Examination of Witnesses (Questions 80
- 99)
MONDAY 16 FEBRUARY 1998
PROFESSOR B FENDER
80. Do you accept that? If you do, what
have you done about it?
(Professor Fender) I am accepting the general
argument of the estates directors that purchasing officers in
general have enough to do purchasing goods and services and that
the procurement of buildings and related services is a specialist
activity. One might hope that over a period of time procurement
purchasing officers might in fact be able to help with buildings,
but there are many specialist purchases; IT for example is a specialist
purchase which on the whole is best left to them.
81. Do you give advice regarding the procurement
of consultants or the construction contractors or things like
that, on how that should be brought about?
(Professor Fender) Yes, we give general advice
about procurement. In this case CVCP have given advice as recently
as January of last year. If we are talking about procurement more
generally, we ourselves develop with the sector and indeed are
creating a unit which will provide at a national level advice
to all those purchasing in universities. We take purchasing very
seriously but we do believe that the procurement of buildings
is a rather specialist activity and perhaps some institutions
should involve their purchasing officer if it is appropriate.
Really purchasing officers do have a lot to do already in purchasing
goods and services.
82. I am glad you have answered that because
could I take you now to page 35 and paragraphs 3.15 and 3.16,
where we see that failure to give appropriate consideration to
whole-life costing seems to be, I will not say endemic, but certainly
there.
(Professor Fender) I agree that whole-life costs
should be taken into account and indeed in a value for money study
we did examine energy management in institutions, produced advice
and promoted that particular aspect of whole-life costing in buildings.
We are committed to that, although I did say that sometimes institutions
were so narrowly balanced in their funding that if there was no
relatively quick payback it was rather academic as to whether
they could go all the way through to the end of the project.
83. When did you issue this advice?
(Professor Fender) In 1996 we produced an energy
management guide with a national launch, a lot of publicity.
84. At the bottom of paragraph 3.16 we have,
"The Funding Council are currently conducting a study on
whole-life costing which should provide useful guidance for institutions".
(Professor Fender) Yes. I picked out one aspect
of whole-life costing, which was the energy one, but-
85. You are doing another one.
(Professor Fender) No, we will give advice about
the whole generic nature of whole-life costing. Indeed quite a
lot of that has come about because of the support we have given
to private finance partnerships, where very often you cannot do
the appraisal in effect, come to an agreement with a private supplier,
without looking at the whole project. The sector has acquired
a good deal more experience of whole-life costing over the last
three or four years.
86. May I take you to the previous page
and Example 10? What are you doing to encourage these institutions
to have some form of standardisation or generic aspects in certain
of their requirements? It is very expensive to go and have individual
items designed and built each time, whereas if there is a degree
of standardisation would that not bring your costs down?
(Professor Fender) That is why I am pleased that
the Council with others in the sector has taken this initiative
on procurement more generally, on purchasing more generally. We
have done that in order that we may see what the benefits are
from purchasing in large quantities, although not everything can
be so done. The question of standardisation and the savings that
come from that will be probably more applicable in larger institutions,
indeed these two institutions here were large. The promotion of
this report in itself and its case histories will help to draw
attention to that.
87. When did you undertake this particular
study?
(Professor Fender) Which particular study?
88. The one you just referred to into standardisation.
(Professor Fender) No, I said what we are in the
process of setting up, we are looking for a director at the moment,
a purchasing unit which will operate across the UK and provide
at its core software--
89. When did you do that?
(Professor Fender) We have been setting it up
in the last six months or so. We have the agreements, the specification,
budget, now we are looking for a director.
90. Did the NAO's report have any influence
on this at all?
(Professor Fender) No, we have always taken purchasing
as a serious element of delivering value for money.
91. You have been the accounting officer
for quite a few years, yet it is only being set up now.
(Professor Fender) There is quite a long history
of purchasing. The sector took an initiative itself, CVCP promoted
purchasing rather vigorously but it was felt we could do even
better if we combined forces and set up this new unit.
92. You referred to the need to spread best
practice and it always sounds like motherhood and apple pie. How
are you actually going to do it and make sure that it does get
spread and make sure that it does get implemented?
(Professor Fender) I have given you an indication
of how we can assess progress. We can do it through the initiatives
where we do fund specific projects, we can look to see whether
chronologically we are seeing an improvement. That is happening
in fact. My colleagues tell me that they can see distinct improvements
in a number of areas which in part at least must be due to our
advice. That is one way: the other is indeed simply to observe
the practice either through our regular visits to institutions
on an audit cycle or just in the way in which my staff visit institutions.
They can pick up a feel for the particular management and the
things which have been done in universities and get an impression
at least about that.
93. I do not mean this to sound unfair but
do you not think that the academic world is just a bit too laid
back and a little bit too relaxed about putting any zip and drive
behind all of this? Ivory towers and things like that.
(Professor Fender) No, I do not and I think the
evidence proves it. I want to go back again to what higher education
has delivered over the last decade: double the student numbers;
the amount of research has gone up; it is the main provider of
basic and strategic research; 80 per cent of the publications
come from universities or associated bodies like hospitals. All
that is evidence of good energy.
94. A good trailer and a good bit of propaganda
for education and I am all for it. It is a good thing. However,
we are actually talking about how we build the buildings and how
they are brought into commission. I do think there are several
areas here where it is just a little bit too easygoing and a little
bit too relaxed, but there we are.
(Professor Fender) If that is your impression,
I hope future visits will demonstrate that it is not a correct
impression.
Mr Love
95. I am going to ask the last question
in a slightly different way and by means of introduction to it
just remind you and everyone here that as I understand it there
are 139 institutions in the higher education sector. By your own
admission those institutions estimate that £4.2 billion worth
of expenditure is needed by the estate. It was indicated earlier
on in the report that something like 50 per cent of the funding
for that may indeed come from the private sector. We know that
competition is increasing within the sector and I have to say
from previous reports to this Committee and indeed previous publicity
that the academic world's brush with the commercial world has
not always been successful. All of those points have been raised
as an introduction to asking the question: do you think the approach
you have personified here this afternoon, if I might put it down
as a gentlemanly, hands-off approach, is still applicable, recognising
the changes which are taking place?
(Professor Fender) I would not describe it as
gentlemanly and hands-off. I would describe it as a deliberate
strategy of maximising the independence and effectiveness of institutions.
It is not just a laissez-faire, let us not interfere, approach.
Deliberately working through strategy, setting standards through
good practice, good advice, promoting that, following up with
audit, working on providing the data which allows institutions
to compare one with another, working on bench marking approaches,
is not just hands- off, that is a deliberate attempt to maximise
the value which is delivered for the taxpayer's money.
96. What you said and what comes out in
this report and specifically in your own report is that you want
to do everything by providing advice, by seeking consensus, by
being able to reach agreement. The issue that has bubbled under
the surface around the table here this afternoon is what other
roles the Higher Education Funding Council has. I would ask you
to describe your role and in particular what sanctions you have
available where you perhaps do not think that an institution is
carrying out its functions properly.
(Professor Fender) Curiously enough institutions
do seem to accept our advice. We do in effect have incentives
because you have to demonstrate good practice in order to be successful
at winning the very small amount of funds which we offer.
97. That is only for those capital projects
where you are providing funding.
(Professor Fender) Yes.
98. There is no funding coming from your
organisation. You do not have that sort of role.
(Professor Fender) It does set a standard, does
it not? It gives an indication of what is required to be successful.
Academics are good learners. They pretty soon learn to develop
practice which is likely to be successful.
99. We were provided with an annex and I
am sure you are only too well aware of this but I should like
to read it out. It is talking about your responsibilities. It
says the Chief Executive "... must satisfy himself that institutions
have appropriate arrangements for financial management and accounting
and that the uses to which the Funding Council's grants to institutions
are put are consistent with the purposes for which they were given".
I would have thought that within that wording you would have quite
strong powers where you felt it necessary to intervene.
(Professor Fender) Yes, and you would be surprised
how many people come and try to urge me to use the sanction of
withdrawing funding as a means of promoting a particular kind
of behaviour. I do not think that is the right route. First of
all, who suffers if we were to do that, if we were to go through
to that limit? The answer is that the students would suffer. I
do not believe it is necessary to do that. The evidence suggests
that institutions do take advice, that our methods of promoting
their accountability work. We can be quite tough in our advice.
One or two heads of institutions might not altogether relish conversations
with me if I believed that they were not delivering what is expected.
Yet I do not believe you need to go further than that, you do
not need to withdraw funds.
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