Lord Fraser is chairing the inquiry
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The inquiry into the cost of the Holyrood project has heard that the site became an option after a chance meeting on an Edinburgh to Glasgow train.
Chartered surveyor John Clement said that after a conversation with civil servants he began working on the possibility of picking Holyrood, which was then a brewery headquarters.
Before that meeting in September 1997, three sites were considered for the new Scottish Parliament.
These were the old Royal High School site at Calton Hill, Victoria Quay, in Leith and a site at Haymarket.
However, Mr Clement said he knew Scottish and Newcastle Breweries was looking to move its headquarters from Holyrood.
Following the conversation with Scottish Office officials, conducted while standing on a crowded train, he began working on turning Holyrood into a fourth candidate.
Mr Clement said: "It had all the right components: transportation, backdrop of Salisbury Crags and it would work as far as a tourist attraction goes in encouraging people to visit the parliament."
He told Lord Fraser of Carmyllie, who has been carrying out the inquiry, that commercial confidentiality meant details could not be revealed until December 1997.
The inquiry has already heard that a feasibility study was carried out in seven days.
Mr Clement said preliminary work went on in secret before Holyrood was announced as an option.
'Uncertainty' prevailed
Earlier during the inquiry, a civil servant admitted that the initial plans for Holyrood were "based on uncertainty".
Paul Grice said the then Scottish Secretary, Donald Dewar, had ordered staff to have a parliament up and running for MSPs by April 2000.
Mr Grice was head of the Referendum Legislation and Implementation team in 1997 which steered in devolution following Labour's general election win that year.
The shape of the parliament, six years on
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He told the inquiry that despite not having a plan for the new parliament, officials "got on with it" under orders from government ministers.
Mr Grice, who is now the chief executive of the Scottish Parliament, was being questioned by John Campbell QC, counsel to the inquiry.
He asked Mr Grice: "How can you know what plans to make if you don't have any officials from a parliament, you don't have a blueprint for what the parliament can or can not do, you don't have any elected members and you don't have any enabling legislation?"
Mr Grice replied: "When ministers demand something you very much get on with it.
"What you have to do is consider what you do know and what you don't know.
"But at that stage we were making projections and estimations based
on uncertainty."
Floor space
Mr Grice said that he drew many of the ideas for the blueprint of a Scottish Parliament from Westminster.
Lord Fraser asked: "Surely the mood was not that we were going to follow Westminster but that we were not going to follow Westminster?"
He went on to question why the floor space in the civil service-drafted plans for a building had suddenly expanded after Sir David Steel became presiding officer.
"I'm baffled by this drive to get the parliament up and running when, as counsel to the inquiry says, you didn't even have any elected members," Lord Fraser said.
The venue in Edinburgh where the inquiry is sitting
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"But as soon as you get your elected members and David Steel is elected as
presiding officer, 40% of gross floor area is added to the building.
"It seems to me essentially as sure as night follows day that costs are going
to spiral when you have taken a model which elected members don't want to
follow."
Lord Fraser also asked Mr Grice about an exhibition organised by the Scottish Office to run from December 1997 to January 1998 which showed off the four sites that were in the running.
He said: "It might appear to a member of the public that this whole
exercise was something of a sham and misleading because you knew by then, along with senior officials, that by December 15, for example, Haymarket just wasn't a runner.
"But nevertheless you were then asked to put together an exhibition, albeit
only for information, which included amongst them the Haymarket project."
Mr Grice strongly denied the suggestion and insisted the exhibition was about
being "as open as possible" with information rather than seeking views from
the public.
The inquiry continues on Thursday.