Examination of Witnesses (Questions 60-79)
LORD BACH,
MR JOHNSTON
MCNEILL,
MR IAN
HEWETT AND
MR JOHN
O'GORMAN
11 JANUARY 2006
Q60 (11.01.06) David Taylor: Moving
on to the relationship between the RPA and Defra particularly
in terms of the resourcing of the development of the systems.
When we went to Reading we were told fairly clearly, by Mr McNeill
I think, that Defra had always accepted that the first year and
the period leading up to the new system would be more costly in
terms of financial resources and when additional funding had been
requested largely it had been granted reasonably promptly. Is
that a fair summary of what you told me?
Mr McNeill: Yes, Chairman, it
is.
Q61 (11.01.06) David Taylor: That
is fine. However, a fair number of the written submissions that
we have received suggest that the RPA totally misjudged the resources
that you were going to need, that you realised rather late in
the day that there were problems on the horizon and they, the
people submitting these observations, would have liked the opportunity
to lobby for a greater number of resources rather earlier than
you managed to do. They say this, at least in part, resulted from
RPA and Defra being very secretive about aspects of the Single
Payment Scheme and because you did not disclose this information
the industry were not able to apply pressure to get resources
in. In other words, it was very much a last minute crisis driven
scenario that they observed from the outside. Is that a fair description
of what was happening, Mr McNeill?
Mr McNeill: I am not sure it is,
to be fair. The challenge that faces one is how to get over these
problems in the most effective way. We have problems with our
Rural Land Register, the volume of applicants putting in IACS
22s telling us about new land change, et cetera, are much higher
than we expected, and we have discussed that. One difficulty was
we had a piece of technology which meant that we were able to
make those adjustments and our staff were engaged in that work.
For a number of reasons, difficulty with new systems, time available
for the new systems when they had to be taken down and work done
to them, maintenance work et cetera, and all the normal bedding
in difficulties one experiences with systems, we could not get
the productivity. We were reluctant to outsource that work because
we were then left with a significant technical problem where somebody
else does it in their system and puts on a lot of additional information
and then we come to try to patch the systems together again, and
that was considered quite a high risk strategy where you have
got different platforms, different technology, trying to bring
that information across and basically patching it back into our
own Land Register. As I mentioned, we are talking now of a Land
Register that has over two million parcels of land and very, very
significant investment. The balance was not just, "Let us
get some additional funding from Defra and go to the market and
find ourselves a supplier", the assessment was, "Which
is the less risky option" and once we had decided that because
of productivity and because of difficulties we had we were not
going to get there—this was then a pretty critical path—we
went to the Department, they supplied additional funding and we
did outsource the work. Thankfully the technical problems were
well understood and could well have happened. We were advised
by our consultants and Accenture, "This is a dangerous, risky
strategy" but at the end of the day it was the best of the
two choices and it enabled us to continue the work. The decisions
sometimes had to be weighed and that took time to see what our
performance was in getting the systems improved. It was not so
much that we were indecisive, it was that we were trying to make
sure that we took the right decisions.
Q62 (11.01.06) David Taylor: Earlier
on I asked the Minister with hindsight whether or not there was
anything that he or his predecessors would have done otherwise
to avoid the situation where we are now. You seem to be saying
the same thing that Norman Lamont and Edith Piaf both said, you
regret rien even in the light of the position that we face
at the moment. Is that a fair summary that with this 20/20 hindsight
there is nothing significantly you would have done differently?
Mr McNeill: I regret much in terms
of what has gone on. When I took this job on it mentioned IT enabled
changes. It has been a salutary experience in bringing about a
massive change of this nature and relying on technology. In fact,
I was with some colleagues in Holland recently from the paying
agency there who are going down the same road next year, perhaps
with a slightly less complicated system, who are already very,
very concerned that despite the fact they have had an additional
year they are going to run into very much the same problems. It
is not just government experience, our advice from our consultants
and others is it is much the case everywhere and we have seen
some recent high profile incidents about food not being on shelves
in supermarkets, et cetera, because of technology difficulties.
The fact of the matter is when you introduce a new system it is
a risk and you need to consider very carefully how you best manage
it. I think we have best managed it. We have a number of OGC reports
where we have independent reviews by teams of core experts separate
from Accenture and ourselves who have come and reviewed us on
a number of occasions. Whilst they accept this programme as high
risk, they have repeatedly identified it is under excellent programme
and project management and have identified that it is a good piece
of work. It is a high risk strategy but they do still believe
it is deliverable.
Q63 (11.01.06) Lynne Jones: You acknowledge
that there came a point when you needed additional resources to
implement the scheme. Could you say exactly when that was or at
what point in the implementation programme that was? We have had
some written evidence which suggests that the RPA was warning
ministers about the complexity of the scheme. What do you say,
that you were pressurised into implementing this model a year
earlier than you needed to in the name of political expedience,
the kind of pressures that Lord Bach referred to earlier about
the fact that we had been negotiating hard on this change in the
way the subsidies were administered and, therefore, we had to
plunge into the deep end before anybody else?
Mr McNeill: There have been a
number of occasions when we have become aware of increased costs.
We sat down with Accenture, having negotiated a contract through
an 18 month procurement exercise, and started to talk of very
significant changes. Obviously they pointed to the fact that it
was going to take more time, it was going to require additional
funding, so we identified that and discussed it with the Department.
With our Customer Service Centre experiences, which I am sure
we will touch on in the course of today's discussions, we identified
that we had not sufficient capacity there and identified the need
to increase that by contracting upward.
Q64 (11.01.06) Lynne Jones: I want
to know when.
Mr McNeill: There were a number
of phases. I can go through the different particular times, if
you wish, or I am happy to write and document the various stages.
Q65 (11.01.06) Lynne Jones: It would
be useful to have a list of all the times at which you identified
additional resources and presumably immediately put in requests.
Mr McNeill: If I could say, the
Permanent Secretary of Defra has chaired a board which has looked
at this work—I can supply the dates of all the meetings—at
least on a monthly basis and I myself had bilaterals certainly
with the previous Permanent Secretary, Sir Brian Bender, on a
monthly basis. He has also been very close to meetings with Accenture.
At those formal meetings of those boards we have produced reports
explaining the pressures on us in terms of increased costs because
of the time frame, because of the change in requirements, and
those have been regular features. Those meetings were also attended
by Defra's Director of Finance, Andrew Burchell, the Director
General responsible for policy in this area, Andy Lebrecht and
indeed Mark Addison, another Director General of Defra. We had
very, very high level consideration of the pressures upon the
organisation to deliver this and the cost implications.
Q66 (11.01.06) Chairman: With this
impressive list of people who have been scrutinising this on a
monthly basis ever since the project was incepted, with all of
this looking, I come back to the question I asked at the beginning:
we are 20 days away from the end of January and the beginning
of the month in which something definitive is supposed to be happening
and in spite of this intensity of effort you cannot tell us an
answer to a simple question, when will the payments be made. Why?
Mr McNeill: We are continuing
the work which has been under tight project and programme management
control since January 2004 where we projected February payments.
At this moment in time we have a significant number of outstanding
issues to address in regard to a number of claims.
Q67 (11.01.06) Chairman: Mr McNeill
and Minister, can we stop beating about the bush with all this,
"We hope to do it but we have still got significant this,
that and the other things". Can you just put us all out of
our misery and tell us what is going to happen. If it has all
been so well managed and peer reviewed as a great project and
you have got the risks under control, and I am sitting here thinking
within 20 days we are going to get into the month of action and
you are telling me that there are still significant this, that
and the other things, surely you must by now have got an idea
in such a well managed project whether you are going to make these
time deadlines or not. Are you?
Mr McNeill: At this moment in
time we are still projecting—
Q68 (11.01.06) Chairman: No, Mr McNeill,
I do not want to know about what you are still projecting. Let
us have some straight talking. Are you or are you not going to
be in a position by February to make full payments, yes or no?
Lord Bach: Chairman, I know your
question is addressed to Mr McNeill—
Q69 (11.01.06) Chairman: You can
answer it simply yes or no, Minister.
Lord Bach: I am not sure I can.
It is very tempting and if I were to answer it now, today, I would
say yes, yes, yes, but it would be a mistake to say that because
there are technical reasons still, and I did mention them earlier
and you kindly said you would come back to them and ask my experts
on them, why it may not happen as we think it will that full payments
will still be paid by the end of February. If there are technical
reasons that mean that it might not be paid then we have to tell
the Committee that is the position.
Q70 (11.01.06) Chairman: Minister,
when I was a minister I was responsible for the introduction of
self-assessment to the UK tax system and I knew it was going to
happen because I had an enormous amount of definitive information
from those who were managing the project. I can remember the detailed
timelines, breakdowns, deadlines. It was all there, because that
is the way complex IT projects are managed. I would think Mr McNeill
now knows the answer to the yes or no question because if it is
such a well managed project he would be able to give you the assessment.
Mr McNeill, are you technically in a position to give the Minister
that assessment if he asks you the question?
Mr McNeill: We report on progress
on this piece of work to ministers and I have mentioned the various
other committees that we report to. The position is that we are
on a daily basis monitoring how quickly our staff—it is
not at this time a systems issue—are dealing with the significant
number of queries relating to claims. The clearance of those is
a matter for some fixes which we have requested from Accenture
going in place and working, it is to do with the productivity
of our staff who are working 15 hours a day and Sundays.[8]
Q71 (11.01.06) Chairman: You have been
telling us that they are working their socks off, they have been
at it very hard, you have talked about the additional work-arounds,
the additional resources, but are you telling me as a manager
with an enviable reputation in a well managed IT project that
has been peer reviewed that 20 days from the end of this month
you cannot at this juncture tell me yes or no if these payments
are going to be made in full in February. I cannot believe that
the project is as well managed as you suggest if you are not able
to answer this simple question.
Mr McNeill: The 20 days productivity
will result in us assessing at the end of the month how we performed—obviously
we are doing it daily at this time—and taking stock not
just in terms of how many claims have we now cleared and what
is outstanding but also in terms of potential disallowance.
Q72 (11.01.06) Chairman: How many
have you got outstanding? Come on, Mr McNeill, this is dancing
on the head of a pin. I cannot believe that you or the Minister
cannot tell this Committee now what is going to happen in the
future. For the sake of the farming industry, can you not put
them out of their misery and tell them definitively what is going
to happen. I really cannot believe if you have got such fingertip
control, productivity measurement and all of these insights into
what is happening, that in such a well managed project you cannot
tell us if within a month's time, because the 14th is the deadline
of definitive identity, you are going to make it or not. If not,
why not?
Mr McNeill: As I have explained,
we are monitoring this on a daily basis. We want to be assured
that we are in a position where we can defend the payments both
from a disallowance perspective and—
Q73 (11.01.06) Chairman: So when
will you know on this daily monitoring? At what point will you
wake up in the morning and say, "I have monitored it sufficiently
I can answer Mr Jack's Committee's question"?
Mr McNeill: The next checkpoint
meeting will be at the end of the month.
Q74 (11.01.06) Chairman: So you are
going to wait until the end of the month before you can make your
mind up?
Mr McNeill: Of course, in the
interim if we have a major problem, a major systems failure, then
we will be able to approach ministers, explain our difficulties
and reflect on what is the best way ahead.
Lord Bach: Chairman, I ought to
say that I made it clear right from the start that I wanted to
give the RPA every chance to make the full payments at the start
at the end of February. I did not want to pull back from doing
that because of some difficulty that might arise. I was prepared,
and still am, to give the Rural Payments Agency as long as they
require in order to be able to say they can make the full payments.
If at any time they say they cannot make the full payments I will
announce publicly that we cannot do it and we will make partial
payments in February. Because we are trying to do these full entitlements,
and it is crucial to get these full entitlements done, once we
can establish these full entitlements we can say that we will[9]
meet the end of February payment date. If we cannot get the full
entitlements done then we are not committed to say that we will
start full payments by the end of February. I think it is appropriate
and right to give us every chance of making the full payments
at the end of February. I only wish I could answer your question
because I would very much like to and, indeed, I have been quite
strong in asking my officials whether there is an answer I can
give you yes or no today because this was an obvious question
the Committee would press on. Being as fair and proper as I can
be, I cannot give you that answer today. I tell you again, I expect
us to start making full payments by the end of February 2006.
Q75 (11.01.06) Daniel Kawczynski: Just
a very quick question to Mr McNeill. Are any of your staff or
you paid any bonuses for making these payments on time, or do
you just have a flat salary?
Mr McNeill: No, I am paid a bonus
providing we make start payments in February and complete 96%
by the end of March.
Q76 (11.01.06) Daniel Kawczynski: So
you receive a bonus if 96% of these payments are paid on time?
Mr McNeill: Yes. It is a performance
target for the Agency and for myself as Chief Executive.
Q77 (11.01.06) Patrick Hall: It may
have come up already and certainly my colleagues, Mr Williams
and Mr Taylor, may have already discovered this. The 120,000 claimants,
much larger than expected, had to be in by last May, was it?
Mr Hewett: 16 May was the claim
deadline for full payment. 10 June was the final deadline established.
From 16 May to 10 June there was a sliding scale of penalties
on payment.
Q78 (11.01.06) Patrick Hall: You
have known since then what the situation is. In fact, several
months before that you had already said that you were unlikely
to make the ideal window of payments, which was December. You
said in February of last year that it would be not before February
2006 but these claims were coming in because the deadline was
after your announcement that you would not be able to make it.
When all the claims are in is there further communication to check
them out? Is that why it is taking so long? Not only the volume
but the detail on each.
Mr McNeill: The reason, despite
the volumes, and as you say after January 2005 people were submitting
their claims, working on our understanding of what the likely
numbers were going to be, working with our suppliers, looking
at the project and the programme planning, it was clear to us,
and Accenture made it clear, that they could deliver the releases,
the IT we needed for different phases of the processing of claims.
It was that to a large extent that put us on the timescale that
we were on. We realised that despite our best efforts that was
the soonest they felt they could build, test and deliver the systems
that we needed to process the claims. That was the critical path
through that. With the volumes we could well have put more staff
on had there been an issue and taken different approaches, but
it was largely to do with the systems development.
Patrick Hall: Maybe Mr Taylor is going
to pick up on that.
Q79 (11.01.06) David Taylor: In May
1967 I entered the world of public sector IT where I worked happily
for 30 years prior to becoming an MP in May 1997 three decades
later. Some of the story that I am hearing today, and I was working
on design, development, implementation and operation of public
sector systems, seems horribly familiar. I put to you in Reading
the phrase, and I know you rebutted it vigorously but I am going
to put it to you again, that you are over a barrel to Accenture,
are you not? Both you, the Minister, and you, the RPA. They are
rubbing their hands, are they not, with the profitability from
all the extra work and changes and indecision and the delays that
we are seeing? The Government, the taxpayers and the farmers are
over a barrel, are they not?
Mr McNeill: I will accept that
it weakens one's position having to go into the market, having
specified a certain requirement, then to change that. That does
leave you in a difficult position, a more challenging position,
in terms of the commercials of the deal. I think that is the same
no matter what one does: if you want an extension on your house
and decide to change it halfway through it is going to cost you
some more, it is going to take longer, there is nugatory work,
et cetera. All I can say to you is we have an excellent commercial
team. We are fully supported by Bird & Bird, which is one
of the top legal firms in the City, and recommended highly by
OGC. We have an excellent contract drafted by Bird & Bird.
We have had some very frank discussions and, I have to say, those
discussions with Accenture have involved the secretary of state,
ministers, the permanent secretary and others where we have had
frank discussions about performance and, indeed, discussions about
future performance and costs.
8 Note by witness: should be "weekends". Back
9
Note by witness: insert "or will not". Back
| 
