'Hell on wheels': The bitter battle to complete Edinburgh's tram line

Politics were at play throughout, both at Holyrood, with Alex Salmond’s minority government failing in its pledge to cancel the tram project, and at a local level, with a group of SNP councillors opposing the scheme in coalition with those attempting to push forward the plans.

The Edinburgh Tram Inquiry, led by Lord Hardie, has now reported back its findings on what went wrong, more than nine years after the project opened to the public – with the complete line from Edinburgh Airport to Newhaven having cost more than £1 billion when it opened in May this year.

Lord Hardie (Image: Edinburgh Tram Inquiry)

Lord Hardie pins a lot of the blame on Transport Initiative Edinburgh (Tie), set up by the council to deliver big transport projects, as well as the city council itself and Scottish Government ministers, Jenny Dawe, who led the city council through the upheaval, told the Edinburgh Tram Inquiry that ahead of the 2007 local council elections, “there was almost unanimous support” for the project.

Her LibDems group formed an administration with the SNP, but power and influence and city chambers rested on a knife-edge.

Read more: Edinburgh tram inquiry reveals 'litany of avoidable failures'

Also in 2007, the SNP formed a minority government at Holyrood, having pledged to cancel the project in the party’s manifesto, but the government’s bid to do so, led by then-finance secretary John Swinney, was defeated by MSPs.

As things stood, Transport Scotland was to put forward a maximum of £500 million for the project, while the remaining £45 million would be found by the council.

Ms Dawe admitted that in 2007, there was not “any planning or conception” that costs could exceed the original £545 million budget – but Lord Hardie revealed in his conclusions earlier this week that the total cost of a truncated tram line was estimated to be around £835.7 million.

It would later emerge that the contract Tie had drawn up for a consortium of companies including Bilfinger Berger and Siemens was not a “fixed-price” arrangement, as was understood by councillors.

Councillors were also not given the full picture of the risk involved in the contract, while design work had not been completed before the construction had begun.

The clash between Tie and the companies delivering the project blew up in 2009 with the so-called “Princes Street dispute” which left Edinburgh’s premier shopping street a very visible wreck.

Tram works on Princes Street (Image: PA)

It even resulted in Mr Swinney putting pressure on Tie chairman David Mackay, telling him to “get it sorted”.

Councillors were told that the consortium “was refusing to start work on Princes Street” and “was proving very difficult to work with”.

But Richard Walker, the former manager of the consortium, told Ms Dawe that “they were legitimately due money and Tie was refusing to pay.”

The Princes Street dispute was not the only disagreement between Tie and the consortium, but councillors were kept in the dark due to alleged confidentiality as to how resolutions were being ruled in favour of.

Ms Dawe said: “Hindsight is a wonderful thing. It eventually became apparent that things were not going the way that Tie was portraying and that they were being over-optimistic about what was happening.

“Behind the scenes, there were emails going back-and-forth that made it clear that some people had found that the sums were not fully adding up.”

She added: “The contractor not getting on with the work was sending out the wrong message to the city – it was experiencing all this disruption and nothing was happening.

“It got worse and worse, and for months the city was a mass of traffic cones, barriers and holes with exposed pipes in them. It was a very bad situation.”

The utilities works, moving cables and other items out of the path of the proposed tram line, threw up a number of unexpected and expensive scenarios, including the discovery of underground chambers and more than 300 skeletons and wooden coffins were revealed in one location.

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It had initially been hoped that contributions from developers would help plug the initial fund gap, but Edinburgh did not escape the global financial crisis, flattening the construction industry.

In January 2010, it was confirmed that the consortium was due extra money due to the flawed contract, despite assurances that had been given by the bosses of Tie.

In March of that year, “Operation Pitchfork” was touted by council officials, with three options set out – terminating the contracts, truncating the project or attempting to resolve the dispute.

The Edinburgh tram route

The costs of Edinburgh’s troubled tram project at this point was estimated to be around £650 million.

But Tie chief executive Richard Jeffrey was still insisting that "there is disagreement over what is or is not included in the original 'fixed price' contract"; and claimed "the contractor is refusing to get on with the works in an attempt to coerce us into agreeing to change the form of contract," telling councillors that he would not allow the city to be "held to ransom".

In October 2010, it emerged that of nine formal adjudication decisions, six had gone in favour of the contractors, two had been spilt decisions and only one had been found in favour of Tie.

Ms Dawe said that by the end of the year she was “beginning to lose confidence” in Tie and “felt that Tie were a large part of the problem in the standoff”.

Things went from bad to worse for Tie when Mr Mackay resigned as chairman of the company, labelling the Princes Street standoff as “hell on wheels” and claiming that Bilfinger Berger was a “delinquent” contractor.

Formal mediation would be needed, taking place at Mar Hall in Glasgow in March 2011 – with plans drawn up for the line to be built from the airport to St Andrew’s Square.

Read more: Edinburgh Tram Inquiry: John Swinney accused of meddling in crisis

By June 2011, more than £400 million had been spent on the disaster-hit project, all but ruling out cancelling it entirely at a cost of around £160 million.

Council showdown to shortern tram project

A business case was drawn up for the shortened route from Edinburgh Airport, now ending at York Place instead of St Andrew’s Square at a cost of £776 million – meaning extra funding of £231 million was needed by the council, with a borrowing strategy set out.

But the plan needed the backing of councillors and shockingly, the city council voted instead to terminate the tram at Haymarket instead of York Place after SNP members abstained on Labour’s proposal.

Ending Edinburgh’s tram line at Haymarket would mean the project would permanently make a loss due to it not running through the city centre, while there was relatively little difference in cost to truncate the project at Haymarket instead of York Place.

The project still required around £72 million from Transport Scotland which threatened to withhold the funds in light of the decision to end the line at Haymarket.

So with a crunch vote to reverse the Haymarket decision, SNP councillors backed their coalition partners – leading to a settlement agreement between the city council and the contractors, with Edinburgh’s tram line to be built from the airport to York Place.

Read more: Edinburgh's tram extension success 'shows toxic legacy is history'

With the agreement, Tie was dropped in favour of direct council involvement and Transport Scotland was drafted in to oversee the completion of the project.

The truncated tram line opened to passengers on May 31, 2014.

Hardie pours blame on those involved

In his inquiry report, Lord Hardie had widespread criticism for Tie, labelling several of its key players as unreliable witnesses.

Tie was highlighted by Lord Hardie for a “failure to achieve the price certainty” of the council and to “transfer the risk” to the consortium.

The council-owned company has also been blasted for failing “to work collaboratively” with the council and contractors and failing to “report accurately on progress”.

Tie was also responsible for the cost of the project being “underestimated”.

The city council also came under fire from Lord Hardie, including for the governance of the project and a failure to monitor progress.

The local authority’s head of legal services, Nick Smith has also been singled out for criticism, with Lord Hardie suggesting he could have pursued “a deliberate policy of withholding information” from councillors, having mentioned “a restricted info flow” in an email in 2010.

Scottish ministers, particularly Mr Swinney, have also faced criticism.

John Swinney (Image: PA)

Mr Swinney’s “integrity” has been called into question by Lord Hardie, while he was blasted for the withdrawal of Transport Scotland expertise from the project in 2007 and meddling in the stalemate from behind the scenes.

Completing the line to Newhaven

For many years after the tram opened, the idea of completing the line to Newhaven seemed unthinkable.

But a robust business case consisting of borrowing, paid back by future ticket revenues along the densely populated Leith route, has made a success of the trams to Newhaven project, surviving the pandemic largely unscathed.

Another key lesson learned was to build in 6% of the costs as extra insurance to counter optimism bias into the business case, a recommendation laid out by Lord Hardie this week for future projects.

Council leader Cammy Day, said that towards the end of the original doomed project, the city council had “already introduced a raft of changes to project management and government”, which he said “proved crucial to the successful implementation” of the Newhaven project.

He added: “In developing the trams to Newhaven route, clear, timely communication has been key, both between project managers, contractors and elected members but also residents, businesses and other stakeholders.

Cammy Day (Image: PA)

“We’ve drawn on the experience of skilled project managers throughout, with a particular focus on securing independent oversight and expert advice at every stage.

“The establishment of a tram board incorporating independent members, for example, has allowed effective scrutiny, while taking on board the advice of industry experts helped us to take full account of the risks involved.”

Mr Day added: “We’re already looking at options for expanding the network further – to the north and south of the city, and potentially also to neighbouring authorities – and it’s encouraging to see this is very much part of the Scottish Government’s plans too.”