Examination of Witnesses (Questions 40-59)
ALEX ALLAN,
ROD CLARK
AND BARBARA
MOORHOUSE
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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