RESPONSE FROM INTELLIGENT ADDRESSING LIMITED TO

THE CLG SELECT COMMITTEE IN RESPECT OF

ORDNANCE SURVEY

 

 

 

 

Introduction

 

We welcome the decision by the Communities and Local Government Committee ("the Committee") to conduct a short follow-up exercise to check the progress of recommendations made in its 10th report of Session 2001-02 (HC 481) relating to Ordnance Survey.

 

 

 

Issues of Context

 

Intelligent Addressing Limited (IA)

 

 

IA is a specialist private sector SME employing recognised experts in addressing and data management.

 

It was created in 1999 to work in a public/private partnership with the Improvement & Development Agency (IDeA), a subsidiary of the Local Government Association, helping local government create the National Land & Property Gazetteer (NLPG).

 

 

The National Land & Property Gazetteer (NLPG)

 

The aim of the NLPG is to improve service delivery to citizens. It has become one of the most successful modernizing Government initiatives within local government.

 

The NLPG improves service delivery by creating and maintaining a master list of references for all land and property throughout England & Wales. The process by which the NLPG is updated improves the currency and completeness of local authority address data and facilitates the linking of local data (eg for call-centres and social services) through a shared address referencing system.

 

The NLPG is already proving its value to local government and the emergency services in their interactions. It is potentially also of great value to central government and the private sector. At present it cannot be licensed for use outside local government on what IA consider to be fair and reasonable terms because an element of NLPG data was originally derived from Ordnance Survey.

 

 

 


 

Summary

 

 

Q1. Boundary definition?: If anything, the boundaries of OS's activities are now less clear than they were five years ago because the role of OS was widened and blurred in their Framework Document (2004) which also drew no distinction between their commercial activities and public service.

 

There needs to be a clear definition of OS's operating boundaries. Separation of their data collection activities ("upstream") from those which are "commercial" ("downstream") is vital if other operators are going to be permitted to work successfully in this market-place.

 

Q2. Independent arbitration?:The government wants to encourage the growth of the UK's knowledge economy as a means of sustaining international competitive advantage. Given the central role of PSI to this objective, it needs to attract re-users of PSI as well as investment and ideas for new services. These things will not occur unless the "rules" of engagement are clear, fair and enforced. In our experience none of these things are currently the case.

 

Q3 GI Panel Assessment?: It is difficult to make any assessment of the GI Panel's operation since it was introduced two years ago, primarily because little of any substance has been published. However, we consider that Government shows few serious signs of appreciating the strategic importance of Geographic Information to its operations and that, until it does so, the work of the Panel, whatever it is, will remain undervalued.

 

Q4. GI Panel membership?: The membership of the Panel should reflect its remit which we argue needs reconsideration. If it is to serve as an independent advisory body to government it needs a well-respected and independent Chair and more balanced representation, particularly from the private, academic and local authority sectors.

 

Q5 Role of GI Advisor to Government?: It is surprising that such a clear conflict of interest, which has been so well sign-posted over so many years, has been allowed to endure by Ministers, implying a lack of understanding of the scope of OS's current commercial remit and influence.

 

Q6. OS competitive postion?: OS is the only source for much of GB's essential geographic reference data. It makes that data available on terms which do not encourage competition, stimulate an active third-party GI "Value-Added" supplier market or encourage wider GI uptake. OS licensing terms are perceived as restrictive and complex and their prices high and inflexible. Nor does the Treasury benefit from the current OS business model which appears to have resulted in an overall deficit on normal operations over the past seven years whilst prices of their key products have remained broadly static.

 

 


Background

 

1. Over the past six years there have been many government policy statements about the importance of the public sector improving its efficiency and service delivery, Sir David Varney's being the most recent.

 

2. However, at least one crucial part of the public sector has a remit which currently cuts across the grain of these two government objectives. The questions posed by the CLG Select Committee about Ordnance Survey are aimed at the heart of this conundrum.

 

3. On the one hand the government seeks collaboration across Departments, "partnership working", the sharing of core data (where appropriate), and joined-up access to government services for citizens, and on the other hand it seeks to encourage cost recovery on (a few) pivotal parts of Public Sector Information (PSI) which prevents these things happening quickly, easily and efficiently.

 

4. Geographic Information (GI) is a central part of virtually all government information, although not always recognised as such. Virtually all government services are delivered to a "place"; and yet Ordnance Survey, a monopoly supplier of many key datasets relating to place, is required to operate on a commercial basis and thus imposes barriers - through restrictive licensing terms and high cost, the value of which cannot always be measured precisely - on re-users of their data in government and the private sector.

 

5. There is a further conundrum. On the one hand government wants to encourage the private sector to innovate, develop and provide choice and wealth to the economy and on the other hand, in a crucial piece of the information infrastructure, it has implemented a policy approach which encourages the expansion of its own monopolistic commercial supplier, inevitably a disincentive to the private sector as the competitive playing-field appears far from level.

 

6. We believe there are several reasons why such obvious conundrums have been allowed to endure:

 

o First, the issue is not a vote-winner. It is seen as an "administrative" matter of "process" and relatively low priority, and the consequences are normally passed for resolution by those with the power to question and initiate change in the public sector to those who have neither;

 

o Secondly, the issue relates to a policy, which emenates from Treasury, but with implications across other Departments. There is no single Minister responsible; and

 

o Finally, certainly in the case of Ordnance Survey, some of the potential and necessary changes, directly threaten what we consider is their overly-comfortable business model. It is too easy for OS to argue (even if potentially fallaciously) that there will be a net increase in cost to government or a diminution in the quality of map data if the current policy is altered.

 

 


 

 

 

1. The "need to define the boundaries of Ordnance Survey public service and national interest work." To what extent has the position changed in the intervening five years? How clear are the boundaries between the OS as holder of base geographical products and as a commercial operator?

 

Q1.1

If anything, the boundaries of OS's activities are now less clear than they were five years ago because the role of OS was widened and blurred in their Framework Document (2004). Specifically, the Document failed to clarify and define the generic area of OS operations: most nationally important datasets have a crucial geospatial element but OS has a remit to manage "nationally important geospatial datasets" but clearly not all such datasets.

 

Q1.2

The recent DCLG response that there is "no distinction between public service and commercial activity for Ordnance Survey" does not offer further clarity. If true, it even raises the possibility that the commercial activities of OS equate to their public duty. This could put the OS beyond the reach of the Office of Fair Trading and Competition Law.

 

Q1.3

Given the position of OS in the market-place and the scope of its remit, it might be expected to have achieved a substantial net revenue growth since it became a Trading Fund. However, growth in normal "external" operating turnover (excluding the AA settlement, NIMSA contract and reorganization grants) appears to be about 5% pa since 31/03/1999 whilst product prices (except for AddressPoint) do not appear to have fallen. Excluding the AA settlement (as an exceptional windfall) but including NIMSA and reorganization grants, OS's accounts indicate a cumulative operating deficit for the seven year period (to 31/03/06) of 433,000.

 

This appears to us to be a disappointing performance and well below the general rate of growth of the information industry; perhaps an indication of the difficulty that the public sector encounters when expected to act entrepreneurially.

Q1.4

It is our experience that OS is both commercially aggressive and expansionist (although their results do not imply much success at either) and that their current remit encourages them to be both which acts as a brake on wider market development. There needs to be a clear understanding of OS's operating boundaries. A proper separation of their data collection activities ("upstream") from those which are "commercial" ("downstream") is vital if other operators are going to be permitted to work successfully in this market-place.

 

 


 

 

Q2 The "clear need for some form of independent arbitration so that conflicts can be resolved between OS and its partners and customers." To what extent has the position changed in the intervening 5 years.

 

 

Q2.1

Since the DTLR Sub-Committee published its recommendations in 2002, the Office of Public Sector Information (OPSI) has introduced the Information Fair Trader Scheme (IFTS), the Public Sector Information Regulations (PSI Regs) have become law, and the Advisory Panel for Public Sector Information (APPSI) has been formed as an advisory and further review body (on the PSI Regulations).

 

All these have been tested by our company in the past two years. Our conclusion is that their processes do not offer clarity or certainty of redress because of a lack of empowerment and resources amongst the appropriate authorities.

 

Q2.2

It needs to be understood that if government organisations are encouraged to perform commercially then they will inevitably defend their business models and commercial practices from attack by potential competitors. The response to Parliamentary Questions have revealed that OS employ 6 in-house lawyers and paid over 500,000 in legal fees in 2005/06, a total overhead which substantially exceeds OPSI's entire annual budget.

 

Q3.3

Therefore, if the government is to self-regulate (which it tries to do through OPSI), then such self-regulation must be capable and willing to deal with public sector bodies which are reluctant to conform. Government is suspicious of self-regulation in the private sector and should bear its own concerns in mind when assessing the best way forward.

 

Q4.4

The government wants to encourage the growth of the knowledge economy as a means of sustaining international competitive advantage. Given the central role of PSI to this objective, it needs to attract re-users of PSI as well as investment and ideas for new services. These things will not occur unless the "rules" of engagement are clear, fair and enforced. In our experience none of these things are currently the case.

 

 

 

Q3 What is your assessment of the UK Geographic Panel's operation since its introduction in 2005?

 

Q3.1

We consider that Government shows few serious signs of appreciating the strategic importance of Geographic Information to its operations and that, until it does so, the work of the Panel, whatever it is, will remain undervalued.

 

Q3.2

It is, nevertheless, difficult to make any assessment of the GI Panel's operation since it was introduced two years ago, primarily because little of any substance has been published. The Minutes are sparse and do not indicate clear progress towards the completion of a well-defined programme of work.

 

Q3.3

We do not believe the remit of the Panel was drafted by ODPM in the way that had been anticipated by the DTLR Sub-Committee, since the Director General of OS retained her role as GI Advisor to Government (the Panel has only some vague and potentially irrelevant medium to long-term remit).

 

Q3.4

This lack of a meaningful and valuable role is one of the Panel's clear weaknesses. The view of many outside the Panel is that it is currently a vehicle to give legitimacy to OS's own strategy. The position needs fundamental review.

 

 

 

Q4 Is the current panel's membership sufficiently balanced with three private sector representatives among its 12 members?

 

Q4.1

The membership of the Panel should reflect its remit which, in Q3, we suggest needs fundamental review.

Q4.2

If, for example, it was to become an independent advisory body to Government then we would suggest it should recruit an independent and well-respected Chair and have a wider representation amongst its members, especially from local government, the public utilities, the private sector and academia.

 



 

Q5 Should the head of a commercially active organisation continue, ex-officio, to be official adviser to Ministers on "all aspects of survey, mapping and geographic information."

 

Q5.1

No. The Select Committee should be clear that the OS, as it currently operates its business model, is perceived by the majority of the GI community as an entirely commercial organisation having no restraining remit of "public duty".

 

Q5.2

It is surprising that such a clear conflict of interest, which has been so well sign-posted over so many years, has been allowed to endure by Ministers. This implies a lack of understanding of the scope of OS's current commercial remit and influence.

 

A perception of a conflict, rather than actual evidence of abuse, is all that is required for a process to appear disreputable.

 

 

 

 

Q6 Does OS use a monopoly position to prevent fair and transparent competition in the geographical information market?

 

 

Q6.1

OS is the only source for much of GB's essential geographic reference data. It makes that data available on terms which do not encourage competition, stimulate an active third-party GI "Value-Added" supplier market or encourage wider GI uptake. OS licensing terms are perceived as restrictive and complex and their prices high and inflexible.

 

Q6.2

In our opinion, OS licensing terms are designed to protect the current OS business model which is risk averse but puts pressure on OS to make a financial surplus. The model places OS at the centre of the supply chain, focusing on achieving benefit for OS rather than considering primarily how the UK can best secure its future geographic information needs.

 

Q6.3

At present no third party supplier can access the OS base data except through the acquisition of OS products which we consider to be of "added value".

 

Q6.4

We believe that OS needs to be split in two: an upstream producer/ procurement activity to meet public sector requirements (ie to maintain the national geospatial database) and a downstream commercial activity. The producer activity would licence data (which it produces or procures) at cost (eg plus 5%) to any third party on simple and homogenous terms. In this model OS "commercial" would become a third party supplier.

 

Q6.5

It is worth noting that, in OS's 2000 accounts, the National Audit Office reports that it had been informed by OS that the cost of maintaining the National Geospatial Database was 28 million pa, some 30% of OS's overall cost base at that time. We are not aware of any reason to suggest that the proportion of OS's costs relating to data maintenance has increased since 1999 whilst the proportion of staff engaged in data maintenance appears to have declined.

 

This suggests that a significant cost reduction might be achieved in the supply of base geographic reference data if it were to exclude the apparently expensive licensing, marketing, commercial management and administration overheads which, in our view, should be transferred to OS "commercial".