Examination of Witnesses (Questions 60
- 69)
MONDAY 12 MARCH 2001
MR DAVID
HENDON, MR
CHRIS DE
GROUCHY, MR
PETER TOPP
AND MS
LYN DAVIES
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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