The Glasgow School of Art has admitted it is heading to arbitration with the company that insured a national treasure in the wake of the scandal over 20 months of inertia over its rebuild that is expected to add millions to the estimated costs of more than £100m.

The GSA has finally broken its silence over the insurance issues after a Herald series of investigations revealed how attempts at the reinstatement of the masterpiece originally designed by renowned Scots architect Charles Rennie Mackintosh had stalled leading to serious questions about whether the restoration will ever happen.

The Herald revealed that a six-year failure to reach a settlement over a "complex" insurance claim over the fire that ravaged the Mack and a potential legal battle has contributed to the level of "inertia" over its reinstatement.

We revealed that a long-term inability to reach an agreement with insurers over a payout and a botch up over the way the school went about procuring experts to rebuild the Glasgow School of Art's Mackintosh Building after the June 2018 fire have been key to what some see as the effective "suspension" of works on the building.

READ MORE:  Glasgow School of Art: Insurance claim fuels Mack rebuild 'inertia'

READ MORE: Lachlan Goudie: ScotGov must intervene over School of Art fails

Glasgow School of Art: We 'appreciate' concern over future of Mack

Glasgow School of Art: students and politicians recall the 2014 fire

'A scandal': 19 months of 'inertia' over the rebuild of a Scottish national treasure

The GSA refer to any insurance income received from the fire in its official financial records as a "contingent asset" meaning that it is only a potential financial gain.

They June 2018 fire destroyed the building as it neared the end of a multi-million pound restoration project following an earlier blaze in May 2014.

While a design team was supposed to have been in place, according to the GSA itinerary, by August 2022 - that still has not happened with hopes of getting any council planning approval for the project not expected until the spring of 2026 the earliest, according to estimates based on the GSA's own schedule.

The GSA has now said that is has chosen to enter into arbitration proceedings with its insurers.

The Herald: Glasgow art school fire

It said: "Since June 2018, the Glasgow School of Art has been working through the very complex insurance claim, supported by a team of external legal and insurance professionals.

"Following publication of the Scottish Fire and Rescue Service Fire Investigation Report in January 2022, insurers requested further information which the Glasgow School of Art provided to enable them to confirm policy cover.

"In the absence of this confirmation, The Glasgow School of Art has chosen to initiate arbitration.

"The arbitration process is subject to a confidentiality provision which means that we are not able to disclose any further details."

They confirmed that work to date, has totalled around £18 million and has been funded by interim payments from the insurers.

In the wake of the 2018 fire, GSA said that an insurance payout was key to cover the bill for rebuilding the Mack.

The chairwoman of the school’s board, Muriel Gray, said that rebuilding the Mackintosh was ‘non-negotiable’.

She suggested that no further public funds would be required, and that rebuilding costs could be supported by insurance money, charitable funds and fundraising left over from 2014, when the school was the victim of a previous fire. 

It is said that the GSA is now hoping to have a design team in place by July to identify the "appropriate route to delivery"

A fresh business case is expected with itss conclusions to be made public in early 2025.

But as the Herald previously revealed, the project will not be completed by the original 2030 deadline and is not now expected to be complete within the next decade.

It was confirmed at the end of March, last year that no new architect procurement process was currently being undertaken nor had any new timescale for this been defined. According to the school's project itinerary, that process alone was expected to take four months.

Funding arrangements had still not been confirmed and neither the Scottish or UK Governments were approached to date by the GSA in any bid to secure funds to cover the capital costs of any restoration. The business case schedule talked of confirming funding arrangements to be in place by April 2022.

And no steps have yet officially been taken to appoint a main contractor for the reinstatement of one of Scotland's most internationally renowned landmarks.

An original GSA risk management analysis categorised a delay of more than six months with the project as "catastrophic".

A contrast has previously been made with the work done on the Notre Dame Cathedral in Paris, which was severely damaged by a blaze in 2019 and is scheduled to reopen at the end of this year.

The issues with insurance have emerged after the Herald revealed that in 2012, before the first fire, the GSA's land and buildings were valued at £8.138m. Before the second fire in 2018, the value was put at the same, £8.138m. After the 2018 fire, however, the valuation had dropped to £1.561m.

The Herald: Fire damage at the Glasgow School of Art's historic Mackintosh Building

Some raised questions on the logic for the valuations in the wake of what is a six-year insurance complication.

According to financial papers, after the 2014 fire, an examination of the Mack valued it at "considerably in excess of the depreciated figure used in these accounts... accordingly, it was deemed that it was satisfactory not to impair the Mack".

However, after the 2018 fire, the extent of the damage meant that the value of the building was "fully impaired", meaning that there was a permanent reduction in its value. It left only the value of the land on which the Mack stood.

At the time of the 2018 fire the Mack was covered by what the GSA called an owner-controlled insurance programme, designed to co-ordinate general liability coverage for all parties working its rebuild.

That comprised cover for the contract works and the pre-existing structure of what is one of Scotland's most precious landmarks.

But according to a December financial analysis of the state of the GSA, the value and method of the receipt of insurance sums relating to the Mack had "still to be agreed" so represented a "contingent asset".

A three-year-old detailed business case examination of the project revealed that while a variety of funding sources may be available to deliver the capital project and support operation of the new building, its affordability was "dependent" on the outcome of the insurance claim.

A report of a governors meeting from June, last year seen by The Herald said that more detailed discussion on the options available to the GSA would be useful once the outcome of the insurance claim was confirmed.

The document said members also reflected on the need to "exercise caution" in regard to how all available funding should be deployed in respect of the re-instatement of the Mack.

Apart from the insurance dilemma, also putting a spanner in the works is the botched process for procuring architects to design the project.

Glasgow School of Art fires: read the series in full here

The contract was due to start in January 2023, five months after the design team was due to be in place according to the design team was supposed to have been in place according to the original 2021 business case itinerary.

Architects John McAslan + Partners were the original top scorers in the bid to oversee the rebuild. But it was then awarded to another firm, understood to be Hawkins\Brown after a recalculation.

The Herald:

The reset came after the school received a pre-action letter from one of the other bidders challenging the final outcome was received on February 3, 2023. The school was advised to expect a summons three days later.

The school blamed a "technical error in the scoring matrix used in the procurement process" for the issue.

Professor Penny Macbeth, director of the GSA said: “We are committed to the faithful reinstatement of the Mackintosh Building, and for that to be done in an exemplary way, returning it as a working art school building at the heart of Glasgow’s creative and cultural eco-system.  

“While the protective wrap installed in June 2023 does its job of allowing the building to dry out over the next couple of years, it is important that we move forward with parallel work strands in what is a complex building project.  

“What we are now doing, through the SOBC [Strategic Outline Business Case] Addendum process, [is]  robustly testing our previous assumptions, economic impact, timelines and approaches to delivery, whilst initiating arbitration with our insurers, will ensure we can make strategic, evidenced-based decisions, ensuring the Mackintosh Building is successfully rebuilt and contributes to the regeneration of Sauchiehall Street and this part of Glasgow City Centre.”