Examination of Witnesses (Questions 100-113)
MR JOHN
OUGHTON, MR
PETER FANNING,
MR HUGH
BARRETT, MR
MARTIN SYKES
AND MR
DAVID ROSSINGTON
17 MAY 2006
Q100 Mr Gauke: Would you say there
was one area of the public sector that provides your biggest challenge?
Mr Oughton: I think they all have
different challenges. They all have different circumstances to
face. They all have, quite rightly, very significant modernisation
and transformation programmes under way, and they are all different
in character. It would be very hard to rank them in order of difficulty.
They are all very challenging things to do but, as the Prime Minister
said to the CBI last night, you have to go through a process which
will have some very short-term and painful consequences in order
to deliver those benefits, and that is what we are seeing now.
Mr Fanning: I think it is worth
reassuring you that we do not treat every public body equally
in that we do focus our attention on the top eight departments
plus local government because when we do our numbers, they tend
to have the biggest contribution to the efficiency targets, to
the value-for-money targets. Indeed, when we look at the mission
critical projects, they do tend to be concentrated around the
eight largest departments, plus local government. So we do very
clearly, and indeed it is one of my responsibilities, make sure
that OGC's resources are disproportionately allocated to our highest
priorities and they track the progress over the last year in making
sure that we are focusing our resources in that way.
Q101 Mr Gauke: Do you ever find there
is a danger of overlap with other organisations that are trying
to find efficiency, particularly in local government where there
seems to be a plethora?
Mr Oughton: There is that potential
risk. It is a very crowded scene. For example, with the Local
Government Association, the Society of Local Authority Chief Executives
and IDeA (the improvement agency), we want to work with and in
cooperation with them rather than trying to compete with them.
I think we have developed a good relationship with those bodies
that allow us to do that.
Q102 Ms Keeble: I want to ask some
follow-up questions. I can understand that you might not want
to point to any particular groups as being less efficient or less
effective than others, but nonetheless it must remain that there
are particular difficulties in some areas. In response to David
Gauke's question, it must be possible for you to say something
about which bits of the public sector pose the biggest challenge.
At the time when we have these spiralling deficits in some areas
of health, it must be possible to say who is doing clever procurement
and who is not, or who is managing their structures and systems
better and who is not, and where the challenges are.
Mr Oughton: May I turn that round
and draw attention to the fact that in local government, for example,
I think the efficiency programme is going very well. In a sense,
I rather expected that to be the case because local authorities
have a tradition, leading all the way from the compulsory competitive
tendering process, in addressing these issues. Against the target
of £1 billion on efficiency, which local authorities were
committed to in the first year of the efficiency programme, they
report that they are likely to be achieving £1.9 billion;
that was the mid-year assessment that the then Office of the Deputy
Prime Minister as able to make. I think that is a good example
of where a sector is doing very well. That is certainly true.
Q103 Ms Keeble: There are some very
specific things around that. I would challenge some of the points
you made earlier about the culture of the public sector not being
concerned about the bottom line whereas the private sector is.
Since you have mentioned CCT, I was a council leader during that
era. I can tell you what our sickness rates were compared with
the private sector, what the cost per hour was of the different
concepts, and how much fraud there was, in which department it
was and in which contracts. Surely you must be able to do that
now with different bits of the public sector? I think that is
what people want to know. They want to know where the waste is,
who is being effective and what other people should do. I am sure
our Conservative colleagues want to put down awkward questions
to the department that is not doing so well. You must be able
to give us some of those specifics.
Mr Oughton: If I may, I am violently
agreeing with you because in the local authority sector, largely
I think through the beneficial effect of the comprehensive performance
assessments, it is possible to look very precisely at the efficiency
and the effectiveness of local authority bodies. Looking at the
use of resources block of the CPA tells you a lot about how local
councils are using their resources; that is absolutely true. Yes,
of course there are some very good measures and some very good
benchmarks. You have mentioned sickness as an example, costs of
transactions and all sorts of things that can be looked at.
Q104 Ms Keeble: Shrinkage from the
depot?
Mr Oughton: You could pick any
range of examples. I did say at the outset that I have always
taken the optimistic view, the confident view, that in some parts
of the wider public sector there was already a very well developed
approach to efficiency. That is precisely what we found in local
government. In that sense, yes, there is a focus on achieving
the results. My point about the bottom line was a very precise
one, in a sense. It was saying that in the public sector the concept
of P&L does not operate in the way it does in the private
sector. We have to have different measures of performance. Are
we concerned about those measures and whether we do well? Yes,
I think we absolutely are.
Q105 Ms Keeble: What would be the
magic bullet that would make public spending more effective? That
is what we all want to know, is it not?
Mr Oughton: I think it is a number
of factors. If I have the magic bullet, then we are doing very
well. It is a combination of factors. It is being absolutely clear
about the outcomes that one wishes to achieve. So you need to
have an absolutely clear statement of the end result for which
one is trying to pitch. One of the major weaknesses of delivery
of big programmes and projects that our gateway review technique
has identified and the National Audit Office has identified as
well is uncertainty about what we are trying to achieve. Getting
that certainty is a very important start point, then resourcing
what you are trying to do properly and having good metrics and
good methods for tracking performance as you move forward through
your programme, and spotting when you are going off track and
fixing it. These are basic good programme and project management
techniques that you find in well-run organisations in the public
and the private sector.
Mr Fanning: The efficiency programme
is actually made up of 300 separate projects, all of which have
clear targets, clear milestones and action plans, and they are
all individually tracked. David Rossington and his team can identify
variances against performance during the life cycle of a project
and can take action in order to remedy that. One thing we have
learnt from this process is that if you do the fairly obvious
routine yet not particularly exciting things, you can make a big
difference. You can make a big change. The challenge is to be
able to assert that efficiency is happening. We can demonstrate
that it is happening. One of the debates emerging around this
is in a situation where we wish to increase resources in a particular
area, how we know that those resources are not being absorbed
in inefficient activity. The answer is that you do what David
and his team are doing. Similarly, if you take resources away
from a particular activity, how do you know that the result of
that is not a reduction in service or quality of service to the
public? The answer is that you have a programme similar to the
one we are setting up where people are asked to be very specific
about how they are going to deliver those efficiencies, and you
measure their performance against that and take action where there
is a variance against the agreed performance.
Q106 Mr Gauke: My supplementary is
to return to the issue of cash and non-cash savings. Clearly,
it is very easy to measure cash savings. With regard to the non-cash
savings, it must be more difficult. How confident can you be that
the assessment of the non-cash savings is measured correctly?
Mr Oughton: The answer is: more
than I could have said six or nine months ago. I will ask Mr Rossington
to come in on this. We have done some very specific work with
both Health and Education, front-line reviews as they are called,
looking very closely at working practices and ways of working,
for example in health, looking at the top 10 clinical interventions
where the processes can be changed and streamlined to deliver
good clinical outcomes with a more effective, efficient use of
the resource in question. We now have some evidence. We have a
much clearer understanding of what those changes need to be in
order to deliver the end result. That allows you then better to
track them. That is why we are able now to set some base lines
from which we can calculate the benefits.
Mr Rossington: We have done work,
particularly with the Departments of Health and Education, in
this area. The answer is that for each of the 300 programmes delivering
a set of benefits you have to set up a separate measure of efficiency.
Q107 Mr Gauke: I am sorry to interrupt.
On education, for example, is the end measure going to be exam
results and is that not going to take years to come through? You
are not going to be able to measure that accurately for a very
long time.
Mr Rossington: It depends on the
programme. For example, there is a significant amount of efficiency
saving in education that comes from better procurement. You can
set up a system to measure the benefits that you are getting from
those procurement savings and so on.
Q108 Mr Gauke: Is that a cash saving
as opposed to a non-cash saving? The problem is the non-cash savings.
Mr Rossington: Yes. In the non-cash
area, an example from education would be looking at the benefits
that you get from changing the school workforce and freeing up
teachers' time. You have to devise a specific set of measures
to capture that. The way in which departments have set out these
methods is in documents called Efficiency Technical Notes, which
are publicly available. Those have been through two stages. There
was a first stage in the autumn of 2004 and a second one a year
later, last autumn. In the report that the NAO produced earlier
this year, they pointed to significant improvements between those
two periods. That is not to say that, given that this is a very
difficult area, everything is absolutely perfect. There is more
work to be done.
Mr Gauke: My issue with the Efficiency
Technical Note, to come back to education, is that it provides
measurements that show more time being freed up for the teachers,
which is great, but to get through to savings for the taxpayer,
either improved output or cash savings, it seems to me it is not
giving us the answer because that is still some way off.
Q109 Mr Newmark: The question is:
how are you measuring that financially? It seems so amorphous
that, at the end of the day, I suspect it is going to lead, once
again, to some fairly creative accounting by the Chancellor in
terms of achieving that target, and that is what worries me because
it is a non-cash item.
Mr Oughton: Mr Gauke and Mr Newmark,
you have to accept the proposition that the use of trained, experienced
teacher resource engaged in teaching pupils, preparing lessons,
producing a high quality support and intervention with children
in the classroom is more likely to deliver a better outcome than
not.
Mr Newmark: Those are all important things
but how do you measure that financially?
Mr Gauke: I agree with that, but the
question is how you measure that.
Q110 John Thurso: I have one very
short question I want to ask. Does your remit run in Scotland—i.e.
through the devolved administration—or are you simply concerned
with the reserved departments where they happen to operate in
Scotland?
Mr Oughton: No, our remit does
not run in the devolved administrations, although it happens that
I have a small office in Edinburgh where I have staff who are
deployable actually in the north of England. It is a convenient
geographical base from which they can operate. However, that said,
we do have very close relations with the Scottish Executive, the
Welsh Assembly, and indeed in Northern Ireland, both in devolved
mode and in Westminster Government mode, and we exchange evidence;
we exchange experience; we exchange good practice. David Rossington
has regular planned contact with the Scottish Executive that is
of course running on a parallel track with an efficiency programme.
Mr Fanning: For the avoidance
of doubt on this point, the European Procurement Regulations are
negotiated by OGC on behalf of the United Kingdom as a whole.
It is a very narrow technical matter.
Mr Oughton: That is in one specific
sense.
Q111 Chairman: Finally from me, the
Treasury's Departmental report last year included some information
on your seven key priority targets. I cannot find anything in
this year's report. Is there a reason for that?
Mr Oughton: The reason for that
is that, in assessing how to set the targets for OGC, I made a
judgment that widening our remit meant that trying to operate
to seven key priorities was not, in the future, the right way
of looking at the OGC. The problem would have been quite simply,
Mr Fallon, that in order to take on a wider remit, I would have
had to have taken on an eighth, ninth or tenth priority, and that
did not seem to me to be a good way of giving a management signal
to the organisation. What I have done now is to focus the attention
of the organisation on three key targets. I think people will
remember three but they cannot remember seven or ten. Those three
key targets are around: first, delivery of the efficiency programme
of £21.5 billion; secondly, our PSA target on value for money;
and, thirdly, achieving a significant improvement in the successful
delivery of major programmes and projects. Everything we do in
the Office of Government Commerce has to be focused on supporting
one or more of those targets for it to be worth doing.
Q112 Chairman: In which official
publication will we see information on how well you are doing
that?
Mr Oughton: You will see that
in future in the Departmental Report. That is how I will measure
myself, but we will continue to measure ourselves formally against
the PSA targets for this spending round. Those will not change.
Those do not change during the period.
Q113 Chairman: Thank you very much.
You have promised us at least one note. I would ask you to continue
to think about an answer you did give on the March 2008 positions.
The longer this process goes on, I think you sense the importance
of bolstering its credibility and whether you can publish at the
end of June/July 2008 a final outcome I think is something you
really ought to consider.
Mr Oughton: We will certainly
do that.
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