisely to help think about some of the challenges of running a railway at the end of this. The use of benchmarking also comes through strongly in our report. That has been a big theme of our work on HS2. I could go on to others. There are two behavioural points that I would like to stress. There is a huge tension all the time in these projects—the Crossrail example is a good one—between balancing realism and optimism in delivery. You need a degree of can-do optimism. You also need realism, informed by facts and understanding of what is going on on the ground. We will certainly be taking that to heart in thinking about how we are dealing with HS2. The other general point is just how you get trust and transparency working throughout the delivery of a really complex and difficult project. Sometimes it is quite difficult in a political system, when you are delivering controversial projects, to create an environment in which there is genuine trust and open communication at all times. We really have to have that for HS2.

Chair

You talked about changes at the board at HS2 being led by the current chair of HS2. Is there anything else that you need to see change significantly at HS2 to make sure that some of these problems are resolved or avoided?

Bernadette Kelly

I think a lot of this is already embedded in the things that we are doing, because you learn these things constantly. There is not a moment of truth in these things; it is a constant process.

Chair

But there is nothing else? There is no other Belisha beacon or warning sign?

Bernadette Kelly

No, but the challenge we need to keep very firmly in mind—we really do need to challenge ourselves, the company and the politics of HS2 on this—is this balance between being realistic about what can be delivered within the milestones set and not fixating on milestones in a way that ultimately causes perverse behaviours or inefficiency. That is the thing that I have taken to heart and that we need to reflect on as we take that project forward.

Chair

We will be talking about that in relation to Crossrail.

Sir Geoffrey Clifton-Brown

Ms Kelly, I am amazed by that list you have just given us. This Report has a lot to say about how contracts are let, and a lot of what has gone wrong with Crossrail is to do with how the contracts were let—whether they were let on fixed price; whether they were let with incentives built into them; the interfaces between different contractors; and the compensation arrangements. A host of things have gone wrong. Surely, those all read across to HS2, and the board of HS2 needs to be thinking very carefully about that.

Bernadette Kelly

I agree; you are quite right. The NAO Report has a lot to say, and I am sure my fellow panel members will be able to say more about the decisions that were taken in terms of how contracts were let. The NAO Report particularly identifies that a large number of projects were let and that the interface risks within them were not sufficiently managed. Clearly, that is an important lesson. I do not take from that that there is a single way to let contracts or to manage interface risks. I do take from it that whatever system is chosen by HS2 needs to reflect on whether the contractual arrangements, the arrangements for managing risk and the arrangements for managing interfaces are all under control. Those things will absolutely be being thought about very carefully by HS2 Ltd, which of course is entering into a lot of contractual arrangements at the current time. The structure of some of that looks quite different from some of the structures that were in place in Crossrail.

Sir Geoffrey Clifton-Brown

Can I probe you on one of the Chair’s other areas of questioning? Clearly, at the end of the day, how much money you put in has an effect on the type of railway you get out—things like the number of trains, the speeds and so on. Will Parliament or the public, or both, have an opportunity to influence those decisions before final decisions are made?

Bernadette Kelly

There are already requirements built into the hybrid Bill for phase 1, and obviously we now have a hybrid Bill going through for phase 2a. It is an interesting question. On the judgments that now need to be made about any changes to the specification of HS2 to ensure it can be delivered in an affordable way, those are the questions that Mark Thurston and the new chair, Allan Cook, are thinking about and assessing. The Government will ultimately need to take some judgments about what balance it wants to strike in this project between scope and cost. It would be quite difficult to deliver a project in a way that allowed the public to be consulted on at every single point in time, particularly given the extensive consultation that has taken place already on HS2 and the extensive parliamentary consultation through the hybrid Bill process.

Sir Geoffrey Clifton-Brown

Finally, if you wanted to cancel the whole of HS2, where does that point arise?

Bernadette Kelly

I have not assessed that. As far as I am concerned, the Government have been very clear that we are delivering this project. Therefore, that is what my Department and HS2 Ltd are working to do. With any project, if there is a go/no-go decision to be taken, which is the Government’s choice to make, given their priorities, you would assess the costs and benefits that would accrue if you proceeded and balance them against the costs that have already been sunk into the project. From an accounting officer perspective, I would need to make an assessment about what that told me about value for money, but that is almost a technical assessment. Right now, I am working hard on HS2 and working hard to deliver the project, because that is the Government’s clear and stated priority.

Chair

We will move to Caroline Flint, but can I urge you, Ms Kelly, to keep your answers a bit shorter? We will not get through our business if we carry on at this length. Ms Flint will ask tight questions, as ever.

Caroline Flint

Ms Kelly, could you tell me how the Department is assuring itself that the budgets for land and property acquisition is sufficient, given that NAO Reports have shown that the estimates are out of kilter and the “Panorama” programme indicated that there were completely misleading promises about what this would cost? Where are we on the budgets for land and property acquisition?

Bernadette Kelly

I confess I did not look into this in detail before today’s evidence session, but I did so at a previous point when it was looked at very carefully, in settling HS2 Ltd’s accounts last year. At that point, we looked carefully to ensure that the assurance of property estimates was sensible, was being updated and took into account independent advice. To my knowledge and understanding, although I can always write with further details, there is a thorough process within HS2 to assure itself regarding land and property estimates.

Caroline Flint

I am sure the Committee will take you up on your offer to write to us, not only about the amount of money and looking at the comparison with what was suggested before, but about the governance and how you are assuring yourself that they are identifying the right values against the lands and properties that will be affected. Moving on to a situation in my own patch, south Yorkshire, as a result of HS2 route phase 2b, which was an alteration to what was originally expected, the Shimmer estate in Mexborough has faced a huge amount of uncertainty. To give a real-life example, HS2 claimed for two years that only 16 demolitions were to be made on the Shimmer estate. In 2018 it had to revise that number up to 52, but that is still not an accurate reflection of the impact on that estate. How can we have confidence in the processes and methodology for determining what needs to be acquired at what cost, if some fundamentals such as that are going so wrong?

Bernadette Kelly

Again, I am conscious that I did not have a chance to look into the detail of that point before this Committee; I will do so in response to the question. I am obviously well aware that the Shimmer estate has been a particular area of sensitivity, that residents have been impacted by route decisions on HS2 and that there are extensive conversations going on between the company and those affected by HS2. Every effort is going into ensuring, first, that estimates are correct and, secondly, that residents and property owners affected by HS2 are treated as fairly and as well as possible. I am sorry I cannot give you a more detailed response than that. I will see what I can pull up.

Caroline Flint

Maybe I will just give you something to take away and think about. It is understood that, when the alternative route was being looked at, surveyors and others were looking at old maps that did not show the existence of the Shimmer housing estate, which is a new estate—that by the time the announcements were made you were aware, but when the plans were being put together, it was not even seen. I would really like you to come back to us in writing about how such a basic error could happen in planning such a major development. Do you accept that that is unacceptable and does not give us confidence in the way these areas are being surveyed for impact?

Bernadette Kelly

I will certainly write setting out the facts of how the Shimmer estate has been taken into account throughout the development of this project. I am not sure whether I can confirm the particular facts that you are describing, but I would be very happy to set out the facts as we and HS2 Ltd understand them, and the steps that HS2 Ltd has taken to manage the impacts of this on the Shimmer estate.

Caroline Flint

Alongside the examples I have given about the impact on those homes and the people who live there, the estimated costs of the new spur are spiralling as well. For example, the estimated cost of making Sheffield Midland and Chesterfield stations HS2-ready is £825 million, but none of that is included in HS2’s cost envelope. I can give you other examples. It would seem that any one of these factors would trigger a review of the business case of such a major project. Is that going to happen?

Bernadette Kelly

There are many estimates made by many parties relating to the costs of HS2 Ltd. Very often, we do not recognise those cost estimates or necessarily understand on what basis they have been derived. I am conscious that there are lots of alternative estimates out there, but we don’t necessarily recognise them or understand how they have been arrived at. As for the business case, we absolutely will be revising it thoroughly in the light of our understanding of actual costs and benefits of the project, as we know and understand them, and as HS2 Ltd are able to advise on.

Caroline Flint

Moving on to skills, could you tell us a bit more about how you think the academies that have been established to provide the skills for HS2 are working? Where employees are taken on, what proportion of those employees are foreign workers as opposed to those already living in the country?

Bernadette Kelly

As you know, two skills academies have been established to help provide the supply of apprenticeships and skills for HS2 Ltd. I think that is a positive example of how a project like this can help to grow the supply chain and the skills base. There are now hundreds of apprentices working on HS2 Ltd. That may be something that Sir Terry has some recollection of as well, as I know he has been involved in these. I cannot give you a number of foreign workers versus domestic workers. I am very happy to get that number and to give it to you, but I am afraid I don’t have it available.

Caroline Flint

If you could write to us on that and, if you haven't got the number for this either, can you write to us on it as well? It is about the places that are available at the various colleges. Obviously, we have the national rail college in Doncaster, but there is also what I think is still called the HS2 academy in Birmingham. Could you provide us with information about take-up of places, and whether they are being fulfilled?

Bernadette Kelly

Yes, I am very happy to do that.

Chair

Thank you very much, Ms Kelly.

Lee Rowley

I wanted to follow up on Ms Flint’s point from a moment ago. You said you don’t recognise a number of the estimates and statements around some of the costs. Chesterfield and Sheffield were referenced. As a Chesterfield MP, how are you expecting the electrification of that spur from Clay Cross to Sheffield, and all the reconfiguration at Chesterfield and Dronfield stations, to occur with no additional money?

Bernadette Kelly

I am wary of being drawn on very detailed things, lest I give slightly inaccurate answers.

Chair

Fine. Tell us what you can.

Bernadette Kelly

I think the general point is that the budget for HS2 Ltd assumes certain costs that will be paid by the company through the project to deliver that project.

Chair

Does it include the spur that Mr Rowley has just talked about? If you can’t tell us, okay.

Bernadette Kelly

I am sorry. If I have advance notice, I always come ready to answer these questions. At this level of detail, it is sometimes a little difficult when I don’t.

Lee Rowley

It is more the principle of assuming a greater scope without additional money, unless there was a lot of money splashing around in the first place. Otherwise, it is reasonable of me, as a local MP, to assume that it will either be done on the cheap, or badly, or end up in the same place as what we are about to discuss—Crossrail.

Bernadette Kelly

The budget for the project has been set in relation to the scope that exists. There may be aspirations—I am quite sure there are—to extend the project in ways that would deliver benefits locally and that would not be included within that budget; funding would need to be found from other sources for those benefits to be unlocked. That is the sort of general, in-principle point that I would make. The thing we must do, at all stages in this project, in taking it forward, is ensure that we are clear about scope, and cost and budget in relation to that scope. There is always going to be the potential for other things to be delivered outside that which deliver benefits, although they may not be funded from the same source.

Chair

I think you just launched a major bidding campaign from Chesterfield. Mr Rowley, was there anything else?

Lee Rowley

The question on capacity and speed: what is more important?

Bernadette Kelly

I think we increasingly see that the real benefits of this project are capacity. It is absolutely about a major uplift in the capacity of our national and inter-city rail network. Speed is important in so far as it improves connectivity and delivers journey time improvements, but I think in terms of how we talk about the project now, we really think about it as capacity, connectivity and growth.

Chair

Sir Geoffrey, a last, quick one?

Sir Geoffrey Clifton-Brown

I shall be asking the other witnesses questions about the contingency in Crossrail, but I want to ask you about the contingency in HS2. How much of that £56 billion figure is contained within contingency, and will that be adequate?

Bernadette Kelly

Contingency is included within the overall funding envelope for all phases of this. Clearly we will need to be reviewing that level of contingency as the project develops, but, yes, there is an allocation for contingency.

Sir Geoffrey Clifton-Brown

How much is it at the moment? Or please write to us.

Bernadette Kelly

Okay, I will. I am sorry; if I give you the figures, I will end up potentially giving you the wrong ones. There is an allowance for contingency for this project.

Chair

We need to move on now—other witnesses have waited patiently—to the knotty issue of Crossrail, so I want to start with you, Sir Terry Morgan, and Andrew Wolstenholme. When were you first aware that there were problems, Sir Terry, with the delivery timetable for Crossrail?

Sir Terry Morgan

Problems? To be frank with you, with the programme, there were always problems.

Chair

Right, but when did you realise there were problems that were so significant that they were going to delay the opening?

Sir Terry Morgan

I always think we had a very transparent relationship with the sponsors, but we formally came to a position about not being able to deliver the programme in July 2017.

Chair

That is when you formally came to a decision. Is that the first time that you were aware, as chair of the board, that there was a problem?

Sir Terry Morgan

We had, at every board meeting, discussed the condition of the programme and our ability to deliver it in 2018. In a way, I am repeating what the permanent secretary has just said, but I am the first to acknowledge that there is a very fine line—I think the culture we created in Crossrail was very helpful on many occasions—between can-do and optimism bias. I would acknowledge that even in July we would have underestimated the scale of what remained to be done. Systems integration is clearly a very good example of that. Always, when we were getting into these difficulties, the executive would develop a mitigation plan, and normally associated with that would be, “And if we are late, what would be the cost consequences of that?” So there was always this calculation about cost versus time, and we also always took into account the strong sense of needing to demonstrate that we had done everything feasible to open the programme, as had been promised, in 2018. That was a very strong driver, both within the programme and politically, in terms of the sponsors that we dealt with.

Chair

Mr Wolstenholme, when were you first aware that opening on time was going to be a challenge?

Andrew Wolstenholme

I’ll answer that, but can I just thank you for inviting us here, Chair, and the Committee? It is very important that we understand what the lessons are, and for the NAO Report to highlight some of those. I spent seven years on this programme, and I would like to say how personally disappointed I am that clearly there is now an overrun. I am personally disappointed for the passengers who are not using that service now, and personally disappointed for the many tens of thousands of people who did a fantastic job in delivering the programme thus far. On when we first realised, if you look at this holistically for a moment, we have something that is completely unprecedented that is bringing in new and novel technologies and has not been done in the UK before. The 42 km tunnels, the 10 new stations—these stations are between 20 and 40 metres underground.

Chair

We are aware; we have been to visit, and the NAO Report highlights some of those engineering challenges. I want to cut you short a bit, because we need to get to the main question.

Andrew Wolstenholme

But if you paint the picture holistically of how this programme has got to where it is over the past 10 years, as Sir Terry has said—you use the word problems, but I use the word challenges—there have been huge challenges throughout the programme, and what this project team has done consistently is make professional judgments about how it delivers remediation on those particular activities. I can give an example to illustrate the sort of things we had to get over, which will lead into 2017. There was a one-year delay on the Moorgate shaft. Just before that, if you look at the NAO Report of 2014, we were reporting that the programme was only at 65% likelihood of completing, and that was in 2014. If you look at the examples of how we have delivered that, we will take you to 2017; there were three aspects of the programme in 2017 and the risk profile was perhaps designed in a different way from how it was earlier. We then had three different supply chains, one representing the complex rail systems, one representing the stations and one representing the rolling-stock. There were three risks in particular that we were looking at very carefully. One was the whole sequence to lead into the energisations of the tunnels in the east, and that was very important, because that energisation—

Chair

Obviously, this has been your baby for a long time, seven years, and there was a lot of major and good engineering work that went on. The point is that it did not deliver in December 2018, and we need to understand when you knew there might be a problem with that delivery. What you have just highlighted is that, of course, there were big problems along the way, but the key question is when you, as a chief executive and as a board, knew that those big problems might lead to a big risk to the delivery date—a set delivery date, which is a challenge in itself. I don’t want to go through every detail of the Report, because it is well written and we have all read it, but if we take figure 6, it illustrates an example. From September 2016, the risk exposure was quite some distance from the contingency money available, so there was obviously a big problem, which then widened by autumn of last year. That gap was not appreciably narrowing, on balance. There was obviously a mismatch between the risk exposure and the contingency funding available to do it. That gap was widening unhelpfully. Were you aware of that, Mr Wolstenholme?

Andrew Wolstenholme

We were aware of the risk exposure, but the outcome of where the cost risk is is all about the activities that happen on the ground. I was just explaining that in 2017 there were three issues driving that risk. The first was the critical path taking us to the energisation, which is important, because the energisation then gave you the eight-month window through which you did the dynamic testing. Of course, in November 2017 there was an explosion, and we can come back to the implications. The second critical path was going through the completion of the stations and the railway systems, and the third was bringing the complexity of the trains and rolling stock into the stage 2 and stage 3 scenario.

Chair

But these were known challenges or known risks. That was the whole challenge of the project—major, exciting, interesting, ground-breaking engineering works and IT and so on, but all integrating, and integration ultimately was Crossrail, or will be Crossrail.

Andrew Wolstenholme

Yes, but if I may say so, these risk are dynamic risks. You have a clean plan of how to start the programme off, and you find things such as Moorgate, and incidents that are unknown and unplanned, such as Pudding Mill Lane. Those are things you have to be able to accommodate as you go along. On illustration 6, I can tell you that in 2016 we were carrying a contingency of £859 million at P50. We had identified risks then of £763 million, so we were still covered in terms of those risks. The exercise we undertook to ensure that we had headroom within that contingency was extensive. Those are typically the sorts of things that we did: it was in five parts, with the aggressive pursuit of opportunities to win further headroom.

Chair

You had each of these problems, and it sounds as though each time you were reporting to the board, and the board and you were trying to manage those problems, but when did you first realise that they were so significant that there was a risk to the delivery date? It is relatively unusual to have a very set delivery date for a project of this complexity. As Ms Kelly highlighted, it was set a decade or so out. When were you aware that these things might cause a problem, and what were you telling the board at that point?

Andrew Wolstenholme

Up to early 2018, we were assessing what the risks were and the culture of the team. We realised the importance of the political ambition; we realised that the objective of Crossrail was to open in December 2018. We were assessing the risks and, as Sir Terry Morgan says, we were finding ways through the risks.

Chair

The can-do approach was perhaps over-optimistic in the end.

Andrew Wolstenholme

I think there is a difference between optimistic and can-do. Yes, it is absolutely true to say that the team was working across the complete enterprise of Crossrail to find ways through the challenges and the risks that we had, and that was the culture that we had. We can talk about that balance between optimism and over-zealousness versus can-do but up to that point, if you look at the history of Crossrail, we had continually found big, major engineering challenges for which no technical solutions existed, and that is what we sought to do.

Chair

That wasn’t a surprise. You are digging up a large chunk of central London for a start. Those known unknowns were going to be built in. Do you think you did not plan for those known unknowns?

Andrew Wolstenholme

I think we did plan for those unknowns but, despite the fact that you spend two years doing survey and remedial work, you still find things that you are not expecting. The context within which we are working on this massive programme that was setting new standards and achieving things that had not been achieved before—

Chair

But at that point you must have realised there was a risk to the delivery date because of these big challenges you were uncovering.

Andrew Wolstenholme

As I say, in 2017 the risk profile was different. There were the three risks around an explosion at Pudding Mill Lane, the complexity of finishing off the tunnels, and introducing the new rolling stock. Those were substantial risks, and the programme that we put together in March 2018 still found a route through in order to open in December ’18. This is, with respect, looking at the dials that we had at the time. With the benefit of hindsight, one might have read something different from those dial, but as one was sitting managing those risks going forward and understanding the complexity of those risks and the interfaces of how those risks were presented, there was a considerable amount of risk there. At that stage, the programme team was still clear that there was a path through to December ’18. On the difference between its being risk-free, this programme has never been risk-free.

Chair

I don’t think we ever suggested that a project of this capacity would be risk-free.

Sir Terry Morgan

Could I give you an example? We had a number of phases. First of all, building the tunnels and starting some of the fabric of the station boxes. There were a number of ground conditions that were not what we expected them to be and we had to slow down certain parts of the programme. The pressure that we had in the programme and which the executive were expected to respond to was not just to say, “The consequence of this is that we are tunnelling late.” The answer was always, “You’re late, but what are we going to do to mitigate the risk?” On tunnelling, in 2016 we finished to within two or three weeks of a plan we had laid in 2012, but there were consequences. If you take Moorgate in the way that Andrew described, it meant we could not progress the station box work, so in parallel with the tunnelling there was also work ongoing to actually look at the plan to complete the stations. It is true that as time moved on some of those aspects became tighter and tighter, but the pressure to try and meet the end date was still very much part of what we were trying to do.

Chair

Did you ever question that end date, Sir Terry?

Sir Terry Morgan

The answer is I can’t remember a board meeting where we didn’t. Indeed, where we were needing further assurance that the advice we were getting from the executive was robust, we had at least four independent reviews to assess the plan that had been presented to us by independent experts. To be frank with you, the project is so complex and so big that when you talk to an expert, not many people have actually done what we have done. What they did was evaluate the plan we put in place.

Chair

I repeat: we acknowledge that they were very big and interesting engineering projects, but today we are not here to talk about the challenging and interesting engineering. We are here to talk about the overall project management, which we recognise included that, but ultimately, it has not just overshot on time, but massively on budget, and has had a big impact, for instance, on TfL’s farebox for a start.

Sir Terry Morgan

That is not a consideration for the programme.

Chair

No, but what I am trying to say very clearly is that there are very big consequences to this delay on Londoners and those beyond London who will be using it. We need to focus. We need to put aside that we recognise that major and exciting engineering projects are involved in this and that, overall, it is a big and exciting engineering project; we are trying to focus on the value for money. So to pick up on that before we come to Sir Geoffrey, Mr Wolstenholme, you have just heard from Sir Terry that he was getting assurances from you as the executive that things were on time. Did you ever question the opening date? Did you ever have a conversation with Sir Terry about changing that date, to make it easier to deliver and to manage the risks that you were having to manage?

Andrew Wolstenholme

As Sir Terry said, we constantly questioned the programme and our ability to deliver that programme.

Chair

Specifically, did you look at the issue around the delivery date? Because that has been a big driver of some of these problems.

Andrew Wolstenholme

No. We didn’t ask permission to deliver this programme late. I will tell you why. Whenever we did the parallel studies as to how to deliver the December date, we also looked at the economy. We tried to do two things: first, to deliver it on time; and, secondly, to deliver it within the funding envelope. All the studies showed that because this programme carries such a vast number of different suppliers in different combinations, it is very expensive to manage that overhead. So the most economic way through was not to delay; the most economic way through was always to find a way through those risks and challenges. Therefore, the shortest period on Crossrail, the shortest programme—this is normally the case on most programmes—is the most economic. Whenever we came up with studies saying, “Can we delay things? Can we move things back?”, that always added cost. The inference from that was no. We had a challenging programme; we knew what the risks were; we knew what the political ambition was; and the culture of this, to work right across the enterprise, was to find ways through those issues. Now, as I said, back in 2017, and with the benefit of hindsight, there were things that happened that are unknown unknowns, such as an explosion at Pudding Mill Lane. The instinct of the team right then was to go and fix it. We did absolutely herculean things to find a way through that. Again, we submitted the plan to the board in March, which had allocated the right time for testing and commissioning, but had underestimated—this is with the benefit of hindsight—those activities that were yet to be completed on the stations. I am sure that Mark will talk about that later, but I would agree with him: we had underestimated, despite the fact that the information we had on our screens was coming from the specialist suppliers who had designed and put their programmes together. We had underestimated that. The programme was therefore very tight in March. It carried lots of risks. The PRep would acknowledge the fact that it had carried risks and would be showing lots of red on the screens. Much of the information that the PRep got was derived from our own reports, so acknowledged that the programme was very risky at that stage. We openly and honestly, with transparency, discussed that with the board and the sponsor at the time.

Sir Geoffrey Clifton-Brown

Sir Terry, I fully acknowledge all the technical achievements of the railway—we have been through all this—but in 2016 you had burnt up all your contingency of £600 million. By the beginning of 2018, you were rapidly burning up £2 billion-worth of TfL’s contingency. In June 2018, I was on an official visit, and I was told then that everything was still on time, and on schedule to open at the end of last year, and yet we had a visit this last week and we could see just how much there is still to do. The opening time is likely to be delayed by two and a half years. Doesn’t all this really demonstrate that your board wasn’t on top of the job?

Sir Terry Morgan

It is obviously something I have thought about a great deal. One of the things that was always a factor—I would have said something similar to Andrew in the opening statement, but I would add this—was that all our plans were based on submissions from our supply side. We underestimated the system integration; of that I have no doubt at all. But the board itself, I still think was a good board, with the right skillset. I have obviously thought a great deal about that. We carried out our duties in the right way and we didn’t breach our contingency. It’s a very difficult calculation to make, but all our costs to complete were based on some form of probability analysis, whether it was P50, P80 or P95. There were very distinct lines of engagement with the sponsors if we breached, whether we called it an IP0 at P50 or whatever, and we had a number of different trigger points. In terms of the numbers that you were quoting, we did not breach. If we did breach, we had a duty to—and always did—report back to the sponsors at the time we were reporting a breach. We did do that, as we actually had to access some of the reserve funding that had been made available by the sponsors as we were coming to draw down some of those contingencies to meet the date in December 2018 that we were trying to go after. It was always the case that we were putting a lot of pressure on the supply chain to deliver their productivity. They did not. And I would argue that one of the risks you always take when you start moving the date is that the pressure comes off the supply side delivering on their promises. That’s always the risk that you take with these programmes. Getting them to actually get back to the pace we were looking for is very difficult.

Sir Geoffrey Clifton-Brown

Can I ask you a very simple factual question?

Sir Terry Morgan

Please.

Sir Geoffrey Clifton-Brown

At what point did you have a candid conversation with your sponsors—namely, TfL and the Department—about delaying the opening date?

Sir Terry Morgan

You have to bear it in mind that I’m the non-exec chair, so it would have been the executive who replaced Andrew who would have spoken. I spoke to the Secretary of State and made him aware at the end of July that we—

Sir Geoffrey Clifton-Brown

End of July 2018?

Sir Terry Morgan

2018. I also—

Sir Geoffrey Clifton-Brown

Not until then?

Sir Terry Morgan

Not until then. There had always been a conversation around the status of the project, and we talked about some of the challenges that we were facing, but at that time, we still had a plan that I had tried to get validated independently, by experts, to support the board’s recommendations from the executive. We always had the evidence that supported the fact that we had a plan to open in 2018, yes.

Chair

But on 23 July you came to an all-party parliamentary group here, on Crossrail.

Sir Terry Morgan

I did.

Chair

And you told them that it was on schedule.

Sir Terry Morgan

It was a very difficult time, to be frank with you.

Chair

Sorry, it was a difficult time, to be frank with the Committee or with the all-party group?

Sir Terry Morgan

Well, verbatim, I talked about the fact that there was a huge challenge still to be undertaken before we could get to that position. We had a board meeting just after that. I saw the Mayor of London towards the end of July and I made him aware—well, with the chief executive. We made him aware that the plan for 2018 was no longer deliverable. I had this expected response from both sponsors: “It has to be done in 2018.” What else could we do? How do we throw money at it to get there on time?

Chair

So when you went to see the two sponsors at the end of July, they told you that you had to continue—

Sir Terry Morgan

Find a way of opening the railway. That was always the right pressure, by the way. I have absolutely no problems with it. I was never under any pressure to say something I did not believe was true. But that was always the expectation.

Chair

We may go back to the issue of the APPG in a moment, but Ms Kelly, just on that point, before I bring in Mr Davies.

Bernadette Kelly

My understanding—our records show that Sir Terry did indeed raise this in a conversation with the Secretary of State at the end of July. That was in the context of a meeting on HS2, but it came up in the margins. At that point, Sir Terry indicated that the board was now considering options around delay. This was the first time, I think, that the board had countenanced that December 2018 might not be met. Formal notification, I should say, of that did not come until August, after the board had actually formally considered the situation. I would just distinguish between those two things.

Chair

And do your records say what the Minister or the Department said back to Sir Terry?

Bernadette Kelly

I was not in the meeting, so I can’t give my personal recollection. I’m quite sure the natural reaction of the Secretary of State would be, “Do everything you can.”

Chair

But would it have been minuted? The civil service are excellent at minuting meetings.

Bernadette Kelly

Yes, it was; there are notes. It was kind of, “Do everything you can to see what opening is possible.” That was certainly the gist of it.

Sir Terry Morgan

I left no notes for the Secretary of State at that meeting and I have no idea what was minuted from that meeting, but what it very clearly said was: there is no feasible way of opening the railway in 2018. With the Mayor, it was different; we—

Chair

You said that very clearly: there is no feasible—

Sir Terry Morgan

I said that, but it was repeating something that had been said to the Mayor two days—three days—before.

Chair

To be clear, this is the Mayor you are talking about, not TfL, at this point.

Sir Terry Morgan

I’m talking about the Secretary of State.

Chair

Yes, sorry, the Secretary of State.

Sir Terry Morgan

I saw the Secretary of State on the last day of July, and it was to be a meeting about HS2, but we didn’t spend much time on HS2, as you might imagine. I had seen the Mayor three days before that. We had left a copy of the presentation material that the chief executive used. The words were very clear: delivery in 2018 was no longer feasible. And we offered three dates in 2019 that we thought we could match. The work that was done, which the permanent secretary is referring to, was that we had not costed the consequences of the delay. We needed in August to go away and do the costings to support the late delivery.

Chair

Can I just be clear? I thought earlier you said that you were told to go away and find a way to do it, so can you be clear what “it” was? I was under the impression that you meant doing it by December 2018.

Sir Terry Morgan

The conversations were different. With the Secretary of State, it was, “Surely we should be able to open something,” and the answer was, “No. We’ve been through that.” To my mind, that was a justifiable response from the Secretary of State.

Chair

So they asked the question and you said no, very clearly.

Sir Terry Morgan

With the Mayor, it was different: “How can I throw more money at it? Can we actually incentivise the contractors more than we’ve already done?”

Chair

And what did you say to the Mayor?

Sir Terry Morgan

The answer was very clearly in the words, “We have gone through all of that, and it is no longer feasible to deliver.” I am very clear.

Chris Davies

Mr Wolstenholme, the Chair tried to get out of you for 20 minutes when you thought this had gone wrong. We tried last week to get out of you, Mr Meggs, when Crossrail will be opening. I am just wondering whether it is in the job description of the chief executive of Crossrail to avoid questions when they are put to you. Can I just go back to you, Mr Wolstenholme? Do you agree with Sir Terry that it was in July of last year that this went wrong, and you realised it was going wrong and it wasn’t going to open in December?

Andrew Wolstenholme

I actually left the project in March 2018.

Chris Davies

But you must have seen, even in March—this was a massive project. You must have known when it was going wrong. You had been advising Sir Terry.

Andrew Wolstenholme

I have explained that point in time in 2017 when the risk profile changed. I have also explained that in March 2018, when we put the final programme down, along with a cost and a lot of the risk assessment, we explained that this was a very high-risk approach. No one was in any doubt in March 2018, which was my last month, that there was not a valid programme ahead, but it came with considerable risk. I think that is the point that we made when we spoke to the sponsors in January, February and March. It was quite clear to my programme director, who took over from me from then, that there needed to be three test points through 2018 at which he measured either the maturity of the rolling stock or the maturity of the systems that supported the rolling stock, in the RailTrace and on the stations, and there needed to be a decision through 2018 as to whether this opened or not. That, as Sir Terry has said, was formulating in July of that year. In March, we had the programme. It had a high level of risk. That was explained to the board, explained to the sponsors, and that was the position we were in in March.

Sir Geoffrey Clifton-Brown

Sir Terry, at this really important meeting when you went to tell the Secretary of State that the thing was not possible to deliver by December 2018, you indicated just now that you gave him some dates when you thought it could be delivered. What were those dates?

Sir Terry Morgan

There were three dates that had different probabilities attached to them, but took you into the third quarter of 2019.

Sir Geoffrey Clifton-Brown

The project would be complete by the third quarter of 2019.

Sir Terry Morgan

The key to Crossrail was always around a date on which we could open what was described as stage 3.

Chair

The central bit.

Sir Terry Morgan

Stage 3 was the opening of the tunnels between Paddington and, basically, Canary Wharf. That was always the centre of attention, because that is where we had to get the rolling stock to work, it is where we had to get the stations complete, and it is where we had to get the systems integration in play. That was our key date. Stages 4 and 5 were beyond that, but to be frank with you, it was all about getting confidence into a programme.

Chair

So the third quarter of 2019 was when you expected that.

Sir Terry Morgan

Yes.

Sir Geoffrey Clifton-Brown

Nevertheless, you had been responsible for this project; for producing a railway. What were your predicted dates for stages 4 and 5—that is, to complete the railway—at that meeting?

Sir Terry Morgan

At that meeting, it was off into 2020. I do not have the data with me—I could provide a copy of it—but stage 3 was always absolutely key to the programme. Until we got stage 3 started, we really were not testing Crossrail as a programme.

Chair

Mr Wolstenholme, you left in March, and you said that you were raising warning signs that there were future target dates to meet certain milestones ahead. Are you saying, though, that when you left in March, everything was okay and there was a possibility that you could still deliver it by December 2018?

Andrew Wolstenholme

In March, with the information that we had, with the programmes that were put together from our supply chains, and with the time that we knew we needed to do the integrated testing, there was a considerable amount of risk. The discussion with the sponsors and the board is that we needed to test that risk through the course of 2018, in early summer and mid-summer. That was a clear indication that those risks were not certain to go one way or the other. There was still a lot of work to do, and a lot of risk to unwind. That risk came from two areas: one was the maturity of the train and rolling stock, and the other was the completion of the tunnels and the physical stations themselves.

Chair

Did any of your suppliers raise any concerns about the delivery dates and the milestones that you were setting?

Andrew Wolstenholme

I will focus on the area of most complexity, which was the completion of the SCADA system on the station. When you have put in the final pipes and wires—mechanical and electrical—then you put the complex systems overlay on it. We were using a specialist contractor who had done this. Of course, the novelty was that there were 10 stations’ worth of this to do. But based on the information that he provided in late 2017 on the then best definition of the scope that needed to be done, we were getting indications from programmes in our supply chain that the scope of work on each station was between three and six weeks. That is the information we were getting from our supply chain at the time, and that is what we loaded into our programmes. Of course, with the benefit of hindsight, that was materially inaccurate and wrong.

Chair

Who was doing an assurance of that? Sir Terry, you have talked about independent studies that were commissioned by the board. Did it look at the whole SCADA set-up? We saw some of that when we were in Tottenham Court Road. We recognise the complexity, even as lay people. Did you have people doing assurance about those deadlines?

Andrew Wolstenholme

I am not sure that in March 2018 we had an independent review of that particular area of scope. What we did say is that where we had complexity and needed assurance, we went out to go and find those reports. On several occasions, be it the system integration or some of our industrial partner’s Network Rail issues, we went out and had those separate independent reports to see whether the risks that we are looking at are the same risks that we are dealing with—is the knowledge from around the rest of the industry in the world comparable to that?

Chair

Were you personally walking the sites? Were you going and talking to the contractors on the ground about whether they could deliver this?

Andrew Wolstenholme

Constantly.

Chair

And they assured you, eyeball to eyeball, that they could deliver this.

Andrew Wolstenholme

Of course, when you can see physical activity, it is demonstrable. There is always an issue in the whole sector around how you measure progress in software and software codes, because a lot of the SCADA is about software and software codes. In order to take that risk off of the critical path, part of the integration strategy, which had several tiers on it, was to put all of this through an off-site laboratory. This is standard best practice in the industry. Thameslink had an extremely good off-site laboratory, and we took hold of the ideas. What that did in 2017 is begin to make sure that any issues and risks that there were would be detected earlier.

Chair

Sir Terry, did all these independent studies you have commissioned as a board flag up that some of these supplier promises were over-optimistic?

Sir Terry Morgan

No. These independent reports came in and were discussed by the board. We never kept those to ourselves; we always shared those with the sponsors. They reinforced the plan that was in play. As you might imagine, we had one or two issues in there that we needed to address—not least the behaviour of one of our contractors, and I think they are still not behaving in the way I would want them to. The behaviour of one of the contractors was very difficult, and that has always been an issue when you say contractors complain. In the 10 years in which I was on Crossrail, I was never approached about complaints about the supply chain. Did I hear rumours about what the supply chain thought? Of course I did, but I did not personally advocate an approach to concerns about the programme. Indeed, when in August I met a number of the key contractors who are still causing problems, two of them came to me and said, “Is there anything we can do to support an October completion date? We’ll do everything we can to support you.” My answer to that was just, “Get it done.” There was always a gap between the ambition and what got delivered on the ground, I’m afraid.

Chair

And you did not realise that till summer last year?

Sir Terry Morgan

As I said earlier, we put a lot of pressure on the supply chain to deliver—that was this whole thing about “can do”. We got many things done that people said were not possible. Of course, the job of a programme is to drive the programme to deliver beyond the expectations of what people thought was possible.

Chair

Whose decision was it? Was it at board level, Mr Wolstenholme? Presumably you recommended to the board that partners such as Bechtel were subsumed into the Crossrail team. We heard, when we went to visit Tottenham Court Road, this proud boast: “We’re all one team—we’re all Crossrail. It doesn’t matter which company we’re in.” That took away some of that independent assurance.

Sir Terry Morgan

Actually, we had five levels of assurance, compared with the Olympics, which had three. We had 150 audits in the last year of the programme. In the assurance process, we had the NAO, the IPA and all sorts of people.

Chair

Not everyone was necessarily looking at the whole thing. What about project management assurance?

Sir Terry Morgan

The problem, as Andrew said in the introduction, is that this is a digital railway. Nobody has done that in the UK before. There are very few people around the world—

Chair

Ultimately, it is project management. Bechtel are an international company that do project management, but then instead of project managing one step removed they were brought into the whole. Did that make a difference?

Sir Terry Morgan

I know you asked the question to Andrew, but I was actually in Crossrail when the decision was made to change the model of how Bechtel should operate. They won the bid. They put resource against what they thought it needed to do. Surprise, surprise: the costs started to escalate quite significantly. They wanted a lot more people. What we didn’t want, as we laid out much bigger contracts in the supply side than we had originally envisaged, was big contracts with a big contractor—Crossrail—sitting on top. We saw that as being very cumbersome administration, so we agreed to change it. In a very simplistic way, to put this in context, we had probably 400 people from Bechtel. This is not a small piece of Bechtel inside the programme; this was very, very significant. We had a rule that we tried to operate that if we had appointments to make that we thought would last the lifetime of the programme, it was better value for money for us to try and recruit them and to create a more integrated team. That was the driver for doing so.

Chair

To be clear, these Bechtel people became Crossrail employees?

Sir Terry Morgan

They were. There was almost a proud boast, to be frank with you, that when you went on a site you wouldn’t know who was Bechtel and who was Crossrail.

Chair

That was exactly what we got, you will be pleased to hear, from the project manager when we were on site last week. But my point is, once you have wrapped them into the structure, you are losing the contractual bite that you have got over them.

Sir Terry Morgan

With 400 people from Bechtel they dominated the delivery side of the programme.

Andrew Wolstenholme

May I add something? If you are comparing a thin client—a client with very few people in—with a Bechtel, for instance on the ODA Olympic Games, the scope of the Olympic Games, which was £1 billion of revenues and £2 billion of transport programmes, all on the surface, with fairly simple logistics, are the sorts of projects that you can draw lines round, and you can articulate where those risk boundaries are. It is a very appropriate model to have an ODA-style layer of programme or project managers who you incentivise to do that.

Chair

The ODA being the Olympic Delivery Authority.

Andrew Wolstenholme

Correct. If you look at the Crossrail scenario, this is 42 km. There are 52 construction sites on Crossrail in order to get down to the access. The reason that I was explaining the sorts of risks that were going on in 2014-15 is because an unknown obstruction in Moorgate caused a tunnel boring machine 2.5 km away to stop, which was the right place to stop it. That created the circumstance where the whole of the tendered track installation programme was reversed. I think the implication you are giving is: “Why didn’t you just ask Bechtel to take on that risk?” These are enormous risks, and the reason that we ended up with 36 different suppliers is because, if you look at the analysis that was done in 2010, the capacity of the industry to be able to take on risk, to take on skills and capability, was a very scientific approach. When those programmes were let over a five-year period, vertically and horizontally, we did a very careful piece of analysis to determine how strong the balance sheets were, how able they were to take on the technology, and how to optimise the interface risks between those. We got this report looked at by an independent group of procurement experts, which acknowledged that the compromise that you have to make, in having the right size of contractors and understanding the risk between these different interfaces, was around what we had at the time. If I had that decision again, that is the answer you would get. There is no way that you can put one organisation with one balance sheet between the complexity of those risks and seemingly protecting you against managing the complexity of those interfaces.

Chair

We are going to come on to some of the odd incentives with payment in a moment.

Sir Geoffrey Clifton-Brown

Mr Wolstenholme, you will have seen, I hope, the NAO Report. It is an agreed report between the NAO and the Department for Transport. I would like to take you to paragraph 2.19 on page 25, which states: “Crossrail Ltd integrated contractors from the two partner firms”—that is Transcend Ltd and Bechtel—“within the central Crossrail team…this meant that Crossrail Ltd had few commercial levers to drive management and integration of the overall programme, and took on all the risk of doing so itself.” Is that not pretty damning of your strategy in this respect in not allowing the project managers to get on and do the job themselves?

Andrew Wolstenholme

We did not have a Carillion failure on our job. We were very conscious of the ability and capacity of our supply chains to take on risk. The form of contract is the NEC—the new engineering contract—and there are various formulas with it. You can fix the price. When you fix the price, you are certain of the scope, and normally you are certain of that scope because it is manufacturers and you can draw a line and a boundary around it. We did not have that position. I do not know of any option A contracts that we actually delivered, apart from moving the 4.5 million cubic metres of spoil, which was a very fixed volume, to Wallasea island. It was appropriate to have a form of contract that was a target cost. That allowed you, at the level of scope definition that you had in the early days, to be able to get the contracting organisations in early to make sure that their ideas and innovations were locked in. Once you then agreed that scope, which still had many years of design definition to go, you then allocated a target cost. The reason that form of incentive was chosen was because those contractors then had their own interface schedule and scope of work. They were looking after their own target cost around that agreed number, and you have got to get that number in place.

Sir Geoffrey Clifton-Brown

It is a long answer to a simple question. The question is: was it wrong to let those two contractors off the risk of not delivering the job on time?

Andrew Wolstenholme

I think I have explained the size and the scale—

Sir Geoffrey Clifton-Brown

I am not interested in the size and scale. I am interested in how you structure a project like this.

Andrew Wolstenholme

If we went back and did it again, I believe that the right answer for the complexity and the number of interfaces is to understand the risk and then get the best people to manage that risk. You cannot do that by just putting them in a single office and saying, “That risk is yours.” The complexity and dynamics of the risk profile were such that you needed every day to manage that risk register and apply the appropriate technologies to manage that risk. I would not change it. If I went back and did it again, on balance I think we had the right number of contracts and the right contractual mechanism in letting them through a target cost. On balance, there were more examples where the combined team found a way through, rather than holding on the risk. There is no way—

Sir Geoffrey Clifton-Brown

We have exhausted this subject. Can I move on to a different subject? I made two official visits to Crossrail, one in January 2017 and one in June 2018. In both visits I was told how wonderfully all the civil engineering—the tunnelling and the rails—had gone. A huge amount of time was spent on the escalators. Not once was I told that there were problems with the systems engineering and the integration. Is it a fact—it is a useful lesson to learn for HS2—that you and your management spent too much time concentrating on the civil engineering aspects of this project and not enough time on the systems engineering?

Andrew Wolstenholme

I do not think it is as simple as saying, “Is it a fact?” If you look at how the transition of the programme went through, there were five different transitions to the programme. You are right in saying that the early three or four years were focused on the enabling works and then the heavy and complex tunnelling works. If you look at the programme in 2013-14, the organisation changed to ensure that we had the right leaders, supervision and skill sets to manage the new supply chains that were coming in. First, those represented the stations. Later on, we then had another organisation shift, in order to make sure we had the right skill set to look at the complex rail systems. The final organisation shift that we had enabled us to make the transition between a construction programme and Transport for London, and make sure that we had those skill sets to manage the remaining risk. I very consciously looked at the organisational design, to make sure we had the right skill sets. If you go back to the beginning—I will give this one example—there were only a few dozen people who had the skill sets to dig soft tunnels. On reflection, if you look at the industry that is presented to us, there is still a huge skills shortage around certain elements that you need at certain times. I think that, on reflection, we should probably have matched the great work that we did in the tunnel with training in the academy, to make sure that the skill set was robust. With the strategic resource management at a level, there were competing programmes at the time and, yes, it is true to say that those resources that we needed in 2018 were scarce and difficult to get.

Chair

Before I move on to Mr Wild in a moment—I warn him of that—you have both talked about the challenges of system integration, including the fact that you have stations to complete, the lines—all of these elements and complexities. But it was always known that integrating it was one of the challenges. I still cannot quite understand why you did not appreciate the challenges of integration, particularly—as we saw from our visits—some of the challenges of the IT, at an earlier stage. Seriously, did it not ever keep you awake at night—that difficult last year, six months, or whatever time period—when you were beginning to have to integrate these systems? And the fact, Mr Wolstenholme, that when you left you still were not integrating systems in March for a December delivery, because you were not at that position yet—did that not sound an alarm bell to you, in all honesty?

Andrew Wolstenholme

The whole subject of integration is huge when you look at the enormity of this programme—

Chair

But that was the programme.

Andrew Wolstenholme

Right, so we set up something called the railway integration authority back in 2015-16. That authority looked over seven different geographical areas, through eight different stages, and the element that we are talking about is one of those elements within one of those areas. Again, with the benefit of hindsight, three things were coming together on those stations that had never been done before. One is that there were 10 of them; and the second is the aspiration, which is quite understandable, of TfL to produce a digital railway. Thirdly, not only was that going to be controlled locally in the station environment, but it was going to be controlled remotely, and I think that people had not appreciated and not understood the complexity of that. I also said that the relatively late arrival of the mechanical and electrical systems compounded three elements: shortage of skills; a misunderstanding of the complexity; and this happening relatively late in the programme. That is why this risk appeared relatively late—because these things only come late. This activity is the final activity that you do—

Chair

Sorry, but a late understanding of the complexity? You have just outlined very clearly why it was a complex project, although I have to say, regarding the number of stations, that there are plenty of metros and so on around the country that have built 10 at a time. There are examples, perhaps not all in the same place at the same time, of trains run on a digital basis without drivers, for example, although clearly they are not as complex as Crossrail. However, you must have seen these complexities coming. You took on, with enthusiasm, this huge and complex engineering project as chief executive. You must have been enthused partly because of the complexity, surely. And you are telling us that you did not really understand that until just around the time you were leaving?

Andrew Wolstenholme

I think that—Mark can probably help out here—a normal station in a TfL environment would potentially have around 100 points where you monitor. These stations that we are discussing were specified with around 1,000 points to monitor.

Chair

This is the monitoring for the drilling?

Andrew Wolstenholme

No. This is monitoring for the supervisory control and data acquisition, or SCADA, system in a single station, which was of an order of magnitude more complex than a station that you would see on the network today. Yes, with the benefit of hindsight, I think that no one—including the specialist supplier, who was actually allocated to provide this—had understood the complexity and the volume of work that needed to be done right at the end of the construction process.

Chair

Right. I have to say—Ms Kelly is a welcome recipient of our questions on the complexities of integrating complex rail projects; I am sure she enjoys it every time she comes—it is not a new thing that the integration of many rail projects above ground is challenging, so obviously below ground was more challenging. Sir Terry, as a board, do you think you were asking the right questions and getting the right assurances? If someone came to build an extension in my home and said, “Don’t worry. It will all be fine,” I woud be asking them a few more detailed questions to make sure they were really on the timetable and the detail. Were you getting the right information from the executive? Was your board up to it and asking the right questions?

Sir Terry Morgan

I think we had people on the board who were up to it, with the skill sets. We always thought very hard about who should be on the board and why they should be on the board. For example, we had a retired chief operating officer from MTR in Hong Kong, which, at the time we recruited him, was seen as the benchmark railway around the world. He joined the board.

Chair

Was he asking the right questions?

Sir Terry Morgan

Absolutely, and he still asks lots of interrogating questions. To be frank with you—I know this is not necessarily the thing that people want to hear—one of the things that stopped us having in-depth understanding of system integration was the lack of a train. There was an adverse notice issued to the sponsors in 2017 that the train we were expecting to see delivered, which was under contract with TfL, was not available. It is a digital railway, so the heart of the railway is in that train. That is what drives the system.

Chair

But there are so many other complexities. I don’t think the absence of the train was the sole thing.

Sir Terry Morgan

No, not the sole thing, but that train is probably the best part of two years late now.

Chair

I am not going to get drawn on the train. I am going to bring in Mr Lee Rowley and then Sir Amyas Morse, and then we are going to move on to some other subjects before coming back to Mr Rowley.

Lee Rowley

Mr Wolstenhome and Sir Terry, you have extensively explained how complicated this programme is and said that there is an incredible amount of complexity. It was perhaps unique in the world, in terms of its complexity. Why, then, does the NAO describe your plan as “aspirational” on page 7 of its Report?

Andrew Wolstenholme

The programme that we referred to—the MOHS, or the master operational handover schedule—

Lee Rowley

I just want you to answer the question. If you were trying to manage such a level of complexity, why did you have only an aspirational plan?

Andrew Wolstenholme

I have to say that I don’t agree with the word “aspirational”. The programme has more than 20,000 activities to it. It was built up bottom-up by the suppliers’ programme. It was very carefully composed in order to make sure that it served the purpose of being able to deliver the messages to the board, the supply chain and the audience that needed them. As you know, building up programmes for a programme the size of Crossrail means hundreds of different supply programmes coming together.

Lee Rowley

Yes, and unfortunately the NAO don’t think you had it. “Crossrail Ltd started to produce a detailed, realistic, bottom-up plan in late 2018”—after you left the company. They are indicating that they do not believe you had a plan that was sufficient to manage the complexity that you have been so keen to tell us about for most of the last hour and a half.

Andrew Wolstenholme

If you go back to the start of the programme in 2012—

Lee Rowley

I’d rather talk about the end of the programme, which is the problem.

Andrew Wolstenholme

I understand that, but the detail of the programme emerges as you go forward.

Lee Rowley

I don’t need any education in how programmes emerge. I want you to tell me why the NAO are wrong in their assessment, towards the end of this project, that you did not have a detailed, realistic, bottom-up plan until after you left the company.

Andrew Wolstenholme

With respect, they are referring to the element of work that was done at the time. I don’t think the NAO are saying that, for the whole of the eight years that provided an extremely successful outcome on those elements, we did not have a programme.

Lee Rowley

I’m just telling you what they have written. It is a very clear statement: “Crossrail Ltd started to produce a detailed, realistic, bottom-up plan in late 2018”, ergo you did not have one beforehand. The Department for Transport presumably agrees with that, because they signed this off.

Chair

Ms Kelly, while we are on that, do you agree with the NAO?

Bernadette Kelly

We signed the Report off. We have no factual disagreements with the Report. That was the NAO’s description; those are the NAO’s words.

Chair

Mr Lodge is nodding. He agrees with you.

Matthew Lodge

The MOHS was presented to sponsors as being the detailed plan about how we got the railway open. We assumed it was an integrated plan that would take the project from the civil side to completion and running the trains.

Lee Rowley

I am not sure I understand that. Do you agree that there was no detailed, bottom-up plan before late 2018 or not?

Matthew Lodge

The MOHS was presented to the sponsors—

Lee Rowley

Yes or no is the answer, not a detailed explanation. Do you agree with the NAO’s statement? It is a binary proposition—yes or no?

Matthew Lodge

Based on the Report the NAO put in front of us, I concur with what the NAO is saying—that the plans—

Lee Rowley

Excellent. Back to Mr Wolstenholme. The Department for Transport also agree that you did not have a detailed, realistic or bottom-up plan before you left. Why did you not?

Andrew Wolstenholme

We were able to provide comments to the draft NAO Report, and both myself and some of my project team disagreed, with great respect, on there not being a detailed programme. I accept that, for the thousands of different, complex areas of this programme, the details will emerge. I accept that a year before, in 2017, there was not the same crystallisation or granularity of the programme that was required a year later in order to deliver that detail. I accept that, but that is how the layers, the detail and the granularity of programmes are produced. These emerge, and when the detail of the final supply chain is let and awarded, that is the point at which you can bring in that level of detail to your higher-level programme. In the early days these were concept designs. Later on these were detailed designs. Further on through the supply chain, you have the actual engineering drawings that you are going to deliver, and only at that point can you cascade these up into the final detail. I accept, for those elements of scope, that that detail emerged late in the day.

Lee Rowley

I was not seeking the final plan; I was seeking a detailed, realistic and bottom-up plan. The NAO does not think you have it.

Sir Amyas Morse

As I have listened to your testimony, I have heard that you did not realise how difficult the systems integration would be, you did not realise that the completion of the stations would be late, you did not realise that there would be site difficulties with ground state and so forth. All those added up to major difficulties that now mean the project will be late. You had the job of identifying things early enough to give assurance that the plan could be delivered. That was surely the job. To say that this is so unique that it was a voyage of discovery all the way through is really not a reasonable position to adopt about a major project. You cannot say that you entered into it with a timescale, a cost and everything else, and that we accepted that as a kind of speculative set of indicators. That is not what we were hearing from you. We heard from you that this was all going really well and would be delivered on time until pretty late in the day. We tried to explain in the Report that, by taking all the risk into Crossrail Ltd but leaving a lot of the variable factors under the control of the contractors, you actually did not know what was going to happen until quite late on. You have more or less admitted that, too. You were not really in control of the project—isn’t that a fair comment?

Andrew Wolstenholme

No, I don’t agree with that at all, with great respect.

Sir Amyas Morse

You don’t need to give me great respect. Just give me some evidence.

Andrew Wolstenholme

In taking on some of the huge challenges and elements that we had, no, we did not have the answers. We were not able to specify those things that we did not know. That is why I go back to many issues that occurred throughout the engineering. Perhaps we made that look quite easy, but we had to find ways around the challenges that we had, and we constructed a team that was able to find routes around those. On the three risks that we had in 2017, by then there were only 13 months to go before that incident at Pudding Mill Lane. Right then we were able to reconstruct the programme of testing and commissioning, but still providing sufficient time. In all of these we had programmes from our specialist suppliers and dashboards to understand how those risks were dynamically changing at any time. Based on the information and expertise that we had, we made clinical, open and honest decisions that we put forward to the board and to the sponsors in order to move those risks forward. It is incorrect to say that Crossrail Ltd was managing the risk and that the contingencies were held apart.

Sir Amyas Morse

In July 2018, you estimated a £300 million cost increase and a nine-month delay. What has actually emerged is a £2.6 billion cost increase and a two-year delay, at least. That is not a project that is under control. I’m sorry; I know it is easier to talk with hindsight and I am sympathetic, but really that is a massive, massive difference. You cannot just say that was all a surprise.

Andrew Wolstenholme

I am not going to comment on the cost that has come out in July 2018.

Sir Amyas Morse

You don’t think they are legitimate? You don’t think they were already in the system and on their way through?

Chair

Sir Amyas, we are not having a conversation. Mr Wolstenholme, on the costs?

Andrew Wolstenholme

I can tell you where the estimate was in December 2017 and in early 2018, which was submitted to the Department for Transport and our sponsors. It looked at several different scenarios for how you would allocate that cost to the programmes. That exercise was called the book-ends, and those were the book-ends between £150 million and, I think, £320 million. That was the allocation that went up for additional funding, and that was in addition to the funding envelope. Those were the exercises I am very familiar with. I am not able to bring myself forward by nine months and to comment on the cost plan that has been put forward at the moment.

Chair

I will move on, then, to the current incumbent and Mr Wild. Let’s start with stations—forgive me; I forgot Mr Davies.

Chris Davies

My question is to Mr Wild, if I may. Mr Wild, I have been watching your facial expression as Mr Wolstenholme has been giving his evidence, and I must say that from this angle it is very interesting. You are now the chief executive; the confidence of the country is now in you to finish that project—I would say on time, but we do not know when that time is going to be. When you look back on what has happened, would you have done things the same way as the previous chief executive?

Mark Wild

I sat on the board alongside Tony and Andrew, so I know the project very well. I will give you my personal view, which is more aligned to the NAO’s: this is a failure and we must learn from it. When I look back at it, not with 20:20 hindsight but with the reality I face now, Crossrail had exceptional system engineering, a system of monitoring and a detailed plan, but all the dials were not telling us of the latent risk that did exist. I completely agree with Amyas that the costs that have come out were there anyway. The real issue on Crossrail, to me, in 2017 was that the system integration authority just did not have the appropriate skills, measurement or methodology. That is a huge lesson for future projects. That is not a criticism of anybody. I think the Crossrail team were absolutely exceptional, but it is just a gap; something so big always needed a powerful system integration authority, not a railway integration authority. The difference is that system integration is much more about sensing these issues. I agree that the project should have spotted them; I think about it all the time. It is a systemic issue, so there is no person to blame. It is simply that the project did not have a system integration authority that could assess the risk. Clearly these costs are real, we incur them every single day and they were there already. The lesson is for the future and we really must recognise it for future projects. My face, by the way, is nothing more than my face, so don’t worry about my face.

Chair

I think you will be in front of us a few more times to discuss these very issues. I will move on to the situation you have inherited. Let’s start with the stations. How much work is there to do at the stations? We were at Tottenham Court Road and we have heard about some of the others, but do you want to list, not every single station, but the work overall and any particular stations that still have to have major works done?

Mark Wild

There are three critical paths in this project to complete, and a sprint to Christmas: the stations, the routeway and the trains.

Chair

I want to talk about the stations, if we can talk about that.

Mark Wild

On the stations themselves, there are 10 stations and eight shafts and portals. They are in stages of completion. You went to Tottenham Court Road, which would be the most complete of our stations. Although it looks physically complete, the electrical engineering, the migration of activities, will take us until August or September. That is a good indication that our most advanced station will not be complete until August or September. They are doing very well at Tottenham Court Road. At the other extreme, Bond Street is 18 months to two years away from completion; that’s the reality. Its design is not complete and will not be complete until September or October. You have got that big range. In the plan we have come up with, we have a good plan that sequences the activities and that enables this railway to open with all the stations, excluding Bond Street.

Chair

Were you aware of the state of readiness of the stations when you took over in this new role?

Mark Wild

My objective is to look forward. I can only tell you what I did when I got in the seat. We spent at least 10 weeks going through, root and branch, counting every camera to do and every wire to install. It is fair to say—and we have to accept this on the programme—that we didn’t really have a full grip during early to mid-2018 of the work that was left to do. The position I am in now is that I would tell you exactly what is left to do on every station. I think that is a fair challenge that we must keep very vigilant about, going forward.

Chair

Just to be absolutely clear, when you took over were you under the impression that work was more complete than what you inherited?

Mark Wild

I have been surprised by the lack of completion and the supply chain particularly; their programmes have proven that there is more work to do than we anticipated.

Chair

Ms Kelly, were you led to believe that the stations were more complete than they were? Mr Wild has uncovered some problems, he says. Were you aware of that before?

Bernadette Kelly

We would have been receiving the same information as the company was providing about the state of completion at the stations.

Chris Davies

Mr Wild, you have indicated and said quite clearly that you have been on the board for two years. Why were you not made aware of how far behind this project was?

Mark Wild

On the stations? Are you talking about the stations particularly?

Chair

Yes, on the stations particularly.

Mark Wild

I think there was a real issue—a failing—that the project clearly did not have enough granularity of information coming from the supply chain.

Chris Davies

In your opinion, who should have reported that to the board?

Mark Wild

The supply chain clearly should have been bringing their plans up and they should have been reported through the programme director to the board. I think there was good transparency, actually, but what wasn’t there, particularly in 2018, was the ever-increasing optimism bias of recovery plans and mitigations. It was becoming increasingly difficult to say, “Well, I do 10 of these items every week. Suddenly I’ve got to do 50 items.” What really happened from early 2018 onwards was the hockey stick effect.

Chair

Sir Terry, on that point—that the board didn’t have enough information—do you agree with Mr Wild? Was the granularity of information missing?

Sir Terry Morgan

I am listening to a conversation that obviously happened after I had left. If you take Tottenham Court Road, I am very aware that we were planning an event with the contractor last June that presented the station in as complete a form as we thought it could be. At that stage SCADA was not able to be installed; that was something we were still phasing through.

Chair

So you are saying that you didn’t know that it was as unready as it was?

Sir Terry Morgan

If Mark were to talk about Bond Street, it was always reported quite openly to sponsors. Bond Street is a problem child, as was Whitechapel. Tottenham Court Road and Farringdon were in a much better state. We had problems at stations such as Custom House and Woolwich that were overcome.

Chair

But given that Tottenham Court Road won’t be ready until August or September this year—you left in December last year and Mr Wolstenholme left in March last year—you had assumed it would open in December last year, so you must have had some very positive information about it.

Sir Terry Morgan

You asked the question earlier if I visited the sites. I visited the sites probably every other week. I tend to look at progress—

Chair

It’s not so much the visits—well, it is a bit—as the metrics.

Sir Terry Morgan

If you visit, you physically see what is going on.

Chair

Obviously that is important, but what about the metrics that were coming up from the different suppliers? What was everyone telling you?

Sir Terry Morgan

At every single board meeting we probably spent the first two hours going through a tour of the programme, with metrics about completeness. If reference was made, for example, to escalators, it included a suite of assets in terms of their completion. So yes, that was reported to the board and indeed reported to the sponsors.

Chair

Did anyone at any point flag the fact that—as we saw when we visited—sometimes you have a small contractor having to ramp up or spread themselves across 10 stations and sequence their work with only a few people involved? Were you aware of the skills issues that Mr Wolstenholme has also touched on?

Sir Terry Morgan

On some examples, yes. There were some examples, but to be frank with you, over the life of the programme we were always told that we were going to have skills shortages. Many of them did not materialise, because we planned our way around them. A question was asked right at the beginning about what percentage of our workers were not British passport holders; 40% of the workers on Crossrail were not British passport holders. We had a skills programme. Andrew is quite right: we focused on tunnelling, because that is where we saw the shortage. We had done a national survey. We planned on 300 apprentices; we had 1,000. There were lots of things that we did as the programme progressed to try to mitigate the situation. These are good examples.

Chair

But some of these were very specific skills and very specific suppliers, so they would be a bit harder to—

Sir Terry Morgan

Later in the programme, to be frank with you, as the M&E work was done.

Chair

Did you not see any of that coming? You had very specific, technical suppliers.

Sir Terry Morgan

In that regard, we were given assurances by our contractors that they had the resources that they needed.

Chair

Contractors often say positive things because they want the contract. Presumably you were a bit more sceptical than just accepting their word.

Sir Terry Morgan

As if we would! No, we did not. We wanted evidence.

Chair

Good. Were you surprised when Mark Wild sat on the board alongside you and said that he did not find that there was enough granularity in the plans? Does that chime with your own experience, Sir Terry?

Sir Terry Morgan

I am disappointed, to be frank with you. As Andrew said at the beginning, I am disappointed that we did not meet the date. It was a very heavily driven programme, and I do reflect on—

Chair

Do you agree, in hindsight—if hindsight were a company, we would all be buying shares in it—that you needed more detail at board level?