The Grenfell Tower landlord held a secret meeting to cut refurbishment costs – including discussing the switch to cheaper cladding – despite being warned by lawyers that it would break procurement law and could void the main contract, the public inquiry into the disaster was told. David Gibson, head of capital investment at the Kensington and Chelsea Tenant Management Organisation (KCTMO), which operated the council tower block for its owner, the Royal Borough of Kensington and Chelsea, organised a “secret” and “offline” meeting with the contractor Rydon in which they agreed more than £800,000 in savings, he told the inquiry on Thursday. The 18 March 2014 meeting was not minuted, but Rydon subsequently agreed to drop landscaping works, cut the cost of windows, and switch more expensive zinc cladding panels for the aluminium alternatives which became the main cause of the spread of the June 2017 fire that claimed 72 lives. The exercise cut the budget from £9.2m to £8.4m. The £293,368 saving on cladding amounted to less than £2,500 per apartment. Gibson told the inquiry he ignored legal advice that such secret negotiations would break European procurement rules because Rydon had yet to be formally appointed after a public tender process. Rydon had already quoted a price cheaper than two rival bids and £800,000 less than estimated by the landlord’s own advisers. But the inquiry heard the landlord still wanted increase savings before awarding the contract. Neither the architect nor the landlords’ construction advisers were told about the meeting. The inquiry has previously heard how the tower’s owner, the Royal Borough of Kensington and Chelsea, lost patience with the first contractor appointed to the recladding project, Leadbitter, when it said the project was going to cost £1.2m more than the budget. It also emerged that Peter Maddison, the TMO’s director of assets and regeneration, had a long relationship with Rydon’s refurbishment manager, Stephen Blake, having worked with him previously. Blake boasted in one email 10 days before the cost-cutting meeting that he had been “informally advised [by Maddison] we are in pole position – ours to lose”. On the same day as the meeting, Rydon was appointed as preferred bidder in a formal letter that did not mention it had agreed to cut at least £800,000 from its formal bid. The TMO’s lawyers had warned that such negotiations would be a breach of EU regulations, stating that “value engineering” could take place after the awarding of a contract, but not before. Gibson read and understood the legal advice, and knew that the negotiations he had with Rydon were contrary to the advice, he said. “There was a good reason for not telling the other bidders that one of the reasons for awarding the contract was that Rydon had agreed to reduce their price by £800,000 or so,” said Richard Millett QC, counsel to the inquiry. “That is that because if they discovered the TMO were discussing cost savings with Rydon prior to the award, that raised the risk of a challenge to the award decision.” “Correct,” said Gibson. Gibson had undertaken “an improper and compromised process with Rydon” and knew it was wrong, Millett suggested in cross-examination. That explained why Gibson did not mention the meeting in his witness statement to the inquiry, which said the tender process was “rigorous and transparent” and conducted within EU rules. Millett suggested this was “misleading”. “I disagree,” said Gibson. The inquiry continues.