Tricia Morrison: Holyrood lessons learned but TIE still in trouble

Last week saw the release of an interim report by Audit Scotland on the Edinburgh Tram network, which, as we know, is very much unfinished. Unfortunately, it is difficult from a road-side view to say that the project is even ongoing.

As the report highlights, only 28 per cent of the infrastructure works are completed when they should now be 99 per cent complete. On top of that, those works now appear to be at a virtual standstill.

The tram project shares the accolade of a having a mid-project report published with another well-known over-time and over-budget project - Holyrood. Following commencement of the Holyrood building works in July 1999, the Auditor General was requested to report on the issues, particularly in relation to cost and time over-run. That report highlighted the manner of procurement of the Holyrood project.

Following completion, a full inquiry report was produced in September 2004, that stated: "One of the most significant, if not the most significant, decision taken during the course of the project was to adopt construction management as the procurement vehicle for construction of the Holyrood building." Construction management is considered to be at the high-risk end of the procurement options, especially for clients who are not experienced in undertaking construction projects. In particular, it is difficult in a construction management structure to attain control over the overall programme or contract sum, both of which went considerably off piste on Holyrood.

The Audit Scotland report provides a useful historical overview of the tram project from 2002 to date. At the time the project was initiated in 2002, the fact that difficulties were being experienced with the construction of Holyrood was well known. In the intervening period to 2004 the Holyrood Inquiry Report was produced and no doubt its findings in relation to construction project procurement were high in the minds of TIE when it selected the procurement routes.

A desire to avoid a similar outcome is reflected in the strategy adopted by TIE. The report emphasises the fact that "most of these contracts (the various construction contracts] were designed to ensure that a high proportion of costs were fixed or… where the volume of work was unclear, based on agreed rates. Payment mechanisms were intended to provide incentives to contractors by ensuring that full payment is not made until the task was successfully complete".

This strategy is quite unlike that used at Holyrood. It is also emphasised that TIE sought legal advice on the form of contracts and how best risk (and therefore cost) could be transferred to the private sector to manage where appropriate. So TIE may have been influenced by the lessons of Holyrood and strove to reduce cost uncertainty and risk to the public purse.

What is not clear is why having apparently ticked all the boxes, the project is now so over time, over budget and deep in dispute.Notably, Audit Scotland could not consider these issues due to the ongoing dispute environment. Interestingly, it did report that the infrastructure contract sets out mechanisms to discuss and resolve the impact of additional work not covered by the contract on programme and costs. These issues are likely to be a large part of what the contractor is now claiming for.

In time, no doubt, studies at an academic level comparing Holyrood, the tram project and the M74 completion project will be produced. Many pages of previous academic and government reports have been dedicated to the issue of why construction projects have the potential to (and quite frequently do) go wrong. Unfortunately they have not succeeded in securing credibility for all high-profile construction public projects.

Audit Scotland emphasised the importance of the forthcoming mediation between the tram parties. However, if that is not successful, Edinburgh could be facing a very long wait for the first tram to run on Princes Street.

• Tricia Morrison, construction partner at law firm HBJ Gateley Wareing.