The extraordinary email exchange - The rejection letter to Schal - The report that favoured Schal
A candid email exchange between two key decision-makers on the BBC Broadcasting House scheme reveals the extent of the bitterness felt over the choice of Bovis as the project’s construction manager.
This is one of seven documents, three of which are reproduced here, that cast fresh light on the year-long procurement process.
The email correspondence, between Chris Evans, the then BBC project director, and Michael Wood, director of the cost consultant Currie & Brown, took place after Bovis had been selected for the scheme in November 2002.
It highlights the anger felt by Terry Chapman, the managing director of Schal, at the decision itself and the fact that the BBC did not communicate its choice directly to the losing party until December 2002.
Evans also reveals why the BBC finally decided on Bovis as its preferred construction manager.
Evans writes that he was finally swayed for two reasons:
- Bovis’ good performance on the BBC White City redevelopment. Evans says that his previous concern about Bovis’ team had been removed and that Bovis director Les Chatfield was “particularly reassuring”.
- Evans’ was concerned that Schal had not mentioned that it had been dropped from a framework deal with J Sainsbury.
A source close to Schal defended the Sainsbury’s issue. The source stressed that Schal immediately admitted to problems with the supermarket client once the issue was raised by the BBC and that the problems centred on an individual job rather than the overall work carried out by Schal for Sainsbury’s.
Also revealed in Wood’s first email, is the fact that Schal was looking for the BBC to pay for part of its bid costs. This is confirmed by a letter sent by the BBC to Schal in December 2002, indicating Schal had lost the bid and that an offer would be made to pay for some
its costs. The letter (in full below) says: “Exceptionally, and in recognition of the particularly strong commitment made by yourself and your team, we are, without prejudice, willing to make an ex gratia payment towards your costs which arose during the final stage of the project.” An undisclosed sum was subsequently paid.
Exceptionally, we are willing to make an ex gratia payment towards your costs
Chris Evans’ letter to Schal
Confirmation that Schal was initially favourite to win the job is contained within a report by QS Currie & Brown. This report also highlights the risk that the decision to choose Bovis could anger the losing bidders.
Two further documents reveal discussion concerning the scheme’s procurement at two governors’ property committee meetings in June and July 2002.
Papers submitted to the first meeting confirm the involvement of Gleeson chairman and BBC governor Dermot Gleeson. The minutes said: “With assistance from Dermot Gleeson we have spent three months running a formal competitive tender, inviting bids from the market to act as construction manager.”
The emails between Wood and Evans
>> From: Mike Wood
Sent: 11 December 2002
Met with Terry last week. Essentially same issues going on. The one area that makes things worse for Schal is that they have had no written confirmation of the position, which if anything increases their frustration.
Terry says he has bid costs of XXX [figure not disclosed] of which he is looking for half. I said that as a goodwill gesture and without prejudice the BBC would consider reimbursement for the additional costs between Jun and Oct. This I would not expect to be more than 25% of the overall, if that.
Terry feels very strongly about the fact that no communication has taken place
Terry still feels that Schal were badly treated and feels very strongly about the fact that no personal or written communication has occurred.
Essentially he is asking for a meeting with you to close out the issues at which we can hopefully close the financial position one way or another. I would also remind you that we do need to close the loop in terms of audit trail on the decision made.
>> From: Chris Evans
Sent: 13 December 2002
Have now written to Terry.
I think it might be helpful if I set out the issues I was balancing in concluding the exercise.
It was clear to me that the quality and competence of the team was the critical factor in making the selection. Neither of the final two had the lowest price bid. In relative terms, the pricing of both final bids was not material. The higher Bovis price on the secondary bid was material but not in my view critical given the incomplete nature of the specification on which that secondary bid was based.
Meeting the two chief execs was particularly helpful to me. Prior to that date I felt that Schal had the edge on Bovis. Schal’s team looked more together while Bovis’ seemed to have promise but was not at that point clearly together. Les Chatfield was particularly reassuring.
I’m not going to put up with 30 minutes of him telling me (again) that we ran an unfair tender
Another important factor was our observation of Bovis’s performance at White City. While the mere existence of that pre-existing relationship could not in itself be critical, we could not rationally exclude our first hand knowledge of their excellent performance at there.
At this point I felt that the two propositions were broadly equal. My concerns over Bovis’ team had largely been removed. We had two credible bids on the face of the propositions in front of us, little to choose between them. This led me to consider a further factor: the relationship between ourselves and the senior team/parent company. I became concerned over Schal on this latter issue for two reasons. Firstly Terry Chapman neglected to mention an issue with J Sainsbury, in holding up Sainsbury as a key client. He neglected to mention that Schal had been dropped from Sainsbury’s approved supplier list. In the event I had to press the issue in order to get a straight answer … It was the difficulty in getting a straight answer that worried me.
The final straw was Terry’s repeated accusation that the process was rigged in favour of Bovis. As you know, this included a direct approach from Carillion to one of our governors. Overall, this left me with serious concerns over our ability to create the right relationship within a contract which was largely about the strength of the combined BBC/CM team.
>> From: Mike Wood
Sent: 16 December
Terry has just called. He hasn’t seen the letter yet but I understand there was some press coverage in yesterday’s papers referring to the appointment of Bovis??
What was your reaction to meeting Terry close this out?
>> From: Chris Evans
Sent: December 16
Bovis briefed the Sunday Times (badly). They have not issued a press release though. Re Terry, the letter went out on Friday. I will meet with him but I’m not going to put up with 30 minutes of him telling me (again) that we ran an unfair tender.
Letter to Schal from Evans, December 2002
I am now able to formally confirm the outcome of our construction management selection process. We have now entered into a contract with Bovis Lend Lease.
On several occasions during the latter part of the exercise, you expressed concerns that the selection process was in some way biased towards Bovis. I should take this opportunity to once again emphasise that this was not the case. The selection team were conscious that they should not be swayed towards Bovis merely because of our current relationship at White City. On the other hand, we felt it important that the mere existence of that relationship should not be counted as a demerit in considering Bovis’ bid.
Exceptionally, and in recognition of the strong commitment made by yourself and your team we are, without prejudice, willing to make an ex gratia payment towards your costs which arose during the final stages of the project.
Your team evidently committed considerable effort to your proposal and this was reflected throughout your progression to the final stage...
Currie & Brown’s May 2002 report
This report by the scheme’s cost consultant narrowly recommended that Schal be appointed. The following shows how it weighed up the risks associated with the two bidders
Risks to project if Schal is selected
- Construction management – availability retention of team. Considered low risk
- Loss of valuable pre-construction advice provided to date by Bovis team – could continue to be sourced through project management team?
- Failure to obtain Land Securities Trillium (LST) buy-in thwarts outline business case process
- Failure to negotiate terms of LST contract (Schal have requested but not seen it).
- Schal have written saying they agree to terms entered into by Bovis
- Increase in bid costs once contract terms/risk transfer is fully understood – Schal/Carillion alternative bid at present is very competitive. Failure to get endorsement of LST board?
- Project team change – Schal substituted for Bovis mid construction due to above. Possible delay/increased cost due to handover
- LST “risk” addition increases.
- Reduced motivation for Bovis on other projects eg White City?
Risks to project if Bovis is selected
- CM – process not seen as fair – disgruntled bidders? Scrutiny of public procurement process, European commission audit?
- CM staff insufficient – 20% less than Schal. Bovis staff costs and fee higher although they have stated verbally that they would increase if necessary at no cost
- CM – availability/retention of team – possibility of higher risk due to other Bovis workload and clients? Bovis team not fully named in contrast to Schal
- Too many eggs in one basket? Programme pressure on both WC and W1 leads to trade off of resources?
- Lack of independence – from PM team
- Lack of independence – from LST