Page last updated at 20:21 GMT, Wednesday, 14 January 2009

Rail contract handling defended

The rail contract is worth about 2.5bn over 10 years

Transport chiefs have defended themselves against criticism over the handling of a major contract to run train services in Scotland.

The First ScotRail franchise was extended for three years last April.

The finance chief of the quango Transport Scotland, Guy Houston, later quit after it emerged he took part in meetings about the deal.

Transport Scotland chief Malcolm Reed heard concerns from MSPs Mr Houston had a "material interest" in the extension.

Mr Houston quit in the wake of an auditor's report which confirmed he took part in the meetings.

He was a First Group shareholder, although this was declared in Transport Scotland's annual report.

Share declaration

Under tough questioning at the Scottish Parliament's public audit committee, Dr Reed said Mr Houston only participated at a "very late stage" in the process.

Dr Reed told MSPs: "He attended two meetings after the deal had been struck. He played no part at all in either the shaping of the deal or the management of the deal."

Mr Houston declared his First Group shareholding after taking up his post in May 2006 and protocols were then put in place to "manage" the situation.

But it was not clear when he made the declaration, MSPs heard.

Committee convener Hugh Henry said Dr Reed knew Mr Houston had a "material interest" in the outcome of any discussions.

The contract extension to 2014 was announced in April without widespread consultation, which sparked controversy among opposition MSPs.

The franchise contract - the largest of its kind let by the Scottish Government - is worth about 2.5bn over 10 years.

The committee also heard from Scotland's top civil servant, Sir John Elvidge, who said it would have been "helpful for everyone" if Mr Houston had declared the First shares at his job interview.

Sir John also accepted Mr Houston should not have attended any meetings on the contract extension.

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