 Good morning to everyone and welcome to the 32nd meeting in 2018 of the Rural Economy and Connectivity Committee. Could I ask you all to make sure please that your mobile phones are on silent? No apologies have been received. The first item on our agenda is a decision on taking business in private and the committee has asked to consider taking item 5 in private. This is to allow the committee to review the evidence that is heard today in private. Our members agreed. We are agreed. We'll move on to item 2, which is the Aberdeen Western peripheral route. I'd like to welcome Lewis MacDonald and Mark McDonald MSPs who are attending the committee meeting for this item. This evidence session follows an announcement that the opening of the Aberdeen Western peripheral route will be delayed. The committee will take evidence from the principal contractors this morning on this project. Written evidence from the contractors was received on Monday and has been published on the committee's web pages. I'd like to welcome, to start off with Stephen Tyle, the managing director of a major projects division of Balfour Beattie. I'd like to welcome Bill Hawking, the chief executive officer, construction and investments from Galliford Tri, and Brian Love, director of the Aberdeen Roads Ltd. There are various questions and I'm not sure if you've spoken to a committee before, but if I can just explain how it works. Basically, you don't need to push the buttons in front of you. When it's your turn to speak, I'll indicate it's your turn. If you want to speak and come in, just try and catch my eye and I'll bring you in. There will be quite a lot of questions that we need to get through. If I think that your question is running on, I will discreetly wag on my pen. The more frenetic it gets means that the longer you've gone on. I'm encouraging you to bring it to an end so we can move on to the next question. It's just purely a method of time management. If I don't need to do it, I won't. I think that's it. The first question this morning is going to be from Richard Lyle. Richard Lyle. Yes, good morning, gentlemen. In a statement that you sent in to the committee item 22, with regard to the final completion of the project, the remedial and financial works to river dawn crossing are progressing as quickly as possible, seven days a week. It is essential that they are carried out correctly, comprehensively, with safety being the utmost concern. I would agree with that, but I have to ask you, how did the defects in the river dawn crossing occur? Stephen. I'll answer that directly, Mr Lyle. Can I just, before I do, just update the committee as we said we would in relation to our statement that you referred to, convener, just on the status of the current situation with the road. Within the last 24 hours we can confirm that we have secured lender consent to the contract variation, which paves the way for the road between Stonehaven, Charleston and Craibstone to be opened to traffic next week. We're working to complete the works at the dawn crossing, which I'll come back to, and we hope to open those works later this month. That's just a quick update, convener, on the status, as we said we would, to our operating statement. With respect to the dawn crossing, it's fair to say that this has been an unexpected issue that arose for the first time in May. If I can just put it into context, we're talking about quite a complex structure. It's 300 metres long, it crosses the river dawn, it has a surface area of about 5,000 square metres, a size of a typical football pitch, so we're talking about quite a significant structure. It is a post-tensioned structure. It is what's called a balanced cantilever form of construction, where you actually construct it incrementally up in the air by cantilevering out formwork on both sides, which balances it. So there are something like 75 segments that you cast in to create the structure, and those segments are then post-tensioned. So there are longitudinal ducts that are cast in to the concrete structure through which steel tendons are installed, those tendons are then stressed and then grouted, and that's what gives the rigidity to the structure. Just again to put some context around the size of the bridge itself, this is 25 metres across. Each segment is about three and a half metres long and about three metres high. You can actually stand up inside the structure. I'm six foot tall and I can stand up inside the structure. What became apparent when we had cast all the segments and we were about to start the stressing work, we found that when we first started stressing there were some minor cracks that appeared on the underneath of the structure, of the deck, some minor cracking. When we observed that, we stopped the stressing operation to closely inspect it. Obviously because we were high up, we needed to get access, which we did. That led to serious investigations. We then de-stressed the bridge and involved our designer to assess what he thought had gone wrong and what the diagnosis for repair was to be. That led to some quite intensive investigations to ascertain the alignment of the ducts. I don't want to go on too long, Mr Gavina, because I can see you looking at me all, but the alignment of these ducts through the structure is quite important. What became apparent is that the alignment of those ducts became, in some locations, displaced, which meant that when you stressed it there was unexpected pressure placed on the concrete around the ducts. That meant that we had to undertake a sequence of repair work, in which we literally broke out sections of the deck in those areas to realign the ducts, recast them and then ultimately restress the structure. Because of the sequence of doing that and design, that was quite painstaking and took us quite a period of time. In a nutshell, that explains the difficulties that we have had with the structure and trying to predict precisely when those works will be complete. Whilst we thought that we had completed all of them in late October, when we were stressing some of the final tendons, we found another similar issue where we hadn't repaired the ducts, because we didn't think that it was necessary that we had to go in and complete those repairs. I'm pleased to say that last Sunday we completed the grouting, so all the stressing and the grouting as of today is complete. That gives us greater confidence around completing the dawn crossing, which is the one area of the site that is holding up the final opening of the road. Thank you for your full explanation about that, but I'm going to tie up. You've answered maybe my third question, so I'll tie up both. Who's responsible or who was responsible for the defect work and what works are required or is required to rectify these defects, as you have mentioned? If I take the last point that defects have been corrected, the issue is around the alignment of the ducts and why they became displaced. We believe that that was probably down to inadequate provision within the structure to restrain the ducts. With concrete and ducts being avoided, they can move. We don't feel that we've probably tied those ducts down sufficiently in the concrete pouring operations, which necessitated the works. We are the design and build contractor, so we're accepting that that's work that we have to do as part of our obligations. Is this a new taping bridge or have you done this taping bridge before? No, we've done this type of bridge before. In fact, for those familiar with the area, we have a similar bridge that crosses the D further south, similar type of construction, and that went without any issues. One of the problems and the complexities at the Don is that you have vertical curvature and a horizontal curvature, so it's moving in three dimensions and that just complicates the alignment, the geospatial characteristics of the structure. To help me before we move on to the next question, could you just give me the timescales for this, i.e. when was the problem first identified? The problem was first identified in mid-May. So, it was identified in May, when did the solution to the problem become apparent? That probably took us about six to eight weeks, and then because of the nature of the investigation work, because you had to effectively drill holes to identify the location of the ducts, and that there was a sort of a rolling sequence, if you will, of investigations and then repairs and liaison with the designer. Obviously, one of the things that we needed to satisfy ourselves is that the repairs in no way inhibited the integrity of the structure when complete, which is why we've had to do it in that incremental way. Effectively, it's taking you five months to repair it, that's roughly what you're saying, but when did you notify the Government, just so I understand, that there was a problem? Because we weren't hearing of massive delays. No, I think the nature of the governance on the contract and the oversight by the contracting authority, they have residents engineers on site, so they would have been aware of the emerging issue almost in real time, but they wouldn't have had, necessarily, the same understanding that we were building up as we were actually involved in the rectification process. Okay, so we can move on, but what we're saying is that in May, as Stuart wants to come in, there was identified a problem, which we knew wasn't going to be a two-minute fix. It was going to take a bit of time, and there was going to be a substantial delay. I think in fairness at the time, we didn't quite know the impact. We didn't know whether it was because we'd only stopped the stressing operation. We knew that we had an issue in one particular area, which we needed to address, but then we needed to ascertain whether that was more widespread, whether we had issues elsewhere, because what we didn't want to do is continue the stressing and actually into your stresses and the concrete unnecessarily. So that's why the design, the diagnosis, took some months. So the true impact of the work in fairness was emerging as we were building a better understanding of the situation. Okay, Stuart. It's just a brief matter. Aberdeen City Council are the ones who are actually got oversight, so was it Aberdeen City Council, you told, or were you also, in addition, communicating with Transport Scotland that ends the government? We were liaising with the contracting authority, which is Transport Scotland, with its engineer, Jay Coops. I think Aberdeen, you're absolutely right, Mr Stevenson. The contract is actually placed with Aberdeen City Council, who are acting as agent for Scottish ministers, and Transport Scotland are heavily involved. Transport Scotland have individuals on site, also supported by their engineering consultant, Jay Coops. That's fine. I just wanted to make sure who knew what when, and I think that's now clear. I think that that adds confusion in the sense that, on 23 May, we heard that, although I fully appreciate the contractors from the cabinet secretary, continued ambition of a target for summer 2018 opening, Transport Scotland's technical advisers on site remain the view that late autumn 2018 may be more realistic. At that stage, we know that there's a problem, but we're not really knowing how big the problem was. Right, Mike. Sorry, yours is the next question. I'm interested in the contract, and I want to follow the money, as it were, in this contract. We were told that this is a fixed-price contract costing the taxpayer £745 million in 2012 prices, and the contract was signed in 2014. We were also told by the Government that there would be no further cost to the taxpayer because of all the delays. Mr Tarr mentioned the contract variation. To the layman, like myself in this, the contract variation means that more money will have been exchanged. I am also aware that you've told your shareholders, and in both companies, that Gulliford try costs have increased by £20 million, more than expected, and that Balford bid isn't as half-yearly results to its shareholders, also said that costs have gone up £15 million. If this is a fixed-price contract, what is the contract variation, and how much more money are you receiving from the taxpayer? Hold on. You were all wanting to answer that. That's great. Stephen, why don't we let Brian come in and then I'll come back to you? I think it's worth explaining the financial structure of the contracts that are in place here. This is a revenue finance structure for the Government, so that means that the Government pays for the road once it's built and complete. It pays an annual unitary charge on a monthly basis. The Government doesn't pay Aberdeen roads limited any money until the road sections are open and the road opens in four phases. Three of those phases are open, and money is flowing for those phases. In respect of the variation, if the variation will come live next week, the section from Stonehaven up to Crabston and taking the southern leg into Charleston will come live, and the Government will make payment of unitary charge for that element of the road proportional to the section that's open. The fixed-price contract pays annually for the 30-year concession period. Aberdeen roads limited enter into contracts with lenders to fund the construction works, and we enter into a fixed-price contract with the construction joint venture. That contract is financed by our debt, funded from markets. I'm concentrating on the cost of the taxpayer, and we have been told by ministers to this committee that the cost of the taxpayer is £745 million fixed-price to build this road. The point that I'm trying to get at is that when you say that I'm interested in this contract variation, the contract has been signed, fixed-price—we all know what the situation is—what is this contract variation, and are you receiving any more taxpayers' money over and above the £745 million for this contract? I'm not talking about the 30-year maintenance, I'm talking about the build contract. I apologize. The Government only pay Aberdeen roads limited once sections of the roads are open. There's a saving as a result of that. We're all predicting that the road would be open earlier than it is, so the Government has paid less to date than it would have been projected when we entered contracts. The section that we're talking about opening next week, which is the 30-kilometre section, was not contemplated at the time that the contract was structured. There were four sectional completions, three of which, as we know, were opened to traffic from last summer. The final one, across the dawn, is the fourth. Effectively, what we're talking about here is a fifth sectional completion, termed P2 to be in our written statement. It's that that required a legal change in order to bring that into effect. It wasn't part of the original contract, and we had to negotiate with Transport Scotland the terms of that variation, because it essentially involved an earlier step up, as Brian was saying, in the unitary charge that wasn't originally contemplated. When we talk about the variation, that's what we mean. I am with you. I understand entirely what you're saying. My question is, over and above £745 million, and it's only released as each section is open. There's no more taxpayers' money going to your companies as a result of you opening the road early. I fully understand that, because I'm not sure I do. The contract was £745 million, and that's for all the works on this thing. You're saying that an extra bit was added in, and are you getting extra money for that? I think that a subset has been added in, which means that we get a proportion of the unitary charge a little earlier than we might otherwise have got it. That's what we're doing. I think that I understand what's going on here, but I want to make sure that we all fully understand the situation. The road from Stonehaven to West Hill Kingswell has been ready, apart from the final sign-off and police sign-off, and it's been ready for traffic for two to three months. We know that. It was part of the section, which included the bridge over the dawn, as well. That's why it hasn't been handed over, and you haven't had your money yet, because of the bridge. This contract variation is about the road from Stonehaven to West Hill Kingswell. You had to have this contract variation so that you could hand the road over to the Government, and the Government could pay its due to you for that road. The Government still owes you money for the bridge when you've finished the bridge. The point that I was asking, and I think it's clear, is that you've made it clear that there's no extra over and above the £745 million of taxpayer money, so you're taking the loss yourselves. Is that correct? I think that there may be a terminology confusion here. With regard to the variation, that proportion of the road that will open next week is just that we get paid a proportional unitary charge as a percentage of the whole charge. That's the variation. It's a no secret that we've faced some significant challenges on this project, very increment, whether the worst, whether, since records began, the demise of Carillion, and some issues regarding utility diversions, delays to those diversions. Mr Matheson has mentioned in his statement that we have some commercial issues with Transport Scotland to discuss. That's not unusual for a project of this nature and size, and we will continue with those discussions. Is that the point of your question? My final question was going to be now that you've confirmed that there's no extra money. I'm puzzled because, as I understand it, you've put in a claim to the Scottish Government for extra money, so that's what's puzzling me. If you're telling us that there's no extra money over and above the taxpayer contribution of £745 million for a fixed price contract, as a layman, I know what a fixed price contract is, are you claiming more money over and above? I keep going back to the same question because what you're saying doesn't follow logically. I understand when you're saying there's no more money over and above the £745 million contract, but you've also put in a claim to the Scottish Government for more money. What is that? So there's no change to the unity charge over the 30 years. I think that's the first thing we need to get secured. The second thing is, yes, we have put in forward a claim to Transport Scotland in respect of some of the issues that we face on the project, where we believe that the risk lies with Transport Scotland, and that is what we will be discussing with them. Those risks relate to relief events for weather and for delays in statutory utility diversions. Sorry, Stuart, you want to come in and ask specifically about the claims. I then want to go round and see if other people can get a few answers and I'll come back to you. I've dealt with a lot of contracts in my life and I just want to understand the structure of the contract. I'm not asking you to open up the detail, because that's a commercial incentive issue. Is it structured, as most contracts I've had to deal with of this character, that basically the works are described in a schedule and that in any project, both sides of the contract will inevitably discover that there is a need for variation in the works described in the schedule? Is there a process whereby, if there are works that change in the schedule, they are agreed by doing the parties that there is a re-pricing associated with that change to that schedule of works? I'm getting a nodding head from Bill Hawking, so I think that understanding that I would have, from my experience, is correct in its context. The next question is, have there been changes to the description of works? I'd be astonished if the answer is no. I've never run a project where there haven't been changes to the schedule. There's been a number of change orders and variations through the contract period, as you'd expect, and as you've outlined. I will say, though, that the value of those changes in the context of the project has been very modest. Indeed, it's perfectly possible for these changes to reduce the price. It does, yes, it can. Have there been any that have done that? Yes, there's been changes both ways. There have been changes that have reduced the price and there have been changes that have increased the price. The commercial discussions that you're having with the Government, are they related solely and in total to the changes to the schedule, or are they in other matters in other parts of the contract? The claim is on other matters. Are you able to open up what those other matters are for us to any extent that doesn't compromise your on-going discussions, which I understand you would necessarily want to protect at this stage? Just picking up on something that Bill said earlier around the issues that have frustrated the progress of the works. One of the most significant has been the early work with the utility providers. This contract is quite extreme in the number of utilities that criss-cross the scheme, so there are something like 300 such utility paths that cross the scheme throughout its 58 kilometre length. You'll understand that the diversion of those utilities in consult with the sequence of our works is quite a critical element to the efficient progress of the works. The claim that we have with the contracting authority with Transport Scotland stems from delays under performance in relation to the utility providers, whether they are electric, underground, overground communications, water and so on. It's those delays that have disrupted the progress of the works and those issues lie at the heart of our claim against Transport Scotland. I know that others want to come in, so I'll make this my last little bit, convener. Is the dispute therefore about how the contract allocates responsibility for the utilities' diversions? I would have expected, but I haven't seen the contract, and of course it's a matter of negotiation, that it would be the responsibility of the contractor to obtain those permissions. Is the dispute around who carries the risks associated with the utility diversions? Although the complexity might not have been known at the front and you could not commit on the timetable that utility providers would work to, the contract ought to make clear who has the responsibility. Whose responsibility was it? The nature of the contract is, as has been characterised broadly, one that transfers significant risk to the private sector. With utilities, the utilities are paid for by the public sector, and there are discussions with those utility companies that predate our involvement in the scheme. There are obligations that are placed on the contractor to work and manage the utility company's work and how their apparatus is co-ordinated with the design of the work that we do. You are getting into slightly finer points of risk allocation as to whether there are gaps for which others, in this case, transport actually carries some liability. It's those issues with Stevenson that lie at the heart of our commercial claim. Stevenson, again, I'm just interested in timelines before I move on to the next question. Can you confirm that those timelines for the major problems with the utilities, which the Cabinet Secretary came to the committee in March 2017, that was the time that you were having the problems with the utilities? Well, the actual issues with utilities began before that. But that's when it was at a crescendo. Again, a little bit like the dawn, you had the emerging impacts of those utilities. Some were completed on time, and others were almost 18 months late. So you had quite a spectrum of disruption. But in March, the Cabinet Secretary came to the committee, and it was my understanding at that stage that there were major problems with the utility, which could have caused the road to be delayed. It was March, the critical period, 2017. But when he spoke to the committee in March 2017, he said that it was still going to open on time, so it indicated that the problem with the utilities had disappeared. Are you telling me that the utility problem hadn't disappeared in March 2017, and that there were still on-going problems, and that there was then going to be a delay to the road that we should have known about? I think that we were there that we were working hard to mitigate the effects of those utility diversion delays, and those delays have been exacerbated, of course, by the extreme weather that we had. So we've been working—well, the two remaining parties of the joint venture have been working tirelessly to mitigate those delays. Okay, but the mitigation of the extreme weather—the Cabinet Secretary came to us on 14 December to tell us that there was a problem with the extreme weather conditions, and it had been the wettest autumn in Aberdeensia, but work was still going on on the A9, but not on the peripheral road, and that digging had to stop. But it was March that he came to tell us—he was coming to tell us that there was a problem, which everyone had heard about on the ground, but at that stage still said that the road was going to open on time. So it indicated to me and the committee, I think, at that stage, that we thought the road problems with the utilities had been resolved, but that's not the case, you're saying? Well, I think that the impact of the utilities has been very far-reaching. I think it's fair to say that we had a programme that had us finishing—I forget the date at the top of my head—I can look it up and write you later if you wish, but it had us finishing round about the same time as the dawn, and then the delays with the dawn pushed the end date art further. It's perhaps worth putting a bit of context around the utilities in this project. There's an excessive 300 utility, the version that's required to put the road in place. That's an average of one utility every 200 metres across a 58-kilometre stretch to generalise and summarise all that activity, which is enormous, into a simple, concise statement. It's an extremely difficult thing. I absolutely understand that. Some of the utilities will be major and some of them will be relatively minor from individual telephone connections to possibly massive telephone connections. We haven't got time to push this, I'm afraid, because I want to take Peter and then Jamie, and then I need to bring in some other members. I'm still interested in the delay to opening the Creabston-Haven part of the road. We know that you've told us that you don't get paid any money until a section of the road is open, and you've told us when we know that that Creabston-Haven stretch has been finished for several weeks, if not months. You've now told us today that you have got lender consent to open that piece of road. That seems to have taken many weeks to get lender consent. I can't understand why that would be the case, given that, if you had opened that road two months ago, you would have had the money in your pocket two months ago. Why is lender consent being such a difficult thing to achieve? To me, it seems it would be very easy for it to get lender consent, because you'd get some money into your bank account. Can you explain why that has taken several weeks or months? I think that Steve and Brian have mentioned before, but there was no contractual mechanism to open that section in the contract. It didn't exist. We couldn't have opened that section without willfully breaching the contract. That's where we are. That's just a fact of the contract. That is why we needed the variation that we spoke about earlier on to the contract to enable us to insert a new sectional completion for want of a better description and allow us to open that stretch. Along with the stretches that are already open, constitutes about 90 per cent of the road by length. There was no contractual mechanism to allow us to open the road until we'd agreed how to go about that with the lenders and with Transport Scotland. In mind, Mr Chapman, it's a huge complex document with dozens of interrelated parties and different advisers. It just takes a frustrating amount of time for all of us to get things done to amend it. I hear what you say. My devious mind makes me think that maybe you were holding off opening this particular road as some sort of lever to try and lever in some extra funds from the Scottish Government, for instance. That was one way that you could say, no minister, we won't open this section until you agree to refund some extra costs for the bridge, for instance. That is definitely not the case. We have a very strong vested interest in opening the road whenever we can, and the delays in opening the stretch that we will open next week have cost us £4 million, so we have a very strong interest in opening the road as soon as possible. Mr Rumbles, there are other people on the committee, and I need to get round them. I will try to bring you in. Jamie Heenew is next, and Lewis is after. I'm sorry to press you on the issue that Mr Rumbles raised, but it's an important point. I'm still not 100 per cent clear on this number of situations. Can I refer separately to the two organisations that are represented first? To Galliford, I'm paraphrasing from the statement that you made to investors a few weeks ago. You said that, owing to increased complexity in weather delays and a result of higher than anticipated costs, your estimate of the final cost will have increased by £20 million. Can you be clear to the committee if it's your presumption that you will absorb that increase or whether transport Scotland will? I'll move on to my question to Balfour Beattie, which is similar. Galliford tri has raised £150 million in the market—that's a statement of facts in the public domain—to cover the issues that are related to the project. That's the scale of the issues on the contract for Galliford tri. The £20 million is cost, and that will be paid by us as our share of the joint venture and is totally separate to the commercial usage that we have with transport Scotland. There's cost on one side, which is cost and claim or entitlement on the other side. Will you be seeking to recover any of that from transport Scotland? There is a claim whether additional costs may have, for example, been for the Donbridge. In that case, it doesn't apply. That's our cost. Separately to that, there might be other costs as part of our claim, which we'll be seeking to recover. So you will be seeking to recover some of those losses? If it's related to elements of our claim. Do you know how much? Well, no. Those discussions are commercial. Okay. Can I move on to Balfour Beattie, in respect of the statement that you made in the notes that we have? This is in August of this year, and you said that in the first six months of the year, presumably 2018, Balfour Beattie recognised an additional £23 million loss on the AWPR project. First point is £23 million on top of what existing loss, so what is the total loss? Bear in mind that that was August. Now we're in December. Could you give us an update on your estimated total loss on the AWPR project? But then, more worryingly, you go on to say that this loss represents a net charge made up of cost increases on the project, partially offset by recovery positions that the group believe are highly probable to be agreed to. Can you explain what are the recovery positions that your group believes are highly probable to be agreed to? On the same vein to my previous question, will you be seeking to recover any of that loss from Transport Scotland? And so how much? Just if I just pick up on the last point about the highly probable, that essentially relates to an accounting standard, and it's a test that you have to satisfy in order to back the judgments that you're making. I think that if I just unwind slightly, and then I'll come back to your question, Mr Greene, if I may, there is no doubt, and it's on record, that we have incurred significant additional costs on this contract in trying to mitigate the delays that have been caused. And whilst we recognise how important this route is to the people of North East Scotland, had we not taken some of these mitigation measures, the road would have been delayed longer than it currently is. So there are significant costs that run into the hundreds of millions. So these are not small sums of their material. They contributed to Koreans' insolvency, not exclusively, but they contributed to it. And it's placed an additional burden on Gallifertry and Balfour Beattie because of the joint and several obligations that we carry under the contract. So we have had to trade losses as we foresaw them within our financial statements. And we have had, in the same way that Gallifertry had to go to the market to raise finance to fund their share of losses, we have had to dispose of assets in order to fund our share of losses on the contract. So we're in a situation, as of today, where the joint venture partners are hundreds of millions out of pocket as a consequence of the work that we've been doing on Aberdeen. Separately, we have a claim for a not insignificant sum that we are in discussions with Transport Scotland over. Those discussions are progressing in a consensual way to try to find a way of resolving the issues between us, and those discussions continue. There are judgments that we make as to where we think those discussions will finally see it. You'll understand those are judgments that are commercially sensitive, but I'm hoping that that just contextualises— It does, but before you move on, I appreciate your forthcomingness, and I appreciate the situation you're in and the fact that you're committed to getting this road open as quickly as possible for the benefit of the people who use it. I do appreciate that, and that is welcome. However, the committee has a duty as well. We were told that the project would cost £745 million. The panel is telling us that there are hundreds of millions of pounds worth of overruns, but it is entirely unclear where the liability for those overruns lies and how much of that will rest on the public purse. It's a very simple question, and I don't think we have any further conclusion to the question, I'm afraid. No, but regrettably, I don't think that I can answer that question the way that you might like. All I can say is that it's a material, serious financial situation that we're in. There are some things that will be to our account. We carry risks, as we discussed earlier, under the contract. If we get those judgments wrong, that's to our account. Where there are legitimate risks that we believe are retained by the public sector, the contract provides for how those issues are addressed through the contract. There are various hierarchies of dealing with those issues. It's uncertain for us at the moment, because we don't know the outcome of the commercial discussions that we're in with Transport Scotland. I can tell you that it's not a very comfortable feeling on this side of the table. Char, can you simply indicate whether your claim against Transport Scotland is in the tens of millions or the hundreds of millions? That's not something that I would want to answer here, because of the commercial nature of the discussions that we're having. I was to put to you that the total cost of the project is over £1 billion. You would accept that. That's broadly correct. From what we've said, you could deduce those areas of the cost. The other point following on from colleagues is that the minister was very critical of Peter Truscott when he made a statement in Parliament on 1 November and said that ARL had indicated or Mr Truscott had indicated that the contract variation was with the lenders and then a couple of days later, he received a letter saying that no such conversations had taken place. Clearly, since then, the contractors have been accused of holding the Government to ransom. I wonder, Mr Hawking, if you would comment on those points. The first thing to say is that Peter Truscott is an honourable, decent man, and he spoke in good faith when he spoke to the minister on 29 October. What Peter Truscott was unaware of was that over the weekend we'd had some issues again with the Don Bridge and that those issues meant that there was an undefined delay to the Don and until we could understand the nature of that and assess the impact, we couldn't send anything off to the funders. Peter Truscott then reported back to the joint venture and as soon as we realised that that was the issue, we wrote to the minister the same day—we went to the next step possibly, I can't remember—to set the record straight. Those are the facts of the matter. But nonetheless, it's still taken a further month to agree a contract variation, which, in principle, had been accepted before the end of October. Well, it hadn't been accepted at the end of October. We got pretty close, to be fair, but there are small isototen teased across. As I said earlier on, it's a hugely complex and interrelated document, and every time anything small changes that goes off in all directions to all sorts of advisers for their viewpoints and come back. Regrettably, it does take longer than we all would like, absolutely. I said earlier on that we have a very strong vested interest in getting the road open at the earliest opportunity, so we were going full steam to try to achieve that. Can you indicate what concession the Government made that enabled you to reach that agreement today? I don't think that it was a concession. I think that, in fact, the Government held firm on some of the issues that we wanted to insert regarding various mechanisms. On the 19th—sorry, yes—on the 19th, we received the minister's final stance on the documents. On the 20th, our legal advisers reviewed the documents, and on a conference call at Hopwell State on the 21st, we resolved to send the documents to the lenders. Just before I go on, Mike Matheson's comment that the contractors have not been entirely straight on this matter is completely untrue. You have been entirely straight. Absolutely. Peter spoke in good faith. Mark, you wanted to ask a question. I just wanted to get ahead of the timelines here. The contract variation that has now been agreed was first discussed in terms of varying the contract to enable the section to be open. As it is prior to that, it is worth saying that the contract variation that has now sort of agreed and will be put into action following today, the lenders consent last night, was a concept proposed by the contractors. It was a variation, and that really came about following when the delays in the dawn crossing manifested in the proper way back in the summer this year. It is worth saying that it is a really complex set of contractual structure that is here. There is a huge number of parties. There are three shareholders in the ARL. There are two parties in the construction joint venture. You have the Government, which is a number of parties at the other side of the contract. The lenders must give a consent. There are five lenders. There is a lenders technical adviser. The suite of contracts goes into thousands of pages, many schedules. It is not quite a straightforward thing. The first part of that is a negotiation between the key parties, the ARL, the contractors and the Government, which was just completed in October and following that date. The last piece of the jigsaw, going back to that, is the lenders consent, which we have been in continual dialogue with our lenders, but we cannot send a formal contract until we have reached commercial agreement at the top level. It is a spider's web of contracts, and it is very complex. That perhaps leads nicely on to my question, which is directed to Mr Tarr. In June, the Balfour BT half-year results the group chief executive's review. It states that part of AWPR is already open to the public. That refers to the Balmedi to Park Hill section. With the majority of the route scheduled to open by the end of August, completion of the new remaining bridge is expected in the autumn. In June of this year, Balfour BT's chief executive was advising shareholders that the piece of work that was necessitated by a contract variation was expected in August. My question is if what Mr Love is saying about the complexity of seeking a variation to the contract is widely accepted. Why were Balfour BT shareholders being advised that they should anticipate that section being open at the end of August, when the likelihood and the reality is now that it has taken about three and a half months longer than that for it to happen? At that time, we did anticipate reaching an agreement that would allow P2 to be, as we termed, to be opened in the end of August. In fact, the road was the construction of the road, so it is actually physical. The certificate was submitted in 16 August. The road was actually physically not only complete in August. The issue has been, as Brian has described, the issues over formally getting an agreement with Transport Scotland over the terms of that variation. We did not know that we were going to have the further problems that I described in October, which has served to push it from sort of a November completion, as we thought, into this month. As I described earlier, we are pushing to try to get that finished by the end of this month. You can understand that, when those comments were reported, that led to people's expectation. Do you regret that perhaps there has not been better expectation management, in particular highlighting what the issues are that the project has faced? That has led, I think, to unhelpful speculation and suggestions around major problems with the Don bridge, which I do not think have been successfully countered by yourselves in terms of your responses prior to today. I think that that was a statement more than a question. That is how I interpreted it, but it is... If you feel that you could have perhaps done more to share information in advance of today's meeting about what the issues with the Don bridge are. Just before you answer that question, I have got to do some expectation management, as well, in the sense that we are still on question 1, and there may be more than one question, and I have got people queuing up. If we could part that question, I am going to bring Mike Rumbles in with a question requiring a binary answer, and then I am going to go to John, and then I am going to Maureen. I would like just a yes or a no answer to this very simple question. I want to know if you have been given any indication that your claims for more tax payers' money over and above the six-term contract would be looked on favourably if you would just open the road between Stonehaven and Westhill. Yes or no? No. Mr Tart? John, it is you on question 2, and then Maureen. Thanks very much, convener. We have concentrated mainly on the technical side so far, but you have mentioned Carillion as well, so I was just wondering if you could explain how much impact did the collapse of Carillion have? Was it a minor hiccup, or was it much more major than that? From a practical perspective, it disrupted our operations insofar as Carillion were one third of the joint venture. They obviously provided one third of the working capital to finance the joint venture, and, broadly, they provided one third of the staff. It is not an exact split, but broadly. When Carillion became insolvent, the remaining two parties, as Steve said earlier on, are jointly and separately bound, so we have an obligation to continue the contract. We employed the vast majority of the Carillion staff to ensure continuity. We took on the obligations to pay subcontractors between the two of us, as opposed to between the three of us, for example. We believe that we mitigated the effect of Carillion's insolvency as best we could. There is inevitably some disruption when half of the staff all of a sudden are concerned about their futures and so on. I think that we did a reasonable job of that. Was that an unusual model that you were jointly and separately liable for each other? No, it is normal for joint ventures. Yes, because we got the impression that, down south, there were projects where Carillion, but maybe that was on their own. The project just stopped when Carillion collapsed. They were on their own in those projects. I think that in all situations where they were operating in joint ventures, the joint venture partner stepped in in a similar way that Galliford trying herself stepped in to take on the staff. You will understand that it was quite a stressful time for those employees of Carillion at the time. The ability to be able to offer them continued employment on the scheme served our purpose and resolved their uncertainty. How does that work? Once a section is opened and the money starts flowing, does some of that money go to Carillion's liquidators for the work that they did? No. Under the joint venture agreement on insolvency, Carillion is excluded from the joint venture. At that point in time, they just cease to be a partner in the joint venture, which regrettably means that they do not take their share of the losses. Beyond the point. I assumed that they would not take their share of the losses, but the work that they had done does anyone get paid for that? It is an integrated team. The way that the joint venture works, there is not work that Carillion does, but the Galliford try. It is one team delivering the whole of the works. You have a financial interest in the outcome of the project, so your interest is a financial percentage interest in the outcome of the contract. That is how the model works. Sorry, I am not understanding that. They had paid their staff up till whenever the date was, and they had not had any money for that because it would only when the road section opened that money started flowing. Because this is an NFT model? It is an NPD model, so the contract that the construction joint venture is undertaking is with Aberdeen Roads Ltd. Aberdeen Roads Ltd pays the construction joint venture. Those payments are made monthly on milestones of works completed. Those payments are funded by debt that we raise. Once the road is open, the unit charge flows to Aberdeen Roads Ltd. Aberdeen Roads Ltd uses that money to repay the debt that is borrowed to fund the construction. Therefore, Carillion had been paid for the work that they had done up to the time of closure. I think that that is enough. We leave Carillion. Can you confirm to me that when they went out of business, there was going to be no foreseen delay as a result of that? Are you still happy that, when Carillion sees trading, it is still open on time? I think that, as I said, there was some disruption around Carillion's insolvency. The second biggest contract in the UK disappearing wasn't a small event. Specifically pinning that to any delay, I would say no. It was a reality that we dealt with. So, them going bankrupt didn't affect the opening time? Not significantly, I would not have said, because we took on most of their staff within a few weeks of the main bust. I think that it is more of the uncertainty that it created within the supply chain as well, because Carillion had firms that were owed money by Carillion. Therefore, he had those some disrupted. The timing, of course, was January, February, so, in the winter months, when the project wasn't in the full flow, it would be during the summer months. We were able to mitigate the impact of Carillion's insolvency. Maureen, finally, I'm afraid that it's you now on question 3. Thank you, convener. My constituency runs from Mughals, through Netherlay, Mary Couter, Peter Couter, right up virtually to the Langstaff. You can see that the majority of the roads are right round to Wellington road and the D. You can see that the majority of the road is in my constituency. We've talked about the effect of Carillion and the effect of utility companies. Can I turn to Storm Frank? Obviously, on the D, there was widespread flooding around where the bridge is. There's continued concern of residents of Peter Couter about how the bridge and the foundations and everything are going to affect the river flow in the future. Did Storm Frank make you revisit any of the drainage around the works on AWPR? Not that I'm aware of, no. The bridge over the D would have been designed for a 100-year storm event, and the foundations hit well back from the river banks. They piled on very deep piles. The short answer is that the design stands as it is. I can check that, but I'm pretty sure that that is the case. The piles do go into the rock in that area, so whatever happens at the water level. It was a very severe storm, as your constituents will know. It impacted our works, but we don't anticipate it impacting the design of the permanent works once constructed. There is still some concern in the communities that they haven't seen what the flood management system is around that part of the D in the future. All of you, as I understand it, are feeding into this, and it would be helpful if we could reassure residents, if you like, in the very near future. I wonder if you could perhaps see to that. The other thing that I want to mention is that a large number of my constituents have been affected by the road. I would like to know where you have taken over pieces of land, and now don't require them any more. Can I urge you to make sure that the handing them back in the proper condition, if you like, is done as quickly as possible? In the meantime, there are circumstances of change that will be wanting to sell their house, so can I get a guarantee that that will be done as quickly as possible? Who wants to answer that, Bill? We will take that back to the site team and make sure that that is done as soon as possible. We are in the process of reinstating a lot of the areas that we have used as temporary standings and that sort of thing. If there are any circumstances that you have been made aware of that you think that we have not delivered on what you would expect us to deliver on, you would be happy to hear that. You will know that I have written to you on umpteen occasions, and I have to say that I have really had a very good response in terms of that and where I have raised issues on behalf of constituents. Once the whole road is open, there is a thing about a year and a day, if you have any claims, is not it? If anybody is affected by noise or something that was not foreseen or something, you can put a claim in up to a year and a day after the road is open. Is that correct? Sorry, I think that I may be able to help slightly on that. I think that is a compensation claim that is dealt with by Transport Scotland. I do not think that it is dealt with by the contractor, and you are entirely right. I am talking in my days as a surveyor where there are statutory timescales that are very, very important. Maybe that is something that we could take up with the cabinet secretary at the next session. I think that the next question is, Colin, a very brief one. I think that it is probably been answered, but just so we can place it on record, you have indicated in the last 24 hours that you have received permission from funders to open the last stretch of the road. You have given an absolute cast iron guarantee to this committee that the road will be fully functioning by Christmas. Categorical about the wording, we have received consent to the wording from the funders, which allows the process of… In other words, there is no further issues with the word, with the drafting to be done. All that remains now in brand confirm is that to append a covering letter that agreed drafting and get everybody to sign it. On that basis, we have a high degree of confidence, yes, and we have already started conversations with Transport Scotland about the logistics of opening that section of the road. It is just to be quite clear about your Christmas date there. The phase that we are talking about is from Stonehaven to Creabstone in Charleston. It is the sub-phase that is required through the variation. The lender's consent and principle has been achieved. We need to apply a legal opinion around enforceability, which will be done this week and is getting done as we sit here at the moment. We then move into discussions with Transport Scotland and the police around the road opening. The Christmas date is related to the dawn bridge. I think that Steve has already covered that the contractor is targeting a date prior to Christmas for the opening of the dawn bridge. That construction programme is subject to many things, notably weather, so adverse weather could throw that out, so that date is not cast in stone yet. You are not able to give a specific date when the full road will be functioning. What do you think is the section from Stonehaven to Creabstone in Charleston by the end of next week? We will be targeting before Christmas for the dawn bridge and the rest of the road that is from Creabstone to Goval. As Brian said, the final part of that bridge construction is susceptible, so it might be impactable with it. Just briefly, you have indicated in previous question that you have not received anything at all from the Scottish Government to open part of the road next week. What exactly were your meetings with ministers all about? What did you discuss if you have not actually received anything to open that part of the road next week? I do not understand what we have been discussing in response to what Mike Rumbles asked, but you have not received anything at all from the Government to open that part of the road next week. What were your discussions specifically about if you have not received anything from the Scottish Government? My interpretation of Mr Rumble's question was that, had we received any favourable view of our claim on the back of opening road, the answer was no. On the back of opening the section of the road, we will start to get the entry charge that Brian mentioned earlier on. That proportion of the road that is open will start to be paid next week. As soon as the road is open, we will start to get paid for that section of the road. Jamie, your answer is the next question. Can I just quickly check, Mr Love? Does Aberdein Roads Ltd currently have or plan to issue any claims against the Scottish Government? The way that the claim structure works under the contracts is that we have the lead contract with the Government, and we have the sub contract with the construction joint venture. The claim is referred to as a common ground claim, so the claim comes from the construction joint venture through Aberdein Roads on to the Government. It is all wrapped up in one claim process. The claims that the two other organisations represented will go through your organisation. It is fair to say that all three members of the panel this morning will have a claim against the Scottish Government. Technically, the claim against the Scottish Government is from Aberdein Roads Ltd. The construction joint venture has that claim against Aberdein Roads Ltd, but the way that the contracts work is called a common ground claim equivalent project relief, and it is wrapped up in one process. For commercial reasons, we do not know the value of those claims at the moment. We can only estimate, given the conversation that we have just had, that it is somewhere between £10 million and goodness knows £300 million. How would you characterise your relationship with the Scottish Government at the moment? The relationship with the Scottish Government has been professional throughout the process. I was involved in the project through bid phase and construction phase. There is no secret. There have been some challenges and there have been some frank exchange of views, as you would expect. Both parties have protected as far as they can their commercial positions, but the dialogue has continued throughout, and it has remained professional throughout. Professionalism is helpful, but we have a transport minister who has made some quite serious comments in the public domain about some of the stakeholders that are represented at the table here. There are some legal, potential legal cases in terms of recovery of costs or overruns coming down the pipeline. The project is delayed by an undefined period of time and overbudgeted by an undefined period of money. Professionalism is one word to describe it, but realistically, how much comfort should the public take in your ability to have an on-going 30-year management and maintenance relationship with the Scottish Government, given the state of affairs at the moment? I would say, in response to that, Mr Greene, that the remaining two parties that joined venture have diligently and professionally and honorably executed the project under very, very difficult circumstances that we have described. Next week, we will hand over 37 kilometres of road to the people of the north-east. All the feedback that we have had so far on those stretches that have been opened is that it is a very good quality and that people are delighted with the impact that it has on their journey times and reliability and so on. We are actually proud of what we have achieved in the face of such adversity. I know that there is some difficulty about it, but I would like to thank all the women and men—almost 15,000 of them—that worked on the AWPI over the last few years for their tenacity and resilience in getting this job finished. That is very welcome. I think that that is probably shared by many of us at the end of the day. The people on the ground are delivering the project and those employment opportunities equally are welcome. We have the transport minister come in to present to the committee shortly after you leave. Quite frankly, when questions have been asked about the project in the chamber, the blame has been put fairly and squarely on the three gentlemen in front of us today. What would you say to the transport minister given the opportunity in that respect? We cannot speak for Mr Matheson, or his predecessor. All we would say is that, I would echo Brian's comment that our exchanges with the Government and with Trump and Scotland have been professional. Yes, they have been robust at times, but they have been professional. That is what I have to say. Sorry, I think that that is probably a good comment to end that on, because Stewart has a question and then Mike, and then we have a question from Peter and one more. It is just to confirm that the overruns in constructing are a matter for the people sitting at the bottom. The claims relate solely to utilities. Yes, but the two are inextricably linked, because the issues with utilities have led to delays and disruption to the execution of the works. Just to be clear, if this is just an arbitrary choice, laying a kilometre of tarmac costs you 20 per cent more than you had put in your original budget, that is for you to pay for. If that increase was caused by utility diversion, that can be part of the discussion that you continued to have. I am just wanting to be clear that the word overruns has a danger of being more comprehensive than I think it is actually. If I take your example of the kilometre, if we had to build that kilometre in three sections at different times, that you will understand is more disruptive than doing one kilometre in one go. I think that that probably characterises some of the issues that we are trying to resolve with Transport Scotland. It is sorely about utilities. The only claim that we have is related to the utilities and our ability to demonstrate the consequential impacts of that, and not those things for which we carry and retain responsibility. Mike and Peter. Just for the parliamentary record, when I asked earlier the question, I want to know if you have been given any indication that your claim to more taxpayer than money will be looked on favourably if you would just open the road. I heard Mr Hawking and Mr Tarl give say no, but I did not hear what Mr Love said. For the record, could you just answer that yes or no to that question? Yes, my answer to that question is also no. Peter, your question. Based on your experience of this AWPR project, do you have concerns about the Scottish Government's non-profit distribution model for financing these? Would you be content to enter a new contract under the similar regime? Okay, because you are smiling profusely at that, it is going to be you that is going to answer that first. We will have to lick our wounds for a bit, but I think the model is fundamentally sound and it is used in schools and hospitals and so on without any issue. I think that is because there are smaller, more defined, more manageable projects. There is nothing to say that that is not the correct model for this type of scheme. I would personally, it is my personal view, say that the risk-reward balance is out of kilter. That is what I would say. The model itself works, provided that the risk-reward balance is balanced. So basically what you are saying is that too much of the risk falls on your shoulders rather than the Scottish Government's shoulders? Is that what you mean? Well, it is up to every contractor to decide what amount of risk they prepare to stomach, so I am not laying the blame anyway. I am saying that the contractors went into the contract willingly, no one forced them to sign it, but I personally think that the risk-reward balance is wrong. Simplistically put, if you bid another scheme like this, I personally would be much more risk averse, which would mean that the likelihood is that I would not win the project in the first place. Or you might put in a slightly higher cost. In the first process, you might say that you would not be quite so keen on your cost things. Absolutely. Just one final thing before. There are still remedial works to be carried out. Let us hope that the road opens before Christmas, but there will still be remedial works to carry out. One of the main ones that I get regularly brought up by the farmers along the route is drainage works. There are still a lot of drainage works to be completed. Can my farmer friends have confidence that you will be around for long enough to make sure that all those drainage issues are sorted? Yes, I can. Before you do that, Peter, if you are going to talk about farming, you need to declare an interest. I need to declare an interest as a partner in the farming business in Aberdeenshire, but I will not connect it to the road. Many farmers have contacted me with many issues, but one that is still very much outstanding is drainage issues, and I specifically ask about that. The projected December date that we are working to now is for the main highway, the main road section to open. There are some ancillary works to go on beyond that date, which you are obviously not on the main road, so that will continue and we are projecting for March for those works. Aberdeen roads has, as Mr Greene has pointed out, a 30-year concession to operate this road. We have a contractual structure where, if a defect manifests itself, whether it is being drainage or the ancillary works, we can seek the construction joint venture to make those corrections. I can provide those assurances that Aberdeen roads limited will be around for the future. I have two more questions, which I would like to get in before my final one. Richard, if it is great, please. My question is that I have had experience of exactly what you have done. The M8, M73, M74, was the same type of bundle in my constituency. What I found out was that the contract was too tight and there was not enough flexibility. Is that where the problems of a risen in ear, where there is not enough flexibility to amend some of the contracts that you have got to get through all the people? It is a very rigid form of contract, that is for sure. I was pleased to see a couple of weeks ago that there was a publication saying that the Government was considering different forms of procurement for infrastructure schemes and building schemes on a slightly different form of contract. On the subject of upgrade or restoration or whatever, the company that is running this is going to be there for the next 30 years anyway and will be responsible for any problems. Maureen, a very short one, please. I, too, would like to thank everybody who has worked on the project. It looks fantastic. Can I just ask what lessons you have learned from this project for future projects? Is it the case that you grossly underbred for the contract? As Steve Smith said, where we have underpriced things, that is for our account, we focused on finishing the job in its entirety the section next week and then the whole job hopefully by Christmas, and then we will review our own shortcomings and the lessons that we will learn. I suggest that we will also sit down with Transport Scotland and have a debate about joint lessons that could be learned for future projects. I would just make one point, which is around your point about did we underbid contract, and my understanding is that two bidders who went to what is called best and final were quite close. Mine is now going to be the final question. My question is on subcontractors that you have used. The problem is, as I see it, is that the contract is programmed to cost £745 million, and by your, I think, Stevens commented, it may well have cost over £1 billion by the time it is all complete. I have evidence of, on the A9, the Dalraddy to kill King Craig section, where subcontractors have not been paid because the joint venture has said, well, we are not paying you the full amount, we will just pay you what it thinks is worse. There are a couple of cases where that is in arbitration. Can you give me a guarantee, or the committee a guarantee, that the subcontractors who have done work in good faith and completed the work up to the required standard will be paid in full, despite the claims that you have against the Government? I think that our supply chain is really important to us. We treat them in the way that we expect to be treated by Transport Scotland. We have actually closed out over 60 per cent by value of the subcontractors that we have placed, and those are consensual negotiations to close out. We do not envisage any material issues with our supply chain in resolving our differences. The issues that we have with Transport Scotland are separate from the way in which we have contracted with our supply chain. I mean, it's good to hear that, because often the bigger organisation squeezes the smaller organisation, and it is those smaller organisations who rarely feel the pinch, so I'm pleased to hear that. Thank you very much for coming and giving evidence this morning. It's been very interesting from our point of view to hear a bit more pieces to the story. I'd like to now briefly suspend the meeting to allow a changeover of witnesses. Can I ask committee members to please make sure that you're back at 20 past 10 in your seats, please? Welcome back. We are now moving on to gender item 3, which is a transport update. This forms a regular update from the Scottish Government to the committee as part of its scrutiny of transport policy. This is the first of our regular transport update sessions with the new Cabinet Secretary for Transport, Infrastructure and Connectivity. An update on the national transport strategy was provided by the Cabinet Secretary for our correspondence on Monday. I've already welcomed Lewis MacDonald and Mark MacDonald, who are going to stay with us for the first part of this item. I'd like to welcome from the Scottish Government Michael Matheson, the Cabinet Secretary for Transport, Infrastructure and Connectivity, Bill Reeve, the director of rail, Michelle Rennie, the director of major transport infrastructure projects, Graham Laidlawd, the head of ferries, Gary Cox, the head of aviation and Cabinet Secretary, I would like to invite you to make a brief opening statement of up to three minutes. Thank you, convener. I'd like to thank the committee for inviting me to provide my first general transport update as Cabinet Secretary for Transport, Infrastructure and Connectivity. Sunday sees a huge step towards promise changes to Scotland Rail's timetable across the country, with peak times capacity being improved. This first phase of revolution in rail will also deliver enhanced rail connectivity across the country and improve passenger journey choice. Those changes bring to fruition many tangible benefits of our significant investment in improving rail connectivity and journey times across most of the Scottish routes. We are taking a strategic approach to our islands and international connectivity. I have commissioned an aviation strategy to better articulate our commitment to support the economic growth that the aviation sector can help to deliver. I am also taking stock on our approach to how we fund and procure ferry infrastructure. Our current ferries plan is under review. On the whole, ferry and aviation services perform well, but I do acknowledge the frustration of customers during recent periods of disruption. Lifeline ferry services and island aviation routes play a key role in supporting the economic, social and cultural development of islands and remote mainland communities. The Scottish Government remains committed to those services. I will now turn to the AWPR. Following the session that the committee held earlier with the contractors for the project, the only reason that the AWPR is not open today is the technical issues on the Dawn crossing. ARL aims to finish the bridge before Christmas, but it is also warned that remedial works are complex, very weather-sensitive and subject to safety and quality tests. We should therefore treat the programme with some caution. I am delighted that, following an intensive period of dialogue with ARL, it has finally provided a timescale for opening the next 31.5km. I made clear to ARL my strong desire to get the road open as soon as possible and that this could not be at any cost, and the Scottish ministers are simply not willing to pay over the odds for the road on account of mistakes or miscalculations of the contractors making. I am pleased that ARL appears to have now recognised that. Having said that, it is disappointing that my personal intervention was required to remove this matter forward. I question why it has taken ARL this long to release these benefits to the north-east when the road had been ready to open on October 5. In my comments there, I am more happy to answer questions from committee members. Thank you, cabinet secretary. The first question will be from Richard Lyle Richard. Good morning, cabinet secretary. When you build a new road, the first question is, when is it going to be opened? My view has always been that it will be open when it is open, but most people want a date. Can you provide an update on the completion and opening date of the AWPR, including the opening of the completed grabstone to stone heaving section? We want a date. We do not want spring Christmas. We want a date. You have just heard from the contractors who are responsible for completing the works, which are outstanding on the AWPR, the expected of the section 2B, open by next week, by the end of next week, and they anticipate having the sections on the bridge over the River Don completed by Christmas. They were not able to give you a specific date as to when the works on the River Don will be completed for the reasons that they explained and as because of the weather sensitivity and some of the technical issues relating to that work, but they intend to have it completed by Christmas. Your predecessor told us that the fixed-price contract for this road was £745 million. The contractors have just told us this morning that this road could cost them up to £1 billion. How much do you think that the fixed-price contract is going to cost a taxpayer? As it is set out in the contract as it stands at the present moment, any claim over and above that would have to be substantiated and demonstrated for any additional payments to be made. However, as it stands at the present moment, it will be within the cost that is set out in the contract. Okay. Thanks for that, cabinet secretary. Yes, they talked about their claims that are going to come forward to you because just looking at their commercial confidentiality, of course, but looking at their published losses to their shareholders, at least £35 million—that's in the public domain—over the road, that's what they are claiming. Can you give us an indication? If the fixed-price is £745 million and they have said this morning that the whole contract could cost—the whole build could cost up to a billion, how much do you think we are expecting to hear from them in their claims? Is it in the tens of millions? Is it in the hundreds of millions? We really just want to know what their claims will be. First of all, it should be recognised that, in any major infrastructure project, claims being made by contractors for a contract of this nature is not unusual. The issue that is then required is for the contractors then to substantiate their claim, to demonstrate the evidence that there is a legitimate additional cost that they have incurred. There is a process for that to be taken forward through a facilitated dialogue to address these issues. It is then the responsibility of the contractors to produce the evidence to substantiate an additional claim. Any claim being settled will have to be dependent upon the evidence that they are able to submit. If any final additional costs are incurred by the taxpayer, it would have to be substantiated by evidence and data provided by the contractors that substantiated our need to satisfy any additional costs. Have they put any claims in up to now for this money? What they have done is indicated that they have incurred additional costs in that form as part of their claim. They have already been involved in a facilitated dialogue, which is part of the contract and dealing with those issues. They have already been involved in that process with Transport Scotland and our officials in Transport Scotland, including our legal advisers. What they have not been able to do is to produce the data and evidence to substantiate that claim as yet. I understand that you could not possibly give us the exact figure, but part of the committee's job is to pursue on spending taxpayers' money. We need to give an indication—we need to understand—really how much taxpayers' money do you think that this road is going to cost us. The bill is in the fixed-price contract. Any additional costs over that will be dependent upon the evidence that is presented by the contractors. They have submitted claims to you. I am trying to get out from you. What they have not been able to do is to submit data to support those claims sufficiently. If you are asking me what will that end figure be, it is dependent upon the evidence that they are able to present and whether it is sufficient. Let me change my question then. Could you tell me whether it is in the area of tens of millions or that they have already submitted claims to you? I am not going to give you a figure because they are commercially confidential, plus, at the same time, any claim that they may state they have is not necessarily one that we would say that that is just acceptable. That is how much we have preferred to pay. Who would adjudicate between the two of you? Who would adjudicate on the claim between their claim and the client? There is a facilitated discussion process that is undertaken through an independent person that is appointed to manage those discussions. They have been on-going. Ultimately, it would be the courts that would determine those matters. It could be through a legal process if the facilitated discussion is not able to resolve them, but from my perspective, from a taxpayer's point of view, any additional claim has to be substantiated and there has to be data to support any such claim. The taxpayer cannot be in a position where it simply accepts a claim that is lodged by contractors on the basis of what they think they have incurred of additional costs. I am not saying that they may not have a claim. What I am saying is that, to do so, they need to be able to substantiate it and produce the evidence to demonstrate it. I think that, from the taxpayer's point of view, that is extremely important. The onus is on them to make sure that they can substantiate any claim. There is a process in the contract to consider those matters. If it cannot be dealt with through that process, it may be a process that then has to be dealt with through the courts. I am not going to give you a figure because this is a matter that could ultimately end up in the courts, but the onus is on the contractors to substantiate any claim that they have. My final question on that is really assuming that it does not go to the courts because, obviously, the courts can take an awful long time. Assume that this facilitated discussion reaches an amicable solution. When will the committee be able to find out how much this road has cost the taxpayer? That is dependent upon the contractors being able to substantiate their claim. The sooner they provide that information and that data, the quicker that assessment can be made. Cabinet Secretary, can I clarify just so that we do not have to push this too far, is that when the final price of the contract is aware, you will inform the committee and Parliament how much it has cost over and above the £745 million that the contract is? If there is any additional cost over and above the fixed-price contract, Parliament will be notified and that will have to be a process that is also open to scrutiny from Audit Scotland. Cabinet Secretary, there are a few questions. I just got one because I pushed the contractors on it. It started in March 2017. It was very much aware that there were huge problems with utilities and Keith Brown came to the committee and advised us in March 2017 that all the problems had been resolved, everything was moving forward and the contract was on time. I am assuming that the Scottish Government then started negotiating almost immediately with the contractor, knowing that there was a problem with utilities, that there would be a cost overrun. Am I right in saying that? Yes or no answer would be fine. Michelle Rennie to answer that because she was involved in the contract and it predates my involvement in it. Can I give you a bit more of an insight into that? I felt convinced that Michelle Wood would be answering that, Michelle. So just to clarify, my recollection isn't that you were told that everything had been resolved with utilities at that point. I think what you were told was what the target completion date was. Without playing out the detail of the contract, the contractor has an obligation to manage utilities. Our view is that the contractor's programme is for him to design, to manage, to resource and then to deliver. That is the nature of the kind of contract that you heard earlier about risk transfer and that is part of the risk transfer as far as we are concerned. Michelle, in the contract could you just inform me what the contract says about cost overruns and how long the contractor has to warn the Government or Transport Scotland that there is going to be a cost overrun that could result in a claim because that would form part of most contracts? In terms of cost overrun, the contractor has no obligation to notify the Government of a cost overrun because of the risk transfer mechanism. Just because the contractor incurs a cost, it doesn't necessarily mean that the Government incurs a cost. In certain circumstances, the contractor may be entitled to additional costs. In that situation, he would need to evidence his entitlement and he would need to substantiate those costs. There is a timescale. What is that timescale? I can't tell you off the top of my head what it is, but there is a prescribed timescale where they need to notify that there is a claim of that nature. My question is if the problem was identified in March 2017, which was when it was identified, we are now somewhat later than that. We are in December 2018. Surely the contractor would have had to identify what the problem was and notify Transport Scotland of the outline of the claim with the ads laid out in the contract. That is correct to notify the contractor. It has been some time since we have been notified. Can I push you for a date? I can write to you and let you know what the date is. It would be very helpful, because we were told earlier this year that there would be no cost overrun. I believe that the contractor must have informed you under the contract that there would be a cost overrun by the time that we were given that evidence. The contractor has identified that he has a claim. The fact that there is a claim does not mean that there is a cost overrun to the Government. Michelle, you and I both understand that, but if there is a claim that there is a likelihood that that claim will have to be considered, whether it is rejected or not, it is not for either side to pre-judge. I think that we will leave it there. I will move on to Jamie Greene, then Stuart Stevenson. Thank you, convener. Good morning, panel. I am quite perplexed, cabinet secretary, by the stance that you and the Government are taking on this. What you have just said to the committee is that if there is a claim by the contractor, what is important to the taxpayer is that this claim is substansiated by data and evidence and that the onus is on the contractors to provide that. Would you agree that what is important to the taxpayer is that they should not be having to foot the bill for cost overruns, the project? The onus is not on the contractor, but the onus is on you and the Scottish Government to ensure that the Scottish taxpayer is not having to foot the bill for the overruns, which could run into the hundreds of millions of pounds, as we have just heard. I am quite surprised at your question. Because a contractor has said that they have a claim, you appear to be taking the view that the Scottish Government should accept that, and it is our responsibility. They seem very confident in their claim. That is the evidence that we took this morning. They may be, and they are not telling you to be confident about it as well. I am confident about our position in acting in taxpayer's interests. If a contractor says that they have a claim, then there is a legitimate process for them to go through in order to deal with that claim. That process will then determine whether there is an entitlement from that. The onus is on the contractor to demonstrate that. What I am not going to do is simply say from the taxpayer's point of view, we accept your claim. We will set your claim on the basis of what you have lodged with us without the necessary evidence and data to support that. Do you think that I will wash with someone like Audit Scotland or this committee if there is additional cost with it? I am very clear with the contractors that if they have additional cost overruns, which they believe they have a claim on, they have to substantiate it. If they substantiate it, it can be considered in the process. I accept, Government Secretary, that there is a substantial risk that there is a claim and elements of that may or may not be valid. The cost of which we do not know is anything from between £10 million and £300 million. There is an existing risk to the taxpayer. I do not see how you can ignore that fact. You have already had a discussion this morning. You heard from the contractors on risk transfer and the basis that the risk sits with them because they have entered into a fixed price contract. The risk rests with them. Anything over and above that has to be going through the substantiated process that I have already set out that is there. What I am not prepared to do is simply say that the taxpayers will just take on that risk without them being able to substantiate it. I think that it would be reckless to suggest otherwise. I am sure that the committee is not suggesting that you are going to be reckless, Cabinet Secretary, Stewart Stevenson and then Lewis. The contractors in the previous evidence session confirmed that their claims are limited to the issue of utilities diversion. They also said that part of the substance of their claim related to Transport Scotland having been involved in discussions with the utilities prior to the signing of the contract that ARL are party to. Therefore, they were leading us to a position of concluding that there was some residual risk that lay with Transport Scotland in relation to the work that was done prior to the signing of the contract with ARL. My question is simply, is that a shared understanding that you have, as described by ARL and the contractors to us, or a different view of the basis of the claims? I am going to bring Michelle Rennie in this issue given her history with the project, but let me just make this point as that. There was almost two years spent in developing this contract, and the companies and contractors who entered into the contract are multi-national, multi-million-pound organisations who wanted the contract, who competitively bid for the contract and who wanted to undertake that work. They signed the contract in the full knowledge of where the risks lay within that contract. They have the legal and technical advisers available to them in their respective organisations. That is not a new process to them. It is a process that has been used in other major construction projects, including on roads and also in building facilities such as schools and hospitals. It is not a new process to them, but they went into it with their eyes wide open and with all of the knowledge of previous contracts. I will ask Michelle Rennie to give you some more detail about the utilities element of it and some of the risks associated with that. I think that it is important to give you a little bit of background. As the minister says, what we are doing here is not new. It is not new in privately financed projects, it is not new in NPD projects and it is not new in design and build projects for Transport Scotland. How we have treated utilities here is exactly the same as we treat utilities across all of our projects. Projects in which Morrison's and Balfour Beatty have been involved in and have successfully delivered across Scotland for a number of years. Throughout the bidding process, there is a period of competitive dialogue. In order for utility companies to be ready, some of them need longer lead times than others, depending on the nature of the utility. We engage with those utility companies very early in the design of the scheme so that we know what utilities we are likely to encounter and know what challenges that we are going to face. We also continue that involvement right through the tendering, the dialogue process, and we make that process transparent to contractors. In fact, we create a situation where we are happy to facilitate meetings with utility companies and the contractors so that they can better understand the nature of the risks that they are taking on. Because any utility diversion is inextricably linked with the contractors programme, it is very important that that is well understood. We want to ensure that any bids that we get in for these projects are robust and that everybody understands what the risk transfer mechanism is. On a related point, it was suggested that the number of utility diversions on this 58km project are exceptional at 300km. I will let you draw your own conclusions, but on an 11km section of the M8 contract, there were 170 utility diversions. You may well draw the conclusion then that 300km over 58km might not seem exceptional. Were some diversions related to gas pipelines that perhaps would not have applied to the M8? Are there some complexities that are quite specific to this environment? Every project brings its own bespoke complexities, if you like. However, the nature of the diversions and the utilities protections and the like here were not any different to those that we would have had on other recent projects in Scotland that some of those contractors will have been involved in. It is not unusual in that respect. To clarify that, before we move on to the next question, I understand that before the contract was awarded in 2014, Transport Scotland would have been in contact with those utilities that might have been affected by the project and would have worn them of potential timescales with the road opening in 2018. Is that correct? That is correct. We will have made those communications clear to the contractor. In the contract document, we will have given them the information that we have had from the utility companies at that point. So there would be every expectation by the contractor that some dialogue had been had with the utilities and they were aware of the project and prepared to move on with it within the timescales that the Government had set? There would be every expectation from the contractor that the utilities are aware of the project and there is every opportunity for the contractor to also meet with the utilities and discuss their own programmes with them. Okay, that's interesting. Lewis. Thank you very much, convener. Cabinet Secretary, listen with great interest to what you had to say and you said, I think, that it's now two months since the stretch of road from Stonehaven to Crabstone was ready to use and that you still questioned why it has taken the contractor so long to get to this point. I take it that you heard the evidence that they presented to us earlier this morning. Their answer earlier this morning was, this is all terribly complicated and we have to ask permission from all sorts of other people. Do you find that as an acceptable explanation for the most modern stretch of road in the country lying unused for an entire two months because there's a failure of internal communication on the side of the contractor? In short, no. I have expressed my frustration in the chamber on a couple of occasions when I have been questioned on this matter. Just to put this in some context, when I am discussed a matter with Peter Truscott, who is the chief executive of Galliford Try on 29 October, informed me that the contract variation, which had been worked on for several weeks and was between the lawyers of the different parties, was with their lenders. As I pointed out in my statement to the chamber, with less than 24 hours having passed from that conversation, I get a letter telling me that that's not the case. Despite that, apparently, Peter Truscott, who is the chief executive of Galliford Try, told me that it was with their lenders. Then we get into a situation where it appeared to be that they weren't able to make progress with the matter of a contract variation with their lenders, which is why I then asked for a meeting with ARL, which took place on the thirsty of that week, which was the 7th of November, where the chief executive of Balfour, BT and the other representatives for ARL attended that meeting to try to identify what was the barrier in them being able to share that with their lenders. They identified a few issues that they believed could be potential barriers with their lenders. I asked my officials to take those issues away to see if they could be addressed. A new contract variation was presented to them on 12 November, which is a Monday, following that. That's within two working days for them. It was then with them and their lawyers to then agree to that contract variation. What I can tell you happened in that intervening period is that, and I noticed that they were saying that the contract variation agreement for the lenders was agreed on the 21st of November. They sought to try and renegotiate the contract variation, which I was not prepared to do, because what had been put to them I thought was perfectly reasonable and addressed the concerns that they had previously raised with me. That was the final offer, and it had been made clear to them. It was then for them to progress the matter with their lenders, which subsequently resulted in their announcement today that they intend to open the section that can be opened by the end of next week. Is it your view that that change of heart by the contractors after the 21st of November was simply a recognition that there was not to be any financial benefit to them from maintaining their position that they had held up to that point? I suspect that the penny had dropped. I wasn't prepared to get into a situation where they were seeking to try and use the negotiations to open phase 2b that can be opened with their wider claim. They had two entirely separate issues, and I wasn't prepared to have beheld to ransom by companies on how they wanted to negotiate the process. My view is that they had taken a misguided commercial approach to deal with the claim alongside that of phase 2b, and I wasn't prepared to accept that until there was a taxpayer to be exposed to that type of risk. I suspect that they eventually realised that I wasn't prepared to move in that matter. The evidence that the contractors gave this morning was that they recognised that there was no link between the agreement to open 2b and any commercial benefit that they may have found. I heard that evidence, and from the discussions that I had with ARL, including the chief executive of Balfour BT, I quickly came to the conclusion that they wanted both issues to be dealt with in parallel. Are you now confident, finally, that the legal signing of the contract variation will now occur in the next few days? They have given us assurances. That will be the case. She heard the assurances that they gave to the committee as well in that matter. I hope that they will keep true to those commitments, but that could have been resolved at a much earlier stage had they not taken what I believe was a misguided commercial approach to trying to deal with her claim and the issue of phase 2b. The next question is from Peter. Do you intend to look at any future contracts like this? In my experience of the similar contract, M8, M73 and M74, it was too tight. Was they able to be amended? That was officials' words, not my words, in a set contract. You were not able to open sections of the road due to contractual problems, so do you intend to, whenever we do another major contract like this, to ensure that you... When you said that it was too tight, what do you mean by that? It could not be amended. For instance, I wanted extra fence and put on the M8s, and that was not allowed. No, Mr Lyle. I would give an example, convener. I would give an example. Mr Lyle, you got it. I am sorry, I have not allowed that in the past and I am not going to allow it now. Cabinet Secretary, could you please answer the question whether you will review the contract terms for future contracts to try to make it more easy for parties to understand? Could you answer that specific question? We just need to be careful here about the... I understand that contractors are going into a contract if there are challenges that they then face. We will then say that it is the contract's fault. We also have a responsibility to protect the taxpayers' interests in these matters, and these companies enter into these contracts with a lot of technical and legal advice with their eyes wide open. Any review of contracts that take place, and like any major infrastructure project, you would always look back on how it has been carried out. For example, we saw from the Queensford crossing audit Scotland's report on how it was a very effective contract, and it was managed as well. You always look back on major infrastructure projects and other lessons to be learned. However, if the intention is that those types of contracts should be made easier for contractors to simply lodge a claim against the Government and make it easier for them to get additional payments from the Government, the answer is no. We can leave it there. Mr Laus had his answer. Peter, could you go on with the next question? Good morning, Government Secretary. In terms of your responsibility and the Scottish Government's responsibility, we have discussed the extra costs. I do not want you to go into that. However, what are the other outstanding issues that are still to be resolved as regards the AWPR road to allow it to open? Some of my thoughts are around the Queensford crossing, for instance. They have been open for some considerable time, but they are still snagging issues going on. What issues are youth thinking that they are still there to be resolved as far as the AWPR is concerned? Clearly, the remedial work that they have to carry out in the bridge over the River Don is the most outstanding of those. In any major infrastructure project, there will always be snagging work. In any major building project, a building can make use, but there will be snagging work for an extended period of time, and builders remain liable for dealing with issues, even in a house building project—never mind a major road building project. There will always be snagging work that can be carried out once the actual project has been largely completed for the purposes for it to be used for where it was designed for. An AWPR will be no different with that. However, the way in which the contract is taken forward is that ARL is responsible for the maintenance of the road for the next 30 years. It will be responsible for any snagging issues. I have heard your point about drainage matters. For some farmers, that is a matter that ARL should be taking forward if there are issues of concern that need to be addressed, and issues of maintenance in the future will fall to them as well, given the nature of the contract. The most outstanding issues are clearly the technical issues over the bridge over the River Don. I thank you for that answer. There was alongside the route of the road, some confidence that concerns that may not come to light for a considerable time, drainage may in one of them will be addressed. I thank you for that. Mark, you wanted to cross a question. Yes, one of the issues that I raised with you, cabinet secretary, at your statement, was that if the section to Crabston opened prior to the Don crossing being finished, if traffic wants to connect further on north using the AWPR, it would need to divert off through the dice industrial estates and potentially the village itself. You said that work was under a way to ensure that traffic management, appropriate traffic management, was in place to reduce disruption. Given that we now have a date for the opening of that section and there will be a lag before the full route is complete, can you advise us that work is completed and when will that work be notified and will it be yourselves who notify or will it be the responsibility of the local authority so that businesses and residents can have some reassurance? I recall the point that you raised during the course of my statement. I will bring Michelle Rennie in to give you a bit more technical detail around the plans. What I was very clear about during the course of my involvement was to make sure that, should any contract variation be agreed to, that we are ready to move as quickly as possible. Transport Scotland has advanced its plans to make sure that, as soon as we have a date as to when that road can open, that we have arrangements in place for that to take place. That means that the additional works that have to be put in place to manage traffic in the area that you made reference to, including with Police Scotland as well, so that we get their sign-off. I will ask Michelle Rennie to give you a bit more detail around some of the technical plans. I am delighted if you want to give an overview. If you want to write specifically to the member and the committee to explain what you are doing in detail, I am happy to receive that at a later date. I am happy to do that, convener, but it is maybe just worth saying that, as the cabinet secretary has mentioned, we have been undertaking some work for a period of time to understand what the impact of opening this section of road would be on the surrounding communities. We have done that work as a collaborative piece of work between our own technical advisers, both local authorities and the contractor. We understand what that is. The traffic management that is associated with rerouting the traffic will be a collaborative piece of work between all those organisations, because everybody understands best what the impact is on their own network. All the signage and everything has been agreed, so there is a plan in place and it is just to be implemented now. Hopefully, it will be for just a short period until such time as the dawn crossing is opened. Obviously, the run-up to Christmas is a busy time and the Crabston junction feeds to Aberdeen airport, so on top of that increased flow to the airport around Christmas time, there will also be the traffic that is connecting north. Have you had conversations with Aberdeen airport to ensure that they can take whatever steps necessary to notify travellers and make appropriate arrangements for people who are going to the airport around Christmas time? We will put out whatever notifications are required and we will do so in conjunction with Traffic Scotland and the local authorities, but I will write to you in detail. If you could write to the committee and we will make sure that it is passed on, because I think that it is relevant to all of us. I think that that is all the questions on that and we are going to move on to the next question on the next subject, which is from the deputy convener, Gail Ross. Thank you, convener. Good morning, panel. Good morning, cabinet secretary. We are going from one road to two other roads now. The A9 dualling, which is 80 miles between Perth and Inverness at a cost of £3 billion by 2025 and the A96, which is 86 miles between Aberdeen and Inverness, is also at a cost of £3 billion by 2030. Could you give us an update on both of those projects, please? You are right. The dualling of the A9 is the biggest infrastructure project that has been undertaken in Scotland. It is a £3 billion project that will drill between Perth and Inverness. It is due to be completed by 2025, and the programme remains on target to achieve that. The first part of the dualling has already taken place was the section that was from King Craig to Dalradi, which opened in September of this year. The construction contract for the second section to be due is the Lunkarte in Burnham, which was awarded on 21 September to Balfour Beattie, who will be undertaking that work. It has also undertaken some preparatory work around constructing temporary access roads, access work areas and ground works offices, which will be their site offices, which will be carried out between now and early next year, alongside some of the design work that has been taken forward. The A9 has been taken forward in 11 different sections. The orders for the other nine sections have been issued, which is about 95 per cent of the draft orders have been issued. The one that is outstanding is the section that has been undertaken through a co-production model, which is working with local community in the Persher area. Once that process is complete, the draft orders will be issued for that section as well. The facing of that work, as I have mentioned, is going forward, and the draft orders for 95 per cent of the drilling programme have now been issued. We will have to wait to see whether we have any public local inquiries into those orders. In relation to the A96, we had the first PLI for the route there, which is a section from Inverness to Nairn, which was completed last month. That is now with the reporter to finalise the representations that they have received during the course of that public local inquiry, and then we will have to wait to see what the reporter's submission is to the Scottish ministers on the matter. We have also completed route options assessments work on the section between Hardmure and Focobers, with the preferred route options announced just yesterday, with the public exhibition taking place between today and Friday of this week for local residents and interested parties to come along and to look at the detail of those. The route options assessment work is also under way on the 26-mile section, which is east of Huntley in Aberdeen, with initial options under consideration. There has been a series of exhibitions over the course of October to provide feedback, and the committee may be interested to note that so far there have been 13,500 people engaged in the process in giving feedback to the proposed programme along the A96. Thank you for that, cabinet secretary. Just a question on the inquiries. I know that it is a long timescale 2025 and 2030, but if we have a number of PLIs, is that going to knock the timetable out at all? It has a potential too, depending on the length of time that it takes and the length of time that it takes for the reporter to submit the report to ministers. You will be aware that it had an impact on Aberdeen's western peripheral route, which led to extensive legal challenges as well, which caused a delay there. There is always that potential. However, the scheduling of the work that we have at the present moment, should it keep to that timetable, will allow us to meet the end point that we are anticipating. However, there is a potential that could be delayed if there are extensive PLIs. Just finally, you mentioned the AWPR. What comfort can you give the committee that that is not going to happen again with those two major infrastructure projects? It is a different type of contract that has been used here. It is a capital bill contract, which has been put in place. The Lungarty-De Burnham contract is a standard design and build contract that we have used successfully throughout the country. John, you had a question. I am delighted that you mentioned the co-conduction model, cabinet secretary. I know that the Deputy First Minister is indeed a very enthusiastic supporter of that approach and that there is an assessment on going. Are you able to explain why that facility is not going to be made available to individuals who have interests in applying that approach to decision making around the Harbure East section of the A96? Do you need a feeling that Transport Scotland officials are positively frustrating any prospect of that approach when adopted? I would hope that that is not the case. The reality is that this is the first time that co-production model has been used in that way. It has been a learning process for Transport Scotland and for the community who have been involved in the process. We want to evaluate that and look at it as well. It should be said that it is also a longer process. It takes longer for decisions to be arrived at as well, which clearly can have an impact on the timeline for taking forward certain projects. We want to learn from that experience and to then look at how that can potentially be utilised in the future. However, it has very much been a learning experience that we want to look at how we can build on in the future. You will understand the frustration of some groups there that this assessment process, as I understand, is concluded shortly. Yet decisions may already be taken on preferred options without the opportunity for the communities to engage in that process. I understand that you want to speed things up and that you will understand that some people may wish to slow things down so that we have informed decisions. I can ask you another aspect. This is a simple request. I understand that it may have been used in relation to the Dunkeld area. That is where drone footage was used to provide additional system where my people can look at our route. I understand that drone footage is quite often used by engineers anyway. Is there any reason why that could not be applied, for instance, in the forest area? In order to use drone footage, we need to get the consent of all of the landowners involved. That is a requirement. We will certainly look to do that in the future. To date, we have used some aerial footage, which is quite helpful in presenting those visualisations. Can you say where that has been used, if I may, in relation to? There is a view—as I say—that the Deputy First Minister is very enthusiastic about the process that was used in relation to the bit in the Deputy First Minister's constituency. We would obviously want the same high level of consultation and engagement that is used elsewhere. As I said, we are happy to do that and we are happy to look at that in the future. Is it possible that that could happen on the 96th? Yes, we will look at that. What is the timeframe for that, please? That is 2030. Forgive me if I may. I am trying to understand the timeframe under which you would consider the co-creative process or co-productive process and also the use of drone footage to inform decision making. Clearly everyone wants the most informed decision making, not one that might be seen as being drawn up in an office in the central belt. In terms of timeframe, I cannot give you a timeframe, but I will be more than happy to take that away and look at it with the A96 project team to see, given the schedule of works that they are taking for the consultation process, where it would fit into that process as and when it would be used. I am grateful. Thank you, Cabinet Secretary. Cabinet Secretary, just before we move on—sorry, just a question from me that you would have heard in the last evidence session—I asked about subcontractors and the payment of subcontractors in joint ventures. Is there evidence that some subcontractors relating to the A9 project have not been paid because the joint venture is squeezing them? Do you think that that is acceptable if the Scottish Government has paid the joint ventures in full? I am not aware of that. I would be concerned if that was the case as well. As you will be aware, from the Scottish Government's point of view, Transport Scotland has a contract with the main contractor, who is then responsible for paying subcontractors, and we would expect that to be carried out in an appropriate fashion. If there was evidence that that was an issue that was arising for contractors, then I would be more than happy for us to look into that issue to see if it can be addressed. In principle, you would not find that acceptable? No, I would not find that acceptable if payment has been withheld. Thank you very much. The next question, therefore, is from Richard Law. Richard Law. Cabinet Secretary, can we look at the on-going work at the Queensferry crossing? Transport Scotland officials wrote to committee on 8 January 2018, setting out details of minor work still to be completed at the Queensferry crossing, stating that they expected the work to be completed by September 2018. However, now, due to principally painting the underside of the bridge deck, which I find should be a no, I painted it before we opened it, will not be completed until the end of 2019. Can you explain to me why the deadline for completion of work to the Queensferry crossing was extended from September 2018 until the end of 2019? That is a year, I think. Do you anticipate any further delays? Are there any stalled work still to be done? Will the work be done by the end of 2018? Can we finally be confident that we will reach and match what we say? The under-deck painting does not have to be completed to open the road for users to make use of the road. That is why it is being covered as part of the snagging work that is completed after the project has been opened for road users. The reason that there have been some challenges with that is that the contractor who is responsible for carrying out that work has to have a deck area that they can utilise for getting underneath the bridge. They have had technical issues with the contractor, the subcontract that they were working with to deliver that, which has presented some challenges for them, which has resulted in a delay in being able to actually get that in place. It is also work that, when they do start it, it is weather sensitive as well. There are periods during the winter when it would not be appropriate during certain temperatures to carry out that type of painting work. The problem in getting this lower deck area that they require for the platform for working on, the delay in being able to get that, has had an impact on being able to carry out the work associated with some of the weather conditions that they are limited in and how they can carry out that work. However, they expected that to be completed by the end of next year. The second area is in relation to some of the concrete finishing that needs to take place on the pillars. There have been some issues with the contractors around the safe working arrangements for carrying out that work, which has been progressed. Once that has been resolved, they should be in a position to be able to complete that next year as well. Again, it is a type of work that is weather sensitive. Given the nature of the environment that they are working in, it is more respected than it would normally be for other circumstances, as you can appreciate, with winds, etc., that they might be exposed to. A combination of technical issues and some weather-related issues has had an impact on completing that work. I think that it is an excellent bridge. I am quite pleased to go over it. However, I find it amazing that the underside was not painted before it was opened, because it was still working. If you are doing the underside, you are not affecting the work on the top. However, I will take that side. There will be on-going maintenance, so we know, on-going maintenance, like anything of that bridge over its period of the next, hopefully, 100 years. It is quite like the rail bridge that, by the finished painting at one end, you have to start at the other end. No, I think that it stopped that for a while, but I think that it stopped doing that for a while. There is a team. I think that there are about 200 contractors working on the bridge still to deal with some of the snagging work. There is also a dedicated Transport Scotland team, who work alongside them. There is a project team that meet with them to look at the progress on making around some of the snagging work as well. 2019, basically everything that was previously outstanding from when it was constructed will be finished? Should be, yes. Thank you. Cabinet Secretary, I think that it might help the committee just to keep us informed, to have a list of, as you have done in the past, or Transport Scotland has done in the past, of all outstanding works, because we have heard various stories about Lyft's malfunctioning, you have said about the painting and various things. It would be very useful to have a list and when those works will be completed, and perhaps explaining the constructions around all the horses that came down into the bridge, which are now being removed. I think that an updated list for the committee would be extremely helpful. More than happy to look at doing that. I am not entirely sure whether there is anything in addition to the last update that you received, but what I would be happy to do is, if there are any additional things, to bring those to your attention. Perhaps if you could give us a full list, then we can check it against the original list, and with that question move on to Colin, if I may please. Thank you, convener, and good morning to the panel. Can I turn our attention to issues on our railways? In September, ScotRail's performance fell below the breach level set out in the franchise agreement. Cabinet Secretary, why did you not take enforcement action against Abilio for their failure to meet the contractual obligations and instead granted a waiver against enforcement of those obligations? As others have previously stated in Parliament, the reason for providing a waiver was because there were a number of factors that had an impact on ScotRail's performance, which were out with their control. There were weather-related incidents, so there was Storm Alley, which had a significant impact. There were also infrastructure problems, which had an impact on their performance. There were also delays in rolling stock being provided to them by Hitachi as well. Factors that were out with their control directly in being able to deal with those issues. The franchise is designed in such a way that that can be taken account of. It seemed reasonable that, given the undertaking of the Donovan review, to look at how it could take forward further improvements and that they were making progress with the recommendations that were set out in the Donovan review, alongside the factors that were out with their control that had an impact on their performance, there was a reasonable case to consider a waiver of the performance breach level. Having said that, there is a threshold that it does not drop below 1 per cent of that performance level. Should it further decrease, there will have to be a remedial plan put in place in order to address that. With the combination of factors, recognising that there were out with the control of ScotRail that were having an impact on their performance, it seemed reasonable to me that they should have a waiver to allow them to make progress on the programmes of work that they are taking forward to try to address those issues through the recommendations that were set out in the Donovan review. In an email on 19 September from your private secretary to Transport Scotland's ScotRail French manager in response to the request by ScotRail for a waiver, your private secretary stated that Mr Matheson is now content but wants to be very clear with ScotRail that any further drop in performance will be unacceptable. That was in September, but since September, in the two reporting periods, performance has actually got worse. Do you think that it was a mistake for you to grant the waiver without a single explicit condition around improving performance? No, because there is a condition if they drop 1 per cent below that base level, they will have to fall into producing a remedial plan to take that forward. All of the other conditions within the franchise continue to be applied? Yes, but the email was very clear. You said that there should not be any further drop in performance. You said that it would be unacceptable, but there has been a further drop. However, you touched on where we are at the moment, and you are right. In the last reporting period, ScotRail is just basically 0.03 per cent away from falling more than the 1 per cent below breach level, which you mentioned. That is obviously prohibited by the waiver. Given that ScotRail has not hit a franchise public performance measure since 2015, when do you think that it will rise above that breach level? Do you think that that franchise is ever going to hit the 92.5 per cent overall franchise target? I am aware that there is an extensive amount of work being taken forward to try to achieve that, including the new rolling stock, the infrastructure investments that have been made, and the change in personnel around certain provisions and arrangements in ScotRail to try to address some of those matters. Some are satisfied that there is a significant amount of work being taken forward to try to address those issues to help to achieve the franchise target. I also recognise that there are issues that are completely outwith ScotRail's control that have a direct impact on their performance. As I mentioned in the chamber yesterday, in the last quarter, 59.5 per cent of all delays were caused by network rail. By and large, over the course of last year, it has been in excess of 50 per cent of all the delays that have been caused by network rail. Those are matters that are outwith the control of ScotRail and will be able to address those issues readily. That is why there is a need for network rail to have a much more robust project management in place and to be much more customer focused on how it takes forward the infrastructure improvement programme to minimise the disruption that causes to those who are providing rail services and ultimately services to the travelling public. The present arrangements, in my view, as to how network rail is managed and how it is operated, is not adequate to be able to address that and something much more fundamental needs to take place in changing that arrangement if we are to start to address those issues more effectively. I am terrified when you are saying that network rail delays, that includes whether or a lot of things at network rail can't affect whether adverse things like, regrettable things like suicides on tracks that close things and delays from trains, there are quite a lot of things in there which network rail cannot actually affect. Am I right in saying that? Yes, you are. The concern is that they are increasing as well. What about those adverse effects that they can't? The impact that network rail is having on rail performance is increasing proportionately. Hence why the office of the rail regulator last week announced that they are taking enforcement action against network rail because of their poor performance and the impact that network rail is having on performance levels and the impact that it has on the travelling public. The committee had a very useful briefing from them last week. Those arrangements were clearly known when the franchise was awarded to Tabilio. Do you think that we will ever get to a stage where this current franchise will meet the 92.5 per cent overall franchise target? Do you think that that will be met, and if so, when do you think that that will be met? I think that it will be challenging to meet it, but what I am confident of is that there is a course of action being taken to give us every opportunity to make sure that that target is achieved. What I cannot provide you with is a date as to when it will be achieved. For the very reasons that I have just outlined, there are a range of factors that are outwith the control of the franchise holder that can have a direct impact on that target being achieved, most notably network rail and the deterioration in their performance. I think that it is an important point. I know that there is a lot of politics at play when we talk about Scotland's rail, but the reality is that the number of the percentage of delays that is attributed to network rail is often used as a top-line figure, but the reality is that, by your own admission, a substantial amount of that are elements that are outside of network rail's control, including the weather. I am sure that the cabinet secretary would appreciate that that is something that is beyond the control of any Government agency or public body. You mentioned in the chamber yesterday that you were having a meeting with ScotRail to discuss this issue. Cabinet Secretary himself accepts that performance is not where it should be. Are those meetings minited, or would you be willing to share perhaps what was said during that meeting? Yes, there would be a note of the meeting. Okay, and what was said? The meeting yesterday was about the unacceptable levels of cancellations that have been taking place over the course of the weekend and into the beginning of this week. ScotRail explained the reason as to why that has been the case, combinational factors, and the late arrival by Hitachi of the new 385s. So, Hitachi have let down ScotRail in delivering them in the time schedule that they had planned to, which has meant that the training programme for training the crews on the new trains is behind schedule. They have been trying to accelerate the process of getting more of the trains accepted into the ScotRail network, which has meant that ScotRail has also had to accelerate their training programme. With the timetable change taking place on the 9th of December this Sunday, they had to get as much of that completed as they could with the new train timetable and the new rolling stock that will become available over the course of the timetable change. Alongside that, the industrial action that has been taken around the rest day's working arrangements has had a direct impact on the number of staff and crew who are available to undertake the training and also to maintain the existing rail network. What ScotRail was able to confirm to me that they were having discussions yesterday with the trade unions with a view to trying to resolve again this dispute, I have encouraged them to do everything they can to resolve the dispute as soon as possible, and I hope that they will achieve that in the not-too-distant future. I have also made it clear to them that the communication of the significant impact that the cancellations were having on the public was not to the standard that I would expect. I understand that there has been a convergence of challenging issues that they have had to try to manage and deal with as best they can. However, the travel on public deserve better and they should have communicated that much more clearly at a much earlier stage to allow the public to understand the potential impact that they had on the services that they were looking to use. I know that there are other questions to come up, but you have just said that the public deserve better. They do indeed, but you have also just said that you think that it will be quite challenging that ScotRail will ever meet the targets that are set for them within its current contract. It does not sound overly positive. I think that the changes that will be made as a result of the new rolling stock, the additional electrification that is taking place, the seven cities programme with high-speed trains will make a massive difference. When the full timetable change is implemented by December 2019, capacity on a rail network and the fleet on a rail network will have increased and the number of services will have increased as well. There will be absolutely no doubt that there will be significant improvements. When I say that it will be challenging to meet that target within the franchise, it will be challenging because there are a range of factors that are outwith at ScotRail's control that can have an impact on achieving that level of performance. My view is that the existing structural arrangements compromise the ability to deliver better passenger services because of the challenges that you have between the infrastructure delivery body and that of the rolling stock service provider. Just on railing stock, because it formed part of another question, I am going to bring Peter in on that and then come back to you, Colin, if I may. Peter? Cabinet Secretary, you have already mentioned the significant delays to the introduction of new rolling stock, including the class 385, which you have already mentioned, and the refurbished high-speed trains for the Aberdeen-Edinburgh route. On that route, only one of 10 trains have actually been refurbished. My question is, is Transport Scotland taking enforcement action against any of the organisations involved in those projects for failure to deliver on time? In terms of rolling stock, three areas, whether delays, Hitachi 385s, reason for the delay, Hitachi, delays in the new Caledonian sleeper, reasons for the delay, CAF, the company that is manufacturing the new trains, and also the reason for the delay in the refurbishment of the high-speed trains, is Wabtec, the private sector company that is responsible for carrying out the refurbishment works as well. As much pressure as possible has been applied to these organisations to try and make progress. I am due to have a call with the global head of Wabtec to make it very clear in Japan that it is unacceptable that we are facing these delays, that it is having a marked impact on performance here in Scotland. I have also made it very clear to Sir Cole, who has got the Caledonian sleeper programme, that it has been unacceptable that new rolling stock has been delayed for the sleeper. Next week, I am having a call with the global head of Wabtec to make it clear that its failure to deliver the refurbishment programme and the timeline that it agreed to when it went into the contract is again unacceptable. It is having a direct impact on the quality of passenger services that can be delivered. As much as can be done to try and apply pressure to these companies who are responsible for carrying out the work, it is being applied. However, I accept that that has a direct impact. The lack of keeping to the timelines that it agreed to when it went into the contracts is having a direct impact on passenger services and the quality of passenger services that we expect passengers to receive. That is fine, but does that mean that there will be financial consequences for these companies and some sort of compensation coming back to the ScotRail or whoever is a result of that? In terms of the issue around the performance when it comes to ScotRail, which would be the attaches and the high-speed trains, there are penalty provisions in the franchise arrangement if they are not able to deliver on the commitments that are set out in the franchise arrangement. Some of that money, as you will be aware, has already been used and we circled into the rail infrastructure and rail services to try to improve those. We have already done that. In the contract with the Circle for the Sleeper Service, there are penalty provisions in that for their failure to be able to deliver on the commitments that are set out in it to provide a new role in the stock and time as well. The 365s that have been hired in to cover the gap, who is paying for them? Part of the money for that is coming from the penalties that have been applied to the franchise. Can you explain why Transport Scotland decided to make early contractual payments to Abilio? Part of the reason for that was because of the financial challenges that ScotRail Abilio was facing within the franchise as a result of a lack of growth in their patronage level, which was having a direct impact on their financial standing. That had largely come about as a result of a couple of significant issues. For example, the closure of the Queen Street tunnel had a direct impact. The delay in completing the Edinburgh to Glasgow improvement programme again had an impact on their ability to grow their service, and that had financial implications for them. The rebasing of it, the reprogramming of being able to draw down money earlier, was in recognition of that. Having said that, there is no additional cost to the taxpayer. That is simply drawing money forward at an earlier stage to meet some of the challenges that they face financially as a result of that lack of growth within their own intended projections when they were into the franchise, but it has got no additional cost to the taxpayer. Bill, can you say a wee bit more about some of the technical aspects about it? I have not got much to add to what you said, cabinet secretary, but I think it is just to say that this is using the provisions within the contract. At the time the contract is signed, there is a forecast revenue line that is included within the contract. It is the case that that revenue growth was held back by the delays to the electrification of the Edinburgh to Glasgow route and by the impact on the Queen Street tunnel closure, which was not known to the franchisee at the time of entering into the contract. We considered it appropriate to use the revenue support mechanism in the light of that change, but there is no increase in the total amount of money that is being paid by the Scottish Government to Scotland. Abelio will not be out of pocket because of the current delays, but it is fair that passengers will be out of pocket by facing yet another fair hike in January, at a time that performance is way below what everybody here believes is acceptable. Let me just be clear here in the point that came back to your last question. There is no additional cost to the taxpayer for drawing forward those early payments. There is no linkage to the idea of fair increases in January, which is a time when fair increases in the rail network across the whole of UK take place. It is not linked to the idea of drawing down some of the early payments from next year into this year. I think that we are very clear that we are saying that the payments are being paid in advance because of delays. Effectively, compensation, if you like, is being given to Abelio with advance payments because of delays, but nothing is being given to the passengers—the ones that you said, in fact, your phrase was, passengers deserve better. If passengers deserve better, why are we going ahead with those fair increases in January? I just want to emphasise this point that there is no additional cost to the taxpayer from drawing forward those early payments. They are drawing them forward into this year that they would have been taken to them in the next financial year, but when it comes to the next financial year, they will not be there because they have drawn forward into this financial year. There is no additional cost. I also want to emphasise that the fair increase is not related to that in any way. The fair increase is the RPI increase that takes place every year across the whole of the United Kingdom network. However, in Scotland, in recognition of that, we also cap that. For example, for those who are regulated of peak fairs, it is 1 per cent below RPI, and those peak fairs are RPI. That is the lowest increase for any part of the UK. It is actually one of the lowest fair increases since 2005 or 2007, over an extended period of time, possibly since we started to have responsibility for franchising the rail network in Scotland. However, I also recognise that any increase in fairs is unfortunate. However, it is also worth keeping in mind that two-thirds of the cost of rail in Scotland is met by the Scottish Government. When you compare that to that in England and Wales, that is significantly more, but it is only 50 per cent in England and Wales. We recognise that it is unfortunate, but we do our best to try to cap that. However, we also need to recognise the significant investment that the Scottish Government puts into rail by meaning two-thirds of the costs of rail in Scotland on an annual basis. However, you do not accept that, given how poor performance is, given the fact that performance is plummeting, you should not be reconsidering that fair increase. What I have said to you is about performance. It is not where it should be, but I also recognise that there is a course of action being taken to try to address these matters. As I have mentioned from the Donovan review through to the investments in your own stock, which has taken place, and additional infrastructure enhancements that have been carried out as well, all of which are about improving performance in moving forward. I am very clear about the need to make sure that they deliver on and improve performance, particularly as we move into the new timetable change that takes place this weekend, which will be completed in a year's time over the course of the next year. Cabinet Secretary, as you are aware, the Scottish Green Party supports the devolution of network rail, but it is not some magic get-out-of-jail card when it comes to accountability. I know that you are not necessarily presenting it as such, because what we are going to see is that we are going to see increasing episodes of extreme weather, which is going to contribute, so we will maybe come to that later. As a general principle, do you believe that any organisation that requires to rely on the goodwill of its staff to work on their days off has sufficient staff? I think that the reality would be that no, they do not if they are too dependent on it, which is why I welcome the fact that ScotRail is in the process of employing, I believe, in the region of around 140 extra staff, which will allow them to remove the need for rest-day working. We had Mr Hynes and his team in here, the Transport Scotland itself. It is quite cluttered, this system, of accountability. As in between the infrastructure, rolling stock, franchisees, etc. No, as between the franchisee Transport Scotland and the political accountability. Yes, it is in some ways, yes. I wonder if you have any plans to end the current ScotRail franchise when the first expiry date of 31 March 2022 comes around, given the current performance? No, not at the present time. Focus is on improving performance, particularly as we move into the timetable change that is taking place this weekend with the additional rolling stock that will come into place between now and May of next year, in improving how the franchise is working at the present time. What do you think the franchisee's attitude would have been if you had said, well, obviously we are giving consideration to that? Is it something that you are giving consideration to? With the worst performance figures in a long time, and I will not repeat them, because at the end of the day, customers are interested in percentage rates. They just want to know that the train turns up, and increasingly the train is not turning up or it is turning up late or it is arriving late. Let us take the scenario that we choose to end the contract early. We then get into a situation where we then have to put it back out for our franchisee to take over the contract, because we are legally obliged to do that. The challenges that the existing company that has the contract has will still be there. 60 per cent of the delays to the services that have been caused by Network Rail will still be there for the next part that comes in to take it over to deal with as well. They will not magic away by simply ending the contract. My view is that the existing structural arrangements in Rail do not meet the needs of passengers adequately. That is because of the way in which it is presently structured, both the infrastructure and the franchise arrangements. The focus has got to be on how we make the existing arrangements work to the best interests of the travelling public. That is about making sure that we are delivering the improvements that can make the changes that will help to improve passenger experience from rolling stock right through to major projects such as electrification programmes, which Network Rail needs to get much better at taking forward in terms of project management in particular. There are no plans to end the franchise on the basis that some of the challenges that existing franchise holders are facing will still be there, no matter who has the franchise. I am entirely right to say that, but that gets down to very raw politics. I do not intend to intrude in another question that I know is coming up, but it is comments like you have made that give the impression that, if you like, the Scottish Government has gone soft in the notion of having it publicly run exclusively in the interests of the Scottish public. No, we have not, and it is wrong to try and characterise it that way as well. It is a mishel perception, as far as I am concerned. You have just said that you are not going to consider that option of ending the franchise. Yes, because the structural arrangements that we would have in Rail would still be there if we ended existing franchise. We would have to put it back out for another franchise, and then we would have the same problems. Regardless of performance? Pardon? Regardless of performance? Regardless of performance? You will not consider ending the franchise. Just for the sake of ending the franchise? No, for the sake of making efforts to improve the performance. We hold the individuals in charge of that organisation accountable. The intern are accountable to you and Cabinet Secretary, you are accountable to the cast. I am not going to end a franchise purely on the basis of that that will be the answer to the challenges that we have around performance. Because so many of the challenges to the existing franchise are coming about as a result of areas that they do not have control over. What I do think that there is an opportunity is with the review of Rail, which has been carried out by Kenneth Williams, in looking at the existing structural arrangements for how rail is provided across the whole of the UK. To get a model that would deliver much more passenger-focused approach to how we deliver rail services in Scotland, which is accountable to this Parliament. That is what I am going to pursue, which then allows us to be in a position where we can address these performance issues more effectively for the travelling public in Scotland and to use a model that can better deliver that for the public as well. I think that a model may be suggested to you on future questions. The next question, then, is Jamie Greene. Thank you. Mr Finnie has touched on it already. With regard to the public sector bid that the Scottish Government wants to pursue, can you answer the following two questions for me? How much does the Government estimate that the bid will cost itself? In terms of its modelling, if it is successful in that bid, how much would it cost to run the franchise in terms of the cost to the taxpayer? Do you mean that if it is a public sector company in your latter question, your second question? What I am saying is that the Scottish Government wants to put a public sector bid into that franchise tender. What is the cost of the bid and if it is successful, what would the cost be of running the service? We have secured the right for a public sector organisation to be able to bid for any franchise, which we have required to put out to franchise under the existing legislation as it stands at the present moment, which is out with the gift that is controlled by the UK Government and by the Department of Transport and the UK Government. A bid on average for a franchise, I understand, is in the region of around £10 million for putting forward a bid. What we would then have to do is, if there was any public sector body in Scotland looking to lodge such a bid or bodies, it could be more than one that chooses to make such a bid. A bid is that it would need to be provided with financial resource to support them in being able to make such a franchise bid. That is the first question. The cost to the taxpayer of a bid, regardless of whether you win it or not, will be £10 million. That seems to be the average industry cost for putting together a bid for a franchise. The more important question is if that bid was successful. What estimates have the Government undertaking as to the cost to the taxpayer of running a public the-own service? That is the real question here. The cost would actually be the cost of the actual franchise that they are taking on, the overall cost of that. I can give Bill Keith a specific figure. We pay in the last year £394 million to ScotRail, of which £260 million goes on to Network Rail in track access charges. The net cost is about £134 million. I have done my maths right. Yes, £134 million. The big number does a lot of pass through to Network Rail for the infrastructure costs, so the net subsidy currently is in the £134 million. £394 million is what is given to ScotRail per annum. Yes, right. That is £260 million, which then gets paid by them to Network Rail. I understand, but is that the cost of running the service that is the subsidy given to the operators is different from how much it costs to run the service? Indeed. The other source of funding for ScotRail is the fare box from the passenger. In the current system, a bellio or the operator of the service, so therefore there is a risk associated with their involvement and any cost liabilities from their part. If they were removed from the equation and instead of a bellio, that party becomes the public, a government body, a public body, I guess what I am asking is what would that risk potentially be, because tell me what the subsidy is is not the same as tell me how much it is going to cost. Sorry. Of course, whoever holds a franchise takes on the liabilities that goes with that and the risks that go with that. You are asking for a figure about what those risks would actually be. I do not know if we can give you a figure because they could be for a whole variety of different things at different times. So, for example, if it was about delays in terms of performance, that would then have an impact on any payments that the penalties that they had to pay as well, so it could be a whole variety of different things, but the risk is carried by those who hold the franchise. Indeed, but you do not know what that risk might be. In effect, you are spending £10 million to put a bid in for something that you have no idea how much it is going to cost to the public. No, no. My understanding is that the £10 million figure is around the cost to actually submit a bid, to put a bid together. You would not necessarily be successful. It could cost you £10 million and not be successful. There is a cost associated with the franchising process, which is inherent in the existing legislative process within the rail network in the whole of the UK. However, I cannot give you a figure on how some of those risks would crystallise and the basis of it is due to penalty payments, about poor performance, etc., because it depends on a whole range of different factors, but the risk is carried by those who actually have the franchise. The franchise is obviously going to be won by those who actually put forward the best bid and it is in the taxpayer's interest. £10 million seems like a lot of money to lose if you are not successful, especially if it is public money, I assure you dad. Can I move on then, in a scenario? The answer is to get rid of franchising. Can I just bring in John and then come back to you, because he has got a supplementary, I think, on that particular point? I smile in his face having heard the cabinet secretary just say that, because, of course, that is the nub of the issue. The nub of the issue is franchising. Mr Greene, of course, would do well to… I mean, I know he wants to use the word risks, but, of course, the tremendous benefit that was accrued to the UK Treasury by the failure twice on private franchises of the east coast, generating £800 million profit. I wonder if that is a model that the Scottish Government is looking at. Of course, once again, it is back in public ownership. Interestingly, I had a meeting with the chair of LNER just yesterday to discuss how their performance was. It would be fair to say that he is not pleased with their performance at all, given where they are at. I think that their PPMs are down in 72 per cent just now, which is very poor. A big part of that is because of the challenges around rolling stock, providers and infrastructure. The point that I am making about getting rid of franchises is that the problem that I have around this idea of just saying this franchise and doing another franchise is that a lot of inherent problems are still ingrained in the system. Until that is addressed and it is more public and travelling public focused, I do not think that we will overcome some of those particular challenges sufficiently. I am incredibly conscious now of time and the need for short questions and short answers. I am going to bring Jamie in briefly and then the next question will be John. Just to clarify, based on the supplementary that was asked, is it the Scottish Government's official position that you would abolish franchising on the real network? I am presently considering, as a result of the UK rail review that is being carried out, I think that that would be a more optimal model for delivering rail services in Scotland. That could include not having a system that requires franchising. Jamie, I am sorry, Jamie. I have said one question. Jamie, I am sorry, I am going to have to move on. I apologise, but I have to try and keep things moving along. John, a question from you. Thank you, convener. I will move to a completely different subject. We have plans for two ferries that are being built, understand at Ferguson's. Some of the committee have been to visit Ferguson's and we also had evidence from CMAAL. So there appear to be delays and there are alleged cost overruns. Can you say anything about what you can do about this? What your view of the situation is at the moment? Are there any potential penalties for either CMAAL or Ferguson Marine? Where are we with it? Obviously, there is a delay at the present moment. Ferguson's is still indicating the expect to deliver. The MV Glenn Sanox, summer 2019, with the second vessel, which I think is 802, to be by spring 2020. As it stands just now, you may be aware from the evidence that you heard that CMAAL is heavily engaged with Ferguson's around delay in the contract and the sort of completion of the ferries. They have staff working with Ferguson's to try and address some of those issues. We have also had someone appointed independently to assess the progress that Ferguson's is making regarding on these two ferries and is reporting directly to CMAAL on the matter and to Transport Scotland or directly to CMAAL. Is there reporting back into Scottish Government colleagues in the economy? So around the progress that they are making in these issues. There is delays, which is unfortunate because the two new vessels are critical to helping to provide greater resilience on the ferry network in Scotland, given the increasing demand that it is facing. In relation to the wider claim that Ferguson's has, those were a design and build fixed price contract that they entered into. Any change to that is a matter that would have to be negotiated and dealt with through any discussions about any additional costs that they have incurred and ultimately could end up in the courts. You are saying that it is design and build and we have not seen the contract, so I do not know what it says. Ferguson's, from what I understand, understood that it was to be that they would work jointly with CMAAL on the final design and build of the ferries. They claimed that, because they did not get enough information from CMAAL, they had to, for example, start building the ferries from the middle rather than from the stern, and that inevitably has cost extra money. They are certainly claiming an amount that we do not yet know, but I was quite taken aback to read the CMAAL accounts that we just got recently, which include the statement that we have reviewed all potential claims with the benefit of legal and expert advice and have concluded that there are no contingent liabilities to be noted in the accounts. Given the discussion that we had on the Aberdeen western peripheral route, where there is acceptance that there could well be a bit of extra cost on both sides, I am somewhat gobsmacked to have to say that CMAAL think that there are going to be no extra costs for those ferries. Look, their accounts have got to be returned and what they believe is true and accurate at that particular point. If there is no substantiated claim at that particular point, then they cannot report that they have one. You have used the term claim several times. Any claim is one that would have to be assessed, evidence-based and data to support it. Ultimately, if it cannot be resolved between CMAAL and Ferguson's directly, it may be a matter that will end up having to be resolved in another place, but at this stage there are claims and they have to be substantiated. I accept that, but my parallels with the Aberdeen road as well, where I thought that you were very balanced in your answers, that there could be claims and they will work their way through. By my understanding, that is the difference between a liability, which there is not at the moment, and a contingent liability, which is something that could arise given certain circumstances. For CMAAL to claim that there is not even a contingent liability, let alone a real liability, I find that somewhat surprising. Well, they would have to be able to substantiate that and how they have arrived at that position, and also any subsequent claim whether the information that they have provided was accurate at the time when they provided it within their accounts. Sorry, John, have you finished? Cabinet Secretary, I mean it would concern me that CMAAL are within your remit. Folks and Marine have not lodged accounts since 2015. There are no accounts for 2016 or 2017, which would perhaps be viewed by most people as very suspicious that a company has not lodged accounts for two years in arrears and a company's house could strike them off from being a company for doing that. If there were liabilities within their accounts or potential liabilities, there should be a balance between them, but we cannot check the accounts, so we have no way of verifying whether there is an outstanding claim. Does that not cause you concern, especially as the Government has left lent them £45 million? It is important that Ferguson Marine. I cannot be responsible for Ferguson Marine in what they do with their accounts. The taxpayers' money? Exactly. That is why any claim has to be substantiated. We have a company that has not lodged accounts. They are responsible for issuing their own accounts. I cannot make them issue their accounts, but any claim has to go through the proper due process to be substantiated, just in the same way that it would be for something like the AWPR. I absolutely understand that, but if I was dealing with a company where I had a contract with them for £97 million, I would have lent them £45 million on top of that, and they had not lodged accounts for two years. Let me tell you that I would be very worried, and I believe that you should be worried. John, do you want to come back on that? On that point, do you think that it is the case that the claim is so horrendous that, when they publish their accounts, that claim will be in the public domain? Ferguson Marine would have to explain that. Has the Government no responsibility or some kind of more direct control? The two sides—Seamall is also a separate legal entity. Is it the Government's position that we do not know where the fault is in all this, and we are taking Seamall's side, or we are taking Ferguson Marine's side, or neither side, or what is the Government's position? Our view is that Seamall and Ferguson Marine need to resolve any dispute that they have around any potential claims. As a process for that to be carried out, it is for them to engage in that process in order to resolve any outstanding claims that they have. If Seamall had to settle for a higher amount, the Government would automatically have to write that check. It would have to be substantiated, because I have absolutely no doubt that in Audit Scotland looking at it and the committee looking at it, you would want to be satisfied that the taxpayer's interests have been taken account of here. Jamie, a brief question, followed by— Sure. I mean, you know, this goes back to the AWPR thing. You are talking about protecting the taxpayer's interests. It is not protecting the taxpayer's interests that those projects are going over budget in the first place, regardless of whose liability it is. Whether it is the ScotRail delayed carriages, it is Hattachi's fault, HST, it is Wabtex's fault, sleeper trains, it is the manufacturer's fault, the new ferries, it is the manufacturer's fault, or AWPR, it is the contractor's fault, it is always someone else's fault. At which point, cabinet secretary, do you take responsibility for any of this? It is their fault. You have just listed to me companies that are running over. What does that say about how you managed these projects? That is a good question. You might want to ask Hattachi. As I asked our global president just last week, Hattachi have failed to meet the several targets that they set for delivering carriages as well. You have been through them all. Let's not go through them all again. With all due respect, convener, he has put those specific allegations to me. Is it that Wabtex has failed time and time again to meet the targets that they were set as well? CAF has failed to meet the targets that were set for them when it came to delivering the new rolling stock for the sleeper. The contractors who have made a claim on what you call an AWPR, if they have a claim, they need to substantiate their claim. That is a claim that they have incurred because it entered into a contract, which was a fixed-cost contract that they went into with their eyes wide open. The responsibility lies with them. I am simply pointing that out, and they need to take responsibility for their failure to deliver on things that they went into contracts in the green that they would do. But Transport Scotland takes no responsibility at all for any of those failures? From some of the question, it would appear that the taxpayer should just accept the errors of private sector companies in failing to deliver on contracts that they enter into. Those are companies that go into those contracts with their eyes wide open. If they fail to deliver on it, that is their responsibility. What we then try to do is to make sure that any issues that arise of an impact on travelling public or use of roads is that we try to minimise that in progressed matters. However, what I am not prepared to do is accept responsibility for the failures of organisations in the private sector that I have not delivered on commitments that they gave. Cabinet Secretary, we are going to move on to the next question, which, briefly, Colin, is from you before we move on to John Finnie. Just on the issue of coming back to this ferry contract, there are two organisations involved, one of which is obviously publicly owned. Given that this is taxpayers' money, given that those are lifeline public services, what are the Government doing to show leadership and to bring people together to try to resolve the dispute instead of simply saying that it is for others to sort out? What are we doing? What is the Government doing to bring people together to sort this out? It would be fair to say that there have been a range of meetings taking place between the Scottish Government, CMAL and Ferguson's to try to find a resolution to some of the challenges that have been faced. Not just myself, I have been involved in that. The Cabinet Secretary for Finance has been involved in it as well, given that they have lead responsibility for the loan arrangements for Ferguson's marine. Alongside that, given the delay that there is going to be with the two vessels that they are constructing, we are also reviewing a resisting ferry plan to look at how that can be improved and enhanced. There is also a ferry action plan that has been taken forward at the present time to look at improving communications to the travelling public and how CalMac are dealing with some of the adverse weather incidents that they are experiencing. There is a range of work that has been taken to try to improve the arrangements with ferry services overall. At the same time, there is also work that has been undertaken internally in government between the different parties to try to get a resolution to some of those matters. My primary focus is to, from a transport perspective, to see those vessels completed as soon as possible so that they can get into the network to provide us with additional resilience in the network, given the challenges that we face at the present time. He brings in John on his question, which is an excellent question. Thank you, convener. Cabinet Secretary, can you provide an update on the review of ferry service procurement, please? We published our details of that last December, which set out that we have been engaging with the European Commission on this matter about the possibility of direct awards. The feedback from the commission has been that the threshold to offer direct awards is very high and very challenging. It will be a challenge for us to meet. Officials in the ferry division in Transport Scotland have been working on this and looking at it. They might say a bit more about the work that we are undertaking on this matter, but we have been engaging with the commission around possibly progressing this further, but it will be complex. Any decision in the matter would be when it would be taken around 2022, when the new contracts are due to be reconsidered. In the cabinet secretary said that it is pretty challenging, but we are continuing to pursue this. In the meantime, we are procuring another ferry service that is progressing satisfactorily with the new contract in place for autumn next year. Work is progressing, but the time scales are running the contract until 2024. A couple of years in advance of that, we need to make a future decision about the way forward, whether we can make direct awards as Government references or whether we need to continue to attend to the services. Thank you for that. I wonder to the extent that Techel and Altmark has been talked about. Of course, we could be in a situation in a few months' time where will that have any continuing relevancy if the UK was out with the European Union? I did say if, cabinet secretary. Presumably, that is a contingency that you have to look at, and it could be a game changer in respect of this particular issue. Who knows where we will be in that issue in the coming days and weeks, but clearly depending on what happens, it could have an impact on the matter, given that it is a state aid issue and that it is a matter that the commission has a clear interest in. We will have to factor that into our planning and thinking going forward, depending on what the outcome is. Rich, you are going to ask a very brief question. Just brief, coming near the budget, are you building in each year, are you looking at building in each year to replace ageing ferries? We have invested £1.4 billion in our ferries since 2007. We have added eight additional ferries to the network over that period of time. The two ferries that are in procurement at present time are in construction at present time and are critical to helping to provide us with greater resilience. What we will be looking at as part of the review of the ferry plan is to look at what other ferries we might have to look at replacing in the years ahead and how that will then fit into our programme of procurement work. Cabinet Secretary, as you know, we write to you extensively about this, and we look forward to a detailed response post 12 December, which I know you will be looking forward to producing. The next question is from Gail Ross. Cabinet Secretary, the Cycling Action Plan for Scotland published in January 2017 aimed for 10 per cent of everyday journeys to be made by bike by 2020, but there has only been a slight increase from 2.3 per cent in 2010 to 3.7 per cent in 2017. There are also variations from region to region. I think that 0.4 per cent is sterling up to 9.8 per cent in Edinburgh. Do you believe that this target is going to be reached and what are you doing to get us there? I think that it is going to be a challenge to reach the target now. A couple of key issues around increasing the number of people who are choosing to cycle. One is education and two is infrastructure. Doubling the active travel budget up to £80 million in the last year has allowed us to put additional investment into supporting infrastructure improvements, which I think can help to encourage people to engage more in active travel options, including that of cycling. Greater education provision. I have been very clear with my officials given the regional variations that you have mentioned. I am also conscious that there can be social variations that we are reaching into in our more deprived communities to ensure that they do not lose out on the opportunity to take an active travel option, including that of cycling. I want to look at how we can help to support planning around social housing provision that helps to deliver greater cycling infrastructure as part of its planning and design as it goes forward. We are hardwining it into our thinking and our planning when we are developing those types of programmes. We have been having discussions with the counterparts on the planning side within the Scottish Government on how that can help to be embedded into designs in the future. It is worth recording that we are seeing an increase in the number of people who are choosing to cycle for short distances, so that last couple of miles is on the increase. Having said that, it is around 4 per cent. It is the highest that has ever been, but it is still a way off what we want it to actually be. The summary would say that it is going to be challenging to reach that target, to be perfectly frank, but we have a number of things in the stream that can help to support us in continuing to move in the right direction. A significant increase in the active travel budget is one of the key factors that can help to deliver the infrastructure, which I think will be one of the most important elements to helping to support people to make a more active travel option. I was going to mention the deprivation issue, which I know featured quite heavily in the second and last edition of the Holyrood magazine, which I was quite interested to read and also your take on that. What about rural areas? Obviously, it can be very difficult, especially in the wintertime, to undertake any kind of long journey on a bicycle. What infrastructure can you provide in more rural areas, as opposed to the urban areas? It is a challenge. I do not know whether it would be heated gloves. There are lots of things that ministers can have an influence on, but the weather is not one of them. I know that as a transport secretary. For example, one of the things that I have introduced in Dundee is that the train station is the new cycling hub that I have created there, which is a heated facility for storing bikes and so on. I think that people can also store some of their kit possibly as well, which allows people to make that choice, even though the weather might not be that great. The following shot of tunnels for cyclists to use to keep them out of the elements is looking at endpoints of the locations where we could potentially create infrastructure that might make it more attractive for people to cycle. Knowing that, at the other end, you have got somewhere where you can dry your bike and you can dry your kit, some of that might be about employers providing those facilities as well to encourage their staff to be able to make those options. Beyond that, there will always be a challenge for anybody to cycle the elements very often and get the better of you one way or the other. If we could just move on to the next one. I am going to ask you a question on the letter that you wrote to the committee on the national transport strategy. It was to be out for consultation in early 2019 with a publication in summer 2019. What does officials have advised that those timescales are under review mean, except that you have kicked it into the long grass? No, it has not been kicked into the long grass because the strategy will be published by the end of next year. The reality is that we are facing significant challenges within Transport Scotland around resource management to meet some of our planning for Brexit, which has allowed us to look at reassigning staff into our unit. It is planning for the potential implications that Brexit could have, which means that we do not have the same resource to be able to deploy to some of the other areas of work that we would wish to move on with. That has resulted in us having to look at delaying some of the work that we would take forward over the national transport strategy. However, the intention is that the national transport strategy will be published by the end of next year. It should be said that there is already work on going around the NTS. We have already had engagement with a whole range of different stakeholders and organisations who have an interest in what the future shape of their transport strategy should be, because that will be for the next 20 to 30 years looking ahead. We intend to have a draft published in the spring of next year, which will allow for greater engagement with the completed strategy at the end of the year. Is reviewing it larger than the basis of having to look at reallocating staff to deal with Brexit issues? I am always nervous about seasons and when a season actually starts and ends because it seems to stretch itself. Could you give me a month when you think that the consultation will start on the national transport strategy? When the consultation will start, I would hope that we will be in a position by the end of me next year to be in a position where that can happen. Maureen Watt is the next question. Yes, cabinet secretary. We have been discussing the transport bill. We have been trying to reconcile the fact that bus patronage is continuing to decline, as it has been for decades. However, if we are going to meet our climate change targets and decarbonisation, we have to increase active travel and travel by public transport. How do you reconcile all that in order that we meet our climate change targets? Clearly transport is a big contributor to overall climate change figures. Active travel, by doubling the active travel budget, is a key part of which is to help to deliver more infrastructure, more programmes to encourage people to take active travel options and to look at how we can design some of our public realm in a way that encourages people to take an active travel option. Alongside that, the work that we are doing around decarbonisation, for example, setting our target for no longer people to find themselves in a position where they have to purchase a diesel or a petrol vehicle by 2032, which is eight years ahead of the UK Government targetness, to try to look at reducing the level of vehicles that contribute to our climate change challenge. Alongside the introduction of low-emission zones in our four big cities, to look at how we can improve air quality in those areas and to encourage people to look at more active travel options, but also greener travel when they are choosing to travel, whether it be electric vehicles or hybrid vehicles or low-emission vehicles. There is no single solution. It is a multitude of different things that we need to take forward from the active travel element to investing in public transport, to support people when making use of that and to help to support the transition to low-carbon vehicles and the introduction of low-emission zones and how that will help to support people in making more active travel choices and improve vehicles, which will cause less pollution. One of the things that we have learned is that bus operators say that people will not go on the bus because they can get stuck in traffic like everyone else. Is there anything that you can do to help local authorities to introduce more bus lanes, for example? We had some of this discussion when I was here giving evidence on the transport bill. Part of the success of the introduction of low-emission zones will be around other actions that local authorities can take to help to give greater bus prioritisation. I heard that the average speed of a busking through somewhere like Glasgow is 3mph, so if you can get that up to 6mph, you can increase the journey time much better or decrease the journey time for passengers and give it much greater reliability. The PILs are there for councils to take forward bus prioritisation and the introduction of low-emission zones is one of the measures that can help to support that and help to add to that, because greater reliability around the time that it will be taken and journeys is one of the key things that can help to encourage people to choose to use the bus. I will bring in John, because I am conscious that I should have brought you in earlier. Sorry, John. That is okay, thank you, convener. We are told in our papers here, cabinet secretary, that the national transport Scotland is a transport strategy as the Scottish Government's long-term vision. I would like to quote from Transport Scotland's recently published Transport Forecasts, because it is quite a bleak vision. Just half a dozen statistics, if I may, and an increase—this is on the baseline of 2014—by 2037, an increase of 25 per cent in person trips by car, 44 per cent increase in goods vehicle trips, 37 per cent increase in vehicle miles, and then, no surprise, that increases journey times, it will add to congestion, and the very damning prediction that is continuing to decline in urban bus passengers of 7 per cent. What feature is the trying to get finances dealing with these individually? The idea that just by changing the fuel itself is going to be sufficient and having low emissions zone is going to be sufficient, that is not going to tackle the issues of congestion that Morian alluded to there. Similarly, more goods being conveyed by road, is it not time to change the approach? The answer that I repeatedly get when I raise the issue of the carriage of freight by rail, that this is a commercial private sector matter not to do with the Government, surely is absolutely essential. If we have that damning figure, a 44 per cent increase in goods vehicles trips, then we should be looking at better ways of conveying that. In terms of freight, it is not just a matter that is a commercial decision. In Scottish Government, we provide funding to help to support freight programmes. For example, the work that has been carried out in Blackford and just outside Gumblain will allow us to get a freight link into, I am just giving it a practical example, a freight link into Highland Spring, which will have a massive impact. The number of vehicles that they use for carrying their products to market, we are putting investment into that to help to facilitate it. I do not want you to think that I am of the view that it is purely a commercial view. No, the Government has got a role to play in helping to support and promote it, and that is a practical example of that happening. There is also the issue about companies making the choice to use freight on rail rather than by road. That might be a commercial decision, but it is a commercial decision that can be heavily influenced by Government. For instance, Government should not be providing money significant sums of money to, for instance, an industrial venture that is beside a rail track and does not make it a condition that at least there is consideration of carriage of goods by rail. That is a fair point that you raise, but there is always a need as well for commercial operators and companies to choose to want to look at utilising rail freight for the distribution of their goods. For example, when we had the whisky train a number of years ago, I remember reading a report on that, which was heavily supported by Government at the time, the challenge was actually getting the companies to make use of it as opposed to using road as well. The challenges that we had, for example, in using the ferry link into Ebrugge, the challenge was getting road users to move into using the sea link, as opposed to travelling down through England to the ports in the south-east of England to cross into mainland Europe. There are challenges around that, but I do not, for a minute, want you to think that we do not have an interest in trying to encourage greater use of rail freight. We are specifically taking forward some action to try and help to support and encourage more of that. Prestwick airport and taxpayers' money Over the last five financial years, the Scottish Government has loaned Prestwick airport £40 million. The figures that we have for operating profit and loss accounts for the last nine years of the company show annual losses each and every year and operating losses cumulative loss of £57 million. My question is whether you must have looked at this and thought when are we ever going to get our taxpayers' money back? Have you any idea? As it stands just now, Prestwick airport, which is a major piece of national infrastructure, is extremely important to the Ayrshire economy, given the businesses that are associated with Prestwick airport. It is in the region of about £38.5 million from the Scottish Government today. It is able to draw down in this financial year just under £8 million for its continuing work. I recently met the chief executive and the chair of Prestwick airport, who have assured me that they are pursuing every possible avenue to reduce their cost base and to increase their revenue. They also engage with interested parties who may have an interest in taking over Prestwick as a commercial concern. It is a very challenging environment in the aviation sector, with overcapacity. The recent impact on fuel prices has had on an airline like Flybee. It will remain very challenging to get more passenger flights in there. However, the wider industries that are supported by Prestwick are extremely important to the Ayrshire economy, which is why the Scottish Government stepped in at the time to take on ownership of it. What we will continue to do is to see where there are private sector interested parties in taking on responsibility or to take over responsibility for Prestwick going forward. They have a cost to the taxpayer, but I also recognise the value that it has to the local economy, which cannot be underestimated. We are giving another loan to the company—this is financial year, are we? It is a loan that is available to them to draw down up to about £7.9 million. From the discussions that I have had with the chair and the chief executive, in this financial year, they feel that they have made more progress in reducing their cost base and also increasing their revenue into the business. If you look at the last nine years' operating losses, they are very similar. The last year, if we have figures, is £6.4 million, previous year £6.5 million, previous year £6 million, previous year £5 million. Right back to 2008, £5 million. It is pretty standard stuff, and there does not seem going on the past record much prospect of the Scottish taxpayer ever getting their money back. Are you confident that we will actually get any money back? Well, keep in mind that those loans are provided on the basis of their commercial loans. They are at commercial rates as well. Any party that was coming in to look at taking ownership of or to purchase press week, they would all feature as part of any negotiations, given that those are cost loans that are linked to press week directly itself. When you ask me directly a question and we are going to get that money back, I wish I could give you a very clear answer on it, but I cannot at the present time because it is dependent upon whether there is another party that wants to come in and take ownership of press week, and it would then be dependent upon what was in those negotiations going forward. I just want to make the point that the reason that the Government has stepped in and makes those loans available to press week is because of the critical nature that the airport has to the wider industry that is supported by press week airport. In the two and a half years that have been on this committee looking at this issue, those are the responses from previous ministers and in fact from the company, and yet we do not see any evidence of any new operators at the airport. There is one schedule airline, Ryanair, two schedule freight customers, Cargo Lux and Air France. Is there any real prospect of getting any more people to use this airport? I think that in aviation sector, particularly passenger side schedule flights will remain very challenging. We can see with Ryanair moving from a significant number of flights from Glasgow to Edinburgh just the way the change is going on, so that is always going to be challenging. There are bespoke services that press week provides, which is unique not just in Scotland but in the UK and to some extent in Europe, which is why it still attracts some of the services that it does provide, particularly around unusual freight. I am told that the abnormal types of freight that they can cope with, which other airports do not deal with because of the equipment infrastructure that they have. Of course, they operate at arm's length to the Government for state aid purposes, but I got a clear impression from the chair and chief executive last week that they are in a position where they believe that they are making progress on reducing their cost base and increasing their revenue by trying to pursue some of the bespoke services that they offer more effectively. They hope to make better progress with that in this financial year. On the issue of another buyer or operator, you appreciate that that is not going to be in the public domain for commercially sensitive reasons, but the opportunity remains there for other operators to come in and look at purchasing the airport if they wish to do so. There are a list of questions. To each person who wants to ask a question, you will get to ask one question, and I would really ask the Cabinet Secretary to keep your answers as brief as possible. Starting off, Colin. Thanks, convener. Last week, the First Minister said that all Government agencies should pay the living wage. Given that the press with the airport is owned by the Government, do you think that it is acceptable that they still do not pay the living wage? In what representations have you made to them to ensure that they do start to pay the living wage? Which one do you want me to answer then? Can I ask you, cabinet secretary, to answer them both briefly, but can I say to other members that if you ask two questions, I will pick one for them to answer? Yes, I do, and I understand from press week that they are making progress to ensure that their employees are covered by the living wage. It was suggested that one option is that if the passengers are losing a lot of money, but the freight and other things are making money, we could drop the passengers altogether and carry on as a freight-only or special airport. Is that an option? Not at the present moment. The freight is a specialist service that they offer, but to lose their passenger services at the present time would be a loss of revenue for them, which they would not want to undertake. I do not think that that is set out in the business plan that has been set forward by press week, which is a five-year business plan that is already working on. I am not convinced that the passenger business is actually profit making, but maybe we can check that in terms of the numbers. Just in terms of the potential sale, do you think that coming with a price tag of all that historic debt that the Government has loaned to the business is making it an appealing sale to potential private investors? At which point—and it is a single question—has the Government considered drawing a line under those loans, or is it still seeking to get back as much as it can? You seem to be keen for me to give a lot of money to private sector companies. I am not going to get into a negotiation around what would be on the table or off the table with any particular dealer for press week. It would be completely inappropriate. I have a very simple question. Based on the fact that £40 million has been learned to press week airport, can you confirm whether evaluation of the assets of press week airport by an independent value has given a value in excess of £40 million? Is there details of that? That is part of the work that is going on at the present time. Sorry. So it is part of the work that is being carried out at the present time? So when it is available, will you be able to answer that question? Yes. So that was two questions. I chastise myself for that. Stuart Stevenson, the last question. Thank you very much. We have touched on greenhouse gas emissions. We are seeing it going up in transport. I will maybe just ask a very tightly focused question with the transfer of many train services from diesel to electricity. Clearly, that is an opportunity to reduce emissions. Given that Network Rail is the biggest purchaser of electricity anywhere in the UK, I believe, would it be possible to persuade them to transfer their electricity contract to a renewable electricity-only contract and, thus, reduce the figures in what is the significant area of rising carbon emissions? That is a very reasonable point. I know that ScotRail has made significant progress in reducing its own carbon footprint, if you want to put it that way. If Network Rail could make a contribution to that as well, that would be the right thing to do. I thank you, cabinet secretary. That has been a long session. I would normally suspend the meeting to allow you to depart, but I am going to ask if you could depart quietly so that I can continue the meeting so that I do not lose committee members at the same time. I will move on to agenda item 4, which is the European Union Withdrawal Act notifications. There are, in fact, seven in relation to UK SIs as detailed on the agenda. Those cover genetically modified organisms, common agricultural policy and animal health. All the instruments are being laid in the UK Parliament in relation to the European Union Withdrawal Act. All seven have been categorised by the Scottish Government in general as category A, making minor or technical amendments. Two of the proposed SIs on common agricultural policy could also be considered as category B, to the extent that the transition from an EU to a UK framework would be a major significant development. I would ask if any members of the committee have any comments on this. I am going to go with John First and Lenster. I have no issue, but I will be supporting. I would particularly like to comment the genetic modification SIVMA and the question about whether the laws that it stands go far enough to protect Scotland from GM crops and products. The basis for that is the statement by Michael Gove. If I quote a headline from the times recently, Michael Gove pledges genetic food revolution. A suggestion that Mr Gove may plan to overrule an EU high court decision from the summer, which classed gene editing as genetic modification. We could end up in a position where we normally have a ban or very tight controls on GM, but the definition of what GM is is very narrow and may mean that, essentially, GM procedures are allowed. Is there a joint process for deciding the definition of GM and GM processes in the future, or understanding whether that would be a matter that would be simply left to the UK Government to define? That would be uncertain if it were. Thank you for that. Just very briefly, convener, you point out that some of the measures might be category B, and I just ask that the Government do notify us if in their view it has moved from A to B, so that we can give any necessary further consideration. I think that that is a good point. I do not think that they will be viewed as that in due course, but I think that it would be from what I have heard unless anyone else has anyone else got anything to add. From what I have heard, providing we add the questions that Mr Finney has asked to the questions, I think that we should, probably as a committee, confirm its content for the consent to the UKSI's referred to the notifications and note or request a response from the Scottish Government on the wider policy matters that have been indicated in the papers and the point that John Youve raised. Are we agreed to do that? That is agreed, and that concludes this part of the meeting. We will now move briefly into private session.