Examination of Witnesses (Questions 20-39)
ENVIRONMENT AGENCY
5 DECEMBER 2005
Q20 Mr Bacon: If you could send us
a note[1]
with details about what you have done externally and also internally
and how much that has cost, that would be very helpful. Paragraph
2.22 refers to the project to complete the business process re-engineering
and build the new computer system, which is due to be completed
in 2008. Which consulting firm or computer firm or firms do you
have helping you with that?
Baroness Young of Old Scone: Sorry,
could you direct me to the paragraph?
Q21 Mr Bacon: This is paragraph 2.22
on page 23. It says, "The project to complete the business
process re-engineering and build the new computer system is due
to be completed in 2008." Which computer consultancy or computer
firm is helping you with that?
Baroness Young of Old Scone: This
is SAP, is it?
Mr Barker: It is consultants called
SciSys.
Q22 Mr Bacon: How much is that going
to cost?
Mr Barker: The total cost both
for the IT and taking account of all the staff costs is just under
£9 million.
Q23 Mr Bacon: Is it possible you
could send us a note with more detail and a break-down of that?[2]
Mr Barker: By all means.
Q24 Mr Bacon: Baroness Young, can
you say when your asset management strategy is likely to be completed?
Baroness Young of Old Scone: We
have made good progress with our asset management process though
we still have more to do on getting ourselves to the point where
we are in the next stage, which is to create the next part of
the strategy. We have been working on asset management since 2002,
we have documented the condition of our assets and cleaned up
the data surrounding our assets. We have allocated clear responsibility
both at national and regional level to all asset management and
asset maintenance and operation. We have introduced a training
and development programme to improve asset management at all levels
in the Agency, and we have also improved our asset management
processes and put in place a number of performance measures so
we can judge how we are getting on with that. We have put in place
a range of efficiency targets in asset management and we are now
moving on to the next stage, which is to deliver our asset management
strategy by the spring, together with an implementation report
and a detailed business case for the next stage of the improvements.
We found it very difficult to recruit skilled asset management
expertise from the outside world but we are glad we now have a
proposition in place to be able to take that forward.
Q25 Mr Bacon: Did you say "Proposition
in place" or "person in place"?
Baroness Young of Old Scone: "Proposition".
Q26 Mr Bacon: It says in paragraph
3.10, "The Agency does not yet have a date for completion
of its Strategy, nor a person responsible for it." I am wondering
how you can look after assets of this size if you have not got
a person responsible for it.
Baroness Young of Old Scone: We
have done considerable work to clarify who is responsible at each
level and we have now been able to recruit someone who is taking
forward the development strategy and it will be ready by the end
of March.
Q27 Mr Bacon: Was the need for somebody
to be in overall charge of asset management identified in your
strategy from 2001?
Baroness Young of Old Scone: No.
Q28 Mr Bacon: When was it first identified?
Baroness Young of Old Scone: The
importance of our assets was very clear in terms of particularly
our flood risk management assets, and we had already put in place
considerable work since 2002 on the cleaning up of our asset data
in preparing for this.
Q29 Mr Bacon: When did it first become
clear to you that you needed a person in overall charge of your
asset management?
Dr King: In order to get a step
change in the way we approached asset management, we identified
a need in 2004. As Baroness Young has pointed out, we had real
difficulty with recruitment. We went out to recruitment, were
unable to recruit from the outside—
Q30 Mr Bacon: What was the restriction?
You were not paying enough? There are plenty of people who do
asset management, most of them in the City, of course.
Dr King: If you look at asset
management in water utilities, which would be the closest to us,
they operate at director level and their salary range is significantly
outside that of the Agency.
Q31 Mr Bacon: Are you prohibited
from hiring at whatever you need to pay to get the person you
need?
Dr King: We are not prohibited
but clearly one has to have regard to the salary structure you
have in place and to the salaries of other directors. What we
did put in place was we were able to get someone internally and
support them by use of an outside consultant who had a lot of
experience in the water utility field.
Q32 Mr Bacon: How much did the outside
consultant cost?
Dr King: It is on a part-time
basis.
Q33 Mr Bacon: I did not ask whether
it was on a full-time or a part-time basis, I asked how much it
was. Could you send us a note with the total expenditure on this
consultancy?[3]
If you are going to spend a huge amount of money on an external
consultant, you might as well put the extra on paying somebody
what is needed.
Baroness Young of Old Scone: Perhaps
I could challenge that—
Q34 Chairman: Thank you. Time is
limited, I am afraid.
Baroness Young of Old Scone: I
would like to challenge—
Chairman: Members are time-limited, I
am afraid.
Q35 Mr Khan: Can I say first that
it really does help if the answers are short. My first question
is by way of comment, to congratulate the Agency on, in the words
of the NAO, "providing a well-managed and professional service".
At the outset I wanted to make that comment. Could I ask your
views on the NAO Report's conclusion about there being four potential
areas which could lead to savings of between £1.4 and £2.5
million, for example, by adopting a risk based approach?
Baroness Young of Old Scone: We
believe the savings identified by the NAO in some cases are genuine
savings, in some cases are transfers of funding between water
management and flood risk management, and therefore although there
may be savings on water management they are still a cost to our
budget on flood risk management. Sorry, the particular one you
identified was?
Q36 Mr Khan: Adopting a risk based
approach to site visits.
Baroness Young of Old Scone: I
think Dr King has already spoken about the fact we have got a
number of sites where a risk based approach will be appropriate
and we have got others where, quite frankly, we already have a
very cost effective way of taking the data.
Q37 Mr Khan: Reducing regional variations
in hourly charges?
Baroness Young of Old Scone: We
have looked at those regional variations and, alas, the idea that
somehow the lowest charge if applied across the board would produce
savings, does not hold water, because in correcting the methodology
and making it more standard between our regions we have in fact
come to the point where the charges vary remarkably little between
regions and are above the £20-24 per hour rather than the
£13 per hour, which is the minimum level looked at by the
NAO. So we have made more standard the costing methodology and
the result is there is very little variation between the regions.
Q38 Mr Khan: More consistent cost
allocations?
Baroness Young of Old Scone: We
are clear that more consistent cost allocations are important,
and we have commented on how we will therefore take money away
from water management costs and put it into flood risk management
costs, but in overall terms to the Agency it does not save money,
it simply reallocates it to a different head.
Q39 Mr Khan: For those potential
cost savings you have agreed with the NAO, what is your timetable
for achieving them?
Baroness Young of Old Scone: In
two of the examples where the NAO gave us targets, in fact they
were illustrative recommendations. They said, "If you were
able to . . .", for example, ". . . reduce the cost
of asset management by 5%, it would save X amount of money."
Similarly, "If you adopted a risk based approach to site
visits which reduced site visits by 5%, it would save 5% of the
cost". These were merely illustrative figures. In fact the
work which has gone on to look at the scope for, for example,
risk based visits has shown where we can and cannot take a risk
based approach, and of course because the visits are very different
at different sorts of sites, a straight read-across from a 5%
reduction in visits to a 5% saving does not necessarily follow.
What we are involved in now is looking at the capacity for making
savings in the areas where genuine savings are possible and have
either got savings underway that used the NAO methodology or else
are looking at what the potential is.
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