House of Commons Commission Report

4  Estates and Works

158. On 12 March 2007 we submitted to the House of Commons Commission our emerging findings in one area. This concerned Estates and Works. It was desirable to consider this area ahead of the main body of the report of our review for a number of reasons—

• first, in the virtually unanimous opinion of those interviewed, the organisation put in place following the Braithwaite report had not proved satisfactory, and significant problems remained in the planning, management and control of the Parliamentary works programme;
• secondly, it is an area of high importance: whether measured in terms of value for money, given the size of the Estates and Works budget (£63 million covering both Houses); the operational significance of ensuring that Parliament can function as a working building and Members and Peers receive the accommodation services they need; or the longer term need to maintain and conserve the Parliamentary Estate, based on the Palace of Westminster;
• thirdly, the House Service had already recognised the need for improvements to be made and had appointed a separate external adviser to assist in the design, management and implementation of plans to deliver an improved Estate strategy. The specialist's remit also covered the consideration of the associated governance, project management and financial processes to achieve faster and better results at optimum value for money.

CONTEXT

159. The Serjeant at Arms Department is the largest in the House of Commons with some 390 staff divided between three directorates: Estates, Works Services and Operations, and the Serjeant's Finance Unit (SFU). The Serjeant at Arms is responsible for accommodation, works, access and security and has an annual budget of some £94 million, which accounts for 39% of the total House of Commons Administrative budget.

160. Estates and Works became the responsibility of the Serjeant at Arms (and Black Rod in the House of Lords) in 1991 following the recommendations of the Ibbs report which also led to the establishment of the Parliamentary Works Directorate (PWD). The Parliamentary Estate centres around Barry and Pugin's 1840s Palace of Westminster, a UNESCO World Heritage site which must be maintained sensitively. The estate is also a working place of the highest importance and must provide upgraded modern services capable of meeting the needs of Members and their staff. Access to the public is a further major consideration. And there is the need to meet high standards of energy efficiency and environmental targets.

BRAITHWAITE 2 REPORT AND FINDINGS

161. The Braithwaite 2 Review of the governance, control and systems of the Serjeant at Arms Department in 2000 found that PWD generally provided high quality service. There were concerns about a lack of transparency in the way it operated: inadequate controls and governance arrangements; poor management information processes and systems to demonstrate value for money; and little evidence that work was going forward within a coherent and agreed long term plan which reflected the House's business needs. Braithwaite focused in particular on the role of the Director of Works, who was perceived as operating with a wide degree of autonomy and acting as both the 'informed client' or 'customer' for works services and the 'provider' of those services.

162. The most important aspects of Braithwaite's corrective recommendations were as follows—

• a strengthened and clearer role for the Serjeant at Arms and by implication for Black Rod in respect of the House of Lords as budget holders for the works programme, with those delivering it being accountable to them, on the basis of agreed performance targets for defined works categories within clear delegations;
• separation of the 'client' and 'provider' functions (in accordance with established models of good practice); with PWD split into two: a Parliamentary Estates Directorate acting as the 'informed client'; and a Parliamentary Works Services Directorate, acting as the 'provider' (containing the necessary project and maintenance managers, furniture services and directly employed labour; and liaising with external consultants and contractors);
• creation of a Departmental finance office, to strengthen financial planning, budgeting and controls, within a context of accounting policy and standards set by the House of Commons Department of Finance and Administration.

163. The separation of 'client' and 'provider' functions was also seen as a step on the way to the possibility of greater 'outsourcing' in the delivery of Parliamentary works services, with fuller use of the skills available in the private sector.

IMPLEMENTATION OF BRAITHWAITE 2

164. The Braithwaite 2 recommendations have been implemented and are working satisfactorily in some respects. Central finance (and HR) units have been established and have delivered many of the improvements sought: concentrating effort efficiently; improving the flow of financial and management information; and promoting best practice, including in procurement.

165. But in the key area of the new Estates and Works Services structures, implementation proved more problematic. The roles of the Serjeant at Arms and Black Rod as budget holders were strengthened in terms of formal responsibilities, but ability to discharge those authorities was not provided for. There also appears to have been a crucial disagreement over detailed allocation of roles and responsibilities as between Estates and Works. The Estates (informed client) branch ended up in effective control of the budget, but was allocated only fifteen posts to discharge this (four of them curatorial, the remainder to cover the roles of project sponsorship, Estates policy and maintaining the forward programme). Against this, there were around 150 posts in Works Services. There were two project sponsors in Estates to supervise the work of more than twenty project managers in Works Services. The programme planning expertise - a vital element in Estates policy and management - was left largely in the hands of Works Services.

CURRENT PROBLEMS AND DEFICIENCIES

166. This background is relevant in terms of the problems identified in the course of this review seven years on. It is arguable that the client/provider split, appropriate in large organisations, was a less suitable model for Parliamentary works, where the development of a critical mass of programme management expertise and single-point authority in governance were of a higher priority. But in any case the way in which the division was implemented was a recipe for duplication, bottlenecks and lack of clarity as to who was responsible for what. This might have worked had there been full collegiate co-operation among all concerned; but in the formative stages of the new organisation at least, the necessary teamwork was lacking. None of this is to criticise the individuals working in the organisations: Estates and Works Services have hard working and dedicated staff, who have delivered and continue to deliver a range of successful programmes. They themselves are among those who have recognised that the existing structure is not achieving the benefits required.

167. The shortcomings identified in this review are validated by the more detailed work being carried out by the external adviser and the external members of the Estate Board. They range from planning and strategy to detailed governance and financial control and may be summarised as follows—

• delays in the delivery of the works programme - for example, the growing backlog in maintenance of the Estate, including the roof of the Palace and the Basement Mechanical and Electrical project, and the Visitor Reception Building;
• inadequate preparation of business cases and investment appraisals, requiring intervention by the Finance Directors on behalf of the Accounting Officers in both Houses, which has compounded the delays in putting the works programme into effect (the Director of Finance and Administration in the House of Commons has, for example, found it necessary to appoint an external consultant to assist his scrutiny, when the improvements required ought to be effected within SAA);
• related difficulties in demonstrating value for money;
• confused lines of authority, with business cases occasionally presented to the Clerk of the House without the involvement of the Serjeant at Arms, notwithstanding his formal budgetary and management responsibility;
• work going forward without proper authority and approval, omissions which raise issues of governance and control;
• delays in the development of a strategic approach, with a 25-year Estate strategy only now beginning to move into place, without yet a clear linkage between this and the immediate works activity or a planned forward programme; there are similar delays in the production of a condition survey of the Estate on which to base such plans, or a full asset register;
• related to the above, the lack of a planned forward programme which takes account of the business needs of the House in terms of accommodation requirements, the Parliamentary calendar (which dictates the periods in which major works can be done) and other influencing factors such as security needs;
• lack of precision in the House of Commons Resource Framework - a document prepared in 2005 - and the need to pin down more clearly delegated levels and categories of work to which they apply;
• the need for simplification and precision in reporting mechanisms for the progress of the works programme and major projects — to facilitate monitoring by the budget holder and supervisory Boards;
• the absence of post-project evaluation and review to provide lessons learned and assist in raising the standard of project management and performance.

168. A report of this kind inevitably dwells on the weaker areas of performance. There are many strengths, not least in the staff's commitment to Parliament. Particular areas run well, notably delivery of minor works and day-to-day maintenance — an area, incidentally, where financial authority and operational responsibility are clearly aligned. In implementing the necessary improvements, it will be important to recognise that the existing system, despite its defects, is not broken. Care must be taken to avoid disruption to the 2007/08 programme of works, while putting in place the changes that are needed for the future.

RECOMMENDATIONS

169. Our recommendations, previously presented to the House of Commons Commission as emerging findings, are as follows—

i.  We recommend that the Estates and Works Services Directorates should be re-integrated under one Director who would provide overall leadership and ensure coherence, consistency, team working, professionalism and delivery.

ii.  The post will be a demanding one, and should be filled by competition, open to outside candidates as well as those with internal knowledge and experience, using flexibility at the top of the payscale, if necessary, to attract outside candidates of the right calibre.

iii.  Key to the new organisation will be a Programme Office, able to pull together the forward plan on the basis of condition surveys and accommodation strategies agreed by both Houses, and to ensure that projects go forward on a properly organised and synchronised basis, with appropriate appraisal and monitoring systems in place. We therefore recommend that a Programme Office should be set up, the functions of which should be worked up in the light of the external adviser's recommendations.

iv.  The re-integrated Directorate should continue to come under the Serjeant at Arms, reporting jointly to the Serjeant at Arms and Black Rod under the existing arrangements (rather than becoming a new joint Department, such as PICT, or a separate Commons-based Department). The basic reason for this is to ensure that property management continues to serve the business needs of Parliament as part of the wider delivery of services for which the Serjeant at Arms and Black Rod are responsible.

v.  The overall budget should be vested in the Serjeant at Arms as it affects Commons interests (and, by implication, Black Rod in the Lords). Detailed delegations to the new Director and his staff need to be worked out. We recommend that ownership of the Estates/Works budget and ownership of the Estate strategy should be pinned down clearly so that financial authority and operational responsibilities are fully aligned.

vi.  We recommend that the Serjeant's Finance Unit (SFU) should remain outside the new combined Directorate, as a separate organisation reporting to the Serjeant at Arms: facilitating the works programme in general; assisting the Serjeant at Arms in financial control and governance; and providing the necessary transparency and separation of duties.

vii.  We recommend that, linked to (vi) above, the SFU should be strengthened beyond its existing advisory function. While the new Director of Estates and Works should be responsible for budgetary planning of the programme and for in-year management, the SFU should have a new executive responsibility for the construction of better quality business cases and general compliance. This should remove from the Finance Director(s) the need to conduct detailed scrutiny of business cases, a practice which causes delays at present and blurs responsibility at Board level for the operational implementation of the works programme. The purpose would be to ensure that —

no business case should go from the Estate and Works area to the Serjeant at Arms, Clerk of the House/Chief Executive or Management Board without prior certification by the SFU; and

financial authorisation for the Estates and Works area to commit expenditure, following approval of business cases, is given by the SFU.

viii.  We recommend that levels of delegation for works expenditure should be reviewed and harmonised as between the House of Commons and House of Lords to facilitate synchronisation of decision-making on joint projects.

ix.  We recommend that the House's Resource Framework guidance should be revised in respect of project approval processes, with clarification of what constitutes 'works', 'leases', 'consultancy', etc.

x.  In order to improve performance and develop a better ability to contract from the private sector, we recommend that training of project managers should be given high priority; greater reliance on bringing in project managers from the private sector may be required.

xi.  In principle, Parliament should consider more strategic partnership arrangements with the private sector to deliver elements of a longer term programme whereby more risk is transferred to the private sector; for this to occur, however, the Estate strategy itself needs to become more mature and staff to become more skilled in the intelligent client and sponsorship role.

170. The recommendations, expanded by those of the external adviser, will require a major effort in implementation, particularly against the background of the experience with the Braithwaite recommendations. For these reasons, it is further recommended that the Estate Board should take on an executive role on a temporary basis for the implementation phase, in addition to its existing advisory responsibility. The presence of external advisers on the Estate Board should provide helpful experience on which to draw. The terms of reference for the Estate Board should be reviewed accordingly.

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Prepared 25 June 2007