Vic Emery, who was chair of the council’s tram firm TIE and took part in mediation talks alongside council chief executive Sue Bruce, said the agreement with contractors Bilfinger Berger Siemens in March 2011 was a commercial deal to ensure the project continued.
The agreement involved the council paying £362.5m for completion of the off-street works from Edinburgh Airport to Haymarket and a further £39m to get it to York Place.
Mr Emery told the tram inquiry: “I think generally the team thought it was not a good deal, but in the basis we wanted continuance of the project and we wanted to get a resolution a number was agreed. I don’t think anyone thought it was good value.
“This was the best deal could be done. You either said yes to this deal or you walked away.
“I have been here before on other projects. It’s called a pig deal.”
Mr Emery, a former shipyard boss who later became chair of the Scottish Police Authority, was appointed TIE chairman just a month before the mediation talks began at the luxury Mar Hall hotel near Glasgow.
He described how the consortium, Bilfinger Berger, Siemens and CAF - collectively known as Infraco - were based in separate rooms at one end of the building. TIE and the city council had adjoining rooms in the basement. “We had a caucus room where the negotiators met.”
In advance of mediation, the council had looked at three options - securing a revised contract with the existing consortium, terminating the contract or pressing on with existing terms of the contract.
The third option was ruled out as unrealistic but views were divided on the merits of seeking a new deal with the existing contractors or ending the contract and finding new contractors to finish the project.
The inquiry, chaired by Lord Hardie, was shown notes from January 2011 suggesting that Tony Rush, a disputes specialist brought in as a consultant to TIE, felt there was not enough time to estimate the costs involved in ending the existing contract and completing the project with another contractor.
Mr Emery said: “The mediation was focused on finding a solution with the existing contractors.”
He said when the talks started the consortium proposed a price of around £750m, which was “miles away” from the figures TIE and the council had been working on.
Mr Emery said: “When Infraco put their offer on the table we could have gone ‘God, you must be joking, we’re out of here’. There was no desire to do that. The desire was we need to go back and make another offer.
“There was a lot of backwards and forwards in between, but the final offer was: we have to go back with something, why couldn’t we go back with half what they said? And to our surprise they said yes, done.”
Inquiry counsel Ross McClelland suggested TIE chief executive Richard Jeffrey, project director Steven Bell and commercial director Denis Murray had not been content with the deal. He asked: “As TIE chairman did you essentially have to overrule your management team?”
Mr Emery said: “Yes, was the primary negotiator with Sue Bruce and Ainslie McLaughlin, so yes I did the deal.”
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