Examination of Witnesses (Questions 60-79)
MR PETER
GERSHON CBE AND
MR HUGH
BARRETT
WEDNESDAY 24 OCTOBER 2001
60. You would not normally keep records of who
was asked to tender, whether there was a tender?
(Mr Gershon) As the Report identifies, in some cases
a supplier was selected on the basis of an informal telephone
conversation. That is clearly stated in the report. That would
have resulted in a purchase order being placed, but if the person
had moved on, the knowledge of whether he had phoned multiple
organisations or just one would have been lost.
61. That is true whether you have got an organisational
change or not, it seems to me.
(Mr Gershon) Yes.
62. So again I am confused as to why there should
be a special category and that organisational changes mean that
the knowledge is lost. It does not seem to me that an organisational
change should come into it at all.
(Mr Gershon) Very often knowledge is lost because
people get moved around, responsibilities change. It is not unusual
in an organisational change for some knowledge to be lost, particularly
if a written record has not been maintained.
63. Will you in future be maintaining records
of how tendering is done? Is this going to be a policy, that records
always ought to be kept of whether particular procurements have
been through a full tendering process?
(Mr Gershon) Firstly, where there is competition,
there is use of frameworks, so there clearly is knowledge of how
those procurements were let. I would expect with a more comprehensive
set of controls in place around the use of single tendering action
that that would also result in better information in future as
to what had been authorised for use where single tender action
had been authorised. That should make it possible in the future
to get better information in this area.
64. I am interested that you emphasise continually
"better". Are you saying that if in five years' time
you come back to this Committee for a further review of procurement
action, you will be able say that we have records now of how the
procurement was done in the larger-scale contracts of £10,000
and above, or whatever the equivalent then is?
(Mr Gershon) I do not think at this stage I can give
you that guarantee that it would occur in 100 per cent of the
cases. I can say it will be better than it is today for the reasons
that I have addressed.
65. Will it be your policy, will it be your
advice to Parliament that they always in 100 per cent of cases
of more than £10,000, or whatever limit you set, that they
always ought to retain documentary evidence of how it was procured?
(Mr Gershon) Yes.
66. It will be policy in future?
(Mr Gershon) Yes.
67. You said earlier that the demand for specialist
expertise exceeds supply within government offices and therefore
you have to go out and purchase professional services from elsewhere.
Would it, in your view, in general be cheaper if these specialist
services were provided in-house? Do you find in general where
you have got the specialist skills it is usually cheaper to go
in-house?
(Mr Gershon) You have got to remember that the private
sector or the suppliers of professional services take the risk
about utilisation of the people. So that to compare like with
like you would have to have a situation where we could see full
utilisation for the comparable skill.
68. Yes?
(Mr Gershon) There are a number of areas where if
wage rates and certain terms and conditions of employment were
closer to parts of the private sector than they are today, it
would be possible for government to have more of these skills
in-house.
69. Yes?
(Mr Gershon) But not completely. There are always
going to be certain specialists where you do not have the requirement
to use these people on a full-time basis. You need them for a
project and then they would go and work somewhere else. But, yes,
there are certain skills where the Government's ability to have
these skills in-house is constrained by Civil Service pay and
terms and conditions.
70. There are cases therefore where if we could
get the people in-house it would be cheaper to do it in-house?
(Mr Gershon) Yes.
71. Given that that is the situation, what is
the minimum amount that the Government has spent on management
consultancy over the last, say, five years? Which year had the
smallest amount paid for management consultancy skills and what
was that? We are told in this year it was £231 million.
(Mr Gershon) The only two points of reference, as
far as I know, are the results of the 1994 study and the results
of the NAO Report.
72. So you do not know how much is spent on
management consultancy in any other year apart from that?
(Mr Gershon) No, because there has not been a process
of doing regular analysis overall of government's procurement
expenditure. That is one of the things I am trying to put in place
through the OGC so we do get a better handle, as good a handle
as we can get, until the stage is reached where all departments
will have modern financial and management information systems
that allow us to do certain things in a more intelligent way within
procurement and help departments get a better focus not only on
this area of their expenditure but all areas of their expenditure.
73. Given that you do not know what the figures
are for the other years—and I accept that is something you
do not at present know—is it reasonable to say that the
amount discovered in the NAO Report is roughly the sort of figure
you would expect to be true on an annual basis?
(Mr Gershon) I do not have any information that would
enable me to give you an informed answer to that question and
I think it would be wrong of me to speculate.
74. If it were true that you found in future,
when you get better information, that you are spending around
£200 million every year on management consultancy, would
that indicate to you that it might well be worth trying to get
some more in-house work done because if that is the sort of level
you are talking about clearly you will be able to keep quite a
number of people busy 100 per cent of their time if they work
in-house.
(Mr Gershon) I think that management consultancy is
a term that covers a very broad range of activities and, as the
report identifies, today's drivers for the use of consultancy
are different from the drivers that existed in government even
three or four years ago. I think, given the way the demand on
the public sector is changing, I would expect over the next three
or four years that some of the drivers would change still further.
I think that, if you are going to bring more in-house, you have
got to be satisfied that this is an area where you can see over
quite a long period of time you are going to have the need for
that particular set of skills and allow for the cost of how we
refocus and reskill these internal management consultants on to
new areas of activity. Management consultancy does cover a very,
very broad spectrum of activity. We want experts as opposed to
generalists. You cannot just take someone who has a title of management
consultant and apply him to any and every assignment that falls
under the heading of management consultancy.
Mr Rendel: Chairman, I shall give up.
Mr Steinberg
75. I have to say, Mr Gershon, this is hard
work, it really is. I am sat here and I have never heard a witness
give such guarded responses to questions and non responses. The
simple question I want to ask is, the National Audit Office have
said that you should be able to find something like £57 million
worth of savings over the next year on the £610 million that
is spent. Right?
(Mr Gershon) Yes.
76. It seems that nothing has been done since
1994 when recommendations were made and you seem to argue you
cannot answer for that because you were not there. That is usually
the situation that most accountancy officers find themselves in,
they are answering for periods when they were not there. Nothing
has been done since 1994 to make savings so what are you going
to do to make these savings the National Audit Office are requesting
that you do?
(Mr Gershon) First of all, I would like to say the
fact that I was not there at the time is not the reason for not
knowing the answer. I have been asked some specific questions
where I did not have the knowledge to give a specific answer and
I answered those questions truthfully. I am sorry if the Committee
thought I was being guarded but I think it is better to answer
the questions truthfully that I do not know the answers.
77. Should you not have found those answers
out before you came to the Committee to give evidence?
(Mr Gershon) I was asked did I know what Government
expenditure was in each of the five years on management consultancy.
I cannot find any source of that data.
78. Does that not clearly prove that the history
is pathetic and it is about time something was done and should
data not have been kept in the first place?
(Mr Gershon) As I have explained, changing a department's
internal financial management is not something that is just driven
by the need to have better management information. These are expensive
IT based projects, they need to be undertaken with care and consideration,
not rushed. There is often significant expenditure involved and
departments are moving, driven by their overall business needs,
to update their internal financial management systems. As they
do better information becomes available. I have explained to you
an initiative that was undertaken by the OGC to try to get a better
handle using whatever data we can currently obtain from existing
departmental systems.
79. Can you tell us in simple terms, in layman's
terms, what are you going to do to save the taxpayer £60
million next year from consultancy fees that, frankly, are being
overpaid?
(Mr Gershon) I am not going to respond to the comment
about overpay.
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