Examination of Witnesses (Questions 1
- 19)
TUESDAY 15 JANUARY 2002
MS VANESSA
LAWRENCE, MR
DAVID WILLEY
AND MR
STEVE ERSKINE
Chairman
1. I will now start this session of our inquiry
into the work of the Ordnance Survey. Can I point out that the
Committee has received quite a few memoranda and they are on the
table at the back if anyone wants to have look at copies of them.
Can I also place on record the Committee's appreciation to the
Ordnance Survey for looking after us this morning and for their
hospitality. We are very grateful. Could I ask you to pass on
to all your colleagues our thanks for taking us round and answering
our questions. Can I now invite you, Ms Lawrence, to introduce
yourself and your team to the Committee.
(Ms Lawrence) I am Vanessa Lawrence.
I am the Director General and Chief Executive of Ordnance Survey.
(Mr Willey) I am David Willey. I am Deputy Chief Executive
of Ordnance Survey and Director of Business Change.
(Mr Erskine) I am Steve Erskine. I am Managing Director
of Graphic Brands at Ordnance Survey. Graphic Brands delivers
electronic and paper graphic products to the retail market place
for consumers and small businesses.
2. Do you want to say anything by way of introduction
or are you happy for us to go straight to questions?
(Ms Lawrence) I should like if I may to do an introduction.
First of all, may I thank you for visiting us here in Southampton.
I am delighted that this morning's tour was of some use. Ordnance
Survey has a very long history and a very proud heritage, but
we are now very much part of the information content business.
The Ordnance Survey brand is known throughout Great Britain and
in fact throughout the world. I am delighted to say that in December
2001 there was a MORI poll amongst Members of Parliament in which
Ordnance Survey came out as the second best regarded organisation
out of 70 organisations considered by MPs. Ordnance Survey is
responsible for creating and maintaining the master map of Great
Britain and an independent assessment showed that we underpin
£100 billion worth of gross domestic product per annum in
this country. The master map is a very dynamic database. We make
5,000 changes to it every day, very much reflecting the dynamic
landscape of Great Britain. Ordnance Survey produces paper and
digital products from it but also our partners in turn take that
data and turn it into other products, good examples being A-Z
and AA street atlases that you may know, and also many organisations
put the data into a computer system and it is sold to people like
emergency services, local and central government and used for
things like siting new superstores in high streets and so on.
Ordnance Survey is a £100 million business employing 1,900
staff. We have to make a profit under our terms of the Trading
Fund. We use those profits to invest back into our business, into
our infrastructure, and also into our data. In the last 12 months
we have completely recreated the master map of Great Britain,
very much reflecting the technological changes that are facing
both ourselves and our partners. We have reorganised the business
to make it more customer facing. We have also strengthened our
management team with experts from both the public and the private
sector. We have produced and implemented our E-strategy which
I think you heard about this morning, and we have also launched
our new Partner Programme so that it is easier and more advantageous
for our partners to work with us. The first part of that was our
Development Partner Programme which came out in November 2001.
In December 2001 it was announced that we may move to being a
Government Owned PLC. We welcomed that announcement because we
do believe we are here in the nation's interest and we are very
firm on that. However, we need to ensure that together with partners
we are agile enough and have the right kind of products to meet
our customers changing needs. We also have to prevent overseas
competition from eroding our business and that of our partners,
and we believe the Government Owned PLC will give us greater flexibility
for things like investment and also help us to recruit and retain
staff in scarce resource areas. The geographic information industry
is very much growing and the use of location based information
is growing. In fact, many of us have said that location is the
fourth driver to business along with revenue, time and costs.
We also know there are many emerging markets in location using
things like the 3G mobile phones and also web-based systems. Our
vision is very much that, together with partners, more people
will use location based information than ever before. This would
not be possible without the dedication of our own staff and also
the collaboration that we receive from the trade union side here.
We face many challenges but our staff came together absolutely
in December (and I think you learned about this this morning)
for the OS Experience so that we all go forward with one vision
very much understanding the challenges that we face and the way
we need to work with customers. Finally, I should like to say
that I am very proud to head Ordnance Survey and we are delighted
that you have come here today so that we can explain more about
it. Thank you.
Mr Betts
3. Coming on to the point you made about the
possible change to a Government Owned Public Limited Company,
you explained why you thought the change might be beneficial.
If we came back to meet you in five years time and that change
had taken place, what do you think the impact and effects would
be?
(Ms Lawrence) At the moment we are at the end of phase
one of the Quinquennial Review and in phase two we are going to
look into all the costs and benefits. From the work that we have
done as a team before the announcement we do believe that it will
allow us to be more agile at responding to changes that are needed
by our customers because back in the early nineties there was
a huge amount of under-investment in Ordnance Survey. We are addressing
that with a very aggressive investment programme which you have
heard about this morning, but the challenges that our customers
are asking us to respond to are so great that it is important
that we are able to get the investment more quickly than ever
before. We are also in a very scarce market for experts. This
country does not have enough trained geographic information specialists,
so as a result we have struggled to manage to recruit them because
of the salary differentials with the private sector. As a result
we believe that it will allow us to professionalise a lot of our
areas because it will give us a greater opportunity to recruit
and retain staff because we will not be so constrained in staff
salaries.
4. So there are two issues really. Currently
you are constrained from borrowing the amount that you require
to invest and you are constrained from paying people the salaries
you think you have to pay to get the right people.
(Ms Lawrence) Amongst other things. I do not know
whether my colleague David would like to give some greater insight
into some of those issues.
(Mr Willey) To build on your first point, the ability
to borrow for investment has not been an issue for us in our first
two or three years now as a Trading Fund. We have enough money
in the business to be able to invest where we need to. However,
that will not be for ever and a day. The ability to be able to
borrow to invest will be very important in this business as we
continue to grow. I might also look at it five years ahead from
a different perspective and say, "What would happen if we
continue as a Trading Fund in five years time?" There I do
think that the crucial bit is having the right staff to lead the
organisation, having the right skills, particularly in some of
the scarce areas of sales and marketing, for example, and some
of the technology areas. If we continue as a Trading Fund, if
we continue under some of the restrictions that exist for us as
a Civil Service department, it does mean that we are less likely
to be able to attract, retain and recruit those sorts of people.
That is where I think we will see the difference. In five years'
time we will see an even more customer focused organisation.
5. But you are moving to a more commercial environment.
There is this inherent conflict, is there not, in your business
between the public interest element of it and the commercial requirements
on you? If you look at what has happened to Consignia which has
gone down this route already, it has not exactly been a completely
smooth path for them. Do you anticipate similar problems?
(Ms Lawrence) I do not think I am well qualified to
discuss Consignia's business but certainly we are very much working
not so much at the technological edge, because I would never want
to be quite at the technological edge, but close to having technologically
revolutionalised Ordnance Survey over a 15-year period. Our staff
numbers are considerably less. They have reduced from nearly 4,000
twenty years ago, 2,500 ten years ago down to 1,900 today. Currently
NIMSA covers our national interest work that we do.
Chairman
6. Could you tell us exactly what NIMSA is?
It makes it is easier for the record to be kept.
(Ms Lawrence) NIMSA stands for National Interest Mapping
Services Agreement. It is an agreement with Government at cost
and it covers such examples as the mapping of the uneconomic areas
of this country in the rural areas. It covers our 24 hours a day,
seven days a week service for mapping in emergencies. David may
wish to give further details on NIMSA.
(Mr Willey) NIMSA is a contribution to those activities
which are essentially non-commercial, those things that we would
not do if we were an out and out commercial organisation. It includes
a contribution to mapping areas of the country where there is
not really any commercial need for that mapping to the degree
that we require it.
Mr Betts
7. Once you have got the public interest elements
clearly tied down by agreements and you are free to move off into
the commercial field to make your rates of return and so on, to
be freed up from borrowing, to be free to pay your staff what
you want, is there anything to stop you from going to a privatised
or partially privatised organisation?
(Ms Lawrence) As a Board we do not think privatisation
is optimal for this organisation. We believe we are here in the
nation's interest and if we were fully privatised and at the vagaries
of reporting to the Stock Market we do not think it would be in
the nation's interest. You mentioned our move into the commercial
end of the business. We are in a situation where we face competitors
from overseas, so it is important that, together with our partners
here in Great Britain, we work together to continue ensuring that
we are here and our business is sustainable.
Mrs Dunwoody
8. Are they state or commercial opposition?
(Ms Lawrence) They are commercial.
9. Are they subsidised by their governments?
(Ms Lawrence) Some of their holding companies are
subsidised but I believe that in the majority of their investment
they are doing global activities rather than just national mapping
work.
10. Which would be the biggest of your commercial
opposition?
(Ms Lawrence) I would prefer if I may to write to
you, Mrs Dunwoody, regarding our competitors because naturally
it would be indiscreet of me to mention them publicly.
Chairman
11. You do not want to give them any publicity?
(Ms Lawrence) However, it has to be said that their
interest is mapping countries throughout the globe, whereas we
believe we are here to be responsible for Great Britain.
Mrs Dunwoody
12. The United Kingdom or Great Britain?
(Ms Lawrence) We are actually responsible for only
Great Britain. Ordnance Survey Northern Ireland maps Northern
Ireland and Ordnance Survey Ireland maps the Republic of Ireland.
The three Director Generals meet at least every six months and
our own teams meet. Two things we have done are that we make sure
that when global companies want to work with the British Isles
it is important that there is a consistent message coming from
us all and also this morning you heard about the importance of
TOIDS (topographic identifiers), and I do believe that Ordnance
Survey Northern Ireland and Ordnance Survey Ireland will be adopting
the TOIDS system.
Mrs Ellman
13. Is cost recovery the best way of funding
the National Mapping Agency?
(Ms Lawrence) There are lots of different models you
can use for funding national mapping. When considering other models
around the world certainly our model seems to be a very effective
one. We have recently seen examples in the United States, for
instance, where they moved into a situation where they were more
like vote funded 25 years ago. When they moved to that situation
they were promised that there would be considerable government
funding continuing for a very long time. Things changed and they
became very under-funded. Their Director General has quoted that
much of their data is eight years out of data and in many places
it is up to 27 years out of date. They are now putting together
a programme in which Congress has asked them to consider how they
can get their mapping back up to a reasonable maintenance programme.
We currently guarantee that if you are in an urban area of Great
Britain your change to the landscape would be on our maps within
six months and in rural areas within five years, and so we very
much represent the landscape of this country.
14. Concerns have been expressed to us that
the charges may be or may become too high because of the funding
arrangements. Would you agree with that?
(Ms Lawrence) I find that quite a difficult statement
to agree to. Since September 2000 our data prices have been held
and we have seen many prices come down quite considerably. LandLine,
which is our large scale database, the precursor to OS MasterMap,
had a 5 per cent reduction in prices; I believe in September 2000
we held the price. For our service level agreement we are under
the terms of the agreement able to put the prices up by RPI. We
did not do that last year. In our Business Geographics, they have
continued to fall progressively and there are some data sets (a
good example being Address Point) where we have completely looked
at the market and the way that people wish to use the data and
did some renegotiation with our partners in that, who are Royal
Mail/Consignia, and now we have dropped the price for a site licence
from £800,000 to £120,000 per year.
Chairman
15. What you are telling us is that the maps
were overpriced and the services were overpriced and by bringing
the price down you are able to sell more and therefore increase
your income. Is that right?
(Ms Lawrence) I would refute that. In certain instances
perhaps the pricing was inappropriate, but, as in Address Point,
there are others which it has reduced. I was a user of Address
Point in my previous private sector life. I was a user of all
Ordnance Survey products in that life. Certainly in things like
LandLine coming down by 5 per cent, I do not think that was saying
it was overpriced. I think it is just reflecting all the changes
and the way we are able to use technology. We certainly are ensuring
that we always have a fair and equitable price.
Mrs Ellman
16. The Quinquennial Review sees great opportunities
for you in becoming a Government Owned PLC. Do you agree with
all the things they say, that it will be easier for you to have
joint ventures, that you will be able to attract private sector
candidates, that you could be more effective in innovation? Do
you accept all that?
(Ms Lawrence) That report was published on 19 December.
We were very aware of the outcome some time before of the potential
hook-up. While it was in discussion we did a lot of work as a
team to understand both the costs and the benefits of it. From
our findings we do agree with everything that has been said, but
Stage 2 will be starting in February and at the moment there is
an OJEC notice out to find the new consultants to undertake Stage
2 on behalf of the Minister. It may of course be the same consultants
who did the first Quinquennial Review, Stage 1. Certainly what
they were looking to was the costs and benefits of looking at
the whole change and further work will be done at that stage.
We agree with it at the moment but there is a lot of further work
to be done.
17. Have you been held back at the moment by
your current status?
(Ms Lawrence) We have been with our current status
since April 1999 and certainly in that time we have met our agency
performance monitors and have developed the business, but we are
finding it incredibly difficult to recruit staff in the professional
areas. I have recruited three new directors this year and it has
been a struggle. For one of the directors I had to go out on four
occasions to find a person who would join us and this was because
of constraint by salary; there are great constraints on salary.
On all of them we had to go out twice, so it involves a huge amount
of work. We do now have a complete team. One of our directors
has decided to retire so we once again are facing the struggle
of recruiting people, and at senior manager level we face the
same problems.
18. Do you have a problem in holding the same
staff?
(Ms Lawrence) We do have a problem regarding staff
who join us as graduates. If you have a geographic information
degree it is normally at MSc level and you will have done three
years at university doing your base degree and then one year doing
your MSc. Often people join us at that level but our pay rates
even at that stage have quite a discrepancy with the private sector.
We often might be paying somewhere in the region of, say, £17,000.
Even at starting salary it would be between £20,000 and £25,000
in the private sector. Within six months in the private sector
they would be expecting to earn in the region of £32,000
to £35,000 whereas they would still be on £17,000 with
us, or maybe a little bit more. We are in the situation where
we are having to negotiate large contracts, even multimillion
pound contracts, and certainly in account management areas we
find it very difficult to recruit the staff who are able to form
those relationships with the customers. Our staff in those areas
are often being paid, say, £30,000. In the private sector
which is quite developed in this country. Certainly nearing six
figure sums in some cases. We struggle and we do lose staff often
to the private sector. We are an excellent training ground, which
is a positive and also has a negative side.
Ms King
19. Returning to the National Interest Mapping
Service Agreement, NIMSA, are NIMSA funds used solely for non-commercial
services and products?
(Ms Lawrence) Yes, they are. Perhaps I could ask my
colleague David to expand on NIMSA.
(Mr Willey) They are not actually used for any services
or products. They are used for maintaining the mapping of Great
Britain. Through this we can maintain national standards of consistency
in terms of quality, currency and specification. It does not directly
fund products or services. There are then products and services
which are available to everybody which are consistent whether
you buy them in the north of Scotland or in central London because
we have NIMSA underpinning that specification.
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