Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 320 - 339)



  320. So the technical capacity simply was not there?
  (Mr Sykes) Yes.

  321. I wonder if I could draw your attention to the last sentence of your written evidence to the Committee in which you say, "We would also welcome greater emphasis on OGC's strategic role in assessing key PFI markets and how they might more effectively . . .", and so on. First, to give us some factual base, what sort of involvement do you have directly with PFI programmes, given that your own spend is roughly 1 per cent or so—less than—of the Department's total spend?
  (Mr Acheson) Most of the PFI projects in the Department as a whole are Highways Agency, and, as we have identified already, they are the big players in this arena. At the moment, we have 16 signed PFI contracts and four still in procurement.

  322. Out of a stock of 20?
  (Mr Acheson) Yes.

  323. What is the value of those? Is that the whole 20?
  (Mr Acheson) I can tell you the total figure of the signed deals[8], which is £8,681 million[9] of audited PFI deals.

  324. That is the highways so here we are talking about road schemes' improvement and new construction?
  (Mr Acheson) That is primarily the case but that also includes the Channel Tunnel Rail Link, which is approximately half of that figure.

  325. Well, that must be an interesting one. It certainly keeps your finance and accounting systems chugging away.
  (Mr Acheson) Indeed. The key point we want to make here on PFI is that, as I say, nearly all the PFI schemes are Highways Agency in number terms and whilst we talk to the Highways Agency we have a monitoring role, not a direct involvement.

  326. So here we are talking about supervising a relatively small number of very large PFI schemes of a large per unit value. Against that background, which of course is rather different to the background of our last set of witnesses, what does this last sentence then mean? What is OGC's strategic role in that context and what are the key PFI markets that still need to be assessed?
  (Mr Acheson) The other part of the overall departmental agenda is a local authority one, which we touched on earlier, where there are all sorts of things in a local authority arena which we as a Department will look at coming from local authorities to see whether they are sensible and it is this bigger field that this sentence is aimed at. We have got different markets. There is the central bit, the agency bit and the authority bit, and they are all different and they all have their own governance and so on. So the strategic feel of key markets is really talking about the whole shooting match and there, there are all sort of issues where a central view would be helpful about what government as a whole, central and local, should be doing, and sometimes that is not clear.

  327. Right. So how is it not clear?
  (Mr Acheson) It tends to be bottom up. An authority or an agency will say perhaps, "We will do this", and it is filtered through the project review group and so on but there is no strategic sense that anybody is looking at the market generally to see that this area has not been tackled and to say perhaps we should look at that, talk to industry and see if there is some scope for significant improvement in that particular area. At the moment it is the wrong way round. It is easy to say that but there is not anybody that is doing that.

  328. What you are saying to us that you would like OGC to do is to say, "The best PFI possibilities are in these fields"?
  (Mr Acheson) It would be helpful.

  329. Then you would give guidance to your agencies and to local government to encourage them, or direct them if you have got the authority to do that, in those particular directions?
  (Mr Acheson) Ultimately, yes, that is the ideal world.

  330. Has local government been asking you to do this?
  (Mr Acheson) The honest answer to that is no. I would guess in many cases they would welcome that but I do not actually know that.

Mr Beard

  331. Briefly following that, you have a tremendous purchasing power from the contracts you are putting out. When you are dealing with companies, is it part of the OGC Guidelines to encourage companies to innovate in whatever you are dealing with? Is that part of the process, to bring that into account?
  (Mr Acheson) Yes, in a general way certainly. What we would try not to do, for example, in any kind of specification of requirement for an individual contract is to say, "We would want you to put so many people on the job and do this work so that we get precisely where we want to be in terms of input." We say, "This is what the end result is. You tell us how you are going to get that." We can then assess that alongside other bids to see who has got the best solution. So innovation falls within that envelope in the sense we would look at the end result rather than the inputs and many specifications some years ago tended to focus on input where we knew best and we dictated what contractors had to do, which stifled innovation.

  332. Do you, for instance, in letting a highways contract, look to the contractor to take a step forward in improving the quality of the road surface so that you do not have to maintain it so many times, those kind of things?
  (Mr Acheson) Those kind of discussions do go on between the Highways Agency and highways contractors.

  333. Is that sort of injunction, to try to push things on and innovate and not just buy something you bought 20 years ago, part of the OGC guidelines?
  (Mr Acheson) The general concept of best practice in procurement across the board is to do exactly that and work with contractors to get a better deal and continuous improvement.

  334. Could we move to estates and property. You say that the OGC has an important and continuing role to play on property and estate matters. In your memorandum you say you fully support that and "would not wish to see it diluted". Who is threatening to dilute it?
  (Mr Sykes) I think in positioning itself for the future, the OGC has directed its resources in an advisory way to promote achieving excellence and best practice of construction and for some departments and agencies has withdrawn providing the supervising officer role for work.

  335. Could you explain what that means? I am not sure what it means.
  (Mr Sykes) In the past PACE would have actually acted as the expert client for some smaller departments and agencies and, of course, some of the bigger departments and agencies, it would have been a repository of expertise in estate and construction matters. As I say, in repositioning itself to address achieving excellence it has withdrawn from some of those services. We think they should retain leadership across government in estates and property issues.

  336. Who is the cause of them not retaining that leadership?
  (Mr Sykes) I think it is a matter of them deciding within the resources that they have where their priorities are and focussing the resources in that direction.

  337. The way your memorandum is phrased it does not sound as if it is a natural consequence, it sounds as if somebody is having a turf war and they are losing.
  (Mr Sykes) I do not think is a question of a turf war and their losing I think it is a question of encouraging them that they should maintain this central co-ordinating role.

  338. Have you put that to them?
  (Mr Sykes) Yes.

  339. What is the response?
  (Mr Sykes) The response is positive.

8   Note by witness: The 16 PFI deals total £5,516 million. Back

9   Note by witness: The £8,681 includes DTLR's PPP/PFI deals and other PPPs where there was a funding link to DTLR at the time the deal was signed, e.g. local authority light rail schemes part-funded by DTLR and contracts now held by Transport for London. Back

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