Chapter 53: Planning the refurbishment

Initial design team meeting: April 2012

¶53.1 The Grenfell Tower refurbishment began life as an independent project on 19 April 2012 with an initial design team meeting attended by Studio E, Max Fordham and Leadbitter.³⁵¹³⁵¹ {ART00000013}. Artelia was also present as a potential consultant for the TMO, having acted as employer's agent and quantity surveyor for the KALC project.³⁵²³⁵² Cash {ART00006544/5-6} pages 5-6, paragraph 16. Simon Cash was designated project director for the refurbishment, the most senior position with overall responsibility for the delivery of Artelia's services.³⁵³³⁵³ Cash {Day47/210:21-23}. The purpose of the meeting was to introduce the project, to set out in broad terms its scope and objectives and to discuss costs and funding. The TMO indicated that it would request a budget of £6m from RBKC for the full cost of the works.³⁵⁴³⁵⁴ {ART00000013/4} item 5.0.

¶53.2 On 2 May 2012 Simon Cash wrote to Mark Anderson of the TMO offering to perform quantity surveying, employer's agent and CDM co-ordinator (CDM-C) services for the refurbishment.³⁵⁵³⁵⁵ {ART00000301}. This letter attached documents including: the RICS standard form of Quantity Surveyor Services; the RICS standard from of Employer's Agent Services and a printed list of services stated to be a summary of the duties of a CDM-C under the CDM Regulations 2007. The letter appended RICS standard forms of contract for employer's agent and quantity surveying services³⁵⁶³⁵⁶ {ART00000301/7}; {ART00000301/17}. These documents listed specific functions which Artelia selected by marking tick boxes. and a list of CDM-C services.³⁵⁷³⁵⁷ {ART00000301/24} stated to be a summary of the statutory duties of CDM-C.

¶53.3 On 21 August 2012 Mark Anderson confirmed that the TMO wished to appoint Artelia to carry out those functions on the terms outlined in its proposal of 2 May 2012 under the standard RICS standard terms. Although the parties did not sign a contract at that time,³⁵⁸³⁵⁸ Cash {Day47/213:24}-{Day47/214:2}. both appear to have acted on the basis that they were contractually bound on the terms set out in Artelia's proposal. Eventually, on 23 June 2014, Artelia and the TMO executed a formal deed of appointment incorporating the RICS standard terms.³⁵⁹³⁵⁹ {ART00005742}. The Schedule of Services stated that Artelia would perform the roles of quantity surveyor, employer's agent and CDM co-ordinator.³⁶⁰³⁶⁰ {ART00005742/23}.

Artelia's cost budget estimates in 2012

¶53.4 A second design team meeting was held on 24 May 2012.³⁶¹³⁶¹ {ART00000038}. At that meeting Chweechen Lim, a quantity surveyor employed by Artelia, was instructed to prepare a cost budget estimate for the project.

¶53.5 Between June and December 2012 Chweechen Lim prepared several cost budgets for the TMO under the supervision of Simon Cash.³⁶²³⁶² Lim {ART00005817/5} page 5, paragraph 15; Cash {Day48/2:5-6}. The estimates were based on information provided by the primary designers of the project, Studio E, Curtins Consulting and Max Fordham³⁶³³⁶³ Cash {Day48/130:24}-{Day48/131:1}. and ranged from £7,803,000 to £9,645,000.

¶53.6 The first estimate in 2012, which costed the project at £7,803,000, was presented at the third design team meeting on 7 June 2012.³⁶⁴³⁶⁴ {ART00000079}. At that meeting Mark Anderson, then interim Director of Asset Investment and Engineering at the TMO, indicated that he was content with the projected cost. He confirmed that RBKC's funding was £6 million, but that he expected further funds to be made available from the TMO's capital programme.³⁶⁵³⁶⁵ {ART00000079/1} The TMO Capital Programme was an RBKC-funded investment programme for works to improve residences.

¶53.7 During 2012 the estimated total cost of the project changed several times, increasing by December 2012 to £9,645,000. The changes were attributable to a number of factors, including changes to the scope of the works and corrections of errors in measurements.

¶53.8 After June 2012, none of Artelia's estimates were within the budget available to the TMO, a fact not lost on those involved in the project. In mid-September 2012, after Ms Lim had costed the project at £9,280,000,³⁶⁶³⁶⁶ In Estimate 3 Rev 1 {ART00005913}. both Artelia and Studio E told the TMO that either the budget must increase, or savings must be achieved, whether by reducing the scope of the project or through "value engineering".³⁶⁷³⁶⁷ {ART00005879}; {ART00005783}; {ART00006081}. In theory, "value engineering" involves making changes to the design or specification that reduce cost without sacrificing performance,³⁶⁸³⁶⁸ Hyett, Specialist Report {PHYR0000028/13} section 3.3.21 quoting the definition of value engineering in the RIBA Stage Guide 2015. but in our view it is in practice little more than a euphemism for reducing cost, because substituting a cheaper product for a more expensive one or altering the design or scope of the work in a way that reduces cost almost invariably involves a compromise of some kind, whether in content, performance or appearance. Certainly, in the present case the expression was being used by the parties simply to mean changes that would lead to a reduction in cost.

Leadbitter's proposed appointment

¶53.9 At the outset of the Grenfell refurbishment project, and throughout 2012, the TMO had planned to engage Leadbitter Group ("Leadbitter"), the principal contractor for the KALC project, using the IESE ("Improvement and Efficiency in the South East") framework agreement, which was a legitimate alternative to a full procurement exercise.³⁶⁹³⁶⁹ Anderson {Day52/73:13-21}; Anderson {TMO00847334/2} page 2, paragraph 8. Accordingly, representatives of Leadbitter were present at most of the Grenfell project meetings in 2012 and were on the distribution list for the minutes. Leadbitter became involved in some activities, including preparing a programme of works³⁷⁰³⁷⁰ Minutes of meeting 5 {ART00000169}, item: "Programme". and conducting site inspections.³⁷¹³⁷¹ Minutes of meeting 10 {ART00000489}, item: "Contractor". However, retaining Leadbitter was not uncontroversial within the TMO and the minutes of a meeting of the TMO board on 24 May 2012 record that it needed to be persuaded that using Leadbitter was in the TMO's best interests.³⁷²³⁷² {ART00000038/1} item 1.00. Efforts by Mark Anderson to persuade the TMO board to appoint Leadbitter continued until at least November 2012,³⁷³³⁷³ TMO Board meeting minutes, 15 November 2012, {TMO10001766/90-93}. but although it authorised the TMO to enter into a pre-construction agreement with Leadbitter,³⁷⁴³⁷⁴ TMO Board meeting minutes, 15 November 2012 Part B {TMO00883922/2-3} item 2. the TMO failed to do so, probably because RBKC and Leadbitter had been unable to agree a final cost for the KALC project, as explained below.

¶53.10 At the beginning of 2013, RBKC and Leadbitter were negotiating the final account for the KALC project, but they were finding it difficult to reach agreement.³⁷⁵³⁷⁵ Laura Johnson {Day128/116:3-16}. On 3 January 2013, Laura Johnson sent an email to Cliff Thomas of Leadbitter telling him that in view of the continuing failure to agree the final account for KALC, RBKC would no longer be recommending that the TMO appoint Leadbitter on the Grenfell Tower project and would advise it to invite tenders from a list of contractors that did not include Leadbitter.³⁷⁶³⁷⁶ {ART00000637}.

¶53.11 Although Ms Johnson was the senior responsible officer for the KALC project, she was not the senior responsible officer for the Grenfell Tower refurbishment. Nor was anyone else at RBKC, because the refurbishment was a TMO project and RBKC had no power to decide which contractors the TMO should appoint to deliver its projects.³⁷⁷³⁷⁷ Anderson {Day52/28:11-22}. Nevertheless, that did not stop her trying to use Leadbitter's interest in the Grenfell Tower project as a means of putting pressure on it to agree the final account for the KALC project.³⁷⁸³⁷⁸ Laura Johnson {Day128/118:25}-{Day128/119:1-2}. Ms Johnson took the precaution of sending a copy of her email to Mark Anderson of the TMO so that he would see that RBKC, as the TMO's funder, was seeking to apply pressure to Leadbitter in that way. Although Artelia had also received a copy of Ms Johnson's email to Leadbitter, it nonetheless continued to hold discussions with Leadbitter about the cost of the refurbishment because the TMO was Artelia's client and the TMO wanted Artelia to carry on negotiating with Leadbitter.³⁷⁹³⁷⁹ Cash {Day48/152:9-19}.

¶53.12 Despite the advice from Artelia and Studio E to increase the budget or achieve savings, the estimated cost of the project continued to rise. The TMO had wanted to enter into a contract with a principal contractor for the refurbishment works by 8 January 2013³⁸⁰³⁸⁰ As recorded in the minutes of the 22 November 2012 meeting {ART00006750} item 2.2. and therefore by December 2012 there was a pressing need to agree a fixed sum for the project with Leadbitter, which at that time was still expected to be the principal contractor.³⁸¹³⁸¹ {ART00000633/4}.

Discussions between Leadbitter and Artelia: January–April 2013

¶53.13 The IESE framework provided for a two-stage mini-tender procurement process for use by public bodies in the south-east of London. The first stage of the process was the selection of a contractor from eight on the framework list; the second was negotiating with that contractor to agree a price.³⁸²³⁸² Lim {ART00009428/10} page 10, paragraph 27. As Leadbitter had already been selected at the outset of the Grenfell Tower project, the IESE process effectively began with negotiating the contract price.

¶53.14 However, even before discussions had started, Leadbitter indicated that it considered Artelia's cost estimate for the project to be £2 million too low.³⁸³³⁸³ {ART00008469} item 3. In January 2013, one of its quantity surveyors, Mohit Kotecha, estimated the cost at £12.6m.³⁸⁴³⁸⁴ Kotecha {LBI00003938/3} page 3, paragraph 9. Between January and April 2013, Ms Lim and Mr Kotecha exchanged assessments of the cost of the project, commenting on each other's calculations in detail. They also met in person several times.³⁸⁵³⁸⁵ For example: 17 January 2013 {ART00006072/2}; Lim {ART00005817/14} page 14, paragraph 52; and 25 March 2013 {ART00006018}; {ART00006074}. Both Artelia and Leadbitter adjusted their assessments as a result, having taken into account a number of factors, including some value engineering options.³⁸⁶³⁸⁶ {ART00006072}.

¶53.15 Artelia attempted to test its cost assessments by approaching various contractors who had procurement framework agreements with RBKC.³⁸⁷³⁸⁷ {ART00001005}; {ART00009101/18}. At the suggestion of Peter Maddison, Director of Assets and Regeneration at the TMO,³⁸⁸³⁸⁸ Maddison {Day58/178:19}-{Day58/179:1-4}; {RYD00001115}. in April 2013 Artelia also approached Rydon, even though it was not included in any available framework agreements.³⁸⁹³⁸⁹ {ART00008995}; {ART00008434}; {ART00009105}. Although it was not unusual for potential competitors to be asked to provide information for the purpose of checking costs,³⁹⁰³⁹⁰ Lim {ART00009428/17} page 17, paragraph 49. none of the contractors approached for that purpose did so.

¶53.16 Leadbitter's costings drew attention once again to the main difficulty facing the TMO, namely, the inadequacy of its budget. Both Ms Lim and Mr Kotecha, the professional quantity surveyors in the best position to assess the costs, agreed that they exceeded the funds available by a significant margin.³⁹¹³⁹¹ Cloke {MET00070907/5} page 5. Although they worked to understand the differences between their analyses, others in the design team and the TMO tried to find ways to bring the project within budget.³⁹²³⁹² {ART00006129/2}; {ART00005911}.

¶53.17 The cladding was a focal point of the discussions about savings, being described by Bruce Sounes as an obvious target.³⁹³³⁹³ {ART00005911/1-2}. The TMO also asked for information on the savings that could be made, including specifically on cladding.³⁹⁴³⁹⁴ On 27 February 2013 {ART00005807}; 22 March 2013 {ART00006017}. By April 2013, the cladding, together with the crown and the construction of the new windows, was assumed by all involved in the project to be a prime area in which costs could be reduced and it featured prominently in budget discussions from that point onwards.

A new procurement process considered: February 2013–April 2013

¶53.18 Peter Maddison joined the TMO in January 2013 as Director of Assets and Regeneration. Like his predecessors, he was attuned to the relationship between RBKC and the TMO and regarded RBKC effectively as TMO's client.³⁹⁵³⁹⁵ Maddison {Day57/80:19-25}-{Day57/81:12}. He and Laura Johnson had several meetings about the Grenfell Tower refurbishment in the first quarter of 2013.³⁹⁶³⁹⁶ See Maddison's notebook for January – May 2013 {TMO00879771} for example, at page 26 (for 13 February 2013). Ms Johnson accepted that in early 2013 she had discussed the relationship between RBKC and Leadbitter with Mr Maddison and had mentioned the difficulties she was having with Leadbitter on the KALC project.³⁹⁷³⁹⁷ Laura Johnson {Day128/119:21-24}.

¶53.19 By late February 2013, Peter Maddison and Paul Dunkerton, who was working as a freelance project manager for the TMO, had become frustrated with what they perceived to be the slow progress of the negotiations with Leadbitter on the Grenfell Tower project. On 27 February 2013, Mr Dunkerton asked Alun Dawson of Artelia to produce a programme based on running a fresh procurement process for a principal contractor³⁹⁸³⁹⁸ {ART00008989/4}; see also 15 March 2013 {ART00006556/2}. and from about that time work on a new procurement exercise ran in tandem with the attempt to agree a price with Leadbitter for the refurbishment. The TMO Programme Board discussed running a new procurement exercise at a meeting on 25 March 2013.³⁹⁹³⁹⁹ {TMO10038870}. At that meeting Peter Maddison recommended that it should do so but noted that it might be difficult to explain that change of heart to the TMO board, which had been persuaded to use Leadbitter in the interests of efficiency.⁴⁰⁰⁴⁰⁰ {TMO10038870/2}.

¶53.20 As incoming employer's agent from March 2013, Robert Powell took over the task of considering a fresh procurement exercise.⁴⁰¹⁴⁰¹ Powell {ART00008984/11} page 11, paragraph 43. On 10 April 2013 he proposed that Artelia produce a full report, without which he considered that the TMO could find itself in a worse situation.⁴⁰²⁴⁰² {ART00001083}. On 19 April 2013, Mr Dunkerton confirmed the TMO's instruction to Artelia to provide formal advice on how to proceed with the Grenfell Tower project.⁴⁰³⁴⁰³ {ART00001116}. That was exactly a year after the first project team meeting.

Artelia's Status Report: April 2013

¶53.21 Artelia produced a Status Report dated 23 April 2013,⁴⁰⁴⁴⁰⁴ {ART00009101}. the executive summary of which identified a number of factors which had contributed to the slow progress and excessive cost of the scheme. Artelia did not consider re-procurement a viable option and recommended that the TMO should retain Leadbitter as principal contractor.⁴⁰⁵⁴⁰⁵ {ART00009101/18-19}. It warned the TMO that if the project were not stopped and the scope, programme and cost fundamentally reviewed, it would fail.⁴⁰⁶⁴⁰⁶ {ART00009101/25}. It therefore recommended that the scheme in its existing guise be stopped immediately, pending a design team review.⁴⁰⁷⁴⁰⁷ {ART00009101/25}.

¶53.22 The trenchant terms in which Artelia couched its opinion was matched by the strength of feeling of those working on the project. Philip Booth, who became involved in it in April 2013,⁴⁰⁸⁴⁰⁸ Booth {ART00008527/3} page 3, paragraph 12. Philip Booth assumed the role of EA in July 2013 when Robert Powell left Artelia. recalled that the project had been in a state of distress at that time.⁴⁰⁹⁴⁰⁹ Booth {Day49/128:24}-{Day49/129:15}; {Day50/113:19-21}.

¶53.23 Simon Cash repeated Artelia's advice to the TMO in a meeting on 26 April 2013.⁴¹⁰⁴¹⁰ {TMO00830537/2} Section "Procurement" Item 8. On the same day, Peter Maddison confirmed that a budget of £8.5m for construction costs would be available for the project.⁴¹¹⁴¹¹ {ART00009081} item 3. Confirmed in Powell's Draft project Brief of May 2013 {ART00006475} under header "Budget".

¶53.24 On 2 May 2013, perhaps in a bid to save a project in trouble, Robert Powell sent Paul Dunkerton a Draft Revised Project Brief,⁴¹²⁴¹² {ART00006475}; {ART00006383}; Powell{ART00008984/25} page 25, paragraph 77. in which he proposed that Artelia should take on the roles of project manager and employer's agent in addition to its responsibilities as quantity surveyor. He also suggested that Artelia should become the lead consultant.⁴¹³⁴¹³ {ART00006475/2} under "Contract and Procurement". In the event, however, when a formal contract was eventually signed in July 2014 Artelia was engaged to act only as employer's agent, quantity surveyor and CDM co-ordinator.

A change of priorities: value for money rather than maintaining programme

¶53.25 On 21 May 2013, Robert Powell sent an email to Philip Booth and Simon Cash describing a meeting he had attended with RBKC and the TMO earlier that day. He told them that Peter Maddison had been overruled by Laura Johnson, that Mr Maddison was no longer keen to appoint Leadbitter as principal contractor and that value for money was more important to RBKC and the TMO than preserving the programme. He said that it was likely, therefore, that the TMO would decide to hold a new procurement process in accordance with EU regulations.⁴¹⁴⁴¹⁴ {ART00006252}.

¶53.26 From that moment, the TMO's attention was increasingly directed towards a new procurement exercise, either by inviting tenders through the Official Journal of the European Union (OJEU) or by making use of an existing framework agreement. Neither Laura Johnson nor Peter Maddison accepted there had been any overruling,⁴¹⁵⁴¹⁵ Maddison {Day58/100:20}-{Day58/101:13}; Laura Johnson {Day128/145:2-11}. but, even allowing for some flamboyance in Robert Powell's turn of phrase among colleagues,⁴¹⁶⁴¹⁶ Booth {Day50/16:8-11}. it is clear to us that Laura Johnson had exercised a decisive influence in favour of re‑procurement.⁴¹⁷⁴¹⁷ Powell {ART00008984/27-28} pages 27-28, paragraph 85; Cash {Day48/164:10-16}. Mr Maddison told us that he had changed his mind as a result of what he had been told by Laura Johnson about problems which RBKC had encountered with Leadbitter on the KALC project, although that is not supported by any of the documents we have seen.⁴¹⁸⁴¹⁸ Maddison {Day58/103:2-19}. Ms Johnson, for her part, accepted that her view of Leadbitter had influenced the TMO's decision to put the contract for the Grenfell Tower refurbishment out to tender again.⁴¹⁹⁴¹⁹ Laura Johnson {Day128/120:6}-{Day128/121:1}. We think that when they gave evidence both Ms Johnson and Mr Maddison independently sought to downplay her influence over the direction of the Grenfell Tower project in order to preserve an appearance of independence from RBKC on the part of the TMO not wholly borne out by the contemporaneous evidence.

¶53.27 In his email Robert Powell said that the emphasis of the TMO's approach had changed from "programme" to "value for money". Even though the scope of works was still evolving,⁴²⁰⁴²⁰ As can be seen by Laura Johnson's email on not progressing kitchens / bathrooms {ART00006252}; Booth {Day50/11:2-25}; {Day50/12:5-8}. the project was constrained by an inadequate budget. In the context of the developments that had by then taken place, it is clear to us that the email was recording the change of emphasis on the part of the TMO from one of maintaining the original programme to one of saving cost, and that what the TMO really meant by achieving value for money was finding a contractor who would do the work at a cost lower than that suggested by Leadbitter.

Artelia reports: May–June 2013

¶53.28 On 24 May 2013, Artelia produced an Addendum to its Status Report.⁴²¹⁴²¹ {ART00006232}. That short document stated that the TMO had made it clear that value for money was to be regarded as the key driver for the project and that it remained to be convinced that the existing arrangements with Leadbitter could provide that. It therefore believed that a new procurement process would provide best value. In the light of those observations Artelia recognised that it was necessary to reconsider its original recommendation and accept that value for money might be enhanced by seeking a principal contractor through a new procurement process.⁴²²⁴²² {ART00006232/6}.

¶53.29 When Robert Powell sent the Addendum to Peter Maddison, he commented that he hoped it gave him the support he had been looking for to proceed with a new procurement exercise for a principal contractor, in contrast with the earlier recommendation which had been based on information that had become obsolete.⁴²³⁴²³ {ART00009020/2}. At the time, Robert Powell described the Addendum to Simon Cash as "political lubrication" to give the TMO justification for going against its original recommendation to keep Leadbitter involved in the project.⁴²⁴⁴²⁴ {ART00006418}. It is apparent that the TMO had decided to start the project again from scratch, which required it to climb down from its position that there was a benefit to using the contractor it had employed on the KALC project. The TMO needed a professional opinion to support its change of position and Artelia, under pressure from its client, duly obliged. In our view, Artelia, as a professional consultant, should not have allowed itself to be influenced to that degree by its client.

¶53.30 That change of approach was reflected in a revised version of Robert Powell's Project Brief⁴²⁵⁴²⁵ {ART00009032}. that was circulated by Philip Booth on 3 June 2013.⁴²⁶⁴²⁶ Booth {ART00008527/13} page 13, paragraph 55; {ART00008529}. According to that version, the primary driver was "Cost (Value for money)". The Project Brief was presented at a meeting on 6 June 2013 and was approved by the TMO, with some adjustments.⁴²⁷⁴²⁷ {TMO00833043} item 1.1.; Philip Booth made the amendments and reissued on 10 June 2013: {ART00008641}; {ART00008825}.

¶53.31 In a meeting on 6 June 2013 Peter Maddison asked Artelia to change the Addendum to demonstrate that a fresh procurement exercise would deliver better value for money,⁴²⁸⁴²⁸ {TMO00833043} item 2.1. and in a further meeting on 11 June 2013, he asked Artelia to reword it.⁴²⁹⁴²⁹ {ART00006473}. Accordingly, Simon Cash sent Mr Maddison a revised status report dated 18 June 2013,⁴³⁰⁴³⁰ {TMO10048492}; {ART00001241}. the contents of which had been materially altered. Simon Cash noted in his covering email that he had reworded sections to "read in a better light".⁴³¹⁴³¹ {ART00001241}. Having already changed its original advice in favour of support for a new procurement process, in this latest version of the addendum Artelia, having analysed the options, now more firmly recommended that using the EU procedure, rather than a framework agreement, would be more likely to give value for money.⁴³²⁴³² {TMO10048492/28}; Booth {Day50/19:9-18}. In addition, criticisms of the TMO were largely removed or watered down and replaced with criticisms of Leadbitter.⁴³³⁴³³ Cash {Day48/191:5}-{Day48/194:7}.

¶53.32 Simon Cash was reluctant to amend the criticisms of the TMO because they did not reflect Artelia's assessment of what had happened on the project,⁴³⁴⁴³⁴ Cash {Day48/194:18-20}. but he was put under pressure to do so by Peter Maddison in the course of what he described as a "particularly strong"⁴³⁵⁴³⁵ Cash {Day 48/194:15-16}. conversation. Mr Maddison did not accept that description of the conversation, but he did accept that a "frank" conversation⁴³⁶⁴³⁶ Maddison {Day58/143:3-8}. had taken place between them. Later, in an email sent on 17 September 2013 to Claire Williams, the project manager in the TMO Assets and Regeneration Department, David Gibson, TMO's Head of Capital Investment, said that the TMO had had to "twist [Artelia's] arms quite hard" to obtain the revised report.⁴³⁷⁴³⁷ {TMO10048490}. Mr Gibson's evidence was that he meant that the report had not been in the clear form he had wanted,⁴³⁸⁴³⁸ Gibson {Day53/139:7-19}. nor had it been as positive and forward-looking as he had expected,⁴³⁹⁴³⁹ Gibson {Day53/140:1-5}. but the clear meaning of the words used in that email is that Mr Gibson was aware that Artelia had been reluctant to amend its earlier report and had required some considerable persuasion to do so. In our view the evidence shows that the TMO put significant pressure on Artelia to make changes which it would not otherwise have made.

¶53.33 Peter Maddison relied on the advice expressed by Artelia in the Addendum to support his presentation to the TMO board on 20 June 2013.⁴⁴⁰⁴⁴⁰ Maddison {Day58/143:16-22}; {Day58/148:13-24}; {TMO10002849}. The board agreed to hold a new procurement process, noting the then estimated cost of £9,780,000 for the project.⁴⁴¹⁴⁴¹ {TMO10049945} item 1. In her Budget Monitoring Report for the first quarter of 2013/2014, prepared for RBKC's Management Board, Leaders Group and Cabinet, Laura Johnson reported that the estimated cost of the Grenfell Tower refurbishment was around £9,700,000, but that that was to be confirmed after the procurement process had been completed.⁴⁴²⁴⁴² {RBK00013783/6} paragraph 3.15. She recommended that the cabinet increase the total budget accordingly.⁴⁴³⁴⁴³ {RBK00013783/7} paragraph 4.1; Laura Johnson {RBK00034943/14} page 14, paragraph 58. That increase was approved by RBKC's Cabinet on 18 July 2013.⁴⁴⁴⁴⁴⁴ {RBK00059321/2} paragraph A5(iv).

The OJEU procurement

¶53.34 One effect of the decision to hold a new procurement process for the selection of a principal contractor under the OJEU process was to force the TMO to decide the scope of the project and the materials to be used. The details were set out in the NBS Specification, which was included in the tender packs.

¶53.35 The tender process was led by Jenny Jackson, a procurement specialist engaged directly by the TMO, with the assistance of Artelia. The TMO published a notice of its intention to award the contract on 20 August 2013.⁴⁴⁵⁴⁴⁵ {ART00008871}. Despite the notice receiving 22 expressions of interest, only five potential bidders returned responses to the Pre-Qualification Questionnaire by the deadline of 20 September 2012.⁴⁴⁶⁴⁴⁶ {ART00008876}. All five, namely, Mulalley & Co Limited, Keepmoat Regeneration Limited, Durkan Limited, Rydon Maintenance Limited and Wates Construction Limited, passed the Pre-Qualification Questionnaire evaluation, which was scored by Artelia and the TMO,⁴⁴⁷⁴⁴⁷ {ART00008544}. and were invited to tender.⁴⁴⁸⁴⁴⁸ {ART00001972}; {ART00008841}; {ART00008584}. Although Leadbitter had been informed about the process in July 2013,⁴⁴⁹⁴⁴⁹ {ART00008603}. it did not tender for the project.

¶53.36 In the end, only three of the five companies which had satisfied the Pre-Qualification Questionnaire eventually submitted tenders, Wates having pulled out on 18 December 2013⁴⁵⁰⁴⁵⁰ {ART00008690}; {ART00008642}. and Keepmoat on 15 January 2014.⁴⁵¹⁴⁵¹ {ART00008949}. The tenders were opened on 14 February 2014 and it was immediately apparent that Rydon's was significantly lower than those of the other two companies, Durkan and Mulalley.⁴⁵²⁴⁵² {ART00005886}; {ART00008976}.

Manipulation of the procurement process

¶53.37 Following their formal evaluation, Rydon's bid was confirmed as being the lowest price; it also achieved the highest score on quality.⁴⁵³⁴⁵³ {ART00002167/23}. All the prices for the external facade were substantially higher than Artelia's estimate. The basis of evaluating tenders was 40% for price, and 60% for quality, of which 55% was attributed to written submissions and 5% to interview. Weighting the scoring in that way meant that the tender process slightly favoured the bidder with the highest quality rather than the lowest price. After the scores for the written submissions had been collated, Rydon's bid was identified as the most competitive.⁴⁵⁴⁴⁵⁴ {ART00002167/23}.

¶53.38 Residents had some limited participation in the process.⁴⁵⁵⁴⁵⁵ Williams {TMO00840364/8} page 8, paragraph 39; {TMO00840364/27} page 27, paragraph 149; Booth {ART00008527/23} page 23, paragraph 89. At the stage of the Pre‑Qualification Questionnaire in October 2013, and at the stage of the Invitation to Tender in February 2014, they contributed their assessments of the quality of the tenderers' communication and liaison with residents.⁴⁵⁶⁴⁵⁶ Booth {ART00008527/23} page 23, paragraph 89; {ART00008693}; {ART00008909/3} question 10.3 only; {TMO00847721} question 7.1 only. They were not invited to contribute questions about programming or quality, even though those were matters which affected them and on which they might have had valuable insights.⁴⁵⁷⁴⁵⁷ Williams {Day54/176:12}-{Day54/177:22}. On 21 February 2014, Cllr Judith Blakeman suggested to Peter Maddison that some residents should attend the interviews with those who had submitted tenders.⁴⁵⁸⁴⁵⁸ {TMO10005313/4}. That required Claire Williams to find a leaseholder and a tenant at short notice.⁴⁵⁹⁴⁵⁹ {TMO10005313/3}; Residents apparently attended {ART00008870}; {ART00008969}. We do not know which residents attended the interviews or what contributions they made, although Ms Williams thought that Pily Burton and Fahed Barakat had been involved when no one else had come forward.⁴⁶⁰⁴⁶⁰ Williams {TMO00840364/8} page 8, paragraph 39. On any view, only very few residents were involved in the process. They marked a limited range of questions, their scores were averaged with those of the professionals and the TMO,⁴⁶¹⁴⁶¹ Booth {ART00008527/23} page 23, paragraph 89; Booth {Day50/43:14}-{Day50/44:14}. which diluted their contribution, and, when it came to the interviews, their attendance appeared to be an afterthought. Despite the TMO's saying that it had every intention of involving residents in the process,⁴⁶²⁴⁶² Williams {Day54/166:3-6}; Williams {Day54/168:5-8}. we think that their involvement was largely symbolic, having been hastily arranged and entirely undocumented.

¶53.39 In its final tender report, dated 12 March 2014, Artelia confirmed its view that the prices of all three bidders were "at a sustainable level".⁴⁶³⁴⁶³ {ART00002167/13}. Even so, as was made clear in Artelia's Draft Tender Report, even Rydon's tender sum (the lowest) exceeded the budget then available and in those circumstances Artelia sought the TMO's permission to undertake a value engineering exercise with Rydon.⁴⁶⁴⁴⁶⁴ {ART00002167/23}. By that point, however, Rydon (but no other bidder) had been told by the TMO that it was "in pole position" and would be awarded the contract if it could indicate that it could make significant reductions in its price through value engineering.

¶53.40 There then followed some days of discussions about potential areas of savings and specific amounts, in order to arrive at an agreed figure.⁴⁶⁵⁴⁶⁵ See Chapter 55 The discussions culminated in a meeting on 18 March 2014, at which the TMO and Rydon agreed that if Rydon were awarded the contract it would reduce its price.⁴⁶⁶⁴⁶⁶ See Chapter 55 The TMO considered internally that a reduction could be achieved through the "value engineering" clauses in the proposed building contract,⁴⁶⁷⁴⁶⁷ Gibson {Day54/13:9-12}; {Day54/17:12-19}. but that was really just a euphemism for reducing the cost to enable an acceptable price to be achieved.⁴⁶⁸⁴⁶⁸ Per Gibson email to Rydon {RYD00003302/1-2}.

¶53.41 The discussions between the TMO and Rydon, which took place at a time when the procurement process had not been completed, were not contemplated by the legislation relating to procurement. The meeting of 18 March 2014 was particularly significant, because Rydon was given an opportunity to amend its price in advance of the award of the contract, an arrangement for which the TMO could provide no reasonable justification. Those involved in the meeting knew or should have known that what they were doing was improper. The meeting was described in correspondence as taking place "offline",⁴⁶⁹⁴⁶⁹ Chapter 55 the TMO did not invite its professional advisors, and no minutes were taken. Moreover, it had received advice from its solicitors that a meeting of that kind was not permissible.

¶53.42 Simon Lawrence explained to Mike Albiston of Harley that Rydon was alive to the risk that other prospective main contractors might challenge the procurement process on the grounds that they had not been given a similar opportunity to engage in the value engineering process.⁴⁷⁰⁴⁷⁰ {HAR00010160/6}. Stephen Blake said that he never considered the potential for challenge by other contractors⁴⁷¹⁴⁷¹ Blake {Day28/187:1}. and denied having any knowledge of Mr Lawrence's concerns,⁴⁷²⁴⁷² Blake {Day28/188:6-24}. but we do not accept that evidence. As we explain in Chapter 55,⁴⁷³⁴⁷³ Chapter 55 the meeting of 18 March 2014 was organised through Mr Blake and he was the driving force at Rydon behind the early value engineering process. Mr Blake himself asserted that the TMO had been changing the basis of the tender⁴⁷⁴⁴⁷⁴ Blake {Day28/185:24} – {Day 28/186:5}. and it would be surprising if he had not considered the concerns articulated by Mr Lawrence as a result.

¶53.43 The steps that were taken to reduce the price of the works are described in Chapter 55 However, it is striking that the TMO appears to have given no thought at any stage to asking RBKC to increase the budget to meet Rydon's tender price, rather than seeking to drive down the costs to bring them within the budget. Given that in July 2013 RBKC had been amenable to an increase in the budget by about a third (from £6,000,000 to £9,700,000),⁴⁷⁵⁴⁷⁵ {RBK00003316/3}; Feilding-Mellen {Day131/153:6} – {Day131/155:18}. it is possible, to put it no higher, that RBKC would have agreed. Indeed, in July 2014, it agreed to increase the budget to £10,300,000, without any apparent reluctance or obvious opposition from within the cabinet.⁴⁷⁶⁴⁷⁶ Feilding-Mellen {RBK00054433/4} page 4, paragraph 11; {Day131/161:16}-{Day131/162:18}.

The contract with Rydon and confirmation of the budget

¶53.44 On 18 March 2014 Rydon was told that it had won the contract. On 27 March 2014, Peter Maddison presented a paper⁴⁷⁷⁴⁷⁷ {TMO10005583}. to the TMO board⁴⁷⁸⁴⁷⁸ {TMO10031040}. in which he recommended that the TMO should enter into what he called a "pre-contract arrangement" with Rydon so that the project could make progress while the possibility of reducing the price was investigated, in particular by changing the cladding material and securing government funding for improving the building's energy efficiency.⁴⁷⁹⁴⁷⁹ {TMO10031040/2}. According to the minutes of that meeting, the board asked Mr Maddison whether Rydon might have submitted a low tender in order to obtain the contract, but he confirmed that he had confidence in Rydon's pricing⁴⁸⁰⁴⁸⁰ {TMO10031040/3} item 3. and that any problems with the budget would be addressed during the pre-contract period.⁴⁸¹⁴⁸¹ {TMO10031040/3} item 2. In reality, the primary focus of attention during the pre-contract period was clearly on achieving a reduction in Rydon's price; at any rate, there is no evidence that the TMO board took any steps to find out whether it was realistic. Peter Maddison conceded that that had not been the purpose of the pre-contract period and said that the minutes were incorrect to the extent that they stated otherwise.⁴⁸²⁴⁸² Maddison {Day59/71:3-21}. However, the minutes of the meeting are detailed and we consider that they probably are accurate. We think that Mr Maddison did reassure the board that the budget was sustainable and told it that any concerns that Rydon might have submitted an artificially low tender would be addressed during the pre-contract period.

¶53.45 Having received that assurance, the TMO board agreed to appoint Rydon as principal contractor for the Grenfell Tower refurbishment. Accordingly, it authorised an immediate agreement to cover preliminary work up to the value of £350,000 and thereafter a design and build contract for the works as a whole at a total price of £9,700,000, inclusive of fees.⁴⁸³⁴⁸³ {TMO10031040/3}; {RYD00086702}; {RYD00094236/91} paragraph 215.

¶53.46 On 19 June 2014, Laura Johnson presented a paper to the RBKC cabinet⁴⁸⁴⁴⁸⁴ {RBK00000409}. recommending an increase in the budget for the refurbishment from £9,700,000 to £10,300,000 to include a contingency.⁴⁸⁵⁴⁸⁵ {RBK00000409/5-6} Item 3.2; {RBK00000409/8} item 6.2. The cabinet agreed the increase,⁴⁸⁶⁴⁸⁶ {RBK00018808}; Laura Johnson {RBK00034943/14-15} pages 14-15, paragraph 58; {RBK00034943/16} page 16, paragraphs 65-66. which was noted in an executive decision issued by Cllr Feilding-Mellen in August 2014.⁴⁸⁷⁴⁸⁷ {RBK00003309}.

The influence of cost in the selection of materials

¶53.47 In response to a suggestion that it had been concerned above all things to reduce costs the TMO argued that its choice of the more expensive cassette version of the panels for the rainscreen showed that cost had not been the sole or overriding consideration in the selection of materials.⁴⁸⁸⁴⁸⁸ Phase 2, Modules 1 and 2 Closing TMO submissions for TMO {TMO00903690/13} paragraph 52. However, the evidence does not support that conclusion. Peter Maddison denied that the TMO had been looking for the cheapest option; he said that it had been looking for a material that would, in his words, "achieve planning permission and ... meet the regulations".⁴⁸⁹⁴⁸⁹ Maddison {Day59/90:9-23}; TMO submissions {TMO00903690/13} paragraph 53. As Mr Maddison's evidence makes clear, the need to obtain planning permission was a critical factor in the decision about which version of the product to use. Emails passing between Simon Lawrence and Claire Williams in May 2014 refer to the TMO's discussions with the planning committee about the different forms of fixing and the adverse cost implications if it were to prefer cassettes.⁴⁹⁰⁴⁹⁰ Emails 6 May 2014 {TMO00851142}; 23 May 2014 {RYD00005374/1-2}. Simon Lawrence asked Ms Williams whether showing the committee examples of the panels in cassette form would be a risk.⁴⁹¹⁴⁹¹ Email 23 May 2014 {RYD00005374/2}. He hoped to persuade it to accept riveted fixing by showing it a mock‑up.⁴⁹²⁴⁹² Email 29 May 2014 {RYD00005374/1}. Mr Maddison was informed of the efforts being made to persuade the planning committee to accept riveted fixing⁴⁹³⁴⁹³ Emails 6 May 2014 {TMO00851142}; 2 June 2014 {SEA00011069}. and had a meeting with Councillor Feilding-Mellen at which the difference in cost was discussed.⁴⁹⁴⁴⁹⁴ Diary of Peter Maddison {TMO00879770/46}; {TMO00879770_T}/60}. It is clear to us that Rydon and the TMO were seeking to persuade the planning committee to accept riveted fixing for cost reasons. In the event, however, the committee insisted on the cassette version.

Client design adviser

¶53.48 On 28 February 2014, Artelia had offered to act as client design adviser for the TMO, to review and advise on decisions made by the principal contractor in developing the design of the project. Following the appointment of a principal contractor under a design and build contract, the services of those engaged by the client to carry out the initial design work may be transferred to the contractor by a legal process known as novation to enable it to continue developing the design. The creation of new contractual relationships between the designers and the principal contractor creates a risk that the contractor may wish to adopt lower quality design solutions than those originally contemplated. The designers, whose client is now the contractor, are not able to advise the employer on matters of that kind. As a result, there is a risk that a design agreed with the employer before the appointment of the contractor may be watered down as a result of commercial pressures.

¶53.49 In early February 2014, Artelia and the TMO (represented by Jenny Jackson) were negotiating amendments to the terms of Artelia's appointment. The discussions eventually concluded with a variation to the contract agreed in July 2014. In the context of those discussions Philip Booth reviewed the scope of the services to be provided by Artelia as employer's agent and concluded that they would not overlap with the services that would be provided as client design adviser. Artelia proposed that Richmal Hardinge, an architect, be appointed in that capacity. She had acted as client design adviser to RBKC on the KALC project and had drafted the proposal for the Grenfell Tower project, which offered to set and safeguard design quality. She proposed that she should provide a "Design Compliance Report" before the contract was awarded, after reviewing the contractor's proposals to ensure that they were consistent with the Employer's Requirements, the NBS Specification and British, European and other statutory standards. Ms Hardinge also proposed that, once the contract had been awarded, she would review the contractor's drawings to ensure they continued to meet the Employer's Requirements and provide advice on matters of design as required by the TMO. The proposal excluded any aspects of the mechanical and electrical ("M&E") services.

¶53.50 At a progress meeting on 15 July 2014, attended by Peter Maddison, David Gibson and Claire Williams on behalf of the TMO, it was agreed that the TMO would appoint a client design adviser. However, a few weeks later, on 29 August 2014, the TMO decided to perform the role itself. Claire Williams set out the TMO's reasons for that decision in an email sent to Peter Blythe and Philip Booth on 29 August 2014. They included the fact that the cladding and M&E elements were under guarantee, which she thought obviated the need for such an appointment. A note was later added to the minutes of the progress meeting confirming that the TMO would perform the role of client design adviser itself and stating that it would need to approve all design decisions.

¶53.51 Claire Williams told us that the TMO had come to the view that the services that would have been provided by a client design adviser role fell within the scope of the services Artelia had already agreed to provide and that she had not wanted responsibility for design to be complicated. However those are not the reasons she gave at the time, which suggest that she was more concerned about the value that a client design adviser would provide. In those circumstances we think that the TMO's decision not to appoint Artelia as client design adviser was driven by a combination of commercial considerations and an unrealistic view of the expertise available within the TMO. The TMO's rejection of that offer meant that it was unable to review effectively any of the design work carried out following the appointment of Rydon as the principal contractor. In reaching its decision the TMO significantly overestimated its ability to scrutinise the design work and chose to overlook the fact that no one within the organisation had experience of a project involving the overcladding of a high-rise residential building.

¶53.52 The TMO's decision not to appoint a client design adviser does not, of course, make it responsible for the quality of subsequent decisions affecting the design of the refurbishment or their compliance with the Building Regulations. That rested with Rydon and its contractors, including Studio E and Harley. However, the TMO's decision not to appoint a client design adviser at modest expense was foolish and reflected an over- confidence in its ability to manage the design aspects of the project itself.