Department for Constitutional Affairs - Health Committee Contents

Examination of Witnesses (Questions 40-59)


17 OCTOBER 2006

  Q40  Keith Vaz: — to ask one of your own civil servants?

  Alex Allan: There might well be nobody in that—

  Q41  Keith Vaz: You have a press office, do you not?

  Alex Allan: We have a press office. They may not have had the particular skills.

  Q42  Keith Vaz: Nobody could have done what Mr Sutlieff could have done?

  Alex Allan: I do not know the exact details but I am satisfied that—

  Q43  Keith Vaz: What about Vera Baird's answer to me this morning? What worries me is the principle of this. £11 million of taxpayers' money going on consultants when you pay your senior civil servants in your Department so much money, when we are talking about job cuts. All that is happening is that these contracts are going outside to very big firms like KPMG, PricewaterhouseCoopers, Ernst & Young, to do the work that really you all ought to be doing. The worst part is that nobody seems to have a grip on the commissioning of these consultants, and it takes a parliamentary question from a Member of Parliament and an inquiry by a Select Committee before you all think about trying to know how this is commissioned.

  Alex Allan: As I say, the large sums for the big firms that you mentioned I did know about and they are areas, as I have outlined, for example, on the consumer strategy or in some of the other cases supporting our work on the IT side. For the major sums, yes, we do know and there is the visibility of that and they are employing people with the sorts of skills that we do not have in-house and where it would not necessarily be sensible to try and build up a level of skills for a relatively short term. In terms of the information and how we get it, I will ask Barbara Moorhouse to explain some of the work that has been done there.

  Q44  Keith Vaz: Before Barbara comes in, why is it then that you allowed the Minister to sign—because I know that these questions would come to you as the Permanent Secretary—and she said that the information on what consultants employed by the DCA were used to accomplish was not held centrally and could only be obtained at disproportionate cost. Why did she not act in an accurate and full way to Parliament by telling me in that answer the consultants that she did know what they were doing, the big amounts of money? Why was a full and accurate answer not given to that question?

  Alex Allan: I believe that answer is an accurate answer and, as I say ...

  Keith Vaz: But it is not correct, is it, because you do hold this information centrally? You have just told me you know about the big figures.

  Q45  Chairman: There must be a trigger within the Department at which a particular part of the Department cannot spend a large sum of money on consultancy. It must be referred up at some point. What is the figure?

  Alex Allan: There is a process which perhaps I will ask Barbara to outline, but we do indeed have a number of triggers. There is a basis that if there is a competition, i.e. if this is not let as a single tender up to £25,000, it would be dealt with by a head of branch; between £25,000 and £250,000 by a head of division or group; and over £250,000 by the appropriate board member and potentially by ministers, depending on the issues; and for a single tender under £50,000 by the head of division or group; and over £50,000 again, by the board member.

  Chairman: If it is known at board level, it is known centrally.

  Q46  Mrs James: We are talking about substantial sums, £1 million plus, £2 million in some cases. You must have a system of monitoring costs as they accrue. I would assume that you are billed by the hour by these large organisations. Would alarm bells be going off when bills were getting so high?

  Alex Allan: Some of them may be by the hour, some of them may be fixed-price contracts. I think they would quite often be fixed-price contracts.

  Q47  Mrs James: But you would know exactly what you were getting for your fixed-price contract.

  Alex Allan: Absolutely. There would have been a process by which a contract was entered into which specified what it was that the firm or consultant was supplying and how much we were paying for what.

  Mrs James: I do understand that, but some big people are making big money.

  Q48  Chairman: We have established that if the contract is above £200,000 it would be considered at board level and therefore it is held centrally, if it is a tendered contract to a higher figure, if there is no tender involved, so quite a large proportion of the contracts we see in front of us here that Mr Vaz has weeded out would in fact be known about centrally.

  Alex Allan: Yes, absolutely.

  Q49  Chairman: So why was Parliament told that they were not?

  Alex Allan: The question was what each of the consultants were used to accomplish and how much was paid in fees to each organisation.

  Q50  Keith Vaz: But the Minister could reply, "Well, we don't keep figures below £200,000 but, by the way, chaps and chapesses, above £200,000, this is what we spent."

  Alex Allan: But then she did give you a table which listed a large number of the fees paid to consultants by the court service.

  Q51  Keith Vaz: No. She said it is not held centrally and could not be obtained, only at disproportionate cost, the favourite way in which government prevents backbenchers from finding out information. Can I just ask you: the head of branch who can authorise up to £25,000 without telling anybody basically—is that any amount of money? Can there be any contracts within that £25,000, and when will you get to hear about it?

  Alex Allan: There are obvious rules. First of all, there will be a budget for the particular branch or division, however that is organised, so it is not that they have unlimited funds themselves. Secondly, there are rules operating through our procurement department on how they do it. They do not simply write the cheque.

  The Committee suspended from 4.49 pm to 5.02 pm for a division in the House

  Q52 Chairman: Order. I think Ms Moorhouse was about to give us some more detail.

  Barbara Moorhouse: I would like to just try and set out the position factually as to how we approach the management of consultancy expenditure. If I take you back to my earlier remarks, I said that the failed Oracle implementation was an attempt to try and improve the management information in the Department. It has been recognised for some time that in the area of procurement systems, which is obviously about what we spend and how we procure things and the visibility that we have of services that we buy, the information that the old systems provided to us was not good enough. Clearly, we would have started to see some improvement in those information systems if the Oracle systems re-implementation had not failed, so we are now at a point where we are starting to look at the way in which we can get hold of information about a variety of expenditure within the Department, including that on consultancy. If I try and just quickly summarise where we stand today, we have a series of financial guidelines in place within the Department that require all managers at the various levels that we have described to follow certain policies and procedures before they engage consultants. Sometimes, as in any organisation, those will not be followed. We at the centre do not have visibility in our current systems to enable us to monitor areas where we are not supplied with the information centrally in the way that we would require and indeed have requested.

  Q53  Chairman: Is that just the lower value ones?

  Barbara Moorhouse: Yes, I think it would be fair to say that it was, largely because the bigger values tend to be ones where there is visibility because they are a critical part of what the Department is doing, and therefore there is a visibility just by the nature of people exercising their supervisory functions. What we plan to do within the area of consultancy spend is two things: we are looking to improve the way in which we monitor and shape the expenditure on consultancy in terms of refining the guidance, and using the improved information systems that we are now planning, to be able to monitor whether we are getting the compliance that we seek. It is also fair to say that there are some areas where, for example, approvals may take place in the context of a large project. We may, for example, on an IT project approve the overall expenditure and delegate, rightly, to that particular budget manager or project manager the right to go and engage consultants within predetermined limits. We would not necessarily review the precise use of consultants in those kinds of cases because they are part of an overall project management strategy. Finally, we are aware, of course, that approvals may not be quite as simple as the guidelines suggest, for example, where we take on a set of consultants to do a particular project and the project grows in size and scale from that originally envisaged, and that will happen from time to time, particularly on projects which are complex. I do not offer any of those as excuses; we fully understand the need to respond to and manage consultancy expenditure as effectively as possible. I am just trying to give a summary of the way in which we know that leakage currently happens. We are not happy with it and we have plans in place both to address the management information need so that we can keep a much better handle at the centre, and check up without endless amounts of manual monitoring what is happening within the Department, and secondly, to make sure that we are tougher around the systems and procedures, but that in turn depends on us having sufficient systems to give people good information to control their expenditure. Telling someone that they must work to a limit on consultancy expenditure and then giving them no financial information about spend puts them in a difficult position as well, and that was the situation that prevailed while we physically had no management information systems or financial reporting in the Department last year. So we are, I am afraid, slightly in catch-up. We know it is a catch-up we need to do and we are addressing that now.

  Q54  Keith Vaz: Though, obviously, we are gratified that the system is going to improve, we are very concerned that up until now we seem to have a chaotic system, where nobody actually knows how much money was spent and for what purposes. Maybe the way to deal with this is to send an email or a memo to all senior staff who can commission consultants to tell them that they should not commission consultants unless they are absolutely satisfied that there is nobody in the Department that can do the job, and secondly, when they do commission, to just send you a memo, or somebody in the senior team, and say, "We have spent X amount of money on consultants and it has been spent for this purpose." It is not rocket science, is it?

  Barbara Moorhouse: I entirely accept that and I think it might reassure you to know that the whole area of financial management and indeed consultancy and procurement management has been the subject of a number of reasonably stiff memos, and will continue to be so.

  Q55  Keith Vaz: What would be helpful, I think, to the Committee is if we could have from Mr Allan a list of ... We have the list of what you have spent the money on but, since you were able to tell us in such detail what Barry Sutlieff did, and I am not here as a kind of recruiting sergeant for Barry Sutlieff Enterprises, since you have the figures and you know what has been spent, and we have been assured by Ministers they have been spent properly, there is no reason why you could not tell us what each one of these consultants did.

  Alex Allan: We will see and we will give you as much information as we can.

  Chairman: Thank you very much.

  Q56  Dr Whitehead: Could I ask some questions about Public Service Agreement targets. I note that the Department has responsibility to PSA-target only for two of its four objectives. How does one ensure that sufficient attention and monitoring is given to areas that are outside PSA targets, such as Legal Aid and various other things?

  Alex Allan: Including the PSAs, but going more broadly than the PSAs, we have a whole range of systems and processes to monitor expenditure, to monitor what is being achieved and to monitor performance. We have, for example, monthly audit packs which list performance in all key areas. We get the monthly financial information and we have performance management sub-committees. For example, I chair one with both Rod Clark and Barbara Moorhouse looking at Legal Aid. Clearly, that is absolutely critical, and the fact that there is no PSA attached to it does not mean in any way that we pay less attention to it. We pay very substantial attention to it, and from a number of different perspectives. Clearly, one is the overall financial perspective. Another is what we are achieving. Indeed, Legal Aid does contribute to a number of our PSA targets. The criminal Legal Aid is not directly part of it but, for example, target 5 on proportionate resolution of legal problems, the Legal Services Commission plays quite an important role in that target.

  Q57  Dr Whitehead: Under those circumstances, what is the actual utility then of having PSA targets?

  Alex Allan: They are useful, and I will come back to the individual targets, but they are also part more generally of a strategic number of key areas which form part of a Comprehensive Spending Review settlement whereby the Treasury looks to provide some reassurance to the taxpayer about what it is that is being achieved with the amounts of money they are allocated. So for us, clearly, they are shared ones, but very important targets for numbers of offences brought to justice, for confidence in the criminal justice system. Those are some of our key outcome measures. So they are both important to us and important more generally.

  Q58  Dr Whitehead: Does that suggest then that areas that are outside PSA targets are dependent on those areas that are inside PSA targets for making sure the Department gets its money from the Treasury?

  Alex Allan: In practice, it does not quite work like that, in that when we are putting forward our plans to the Treasury it covers activity ... Clearly, as we talked about, it covers Legal Aid, which is roughly half of our spending, but it also covers other areas, for example, on human rights, freedom of information and so on, which is not the electoral reform, electoral administration, which is not covered by PSA targets. Those form a part of our plans as we put them forward to the Treasury. Not everything is covered by PSAs and I believe this is true of most Departments.

  Q59  Dr Whitehead: You are, of course, dependent on the Home Office for the delivery of some of your PSA targets. Bearing in mind what has already been suggested about some of the issues relating to the Home Office, are you entirely happy that some of your financial future lies in the hands of a Department that may or may not deliver your targets to you?

  Alex Allan: Of course, they are dependent on us, too, to some extent. I think it is right that we do have joint targets. As you say, in the criminal justice area, I do not think it would make much sense to have separate targets. Clearly, internally we have a lot of management information about the operation of the courts, but what ultimately matters is how many offenders are brought to justice, for example, and that does require working together between the police, the prosecutors and the court service, and indeed the probation service, the prison service, all sorts of other parts of the system. It is an issue where I do think setting up the Office for Criminal Justice Reform has made a difference. It has enabled us to get a much better feel for where the particular sticking points might be and, for example, I suppose it must have been about 18 months ago, I remember when the Office for Criminal Justice Reform was looking at future projections for offences brought to justice, and it looked then as if the bottleneck was not actually in the court service but was on the police service in terms of what is called sanction detection, basically how many people are caught and charged. So they put a big effort through the local criminal justice boards into increasing the number of sanction detections, and that succeeded quite markedly and helped make sure that ... So it is a process that can look across and say the problem perhaps locally is under-resourced, or the Crown Prosecution Service and what can be done within the overall Crown Prosecution Service to push more resources in one particular area. There are other PSAs. Our asylum one is where our direct involvement is much smaller. Clearly, with something like bringing offences to justice we have a very big role. In the asylum PSA, which is about reducing the number of unfounded asylum claims, our role is quite small and secondary, in the sense that having an efficient appeal system, one that deals with them fairly and quickly and does not enable people to spin out appeals for ever and ever, will help reduce the number of people who feel that it is worth claiming asylum. We play a more indirect role there, but, of course, we do work very closely with the Home Office on the asylum and immigration issues to try and make sure that the tribunal works effectively as part of the overall system.

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