Examination of Witnesses (Questions 100
- 111)
THURSDAY 11 MAY 2000
SIR ANDREW
TURNBULL, MR
JOHN GIEVE,
MS MARGARET
O'MARA AND
SIR STEVEN
ROBSON
100. Tell us what the real cost of it is then,
so we know what we are looking at?
(Sir Andrew Turnbull) The real cost is £14 million
a year constant in real terms.
101. No other costs that we should factor in?
(Sir Andrew Turnbull) We have certain responsibilities
for the property, but a lot of the facilities management is now
rolled up into that, so it is not simply rent. It now includes
maintenance and so on.
102. Between January 1997 and the agreement
signed on 5th May, there was some delay caused by the incoming
government wanting to look at bits of it again. Did that create
additional cost? Did you have to do any patching maintenance or
things like that that you would not have to have done?
(Sir Andrew Turnbull) I think you will see there has
not been much patching maintenance.
103. We did not see every bit of the building.
(Sir Andrew Turnbull) This has not forced us to get
into a lot of otherwise wasteful expenditure. We have lived with
a building that is getting more and more run down.
104. Have there been costs in terms of inconvenience?
(Sir Andrew Turnbull) It has just delayed, by 18 months,
the time we can get into a more efficient building, but I think
that is not an unreasonable position to be in. Since we decided
to get this thing going again, we have moved actually very swiftly
indeed and overtaken a number of departments that had started
before us.
105. Are you still satisfied that this PFI route
is the best possible deal for doing what has to be done to that
building, and it is better than the alternative?
(Sir Andrew Turnbull) We looked at the public sector
comparator. We get a number of advantages doing it this way. One
is that there is a very strong incentive to finish this building
on time. The risk of cost over-run in the construction phase lies
with the contractor. Also a lot of the services are an integral
part of the contract. The heating system that is installed, or
the ventilation system, is taken by the people who have then got
to run that building. In consequence they have a strong incentive
to look at the problem on a whole-life operating basis.
106. When the business is completed it will
be about 2002?
(Sir Andrew Turnbull) Summer, 2002.
107. Are you confident that you will be able
to use this whole experience as a model for new PFI deals of this
sort being done on government buildings, that anyone would emulate?
(Sir Andrew Turnbull) We certainly hope so, in two
respects, and we have already notched up the first. One is that
the particular structure of the contract is a standard contract
devised by the Treasury Task Force, which we have used. We have
also separated out the funding from building design and facilities
management. We reached a deal with them with a dummy price—if
it costs this much to raise the money, that is what it will cost—and
an agreement about how we will then modify that. We had a separate
funding competition and that funding competition has produced
a cost which was lower than the dummy price we entered into in
the agreement. I think a number of other departments will look
at this arrangement, because it means you do not take the bank
that the group came along with, you choose your developer and
then you have a second free choice as to how the funding is not
only provided, but the method. We actually went, in this case,
for an index bond. We were not tied to a particular funder that
was part of the original consortium.
108. I think we will be interested to have an
analysis that demonstrates this. Is that something you could provide
for us?
(Sir Andrew Turnbull) We can provide an account of
how we did the analysis and the comparison with the public sector
comparator and the comparison with the previous cost of the previous
project.
Mr Plaskitt: That will be helpful. Thank you.
Chairman
109. Finally, a quick question on your IT. Did
you consider out-sourcing IT software development and hardware
purchasing advice in the same way you would advise some of your
government departments to do?
(Ms O'Mara) We have done that in the past. We had
a big exercise of market testing in about 1995. That is something
that we will be looking at again in the context of the Better
Quality Services initiative. As one can appreciate, one does not
do it too often because it creates too many uncertainties for
individuals.
110. The time is right to look at it again,
is it?
(Ms O'Mara) Yes. We thought that as part of Better
Quality Services we should be looking generally at it.
111. Because you have got some big initiatives
in mind in terms of IT?
(Ms O'Mara) No, because it is the time. We would reckon
to do it every so often, and it is something we have to keep in
mind to do.
Chairman: Sir Andrew, thank you very much indeed.
| 
