Select Committee on Public Accounts Twenty-First Report

Examination of Witnesses (Questions 100-119)



  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.

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