Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 100-119)



  Q100 Jon Cruddas: Late 1999, okay. Can I just ask a question on this three year horizon for strategic planning. Does that mean that in 1996 you would not have had the Millennium on your three year strategic horizon?

  Dr Pepper: In 1996, although it was not built into the financial modelling, we were already starting to say "It is coming".

  Q101 Jon Cruddas: "And we should begin to act accordingly"?

  Dr Pepper: Yes.

  Q102 Jon Cruddas: I have only read the NAO commentary on the Burton report but it says here—

  Dr Pepper: Can you just give me a paragraph number?

  Q103 Jon Cruddas: 4.19. It talks about the management arrangements to achieve the successful implementation of the project, recognised the changes in GCHQ's management procedures, which you began to talk about, and proposed some more, "However, it identified high level planning and management weaknesses and made recommendations to address these". The next sentence is the one I want to focus on: "The failure to co-ordinate the development of the PFI deal and the transition process at strategic level was a symptom of such weaknesses". So the actual PFI problems that we have been discussing today were symptomatic of a failure of strategic direction across the whole organisation. That is what it says, is it not?

  Dr Pepper: That is what it says.

  Q104 Jon Cruddas: Your emphasis on the technical problems, given this revolution in information communications, global technologies and the like that was occurring throughout the 1990s, and the imminence of the Millennium, the two issues that we have talked for the last hour and a half on, were not the real issues according to this Cabinet Secretary's commissioned report, the real issues were symptomatic of the failures of the organisation as a whole, namely its whole approach to strategic management?

  Dr Pepper: Can I link the two in what Sir Edmund was saying. We have talked about the initial failure to recognise the true cost. What compounded that is what Sir Edmund was talking about which was having started the project the way we did, having a project team that was focusing on the building which concluded, wrongly as it turned out, that the technical transition was going to be relatively straightforward, they then carried on focusing on the building project. What we did not have in the organisation was a programmatic approach which would have forced them to look at the whole job, both the building and the technical transition, and keep making sure that they were being managed properly together. Had they done that, and had the people who were doing that also been talking in the appropriate way to the rest of the technical organisation, I think it likely that the problem would have come to light sooner.

  Q105 Jon Cruddas: So, therefore, it is symptomatic of a systemic problem within GCHQ?

  Dr Pepper: Absolutely.

  Q106 Jon Cruddas: Only reversed from May 2000 onwards.

  Dr Pepper: Absolutely.

  Q107 Jon Cruddas: I make my point that that rests uncomfortably with the arguments you have been putting forward about the technical problems associated with it and the imminence of 2000 as the primary reasons for the cost overruns. Again, I have not read the report but this seems to take a different route to it which sees these cost overruns as symptomatic of a deep malaise within the organisation.

  Sir David Omand: If I can add a comment there. I think what it is saying is that a large part of the explanation why we did not pick up on this earlier was because of the way the project was run and was symptomatic of an older way of running an organisation which had grown up, as Dr Pepper said, facing the old Soviet target and where individual parts of the organisation could largely run as separate components. The concept of the total enterprise, which is what we are talking about here, had to come in at this period.

  Q108 Jon Cruddas: Are you entirely confident, given the Burton report and its 43 identified changes and the problems he has identified in terms of anticipation of information and communications revolutions, etc., that despite all of these problems you have somehow got the perfect building?

  Dr Pepper: Perfection is a hard concept to grasp. What we have is an exceptionally good building.

  Q109 Jon Cruddas: Despite, or rather because of, the management process? Maybe that is too harsh.

  Dr Pepper: The building design itself was never a problem. The problem was linking the building to the technical transition. The building itself as a working environment, and as an environment to install our IT, is excellent I think.

  Sir David Omand: The rigorous implementation of Edmund Burton's recommendations has rebalanced the whole thing and means, as has been pointed out, the programme has been delivered on time and cost.

  Q110 Jon Cruddas: Can I just ask one final question on that because I have just read your update memorandum to the PAC and a couple of sentences jumped out at me and I wondered what lay behind them. In terms of detail, paragraph two: "IAS delivered the originally-contracted construction and fit-out work in late June, but the Independent Engineer required that a number of faults be rectified before the work could be accepted as complete." A bit lower down: "GHCQ required further work in the form of contract variations to be completed by IAS before the decant could begin." At the bottom: "IAS completed almost all the work required by 17 September . . ." I do not know what lies behind those sentences but it could be interpreted as reflecting still some concerns about the actual management of this project.

  Sir David Omand: No.

  Q111 Jon Cruddas: Minor marginal issues.

  Dr Pepper: Would you like me to explain a bit more?

  Q112 Jon Cruddas: Yes.

  Dr Pepper: The problems in June were not much more than the normal snags that you get with a new building. They had been rushing to finish it by the middle of June, they had done a 99.9% job but there were inevitably still things to be done before we could move in. The variations reflect the fact that we are in a volatile business. The specification for the building had been finalised three years ago and a lot has happened in the world in those three years, including 9/11, and we have necessarily had to make quite a lot of changes to our organisational configuration. Consequently, before we could move our people in there were changes that had to be made from the way it was originally specified to the way we wanted it. We could not force IAS to incorporate those changes in the building process because that would have put the achievement of their bonus at risk and so on, so they would not take it on. What we wanted to do, therefore, what we had to do, was to get those changes made at the last minute. What we worked towards in the methods as we describe in this update memo was a way of getting those done but still getting in on time on 17 September.

  Q113 Mr Bacon: Dr Pepper, how many directors have there been of GCHQ since January 1998?

  Dr Pepper: Since January 1998, Francis Richards and myself.

  Q114 Mr Bacon: I have got the CV of Sir Kevin Tebbit here, which I got when he appeared before us when he was at the Ministry of Defence, which says that he became Director of GCHQ in January 1998.

  Dr Pepper: For six months, that is right.

  Q115 Mr Bacon: Then he left in July 1998.

  Dr Pepper: That is right.

  Q116 Mr Bacon: Since then there has just been Francis Richards and yourself. You have been there since April.

  Dr Pepper: Yes.

  Q117 Mr Bacon: You are not expecting to go anywhere in a hurry?

  Dr Pepper: I am not expecting to go anywhere in a hurry.

  Q118 Mr Bacon: I would just like to continue the point Mr Cruddas was making. If you continue down on page 19, paragraph 4.21, it is talking about the recommendations of the Burton report and it says: "The remaining recommendations addressed issues of leadership and management; communications between different types and levels of staff . . .". That probably covers a multitude of things. ". . . capture of information for planning; investment in people and staff training; project management; and the oversight and control of programmes of work". That paragraph covers just about everything one way or another. It is written in that exquisitely understated NAO style. It sounds very much as if the management of your organisation has been very poor, as Mr Cruddas was saying. Do you think that is fair?

  Dr Pepper: No, I do not think it is fair. Although the Burton report—

  Q119 Mr Bacon: I do not mean that it is now.

  Dr Pepper: No, no, even then. The Burton report did indeed address all those but it did not address them by saying "all these aspects are a complete disaster, GCHQ is a shambles, you need to put something in place". He made recommendations to improve all of those things. Some of them were worse than others. As I have said, the planning mechanism was too stove piped and not far enough looking ahead and that was seriously flawed. On the others he was making points that existing systems could be improved.

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