Examination of Witnesses (Questions 160-179)|
MONDAY 30 APRIL 2001
TEBBIT, CMG AND
160. What system will you have to make sure
that people coming on to military bases to do work on behalf of
your contractors or subcontractors are not Russian spies or illegal
immigrants and people not paying income tax? What system will
(Mr Tebbit) Obviously there will be the normal security
arrangements in terms of passes and the people the contractor
will employ will obviously have to meet certain requirements of
ours. I do not think that will change radically under the new
arrangements from the existing arrangements.
(Mr Andrews) I think I would have much more confidence
in the new arrangements because, as I said, we will be looking
to a prime contractor to put in place a supply chain with which
he has worked before, with which he is familiar, where they have
standard processes and procedures, where he has confidence in
the workforce of those subcontractors. It is the efficiency with
which they discharge their work against the contract that will
determine what profit he makes at the end of the contract.
161. It does depend on the contractor having
a long-term relationship with the subcontractors and not simply
letting to the lowest bidder. I am concerned about the bad driving
out the good. We have assurances from you that that will not happen?
(Mr Andrews) We will select the prime contractor and
his supply chain and that team will be contractually locked in.
(Mr Tebbit) It will be the whole thing, yes.
162. I wonder if I could touch on the whole
exercise and come back to this issue of benchmarking and the point
that was made by my colleague about local government. What comparisons
have you made of what has been happening today with what has been
happening in local government? It does strike me that local government
is far ahead of what you have described to us as having been the
situation even recently or even at the moment.
(Mr Tebbit) I think it is very interesting that you
should raise local government. I confess, we have tended to look
more so far at central government and I am satisfied that with
central government departments we are very much in the lead, even
on hotlines. One of the reasons I had trouble answering the question
was I have been finding other Departments have been asking us
about how to set up hotlines, so I have not had very much experience
of what other people have been finding to match against. I would
certainly be interested in talking to the Department of Health
about their hotline and see whether there is anything we can learn
in the public sector sense about that. As I say, we have tended
to be in the lead. In terms of local government, I really have
to say that I am not aware myself, but I do not know whether Mr
Andrews can add anything to that.
(Mr Andrews) We have not benchmarked
specifically against local government but I would say there are
a number of bodies that cross the private sector, the public sector,
central government and local government, which are seeking to
build a joint approach towards improving processes in the construction
industry. The Ministry of Defence is a founder member of the Confederation
of Construction Clients, which seeks to do just that. We have
a concordat with our colleagues in NHS Estates and we are working
very closely with them to benchmark and compare approaches so
we can build on the best of both organisations.
163. Can I follow on from the point my colleague
made about breaking windows and your argument that there is not
the incentive then to go along and break more. In these circumstances
the incentive is for the contractor to provide security so that
windows are not broken at all.
(Mr Tebbit) Indeed.
164. I am not clear about how this set of issues
about prevention comes into this whole exercise as distinct from
coming along after the event.
(Mr Tebbit) As I understand it, in establishing prime
contracting there will be agreements at the outset on all of the
different output specifications which have to be met with performance
measurements on which these are based, with targets and, indeed,
with reward sharing. What you are suggesting, that a given level
of security should be provided by the contractor, or rather a
given level of conditions should be sustained by the contractor,
that would be written into the prime contract at the outset together
with such details as were agreed about how that is to be done.
The answer is that will be part of the contract from the beginning.
There would then be open book accounting to show that the costs
involved were agreed beforehand, often by reference to a standard
cost base that is available throughout the industry as I understand
it and will be agreed by both. One would proceed from that. I
think you are right that to some extent we will be saying "it
is up to you, the contractor, to decide precisely how you want
to meet certain performance levels" rather than us specifying
exactly how they have to do it. Mr Andrews?
(Mr Andrews) I think too there is an important cultural
change here. Certainly there is an issue about incentivising the
contractor to put better windows in that are less likely to break
but, as we have described, we are adopting an integrated project
team approach to these relationships. We want to build a collaborative
working relationship with the user of the building, with our intelligent
customer capability, our professional staff, and with the contractor
and his supply chain. That team comes together with shared objectives
and shared risks and shared rewards because if the contractor
delivers a better building more cost effectively, we pay less
for it and he would make a better return. It really is building
a team to manage a particular site. I would certainly see the
prime contractor and his supply chain coming up with suggestions
for how the user, by improving the way he used the building, for
example, could actually reduce the cost of running it. It is a
team approach, it is collaborative working between the user, the
procurement organisation and the industry.
(Mr Tebbit) You might say brick up the windows and
put in better interior lighting, I do not know, but those sorts
of ideas will be possible with this.
Mr Davidson: It should be do not break all the
windows as well.
165. Gentlemen, I started off this afternoon
thinking is it not a damned nuisance that reports come 18 months
after they have been first put out because, of course, it means
that you are in a more fortunate position, if I may say, than
many who come before the Committee in that you are able to say
"well, actually we have made these changes". I have
to say the latter part of your questioning has made me think that
actually more reports should come at 18 months distance because
I think it has raised some fascinating issues. Mr Tebbit, you
said that in these circumstances the Works Managers were simply
abrogating their responsibility. This was with reference to the
estimates. Do you recall that?
(Mr Tebbit) Yes, I think I do recall that.
166. But then a few minutes later you said that
they were not necessarily misbehaving and, Mr Andrews, you said
they were competent people and they were able to do the job. Can
I just take you back to paragraph 1.3: "The Department have
stated that dishonest and illegal activity will not be tolerated
under any circumstance, irrespective of any loss or gain to the
Department or others. Furthermore, the Department undertake to
investigate all cases of suspected fraud, theft and irregularity
and, where appropriate, to prosecute cases or take disciplinary
action." I appreciate that is actually talking about fraud,
illegal activity, but presumably the MoD does have disciplinary
and capability procedures as part of its human resources package,
does it not?
(Mr Tebbit) Yes, it does.
167. And you are seriously telling me, in Mr
Andrews' words, in some cases they may not have been acting to
the letter of their job. My God, a coach and horses was being
driven through their job. In your own words, Mr Tebbit, they were
simply abrogating their responsibility, and yet you tell us that
nobody has sustained disciplinary action as a result of that.
(Mr Tebbit) Firstly, we appear to be talking about
one Works Service Manager here.
168. I am not.
(Mr Tebbit) Yes, we are. You said we were talking
about a Works Service Manager who obtained estimates from subcontractors.
I do not know if it is one manager or 30 different managers, I
cannot tell you.
169. What we are talking about here is that
the percentage of cases where the Established Works Consultant
provided an element of cost were nine, 18 and 35 in low, medium
and high value transactions. Are you saying that you are confident
that the sample which the NAO based these figures on is wholly
unrepresentative of other Works Consultants?
(Mr Tebbit) No, I am saying that the responsibility
for doing the job right is the responsibility of the line manager,
of the Top Level Budget holder. He has the responsibility to decide
how he is going to make sure that these things are done properly.
There are prescribed rules and procedures about how in detail
the rules should be carried forward. Here we had cases where Works
Service Managers were not operating by the book. They may have
had reasons for deciding not to operate by the book, they may
not have had, I do not know, but they should not have done it.
170. We are talking about three sites here,
(Mr Tebbit) I am sorry, you are on which page?
171. We are talking about a 91 per cent failure
rate in low value transactions and 82 per cent
(Mr Tebbit) Which page?
172. Page 41, figure ten. An 82 per cent failure
rate to make estimates in mid value transactions and a 65 per
cent failure rate in high value transactions. Now are you saying
this is wholly unrepresentative of what is going on in terms of
the failure rate to make estimates in such transactions throughout
the MoD and that the NAO has plucked these examples out of the
air for good measure?
(Mr Tebbit) No, I am not saying that. I am not assuming
that the consultant should have provided estimates in every single
case. That is not the requirement. There is a judgment to be made
about how often they should produce an estimate. They made judgments
in these cases at nine per cent, 18 per cent and 35 per cent.
173. Perhaps I am mistaken in assuming that
figure 9a, which we went through with Mr Steinberg
(Mr Tebbit) I thought we were on figure 10.
174. We are on figure 10 but my understanding
was that we are basing this on figure 9a and it went on through
to figure 10 but the reason we are basing it on figure 9a is because
property management staff based an estimate cost of each job on
standard reference costs.
(Mr Tebbit) Yes, exactly, there may be a standard
175. That is the beginning of the process, is
(Mr Tebbit) Yes.
176. An estimated cost.
(Mr Tebbit) No, I am sorry, a standard reference cost
is not the same as the Establishment Works Consultant providing
his own estimate of cost. I do not know what percentage was standard
reference cost as opposed to this individual consultant doing
his own estimate. We know that nine per cent of the low value
transactions were done by the consultant, I do not know how many
were referred to the standard references.
177. Let me say this, Mr Tebbit. It seemed to
me that figure 10 in there, where it says that nine, 18 and 35
per cent of the transaction costs were estimated on low, mid and
high value transactions, was actually an indictment of the Department
and its practice, not an endorsement. That was my understanding
of what it was there to show, namely what was going wrong. Furthermore,
if we go on to read the next paragraph, what we then find is that
even in 88 per cent of those transactions where they did meet
a building estimate, what you then had was they did it without
the benefit of a site survey. This was hardly a glowing part of
the report. We are losing track here. What I want to know is why
have no disciplinary procedures been done against the people who
in your words abrogatedsimply abrogatedtheir responsibility?
(Mr Tebbit) Various reasons. Firstly, as I explained
before, it is delegated to Top Level Budget holders to decide
how they wish to do the work.
178. No, no. Stop.
(Mr Tebbit) Secondly
179. We are not talking about the process.
(Mr Tebbit) I think you have made your point, I would
like to answer.
5 Note by Witness: See Evidence, Appendix 1,
pages 25 to 26 (PAC 00-01/169). Back