Examination of Witnesses (Questions 46-59)
MR ELLIOT
MORLEY, MR
DAVID RABEY
AND MS
JILL RUTTER
30 NOVEMBER 2005
Chairman: Thank you very much, Minister,
and to all three of you for coming here.
Q46 Mr Hurd: Do you think that as far
as most Government departments are concerned Gershon is now more
relevant to procurement than the Sustainable Development Strategy?
Mr Morley: There should be no
contradiction between the Gershon objectives and sustainable development
and sustainable procurement. In fact, in many cases, there are
examples—and the Environment Agency has some good examples—of
applying whole-life costing. The Environment Agency responsible
for pumping out the Wheal Jane mine in Cornwall purchased the
most expensive pumps on the market for that job. In the lifetime
of the pumps they have had lower running costs and they have lasted
longer than some of the cheaper pumps that they could have gone
for. On a whole-life assessment they have applied costs in a more
sustainable approach than going for the cheapest option. Gershon
is an important agenda; it is important to us in Defra. We are
well on target for achieving our requirements under Gershon, but
we can demonstrate that we take the issue of sustainable procurement
very seriously in our own department; so there should not be a
contradiction on this.
Q47 Mr Hurd: Is not the whole culture
of the Gershon report about short-term cash savings, reducing
the cash cost—
Mr Morley: Not necessarily. Gershon
is about saving money. You can save money with a whole-life assessment
just as easily, and perhaps more sustainably, than you can by
going for the cheapest option.
Q48 Mr Hurd: Can I bring you to what
appears to be the traditional Treasury rule of not using procurement
to achieve other policy objectives, for example environmental
objectives, which is what we heard in the sustainable timber review.
Is this not exactly what is happening in terms of sustainable
timber procurement?
Mr Morley: Not achieving these
objectives or achieving them?
Q49 Mr Hurd: We heard in evidence that
it was Treasury policy that procurement should not be used to
achieve other policy objectives, but the sustainable timber policy
appears to fly in the face of that.
Mr Morley: I can understand the
point you are making, although there are some aspects of our timber
purchasing policy that are quite legally complicated, for example
taking into account the rights of indigenous people. There are
arguments in terms of the legal advice we have received from the
EU procurement rules that we cannot do that. However, there are
some counter arguments, which I am sure will not be unique to
you, Chairman, that sometimes lawyers will give you completely
conflicting advice on issues. We are in the process of trying
to clarify this issue in relation to the legal advice. In terms
of objectives, our key objective with issues like sustainable
timber is that, first of all, we want it to be legal. That is
a legitimate and completely defensible policy. The second issue
is that we want it to be sustainable, which means we want it to
come from sustainably managed forests. I know that that is not
strictly speaking a financial objective, but it is part of our
commitment, as laid out in our Government strategy, Securing
the Future, for sustainable development, for sustainable procurement.
I would strongly argue that policies such as our timber strategy
are entirely defensible and consistent with our overall sustainable
development policy.
Q50 Chairman: Can we come back to the
principle about whole-life costings. As I understand it, the whole-life
cost exercise only starts at the point of purchase; it does not
take into account environmental considerations, for example that
may have occurred before the point of purchase.
Mr Morley: There is no reason
why it should not, and there is no reason why we should not work
that into the supply chain. It is fair to say, Chairman, that
in terms of developing our strategies these are new approaches
and they do need some work on these areas. It is why we have the
Sustainable Procurement Task Force, chaired by Sir Neville Simms,
because he has a number of working groups looking at a whole range
of issues including the supply chain issue.
Q51 Mr Hurd: Most people around this
table would agree with you about the sustainable timber strategy,
but the point I was trying to clarify is whether there is a Treasury
rule that procurement should not be used to achieve other environmental
objectives, and ask whether you agree with that in the context
of the fact that the public sector spends £125 billion a
year. There is a huge opportunity cost in terms of driving forward
the sustainability agenda.
Mr Morley: I am not aware of a
rule quite as hard and fast as that. We clearly have to have our
overall Government objectives, which is why we work within the
broad framework of our sustainable development strategy, which
is agreed by all parts of Government, including the Treasury,
which signed up to that. I should say, Chairman, that I am accompanied
by David Rabey and Jill Rutter from my Department. I do not know
whether they would like to comment on the Treasury position—or
it is dangerous for me anyway!
Ms Rutter: I hope it is not too
dangerous. The Sustainable Procurement Task Force is jointly sponsored
by Defra and the Treasury. I would have thought that if the Treasury
were going to take the line that it did not accept that there
was something to be done around sustainable procurement, it could
have quite easily said it did not want to jointly sponsor the
Sustainable Procurement Task Force. They are participating in
the Task Force. Mary Keagan, one of their MDs, sits on the Task
Force; they are active in working groups, etcetera.
Q52 Mr Hurd: Can we expect, for example,
a sustainable aggregates task force, or a sustainable food procurement
task force? Is the principle now open?
Mr Morley: The principle of a
sustainable approach applies to all our dealings, which includes
with aggregates in relation to environmental impact assessments
and the aggregates levy. These policies are already influenced
by our commitment to sustainable development.
Q53 Chairman: I have been trying to refresh
my memory as to who it was who told us during our timber inquiry
that "there is an underlying principle that public procurement
should not be used to pursue secondary policy aims"—and
I am reliably advised that it was you! Maybe we should be hunting
around the Treasury to find the answer to this question.
Mr Morley: I can explain that,
Chairman. I am just trying to think of an adequate one! It is
back to the legal ruling that we have had some argument with.
To be honest, it is not so much Treasury; in the case of timber
it was more to do with the EU procurement rules.
Q54 Joan Walley: You mean in respect
of contracts over a certain limit, so it could apply to those
under that limit that is required by the EU procedure?
Mr Morley: Yes, it is contracts
that fall within the level that you have to open up the tender
within the EU.
Q55 Chairman: Can you kindly send us
a note on this?
Mr Morley: I would be very happy
to do that, Chairman.
Mr Rabey: Government accounting
requires that the over-arching procurement policy is value for
money. Value for money equals whole-life costs. The current procurement
rules allow a considerable degree of latitude to departments to
consider environmental and social issues. The issue of indigenous
peoples in timber is particularly difficult because it runs into
issues concerned with labour clauses in public sector contracts
and the International Labour Organisation Convention. That is
the reason why legal advice is being sought.
Q56 Joan Walley: In terms of the evidence
to the Committee it has been put to us that there are always premium
extra costs involved with sustainable and legal timber. The difficulty
is that that cannot then be reflected in the procurement policy,
that those proper costs that are connected with taking that better
job to get the legal sustainable timber cannot be reflected in
the procurement policy; then it is unaffordable. That is the issue.
Mr Morley: It can be reflected
in a sense because the number one priority with our timber purchases
is that it should be legal. It is an undeniable requirement, and
so a strategy which is developed around the concept of buying
legal timber I do not think transgresses any rules. It is certainly
supported by the Treasury in that approach.
Q57 David Howarth: Can you write to us
about the legal position because I do not think it is clear, because
the EU re-interpreted its own rules a couple of years ago, with
its Buying Green Handbook; so I am not sure whether the EU is
the barrier. The ILO might be a barrier but I am not too sure
how because its rules are usually protective of labour rather
than getting in the way of trade. There might also be the WTO
in here somewhere.
Mr Morley: There is a WTO implication
on this, so we are very happy to do that.
Mr Rabey: We are awaiting a note
from the Treasury on social issues in procurement, and it is a
sensitive issue. As a Government Department, we know there are
49 countries in the world that are not classified as free under
various international labour conventions[5].
We are hoping for some guidance from the centre as to how we might
interpret that in public procurement in the future.
Q58 Lynne Featherstone: At the moment
in any procurement decision in Government it is probably difficult
enough already to get whole-life costs considered as opposed to
capital costs; so is it realistic to think that in the current
short-term cost-driven, context of Government we can ever actually
move on to a better way of real costs, taking properly into consideration
viability or sustainability? Is it realistic, or is it pie-in-the-sky?
Mr Morley: It is not just realistic,
it is happening now. The question is on the assumption that the
whole Government procurement strategy is always based on the cheapest
cost option; but that is not the case. The Treasury itself acknowledged
the concept of whole-life costing. They acknowledge that and accept
that that is a perfectly legitimate concept to apply in relation
to procurement policy and procurement strategy; and the logic
of that is that you may not be buying the cheapest goods or acquiring
the cheapest services in the short term, but in the longer term
they are more sustainable and you get some cost advantages. I
did mention the last time I was here that we have just completed
our refurbishment of Defra, where we have paid a premium in relation
to the quality of the refurbishment, the insulation, the materials
and the wood, but we can quite confidently demonstrate that over
the life of the costing you get a good return. We have just done
that. The rules do not preclude it. I think it is fair to say
that if you look at the whole structure of government and if you
include local government, when you have a system that is rooted
in the past ongoing for the cheapest of costs, then it takes time
to change that mindset. That is why the OGC have been running
capacity-building on this; it is why we have had training sessions.
We have to make sure that everyone in the buying system within
government is aware that whole life costing is a perfectly legitimate
method to apply.
Q59 Lynne Featherstone: That message
seems to be really slow in getting through. I wondered if you
had any ideas to help government break out of the traditional
pattern of short termism in terms of costs so that whole life
cycles could be better incorporated into the system. At the moment,
and having sat here today in particular listening to the first
hour, it does seem that it is not happening at a pace one might
recognise, even if you were a shining example.
Ms Rutter: One of the working
groups in the Sustainable Procurement Task Force is looking at
the issue of the whole life costing guidance. The guidance says
you should do whole life costing. It is looking at the issue of
how you make this easy for people to do. That is being addressed
through the task force. We hope that is going to be very productive.
Could I point the committee to two other initiatives that I think
should help change perhaps some of the biases in the existing
system? First, under the Framework for Sustainable Development
on the Government Estate, every government department is being
required to produce its own sustainable procurement strategy.
Those are being published imminently, in December or January.
Secondly, every government department, and even the OGC as well
as an independent office of the Treasury, is producing its own
sustainable development action plan. You will recall that in Securing
the Future (of the UK) as a strategy, we have said that we,
Defra, will stop reporting government progress. We are giving
that to the Sustainable Development Commission under Jonathan
Porritt to report—I think the committee will find those
reports very interesting—on how Government is getting on.
The first way in which we are doing this is, rather than have
a Defra commentary on the sustainable development in government
questionnaire on what progress we have made over the last year
on the framework targets, to publish that with a commentary by
the Sustainable Development Commission in mid-December. We think
that these will change the incentives. Increasingly, individual
departments will be held to account for the extent to which they
are genuinely applying the principles in the Sustainable Development
Strategy. We are very keen that we make clear that it is for every
department to take on board those principles and show how they
apply them through both the operations and policies of those departments.
Mr Morley: We have been applying
the whole life costing. We do have a very strong sustainable agenda
in relation to our own procurement within Defra. We have our own
toolkits for our divisions and our own purchases on whole life
costing, which are available within the department. We are developing
our toolkits for use across Government. We will make the toolkits
available and provide guidance on their use.
5 Clarification added by witness 08.12.05: the UN
Declaration of Universal Human Rights. Back
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