Examination of Witnesses (Questions 100-119)
MR PETER
GERSHON CBE AND
MR HUGH
BARRETT
WEDNESDAY 24 OCTOBER 2001
100. When the Cabinet Office scrutiny was published
it was part of a great efficiency move in Whitehall and Treasury.
Who should have monitored the progress of departments in achieving
these savings? With whom would the responsibility have lain? Would
the Cabinet Office itself have conducted any scrutiny or would
it have left it to someone else? Did anyone think of establishing
a method of measuring whether these savings had been made or not?
(Mr Glicksman) I think the NAO's Report itself covers
this point in the page where they summarise the Efficiency Unit
Report. Departments were asked to produce an initial report on
progress and achievements to the Efficiency Unit itself and a
final report after two years, so the responsibility was placed
on the Efficiency Unit.
101. So how far did they get in those two years
in achieving the £65 million?
(Mr Glicksman) I think I would have to look to the
OGC.
102. Anyone, volunteers, people at the back,
perhaps the constable in the corner would like to make a guess
on behalf of the Government!
(Mr Gershon) What I can tell you is in preparation
we did do some research to try to find answers.
103. "Try" to find.
(Mr Gershon) I regret to tell you that we have been
unable to find that sort of information to establish either whether
it existed at all or whether it has just become lost in the mists
of time. We cannot answer your question.
104. The thought of all these accounting officers
playing hunt the thimble is grotesque. Here we set ourselves targets,
you set Government targets and everyone proceeds to forget about
them. Whose fault was that? Someone had to be at fault or did
a consultant tell them to forget about it? Who should have followed
it up?
Chairman: You are going to earn your salary
now!
(Mr Gershon) I can only tell you how we are trying
to make it better in the future so that this situation does not
arise.
105. What are you doing in the future that they
did not do before, then we will know who to blame in the past?
(Mr Gershon) Firstly, this is not just, in my view,
about monitoring. I think you have to have some sort of institutionalised
mechanism that sustains focus on this. What we have now got in
place is firstly a government-wide tool for measuring value-for-money
improvements from better procurement. We have never had that before.
We have that tool in place now, we have used it once in respect
of the last fiscal year 2000-01. In the light of that there are
certain things we are doing at the moment to refine the tool for
when it is applied in the spring of next year, and we will continue
to build on it. As far as I know, there has never been a consistent
tool in place to measure value-for-money improvements. Secondly,
we now have through the OGC and its Supervisory Board a way of
maintaining sustained top-level focus. To my knowledge there has
never been, certainly in living memory and possibly in recorded
history, any mechanism by way of which a critical mass of departmental
permanent secretaries met. The OGC Supervisory Board meets three
or four times a year where we sit down and discuss strategic procurement
issues and how government as a whole is going to deal with them.
The professional services procurement programme was discussed
at the June meeting, it agreed an action plan, and progress will
be reviewed at the board meeting next summer. To my mind, those
sorts of methodologies were non-existent. The effect of permanent
secretaries collectively focusing on these issues is sending very
strong signals inside their departments' organisations as to what
the top of the office is now thinking is important. That is helping
to sustain focus.
106. I welcome that but bear in mind the last
time there was a bout of enthusiasm, a bout of efficiency, it
lasted two years and everybody forgot about, nobody bothered to
measure it. What are you doing to ensure that when you come here
again in two or three years' time you will be able to tell us
exactly what the situation is?
(Mr Gershon) After the 1994 Report, as far as I know,
there was no methodology put in place for measuring the value-for-money
improvements. As far as I know, a critical mass of permanent secretaries
never met collectively to discuss how the initiative might be
taken forward and what sort of the mechanism needed to be in place
to sustain it. I think that is an innovation. Certainly there
is a very clear incentivisation on departments from the Treasury
to get better value for money out of the procurement expenditure
in general because there is a clear statement from the Treasury
that value-for-money improvements gained within a spending review
period can be utilised by the department on other things. I do
not think we have ever had that sort of explicit incentivisation
before. What we are now putting in place, and you may say we are
trying to do it with rubber bands and sealing wax, is a system
to try to get a better handle using the data we can practically
get our hands on to see what government departments are spending
money on, we are starting to do analyses on it at government level
and departmental level to achieve more focus. As soon as you start
doing that, it raises all sorts of interesting questions from
the top of the office.
107. May I apologise for interrupting. I deliberately
let it run because although I have been semi-jocular in the way
I have presented my questions I am genuinely interested in the
answers and I thought that was a very interesting one and a very
worthwhile one. If it was £500 million in 1994 and £610
million when the Report was prepared, that means there has been
an increase of about 20 per cent. It would seem to be less than
about four per cent a year which does not seem all that enormous,
which is somewhat surprising. Would you know whether there has
been a steady rate of growth in the use of consultants or whether,
for example say—something Mr Steinberg referred to—the
introduction of PFI, which has enormous contractual problems and
therefore I suspect that legal consultancy work is at a premium
at the moment, that that is having a significant boosting effect
on the use of consultants? Does the NAO have any evidence? Because,
in fairness to you, the NAO is doing management assessment of
PFI at the moment. It is probably not prepared but it is due out
some time later this year. Are you able to help us? Has PFI been
a major boost to your knowledge in terms of spending on consultancy?
I do not want to force you into an answer you cannot stand by.
(Mr Burr) The figures we have in here do not include
PFI consultancy as such.
108. You mean all the PFI consultancy is over
and above the £610 million. So the £610 could be a drop
in the ocean because there is a lot of PFI around the place. I
looked into something like £15 billion worth of it in a series
of questions I tabled. This is interesting. You have got £610
million which does not include PFI,—
(Mr Gershon) At the risk of disagreeing with my NAO
colleague, it does include some PFI expenditure. For example,
one of the categories of expenditure identified by the Ministry
of Defence is on its Main Building Project, which is a PFI project,
and the NAO Report does identify that a growth of public/private
partnerships and commercialisation is a driver in the growth of
departments' use of professional services.
109. Exploring the integrity of this figure,
we have masses of quangos and a lot of them are very useful advisory
quangos which are there for technical reasons—perhaps the
NAO can tell us—none of the costs relating to the specialist
quangos that are there to advise government are included in this?
That would be treated as in-house, would it?
(Mr Whitehouse) In carrying out this survey, we wrote
to the major departments and executive agencies and some of the
larger NDPBs, the larger quangos. Our survey did not include all
quangos because we focused on larger organisations.
110. Does that mean that the consultancy commissioned
by the quangos as well as the consultancy commissioned by the
main departments, the parent departments, is incorporated within
the £610 or is it not?
(Mr Whitehouse) Some of the larger ones would be.
I would have to go back and look at the figures.
Mr Williams: Thank you, Chairman.
Chairman: Mr Richard Bacon?
Mr Bacon: May I declare an interest in that
some years ago I was for two years deputy director of the Management
Consultancies Association.
Mr Jenkins: Here comes the inside track.
Mr Bacon
111. May I start by saying that I have got Management
Consultancy Association figures and I notice that 90 per cent
of their revenue comes from the private sector. I now know, having
listened to this hearing for the last hour and a half, why it
was that so many of those member firms said they wanted nothing
to do with public sector consulting. Mr Gershon, can I start by
welcoming the existence of your Office because I have always thought
that of all the core skills government must have, the ability
to procure is absolutely essential, and I think it has been insufficiently
recognised, and the fact that you and your Office now exist is
a welcome development. Can I start by asking about the management
of risk during projects. In your code of practice under the heading
"Professionalism" it says: "Central civil government
will work to a high standard of professionalism when dealing with
suppliers. It will do this by, inter alia, effectively
managing risks during a procurement process and working with suppliers
to reduce risks during the business relationship". Could
you say what are the main risks, in your view, during the business
relationship.
(Mr Gershon) With a provider of professional services?
112. Correct.
(Mr Gershon) I think if you look on the client side,
firstly, the risk is that there is insufficient clarity about
the requirement and that can lead to unhappiness during the on-going
relationship. There may also be a risk that insufficient attention
is paid to managing the contract. Those would be two risks on
the client side. On the supply side the risks could be, for example,
that a very skilled person who is working for a consultancy organisation
that has secured the contract leaves that organisation and goes
to work for somebody else and that the replacement person is not
of the same calibre and cannot work as well with the client as
a guy he has replaced. There is that sort of risk.
113. That is a very interesting answer. In both
cases you are talking about people. On the client side you are
talking about management attention and on the supply side the
people from the consulting firms who work on projects. The Efficiency
Unit Scrutiny Report said there were nine critical success factors
for projects to work. I quote just three of them: "using
consultants only on those matters of most importance to the organisation's
business; using consultants only where management is determined
to take action to bring about change—to grasp opportunities
or to resolve problems; and managing the consultants effectively
so that there is close collaboration between the consultants and
in-house staff and that the task is tackled to a properly monitored
plan". Those things are all more likely if you have got the
commitment of top management on the clients' side to running well-managed
projects. Let me give one more quote from the scrutiny study.
This is talking about the private sector as well as the public
sector: "In the most effective organisations management skills
are high, and they manage consultancy projects very tightly. To
maximise ownership and accountability the same individual, where
possible, will often see the project through from inception to
implementation". Yet in the public sector there are many
examples of where the procurement of the project, or on-going
management after the procurement, involves managers changing very
frequently, the most famous one recently being the one we are
going to look at shortly on the implementation of the National
Probation Service's information system strategy, whereby in seven
years there were seven programme directors. Do you think there
is something about the way in which the Civil Service moves staff
around—that is inherent in the Civil Service culture and
that you would not find in the private sector—that is fundamentally
inimical to successful project management?
(Mr Gershon) Yes because if the Civil Service is to
have an open and transparent process for the selection and appointment
of people, and seeks to openly advertise every vacancy, then I
expect if they wish to advance their careers they are going to
apply for jobs. In my experience of private sector organisation,
yes of course they want to appoint the best people to the job,
but the processes are not as completely transparent as I have
experienced in the Civil Service. Some say, "No, we need
to promote that man in situ because he is critical to the project,
we need to keep him in place but he should not suffer financially
or career-wise as a result of that."
114. You are saying that does not happen in
the Civil Service?
(Mr Gershon) In my limited experience that seems to
happen less in the Civil Service. Because there is a lot of openness
about the grading of jobs and those sorts of issues it seems to
me that the Civil Service is transparently more open than it would
be in a comparable private sector organisation, for very good
and very understandable reasons. But as there is increased focus
now on successful delivery agenda, there is a question of do we
need to put in place mechanisms that might help retain key people
in key jobs, and something ought to be done about succession planning
so that if a person does move for legitimate career reasons there
is someone to backfill him.
115. Can I ask you about one current major project,
the Defence Information Infrastructure which I understand that
as it grows, older and wiser lags are saying it could turn into
the largest IT procurement ever, and if that does prove to be
the case, given the history of IT procurement in the public sector
(which, generously, one would call chequered), what special measures
are being taken to ensure that the Defence Information Infrastructure
is kept on the rails and that the project objectives are delivered
on time and to budget?
(Mr Gershon) That is not a question I can answer specifically.
I think you would have to look to my colleague Kevin Tebbit for
the specific answer. What I can tell you is that the Government
produced a report with a set of recommendations about how government
could be a more successful user of information technology, the
so-called Successful IT report. That has been translated
into a government-wide programme called SPRITE—Successful
Projects in an IT Environment—which all departments are
committed to implementing, including the Ministry of Defence.
116. I am just concerned that should I be on
this Committee in eight years' time that someone will not come
forward explaining why this project was such a disaster.
(Mr Gershon) You would need to look to the Ministry
of Defence to give you a specific answer on that particular project.
117. The report talks about value-for-money
gains through aggregation. In the private sector the use of business-to-business
exchanges has been one of the most successful areas of e-commerce
in terms of achieving savings through aggregating large amounts
of procurement activity. To what extent do the value-for-money
going through aggregation you are looking at involve the Internet,
and, also, in terms of exchanging information between departments,
where the report identifies a clear lack, are you using web-based
solutions or intranet-based solutions for that?
(Mr Gershon) If I can take the first question you
asked, I think the approach that we are following about e-procurement
is quite a slow one. We are going to undertake a series of pilots.
To make successful use of e-procurement in government, it is as
much about culture and behaviour and also how you integrate some
of this very state-of-the-art technology with often quite old
technology in `back of the office' systems. Those are not trivial
issues. I was concerned when I came to the Office of Government
Commerce that in a rush of enthusiasm to embrace these new technologies
there was a risk we could be writing the next chapter in the book
called Government IT Disasters. We are undertaking a series
of pilots in departments to get a better understanding about some
of these technologies and, in particular, get a better understanding
about the cultural, behavioural and integration issues that need
to be addressed if this technology is going to be successfully
adopted. As we upgrade some of our catalogue arrangements we are
allowing web access, for example, to some of our framework agreements.
That is happening but a full use of a government-to-business sort
of approach will depend on the results of the pilots that we are
going to be running over the next six to 12 months in conjunction
with some departments.
118. On competitive tendering the Report says
on page 3: "Staff requiring professional services were often
driven more by pressures of time and a desire to renew existing
arrangements in deciding on procurement methods, rather than a
full consideration of value for money." The Efficiency Unit
study called for departments to recognise that there was a need
to minimise the amount of time consultants spent learning about
an organisation and its business, which plainly is in some sort
of tension with having an open competitive tendering process which
is perhaps solved to some extent through framework agreements.
Drawing on your experience in the private sector—and to
some extent this relates to what Mr Trickett was saying—if
in the private sector you found a consultant you liked and you
trusted and you had a good personal chemistry with and you knew
what results you were going to get, there would be nothing to
stop you using that consultant again and again and there would
be nothing untoward about it. Plainly in the public sector, because
you are using taxpayers' money, there is a probity issue that
does not arise in the private sector, whether or not that is good
for the outcome. To what extent does that inherent problem of
the patent need for probity in the public sector affect the quality
of outcomes when buying professional services?
(Mr Gershon) It puts a greater emphasis on looking
at some of the non-price issues in the determination of value
for money. If you are trying to make an objective comparison between
a firm you may have worked with in the past and a firm you have
not, you have to establish the extent to which you can work with
the people in the company that you have no experience of and that
means taking up references and quite extensive interviewing of
the individual consultants that are going to be deployed on the
task, and in that sense the integrity of public procurement imposes
some additional disciplines that are not always there, where sometimes
in the private sector you would rely on a long-term relationship
and satisfy yourself through other means that it was delivering
value for money. That is a constraint but I do not regard that
as a major constraint.
119. Could I ask you about intellectual property
because the OGC Statement of Best Practice talks about the need
for the government side, the client side, to address intellectual
property issues, both those that emerge during the course of the
project and also pre-existing ones, and recognise that there will
be some intellectual property rights that the client paying for
will want, and others that the consultant will want. Your SCAT
requirements currently do not recognise your own Statement of
Best Practice. Is that something you are addressing?
(Mr Barrett) SCAT is a framework agreement. The current
version of the terms and conditions does, as you say, play a position
which is more favourable to government than the best practice
guide would recommend. So we are at the moment not complying with
our best practice guide.
|
