Examination of Witnesses (Questions 20-39)
Monday 15 March 2004
Mr Leigh Lewis CB, Mr Vince Gaskell, Mr Bernard Herdan,
and Mr Paul Pindar
Q20 Mr Bacon: Appendix 2 is a comparison
of the Passport Agency Report and the Criminal Records Agency
Report and it makes quite interesting reading. The Passport Report
says, "The Agency should have been more realistic about the
time, resources and management effort needed," and the Criminal
Records Bureau one says, "The Agency was optimistic about
timescales . . ." As you go through it looks pretty similar.
Could you say who the consultants were on the Passport Agency
computer project?
Mr Herdan: The Passport Agency
was launched as a public private partnership with Siemens and
SPSL. After the crisis in summer 1999 the National Audit Office
Report was undertaken and then it came to this Committee. I came
to this as the incoming Chief Executive coming in after the crisis.
We discussed it and your Committee produced a set of lessons.
This analysis was produced by the National Audit Office to see
whether we had taken them on board. The conclusion I have drawn
from this is that each situation is different and whereas we did
avoid falling into the traps which the Passport Agency had fallen
into in 1999, there were other traps instead—
Q21 Mr Bacon: If I could ask you to turn
to page 23. You said earlier that you had consulted with potential
users of the service. On page 23, paragraph 3.12, it says, "Input
was high level and representatives were not best placed to inform
the development of operational processes, such as how Registered
Bodies would submit applications." I think that is one of
the most exquisite sentences I have seen from the NAO for quite
a while. You have just said that you consulted with potential
users. What this is saying is you did not, you consulted with
people who were above the potential users but not the users themselves.
Is that right?
Mr Herdan: We did both. This refers
to the customer forum which was put in place in 1999 and there
were trade associations and high level bodies there, but we also
committed to the research with Rosslyn in May 2000 which was reported
and which was a consultation. There were six focus groups organised
with potential customers as well as a raft of in-depth telephone
interviews to find out how they would behave. We did do some of
that, but I do admit that we should have done more. We found out
a bit later on when we had this large scale consultation that
we had got problems which we had not picked up on earlier both
through the customer forum and through the Rosslyn research.
Chairman: Thank you. We have to break
down now for a division. I apologise, gentlemen.
The Committee suspended from 4.51pm to
4.56pm for a division in the House.
Chairman: Right. Mr Richard Bacon.
Q22 Mr Bacon: I would like to ask Aileen
Murphie about paragraph 3.13. It says, "Stakeholders we consulted
said that they had questioned some of the Agency's assumptions,
but felt they were ignored." Who was it that you were consulting
in this way who said later that they felt they were ignored?
Ms Murphie: We consulted with
a number of different voluntary bodies and other organisations
like the Local Government Association. I can give you the names
of specific ones that have said these comments, but in general
these are a summary of the points that they raised with us.
Q23 Mr Bacon: Mr Herdan, you went and
asked these people, so you did do some consulting but then you
ignored what they told you.
Mr Herdan: It is not fair to say
that in generality stakeholders were ignored. There were some
who felt we had not listened to them. We met about 5,000 during
these registered body seminars which were seen as the exemplar
of how the Government was listening and consulting with them.
We took a number of actions as a result of those seminars, including
producing the blank application forms in volume but also other
actions to do with portability, for example, and action to do
with opening up a service with an international dimension.
Q24 Mr Bacon: Nonetheless, these points
in paragraph 3.5 on page 22 about the application channels and
the proposed use of call centres when customer preferences were
to be for paper and so on were flagged up but basically ignored.
It says in the first bullet on page 20 that Capita was cheaper.
Could you say what the original amount of money proposed by Capita
was and the original amount proposed by PricewaterhouseCoopers
and thus how much cheaper was the Capita bid than the other one?
Mr Lewis: The original Capita
price based on demand for three million applications over a 10-year
period was just under £250 million.
Q25 Mr Bacon: How much was the PricewaterhouseCoopers
one?
Mr Lewis: The other bids were
more than £100 million more expensive over 10 years.
Q26 Mr Bacon: How much was the PricewaterhouseCoopers
one?
Mr Lewis: The exact figure was
in the region of £380 million.
Q27 Mr Bacon: So £130 million more?
Mr Lewis: Yes.
Q28 Mr Bacon: The fact that they were
so at variance, it says in the Report, led you to attribute concerns
about the Capita bid on which assurances were sought. You sought
those assurances by asking another consulting group to do an analysis,
did you not?
Mr Lewis: Yes, that is right.
Q29 Mr Bacon: PA Consulting. This is
in paragraph 3.6. On the basis of their advice, among other things,
and on the basis that there was little difference between the
technical evaluation the Agency rewarded the contract to Capita.
How much were PA Consulting paid for giving you this duff advice?
Mr Lewis: I have not got that
figure.
Mr Herdan: I think I would need
to write to you with that information. They were providing a variety
of support services to us in terms of independent assurance.
Q30 Mr Bacon: How much were they paid
in total? Do you have any idea?
Mr Herdan: I would rather write
to you, if I may. It was normal consulting rates.[1]
Q31 Mr Bacon: I would like to check about
the overall costs now. On page 31 there is a chart showing the
costs, £98.8 million, and it says, "The Criminal Records
Bureau start up costs and operating deficits (actual and forecast)
from 2000-2005." I was going to ask if that is the total
cost, but Mr Lewis has already assured me that they were more
than that. I take it, Mr Gaskell, you are not expecting to get
less than the £250 million of the original bid, are you?
Mr Gaskell: No.
Q32 Mr Bacon: What is the total amount
of money you are expecting to be paid over the lifetime of this
contract?
Mr Gaskell: Over the lifetime
of this project we now expect that figure to be approximately
£400 million.
Q33 Mr Bacon: So it has gone from £250
million to £400 million?
Mr Gaskell: That is correct.
Q34 Mr Bacon: For a slower service that
is delivered a year late and it provides less than it did originally.
That is right, is it not, it is being delivered late?
Mr Gaskell: The figure is correct,
yes.
Q35 Mr Bacon: Is it right that it is
being delivered late?
Mr Gaskell: Yes.
Q36 Mr Bacon: Is it right that it is
delivering less now than it was originally proposed to deliver?
Mr Gaskell: That is also correct.
Q37 Mr Bacon: But it is costing £150
million more?
Mr Gaskell: Yes. That is because,
as the NAO have rightly picked up in their Report, the channel
mix is different. Certainly the volume that we are currently operating
at is less than anticipated and, therefore, the unit costs are
higher. They are contributory factors.
Q38 Mr Bacon: The Report says that PWC's
bid assumed that it would be 40% paper based and, therefore, presumably
60% call centre based. Capita's bid assumed it would be 85% call
centre and 15% paper based. Mr Lewis, on what were these assumptions
made for PWC and Capita? How were they reached?
Mr Lewis: There were two bases
for this. One, there was a government intention, an e.strategy
across government in which direction we believed that we were
moving, as we have done indeed, to more of an e.based set of services
and there was also a lot of experience from other major service
provider organisations such as in the insurance and banking industry
which suggested that it was reasonable to look for a telephone
channel to be the primary means of contact with the new Agency.
What became clear is that that did not meet the preferences of
the Agency's customers and when those preferences became clear
the decision was taken, rightly, I believe, but at a late stage,
to re-engineer the processes so that we would accommodate paper
applications in bulk. What went wrong at that stage was that we
did not allow sufficient time to re-engineer those processes sufficiently
well to ensure that they were going to work in the necessary way
at the launch of the Service, which is why I said earlier that
more time should have been allowed and the launch should have
been deferred at that point.
Mr Bacon: Chairman, I have run out of
time. I am still not clear how the percentage figures were reached
but perhaps somebody else can pursue that.
Chairman: Ask that last question.
Q39 Mr Bacon: You talked about comparisons
with the banking industry and various other industries. What I
really want to know is if I am in PWC and I come along and I say
you are going to have 40% paper based and I am in Capita and I
come along and I say I think you are going to have only 15% paper
based, how are these figures actually arrived at? Since they are
so at variance with one another how can they both be sound? Then
you go and get PA Consulting who you pay some money to go and
check, they assure you that it is all okay and that Capita's numbers
are sound. How are they both reached in the first place and why
did not PA or somebody else, your own officials, spot that they
were unsound figures?
Mr Lewis: One thing we cannot
know is what would have happened had we not introduced a bulk
paper channel for applications because it is not necessarily the
case that those original assumptions were wrong. What was going
wrong quite clearly was that those original assumptions did not
meet the wishes of the Agency's customers. They did not want,
at least at that stage, to use a telephone channel for the bulk
of the disclosures to the Agency and that is why at a late stage
the Agency decided to introduce a bulk paper channel.
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