Examination of Witnesses (Questions 60-79)
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15 MARCH 2006
Q60 Greg Clark: I am sure if you
have got the sample you would be able to do so.
Ms Murphie: I do not think it
was particularly different in the 2005 cases as it was in the
previous ones.
Q61 Greg Clark: So there we have
a suggestion from the NAO that it was not a material change.
Mr Riall: The point that I was
referring to was our current performance which is the performance
under the new contract which commenced on 1 April 2005.
Q62 Greg Clark: Why should that have
changed? I can understand if there were teething difficulties
at the beginning but the National Audit Office have said that
they did not seem to notice any appreciable improvement over time,
so what is it about the new contract that is making you report
when you were required under the previous contract to report on
time?
Mr Riall: There are a number of
reasons why performance reporting has improved significantly.
In the first instance the new technology that we have in place
allows us to extract the data much more quickly and to report
more effectively. Secondly, we are subject now to a tougher performance
regime.
Q63 Greg Clark: So you were not being
fined enough before, this is what you are saying. If you had been
fined more then you would have reported things quicker.
Mr Riall: I would argue that the
financial deduction is not the only incentive upon our performance.
Q64 Greg Clark: What was in the old
contract that clearly did not work?
Mr Riall: We were not subject
to performance deductions under the old contract for failures
to report breaches on time.
Q65 Greg Clark: This is useful for
our monitoring of these contracts in the future. What you have
just said to me is that the penalties that you faced under the
old contract were not sufficiently high to incentivise you to
do what you were required under the contract to do.
Mr Riall: There were not financial
deductions for that particular measure under the old contract.
Q66 Greg Clark: So it is only with
the bringing in of financial penalties that you have improved
your practice?
Mr Riall: No, the point I was
trying to make was that it is not just financial deductions that
incentivise our performance because we are clearly concerned about
the reputation of our organisations, about the re-bidding of new
contracts.
Q67 Greg Clark: The proof of the
pudding is in the eating, is it not? The reputational effect was
there under both contracts and yet you had lots of breaches. They
bring in extra financial penalties and suddenly your reporting
performance improves. That is an interesting observation as to
the relative impact of reputational consequences versus financial
consequences.
Mr Riall: Assisted also by things
like better technology, which I have mentioned as well.
Q68 Kitty Ussher: Mr Bacon, it is
a pleasure to serve under your interim chairmanship. I see our
real Chairman is doing other things as we speak. Sir David, I
wanted to probe the relationship between the Department and the
contractors a bit more. Perhaps I could ask why you felt the need
to sign a new contract on 1 April. Had the old one expired?
Sir David Normington: The old
one had expired. It had run from 1999 and had built up over those
years and it was time to have a new contract. It had expired but
also technology had moved on and we knew a lot more about the
system and so did the contractors and it was time to have a new
competition for the contract.
Q69 Kitty Ussher: So you re-tendered
at that point, did you?
Sir David Normington: Yes, it
was a full re-tendering.
Q70 Kitty Ussher: But you employed
the same companies as before?
Sir David Normington: We employed
two of them, yes. They are called slightly different things but
they are the same companies. The good news is that we negotiated
a 40% improvement in the contract. It was cheaper to us, in other
words.
Q71 Kitty Ussher: Great.
Sir David Normington: Which I
think showed that the previous contract had run its time.
Q72 Kitty Ussher: How many contractors
were on the shortlist?
Sir David Normington: I will have
to let you know that.
Mr Taylor-Smith: Four.
Q73 Kitty Ussher: There were four
and then you employed in different guises the original two.
Sir David Normington: They are
broken into five regional contracts, I think. We effectively tender
regional contracts, partly in order to ensure that in areas we
do not end up with just one monopoly provider.
Q74 Kitty Ussher: What kind of assessment
do you do of whether a company is a fit and proper company to
run such an important public service?
Sir David Normington: We will
do the usual checks. It is the normal process. There will be a
specification, of course, and we will be judging the tenders against
that specification. We will be looking at past performance because
in this case we know these companies quite well, not just in this
area but in some others. We will be doing the usual due diligence
checks. It is a quite normal process but, of course, this is a
very high risk operation and these companies are in that business.
Q75 Kitty Ussher: Indeed. I did a
quick press search myself particularly on what I think of as Group
4 Securicor, although I understand you have changed your name
slightly. As part of your due diligence did it concern you that
they were being investigated and had a number of problems in this
area across the world? I found performance disputes in South Africa,
in Kenya, a rather difficult strike in Indonesia, four different
investigations in the US around their protection of nuclear sites,
problems with the training of guards at the Department of Homeland
Security in the US. I will ask you to respond in a minute, Mr
Taylor-Smith. Is that not something that concerned you as you
signed another contract with this company?
Sir David Normington: I did not
personally look at all of that. I do not know whether all of that
was looked at. Certainly we did the proper checks. We were satisfied
that the company could provide us with the service we needed.
I cannot respond on all of those individual cases. We will have
done a proper look but whether we looked at all of those things
I am afraid I do not know.
Q76 Kitty Ussher: Group 4 Securicor
has been highly expansionary in recent months and years. It has
expanded rapidly internationally by acquisition. Did the Department
have any concerns that it was overstretched as it sought to acquire
this large contract in the UK?
Sir David Normington: We awarded
them the contract and they are performing very well and that is
the proof of it really. There are big profitable companies in
this business and Group 4 Securicor is one of them. I think we
were satisfied that they could provide this service well, and
they do.
Q77 Kitty Ussher: Mr Taylor-Smith,
I must give you an opportunity to respond to the points that I
have raised. How would you answer the questions that I have just
put to Sir David?
Mr Taylor-Smith: If I take the
first one about how was the procurement run, in my experience
of working in this area over the last four and a half years this
was unquestionably the most intelligently run procurement I have
been involved with. It definitely resulted in a 40% saving to
the taxpayer but it also resulted in us at the right stage getting
involved with putting in place the relevant measures for measuring
up and also ensuring that the contract met its aims and objectives.
That is an answer to the first one. In terms of our activities
around the world, just to give it some perspective, we have got
400,000 employees in 108 countries.
Q78 Kitty Ussher: Wow.
Mr Taylor-Smith: I am sure that
in any one day we may be celebrating great successes with industrial
relations—for instance, about a month ago we signed as the
first company in the UK in the security industry a collective
bargaining agreement with the GMB—and at the same time we
may be in dispute in South Africa. I think that is an inevitable
consequence of operating a company three times the size of the
British Army.
Q79 Kitty Ussher: So from your experience
within the company you do not think there are any management issues
from operating in 108 different countries? How can you demonstrate
to us that your systems are robust?
Mr Taylor-Smith: I am really very
confident about ethical dimensions, it is an area that myself
and the team talk about a lot.
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