Glasgow School of Art: Insurance claim fuels Mack rebuild 'inertia'

The GSA refer to any insurance income received from the fire in its official financial records as a "contingent asset" meaning that it is only a potential financial gain.

It can be revealed that financial records show that after the fire May 2014, the GSA decided that it would not reduce the value of the 1909 architectural masterpiece in its official records despite the fire.

In 2012, before the first fire, the GSA's land and buildings were valued at £8.138m. Before the second fire in 2018, the value was put at the same, £8.138m. After the 2018 fire, however, the valuation had dropped to £1.561m.

Some have raised questions on the logic for the valuations in the wake of what is a six-year insurance complication.

According to financial papers, after the 2014 fire, an examination of the Mack valued it at "considerably in excess of the depreciated figure used in these accounts... accordingly, it was deemed that it was satisfactory not to impair the Mack".

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However, after the 2018 fire, the extent of the damage meant that the value of the building was "fully impaired", meaning that there was a permanent reduction in its value. It left only the value of the land on which the Mack stood.

The Herald has learnt that at the time of the 2018 fire the Mack was covered by what the GSA called an owner-controlled insurance programme, designed to co-ordinate general liability coverage for all parties working its rebuild.

That comprised cover for the contract works and the pre-existing structure of what is one of Scotland's most precious landmarks.

But according to a December financial analysis of the state of the GSA, the value and method of the receipt of insurance sums relating to the Mack have "still to be agreed" so represented a "contingent asset".

A three-year-old detailed business case examination of the project revealed that while a variety of funding sources may be available to deliver the capital project and support operation of the new building, its affordability was "dependent" on the outcome of the insurance claim.

Penny Macbeth, the GSA director, said in January last year, that the rebuild had been delayed while GSA awaited the publication of the official Scottish Fire and Rescue Service report into the second fire, which did not determine the cause of the fire. That was published on January 25, 2022.

She said the activities are financed by “ring-fenced funding, legacy insurance and fund-raising monies". Muriel Gray, the first female chair of the board of governors at the GSA, said three months after the latest blaze that the school hoped to use minimal amounts of public money for the project and rely on funds from its insurance cover and a private fundraising drive.

At that time she said that people argued that a rebuild would take "anywhere between four and seven years" but that it will "depend on the insurance money and getting the right people in place to do it, building regulations, all the standard technical and financial stuff".

But the later detailed business case in 2021 expected donations and pledges to play a part in the fund-raising believing there "remains significant philantropic goodwill".

A report of a governors meeting from June, last year seen by The Herald said that more detailed discussion on the options available to the GSA would be useful once the outcome of the insurance claim was confirmed.

The document said members also reflected on the need to "exercise caution" in regard to how all available funding should be deployed in respect of the re-instatement of the Mack.

The December financial analysis of the state of the GSA seen by The Herald shows that there has already been remedial work to the Bourdon Building and the Assembly Building and that work had begun on the reinstatement of the Reid Building. All suffered "material consequential damage" through the 2018 fire.

It is understood that a settlement had been agreed in respect of the fire damage at those buildings and that funds had either already been spent or were committed.

Glasgow School of Art fires: read the series in full here

It said that a start had been made to the "reinstatement of the internal structure" and that in the coming year it planned to "progress the rebuilding of the Mackintosh Building".

It said: "The GSA recognises the challenge of funding the reinstatement of the Mackintosh Building. Our mitigation of that risk focuses on both the careful consideration of the management and phasing of the reinstatement project and the systematic management of the associated financial and cash flow issues - including the complex insurance claim, application of restricted funds held or pledged to support the project and progressing, if and when appropriate, the potential for philanthropic support."

Professor Alan Dunlop, one of Scotland's leading architects who once put his hat in the ring to become the next chair of the GSA and is a stakeholder consultee for the project said questions should be asked about the land and buildings valuations.

"The Mack has never been considered a 'normal' building, indeed many regard it as priceless. From a pragmatic asset valuation perspective and for insurance purposes I would want to know how the figures were determined. I would also be interested in knowing what kind of negotiations took place and with whom.

"I find it odd that insurers would have accepted such a figure given the risk involved after the first fire and would be interested to see how much is being paid out to reinstate the building given the debate about rebuilding 'brick by brick.'

"All in all there are big questions about governance, risk management and transparency".

On Monday, The Herald revealed the level of concern over 19 months of 'inertia' over the Mack that has been described as a "national scandal" which would add millions to its estimated £100m+ cost.

A June 2018 fire destroyed the iconic Category A-listed Glasgow School of Art building as it neared the end of a multi-million pound restoration project following an earlier blaze in May 2014.

But attempts at the £100m plus reinstatement of the masterpiece, originally designed by renowned Scots architect Charles Rennie Mackintosh have stalled leaving serious questions over whether its resurrection will ever happen.

Also believed to have put a spanner in the works is the botched process for procuring architects to design the project.

The search to lead the project was canned in March, last year in advance of a reset that has never happened.

The contract was due to start in January 2023, five months after the design team was due to be in place according to the design team was supposed to have been in place according to the original 2021 business case itinerary.

Architects John McAslan + Partners were the original top scorers in the bid to oversee the rebuild. But it was then awarded to another firm, understood to be Hawkins\Brown after a recalculation.

The reset came after the school received a pre-action letter from one of the other bidders challenging the final outcome was received on February 3, 2023. The school was advised to expect a summons three days later.

The school blamed a "technical error in the scoring matrix used in the procurement process" for the issue.

It also said a new invitation would be issued "in due course" following a "thorough" review and that it remained committed to its original restoration timetable. No new invitation has yet been issued over a year later.

Questions were raised by one of four shortlisted architect firms about how the bid had been scored after the original award.

An architect was needed to pilot a "faithful reconstruction" of the grade A listed building which was almost totally destroyed.

The Glasgow School of Art insisted that the decision was "appropriate and fair" and that it was working with shortlisted firms as part of a review of the process.

But a partly redacted email in which the parties’ names were blocked out, seen by The Herald, revealed that the unsuccessful team asked: "We were disappointed to have lost because we put a huge amount of work into our bid and felt that [we] were uniquely placed to restore this fine building.

"Our firm has done bids for many years, but we have never lost on such a narrow margin."

It went on: "This has resulted in the wrong outcome being announced to bidders."

Later an internal GSA email confirmed errors were found with the scoring process and that "an issue [had] arisen with the outcome of the Architect Led Team tender evaluation".

GSA had contacted all the shortlisted practices to say it had withdrawn its initial notification letter, which said John McAslan + Partners had topped the scoring.

The message read: "[Errors identified within the scoring matrix have] resulted in inaccurate outturn positions on both the technical and price evaluation."

After details of the procurement issues emerged, the art school said the reset decision "will not impact on the timing or funding of advance works to the Mackintosh Building announced in January 2023".

The GSA said it wanted to bring on board an external procurement consultant to advise on the new process and to support them "practically and procedurally in delivering a demonstrably open, fair and compliant process".

It further emerged that two further architect teams that had lost out in the process in November 2022 warned of potential legal proceedings in connection with the process adopted.

One questioned the formula for scoring and warned that if clarification on how it was carried out was not provided within 24 hours they would be "forced to consider issuing more formal proceedings to challenge the outcome of this tender".

After the pre-action letter was received, the GSA told those who had taken part in the process that it had decided to "close this procurement process" and that "no award will be made under it".

A letter from the GSA director of finance Andrew Menzies said: "The school will take a little time to consider how it will now procure those services."

A letter from the GSA director of finance Andrew Menzies told the original top scorers in January, last year, that the bringing of court proceedings against the GSA during what it described as a standstill period in the contract process would "automatically continue the prohibition on entering into the contract until the court proceedings are determined, discontinued or disposed of, or the court, by interim order, bring to an end the prohibition..."

By February 16, last year letters went out from the GSA that it intended to run a new procurement for an architect-led design team and that it planned to start that process "in the coming months".

The GSA said there is no outstanding legal action in respect of the procurement process.

The GSA say that they "understand the sense of concern from many people" over progress over the reinstatement of the Mack but that they remain committed to the project.