Rydon sought to “pocket” more than £100,000 of the savings made by switching to the deadly aluminium composite material (ACM) cladding on Grenfell Tower by hiding the true costs from its client, the inquiry into the fire heard today.
Simon Lawrence, former contracts manager at Rydon, was interrogated today about the cost-saving process that ultimately resulted in the decision to switch the previously planned zinc cladding panels for ACM on Grenfell Tower.
He was shown documents revealing that cladding sub-contractor Harley Facades had estimated the saving made by switching zinc for ACM at £419,627 on 14 March 2014.
But Rydon produced a separate assessment for its client – building manager Kensington and Chelsea Tenant Management Organisation (KCTMO) – just four days later, which listed this saving as £293,338.
Asked to account for this £126,259 difference, Mr Lawrence said: “I would suggest by that, although not my area of expertise, that Rydon took some of the savings for themselves.”
Mr Lawrence, who is no longer an employee, added that he believed the money “went against risk or addition to profit”.
Rydon was under particular financial pressure at this point. As well as being asked to make savings of more than £800,000 to meet KCTMO’s budget, the firm had underestimated its own costs by more than £212,000, thanks to a mistake by a member of its financial team, Frank Smith.
In an email on 11 March 2014, Kate Bachellier, a cost estimator for Rydon, described this as a “Frank-ism” and said it would mean they had to work “a little bit harder to find some [value engineering] savings”.
“Was the plan at Rydon to keep the TMO in the dark about the real extent of savings which could be made by the ACM switch and then pocket the difference to make up the shortfall made by Frank Smith’s estimating error?” asked Richard Millet, counsel for the inquiry.
“That could be the reason for it,” responded Mr Lawrence.
Earlier, the inquiry had heard that Rydon was effectively tipped off that it was going to win the bid before the tender process closed and was invited by KCTMO to start discussing further cost savings.
In its bid, Rydon had priced the job at £9.2m, while rival contractor Durkan priced it at £9.9m and Mullaley at £10.4m.
An internal Rydon email on 11 March – before the result of the tender was announced – reads: “I have spoken with Peter Maddison at KCTMO who informs me that our price… is in first place.
“Therefore subject to a small amount of value engineering, Peter should be in a position to recommend our appointment on this scheme to his board early next week.”
Rydon then held the meeting with KCTMO representatives on 18 March to discuss means to take £800,000 in cost out of the project in order to meet its budget.
This process – known as value engineering – involves switching products for cheaper alternatives without compromising quality.
“You’ve got to find over £1m of value engineering to satisfy your client and to maintain your profit margin. That would be a bit of a challenge, wouldn’t it?” Richard Millett QC asked.
“Yes,” Mr Lawrence replied. “There were items that were assessed and savings were made.”
Earlier in the day, Mr Lawrence was questioned at length about Rydon’s decision not to retain fire engineer Exova as an advisor to the project.
Exova, which had previously been advising architecture firm Studio E, had produced an “outline fire safety strategy” in October 2013 which said that the changes would have “no adverse effect” with regard to external fire spread, but that this would need to be “confirmed in a future issue of this report”.
However, as Rydon did not continue to pay Exova to advise on the project, this “future issue” was never written.
The inquiry saw meeting minutes from 4 April 2014 which record that Mr Lawrence promised to “contact [Exova] with a view to using them going forward”.
At further meetings throughout June, July, September and October, the minutes continued to record that Rydon would seek the appointment fire consultants for the project.
But away from these meetings, Mr Lawrence indicated that no fire engineer would be appointed, telling lead architect Bruce Sounes that the firm was content to rely on building control inspectors at the local authority (who signed off the work as compliant) to check for fire safety issues.
Mr Lawrence said: “Rydon didn’t typically engage fire consultants in my experience and we did regard it as building control’s responsibility to raise concerns.”
He said previous cladding jobs the firm had carried out (such as the Chalcots Estate in Camden and Ferrier Point in Newham, both of which have since required remediation work) had been done without the input of a consultant.
“Is it right that you saw building control’s role as an adequate and reliable substitute for having a specialist fire consultant in your team as a sub-contractor?” Mr Millett asked.
Mr Lawrence replied: “Not just building control, but by having a specialist sub-contractor and a design team that has knowledge of designing in accordance with the building regulations.”
Asked specifically about the report produced by Exova, Mr Lawrence said the statement regarding external fire spread had given him “comfort” that there was no fire risk from the cladding plans.
He said that he assumed it had taken into account the cladding, and that his reading of it was that “providing we complied with the building regulations… then [the plans] will not have any adverse effect”.
Mr Millett said that this could not have been a “fair and tenable” reading of the statement, which clearly said a final version of the report was required. Mr Lawrence denied this.
The inquiry continues tomorrow with further evidence from Mr Lawrence.
Week one: A vivid picture of a broken industry
After a week of damning revelations at the opening of phase two of the Grenfell Tower Inquiry, Peter Apps recaps the key points
Week two: What is the significance of the immunity application?
Sir Martin Moore-Bick has written to the attorney general requesting protection for those set to give evidence at the Grenfell Tower Inquiry. Peter Apps explains what the move means
Week three: Architects of misfortune
This week saw the lead architects for the Grenfell Tower refurbishment give evidence to the inquiry. Peter Apps runs through the key points
Week four: ‘I didn’t have any perception that it was the monster it’s become’
The architects continued to give evidence this week, outlining a lack of understanding of the fire risk posed by the cladding materials and its design. Nathaniel Barker reports
Week five: ‘No adverse effect in relation to external fire spread’
As the Grenfell Tower Inquiry returns from its long absence, Peter Apps recaps the key points from a week of important evidence from the fire consultants to the refurbishment
Week six: ‘I can’t recall any instance where I discussed the materials with building control’
Nathaniel Barker summarises what we learned from fire engineers Exova, architects Studio E and the early evidence from contractor Rydon
Week seven: ‘I do not think I have ever worked with a contractor operating with this level of nonchalance’
Two key witnesses from contractor Rydon gave evidence this week. Peter Apps recaps some of the key points from a revealing week of evidence
Week eight: ‘It haunts me that it wasn't challenged’
Four witnesses from contractor Rydon gave evidence this week. Lucie Heath recaps what we learned on the last week of evidence before the inquiry breaks for five weeks
Week nine: ‘All I can say is you will be taken out for a very nice meal very soon’
This week the inquiry heard evidence from witnesses at Harley Facades, the sub-contractor responsible for Grenfell Tower’s cladding. Peter Apps recaps the key points
Week 10: ‘As we all know, ACM will be gone rather quickly in a fire!’
As the Grenfell Tower Inquiry entered its 10th week, Jack Simpson recaps the key points from a week of important evidence from the refurbishment’s cladding contractor
Week 11: ‘Did you get the impression Grenfell Tower was a guinea pig for this insulation?’
With witnesses from the cladding subcontractor, the firm which cut the deadly panels to shape and the clerk of works which inspected the job giving evidence this was week full of revelations. Peter Apps recaps the key points
Week 12: ‘Would you accept that was a serious failing on your part?’
With the surveyor who inspected Grenfell Tower for compliance giving evidence, this was a crucial week from the inquiry. Dominic Brady and Peter Apps report
Week 13: ‘Value for money is to be regarded as the key driver for this project’
With consultants to Kensington & Chelsea Tenant Management Organisation (KCTMO) giving evidence, attention at the Grenfell Tower Inquiry turned for this first time to the actions of the TMO and the council. Peter Apps reports
Week 14: ‘Did it not occur to you at this point that your budget was simply too low?’
This week, for the first time in phase two, the inquiry heard from Kensington & Chelsea Tenant Management Organisation, the landlord that oversaw the fatal refurbishment of Grenfell Tower. Lucie Heath reports
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