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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 266-iii House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE ENVIRONMENTAL AUDIT COMMITTEE
SUSTAINABLE PROCUREMENT POLICY
Wednesday 16 March 2005 MS JILL RUTTER, MR BOB ANDREW and MR ANDY DAVEY MR MIKE DAVIS, MR PETER FANNING and MS ANNE TURNER Evidence heard in Public Questions 239 - 329
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environmental Audit Committee on Wednesday 16 March 2005 Members present Mr Peter Ainsworth, in the Chair Mr Gregory Barker Mr Colin Challen Mr David Chaytor Sue Doughty Mr John McWilliam Mr Malcolm Savidge Mr Simon Thomas Joan Walley ________________ Memorandum submitted by Defra
Examination of Witnesses
Witnesses: Ms Jill Rutter, Director, Strategy and Sustainable Development, Mr Bob Andrew, Principal Procurement Adviser, Procurement and Contracts Division, and Mr Andy Davey, Environment, Business and Consumers Division Department for Environment, Food and Rural Affairs examined. Q239 Chairman: Welcome. Thank you very much for coming and may I apologise to you all for the delay in the beginning of the session. We had extra business to conduct. I understand you may have an opening remark or two you would like to make to us? Ms Rutter: If it would be helpful to the Committee, I will introduce my colleagues and update because the Defra memo that you had predated the sustainable development strategy which the Prime Minister and our Secretary of State launched last week. It might be helpful to tell you where things have moved to. I am Jill Rutter, director of strategy and sustainable development at Defra. On my left is Andrew Davey who is the programme manager for the sustainable consumption of production, a strategic priority within Defra. He sits in the environment, business and consumer division. On my right is Bob Andrew, who is the principal procurement adviser in Defra's procurement and contracts division. You picked a very timely theme, as you will have seen from our sustainable development strategy. One of the things that emerged very clearly from our consultation was that, particularly for the business community, sustainable procurement, the ability to embed sustainability into government procurement, was a litmus test of the government's seriousness on sustainable development. In the memorandum we submitted, we said that the new strategy would chart the way forward. Over the past months we have been working with colleagues in the Office of Government Commerce, colleagues in the Treasury, colleagues in the Sustainable Development Commission and with other government departments through the Interdepartmental Programme Board for the development strategy to do that. There are some very specific commitments in the strategy. The first is a clear commitment to leadership. The strategy sets out our commitment to be a leader in the EU on sustainable procurement by 2009. There is a process of bench marking going on at the moment within the EU. What does that mean? The UK is taking a lead on that. That is going to crystallise at a conference in October under the UK presidency. At the moment, a lot of work is going on in assembling the evidence base. When we assemble that evidence base, we will look to convert those into more targets. We are working with suppliers on embedding sustainability with the Office of Government Commerce and the NHS Procurement Supply Agency successor body, whatever that may be. We are working with the Chartered Institute on the skills agenda. There is a lot of good work going on so it is business as usual. What our Secretary of State was very keen to deliver through the new strategy was a step change in performance. That is why she has asked Sir Neville Simms, the retiring chairman of Corillian plc and the chairman of International Power, to head up a task force on sustainable procurement with a view to drawing up what we are calling a draft national action plan to be available by April next year. We are in the process of landing the terms of reference and the membership of that task force with Sir Neville. Obviously, as you come to conclusions from your study, it would be very useful to us to be able to feed those findings into Sir Neville's task force. That is a very important way of taking this agenda forward and accelerating to delivery. One other theme that is very clear through our new sustainable development strategy is that of better departmental accountability. There is already a commitment in the framework on the government estate part on procurement that every department will have its own sustainable procurement strategy by the end of the year. There is also a commitment to the new sustainable development strategy that every department will produce its own departmental action plan at the end of the year. In addition to the work done in this committee, we are also proposing to expand the remit of the Sustainable Development Commission to report to the Prime Minister on progress on delivery. One of the things that is very important to us is that this becomes something the departments feel genuine ownership for in how they are taking it forward. Q240 Chairman: Could you elaborate a little more on your relationship with the Office of Government Commerce? They said to us that they see you as the lead policy department in sustainable procurement and they are only there in an advisory capacity. Is that still the position? Ms Rutter: Defra leads for the government on sustainable development but Defra does not deliver sustainable development on its own. Part of what we are doing is putting in place new delivery arrangements to make clear that where we lead others are embedded and delivering. We see ourselves, along with other interested government departments, as helping to define the policy. For example, on the new task force, Defra will be funding the secretariat for the new task force but we look to OGC to provide expert advice on procurement. Vitally important is how our policy ambitions are reconcilable with constraints that may come out of the EU procurement framework etc., and also in their role as giving guidance to all departments on procurement they have a very important part in the delivery role. We have been working very closely with OGC and we seem to have spent many of the last few months in meetings with the OGC. We have presented on this both to their managers, to the senior and middle manager level, the OGC board and the OGC supervisory board last week. My permanent secretary presented to get buy-in at all levels on this agenda from OGC. I think that relationship is working very well. Q241 Chairman: Did you have any sense at any time that they thought this was all rather a bore? Ms Rutter: No. You have Peter Fanning giving evidence later so ask him. Q242 Chairman: I am interested in whether they have said, "Wow, yes. We are really up for this and keen on it" or whether it was regarded as a bit of a chore, something that they had to be coerced into doing, or coaxed rather than coerced perhaps. Ms Rutter: I do not think so. What was very noticeable last week when my permanent secretary presented to his permanent secretary colleagues at the OGC supervisory board was the degree of instant buy-in. This was something that they wanted to do, were very up for doing, and saw it as a very helpful way of delivering their own objectives rather than as an add-on. I have some sympathy for OGC because there is a great temptation to regard procurement as a magic bullet that can solve lots of departmental policy problems. If only you can get it through procurement, that is going to be the answer and it is great because it is not a tax or a charge or more government money, in a sense. I can see that OGC are concerned that they have to turn the policy advice coming from a number of government departments into guidance that is usable by procurement officials at the front line for delivery. One of the conclusions we have come up with is there is no shortage of guidance on how to do things. There is a danger of overload. If you try to deliver too many policy objectives through procurement, you end up delivering none because there is too much noise around. Mr Andrew: We have had a very close relationship with OGC on the timber procurement policy and on the food procurement initiative. They have always helped and given advice, attended conferences and meetings. It has been very useful and a good working relationship. Ms Rutter: Claire Poulter chaired the sustainable procurement group and that drove the input into the framework and developed the quick wins, the joint notion on environmental issues in purchasing. The collaboration has been very good. If anything, Defra is slightly under-resourced rather than OGC. Q243 Joan Walley: Can I press you further about timber procurement in respect of the way that you are working with OGC and ask what links there were with the Foreign and Commonwealth Office in respect of the concerns that were displayed on News Night last night about the way in which there has not been full US support for the stance that the government is taking, which is largely being able to take a leading role in the G8 precisely because of making progress on the timber procurement issue. Mr Andrew: OGC was not directly involved in that particular issue. I was, along with the Department for International Development and the FCO. I am a member of an international forestry group in Whitehall and we meet regularly and exchange information and collaborate or cooperate on all those sorts of issues. I have been quite involved in the G8 process and the lead up to the briefing on the policy being developed for that. I was aware of that News Night programme. Q244 Joan Walley: Were you aware of the US position on it? Mr Andrew: We were advised by the journalist involved of the US position and we expressed surprise. Q245 Joan Walley: You were advised of the US position through the News Night reporter? Mr Andrew: Yes. I had been to a previous briefing session of officials where the US had made their position clear: they did not think that the timber procurement policy would be appropriate for the US because they were a net producer and they did not see that there was any need to interfere with the market mechanisms in that respect. There was no indication from that meeting that they were planning to scupper the initiative. Q246 Chairman: The Sustainable Development Commission told us in evidence, which you probably have seen, that there was a lack of leadership throughout government in the area of procurement. Do you think that was true, is true, is being addressed now? Ms Rutter: I think it is a lack of initiative on procurement. Procurement remains the responsibility. This is one reason why permanent secretaries sit on the OGC advisory board. Leadership and procurement are part of every accounting officer's responsibility so in a sense should there be some central government leadership as opposed to the advice and support people get from the Office of Government Commerce - I am not sure that is really what you are looking for. Jonathan Porritt in the comments on the new strategy said that there is a new seriousness about delivery. That is one reason why we are very concerned to reinforce departmental accountability through the new frameworks we have. It is why we are also very concerned to try and galvanise action and why we are setting up the new task force which the STC will be represented on, to define where the priority areas are, to make a real difference. We are very keen to draw on work that Andy Davey's team have commissioned on the evidence base to look at areas where government procurement makes a significant impact on the environment in the first instance and also bringing in potential social issues. Also, where government purchasing has significant capacity to drive market transformation, where we can use our purchasing clout to change a whole market. Those are some of the things that the Simms task force will be doing in setting out a plan which we will then hope to translate through this theme of government leading by example, which was one of the key themes our Secretary of State highlighted last week and one of the reasons we have singled out sustainable procurement as an area where we want to show what we are doing. We hope to show more leadership in the future. Q247 Chairman: That is interesting because the report of the sustainable procurement group in January 2003 indicated that the SDU would be waving goodbye to the issue of procurement at a fairly early opportunity on the basis that it was all going to be mainstreamed and there would be no longer any need for Defra to play such a hands on role. Has that situation now changed? Ms Rutter: It has because we have now decided that we want this task force to try and deliver a step change in delivery. That came through very strongly in our consultation. Q248 Chairman: Is that because it has not been mainstreamed? Ms Rutter: The jury is out. We do not have the evidence of what has happened so far. Every department has until the end of the year to draw up a sustainable procurement strategy. Having talked at the OGC directors' meeting, every department can point to examples of good practice but whether it is systematically applied across the piece is the area where as yet, because the framework has only been in place since last October, we do not have the evidence yet. Looking within departments, I do not think yet we have managed to unleash the potential for procurement and that is what I hope the Simms task force will be looking at, to assist in this process of market transformation and make a big leap forward. The other point about the Simms task force and why we think this is very important is that it is going beyond the 13 billion central, civil government expenditure into the wider public sector. We are looking there to influence best practice in local authorities and the NHS and set an example to business there as well, which is why we attach such importance to clear business and contractor supplier buy-in to it. We have concluded that the easiest thing to do for this is to establish a secretariat which will nominally for the time being be shared between SDU and Defra's procurement contract division, drawing on PCD's expertise, drawing on the work that is going on in EBC on market transformation and the evidence base. Q249 Chairman: Far from looking to reduce your role, which is what the situation was in January 2003, you are very hands on and involved and very much driving the whole agenda. Ms Rutter: We are going to provide the support for the task force, yes. Q250 Joan Walley: I am slightly confused as to where the task force and the action plan sit together. You mentioned earlier the issue about overload. It would help me enormously if you could set out for the Committee why we need the action plan and how the action plan is different from the task force that you talk about. Ms Rutter: The task force is asked within a year to draw up the action plan. Once the action plan has been drawn up, recommended to ministers and adopted by ministers, the task force ceases to exist. It is a one year task force to say what does the public sector need to do to deliver this step change which is going to put us on a trajectory to deliver the goal of being a leader within the EU by 2009. It is time limited. We would ask them to look at some of the barriers to delivery on sustainable procurement. It may be that overload is one of those barriers in which case one of the things we would be seeking to do is to say, "Where are the priorities? How do we do that and where is it really important to do that?" I will give you a very quick example on overload. We have had lots of guidance in Defra about using recycled paper. When we did the analysis of where we were in performing, we discovered Defra had a pretty feeble track record on using recycled paper and only 43 per cent of our paper was recycled. We said, "Okay. We are going to take away the choice." Defra does not buy anything other than recycled paper now. That is an area where we decided that more guidance was not the answer but saying this is a policy decision and this is the way we will go. It may be that is the sort of thing that comes out of the task force. I am having my first meeting with Sir Neville on Monday so I do not want to prejudge how he wants to operate the task force and what he sees as the priorities. One of the reasons we have gone to Sir Neville is that Corillian is an established leader in embedded sustainability into its operations. Q251 Joan Walley: Was it your choice to go to the private sector for that leadership role? Ms Rutter: Yes. Q252 Sue Doughty: On the subject of paper, being one of these people who has regularly over the years put in PQs to ask about use of recycled paper, every department has been claiming that they are using recycled paper and it was more or less the norm. Are you claiming a quick win here over paper when you have already had that win some years back? I appreciate you are trying to bench mark and get your house in order and I applaud that but could I have a little more background as to why we were told in the past that you were using recycled paper? Ms Rutter: I am afraid I cannot answer as to why you had the data in the past. We now have an SDU government website where the departments load their own data against the targets in the framework and the government estates report their progress so that they are open access for people to monitor progress. Defra was using recycled paper but was not using 100 per cent recycled paper which was the issue specifically. Mr Andrew: It may be due to the fragmented nature of the government estate, NDPBs and agencies. There are hundreds of different procurement organisations and it may be that in the past, despite central initiatives, the messages have not percolated down to the grass roots level. There have been in the past paper buying commodity groups that have been set up to collaborate across government and Whitehall departments. They have been successful in that a central contract could be negotiated by two or three departments working together. Why some smaller procurement organisations within the government estate have not used those I cannot offer an explanation for. Q253 Sue Doughty: 43 per cent seems rather less than half. Ms Rutter: That was Defra's own figure. Q254 Joan Walley: I wanted to pursue the action plan because we heard last week at our inquiry in the evidence we received, including evidence about the national procurement strategy for local government, that all the things you are saying now are going to be done in this action plan under the auspices of the task force should already have been done in any case. I do not see why we have not been getting on and doing all of this, rather than being about to start now for something that will not be delivered until at least April 2006. Ms Rutter: We bench mark against the EU. We have set an ambition of being a leader on sustainable development in the EU. There is work going on to look behind the EU figures but the figures suggest that the best performance is that 40 per cent of procurement is sustainable and is green procurement. Those two things are not exactly the same, but it is the easiest component to measure. The UK is at 22 per cent, so there is a gap. If the Simms task force looks at evidence and says there is no issue here; everything set in train is going very well, it can efficiently self-liquidate or whatever. We do not think that is going to happen because we think there are still some quite significant barriers to sustainable procurement. I can give you one example on measures to promote energy efficiency. The government has targets for energy efficiency in the government estate. We have been working with our own estates operations people and with the Carbon Trust on embracing the Carbon Trust's carbon management scheme. Quite a lot of private companies are signed up to it. Local authorities are signing up to it but Defra has now said that it wants to embrace carbon management. One of the barriers to carbon management though has been lack of ring fenced funding. We are going to work with the Carbon Trust on ring fencing some money that will go into delivering energy efficiency on the Defra estate. We will recycle those savings back into further energy efficiency measures. That has not happened to date so we think there is scope for some quite significant improvements but I would be delighted to be proved wrong. If I am told that this is not needed because everything we have, the sustainable procurement strategies have come through in December and they are all absolute paragons of best practice, I would be delighted to be told that we have been gold plating by having the task force. I do not think that is going to be the case though. There are still some big wins we can bring in through the task force. Mr Davey: The European Commission in its communication on integrated product policy 2003 encouraged Member States to develop a national action plan for greener public procurement by the end of 2006. A similar recommendation came out of the OECD, recommending national action plans for greener public procurement. In the European Commission environment and technology action plan, it also singled out progress on greener public procurement to drive the market for environmental technologies. In terms of taking forward our policy commitment on environment technologies, we have to be proved wrong if the task force says that there is not a need for a national action plan to deliver these agendas. Q255 Joan Walley: Does that mean all the recommendations of the sustainable procurement group's report have been implemented? Ms Rutter: They are being implemented. If you look at the Defra memorandum, that listed how that was being taken forward. OGC has developed the quick wins website and there is work in train to say that there were initially 28 products. The government buys a huge number more than 28 products. Work is now underway in Andy's division looking at accrediting the next 50 products for quick wins. That is work in progress. Those recommendations have been taken up and are being implemented. When you get proper monitoring against delivery on the framework, we will know how much impact those have had. Andy Davey has been commissioning a report from the Green Alliance which we will get at the end of April on barriers to sustainable procurement in the public sector. Q256 Joan Walley: Looking again at this action plan, you mentioned the task force. Who is going to be putting the action plan together? Who is going to be responsible for that? Ms Rutter: Sir Neville Simms is going to report to our Secretary of State and the chief secretary to the Treasury. The Treasury, as you know, sponsors the Office of Government Commerce, so the chief secretary is the minister responsible for the Office of Government Commerce. It will be a report to both of them and will contain recommendations on what the government should do to achieve its aspirations. It will then be for ministers to adopt the action plan and implement it. We are very keen that it goes wider and gets buy-in through the process of developing the action plan and that it goes wider than the narrow central and civil procurement that is immediately under the government purview. Mr Davey: The sustainable procurement group report focused on central civil government and the national procurement strategy focused on local government and we envisage the national action plan trying to draw all that together. Q257 Joan Walley: How will public private partnerships be included in all this? Ms Rutter: They will be caught up as they are a major way of procuring particularly buildings and deliveries in key services. Those will be addressed through that. Q258 Joan Walley: That is part of the remit, is it? Ms Rutter: Yes. One of the reasons the Treasury is very supportive of Neville Simms is that he has been involved directly in a public private partnerships group, so he is well versed in the minutiae of PFI, which is one reason why he is a good candidate to do that and has credibility with the Treasury and why we thought that was very important to have someone who could bring that in. Q259 Chairman: You mentioned a survey that suggested that 22 per cent of the UK's buying is green compared to 40 per cent across the EU. Can you source that for us? Mr Davey: It was an EU survey and my understanding is it was based on a sample of local government statistics. Ms Rutter: There is work going on now on bench marking in Europe so we will get more robust figures and those are the figures that will be produced in October 2005. The UK is very heavily involved in that work programme. Q260 Chairman: When was the survey you referred to undertaken? Mr Davey: 2003. We can provide the reference source. Q261 Mr Chaytor: On the question of EU leadership, you say by 2009 you want to be a leader but not necessarily the leader. Do we know who the leader is at the moment and how do you define being a leader? There are only 25 countries in the EU so anybody presumably in the top eight can have a reason to claim to be a leader. It seems to be a fairly vague objective, wanting to be a leader. Ms Rutter: At the moment, the perceived leaders are the Scandinavian countries and we will be clearer about that when we see the results of this detailed bench marking exercise. I would have thought a reasonable estimate would be at least top quartile in the EU. You would have to look at the distribution as well. It is a bit difficult to say we want to be the leader because that gets you into some competitive thing and this is very much giving a sense of direction of where we want to go. There is a similar aspiration in the EU that all countries are up at what is now average, so we need to move beyond that. We do not want the UK to just be average so that is how our Secretary of State has chosen to specify this objective. Q262 Chairman: From where we are at the moment, it sounds as though average would be quite good. Mr Davey: The EU study inspired the principle of bench marking, setting targets and trying to drive forward performance across the EU, but I do not think the approach was sufficiently robust in order to set meaningful targets which is why we started a programme of work with the European Commission to set more robust, reliable bench marking and targets within that. Ms Rutter: The leaders at the moment, according to this study to be sourced, are Denmark and Sweden at around 40 per cent and 50 per cent respectively. The UK is at 22 per cent and the EU average is 19 per cent so we are slightly above the average. The idea is that the average goes up and the UK should go into the top division. We may not yet be Chelsea but we will certainly be premiership rather than whatever they call it now. Q263 Mr Chaytor: Are there any obvious reasons why Denmark and Sweden are up there? It does not come as a surprise to many of us but are there any obvious lessons that we should be drawing as of now? Are there particular models of good practice that could be easily transported to the United Kingdom? Ms Rutter: I would say where they lead is on buildings. Their buildings standards are significantly higher than ours. Q264 Mr Chaytor: You mean in terms of energy efficiency or sustainable materials or both? Ms Rutter: Recycling. Q265 Mr Chaytor: This is the surprising thing to most of us. This is not rocket science. For donkeys' years everybody has known that Denmark, Sweden, sometimes Norway and Germany have done far more than we have in terms of recycling, energy efficiency, use of sustainable materials. Why does it take so long? When the light finally dawns, why do we have to construct a framework and then why does the framework suggest a strategy and then why does the strategy not suggest the action plan? It seems an incredible bureaucratic prolongation of the agony to get it to the point that everybody knew we should have been at 20 years ago. Ms Rutter: There is no barrier. Nobody is having to wait. Every permanent secretary who went to that meeting and said, "Yes, this is very helpful and very good", is now going to have to publish their own sustainable procurement strategy. There is no barrier. We are not telling people they have to wait for these. We hope this will add value and give further impetus. I would say very much that we should be putting in the regulations so that the laggards are pulled up but there seem to be some barriers to doing this so it is quite important to have a systematic look across the piste. As we said, redundancy is perfect. If we are doing that so well that we do not need this that is great. It is very reassuring that it was just that we did not have the information collected in one place well enough. Q266 Mr Chaytor: In terms of your relationship with the OGC how do you characterise this because both the department and the OGC have a responsibility for leadership here? What is the nature of the relationship? Are you the providers of the expertise? Are you there to prod them along? Do you feel they are recalcitrant? If not, why have they not been doing it already? Can you say a word about how the relationship works and what mechanism there is between Defra and the OGC to drive this forward? Mr Davey: A simple split in the responsibility if you like is that the OGC shows how it can be done and Defra identifies what standards there should be. Q267 Mr Chaytor: Who is responsible for the quick win list? Mr Davey: Defra identified the quick win product standards. Ms Rutter: It is on an OGC website because that is where people will go to get that information. Procurement professionals do not come to Defra. There has been a slightly different division of responsibility in the areas of food and timber in the work that Bob has been doing. Mr Andrew: In my experience with timber, as this committee will remember from a few years ago, we probably took longer than we should have done to implement and achieve what we have done now because we did not project manage it properly, so the plans that we have now for sustainable procurement generally have taken a lesson from that particular experience, on food in particular, in that where we have had a better project managed initiative that progress has been more rapid. Q268 Joan Walley: In terms of the changes you have made to project management are you sure that we would not end up with non-sustainable timber being procured for the doors of the Cabinet Office any more? Mr Andrew: We are confident that with the system in place now government buyers should have enough information and direction and guidance to be able to source legal timber as a minimum. We have a system where there is an option for suppliers to provide sustainable timber if they can in recognition that it is sometimes not that easy to acquire. We are addressing the same issue with food assurance. We are trying to raise the standards of food production and specify that in contracts. The latest information we have from the Sustainable Development in Government report indicates that there has been quite a significant increase in the volume of certified products being purchased by central departments and there is some anecdotal evidence from the timber trade, from local authorities and from various actors and players in the market that the government initiative has had quite a significant effect and the Timber Trade Federation are now developing their own responsible purchasing policy in response to that, so it has had a positive effect over time but we think we possibly could have done it more quickly if we had project managed it better in the first place. Q269 Sue Doughty: First a quick query about timber. At the moment we seem to have moved into the legal, which is progress, but we cannot guarantee that we are into the sustainable yet. We will get sustainable timber when we can. What are the barriers to getting sustainable timber? Is it that somebody is specifying non-sustainable timber and, if so, why? Mr Andrew: There are not that many barriers for the majority of timber that central government purchases. Most of the timber that we purchase will be from northern arboreal forests where certification, governance and so forth is quite good. The barriers will be where we need to buy hardwood from the tropics where there is very little certified timber and it is quite difficult to get that. If the Environment Agency want to buy greenheart to do coastal protection or river protection or something like that because that is the only species that they have identified where there will be sufficient, it is quite difficult to get that timber certified as sustainable. It may even be difficult to get it with evidence of legality but that is a minimum requirement so we have to assume that our suppliers are able to comply with that. Q270 Mr Chaytor: I am still slightly unclear about the distinction between your role and the OGC's because you clearly have the expertise in timber and in food, but if I am a procurement officer in another government department presumably I come to you in the first instance. There is no point going to the OGC website if I want to know about timber and I want to avoid Greenpeace camping outside my department when I am replacing all the internal doors. Mr Andrew: Yes. It is a sustainable development government website which we hope to change into a central point of expertise website in the not too distant future. Q271 Mr Chaytor: I have had a good look at two websites. I have got the quick wins website which is the OGC website and I have got the SDIG website which is the Defra website. Mr Andrew: That is true at the moment, yes. Q272 Chairman: Is that not confusing? Mr Andrew: We have the quick wins on the Defra website too. Chairman: Can you not rationalise it? Q273 Mr Chaytor: Are there any more websites? We are talking about these two websites. Part of the evidence we have had from previous witnesses is that the cultural change needs to reach deep down into organisations to the procurement officers who are doing the day-to-day work. It is fine to have the overarching strategy but unless the people doing the job and filling out the order forms are fully au fait it will not work, and surely it needs to be made as clear and simple as possible and there needs to be one source of advice they can go to for almost everything. Ms Rutter: We would absolutely agree with that. One of the issues on sustainable development is that there is some wider social dimension and quite a lot of government departments currently are working with the OGC on guidance on some of those social dimensions as well which the Environment Agency gave evidence would be useful to have brigaded together. One of the key things we want to be looking at and one of the barriers in the work that the Green Alliance is doing is about why it does not happen is that people do not know where to go for the information and it would be easier if they had one place that was very obvious. That would be a quick win we could make, rationalising where the advice is. What the incentives are is another important issue, whether procurement officials on the front line feel empowered to make decisions about choosing more sustainable options and whether they are skilled to do it. Some of those barriers are the ones that we need to address and, as you rightly say, there are quite important cultural issues about environmental procurement and officials saying, "What do I think my job is?". I may have perceived that my job is to get what is in a sense the least cost deal for the department and I can always justify that. Anything more sophisticated than that makes me more vulnerable. I had a very interesting conversation on Monday with somebody who is trying to persuade the Fire Brigade in Nottingham to change to more of a prevention approach. He said that people who join the Fire Brigade join because they want to put out fires, so saying to them, "We will have fewer fires if we invest more in sustainable strategies" is not why they joined the Fire Brigade and it is that sort of mindset shift that you need to get about, that the safe option is the cheap option. The sustainable option is the best value for money option in the long run but it takes a degree of courage and empowerment to feel comfortable in going for that. How do we get that information to people? How do we make them feel they can make those choices and how do we incentivise them to say, "We will rate you better if you do it like that" is an important set of issues that we need to be addressing now. Q274 Mr Chaytor: As things stand now how do you inform or influence other departments or have we just got to wait for the action plan, the Green Alliance report, before we can move forward? Is there a regular bulletin or newsletter or circular or is it informal, word of mouth, somebody rings up as and when? Is there any regular structure of communication between Defra and other departments to inform them about the benefits and mechanisms of improving the sustainability framework? Ms Rutter: When we produce things like publishing the new procurement section to the government that goes round both the sustainable development officials group and the estates managers group, so we have various ways to access people so that we keep them informed. People throughout Whitehall know very well Defra's activities on timber and food so would know to come to Bob and colleagues on that. One of the issues we have had about the creation of a website is, "We will build a website but will they come?". It is necessary but is it sufficient to get them to go? That is one of the issues we have to look at, how do we best communicate? At a time when people are being bombarded with quite a lot of guidance why should they look at your guidance? Q275 Mr Chaytor: People will look at the most authoritative guidance. Ms Rutter: Yes, and that is why we need Defra and OGC on this set of issues to work very closely together. There must be a sense of competition between the two of us. Q276 Mr Chaytor: Do you have responsibility for tracking how departments are performing? Do you know how departments are performing, particularly on the question of risk assessment, because I understand one of the issues in the SDIG questionnaire was this question of carrying out risk assessment and it seems to be a very variable practice between departments. Ms Rutter: All departments will have to cover risk assessment in their sustainable procurement strategy and how they go about it. What we did for the first time this year was ask independent consultants to audit how they thought the government was doing, to look at the information that departments are supplying, and that is something that we think added quite a lot of value so, rather than us sitting and assessing it, we will do that and play those results back to departments. When they have explicit policy statements we will be looking at benchmarking from that what is best practice. What we want to do in the first place is to get advice on how to do that to make sure that they are embedding best practice in the Environment Agency and onto a help line on environmental risk assessment. Mr Andrew: We also would look to use the regional centres of excellence that are being created for local authorities and I believe there are similar collaborative arrangements for central government to pursue these policies and strategies. Q277 Chairman: Can I just come back to where people go to look for information? It seems to an outsider such a straightforward quick win to obtain because, as you say, a single source of information would be a real help for people and much less confusing. The problem is that this is not new. I am going back to the Sustainable Procurement Group January 2003 report which recommended that there should be a single website of sustainable procurement by the autumn of 2003 so, far from being a quick win, you are already 18 months behind and you have not one. What is the reason for the delay? Why is that so hard? Mr Davey: OGC Buying Solutions, in response to that recommendation, developed a pilot website for sustainable solutions. I understand that that website began with listing the 27 quick win product categories by describing what the specification was so that any procurer could essentially put in place the specification to any contracts they were letting over the forthcoming period, but also added links to where they could buy those products immediately off OGC Buying Solutions' catalogues or elsewhere from other government catalogues. I am not sure when that website was developed but that has been in place for some time. I understand that now it is part of their commitment in the Sustainable Development Strategy that they are looking to roll that out beyond the 27 quick wins to provide a central source of information portal. Ms Rutter: The advice is all drawn together in the joint note on environmental in purchasing which was published in October 2003 and which gives you a series of other places to look, but that is a comprehensive note on what you can and in a sense cannot do as well on embedding environmental considerations. A lot of the comments we have had from people at various workshops such as those organised by the Sustainable Development Commission or at conferences on procurement have said that people know there is a lot of advice there. How to make sense of the advice and rationalising ,how to make this more usable to people is a key issue going forward. Whether people find it too difficult to find I do not know because I personally have not had to do that. There is also quite a separate issue which was certainly a big issue when I worked at BP where people were very concerned to put everybody through the key suppliers. There is also quite a lot of concern that in a lot of government departments, for quite sensible reasons, people do not always go through central procurement to procure. Sometimes it is easier just to nip off down to Rymans or whatever. Do you need to deal with the nipping off to Rymans culture? It is quite difficult to do that and that very often may be the easiest route and why we under-perform vis-à-vis getting the procurement process. The other thing is getting to the whole department. Q278 Mr Chaytor: Is there a paragraph in the guidance about nipping off to Rymans? Ms Rutter: I am just looking at it to see if there is anything like, "For God's sake do not do that". Q279 Mr Chaytor: Is that a Defra document? Ms Rutter: No. This is the OGC's. I think we supplied it to the committee earlier. It is the joint note issued in October 2003 by Paul Boateng and Margaret Beckett, jointly issued by the Office of Government Commerce and the Department for the Environment, Food and Rural Affairs, on environment issues in purchasing. There was another SPG recommendation which is still in a follow-up phase, which was to deliver a parallel joint note on social issues in purchasing and that is going to be coming out some time later this year. This gives you clear guidance on what you can and cannot do. This is one of the areas where we have to look very much to OGC guidance on what is compatible with EU procurement directives. You have had earlier evidence on some of the constraints that may impose because it is very important that we procure legally as part of sustainable procurement. Q280 Sue Doughty: I want to go on Gershon but just before I do, looking at your memorandum, paragraph 15, you say, "Defra has worked with DfES and the Department of Health on the Healthy Living Blueprint for Schools and Food and Health Action Plan". I am interested in this because I was in a school last week which was fair traded everywhere except school dinners and they were back in the past with school meals. I was saying to them, "What are you doing about improving your school meals?", because the schoolhouse does not have a good reputation, and it was quite clear that no, they were not doing anything, no, they were not going to do anything because they felt the problem was intractable. It is back to this whole problem and I think in fairness you have been outlining this problem about whether you should be pushing information at people or expecting them to pull it down. How soon will we start seeing that gap between the work that is being done on food, the fact that there is a Healthy Living Blueprint for schools, and the fact that school meals ought to be rather better than they are? At the moment we seem to be relying a lot more on Jamie Oliver and rather less on the department. Mr Andrew: It is difficult to say how long. We have been working on this for a couple of years now and Jamie Oliver certainly has helped because he has lent a high profile to it and has got a lot of people interested in it. A lot of work has been going on behind the scenes and Defra has published a number of case studies and has been funding pilot projects to encourage more local suppliers of food to schools and hospitals and so on and it is beginning to bear fruit, if you will forgive the pun. There are still barriers to overcome. We had a national suppliers' conference earlier this month and that was quite successful in raising awareness of the issue because one of the barriers is that local producers and farmers in particular will not work together to make themselves more competitive. There are various activities going on. In London, for example, there is ----- Q281 Sue Doughty: But when can we see schools ----- Mr Andrew: It is already happening in some schools but I agree that it is not widespread yet. Q282 Sue Doughty: We can always have the good example in any walk of life. When are we going to see a school like the one I was at, which is not particularly bad, is not particularly good, but certainly needs to get its act together on its school dinners, getting its act together? Ms Rutter: That is a question I am afraid you would have to address to our colleagues from the Department of Education and Skills. All we can do is issue guidance and offer assistance but policy on school meals is very clearly the responsibility of DfES. Q283 Sue Doughty: Thank you. I will move on to Gershon. We have this problem about Gershon and savings and whole-life costs. One of the things that worries me is always that if people are working with an annual budget whole-life costs do not fit within an annual budget. What are the implications for sustainable procurement of the savings targets that are set within Gershon? Will it take it forwards or backwards? Ms Rutter: We raised this issue shortly after Sir Peter Gershon's report was published with OGC saying that we had picked up concerns that people felt that the Gershon agenda trumped the sustainable procurement agenda because it was going to run in the opposite direction. What we worked with OGC to do was to make clear that there is no sense in which the Gershon agenda says, "Do not look at value for money" when "value for money" is defined as the most economically advantageous tender, not the lowest cost tender. There is no necessary conflict at all between Gershon and what we are trying to do, and indeed in very many ways sustainable procurement should help Gershon. Some of the areas where you want to invest in things that lead to long-run savings should help you meet your efficiency targets rather than take them away from you. There is an issue whenever people feel they are managed on cash and Gershon has given a bit of extra edge to that, but our colleagues in OGC have been very clear in giving people the message that Gershon does not imply lowest cost. Gershon implies best value for money and that is what they should be looking to do. We have been trying to clarify that because it was down the front line. Quite a lot of people were assuming that it just meant for everything to go out of the window and just go to the lowest cost. Q284 Sue Doughty: So you are confident that within those various lines of Gershon of making cash savings, cash savings, cash savings, they can still do that using sustainable procurement and making sure that the environmental considerations are built in? They will not feel under such pressure that they will say, "We do not know what to do. That is cheaper. I have got a deal with that supplier and I am going to meet my boss's target for saving money on the bottom line"? Ms Rutter: One of the three legs of sustainability is economy, so where something offers very good value in that sense, sustainable development and embedded sustainable procurement do not say that you do not go for a low cost option that releases more funds to invest in other projects or whatever. What we are saying is that there is not necessarily a conflict. We want people still to be looking at delivering on all three legs and that is why we have set separate targets that they are supposed to be meeting and I suppose the industry produces the same procurement strategies for every permanent secretary then to reconcile their accountability to delivering sustainable procurement with accountability to meet living cash savings as well. In terms of some of the long-running things, for example, energy efficiency, with a small amount of up-front investment, suitably prioritised, can deliver considerable long-run savings. It is a question of unlocking that initial capital investment. Many of you may have been in the chamber for the Budget speech. I was not. I tried to read it on the website but I did not get a chance, but certainly the Defra press notices welcomed the announcement by the Chancellor that energy efficiency was now to have an invest-to-save feel. Q285 Chairman: It was not mentioned in his speech. Ms Rutter: It has certainly gone up on the Defra website so we might want to check that one. That is one reason why we are very interested in doing this demonstration project with the Carbon Trust to show other people that a bit of up-front investment and ring-fenced money can yield very considerable long-run efficiency savings. It is slightly different from the whole-life cost issue. Q286 Chairman: Can I just interrupt? I do not want to be pedantic about the definition of sustainable development but it has actually altered and it now has more than three legs according to the new sustainable development strategy; it has five legs. You say that one of the legs is economy, achieving a sustainable economy, which is not the same as economy in the sense that it is used on an economy pack of baked beans, which is in a sense the criterion by which you may have used it earlier this afternoon. Ms Rutter: Those are our five new principles. We had ten principles in the 1999 strategy so in a great Gershonite move we have rationalised our ten to five. The SDC had six and the Scots had three so we have now agreed across the UK that we now have five principles. What we have done is move to this new more integrated vision for sustainable development which is what we call in chapter one of the Sustainable Development Strategy the new purpose. It makes it very clear that the economy is a key enabler of sustainable development with strong economies. Efficiency in government spending is one element in that, which is why you do not want to throw that very crude, first-round value for money completely out. I think we need to be able to justify what the other benefits are that you are delivering if you opt for something other than lowest price because that is part of our duty to taxpayers, to deliver first-round value for money. You have to be pretty clear about articulating what those environmental and social benefits you are delivering are if you go for something other than the lowest cost tender. Mr Davey: There was also a review in the procurement community on the attention that Gershon has given to the fact that modern professional procurement could serve to raise the profile of sustainable procurement, so there could be a spin-off from that. The other thing we have is some evidence from the private sector of where retailers in particular have taken a focused approach with their supply chains and delivered savings of around £2.5 million simply from pursuing resource efficiency measures or waste minimisation with a number of key suppliers. We are currently looking at the lessons from that just to see how much of that can be transferred into public sector supply chains and better supply management. Ms Rutter: I know that OGC feel, as Andy is saying, that there is an opportunity from some of the Gershon themes around concentration of suppliers by using the public sector buying power more intelligently and working with those suppliers to deliver solutions that are both good, which I might in my ex-Treasury role have called crude value for money, but also build in wider environmental and social considerations. I think Andy is right, that we can see this as a threat but also as an opportunity and it is incumbent on us to make sure we exploit the opportunity. Chairman: Thank you very much indeed and thank you for your time. Memorandum submitted by Office of Government Commerce Examination of Witnesses
Witnesses: Mr Peter Fanning, Deputy Chief Executive, OGC, and Executive Director for Access to Skills and Know-How Directorate, Ms Anne Turner, Director of Procurement Policy, and Mr Mike Davis, Procurement Policy Unit, Office of Government Commerce, examined. Q287 Chairman: Thank you very much for joining us and sitting in on the previous session. You heard us discussing the old chestnut of the debate between efficiency, value for money and doing the right thing by the environment and sustainable development. Your mission in life is really efficiency, where the greenery of procurement fits into your agenda, that the most efficient option is not always the best in terms of the environment. Mr Fanning: Perhaps I can begin by introducing myself and my colleagues. My name is Peter Fanning. I am the Deputy Chief Executive of OGC. I am supported by Anne Turner and Mike Davis from the OGC Procurement Policy Unit. Taking the specific question that you asked, our position would be that green issues - and I am interpreting "green" to be sustainable issues - are mutually reinforced by efficiency in the way that we define it. Perhaps I can refer you to the OGC report itself, which on the first page talked about sustainable efficiencies recognising that simply scoring efficiency in year one and causing a problem in future years was not what the agenda was about. Secondly, again, within the first few pages of the review Peter Gershon made reference to how they define efficiency. There were separate definitions of efficiency. It included things like reducing the numbers of inputs while receiving the same level of service. It referred to lower costs but it also referred to getting additional outputs for the same level of inputs and improved ratios of output per unit cost and so on. The basis point is that it would be a travesty of what has been written in the policies that we have been asked to deliver to equate efficiency simply with lowest cost. It is not what we have been asked to do, nor what we are proposing to do. The other point, which is a matter of information and fact, is that OGC's remit extends beyond efficiency. We have been given three targets within the SRO4 period. The first is to deliver the efficiency agenda. The second is to deliver value-for-money gains within civil central government. The third is also to improve the strike rate of emission-critical projects. Beyond the SRO4 period we have got a mandate to support the delivery of continuous improvement within the public sector, to improve government markets and also to support the dissemination and use of know-how and skills both in project management and procurement,. We have a wider agenda than simply "green". Q288 Chairman: Forgive me if this question reflects an ignorance of the deep internal structures of government, which I have to admit exists on my part, but when it comes to sustainable procurement is this an OGC issue or is it primarily an issue to do with OGC Buying Solutions, which is the internal agency? Mr Fanning: No; it is both. What people refer to as OGC has a policy lead-in in procurement for civil central government that will be extended to the wider public sector after 1 April. OGC Buying Solutions is our trading arm and that simply offers a variety of services to colleagues right throughout the public sector. For example, if you wanted to buy paper which met Defra's quick win environmental specifications then Buying Solutions would provide you with pre-qualified suppliers of that paper but it is not the government's policy to limit them to the choice of suppliers that accounting officers may choose. It may be the case that a school might find it more satisfactory to go down to Rymans to buy a ream of paper than to buy through one of the consortia, of which Buying Solutions is but one. Ms Turner: Perhaps I could build on that for the committee. Buying Solutions offers a set of contracts that are offering pre-tendered, gone through all the official journal of the European Community processes, and then they are available for other departments and sometimes the wider public sector to use, which is a benefit to them because it is quicker and cheaper because they themselves, in forming those contracts, be it for paper or for fridges or any of the other range of products and services that are on offer through these contracts, do not then themselves have to tender their specification because that has been done. That is broadly what Buying Solutions offers as a service. Mr Fanning: It is a bit of theatre, for which I apologise, but Buying Solutions' catalogue has 150 pages of suppliers who have already been pre-qualified, as Anne demonstrated, and it speeds up the process of choice of a supplier. Q289 Chairman: Do you have staff dedicated to sustainable procurement or is it something that is imbued within all staff? Mr Fanning: I am responsible for OGC's internal resources and the allocation of those and I think that the truthful answer would be that we do not have a sustainable procurement team but we would regard sustainable procurement as interwoven through the whole of our activity. For example, value for money is defined as whole-life costs and also being fit for purpose as defined by the user. It seems to me that if you unpick the definition of value for money - and I refer you to our memorandum, and indeed the Defra memorandum - it is entirely consistent with sustainable principles. You have to look at the cost of acquisition, the cost of operating and the cost of disposal of whatever procurement you want to make. The second point I would make is that in addition to trying to ensure that, if you like, sustainable procurement principles pervade everything that we do we are responsible for something called the government procurement service, which is a body which is a virtual body which supports those involved in civil central government in procurement. A hundred people a year go through the certificate of competence and everybody who goes through that certificate of competence will be trained in sustainable procurement principles. Recently the supervisory board for OGC received a paper outlining how the government procurement service might be refreshed as it has been going some time and we would like to invest a little more to re-energise it. As part of that refresh I can give you an assurance, because I am responsible for it, that we will incorporate within it sustainable procurement principles more specifically than we have in the past. Q290 Chairman: The buck stops with you, does it? Mr Fanning: I am happy to accept the buck. Q291 Chairman: You have ownership of the buck? Mr Fanning: I am happy to accept the buck on that point. Q292 Sue Doughty: Do you find there is conflict at all between saving the government money and embedding sustainability into what you are doing? Is there still an issue here? If you are driving hard on contracts you have a huge amount of pressure on you from the government to make efficiency savings. Is there not a bit of a conflict there? Mr Fanning: I would contend that there is not a conflict in that the drive is to make the best use of resources and the way we define best use of resources is by examining value for money in the way that I have described. Perhaps I might involve my colleague to give you a slightly different perspective on it. Mr Davis: The key thing which is often misunderstood is that if you look at government procurement policy it says that it is about giving the best combination of whole-life cost and quality to meet whatever is the user requirement. The user department or purchaser decides what it needs to buy, maybe by looking at Defra's strategy or whatever it is. It will then look at how it can do that and put it into a specification. When the bids come in you will have got whole-life costing and quality in those bids. You do not look at up-front price alone. That policy has been in place a long time and will continue with the efficiency agenda. As has been said, that does not change that policy. It is set in Government Accounting chapter 22 and therefore it is not about cost saving. There may be issues for certain types of products and services where cost is a big issue, part of what you are trying to achieve, but generally you can build all sustainability issues one way or another into that process, particularly environmental issues, which are about the product and service you are buying. The policy sets the framework for departments like Defra and other policy areas, like the Home Office on quality or whatever it is, to show how you can do both things together and work within that policy to deliver your aims. Q293 Sue Doughty: You have got in your strategy a commitment to make the UK a leader on sustainable procurement by 2009. How do you see this happening? What is your role? Ms Turner: The particular targets are going to need to be delivered by departments although this is a Defra strategy objective. Where OGC comes in on the European side is that we are responsible for negotiating for the UK for changes to the European procurement rules. As this committee I am sure knows, Article 6 in the European treaty has to be reflected in all the European policies that follow on from that. Procurement rules are no exception and so we now have procurement rules that have been clarified to take into account sustainable procurement issues because that is very clear in Article 6 of the treaty. In terms of the "what" for delivery, that is for Defra, and the "how" as far as the procurement element is concerned is very much for us. We work hand in glove to help our colleagues in Defra and elsewhere to explain how sustainable procurement, including this very important new goal in the Defra strategy, can be achieved through procurement but is also consistent with efficiency and value for money and is completely legal, so it is very much joining all those dots to achieve a particular goal. Q294 Sue Doughty: How are you making sure that not only are you meeting the rules but also any changing themes within Europe? Are you harnessing and walking step-by-step along what is happening in Europe in terms of what they are wanting from people in terms of procurement or are you going in one direction and hoping to catch bits along the way? Are you negotiating within it or parallel to it? Mr Fanning: We are responsible for that. Q295 Sue Doughty: There is a job to be done within Europe also to join the dots. The European Commission has recently issued a practical green handbook which shows what is being done in different Member States to procure in a sustainable way so that the Commission itself is trying to join up, because obviously that is dealt with by a different part of the European Commission and it tends to be organised in a very stratified way. The Commission is doing its bit. Within the procurement part of the Commission these policies also find their way into the discussion. Whether that is when we are negotiating new wars(?) or talking in the advisory committee on public procurement there is a constant refrain as to how you can deliver sustainable procurement or environmental objectives through procurement as well as complying with the rules. Mr Davis: You can always look at them when we are doing things in the UK and when Europe is tackling these things in the same way. What we have done in our relationship with Defra is provide the "how", how we can do things consistent with value for money and new rules. They tell us what they are trying to achieve because procurement is usually just one delivery mechanism for what they are trying to do with sustainability. There will be lots of options. They will come to us and say, "Is procurement a good way of dealing with this? What can we do? These are the sorts of product areas we are interested in", or whatever it is. We will then show how that can fit with the legal and policy framework. In Europe our part of the Commission will be doing the same as us, ie, coming up with good directives that respect sustainability. The new procurement directive gives a lot of advice on how green issues can be taken into account at each stage of the procurement process. As Anne said, there will be another part of the Commission that is looking at sustainability and the two have to work together and the green handbook shows that to some extent. Our joint note with Defra also shows how these two aspects of government can work closely together. Q296 Sue Doughty: In terms of sustainability you obviously take into account environmental impacts. Do you take into account social impacts? Mr Davis: Social impacts are more difficult. They can be taken into account and, as Defra explained, one of the things we are doing at the moment is coming up with a joint note on social issues in public procurement to supplement the one on environmental factors. Social issues are more difficult for two reasons in my opinion. One is that there are so many of them. They can range from quality issues to helping SMEs, to fair trade, ethical trading, to a whole range of employment issues. They often need to be tackled in different ways. Some of them need to be tackled in terms of war criteria; others in terms of specifications, so to roll all those into one note is quite difficult but we are determined to do that because we think it is right that there needs to be one document that people can look at in terms of social issues in public procurement. Environmental is easier because it is about the product or service that you are buying, a greener product or vehicle or whatever, so that is much more easy to fit within the green policy framework. Social issues can be done and we are trying to find ways to show how they can be done in the best possible way. Mr Fanning: The note is in preparation and we will publish that in due course. If I could round that off, one of the things that emerges very quickly once you begin to dig beneath the surface is that there are lots of very complex issues. There are often lots of trade-offs. The approach we take in OGC is to enable people to make thoughtful decisions. We do not tell people what decisions to make but we do tell them how to make them and we advise them in navigating their way through the forest of rules and regulations and problems that arise. We do that through a number of devices. We invest quite heavily in training. I mentioned the government procurement service as part of that package. We also provide guidance and that guidance evolves into standards where that is appropriate. We also provide services. We have consultants who can support people going out there making purchases and also we have got OGC Buying Solutions which gives people lists of suppliers who are pre-qualified. Indeed, the list that I went round earlier identifies products which meet the quick win criteria but also, because I am sure that the committee is interested, those suppliers which are SMEs and a purchaser may wish to direct their business for policy reasons to the SMEs and we would therefore provide a list of SMEs who would be pre-qualified that they might be able to choose from. Q297 Chairman: Does Rymans feature in this list? Mr Fanning: I cannot remember. It is 100 pages and I simply do not know but we are very happy to advise you. Q298 Mr Chaytor: In terms of the recommendations of the Sustainable Procurement Group, what progress have you made to date and what do you anticipate will be the progress over the next 12 months and 24 months? Mr Fanning: Most of the substantial recommendations have been largely fulfilled. Q299 Mr Chaytor: What are they? Mr Davis: The two things we have had a big interest in were the joint note, the environmental note, which was an update on a much earlier note to make it much more proactive and positive, and the quick wins which had been built into the OGC carbon emissions framework. Q300 Mr Chaytor: The quick wins are now ongoing? Mr Fanning: They are. Q301 Mr Chaytor: With these extra 56? Mr Fanning: Yes. Mr Davis: They have also now featured in the framework for the government estate which now has a section on procurement which has taken that forward. One of the blessings of the new Defra strategy is to try and bring all these things together, see where we are and therefore what needs to be done in the future. You could argue that there are a number of different strands of guidance and activity at the moment that tend to overlap and one of the things the task force will do is see what the priorities need to be and then take that work forward and say what are the key targets for the future. Q302 Mr Chaytor: In terms of your own planning over the next year or two or three do you have specific objectives in terms of advancing the cause of sustainable procurement? The impression is that this is all rather nebulous. There is a process taking place, it is a very long-winded process and the borders between the exact responsibility of OGC and Defra are sometimes a little bit fuzzy in that the advice given to departments is a bit tentative. There seems to be a lack of drive and direction. Is that fair? Ms Turner: We mentioned the Sustainable Procurement Group work. Quite a lot has been achieved already, as my colleagues were saying, and indeed Defra colleagues were saying, but there is some ongoing work as well. The development of this note on social issues is something that we are very much engaged in right now. Q303 Mr Chaytor: Is there a timescale for the completion of that note? Ms Turner: There is not a timescale explicitly for the completion of it but we are aiming to have it completed by the summer. The reason I am being a little bit tentative about that is that there are so many issues and they are all important issues and we do not want to sacrifice dealing with those issues properly for the sake of an artificial timescale. Mr Fanning: I would like to challenge the contention that sustainable procurement is any different from any other procurement. The clear policy that is enshrined in Government Accounting chapter 21 is that procurement has had to comply with value-for-money considerations and that leads you directly into the whole area of sustainable procurement and the question you very quickly come to is what do you then end up buying. There are two factors, it seems to me, that one has to consider. One is that you have to have information that people who are buying can rely on and the quick win is an example of an initiative taken by OGC outside its direct remit. Indeed, that quick win initiative was taken by colleagues in our trading arm and our trading arm is targeted on meeting financial targets but they took on the quick win work as a sort of pro bono activity because they believed in it. The Sustainable Procurement Group is chaired by the Deputy Chief Executive of OGC Buying Solutions. The second thing that one needs to do is get people doing the right thing. They have got to be competent and they have got to know how to use the information sources and the techniques that are promulgated. I would not want the committee to go away without recognising our determination to improve the way things are done. That is a non-trivial task to improve the quality of procurement generally throughout the wider public sector and it is significant that only four departments of state have procurement specialists, if you like, or people with procurement expertise on their board. One of our internal targets is to increase the representation of so-called commercial directors on the boards of government departments. The point I am trying to leave you with is that there is no magic wand here. There is a long march to improve the quality of procurement and project management skills throughout government and the wider public sector. You have to put a policy framework in place but you also have to train and skill people at the same time and that takes time. Q304 Mr Chaytor: I understand that. You said it was one of your internal objectives to increase the number of procurement specialists. Mr Fanning: Yes. Q305 Mr Chaytor: Is this published? Mr Fanning: Oh yes. Q306 Mr Chaytor: In your annual report this appears as a specific objective? Mr Fanning: I would not want to mislead you. It is certainly something that the supervisory board discussed last Tuesday. Indeed, we had a presentation from the Commercial Director of DCA and one of the observations made by a senior member of the board was that the strongest argument we had ever seen for having a commercial director on board had just been presented by the performance of the Commercial Director of DCA. It is something we are pursuing but it is not one of our formal PSA targets. Q307 Mr Chaytor: Could I turn the clock back to the time when the EC public procurement directives were agreed because your website apparently says that all the UK's objectives were secured in the finalisation of both directives. What were our objectives at that point? Mr Fanning: On this point I must defer to my colleagues. They were involved and I was not. Ms Turner: I will begin and then pass to my colleague who had the pleasure of negotiating for real. Directives take an enormous amount of time to agree and the origins of these revised directives go back to 1996. I mention that just to give the committee a flavour of where we have been. The 1996 reference is when the European Commission published a green paper on the way forward for the public procurement directives and the drafts appeared in 2000. The UK's objectives were to simplify and modernise and clarify through the directives. The simplification is the easiest bit in the sense that there has been hitherto one directive for each of goods, works and services and the three have been put into one, so it was an instant hit in that respect. The relevance as far as environmental issues are concerned is that the directives themselves have very much clarified and built up what can be achieved consistent with Eurospeak for value for money, the economically most advantageous tender, and there is also consideration of the social issues, and I referred earlier to Article 6 of the treaty and that was in the UK's objective right from the start and that is why we were pleased to say we had achieved what we set out to do. Mr Davis: There were about four or five sub-objectives below the objectives Anne has mentioned, of which environmental and social was one. We were getting in our relationship with Defra clear messages that this was something that needed to be on the face of the directive so that, along with ideas on mechanisms for electronic procurement and the like, there were key targets that we were aiming for. What we have got with the directive, which I think is the best you can get with a legal document, is that at key stages of the process, ie, specifications saying you can take account of green production processes, you can take account of eco label criteria, you can build in essentially what you need to as long as it is relevant to the thing you are buying. At award stage you can take account, as we already knew because this is just a clarification but a very helpful one, things like whole-life costing, energy savings, recyclability. As long as it is about the thing you are buying they can be built in at that award stage. There was a case called Helsinki Buses(?) that explained that in a lot more detail but that was something that was not a surprise to us because we always believed that that was what the directive was already saying but we wanted that clarification on the face of it. Q308 Mr Chaytor: And therefore you do not see that the directive in any way represents constraint? Mr Davis: In terms of environmental procurement, in terms of what the principles are that people are trying to follow and getting good products and services from an environmental perspective, no, I would not say that there are constraints. There will be slightly rigid rules on exactly what you can specify. You could not use a trade name or you have to be careful that something is not discriminatory. There will be things like that so I cannot guarantee that someone could not come to you and say, "I tried to get this green product and I was not able to", but genuinely in our work with Defra I would say that on all the things that we are trying to achieve the directive allows one way or another an environmental issue to be taken forward. Social issues are more complex for the reasons that I mentioned. They are usually about secondary issues that sometimes cannot be directly related to the product or service that you are buying. It is more about trying to influence the companies. That can be more problematic for a whole range of reasons. With environmental issues normally there should not be a difficulty. Mr Fanning: Perhaps I could wrap that up by saying that our experience throughout civil central government and also our growing experience in the wider public sector suggests that it is often not the rules that are the problem; it is the perception of the rules, and part of our job here is to educate, inform and support using a variety of instruments. We would not want you to go away with any anxieties about our determination to enable people to use the rules to meet their own policy objectives. Our general thrust is to enable them to achieve their policy objectives, and if their policy objective is to procure sustainability we can show them how to do it. Q309 Chairman: Some evidence we had last week suggested that the Danes could teach everybody a lesson in flexible use of the EU rules. Mr Fanning: I am sure. Q310 Chairman: I do not know whether you have any observations to make. Mr Davis: I would say that in terms of the negotiations leading up to the new directive and the efforts put in the UK was very much at the forefront in trying to make sure that these flexibilities were built in because, as colleagues have said, it is not just about sustainable procurement; it is about good procurement to use whole-life costing and quality as well as just a price for something. We have never seen that as something that we would have a difficulty with. In my view, in terms of the way the negotiations went, the UK was often seen as very much in the lead on those sorts of issues. Whether we are performing as well as some other Member States in various categories I would leave to others to say, but certainly the framework that we have got is something that we very much fought for and we are very happy with. Q311 Chairman: Can I touch briefly on the Gershon question, which you will have heard discussed before, and in particular on an issue raised by the Chartered Institute of Procurement and Supply who expressed concern about the focus within Gershon, as they saw it, on cashable gains and the lack of clarity on how long cashable gains are accounted for. Is this something that you have wrestled with and, if so, have you come to any conclusions? Mr Fanning: Yes, it is something that we have wrestled with. The term "cashable" should not be interpreted crudely as meaning cost savings. It usually means where there are very clear financial assessments that can be made but I referred you earlier to the five different ways in which efficiency can be managed, and indeed colleagues in OGC who are responsible for managing the Gershon programme (as we term it the efficiency programme) within OGC are putting particular effort into supporting departments and other parts of the public sector in, if you like, the theology of measuring efficiency gains. I recognise that there is a tension. If you are going to try to identify quick wins - I hate the phrase - the simple thing to do is negotiate hard with your suppliers and reduce prices. That is only one of the methods that are available. As the departments are going through the second phase of preparing the technical notes which set out in greater precision than has been done hitherto how they are going to deliver their efficiency gains, this issue of measurement, what is and what is not cashable and what is and what is not an efficiency gain and how you measure it, is being considered at this very moment. Q312 Chairman: Within the culture of the Civil Service though, and given the kind of political environment that is making Gershon happen, that people will be rewarded for achieving non-cashable gains, to use a phrase I do not like, do you think the culture will recognise the achievement of non-cashable gains to the same extent as cashable gains? Mr Fanning: Part of what we are trying to do is develop the culture, evolve the culture. That is the first point I want to make. The second point is that one of the major areas of efficiency opportunities, in fact, the second largest source of efficiency gains, is in the area of productive time which is not a straightforward cashable gain. I think that the skill here is in measurement, in developing a much more numerate culture, a culture which is much more used to using accounting information. I make reference to the work that has been done by the Treasury in trying to support professionalisation of the finance profession within central government departments and that contrasts to local government where I have particular experience. I think that the culture of the Civil Service is one of the things that we find ourselves with and one of the things that we are part of the process of changing. One of the key legs of the support that OGC can provide is to help people deal with the measurement of these efficiency gains and that will depend also on the work that has been done by the Treasury, as I said, in strengthening the financial management systems, and that will require change. Q313 Chairman: There is nothing that you feel is intrinsic to the Gershon process which is unhelpful to the cause of sustainable procurement, or perhaps nothing that cannot be counteracted by determined effort on your part and the part of the Sustainable Development Unit? Mr Fanning: I would say thoughtful effort. What we want is people who are thoughtful procurers, who have placed due regard on all the various policy objectives that have to be met. Q314 Chairman: There is a certain smirking going on at the phrase "thoughtful procurers", I do not quite know why. Perhaps procurers have not always been thoughtful in the past. Ms Turner: Perhaps I could pick up the theme, Chairman, that we do not see anything incompatible in the objectives of sustainable development, value for money and efficiency. I suspect the reason for the smiles around the piste is that what will make that work for real is good practice, which turns again on skills. We keep on hearing this time and again and it is skills right at the top of the tree for the permanent secretaries, and for ministers ultimately, then the people who are doing the procurement for real understanding the "how" as well as the people in departments responsible for policies like sustainable development and fair trade, whatever it may be, and joining that up, and overcoming perceptions that either efficiency and/or procurement are all about low cost or cutting cost. Mr Davis: Every accounting officer will still have to look at what government procurement policy says, which is that it is not about the lowest price. It has got to be about this combination of whole-life cost and quality. That is there and will stay there while the efficiency agenda is going forward so, although there will be misunderstandings and a certain amount of tension there, it should be possible to deliver it. Mr Fanning: Perhaps I can respond to the smirks. The traditional caricature of the procurement process is very formulaic and rule based. In other words, the decision-makers do not actually have to make any real decisions. They simply have to follow procedure which produces an answer. Sustainable procurement is completely consistent with our policy of supporting people who make choices which they then have to account for. One of the reasons why we were particularly delighted to present evidence to this committee was that we see the committee as part of the process of holding people to account for the decisions they have made and it simply is not sufficient for someone to say, "I have followed the rules. Therefore the output is okay". It is for someone to say, "I abided by the rules but I have still got to account for the decisions that I have made and demonstrate how they were consistent with the policy objectives set by government". Q315 Mr McWilliam: I have listened to what you have said very carefully and I am still puzzled. I am puzzled because what you are saying I agree with but I cannot see that what you are saying is consistent with the rules set out in the 1923 and 1932 Treasury Acts which are still in force. They have not been amended. Mr Fanning: Forgive me; I am not familiar with those. Q316 Mr McWilliam: These Treasury rules have not been amended. Mr Fanning: Presumably that is chapter 22. Q317 Mr McWilliam: Yes. Mr Davis: What I am referring to is chapter 22 of Government Accounting which states what accounting officers have to do in terms of public procurement policy and that makes it clear that it is about this broader value-for-money principle and not just price. Strictly speaking a government department that awards a fairly complex contract purely on price is not following what ----- Q318 Mr McWilliam: But, you see, I see that as in conflict with the 1923 and 1932 Acts and unless they are amended at the end of the day an accounting officer could be in a great deal of trouble. Mr Davis: Chapter 22 is not an excuse but it has been in place for a very long time. Q319 Mr McWilliam: We would all like to see sustainable development and we would all like to see analysis on through-life costs but until we can get away from the annualisation and the rest of it that is imposed by Treasury rules we are not going to get terribly far, are we? Mr Fanning: I stand to be corrected on this but certainly under the current Budget arrangements people are used to NGO flexibility. There is a suite of reforms that have been enacted which enable people to plan over a longer period. The proposition that you have to spend all your money in year simply no longer applies. Q320 Mr McWilliam: No, it does, but it is just being ignored and the minister concerned is saying, "We will have to do it that way", but the legislation underpinning that is still there. Mr Fanning: I defer to your knowledge on this one but we are working to chapter 22 of Government Accounting. That is, if you like, our bible. We work with NGO flexibility all the time. One of the problems, as I referred to earlier on, is that while it is our view that the regulatory framework is quite permissive not everybody knows how permissive it is. Q321 Mr McWilliam: That is the point. Mr Fanning: The traditional procurers as it were down at the grass roots often feel - and this is again anecdotal - much more comfortable with very clear rules which prevent them from having to make a decision and then accounting for the decision they make. We are in the business of supporting people but in supporting the environment people have to account for the decisions they have made. Q322 Mr McWilliam: My real question is, do you agree that we really need to look at the basis of what the rules are in legislative terms before we can come to terms with the kinds of things that you rightly say you want to do? Mr Fanning: I neither disagree nor agree because it is outside my area of competence. We would be very happy to write to you on that matter should you wish us to. Q323 Chairman: Thank you very much. Could you also, if you are writing to us, explore a little further - and I am sorry to ask you to do this; I know it is complex and difficult to pin down - how precisely you intend to set about identifying the non-cashable gains within the Gershon context and, as it were, rewarding the process of developing those within the context of sustainable procurement, if that makes sense? Mr Fanning: I understand what you mean and we will try and satisfy that. Chairman: That would be really helpful. Q324 Mr Thomas: You said in reply to an earlier question that you needed skills in measurement. Perhaps you can establish at the end of that how you might measure that and measure the data that comes about so that data collection shows if that is not having the effect against sustainable procurement. Can I conclude on the gateway review process because that is obviously, from the evidence we have received, an important part of your work? I wonder if you could set out for us briefly how the process works and, particularly for us to understand it better, what sorts of projects the departments have been involved in in that process? Mr Fanning: Certainly. A gateway review is a review of a project at a point in its lifecycle and there are six gates, starting with gate zero and going to gate five. Gate zero is often referred to as strategic assessment and it asks the question why you have engaged in this particular activity, whether it be development of policy or whether it be the procurement of something, and that something could be a school or any large asset. The final gate, gate five, is what is known as benefits realisation which, when I was growing up, we called a post-audit report which asks the question, "Have you delivered what you set out to deliver?". There are intermediate stages. From memory, gate three is an examination of whether the project looks at procurement options for the project. The process is that at each one of these five defined stages an independent group of people (and by "independent" we mean not reporting to the department) will do a review of that project. The review is undertaken primarily by a series of interviews but they will also look at evidence and they will write a report which is offered to the senior reporting officer (SRO) responsible for that project. That report is done usually within five days, so the investigation starts on a Monday typically and the report is presented on a Friday morning, and the report is confidential to the SRO and the guts of the report is a series of recommendations on how that project might be improved. The understanding is that the project would not proceed to another gate unless those recommendations had been carried out. Q325 Mr Thomas: Any project that enters gate zero will go right through to gate five, will it? The whole life of the project will go through or is there a spot check along the different gates? Mr Fanning: The first thing is that OGC is invited by the SRO and we have had 900 invitations, I believe, since the gateway process was initiated. Q326 Mr Thomas: It is not an automatic process? Mr Fanning: It is not automatic. Departments invite OGC to review the project. Q327 Mr Thomas: Is this because they have their doubts about the nature of the project? Mr Fanning: Because they think it is a useful process. Because the gateway process was endorsed by the OGC supervisory board and therefore with support and encouragement, if you like, from the top of the shop, OGC sometimes is invited in and the people who make the invitation may initially feel that they have been told to invite them, but the fundamental thing is that the relationship is one where we support the people who are responsible for driving the leading project. The reason why the SRO would call OGC in is that it is a good thing to do. It is seen as being useful and a project which is going well would have as much interest in the outcome of a gateway review as a project that might not be going so well. Indeed, anecdotal evidence might suggest that projects which are not going so well would have an interest almost in not asking for a gateway review. The gateway reviews are very popular. Nine hundred of them have been done. There are gateways which on larger projects command a more experienced team and projects are separated into high risk, medium risk and low risk and the high risk projects tend to attract a very experienced team. I know some of those teams include former permanent secretaries, for example. The purpose of the exercise is to support the SRO in leading that project. A key characteristic is that the team is independent and the relationship between the project team who are undertaking the review and the SRO of the project is entirely confidential. That is key to its success. Q328 Mr Thomas: Can you say in that process where in particular sustainable procurement fits in and where in that process some of the issues we have been talking about in the last three-quarters of an hour: making sure that it is not just low cost, that there is whole-life analysis of this thing, can that be picked up and what remedial action can the process lead to? Mr Fanning: Anne is a senior gateway reviewer. That is what they look like. Ms Turner: I am afraid so, yes. I should declare my interest to the committee. I am a gateway review team leader, one amongst many. The answer to the question is that sustainability issues are generally dealt with under the heading "Wider Context". You may be familiar with the fact that each gateway stage has a particular workbook and there are prompts within the workbooks for the review team which are put to the SRO, the project team and to all those who have a key interest in the successful outcome of the project, or the programme if it is a programme. I have brought along an example which I will briefly read to you. This is from gateway one, business justification. Wider context, an area to probe: does the preferred option meet wider government and departmental policies? Strategic objectives: standards and business change programmes. The review team, the three or four people who will be capable and experienced people in their own right, will be able to interpret that and apply it to other particular project concerns. Allied to these prompts is evidence expected because the underlying purpose of a gateway review is not just to rely on assertion but to look for evidence that what is being said is true. Against that area that I have just read out one example of the evidence given is construction projects: contribution to proper work space strategy, health and safety, sustainability and design quality. These are the ways in which sustainable issues, environmental issues, are built in and can be addressed in the process. Mr Fanning: Sustainability is specifically referred to in relation to construction projects because of the scale of them and also because of the duration over which the project, and indeed the output cost of the underlying asset, is deployed. As Anne said, the underlying policy objective is to procure sustainability and that is clearly specified as part of the project specification. Then the gateway review team will examine whether the project as it has been delivered meets the original specification and that is part of that inquisition process, if you like. Q329 Mr Thomas: What remedial action can that lead to? Are you then empowered, if that is the right word, when you report to the senior reporting officer, to say, "You are off beam here. You are not going to meet the underlying government objectives with the way this particular project is going at the moment"? Can you tell them, "You need to do it this way", or, "You need to do it that way"? How does that work? Ms Turner: The review team does not tell, in the sense of instruct, the project team what to do. What it will do is draw out a number of recommendations, not thousands of them, typically a dozen or fewer, and categorise those as red, amber or green, depending on the severity or the importance really of the recommendations that in the view of the review team should be addressed in order to achieve the project. Anything labelled as red is a clear indication that that should be addressed before the next review. It definitely does not mean stop. That is perhaps the unfortunateness of having a traffic-light approach. It really does not mean stop although I would not want to say that it means jump the lights either. It means do something about it now, and that is taken very seriously by departments because two reds and the reports will be elevated to the permanent secretary. Mr Fanning: There is a protocol for raising the seriousness of a particular significant project which appears to have a red. The Permanent Secretary of OGC would write to his opposite number in the relevant department. It is important not to mislead the committee. OGC has no power to mandate. This is helpful advice offered with an open hand. The protocol is that if the advice does not appear to be acted on then there are certain circumstances when we can elevate our concerns. One of the key features of this process is the trust that builds up between the SRO who is the recipient of the advice and the team that is giving it. It is naturally quite a tense relationship but the evidence of the 900 freely given invitations is that people value a good team turning up and doing a good job. I come back to the point that so much of the procurement work and the challenge of procurement is about the people issues as opposed to the system and process issues. Chairman: Thank you very much indeed for your evidence today and shedding a little light on a rarely seen but very important part of government. We are grateful to you. |