Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 60 - 69)



  60. How intensive is the competition? Where is the primary competition coming from?
  (Mr Topp) The competition comes from a whole variety of organisations depending on the particular opportunity. The biggest market in a way that most people go up for is with the telecommunications operators rather than the regulators. A lot of the competition is focused on the operators and they see working for the regulators as somewhat of a side issue whereas we are focused on the regulators and do not do work with the operators. That is the thing that distinguishes us from most of the competition. It is a very fragmented market.

  61. Mr Hendon, you have certain facilities/services supplied to you at cost, what steps have you taken to ensure cost means precisely that?
  (Mr Hendon) There are a couple of things. First of all we negotiate on the individual services that are being supplied in a fairly intensive way and because we have full access to the books of RSI we are able to understand exactly how the cost is built up or the cost that underlies a proposal from RSI is built up. That enables us to have an intelligent discussion about reducing cost. You will see in the report there is a table—I am not sure whether I can find it—on page 28 there is a table of some areas where we have reduced costs in the way that I have described, in other words by having a discussion with RSI which is far more open than one would have normally have with the supplier and the supplier being far more open about where the costly parts are of what they are proposing, which bits of the requirement they are attributable to. It is possible to arrive at lower costs. Secondly, we have carried out value for money studies to look at the overall costs and make sure that the benefits which were originally being aimed for are being achieved. Capita have carried out one of those studies for us. If you would like Ms Davies could no doubt tell you about that.

  62. Please do.
  (Ms Davies) Okay. What we did was to look at the changed circumstances that have occurred because inevitably what you look at when you are putting a business case together and evaluating a proposal from a private sector bidder will change over time. So we undertook this study about nine months into the contract, I think I am right in saying, and what we discovered was that although there were changed circumstances we were still able to reach the same value for money conclusions as we had in the original business case. There were a couple of areas that we were able to point out were still risk areas and there is evidence RA are acting upon that.

  63. If with hindsight you were able to start the process again, and one understands inevitably there is a learning process, are there any important changes you would make in the advice you gave initially?
  (Ms Davies) I do not believe so. I believe that we were concerned about a number of risks, some of which you have touched on here this afternoon, that we made those clear and that RA should take action in managing those risks. I believe they have been able to do that both through the contract provided and the relationship they have been able to build with their partner. I think there were issues over the delays which were unfortunate that with hindsight maybe could have been avoided.
  (Mr Hendon) There is another way that we make sure we are getting value for money which is that we have the possibility in the contract to go outside the contract to other suppliers for new work if we wish to. Indeed, we did decide to do this in one case. In that particular case this was for some software which was entirely new to RSI but was bread and butter, so to speak, to the company, Hewlett Packard, that we went to. What we were able to do there was to both take the lower cost of the Hewlett Packard software and then to get RSI to integrate it into our systems, to make sure it worked properly with it and to handle the technical interface with Hewlett Packard. I think that was a case where we were both able to get better value for money but also to lean on the partnership to make sure that the technical result was a good one.

  64. Thank you. Before I conclude the questioning to you, I wonder if each of you would consider this question: in the light of your experience in this innovation, is there anything further that you would recommend the Committee should consider in terms of our advice for the future to others possibly following the same route? If we start with you, Mr Hendon, and work along. If you have nothing to say just say "nothing to add".
  (Mr Hendon) My own view would be that this is the right way to do this sort of thing but that we were quite unrealistic at the outset in our cost estimates for the project. It was wildly under-estimated how difficult it was. If people are attempting something like this, even now that it is rather well-known and people can have the advantage of reading this Report, for example, to spot what happened the first time, nevertheless they should recognise that it is complex and difficult to do. The cost estimates need to be robust at the beginning. In terms of timing, my own feeling from reading this Report is that the senior management team in the Agency were engaged in a lot of other things and for that reason this project was run a little bit separately alongside the main work of the Agency. I think that is probably not something I would do again if it were me doing it again, I would want to have the senior management of the Agency entirely integrated into the project because that is so fundamental to the way the Agency works. I do not believe running it as a bolt-on was the right way to do it. I would say that is the advice I would give if another accounting officer asked me what to do, I would say those two things. The third thing is that we have introduced extremely rigorous controls over not just expenditure but over the forecasting of expenditure and the allocation of expenditure to costs. Those sorts of systems are in place in the Agency for everything we do. It does not look as if they were quite as robust at the time as they are now. In terms of understanding exactly how the spend on something as amorphous as making a project such as this work: you really do have to understand not just that the expenditure is justified but to understand which bit of the project that expenditure relates to, and it would then be a lot easier to answer questions like the one Mr Griffiths asked about when we used up the first half a million. Frankly, I am not quite sure where I look for that information.

  65. From within the Agency, Mr de Grouchy, do you have anything to add?
  (Mr de Grouchy) If I may briefly, Mr Williams, yes. Obviously we are very sensitive to the issues which have been discussed here, issues in relation to procurement. The point I would like to emphasise, if I may, is the value for money side of it which has been mentioned. We have been, if you like, adopting a twin strategy which is seeking to invest in these areas that we have been describing but on the reassurance that we are getting value for money from the organisation and that has been very important to us. It is the nature of the agreement which does seem, as I inherited it, very cumbersome and quite legalistic, that has enabled us to do that. We are making progress, we are investing where we need to, and it is benefiting the Agency. From my own perspective, what I would say is that this framework is not necessarily a one size fits all, it is not necessarily the one for every organisation. We have particular circumstances in the RA and the combination of the IT services side and the wider market side is something which is perhaps particular to our organisation. I would advise people to look in that sense before they leap. In relation to the principles of partnership, I have to say my experience has been that side of it has worked very effectively. I think the reason—if I can just return to Mr Rendel's question—that it looks like a win-win situation, is perhaps that the way it has progressed and the confidence which we have been able to derive from the value for money studies is giving us the confidence to make further investment in the future which we otherwise might well not have the confidence to do, or we might seek to do from some other source.

  66. From a somewhat detached view of this, Ms Davies, do you have anything to add?
  (Ms Davies) Just to reinforce one of the points that Mr Hendon made that this is such a fundamental aspect for the organisation, such a fundamental relationship because so many of these business critical systems rely on it that the senior sponsorship, senior attention, is vital to its success. It is very important that organisations realise early on that that level of commitment is important. The future vision as to how it might work is something that really does need to be rehearsed so that everyone can understand the culture change that goes with it, not just the process change that is affected.

  67. Mr Topp?
  (Mr Topp) Mr de Grouchy has pinched some of what I was going to say. People come and ask me at the CMG what is the secret of this partnership that you have got that seems to be working well, and talking to other people about other possible partnerships it is clear that what we have got here works for this particular arrangement but it is not a universal solution. I would say a key thing is the organisations have got to be very clear on their objectives and you have got to get a match of long-term objectives of both parties to the partnership. Then you have to develop the trust between the organisations backed up by a good solid contractual framework which hopefully you do not have to fall back on.

  68. Finally, can I switch to the Treasury as this was an innovation. From your point of view, do you feel you have learned any worthwhile lessons from this in terms of altering the guidance you will give in future to others considering going down this route?
  (Mr Glicksman) I think the guidance has developed since this particular project was put together. I think the main issues are the ones which are explored in the Report, particularly about getting objectives clear and getting the congruence between the objectives of the two different parties who are going forward in the partnerships are as our witnesses have already stated. I think the Treasury's guidance on this which was produced around the middle of 1998 clearly did take on board some of the experiences that the Radiocommunications Agency had had.

  69. We are now over two and a half years on, have you revisited that advice since then in the light of the intervening years?
  (Mr Glicksman) Certainly we have not produced revised guidance. I would have to find out whether there is any further revised guidance in the offing, I am afraid I am not sure.

  Mr Williams: I think it would be quite helpful if you would let us have a quick note on that for the record[1]. May I thank you all. It has been a very interesting and positive exchange of ideas. I am grateful for the evidence you have given us. Thank you very much.

1   Note: See Evidence, Appendix 1, page 11 (PAC 2000-2001/125). Back

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