Crikey’s man in Westminster, Martin Suiteach, has pulled together this cracking tale of the fiasco and emerging scandal that is the Packer-connected Multiplex’s attempt to rebuild the famous Wembley stadium in London.
A sensational internal report has finally seen the light after a parliamentary committee threw all its toys out of the pram and ordered publication by the project managers.
They obliged, but only after negotiating substantial deletions to the text. The end result still shows that our mates at Multiplex were being offered different terms to other bidders in the process.
Now I know that the last time I wrote about this saga, the government had imposed a deadline of April 30 for Wembley National Stadium Ltd (WNSL) to come up with financing or see the venue moved up north.
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Well April 30 came and went. The Culture, Media and Sport Secretary Tessa Jowell came to parliament and told MPs a deal was so close it was giving WNSL more time to come up with the goods.
On the sidelines the cross party Culture, Media and Sport select committee was gearing up to score a few goals of its own, proclaiming that everyone involved in the fiasco so far was going to get a grilling.
The appointed day of inquisition arrived and, mysteriously, the hearing was cancelled. Crikey was perplexed. Having shouted from the rooftops, why did you cancel?, we asked.
“I’m afraid I can’t give you that information,” the ever so polite committee clerk told us.
Calls to MPs went unanswered. WNSL refused to comment. So what do we do in a situation like this?
Like all good hacks, we go looking for the conspiracy theory. The smoking gun in question in this instance is a report prepared last year by business troubleshooter David James into the corporate governance of the project.
WNSL told us the report was only ever meant for internal consumption only. This stance did not impress the MPs on the committee, who wanted to go public with it.
Word has it that the report was reluctantly presented to the committee but was so heavily censored that it was thrown back at WNSL with a threat that a parliamentary order to publish would be issued unless a deal could be done.
The hearing finally took place on Tuesday and the report has been published, albeit heavily censored.
It still makes interesting reading, especially for fans and followers of Multiplex. The report uses asterisks to denote where passages or names have been deleted, so we will follow the same practice here. I have chosen the bits of the report that are most relevant. MPX is Multiplex.
Basically, WNSL is accused of running parallel procurement procedures with Multiplex on one side and all other potential bidders on the other.
The report says WNSL “conducted parallel procurement processes for the same contract therefore making it difficult to have a fully competitive process”.
It also had meetings and dialogue “with MPX prior to commencing any formal procurement process, thereby potentially giving MPX a potential competitive advantage over other contractors”.
“The procurement process fell below industry best practice expected for a publicly funded project and as a result fails to demonstrate whether value for money was or was not achieved,” it said.
“There was a failure of corporate governance due to the omission of the WNSL Board to resolve how to deal with the perceived conflicts of interest.”
“In this report we recommend that WNSL should give consideration to whether MPX’s current bid represented value for money and whether, having made an assessment of the consequent risks and costs, the design and construction contract should be re-tendered.”
Now this is where all those pesky asterisks really kick in. You could play a game here and try to guess who the relevant Australians are.
“Following an invitation to them, made by [*] on 27 May 1999, MPX made what appeared to be a very attractive offer on 21 June 1999 to proceed as preferred contractor with a guaranteed maximum price (“GMP”), with all costs being incurred on an open book basis, with (unusually) all savings reverting to WNSL, with WNSL choosing sub-contractors and with MPX recovering reasonable preliminaries and a fixed margin of between 2 per cent and 3 per cent.”
“We understand from one interview that [*] went to Australia in February or March 1999 to meet [*] of MPX. We have been told that the purpose of the visit was to view MPX’s design and construction of Stadium Australia as [*] was then in negotiation with MPX to build [*].
“Subsequent to this, we have been told that [*] invited [*] to Wembley on 26 May 1999 to make a presentation to the WNSL management/project team on why and on what terms MPX should be invited to bid for the Wembley Stadium Project.”
“On the following day, [*] sent a letter to MPX inviting it to outline its proposals in writing for the construction of the new stadium.”
“Comments made at interviews held by us have suggested that, before any formal tender process was launched, [*] and possibly others at WNSL had apparently been somewhat “seduced” by MPX and the deal which it appeared to be offering.”
“Evidence given at interviews suggests that was possibly due to the following factors:
MPX had proved its ability to deliver a world class stadium in Sydney;
MPX’s and particularly [*’s] “can do” attitude;
[*] and MPX were intent on winning the project to establish a presence in the European market;
the terms which MPX appeared to be offering were significantly more attractive in terms of cost and risk allocation from those which it was believed were available from UK or European contractors;
the UK construction industry was generally nervous about undertaking stadium projects following Laing’s £40 million loss on the Millennium Stadium in Cardiff; and
MPX’s proposal was more likely to satisfy the requirements of the banks who were to be asked to fund the Project as it appeared to place most of the risk on the contractor.
“From what we have ascertained so far, it would have been more appropriate at this stage for all discussions and negotiations with MPX arising from its 21 June 1999 offer to have been put on hold and WNSL either (a) to have made a formal invitation to tender to the market and MPX on the basis of the same contractual arrangements as those offered by MPX (albeit the Board should have been asked to approve the revised strategy) or (b) to have made an invitation to tender to the market and to MPX on the basis of the initial procurement strategy as set out in the WNSL Construction Procurement Report.”
“It is our view that the procurement process for the Project first departed from best procurement practice at this point, from the point of view of being commercially competitive and following industry best practice, as MPX was being given an opportunity to offer terms and have discussions with WNSL before any other contractors had been given the same opportunity.
“[*] instructed [*] in a memorandum dated 2 July 1991 to test the MPX offer by competitive tendering “to demonstrate that we have exposed the opportunity to the market”.
“As a consequence on 14 July 1999, WNSL sent a request for proposals, (“RFP”) to 11 contractors other than MPX purportedly to test the MPX offer against the UK/European market.
“Best procurement practice would have required the contract to have been advertised in appropriate trade journals to ensure full market potential was explored and that the RFP was sent to as wide a group of potentially suitable companies as possible. Instead contractors appear to have been selected on the basis of having previously expressed speculative interest in the Project.”
“It was important that suitable contractors were identified at this stage, in order to maximise the chances of receiving as many appropriate proposals as possible (including European or other overseas contractors).”
“From our investigations to date, it seems clear that WNSL’s invitation as issued by [*] on 14 July 1999 sought tenders on a different basis to that on which the MPX offer of 21 June 1999 was made.”
“On a true construction management contract, the contractor manages the project for a fee but the works are carried out by other contractors who have direct contractual relations with the employer (and not the construction manager).”
“The unusual feature… was that the manager (MPX) was to be paid a “management fee” (a percentage margin of the total cost) but was to directly contract with the sub-contractors, taking the risk of the cost of the Project exceeding the GMP by bearing any additional costs whilst the benefit of any cost savings were to be returned to WNSL.”
“Contrary to good practice, we can find no evidence that a formal invitation to tender (as opposed to simply an RFP) was sent to the participating tenderers containing, amongst other things, a full specification, and the selection criteria and weighting to be used for evaluating the bids.”
“Following the RFP being issued on 14 July 1999, separate communications from those with the contractors to whom the RFP had been sent are documented with MPX throughout June, July and August 1999, as part of the “parallel” process. For example, on 26 July 1999 [*] wrote to [*] of MPX stating that “things are moving along nicely . . .” and dealing with the issue of margin and the appropriate form of building contract.”
“The ongoing dialogue with MPX included plans and hospitality arrangements for a trip which was, made by [*], [*], [*] and [*] to visit Sydney to see MPX on 31 August to 8 September 1999. Again this appears irregular given that the RFP was out to the market at that time, and risked the perception by the other participating tenderers of preferential treatment being given to MPX.”
In October 1999 Multiplex joined up with Bovis and submitted a bid with other builders. In February 2000 it was appointed as preferred contractor.
In August of the same year it all went pear shaped after terms could not be agreed and BMX was sacked. Undaunted, Multiplex popped up again on its own on September 1, 2000 with a £326.5 million bid.
This was accepted by WNSL without legal advice and, once again, against best practice. It puts Multiplex in a strong position, according to the report.
“To proceed with MPX on uncertain terms for any length of time without having any competition from another contractor, yet with MPX having all the advantages of being involved (in the guise of BMX) in the previous preferred contractor negotiations, increased the likelihood that WNSL would have to make significant concessions in its negotiations with MPX,” it said.
“This would not accord with the aim of achieving value for money for a public project. On the other hand, it would be an expensive and time consuming exercise to negotiation with more than one preferred contractor; this makes it all the more important to have had a rigorously competitive and scrupulously fair tendering process prior to the preferred contractor period.”