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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 107-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE environment, food and rural affairs committee (rural payments agency sub-committee)
Monday 27 November 2006 MR TONY COOPER, MR SIMON VRY and MR IAN HEWETT Evidence heard in Public Questions 803 - 989
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environment, Food and Rural Affairs Committee (Rural Payments Agency Sub-Committee) on Monday 27 November 2006 Members present Mr Michael Jack, in the Chair Mr David Drew James Duddridge Lynne Jones Sir Peter Soulsby David Taylor ________________ Memorandum submitted by the Rural Payments Agency
Examination of Witnesses
Witnesses: Mr Tony Cooper, Interim Chief Executive, Mr Simon Vry, Interim Chief Operating Officer, and Mr Ian Hewett, Operations Director, Rural Payments Agency, gave evidence. Q803 Chairman: The witching hour of 4.45 on Monday 27 November has come round and we move forward with our further inquiries into the Rural Payments Agency. Formally, and for the record, can we welcome Mr Tony Cooper, the Interim Chief Executive of the Agency, Mr Simon Vry, the Interim Chief Operating Officer, and, the only one who is not interim, Mr Ian Hewett, the Operations Director; gentlemen, you are very welcome. You are not going to tell me, Mr Hewett, that you are interim, are you, just to complete the three? Mr Hewett: Not to my knowledge, Chairman. Q804 Chairman: We do not like to be the bearers of difficult news. I think the Committee had hoped that by now we would be coming to the end of our inquiry, but just, as I say, for the avoidance of doubt, the Committee still lives in hope of hearing from Mr Johnston McNeill, the former Chief Executive of the RPA, and we are in correspondence with him. Also, next Wednesday, for those who like to know what the forthcoming attractions are, we will be hearing once again from Sir Brian Bender, the former Permanent Secretary in Defra, now the Permanent Secretary in the Department of Trade and Industry. We are, I suppose, as they say, resummoning him to the witness stand, because there are certain issues which have emerged, which occurred on his watch, and we would like to probe him in a little more detail on that. Once that is done I hope we will be able to start drawing our inquiry to a conclusion. Gentlemen, you are very welcome. I would like to start perhaps with Mr Cooper, with whom I have had the pleasure of talking about the Agency and what is happening, at a meeting which Lord Rooker organised for Members. I was pleased with the workmanlike way in which he approached answering the questions on that occasion, which bodes well for what we are going to be doing. Can I ask you, Mr Cooper, when you came in as Interim Chief Executive, why has the Agency got an Interim Chief Executive? There is a sort of air of lack of permanence to it. Is it because you have particular skills in interim management, or that you are just passing through, because this was a difficult job to do and the pass came to you? Mr Cooper: I was asked if I was interested in helping the Agency, and I was. I took up the post on an interim basis and the plan is to advertise the post in due course. Q805 Chairman: When you decided to give the help that you have just indicated, did you have any conversations with either Johnston McNeill or Mark Addison about the history of the Agency and how it had got to the position that you inherited? Mr Cooper: I did not have any conversation with Johnston McNeill but I did speak to the Permanent Secretary and also to Mark Addison, as well as others. Q806 Chairman: The others, I presume, were the senior managers, were they, of the Agency, that you found yourself in charge of? Mr Cooper: Some were, and some were within the permanent department of Defra. Q807 Chairman: Inevitably, I would imagine one of the first questions you would have asked is "How did we get into this mess?" What did you get as an answer to that question? Mr Cooper: To some extent, I did ask that question, but also I took it upon myself to take a view that I should be looking forward. Therefore, given that I was taking up this role, whatever was there that was the starting-point for me, which obviously has benefits and disbenefits in the approach. My starting-point was that I would accept what was there and try to move forward. Q808 Chairman: I suppose history always supplies an answer, not just to the question of how we got there but also it helps to outline some of the challenges that you face. If you are going to move through to the programme which we will discuss in more detail in a moment or two, it does help sometimes to know where you have come from. What was your surmise, taking over this organisation, as to the key reasons why it had run into such difficulties? Mr Cooper: In summary terms, then the phrase which comes to my mind is it was too much in too short a timescale, obviously then a whole host of issues rolling forward from there. That I think is the way I would sum up where the Agency had got to. Q809 Chairman: Mr Vry and Mr Hewett, you were previously involved in the Agency under Johnston McNeill's watch; what would be your description as to how the Agency got into the mess that it did? What do you say to that, Mr Vry? Mr Vry: In terms of the situation in which the Agency found itself. Q810 Chairman: Can you just confirm to us what you did before what you are doing at the moment? That might also be of help. Mr Vry: I joined the Agency in November 2001 as Change Programme Director. The remit of the role there was to ensure that the senior management team worked together to ensure the delivery of the Change Programme as it was then. Obviously, as the Committee will be aware, the nature of the challenge facing the organisation changed as a result of the implementation of CAP reform. I continued in that role and was due to leave when the Change Programme completed, so I was looking to leave towards the end of 2005. I was asked by Johnston McNeill, then Chief Executive, to stay on to help the organisation towards commencing payments in February, which I did, then obviously, with the issues which occurred in March, I was asked whether I would stay on as Interim Chief Operating Officer from 15 March. Q811 Chairman: Mr Cooper has just told us that it was too much too far and you were involved in the Change Programme. What made you believe that the Change Programme would deliver a functioning, efficient Rural Payments Agency which would also meet the changed operating environment in which Sir Brian Bender was steering the whole of the Department, in terms of the overall Change Programme and the commitment by Defra to certain reductions in its budget? What made you have comfort that it would all work? Mr Vry: I do not think it is fair to say that there was ever 'comfort'. I think, as you will have seen from the various reports, the Change Programme was always identified, from its very early stages, as a high risk programme, and the OGC risk assessments that we undertook throughout the Change Programme showed it to be high risk and it continued to be high risk throughout its life. I would not use the term 'comfort'; obviously, it was always going to be a very challenging programme for the Agency. Q812 Chairman: You must have believed that it could have been delivered otherwise you would not have carried on, however risky it was. It was not, in your judgment, so risky, it would appear, that any of the senior management said to either the Chief Executive or ministers "We can't deliver; it's not going to work. We're not going to be able to make these payments on time; we can't meet our Change Programme objectives." You must have thought, ultimately, however risky it was, it was going to work? Mr Vry: First of all, the Change Programme objectives, towards the latter part of the Change Programme, clearly were focused very much on delivery of SPS and, as we progressed through the life cycle of developing the Change Programme, the risk profile, as I mentioned, did change and it became increasingly high risk. Q813 Chairman: We go from a risky to a higher risk programme. What do you think the elements were which caused that risk profile to change? Mr Vry: I think the report which was undertaken by the National Audit Office was quite useful in summarising the key points. They mentioned a number of factors. They mentioned that changes during the development of the IT systems to incorporate EU regulations and other policy changes reduced the time available for testing before the system went live, so there are issues around that which increased risks. The Agency underestimated the amount of work in mapping farmers' land, and that is absolutely true, there was an underestimate, some people think, of the amount of work which would be involved in mapping; that, in the absence of adequate management information, the Agency underestimated the amount of work involved in processing each claim. Q814 Chairman: It is very good of you to read out the NAO Report, but we have read that for ourselves. What I am actually more interested in is why, Mr Vry, as a part of the former senior management team of the Agency, you prescribed - and I am sorry you happened to be, if you like, you and Mr Hewett, the people who remain, so inevitably you have to take the burden of some of these questions - what I am intrigued by is, as people with expertise, otherwise you would not have been appointed to these tasks, you presided over policies which amounted to the difficulties that you have enunciated, seemingly without perceiving that these problems were going to be the show-stoppers they turned out to be. What went wrong inside the senior management team? When you met to have your various and many meetings, some of which we have seen, did not any bells ring with anybody that you were heading for the rocks? Mr Vry: First of all, when we encountered the changes that we needed to make to the system, as a result of policy changes, in December 2004, we went through a fundamental review of the risks of delivering that programme. We took a view that it was still deliverable at that point in time, but it had increased the risks of delivery. In discussion with Defra, we announced that the earliest we could start making payments would be February 2006, and we worked throughout 2005 and early 2006 to ensure that we did hit that milestone, and indeed we did commence making payments in February, as we had promised some 12 months before. The issue was that where we had not understood the complexity was that it would take far longer to get the payments out; once we started making payments they did not flow through with the speed or at the level that we had anticipated, and that is where then the major problems arose. Q815 Chairman: We are going to come back to follow that through, because I think we would all be very interested to know why there was such a difference between the fit, between what you thought you could do and what subsequently transpired. We will also explore, in some detail, the candour of Mr Cooper's explanation that he has still got an organisation which has some problems which are inherited from the scenario you have put to them. Just to start the process of looking forward, Mr Cooper, can I turn to you and ask you to bring us up to date with where we are with the 2005 payments and how many of them are currently not yet settled, and perhaps to give us a flavour as to what the barriers are to progress on that? Mr Cooper: The 2005 position, we have, I think it is, 41 Priority 1 cases, high value cases, which have not yet been paid; in fact, they have not received any payment. The majority of those cases are cases that are in probate, the minority are held up for some legal dispute issue; so we have explored in as many ways as probably we can to find ways of making payments, including whether we can make payments to executors, and the like. Q816 David Taylor: Sorry to interrupt. Is this 'high value' more than €1,000; is that the definition? Mr Cooper: It is, yes. Q817 David Taylor: It is not that high value? Mr Cooper: It is how we class the Priority 1 case. In previous years a number of high priority or probate cases have existed and have run through and those cases will continue to prevent payment for quite some time probably, although as those cases are resolved we will make payments. The other area is those that are under €1,000, so under £682, and of those we have about 1,700 still to pay, and we will continue to pay those and expect to pay them over the next few weeks. In addition to that, there are some top-up payments which are still due, that is in the order of about 2,500, and we are continuing to work through those. We have some outstanding correspondence which we are still dealing with for 2005. We have made significant inroads into that. In August it was something in the order of 28,000 outstanding items and is now down to 12,000, so we have made significant progress there. Q818 Chairman: Just to be clear on that, you say that you had 28,000 items of outstanding correspondence; what kinds of things did those deal with, in general terms? Mr Cooper: What we have found is, it is a multitude, because there were some people who wrote and said "Where's my payment; when am I going to get paid?" There were some who were responding to questions that we had asked them, for points of clarification, and then there follow-ups to that, saying, "I sent you this information but I haven't heard back." We got into a sort of unmanageable vicious circle round the volumes and we have had to make a concerted effort to sift through those and identify them. There were also some representations made on the basis that perhaps some of the payments were incorrect and we have identified those and given them a higher priority. Q819 Chairman: One of the consequences of the organisation that you inherited was the question of disallowance from the European Union and, using your best endeavours, you have put a contingency of some £131m into the Defra accounts. I think it would be interesting to have a bit more detail as to how that £131m has been calculated, and when the process will begin to determine if it turns into a real £131m you have got to find, or whether it is something which can be expunged from the balance sheet. I gather also that you have made a total provision of £150 million for EAGGF financial corrections for the year 2005-06. I think the £131m is separate from that. Perhaps, again, just so that we understand the overall contingency liability, because that says it looks like your Agency has got £281m of contingent liability written into its balance-sheet, it is quite a lot of money, so where that money has come from? Mr Cooper: The estimate, which I think, in round terms, is £150m in total, there is £131m which is placed as a contingency against disallowance because of the Single Payment Scheme and the balance is against the other schemes that are administered, because of potential disallowances. The £131m is an estimate and, as you are suggesting, can be only an estimate until we have correspondence with the European Commission. It is driven partly because of the way in which partial payments were made, partly because of a level of incorrectness over payments identified during audits. The European auditors are in the process of auditing the accounts at the moment and once they have completed their work they will report back to the Commission. The first step in the process of agreeing the figure is that the Commission will write and advise I am not sure whether it is the Department or the Rural Payments Agency of the figure which they believe is appropriate. When we have that figure then we will start a process of discussion with the Commission to understand why they have reached the figure that they have reached. Our estimate is one that we have estimated taking some advice from lawyers around the interpretation of the Scheme, and clearly we would argue that we have not put at risk the fund at any stage during the decision-making process to make payments. Q820 Chairman: Help me to understand the £131m. Whether it be the £131m or whether it be £1, some real money will have to be found from somewhere; where does it come from? Mr Cooper: The provision that has been made is in the Defra accounts and therefore Defra will need to decide how that funding, if it is needed, is going to be gathered together. Q821 Chairman: Just to be absolutely clear on that point, Defra has a certain amount of expenditure which it has got to make; now, in terms of the timescale, when do you anticipate that the audit process will be concluded? Have the Commission given you any indication of that? Mr Cooper: No. The experience which I believe the Department has had in the past is that it can take anything up to two years to come to an agreed position. Q822 Chairman: In which year's accounts does the £131m sit? Mr Cooper: The £131m has been provided for as a contingent liability in the 2005-06 accounts. Q823 Chairman: If that is the case, in terms of contingent liabilities, Defra will have a certain amount of money that it can actually spend in the financial year in question, because this will be out of the 2006-07 money, is it, just so we get our financial years right? You said 2005-06, but that financial year closed at the end of March this year, so that is where the £131m sits, is it? Mr Cooper: If I may just consult Mr Hewett. Mr Hewett: Very little of the expenditure would have been made by the end of the 2005-06 financial year, but the majority would have been made in the European Council year which ended on 15 October 2006. It is split. Q824 Chairman: Okay; it is split. In actual fact, let us say, somewhere along the line, if you have got a contingent liability in your accounts, you have got to say to yourself, if that turns into real money, it has got to be found from somewhere. What I am trying to be clear in mind about is which year's expenditure it is going to be hurt, because Mr Cooper said, if it comes, whether it is £1, or £1m, or whatever it is, somebody has got to find the money from somewhere. Just so I do not get it wrong, if you are saying it is split between the two years then in the 2006-07 financial year, the one we are in at the moment, Defra may have to find that money, because if it has put the contingent liability and it has got to think "What happens if we pay it out?" some things may not happen in the year, because the money has got to be paid out. Is that the way it works? Mr Hewett: It depends on what the European Commission try to disallow us for. Mr Cooper mentioned it could be for the partial payment solution that we started to make payments in May. It could be for the fact that not all of the monies were paid out by the end of the regulatory window, which ended at the end of June. It could be for the way that we validated claims, which started some many months ago and would have fallen within the 2005-06 financial year. Q825 Chairman: In asking my questions, I have come to the very simple point that, obviously, the public seeing £131m sitting there will want to know does this mean less expenditure in other Defra programmes, if £131m, or some other number, becomes the number? That is what I am trying to understand, just for the avoidance of doubt. Equally, you have also got to put a bit aside for the potential £150m, because disallowance is nothing new in this territory. I think I am trying to get a feel as to what sum of money could suddenly be visited upon Defra as an amount which they cannot spend on United Kingdom programmes which they are going to have to find from their accounts to meet any disallowance that comes. If you do not find that the fine is visited upon you in the 2006-07 financial year, does that mean that the contingency rolls over into the 2007-08 financial year, because that is where the real money has got to come from? Mr Hewett: I suspect that we would need to talk to our departmental colleagues about the impacts, but I think the prudent way to do this is that there is a potential disallowance which could fall in the 2005-06 year, therefore that is why the contingent liability was placed there. Chairman: Being a simple man in these matters, I would be grateful if you would go and talk to your colleagues. What I would like to know is at what point, when disallowance is determined, does contingency crystallise out into reality, and where will the real money come from? The impression given by the Secretary of State, when he has been probed on this, is that somehow this is not real money, that it does not have to be found from anywhere, no programmes are going to be affected and it has got absolutely nothing whatsoever to do with the current Defra budget cuts; but it is real money, at some point in the future, and I would like to know where it is going to come from. Q826 James Duddridge: Mr Cooper, I am interested in some of the changes you and Mr Addison made, first in terms of chronology. Did any of the changes Mr Addison made to expedite the claims of 2005 have a potentially detrimental impact for future years? Mr Cooper: I think the changes that were either introduced or started by Mark Addison are helpful, and I have, largely, I think, taken them all forward and built on those. I am trying to think where a change that he introduced might have a knock-on effect. Q827 James Duddridge: Just to help, you said "largely;" which area is perhaps coming in and looking afresh again at the time point when you said, "No, that's not right to carry forward"? Mr Cooper: I do not think I have come across any yet. So that I do not appear to disregard the discussion we have just had about disallowance, quite clearly, the partial payments that were made and the decision to make those partial payments carry the disallowance risk, and you could argue that is a detrimental feature going forward. I do not necessarily want to go back into that discussion on disallowance, but I think that will be the only area. The sorts of things that were introduced where we streamlined some of the checking, where we started to explore how we would introduce a different way of working rather than the pure task-based working, those are the sorts of things that are going to make a difference and those were taken forward into the 2006 year. Q828 James Duddridge: From when you took over, what specifically have been the Cooper changes rather than the Addison changes? Mr Cooper: I guess, if I can give an outline in terms of my first four months, first of all, which were focused largely around continuing to make payments as quickly as possible and then moving in towards changes in the organisation, restructuring it, looking at the governance arrangements and changing those, defining people's roles and responsibilities clearly, so that they knew what they were doing. The organisation had moved towards being a fairly matrix-type organisation where people had multiple responsibilities and it relied upon good co-operation across different sorts of teams, and whilst my experience is that works well in a well-functioning organisation, when it is in a bit of difficulty it needs to have very clear roles and responsibilities. That is what I defined. I introduced some changes in the senior management team. I introduced an Agency Board with four directors, three of whom were new to that Board, and I introduced two non-executives, to provide a degree of challenge into the organisation. We have also gone ahead and appointed site managers. What I inherited was six sites and they had a management team which shared the responsibility for managing that site, and by introducing one single person I have clearly got a more direct line of control over what is happening there and greater accountability in the organisation. Those were the sorts of changes I made in the first four months. In the last two months and the next two months what I am moving towards is what is the business strategy for the Agency, what are the changes that we are going to introduce and, having taken stock of the IT and confirming that the IT is fit for purpose, then what further investment is needed in that to advance in the way that we need to, to be able to become stable and functioning in a way that I think our customers would expect and stakeholders would expect. Q829 James Duddridge: I have read that you are going to introduce greater quality control over manual checks. What have been the problems which have been demonstrated through the absence of that quality control to date? Mr Cooper: There is a range of quality controls which are already in place, which in some areas are carried out too many times, so we end up checking the checker's work. The approach that I would take is more of a risk-based approach, whether that is on the basis of a member of staff being new to the organisation and therefore going through a learning curve and that you would expect to check their work, or because it is a highly complex case which needs a second look at it. There are quality mechanisms already in place but what I am trying to do is arrange it so that they are focused, to be more effective, really. Q830 Chairman: Can I ask if one of the two, new non-executive directors that you have appointed has got IT or systems experience? Mr Cooper: One has certainly change experience, and I suspect therefore has looked at IT change from a business perspective rather than being an IT expert. I know she is not an IT expert. That is her qualification for this particular job. Q831 Chairman: There is nobody with a specific IT background? Mr Cooper: Not as a non-executive, no. Q832 Chairman: I notice that on page 11 of your Operating Business Plan for 2006-07 you comment on the state of the RPA for doing all the other things for which you are responsible. You have given us an outline as to how you are going to get the Single Farm Payment Scheme right, but sometimes it is easy to forget that you have got lots of other things for which you are responsible. I note that on page 11, paragraph eight, you say: "Unsatisfactory delivery of non-Scheme activities due to resources for non-Scheme activities falling to unsustainably low levels. Systemic failures in RPA due to lack of funding for the resources required, loss of key knowledge, accreditation/control weaknesses, and poor staff morale leads to reduced productivity." If that is the state of the rest of the business, it looks like a pretty big task to fix that as well, together with the focus you are going to have to put on getting the Single Farm Payment Scheme right. Are you equipped to do that and, if so, are you going to get the resources you need to correct that very candid list of problems? Mr Cooper: Can I clarify first though that this is a set of risks that we have identified to the successful delivery of these schemes and for the Agency. Having identified the risks, quite clearly, we wish to take mitigation action to ensure that we do not realise that risk, and the areas that we have identified are those to which we need to pay careful attention. There is a risk that we take too many resources out of those areas that are non-SPS, as we have made SPS the priority for the Agency, and I need to guard against that. I do that by, for example, tracking on a regular basis the performance of those areas against the targets which they have. At the moment I am managing that risk. Q833 Chairman: Can we come to some specifics, because what the Committee has learned over time is that the present set-up is costing far more than was originally budgeted for, and you are still left, roughly speaking, with the present set-up, because you said that you cannot implement the kind of dramatic change that you might want to, possibly for the next two years. If you are going to have to operate the current system with more resources than was originally planned, have you been given those resources and, if so, what does it amount to in millions of extra pounds? Mr Cooper: We have been allocated in this current financial year an additional £23m, which has provided additional funding for the additional people that we have recruited into the organisation. Q834 Chairman: That extra £23m, let us be absolutely clear, does that come on top of the additional resources which had to be put in to get the Single Farm Payment actually up and running, or is it £23m above some base-line figure; just so that we know? I do not want to be accused of inaccuracy. Which is it? Is it £23m above what it cost in 2005-06, so in other words the 2006-07 expenditure is £23m above the 2005-06 for the delivery of the Single Farm Payment? Mr Cooper: I think the annual expenditure, running costs, for the Agency is more or less the same as last year, but I think I should offer to confirm that to you. Q835 Chairman: It would be helpful to have some clarity as to where that £23m comes in. Were you going to say something else before I sought clarity? Mr Cooper: Just to say, that provided sufficient funds to make some additional IT changes which have been necessary and also to fund 300 staff that we recruited to start the process of validating the Single Payment Scheme. Q836 Chairman: Again, just so we are clear, we were told that, to make the Single Farm Payment work, you had to take on 900 staff during 2005-06, these were supposedly temporary people, to make up for the failure of the optical character reader system. Therefore, do I understand that in addition to those 900 you have now had to have another 300 to make it work in the next financial year? Mr Cooper: It is not quite as straightforward as that. Q837 Chairman: This is your chance to tell us what the numbers are? Mr Cooper: The number of staff that we have in the Agency at the moment is about 4,500, but that number fluctuates depending on the demands and therefore it constantly goes up and down and it can vary. I suspect, when I say there are 300, there are 300 people that were recruited specifically on a temporary basis to do the initial processing of the Single Payment Scheme for 2006. They were recruited in one location and, as you would expect with temporary staff, there has been quite a turnover. The 300 people that were recruited, 200 of them went back to college at the end of the summer and obviously we have been continuing to recruit to replace those people. In terms of recruitment numbers, the recruitment numbers are quite different from those that we have actually sitting at desks. Q838 David Taylor: (Are you reviewing training from members of (?) the first batch that you recruited? Mr Cooper: We are putting a lot of effort into reviewing and improving the training facilities that we provide. The induction training and the SPS training is being reviewed and it is being revamped; indeed, I think there is work this week going on to draw upon the experiences of the staff who have been on the receiving end of the training and having to process it as a result of that. We are learning from that and developing different models and different approaches. Q839 Mr Drew: It is very interesting, because obviously I was working on exactly the same script as the Chairman, so either we have pre-prepared this or we are thinking along the same lines, and David Taylor's point is absolutely crucial. You identify and are managing risk, as the Chairman has said, quite rightly, loss of key knowledge. We know that one of the real problems was that the nature of the people who were being employed, without being rude to them, was externalised temporary staff who clearly had no long-term commitment, because of the nature of the employment under which they were taken on, and who were not doing the work, not through any fault of their own, they were not really capable of doing that work. Are you saying that those people no longer exist in the organisation, or are you still taking on students who clearly cannot have any long-term commitment to the Agency? Mr Cooper: We have a range of people employed in the Rural Payments Agency and it would be very wrong to assume that a category of those people employed are not doing a good job. There are many temporary staff that are fulfilling a very, very competent job. Q840 Mr Drew: That was not the case in the previous incarnation. I do not go along with the horror stories which were identified in the press, I think that was the extreme end of what was going wrong, but it is symptomatic of an organisation which was employing the wrong people. Any organisation which has got this level of complexity, and even though you can make the particular functions that people are working on rather mechanistic, it is all about knowledge and application and, I have to say, a degree of interpretation. You are not going to get that with temporary workers? Mr Cooper: There are a number of reasons for some of the difficulties you are describing. One is the experience of some of the management, which is being addressed. Another is the nature in which the training was delivered and the speed with which the training was delivered. Whether, as a management team, we provided the right tools for these people to do the job properly, I do not think it would be fair to think that they were armed, fully equipped to be able to do the job, so I think I want to defend a significant proportion of the staff. There will be one or two who will have left who were ineffective. Q841 Mr Drew: Give us an idea of how many? If you are hiring students, which was the way and it seems to be the way you are continuing to work, with the best will in the world those students are going to work for, if it is the summer holidays, we are talking about three months. If you have got them on a part-time basis, there is a limit to how many hours they can service you for and, more particularly, they are going to come in and out of work because of the nature of their studies, and so on. Give me a feel for what sort of number of people were involved in that category? Mr Cooper: In overall terms then, in fairly sort of round numbers, there are round about 2,300 permanent members of staff in the Rural Payments Agency, and today, because it does move around, there are round about 1,400 Agency staff, and the balance is made up with fixed-term appointments and casual staff who are employed directly. Q842 Mr Drew: How many casual staff? Mr Cooper: I need to ask my colleague, Mr Hewett: do you know the number? Mr Hewett: The numbers are bouncing around all the time, but casual staff tend to be dominated in one or two offices which have gone through the fair and open competition route to get those casuals out for a period of up to two years. Q843 Mr Drew: That is not students? Mr Hewett: No, absolutely not. What I am saying is that there is a mix of staff, and that is for a very good reason. During the course of 2005, processing SPS, we encountered a number of issues, one of which was to make better use of the IT system for longer during the day, so we were running dawn shifts, six till nine, twilight shifts, six pm to nine pm, and sometimes double day shifts, and it is trying to get people around those certain times, to try to flex the IT system as much as possible. People who were available for short periods of a working day, if you like, outside of the normal nine to five period, would be quite helpful to us. What we are trying to do is move to a more permanent situation and the numbers which Mr Cooper mentioned, in terms of employment agency, we are in the process of trying to convert some of those, I will not say all of those but some of those, to fixed-term status, working with the new HR Director that Mr Cooper has brought in. I was speaking to him only this morning on that subject. The new HR Director and I are going to Newcastle, I think on Thursday of this week, for the first of specific sessions on training, where we are bringing together people from each of the sites who have experience of processing SPS to see what changes we can introduce quickly into the training process to build on that which is already there. Chairman: For the avoidance of doubt, Mr Hewett, and again to make certain that we get an accurate view, in commenting on what the problems are that you are addressing presently, there is a sort of retrospective feel about this. If I turn it round the other way, in terms of what we have just heard, this says the right management were not appointed, the right training packages were not originally put in place and nobody really understood how the IT system was fully to operate, given the volume of tasks that you had to do. Mr Drew: And the wrong staff. Q844 Chairman: Indeed, and you have just talked about having to flex the IT system and bring in a pretty heavy series of shift-working solutions to cope with what you had to cope with. Is my surmise correct? Mr Hewett: No. I would say not, Chairman. The first point is that 2005 was the first year that we went through the Single Payment Scheme and certainly we found issues as we went along. I think it has been well documented, the level of change, the amount of land that we had to register, the time it took to register, etc. All of that meant that we have tried to learn the lessons from 2005 and are moving things forward, both in terms of the type of staff that we have running schemes and the amount of training. Q845 Chairman: Mr Hewett, You are quite right in saying you are trying to learn the lessons, but part of our task is to get a very clear and accurate sight as to what actually went wrong. We are getting some good answers about what is happening into the future but I come back to the fact that we were just told that the training was not right and the management was not right. Those are facts; those appear to be incorruptible facts. You are not disputing those, are you? Mr Hewett: Yes, I am, because the training was provided at the time based on what we knew about the system and about the processes. Q846 Chairman: Let us go back to one stage before then: you did not know enough about what it was you were supposed to be doing? Mr Hewett: I think it is well documented, Mr Chairman, that we did not undertake full end-to-end testing for the whole process, the end-to-end process; we did incremental testing of the various components as they came along. Knowing what we know now, if we had undertaken that full end-to-end testing, we may have come up with a different solution in some of the processes. Q847 Chairman: This relates back to the line of inquiry I was putting with Mr Vry, that people set off in the direction of travel not quite knowing what the road map was. Seemingly, you have got some idea of where you would like to end up, but you did not know quite how you were ever going to get there? Mr Hewett: When we set off, of course, we were not going to administer the Single Payment Scheme, we were going to administer 11 farm-based subsidy schemes which we had had since 1993. Chairman: Mr Hewett, you knew that the negotiations on the Single Farm Payment were proceeding and your Agency had close touch with ministers over that. We did a report, if we go back to 2003, in which we flagged up some of the problems that you were going to face, whatever the situation, so I think everybody knew in which direction of travel you were going. The point I am getting at is trying to understand what went wrong in the ingredients of the team who were planning and who had to execute the new direction. The main message I am getting, whether we like it or not, from the words you have said, is that the management were not up to it and the training was not right, in the light of what you encountered. Q848 Lynne Jones: Perhaps Mr Hewett could add something. I just wanted to chip in with a comment. You have no comments to make on policy? Mr Hewett: I am sorry. I have been through that before, on policies. We discovered issues as we went along and we tried to deal with them as best we could at the time. With the benefit of hindsight, clearly there are things which we are trying to do now which, if we had done them before, - - - Q849 Chairman: That accounted for the mounting level of risk which Mr Vry outlined, did it? In other words, you went along discovering things; you discovered it was a far more complicated, risky and difficult venture than you had planned for? Mr Hewett: I think that is fair to say, that the level of complexity became clear only very late in the day. Q850 Lynne Jones: How late in the day, would you say, because the Minister wrote to the Committee in January saying, you mentioned just a little while ago that the original system was set up to deal with the original CAP tasks and then you had the reform, but he told the Committee that the impact of reform would not be significant on the overall IT solution, and that was in January, in a letter to the Committee? How could the Minister have had that impression in January? Mr Hewett: Some of the issues became apparent only after that point, some of them were identified before, but some of the complexities and the level of manual tasks which were required to be processed became evident only after that. I have looked back at the information that we have been producing on a weekly basis over many months leading up to the first payments going out in February and the number of tasks requiring manual resolution increased substantially as we went along. Q851 Lynne Jones: I have looked at some of those and you have Johnston McNeill's memorandum saying basically "This week we've identified X thousand more tasks," and that had been happening on a weekly basis and yet no alarm bells seem to have rung, such that the Minister was still giving out assurances that payments were going to be started at the end of February? Mr Hewett: They started on 20 February. Q852 Chairman: Just to back up that point which Ms Jones has made, I looked at one of those reports and by the time the decision was being taken, that you were going to recommend to the Minister you would start paying out by the end of February, the task rate had gone up from, I think, a sort of September figure of 440,000-odd to over 700,000. What amazed me was that no bells seemed to ring that you might not make it? Mr Hewett: The information that I think went forward explained that we would not complete all of those tasks by the middle of February but that we were satisfied with the degree of accuracy on the overall level of entitlements and payments, meaning that we could start in February, as we had announced some 13 months earlier, and we did make a start to payments. Unfortunately, the payments did not flood out as were hoping, they trickled, and it was at that point we became alarmed. Q853 Chairman: Just to be absolutely clear, there was not a point, Mr Hewett, during the year 2005, at which anybody in the Agency, from Mr McNeill downwards, involved in the senior management, ever had a scintilla of doubt that you were actually going to be able to do what you said you were going to do by the end of February 2006? Mr Hewett: I think Mr Vry has already explained that the level of risk, the risk profile, changed and the risks increased. Q854 Chairman: That is the point I am getting at. The risk profile changed, going through 2005. As you say, this was a voyage of discovery, you were finding out the complexity, you were finding that more things were going to have to be done than you bargained for; behind that there was an argument, a discussion, interim payments, Farmers' Union requesting to know whether you were going to do it. That started towards the back end, the autumn, of 2005, and, in spite of that, you believed that you were going to make it to February 2006 and it would all be okay. What I am trying to get at is that you never wavered from your belief that you could actually deliver 100 per cent of what was required by the end of February, in spite of the fact that every observer from outside was seeing mounting problems. Huge problems with the mapping, lots of unanswered letters, poor communications, all the things that you know about, but which never made you sway one moment from saying, "Excuse me, do you think we ought to think about interim payments?" before you came to the conclusion in 2006 that you needed to do interim payments? Mr Hewett: I think very much we did consider interim or partial payments, even before the European Union adopted a regulation to provide for that, and we discussed with our policy colleagues the potential for that and, once a regulation was adopted and the conditions were prescribed, whether that was something which would assist, or not, as the case may be. The general conclusion was that it would not help and it would add even more work, if we were to try to undertake complex processing of a partial payment to meet the regulatory requirements, and so at that time it was decided to continue with the strategy of going for full payments. It became apparent only during the months of March and April, when we did not achieve the level of full payments that we were anticipating, that we needed to move into a partial payment scenario. It was at that point that Mr Addison, on advice from colleagues within RPA and discussion with policy colleagues, sought agreement to make a partial payment, and that is what we did. Q855 Sir Peter Soulsby: Chairman, I think what we all struggle with is to try to understand how the problems and the risks which were being talked about within the Agency and within the Department led to such a catastrophic failure. A catastrophic failure which, from what you have described today, still presents you with a backlog which is quite enormous and quite astonishing, really, in terms of just the correspondence, never mind some of the other aspects of it, with what you appear to have described to us today being an organisation which really seems to have no aspect of its business that is yet anywhere near stable and, as I understand it, a recovery plan which is two years from completion. First of all, is that a fair summary of the situation, that there is not anything which is stable, there is an enormous backlog and it will be at least two years before this recovery plan is fully implemented? Mr Cooper: There is certainly a tail of work, or a legacy, from the 2005 experience, which is still with us. Ideally, we would have been able to focus more effort on the 2006 scheme without having to clear up the 2005, but, inevitably, you have got to do that before you can move on to the 2006. Yes, there is work to be done on 2005; 2006 though, I do need to emphasise that we did not just stand by and watch 2005 only. The 300 people that we recruited have gone through the first, what we call, Level 1 validation, the initial check of all the claims that have been made, and clarified a number of points which needed to be clarified. There is progress being made there, and now we are processing 2006 claims. Q856 Sir Peter Soulsby: Perhaps you could tell us just where you are at with the Level 1 and Level 2 validations? Mr Cooper: Level 1, I think there are about 1,000 of the Level 1s which have not yet been completed, and that is either because we are still waiting for some information or we are waiting for some oddity in the IT, which has been identified, which is preventing that case from just moving to the next stage. That has not stopped us though from moving those cases which have cleared the Level 1 into Level 2 processing, so the Level 2 processing is now underway. For example, we have identified the claims which have potentially dual claims on them, so that we can resolve those. We are continuing to progress through the Level 2 validation. In terms of your question about where are we going to be with 2006 then I think the Secretary of State has made it clear already that 96 per cent of the fund value by the end of June is going to be challenging, and that is certainly my opinion. What we are trying to do obviously is seek further improvements for the 2007 scheme and it is probably worth bearing in mind that the 2007 scheme actually kicks off when the forms are pre-populated on issue to farmers in March, which is only four months off. Of course, that relies on us having good information to put on those forms. Q857 Chairman: On a technical note, your term 'pre-populated'; that means that the information about the mapping, etc., the information that farmers have given for the 2006 payment, is put onto the form for 2007, and in March next year farmers will look at that and will have to decide if it is accurate or whether there have been any changes? Mr Cooper: That is right; and they have to return that. The further forward we are on validation means that the quality of the information that we can provide is going to be that much better to the farmer, and therefore the farmer has to change less, and once we go through that cycle, the 2008 one, that is when we expect to be in a better position. In my view, it should be a 12-month cycle, let us say, for a scheme; at the moment it is not, it is running at 18 months and beyond, and so my task is to shrink that into a 12-month period so that the information going onto the start of the process for the pre-populated claim forms is accurate. When I get to that position and the faster processing then that is when we are in a stable and, what I would call, a predictable state. Q858 Sir Peter Soulsby: Mr Cooper, you have mentioned the Secretary of State's target for June 2007 and you have also mentioned your task. What are the consequences for you and your colleagues if you do not meet this target, and indeed, while we are about it, for how long are you with the Agency? Mr Cooper: For how long am I with the Agency: my contract is until the spring of 2008. Q859 Chairman: Are you on any kind of performance bonus? Mr Cooper: I am, yes. Q860 Chairman: What is that dependent upon? Mr Cooper: It is the targets that are in the Operating Business Plan. Q861 Chairman: Your hitting the 96.14 per cent payments triggers a bonus payment to you? Mr Cooper: Provided that target is met, yes, it would. Q862 Chairman: Is your salary and bonus package on a par with Mr McNeill's, or a more generous one? Mr Cooper: It is on a par. Q863 Chairman: What about Mr Vry and Mr Hewett and the other members of your senior team, are they on performance-related bonuses as well? Mr Cooper: They are on a different arrangement, because they have targets to achieve but no pre-defined bonus. Under the present scheme, their performance would be considered by the Defra Pay Committee, as with other senior civil servants. Q864 Sir Peter Soulsby: Just to clarify this, Mr Cooper, you are expecting to be with the Agency until 2008, and at the end of that period a recovery plan is to be in place, and by that time you are expecting the Agency to be stable and delivering? Mr Cooper: Yes. Just to clarify; what I would anticipate is that the business strategy that we will produce for going forward will incorporate a recovery programme, whatever those actions are. I would anticipate that would be as part of the business plan that we produce for the Agency, and if we did it on time that should be published in April, and we will work towards that. That would set out what we were doing for the 2007 and 2008 schemes and what I would anticipate is that you would see some visible improvements in the 2007 scheme and have stability in the 2008 scheme. Q865 Sir Peter Soulsby: Can we take you to the issue of part payments. The decision not to make part payments immediately, is that based on the risk of disallowance, or on the effect that will have on your ability to cope with making full payments? Mr Cooper: Disallowance is certainly a factor in there, but the fundamental question was when would the partial payment solution be available, and I had to form a judgment, and therefore make a recommendation, of when I could commit to that solution being available and working, and therefore provide a predictable date as to when payments could be made. That, combined with the more we can do, in terms of validation and making full payments, has got to be the best result that we can achieve, so we want to try to do as much of that as we can in the period up until partial payments are made. The partial payments, yes, potentially, it could run and carry a risk of disallowance, if we cannot get sufficient validation done. Q866 Sir Peter Soulsby: What attitude have the European Commission taken to partial payments? Mr Cooper: They have provided for partial payments and we are working towards trying to comply with those regulations. Q867 Chairman: Could I ask, in terms of the work you are going to be doing to improve the operation of the Payment Scheme, does that involve further software modifications? Mr Cooper: It will do. During the process of getting to the starting-point with the Single Payment Scheme the contract was a fixed-price contract and it had specific items to deliver. During that process some items were either moved to this current financial year or were descoped. Management information is a good example, where that was taken out of the solution which was provided for the 2005 scheme; therefore, if you call that software, which I do, that is part of the service that we are buying from the contractor. Q868 Chairman: From Accenture? Mr Cooper: From Accenture, yes. Q869 Chairman: Just to be clear, are you going to have to find extra pounds to pay Accenture to do some of this work, or because it was a fixed-price contract you have paid them all the money they are going to get and in the next two years they are still going to have to do certain other tasks? Mr Cooper: No. The fixed-price contract was for the deliverables up to the point of the Single Payment Scheme going live. We have now embarked on a new contract, which this year is the mechanism by which we are buying the services that we are getting from them. Q870 Chairman: Does that represent additional expenditure which was not planned for, or have you got a line in the budget written for continuing IT expenditure? Mr Cooper: The budget includes the expenditure which I am talking about now. Q871 Chairman: It is not like the extra staff; in other words, it is not another £23m, or whatever the right number is? Mr Cooper: It is included in the overall costs of the Agency, at £223m. We included the estimates of the additional services that we would need from Accenture in that. Q872 David Taylor: Is there a definition of how (- inaudible -), Mr Cooper? Mr Cooper: Let us call it the period when the last release was delivered, which I think was June 2006 this year. Q873 Chairman: I suppose, roughly speaking, it is round about another £20m in IT. If we look at paragraph seven of your Forward Plan, you say: "Additional funding of £46 million has been agreed with Defra, split between running costs and capital to cover planned staff costs and project expenditure (including software development to support the 2006 and 2007 Schemes)." Is that a rough ballpark figure? Mr Cooper: That is right, yes. Obviously, that sum also includes the additional policy changes which we have to make, so it is policy as well as the items that have been descoped, like management information. Q874 Lynne Jones: What problems are you still having with RITA, and how does this square with Accenture's assurance that their system is stable and functioning? Mr Cooper: The RITA system is a complex system and a collection of services and it has been operating quite effectively. It is not necessarily easy to use, I do not believe, I would not describe it as a user-friendly system, but in terms of its functions then those functions work, and work every day. There can be many reasons why there is a difficulty for some of our staff, for example, and it may not be caused by RITA, it may be another part of the IT tools that they use, because they use more than RITA. Q875 Lynne Jones: Could you give an example? Mr Cooper: We use a different system for tracking correspondence, for example, and there are obviously networks and infrastructure which are not provided under the RITA service. Q876 Lynne Jones: That was known when the RITA contract was set up, that there was no interrelationship between the systems? Mr Cooper: It was, yes. The different suppliers work together to make sure that it all gels up, so the information flowing along the infrastructure in the pipes, the networks, that is provided by a different supplier, but obviously they work together. Q877 Lynne Jones: You just said that they do not work together very well? Mr Cooper: No; sorry. The systems within RITA and the interfaces do not work necessarily in the way that I would describe as user-friendly. Our processors have to work with multiple screens to be able to perform transactions, which makes their job more complex. Q878 Lynne Jones: Is this because of the task-based system? Mr Cooper: It is not, necessarily. A task-based system, I think everybody knows that we are moving away from task-based and dealing with a whole case. In a way, there is nothing wrong with task-based systems. My personal view is, where we have to make the adjustment is taking a case and attaching the task which would have been scattered across the organisation under one case. The way it was designed, it was a fairly random sort of distribution of the task across the organisation, which led to lots of confusion, because, for example, different processes could contact the same customer, they could be working on the same case and they would not know that necessarily; whereas the way we are going to work going forward is that one person or one team will have control over what is happening on that case. Q879 Lynne Jones: Mr Vry, you were in charge of the Change Programme and the Change Programme involved setting up the task-based system. Who was it who decided that this was the way to go? Mr Vry: My understanding is that the original proposition for how the organisation should be structured came out of the original business case which was created in 1999, I believe. It sets the objective for the Agency to have a work-flow-based system, which would allow task management, giving maximum flexibility for the organisation, because running 60 or more schemes, as it did at the time, the intention was that you would be able to use staff across the sites to process more than one scheme each and so maximise the flexibility. That was where the original proposition came from. Q880 Lynne Jones: You were not involved at that point? Mr Vry: I was not at the Agency at that time. Q881 Lynne Jones: Do you know who was? Mr Vry: No. I do not know the details of who accepted that business case. Q882 Lynne Jones: When you took over, you thought it was a very reasonable proposition and were happy to go along with it? Mr Vry: When I joined, in November 2001, I looked at the business case as part of my review before joining the organisation to see what was proposed and the business case itself seemed reasonable and sound. It was recognised even then as being high risk, and the original proposal, to implement it inside of 12 months, from PWC was rejected and a longer timeframe was set for implementing the changes that were necessary because it was thought that the timeframe was going to be too aggressive. We then went into a phase, at the same time as I joined, of recruiting a supplier to help RPA, which did not have that experience, to develop an IT system and to help with the business process re-engineering, to change our business processes to map onto that new way of working. That procedure went through and culminated in the appointment of Accenture at the end of January 2003. Then we went forward with Accenture starting to work on business process re-engineering to look at all of the business processes that RPA had got across all of its schemes to see how they could be re-engineered to fit into a task-based system. RPA had already done some work around specifications for that and shared those with the suppliers who had been short-listed and asked them to look at that, and there was opportunity there for parties to view what was the best approach. In the end, we concluded a contract with Accenture which was based around a model which was task-based processing. That was a period whereby we had the opportunity to review that. Of course, as we moved forward, and then during the course of 2003, there were difficulties in the business process re-engineering work which was kicked off with Accenture, which we did jointly with Accenture. RPA was not happy with the outcome from that work and we did not think, at the time, that it reflected necessarily the requirements of the business or, in particular, how we would need to comply with EC regulations in operating the schemes. That piece of work was rejected by RPA and at that point we decided not to proceed with that work with Accenture. In the same timeframe began to emerge the changes of the CAP reform and so there were detailed discussions held between RPA, Accenture and Defra in terms of what would be the appropriate way forward, given the fact that the whole locus of the Change Programme was about to change. This being from one driven by benefits, in terms of implementing a new IT system to put all of the schemes onto one IT system to reduce the number of staff needed, to deliver a lower-cost operation, and the underpinning system therefore was to deliver that flexibility that we needed, to one which was driven more to do with delivering a new scheme, the requirements of which were not known. Therefore it being inherently more risky, in terms of specifying the requirements, than one where we had run, in particular, the 11 schemes which were replaced by SPS, and the whole profile of the Change Programme changed at that point. We went through the process with Defra and Accenture of looking at what the options were, and decided that the focus of the Change Programme should be to deliver the Single Payment Scheme and that we would continue developing the system which was already in stages of development to deliver Single Payment Scheme as the priority. There was still the element of bringing the other schemes on board, but at a much later stage. That pushed back the length of the Change Programme; at that stage, it was estimated that an additional year would be required. We then worked through a new schedule to deliver that IT and all the supporting business processes which would be needed, and training, etc., to support the implementation of the scheme, and settled on a set of dates which we thought were achievable and realistic at that time. As we went through successive months and years, obviously some of those dates were not met; as it talks about in the Report, there were delays in the delivery of policy and there were subsequent changes in the European policy, which meant that as we progressed with the design of the system the requirements which that system was to meet had changed and we had to go back in and redesign elements of the system and retest them. That is why, in the Report, where it talks about the timeframes for the IT being compressed and there being limited amount of testing and no end-to-end testing, it is that picture. The original locus of the Change Programme was focused for a very different thing, and implementation of SPS changed the direction of the Change Programme. Unfortunately, as we moved through to the later stages of the programme in delivering SPS, it became increasingly apparent that a task-based approach alone was not adequate to give us proper control of knowledge of how quickly we were getting through individual payments. Our difficulties were that, as part of the necessary descoping to get the system delivered on time, one of the key components of that, the management information, was not in scope, it had been removed from scope. Therefore we had information which gave us a view of how many tasks were outstanding but actually we had problems with being able to manage through to complete the payments in the timeframes that we had expected. As I said, when we started actually changing the scope of the programme, we had a timeframe, that timeframe changed over a period of time and became fore-shortened by delays in realising policy. That, in turn, impacted upon the testing timeframes, which meant that the testing was not completed to the level of detail that we would have wished, and the processes suffered similarly from compacting on the timeframe. We spent a significant amount of time looking at alternative options, including the development of a contingency solution as an alternative to the RITA processing function, and also looking at potential options for partial payments or advance payments. Significant amounts of RPA and Defra management time were spent looking at those options and how best we could deliver that. Also we used the Office of Government Commerce to provide regular reviews of progress, to give us an indication of whether our own views were realistic or whether they were either too optimistic or too pessimistic, to try to give us that balance. Clearly, at the end of the day, we were not able to get the volume of payments out to the customers in the timeframes that we expected, and we got that badly wrong, and I do not think anybody is arguing that is not the case. We did set a forecast, in January 2005, that the earliest we could make payments would be February 2006 and we met that objective, so we managed that process through. Where we got it badly wrong was that actually, the process of finishing off the validation around these payments and getting the payments out of the door, we got that wrong in the sense that we predicted we would do it sooner than we did. That was a difficulty of running a new IT system, with new business processes, for the very first time. That was why, when I was talking about the elements of risk, the risk profile was increasing, because things that ideally we would have liked to do, like completing end-to-end testing, were not practical in the remaining timeframe. Q883 Lynne Jones: Were you quite happy to go along with the optimistic scenarios which were being put forward, the bullish reports that Johnston McNeill was putting forward, you felt that they were realistic, knowing, as you have just described, all the examinations of the systems which took place, looking at alternatives, which all appear to have been rejected? Mr Vry: The benefit of hindsight is a wonderful thing. Working as a team, we sat down ourselves in RPA and with Defra and with external advice, we looked at the options, we looked at what were the realistic options at the time and what we thought was the viable way forward and, based on that, we felt that it was deliverable. Indeed, the initial headline of getting payments out in February we met, having predicted that a year ahead. What we badly underjudged was actually the ability to process the payments and get the bulk of payments out in a reasonable timeframe thereafter. Q884 Lynne Jones: You were not put under any pressure, either by senior management in your team or politically, which prevented you from expressing any concerns that you might have had? Mr Vry: I think it is fair to say that everybody felt pressure, not that they were put under pressure but felt pressure, that we wanted to provide good, early payments to our customers, which were accurate, and that, at the same time, we wanted to provide value for money for the taxpayer and not encounter significant sums of disallowance. Q885 Chairman: Can I be clear on one thing. Earlier on, you were describing the process of the changing demands that were being put upon the system that you were building as part of the Change Programme, and, if you like, the pressure accelerated as new elements of the Single Farm Payment policy emerged. Did you ever say, at one time, "We need more time in total to deliver the package" to the standards that you wanted and did you ever flag that up to ministers with a request that the process should be slowed down, that the introduction of the Single Farm Payment should be delayed? Mr Vry: There were discussions around the risks of implementing the IT system in constrained timeframes and the risks that could pose and what our alternative options were, and issues including postponing the implementation of it were raised and discussed. One of the issues was that in England we had committed to the European Commission, I believe, I think it was in August of 2004, if my memory serves, that we would be implementing the scheme in the 2005 scheme year. Therefore, it was felt that had to be met and we had to deliver that, therefore we were looking for alternative contingencies to mitigate the risks around the IT delays, but all options were considered. Q886 Lynne Jones: Who would have told Lord Bach that the impact of reform would not be significant on the overall IT solution? Mr Vry: I am sorry, I do not know. Q887 Lynne Jones: You do not recognise that phraseology: would you say that it was not an accurate point of view? Mr Hewett implied earlier that it was not an accurate point of view because he was talking about major changes as a result of CAP reform. Mr Vry: I can say, speaking with hindsight, and hindsight is a wonderful thing, that it is quite clear that the impact of CAP reform was a major issue on the overall Change Programme and RPA's ability to commit the IT. Q888 Lynne Jones: When do you think it became known that it was a major issue? Mr Vry: I think that was one of the issues. It was not at any one point in time, there was a slow accumulation of issues, and if the question is at what point did the tipping-point become - - - Q889 Lynne Jones: It was a slow accumulation of issues and it just crept up on you and you did not notice it happening? Mr Vry: It crept up on us without anybody noticing. If you look at the reports, the reports do state the key issues and there is a lot of reporting around red, amber, green status of the key issues the organisation was facing, and it was recognised that it was an increasing risk profile. Q890 Lynne Jones: Can you tell me what the difference is between the Change Programme and the CAP reform and the Single Payment Scheme? Is developing the SPS part of the Change Programme, because I was led to believe that they were two separate issues, that you were embarking on a Change Programme and then you had to implement this new scheme? Mr Vry: That was the discussion which went on, around the middle of 2003, when the CAP reform issues began to emerge, in terms of being crystallised, that CAP reform was going to have to be sooner rather than later. The Change Programme existed already and it had a clear set of requirements around reducing the organisation, in terms of the number of offices from which it operated, the number of staff which operated it and improving its efficiency and placing the lion's share of the IT onto one single IT system, from what was previously a plethora of IT systems, legacy systems, which were reaching the end of their supporting timeframes. When CAP reform began to emerge as a current issue and looked likely to happen in the near future, there were discussions around how it would be best to implement that. Various different options were considered and the ultimate decision was that it was best that the Single Payment Scheme and the implementation of CAP reform was part of the wider Change Programme and became the key driver for the Change Programme, going forward, as the number one priority for that Change Programme and for RPA itself to focus upon. Q891 Lynne Jones: It was sensible to let go all those experienced staff, as part of the Change Programme? Mr Vry: Again, it is an issue of timing. When it was envisaged originally, with the way in which the organisation was designed to move, it was sensible that there was going to be a downsizing in the organisation, with 11 schemes being simplified into one scheme, and the various different aspects of CAP reform was anticipated in the very early days, that there were opportunities to continue with that downsizing. There was a requirement, which was discussed, about having to give notification to staff about that, so it was not that you could turn around on the Friday and make a decision and then remove people on the Monday, you would have to give them adequate notice, so there was a period in which we had to give significant, I think it was in the order of six months, notice of the intention to do that. Unfortunately, as the complexity of what the organisation was seeking to deliver increased, some of those decisions had already been taken and commitments had already been made to staff to allow them to leave. It was those two issues, pulling in opposite directions but in the same timeframes, which were one of the problems that the organisation faced. Q892 Lynne Jones: Since you have moved to operating on a claims-based business process, is RITA, which was designed for a task-based process, now fundamentally unsuitable? Mr Vry: Currently we are having a review to look at that situation and we are using an external party to have a look at the applications that RPA operates and the infrastructure on which they are provided, to ensure that both the applications and the infrastructure are suitable for RPA's needs going forward. We do not have the review outcome from that yet. I spend some time talking to staff and getting their views and ask them what they think about the system, and there is frustration about some aspects of the system, about the design and how it is not, as Tony Cooper was saying, as user-friendly as it could be, and there are certainly opportunities for us to improve that. The system continues to process claims from receipt through to payment, so it does work and it continues to work. Therefore it is not possible to say that it is not fit for purpose, because it does the job, as things stand. Does it do the job well enough: no, I think we could do more. Q893 Chairman: Throughout your response to Lynne Jones's questions, you have used the word 'risk'. Risk is a concept about probabilities of either achieving or not achieving something. Did you quantify the mounting riskiness, as you went on, numerically; in other words, as we go through, the percentage, i.e. the chance, if you were a gambler, of not achieving the results you have set out to? Obviously, in gambling terms, the odds would be shortening all the time. Did you quantify risk at all as you went on? Mr Vry: We tried to quantify risk and actually set down some examples of how we thought that risk profile was changing over time, but it is not a scientific exercise where we can say we are 75 per cent confident and be sure that is 100 per cent accurate. We tried to give some indication of the level of risk and how that was changing over time, and indeed in the reports that we provided there were graphs indicating risks for different areas that we were operating under which showed the movement of those risks over time. Q894 Chairman: Looking at the summation of the Gateway Review report, within the NAO report, it looked to me as if you had managed to get nearly a complete line of red traffic-lights on 18 August 2005. You have got only one subject which is an amber light, which was 'Scope' of the project. On that particular assessment it is red lines, all bar one, right across. On 22 September, you have got two ambers, the rest were red. Then you were back to all, bar one, on 18 October. That says to me that, in that period, the risk factors were increasing quite substantially. Mr Vry: Are you referring to Appendix Six? Q895 Chairman: Yes. This is actually RPA's report, page 43. Mr Vry: This is the report that RPA did for the Executive Review Group; it is not OGC's report. Q896 Chairman: Even better, if you produce these reports yourself, there is this mounting tide of red traffic-lights and yet nobody puts on the brakes, the car continues to career towards the edge of the cliff? Mr Vry: These red, amber, green ratings were constructed in accordance with the OGC standards for the red, amber, green, and red meaning that actions need to be taken immediately to address the situation. Q897 Chairman: The more reds you get the more, as a layman to these matters, it says to me there is a mounting tide of uncertainty about what we are going to be able to do. In terms of the kind of decision-making process over, for example, interim payments, it is just interesting to look at the increasing occurrence of red traffic-lights against a background of "It'll be all right on the night," amounting to Lord Bach coming to this Committee saying everything would be okay and then, within almost days, weeks, suddenly it was not going to happen. I just do question the competency of the assessment of risk, particularly during that second half of 2005, when your own reasonably objective assessment shows a mounting tide of risk increasing? Mr Vry: There was a key issue of risk, and we used OGC to help review constantly our progress to make sure that we were not being overly optimistic, or indeed overly pessimistic, to give us a way forward. Indeed, we even brought in OGC in October of 2005, and at the end of 2005 they advised us that they were convinced that the programme had a reasonable chance of success of delivering SPS payments within the payment window. We had independent confirmation that, yes, it was high risk and, yes, there were challenges and it was difficult. Q898 Chairman: Did Accenture ever talk to you about their view of the project beyond the sort of narrow little world in which they seem to operate? The message that they gave to this Committee was "We did what we were asked to do. It worked when we tested it; the system was stable. No, we're not offering any observations about that which we weren't responsible for. The end." The end was it did not work. Did Accenture ever communicate beyond their little box, or did they just do what you asked them to do? Mr Vry: First of all, most obviously, there was a contract in place with Accenture for what Accenture was being asked to deliver and we had in place contract management arrangements with them in order to ensure that they delivered against that contract. Also, they did sit on the Change Programme Board. There was a seat for a senior supplier, in fact we had two senior suppliers on that Programme Board; one was external, which was Accenture, our lead delivery partner, and one was internal, which was the IT Director of RPA, to provide us with the ongoing assurance and review as to how the programme was progressing. They were involved in the overall programme, but obviously they had a contract which they had to deliver, which was specifically a part of the Change Programme. Chairman: You did not actually answer my question. My question was did Accenture, particularly if they were sitting on this Board, comment on anything about what they saw going on around them? Lynne Jones: All the additional tasks which suddenly came up? Q899 Chairman: Here, you have got a company with a world reputation, which was why you employed them, because they were good at doing these complicated tasks. They have to understand the totality of the universe in which they are operating, otherwise they cannot plug in the bits, their software, to make it work; they have got to understand externalities. Therefore, if you are looking at what is going on around you and you are a very experienced company and operating in this field, and if you can see risks mounting and problems occurring, did they just sit there, like Trappists, and say nothing, or did they offer any guidance to the management of the RPA that, in their professional opinion, as observers of a complicated system, they might have one or two observations to make about what was going on around them? Mr Vry: As I say, they did take part, on the RPA Change Programme Board, so they were party to some of the discussions which were taking place there. Q900 David Taylor: Was that actively, or just passively? Mr Vry: No, they were actively engaged and they were involved in the discussions. Chairman: They might have been actively involved in the discussions, what I am trying to get at is, were they a positive participator, to say, "Look, guys, you're running into some problems. We understand how complex systems operate and this one ain't going to operate"? Or did they just sit there and say, "Yes, you've asked me a question, are we going to deliver this release, that release, on time; yes, we're going to do that. Have you tested it; yes, we've tested it"? Were they active participators or just merely sitting there, waiting to be asked questions? Q901 Lynne Jones: Did they go along with the optimistic scenarios that were being painted? Mr Vry: My experience was that, during the life of the Change Programme and when they attended the Change Programme Board, they were active participators, and we had a number of workshops with them, looking at the way in which we operated RITA and how that worked within the organisation, and they liked to contribute to that. Chairman: Yet Mr Cooper has told us, very interestingly, that the resulting system for which they were directly responsible was not "user-friendly". I find that intriguing, that you can have these experts sitting there, participating, going to workshops, no doubt talking to people who will have to use it, and yet they produce a system which you describe as not user-friendly. I just find that quite amazing. Surely the idea was to provide something that people can operate properly, without having some of the difficulties. How come you ended up with a non-user-friendly result? Q902 David Taylor: Why did you sign it off? Mr Vry: The first thing which was one of the key issues was obviously there was a requirement to get the system in, in order that we could process the payments. Therefore, we had to work with them to deliver it in that finite timeframe, recognising that we would need to make some changes, but, having said that, the business was involved in signing that off and were the people who were involved in testing it and user-acceptance testing it, to ensure that it was capable of doing what we asked of it. Q903 David Taylor: Was Accenture rubbing their hands at the prospect of future revenue because you signed off this unsatisfactory, non-user-friendly system? Mr Vry: We did say that it was not as user-friendly as we would like it to be, and that is absolutely correct, it was not as user-friendly as we would have liked it to be, and we accepted the solution as meeting the requirements that it was defined to meet. Q904 Chairman: We do not want to get into too much of the detail, because we do not know exactly what was said, but most people when they are designing computer systems want them to be user-friendly. Did not that bit appear anywhere in the specification, that this thing should be user-friendly? Mr Vry: I do not know the exact details of the specification so I would have to go back to find exactly what the wording was, but clearly we had an issue to cover in terms of getting the system in, in order to be able to process the payments, versus not making last-minute adjustments to the system in order to correct some elements which were not user-friendly. Q905 Chairman: I suppose really what you are trying to say, in a nice, diplomatic way, is "We were more concerned with the end-game and getting the thing to work and not so much in refining it." In other words, it was the result that counted first, refinements came later, and Mr Accenture was happy to go along with that philosophy? Mr Vry: What we had to do was make sure that we delivered the system in order to enable us to make payments, so that was the priority. Sir Peter Soulsby: It sounds as though they had you over a barrel there. Q906 Lynne Jones: Mr Alan McDermott was hired in 2001 as your Information Services Director on a salary of £225,000 a year, on a six-month, recurring fee-paid contract. Was the experience of bringing him in a positive one, and has he been replaced? Mr Vry: I can talk about how it worked with Alan. Alan McDermott joined the organisation before I did and he was a very experienced IT professional, with whom I found it very useful to work. Q907 Lynne Jones: Was the experience of bringing him in a positive one; did he contribute effectively to the task that he was set, as Information Services Director? Mr Vry: I am not an IS technology professional so I cannot comment on that, but I can comment on my experience of working with him, which was very positive. Q908 Lynne Jones: Then what did he achieve? Mr Vry: He was very useful to me, as the internal person with IT experience helping us to deliver in constrained timeframes. Q909 Lynne Jones: So that was responsible for liaising with Accenture then? Mr Vry: He and I worked closely together. I had the contract management team reporting to me. Alan McDermott dealt with the technical issues and provided the advice and guidance on the issues which would surround us which related to the technical aspects of the programme. Q910 David Taylor: Does advice and guidance include the advice and guidance to sign off the inflexible, slow and opaque system, because of the time pressures? Mr Vry: There was a whole degree of people who were involved in reviewing the system and, say, an acceptance process, which would include sign-off by members of the Programme Board, based on assurance received from people working within the business to assess whether it was acceptable, against the acceptance criteria. Q911 Lynne Jones: Has he been replaced? Mr Cooper: He has, yes. I have a different IT Director now on the Board. Q912 Lynne Jones: Have you improved the quality of the management information available to you in Defra on the performance of the RPA? Mr Cooper: We are doing a lot of work to arrive at a different set of metrics for the Agency and providing that sort of performance information to Defra. At the moment, a lot of that information is collected clerically, but we are now moving towards a more automated solution. Q913 Lynne Jones: So the RITA will be able to provide you with the management information you need? Mr Cooper: RITA at the moment can provide management information, but the difficulty we have is that when we run the reports then that uses the processing power, it means that it slows down and the service that the processors use is inadequate. What we have to do, which is quite normal, I think, is create a smaller version of the database and take a copy of that and pull reports off that copy, or mirror, database. That will give us then the sort of information that we are looking for. Q914 Lynne Jones: You say that is normal that when you want management information it actually detracts from the performance of the system? Mr Cooper: If it is run against the live database, then if you run complicated reporting against that, yes, that is likely to cause the service to deteriorate, the performance to slow. Q915 Lynne Jones: Can you not get that information overnight? Mr Cooper: There are already batch runs which run, and that absorbs the available window. Some information is pulled off in that way. That is the source that we have at the moment. What I am outlining is how we are moving forward so that we have a better capability to provide the sort of management information I need, the teams need and Defra needs. Lynne Jones: It would be useful perhaps if you could give us a note as to what information you have to collect manually and when you anticipate that will be provided automatically. Q916 David Taylor: Our potted CV for you, Mr Cooper, says that you were responsible for implementing major IT change programmes in the DWP and the NHS. Which of those systems were you most proud of? Mr Cooper: I think the experience I had on Pension Credit probably was the one that I was most pleased with, in terms of how it progressed. Q917 David Taylor: You said earlier on that, at present, Defra has, I think the figures were, 2,300 permanent staff, 1,400 agency and currently some undeclared numbers of fixed-term and casual staff. Can you think of any other government department where the permanent staff are outnumbered by the casuals, the fixed-terms and agency staff? Mr Cooper: I am not aware of any others. I believe that there are some who have a commercial arrangement to run almost 50/50, but I think that is the exception rather than the norm. Q918 David Taylor: Is this driven by Gershon, to a degree, to get these people off the Government's books? Mr Cooper: Defra had a Gershon target to which the RPA was making its contribution, and that was one of the drivers for the Change Programme and the efficiencies which were being sought. Q919 David Taylor: It is smoke and mirrors, is it not? Mr Cooper: Why do you say that? Q920 David Taylor: The head count of permanent staff must be driven down at all costs, so even if you are recruiting some lowly-paid, ill-trained, expensive in the long run, staff, it is at least partly responsible for the position in which the RPA found itself in March 2006? Mr Cooper: The position that RPA found itself in means that the contribution that they were making to the Gershon target has not been achieved. Q921 David Taylor: On 16 March, which I am sure is wired into people's psyche in the RPA and in Defra, the then Secretary of State announced the Hunter Review, a fundamental review looking at the then existing and possible future functions, looking at the effectiveness of relationships of the RPA with the parent department and other key stakeholders: 16 March; it is almost nine months since that was launched. There must be some early information feeding out of the Hunter Review, some early conclusions, some summary data that you could share with us today, in brief. What sorts of things does it say? Mr Cooper: I do not have knowledge of the final report that David Hunter will be writing, and I believe that will be published or made available to ministers early in the New Year. In the early stages of the Hunter Review, they identified some areas that we needed to focus on, for example, the organisational change, the strengthening of the leadership, the strengthening of management and the suggestion that some of the processes had to be redesigned, and those are the things that I have been taking forward in the meantime. Q922 David Taylor: Only three months after that announcement, Defra contracted Corven Consulting to look at the Single Payment Scheme, did it not? Mr Cooper: They did. Q923 David Taylor: Was there not at least some potential overlap between the work of the Hunter Review and what Corven Consulting were charged with, and how has that worked, in practice? Mr Cooper: The first stages of the Hunter Review were undertaken by Corven, so those early findings also are reflecting what the Corven report said. Q924 David Taylor: How much has Corven cost so far? Mr Cooper: I do not know. That contract was between Defra and Corven. Q925 David Taylor: It is not going to be coloured by commercial considerations? We are not going to argue them now. Mr Cooper: I can let you have a note. Q926 David Taylor: Will you write to the Committee with that information? Mr Cooper: Yes. Q927 David Taylor: Then the sister committee, the PAC, last month, Helen Ghosh told them that you had brought in a team of consultants from Gartner to look at the Agency's IT. What is their role and how much will they cost? Mr Cooper: Their role is to take a look at all of the IT in the RPA. Q928 David Taylor: Including the SPS? Mr Cooper: Including the SPS. Q929 David Taylor: Are you going to hold Corven Consulting aside so that they can have a look as well? Mr Cooper: No. Corven were not asked to look at the IT by Defra. Q930 David Taylor: That is interesting. How can you look at the Single Payment Scheme without referring to the IT applications, which are at the core of it; how can you possibly do that? Mr Cooper: They looked at it from a business process perspective and looked at it from the RPA's management capability, I guess, rather than looking at the technical detail of the IT. Q931 David Taylor: We have got all these consultants and agencies and reviews going on, and consultants are buzzing round the corpse of SPS like so many wasps at Wimbledon on a hot day. You are a senior civil servant of very considerable pedigree; do you agree with me that, in my experience in IT, public sector IT, the decision to outsource by senior managers, or top managers, was often driven by a lack of self-confidence about learning IT language or a lack of confidence in the abilities of their own internal IT staff? Which was it that led you to contract out; why were they needed? Mr Cooper: I asked Gartner for two reasons: one because they would provide an independent assessment and I needed a considered view of the condition of the IT. Q932 David Taylor: At great cost. Could you not get the information more quickly and more reliably and more inexpensively from senior IT staff within the Department, or have they all been outsourced because of Gershon's pressures? Mr Cooper: I do not think I could identify three or four people that we have freed up with the right skills to be able to look at the systems and provide that independent view that I need. David Taylor: I find that astonishing, quite frankly. With the 4,500 staff that you have got, you have had to go outside for expensive, gilt-edged consultants. They must be licking their lips. Q933 Chairman: How much is Gartner costing? Mr Cooper: I knew you would ask me that. David Taylor: I did ask it, actually. Q934 Chairman: You have not given an answer; that is why I am asking the question again? Mr Cooper: I need to confirm but I think it is £300,000. Q935 David Taylor: A fixed price? Mr Cooper: Yes, it is. Q936 David Taylor: Until they find them something else to do. Mr Cooper: It is a short-term piece of work. I have used Gartner before for various benchmarking exercises. Q937 David Taylor: How short-term, and how many consultants is that? Mr Cooper: They will report at the end of December. Q938 David Taylor: How many consultants will have been in place for the six months of the contract? Mr Cooper: It has not been six months. The contract was let at the beginning of October. Q939 David Taylor: I am sorry; in the three months. How many consultants, on average, will there be for that £300,000? Mr Cooper: I think there are three or four; there is a core team but there are some further reviewing that is done and drawing on information that they have from their global experience. Q940 David Taylor: Three or four consultants for about three months; that is about a consultant year, is it not, for £300,000? It is more generous than the previous contract to which Lynne Jones referred. Gartner must be awash with money. Mr Cooper: I think it is important that we have clarity on the suitability of the IT before we put further investment in the IT. David Taylor: I do not deny the reasonable use of the objectives of the process. I do query the applicability and value of the source of the consultancy that you have contracted. Chairman: I think the Committee will find it very interesting that, now, with the benefit of hindsight, so much care is being taken over the IT, when I think we can see that there were some questionable decisions made at the beginning of this process about the IT and the development of the software, because that is from where a lot of the problems seem to have come. Q941 Lynne Jones: Do you think that you have the necessary in-house expertise? You are appointing consultants, but should you not have in-house expertise in these areas? Mr Cooper: I take the view that having an in-house capability, to some extent, certainly is necessary. One issue I would have though is how those individuals refresh their knowledge and keep up to date with developments. I think that bringing in a firm like Gartner to do a specific piece of work actually does make sense to me, rather than trying to build that capability in house. Q942 Lynne Jones: When we saw Larry Whitty, I have not recently looked up the account but in effect he was saying that he was meeting with farmers and they were giving him information about problems with the mapping system; we also had a presentation of all the problems that were being experienced by farmers in getting accurate mapping systems. Were you getting any information from your customers, or from within the Agency with members of your staff who were having to deal with your customers, which caused any problems? This would be for Mr Hewett and Mr Vry. Mr Hewett: Yes, we do, through various sources. Until Mr Cooper's arrival I had responsibility for meeting on a regular basis with our main stakeholders; those stakeholders brought some of those cases to our attention. We undertook specific sessions with stakeholders to review specific cases, to follow those through and see if there were any underlying issues and where they were and what we would try to do about those. We also obviously received inquiries direct, through our customer contact centre and through written representations, and again we undertook to review some of those and to follow those through and see what changes were necessary. One of the key points in relation to mapping is just the sheer volume that we were receiving in relation to the 2005 Single Payment Scheme and the volumes that we have seen since, a huge data capture and then cleansing exercise. In 2005 there was a phenomenal amount of mapping inquiries and registrations and modifications to those registrations, which we have not yet seen, thus far, in 2006. I think it is fair to say that some of the technical issues which beset us early on in 2005 and eventually resulted in us outsourcing the digitisation capability, which we discussed the last time we were in front of this Committee, led to that problem in itself, and then certainly the scale of it. As you may have heard, we have since brought that digitisation capacity back within house and are now processing predominantly out of one location. Q943 Lynne Jones: All of this information which was coming from your stakeholders did not lead you to have any doubts that you would be able to achieve the payment window that you expected? Mr Hewett: It was certainly another pressure, which we took into consideration but it did not alter our overall view. Q944 Lynne Jones: Did ministers have access to this information, did they know what was going on; they knew that the stakeholders were up in arms? Mr Hewett: Indeed, ministers had been meeting stakeholders on a regular basis. Q945 Lynne Jones: They knew as well, but again they still thought that somehow or other it was going to be all right on the night? Mr Hewett: Certainly they tried to address issues during the course of those representations and discussions. Q946 Lynne Jones: Can you give me a specific example of measures that you took to address those issues; obviously, you outsourced the digitisation? Mr Hewett: That was the first part of it. That in itself allowed us to increase the rate of digitisation but created its own problems in getting the data back into the system, which then impacted on the speed at which we can validate a claim. The first point was to get the land mapped and registered, or to amend an existing registration, and then we had to get that digitised area, or revised digitised area, back into the main processing system so that we could get on and validate. Once we got over the peak of that digitisation exercise, and certainly we did a huge work amount of work during that outsourcing period, we decided it was more efficient to have the process in house. Certainly the intention is to centralise on one location wherever possible to make sure that any errors are corrected at source, or whether there are any technical issues which were created through the outsourcing, and then getting the data uploaded, to have that all within the system. Q947 Lynne Jones: Did ministers have access to any independent sources of advice, apart from the RPA and Defra, in relation to the whole Single Payment Scheme? Mr Hewett: Advice from their policy colleagues, would have been one, and obviously from the stakeholders. Q948 Chairman: Just on a point of detail there, when you say "advice from their policy colleagues," who were those colleagues? Mr Hewett: Sorry; policy colleagues of mine to their ministers. Q949 Chairman: Policy colleagues of yours? Mr Hewett: My policy colleagues in the Department who would be advising ministers. Q950 Chairman: Who would those be; what functions did they perform? You said "policy colleagues." Mr Hewett: The colleagues within the Department who have responsibility for the Single Payment Scheme. Q951 Chairman: You mean, like Mr Lebrecht? Mr Hewett: Yes; people such as that. Q952 Chairman: He seems to be running everything. When you look at the NAO Report, he seems to have managed to be on the Executive Review Group and he seems to be involved in CAPRI, I know he is a chum of yours, in giving advice. How independent was this sort of route to ministers? Mr Hewett: I am saying there was a different source of advice, rather than just the RPA. Our RPA policy colleagues would have provided advice on the Single Payment Scheme to ministers, separate from that which went from RPA. Q953 Lynne Jones: There was not anybody independent of Defra? Mr Hewett: There were independent members on the CAPRI and on the Executive Review Group. Q954 Lynne Jones: Did ministers have access to their expertise? Mr Hewett: I do not know, as I was a member of only one of those groups. Q955 Lynne Jones: Was there a culture where bad news would be brought to the attention of ministers? Mr Hewett: Yes. Q956 Lynne Jones: When you were having all these problems with the mapping, you discussed the implications with ministers, so they knew, they had all these reports saying that you had identified another 10,000 tasks that week and that the number of tasks outstanding was growing? Mr Hewett: I think those reports were directed from Mr McNeill to ministers. Q957 Lynne Jones: In June 2005 the likelihood of success was rated by the Agency at 40 per cent. What discussions did you have at that time with Defra on contingency options or measures to mitigate the risks of failure? Was this effectively the last chance to follow a different course? Mr Hewett: There were various discussions at various stages. As Mr Vry explained earlier on, there was a contingency solution which was intended to mirror each stage of the process needed, first to data capture and then to validate and then finally to pay claims under the Single Payment Scheme. That contingency system sat alongside, until such time as each of those various stages that we could get through the main RITA solution was in and was operational. At that point, and it came to a certain point, once we had moved into the RITA validation system that contingency system no longer became viable, because once there was only data captured and we had started to validate on the RITA system, if at that point we would have decided to move to the contingency solution we would then have had to go back and separately data capture all of the SPS claims on the non-RITA solution and then start the validation on that non-RITA solution. It was at that stage that consideration turned to the potential of using an interim or partial payment as a contingency solution, and it was at that stage we discussed with our policy colleagues, then in turn we discussed with their colleagues in the European Commission, the potential for a partial payment solution. That is my understanding. Mr Vry: Basically, that is it. We reviewed in that timeframe that you referred to the widest range of options that we possibly could, but as we went closer to the payment window, when information was being placed into RITA at the front end, it became increasingly high risk to withdraw it and place it into other systems, so an early decision was made whether to continue with RITA or to proceed with a contingency solution. The contingency solution was by no means a guaranteed, successful alternative, because in itself it carried a lot of risks and many workarounds and so it was deemed at the time that actually the better option, in terms of the way forward, to proceed with was with RITA. However, that did close off one contingency option. When that occurred then we discussed with Defra alternative contingency options around advance payments and, as is known, Defra and policy colleagues had discussions with the European Commission about what might be available to us by way of advance payment and partial payment options. Q958 Chairman: Can I just be clear on the people who were advising within Defra on the flows of information that you have just identified. Mr Hewett talked about his conversations with policy colleagues. Was there anybody in Defra with IT or systems experience that you knew of who was not in any way involved in either the Executive Review Group or the CAPRI Board, who was also privy to what was going on, who could give ministers some degree of uninvolved, impartial but knowledgeable advice on the messages coming out of the flows of information that you have just described? Mr Vry: There were obviously people within Defra who had IT experience, because there are organisations like the Defra Design Authority, but, the level of engagement, I do not know whether it was adequate for them actually to provide that advice or not. Q959 Chairman: I think what you are saying is, no; is that right, that there was not anybody? The Secretary of State could not ring up X and say, "Have you had a look at this flow of information? Come and tell me whether we're going to make it or not"? Mr Vry: Information was provided through the reports to CAPRI, etc., which were seen by members of the Defra Design Authority, so there were certain amounts of information. Whether that was adequate for them to make those types of value judgment decisions and advice I do not know. Q960 Chairman: This Defra Design Authority, in theory, should have had, in your judgment, the technical capability of raising anything that they wanted to, of a technical nature, about the process that you were embarking on? If they had a concern then obviously they would have had the ability, if they had wanted to, to provide that information to ministers, should they have been so minded? Mr Vry: We had dealings with them, so if they raised queries we would respond to their queries. I believe that obviously the primary source of technical assurance outside of RPA was relied upon from the OGC reviews that were coming to review the various releases that we were delivering. The external assurance was provided primarily by the Office of Government Commerce Gateway review process, which we used extensively. Q961 David Taylor: To your sure and certain knowledge, do the OGC have a great track record in identifying what are the problems with the major systems that they are charged with assessing? Mr Vry: I cannot say to my sure and certain knowledge, because it is my first engagement with the Office of Government Commerce, not having worked with them before, so this was my first experience of them. Obviously, they are the organisation which is tasked with reviewing high risk, mission critical programmes, such as RPA's Change Programme was. Q962 Lynne Jones: They were involved in the discussions around June 2005, were they, and they agreed that you battle on? Mr Vry: Yes. What we asked them to do was review the format of the process that we came up with for helping us to assess the various different options and to look at that to see whether it was as reasonably objective a format for making those decisions as was possible, and OGC were involved in reviewing the process. They did not actually opine the decision, as far as I am aware they did not, but they looked at the process to ensure that the process was a reasonable one. Q963 Lynne Jones: How did you manage to give yourself a green light under 'Schedule' on 9 March, just a week before the whole project collapsed? Mr Vry: That was specifically, as I recall it, in relation to the initial milestone, which was to commence payments in February, and the milestone was met and we did commence payments in February. The subsequent milestone, which included completing the RPA target of 96.14 per cent by the end of March, we had indicated already was not going to be met and so we were focusing on trying to achieve the bulk of payments by the end of March. That was not met, clearly. Q964 Lynne Jones: Basically, the system gummed up? You started making the payments and then it gummed up? Mr Vry: Yes. There were a significant number of payments, about one-third, which had been validated to that stage. They had to go through an authorisation process, and that authorisation process meant that a number of payments which we had expected to go through and to get those payments out to customers did not happen in timeframes that we had expected, and the authorisation process, in essence, did gum up those payments. After obviously the incidents around the middle of March, and Johnston was removed from his post, we then held a workshop with staff from across the organisation on a Sunday to look at the issues around authorisation processes, to see if we could un-gum that process. As a result of taking some steps around there, we were able to pay out twice as much in the subsequent two weeks as we paid out in the previous month, because we managed, for the large part, to un-gum that process which had gummed up those payments. However, that did not solve all of the problems, because obviously there were still a large number of payments which had not completed validation, and that is where we have struggled to get that process to proceed quickly enough, and ultimately a decision around fast payments was taken. Q965 Lynne Jones: Do you take any personal responsibility for the failure of the SPS to deliver? Mr Vry: I think, as part of the RPA Executive and part of the CAPRI Programme Board, all of us, and certainly I speak for myself, feel desperately unhappy that we have not been able to get the payments out to the farming industry. I know and talk to farmers about the issues that has created for a large minority of them and that uncertainty and dissatisfaction for the majority of them. Yes, I take that very personally. I do not like being involved with a failure, and clearly this was a failure, and I am committed to try to help put it right. Q966 Lynne Jones: With hindsight, do you look back and think "I wish I'd done such and such"? Were there any points where things were going through your mind and you might have suggested something different? Mr Vry: With hindsight one could put the world to rights and everything in the garden would be rosy, but the problem was that we did not have hindsight and we were working to an extremely difficult, challenging schedule and we had set an objective of starting to make payments in February and making the bulk of payments by March. By February we had started to make payments, we had validated a third of the claims and we thought it was not beyond the realms of our capability to get the bulk of payments out by the end of March. Unfortunately, we were wrong, we made some wrong decisions and we regret that deeply. That is something that we want to correct and are trying to resolve currently with, obviously, Tony Cooper and the team. It is going to take a while to resolve, it is not something that we have a silver bullet for, that we can correct overnight, but we are determined to correct it. Q967 Lynne Jones: What about you, Mr Hewett? Mr Hewett: Absolutely the same, and we have said so on a number of occasions with our customers and our staff. Our staff are deeply frustrated that they were unable to make the payments to their customers, their claimants, as they see them. We do work very hard behind the scenes to try to make those happen. There are still a number of 2005 payments outstanding and some of those individuals are in very serious financial difficulties and we are trying to expedite those. Even last week there was one particular case which came to my attention where we just simply had to get the balance payment out, they had a partial payment, and we simply had to get that payment out, and we work with various other groups, such as the industry representatives and the voluntary sector, to try to make sure that those payments happen as quickly and as practically as possible. What I think we can do is try to build on some of the issues which came out of the lessons from 2005 to make sure that 2006 does not go the same way and that farmers do receive their payments in good time. Q968 Lynne Jones: Do you think when you appeared before the Committee in January and, for example, Johnson McNeill told us that the Change Programme would make the scheduled savings by 2006-07, that was accurate? Was that an answer made on the basis of an accurate assessment of the situation; we were being given accurate evidence in that session? Mr Hewett: It is difficult for me to answer for Mr McNeill. What I can say is that, based on where we were at that point, we still anticipated starting payments in February, which we did. We had anticipated getting a substantial proportion of the money out by the end of March, which clearly we did not, and for which we apologise. It was seen at that particular time that the bulge, if that is the right term, in terms of the resource effort to process through SPS, would be a short-term issue and therefore the numbers of people required within RPA to process SPS for the remainder of the SPS 2005 cycle and in moving forward would reduce quite substantially, quite rapidly, after the end of March and certainly by the end of June. That proved to be false. Q969 Lynne Jones: Can I ask Mr Vry the same question. Based on the state of knowledge that you had about the Change Programme on January 11, do you think it was reasonable for Johnston McNeill to tell the Committee that you would be back on target and making the savings to the Change Programme by 2006-07; this year, in other words? Mr Vry: If the plans which had existed at the time, in terms of making the bulk of payments by the end of March and then getting the remainder of the payments out before the end of the June payment window, had been completed without having to make the partial payments then the amount of work that we are having to do now would have been very different, so there would have been potential to achieve if not all at least a significant part of those savings. I cannot quantify exactly what there would have been, but obviously, with the difficulties that we had from the early part of March, it has become impossible to deliver that in that timeframe. Q970 Lynne Jones: It was reasonable for him to tell that to the Committee? Mr Vry: Based on the information and the plans which existed at that time, had the payments been made in accordance with that plan, I do not see that it was unreasonable to assume that a significant element of those benefits would have been realised. Q971 Sir Peter Soulsby: Mr Cooper, we have focused again today, and just have been, as we have done on previous occasions, on this interrelationship between the departmental management, the Rural Payments Agency senior management and advice to ministers. These three elements have been an important part of our questioning today, as they have been on previous occasions, and we have talked about the Executive Review Board and CAPRI and who served on what and when and who is advising whom about what. I wonder, Mr Cooper, whether you could just summarise the changes that you and the present Permanent Secretary have made in those relationships and the thinking behind those changes? Mr Cooper: There are several changes around the governance arrangements. Mr Lebrecht has taken responsibility for what is described as the Owner of the Agency, on behalf of Defra, and we have implemented a monthly meeting of a group, which is Defra senior personnel and RPA senior personnel, to discuss the progress on issues that arise with the Agency. In addition to that there is a refocusing of the Ownership Board, which was described in the Framework Document for the Agency and is now in the process of being revamped into a new body, with a slightly smaller group and with myself taking part in that group to explain the progress being made and, for example, to agree business plans and annual reports. Below that there is a structure, which I spoke about, which I put in place, but also there is a joining up of the policy area. There was always an interface between our Defra colleagues and the policy interface within the Agency, and to make that a better arrangement we have put one person in charge of both legs, so there is a single person who has responsibility for staff in Defra and in the RPA. Q972 Sir Peter Soulsby: That describes what you have done, but it does not describe adequately, I think, what the fundamental weaknesses were you were setting out to address and perhaps identify for us quite how you have tackled those weaknesses? Mr Cooper: There has been in the past, I think, and it is something that I have seen elsewhere, a misunderstanding between a department and an agency, and that misunderstanding in the policy context is about the way in which rules and delivery are described. In a delivery agency they speak about things in delivery terms and Defra will speak about things in policy terms and often there is a lack of understanding in terms of that communication. Being able to arrive at what is deliverable, can it be done and what are the impacts, then by joining up that group under one person it means that one person has to form a view and make a recommendation to both the Defra organisation and the RPA organisation. If there were differences of opinion, and we spoke about the disallowance risks earlier on, if the RPA were rash enough to make decisions without consulting with Defra and incurring significant disallowance then, quite clearly, we would be acting in an irresponsible way. One way of making sure that does not happen is that we have joined that up with a Disallowance Working Group, who in turn take the information from the RPA, take information from Defra, assess what the risk is and make a recommendation or provide that information into this group that Mr Lebrecht has set up across the two to consider progress in the organisation with Defra colleagues and with RPA. That is the type of thing that we are doing, which is all about bringing us closer together and joining up the thinking. Q973 Sir Peter Soulsby: Is it fair to say that there was a fundamental lack of clarity about roles and purposes, which really was at the heart of the problems between the Department and the Agency? Mr Cooper: It is quite difficult for me to comment on that, other than what I found when I arrived and things were already underway. Q974 Sir Peter Soulsby: It seems to be what you have addressed, does it not? Mr Cooper: I always believe there is further clarity to be brought to what we are trying to do, and trying to find ways of bringing that clarity and joining people up, I think, is an important facet. Q975 Chairman: I think what we can deduce from that is that the mechanisms which you inherited did not deliver some of the improvements in communication and understanding which now you believe you are putting in place. I think, by a reverse piece of analysis of what you are doing, we can work out for ourselves where we think the holes were, which does lead me to wonder about the role of Mr Lebrecht, who figures in all of this. He was involved in the Executive Review Group and was fairly close, I think, to CAPRI and would have been a key conduit of information about what the Agency was doing, to ministers, with the result of the problems that you inherited. Now the self-same person is heading up an organisation which is supposed to put right some of the misunderstandings that were there before. You might not want to comment about that, but that is again a piece of analysis which I draw from what you have told us? Mr Cooper: I think my only comment is that I firmly believe we must be as transparent as possible about what we are doing, and that is the approach that I am adopting, with the full support of Mr Lebrecht and ministers, I believe. Chairman: I think that is a very good point to conclude our discussions. We like transparency on this Committee. I have to say that in the inquiry we have been undertaking it has not always been possible to get transparency about exactly what was happening, and some of the things that we have been asking about today I think still leave the members of the Committee scratching their heads about, if there was so much expertise available, how did it all go so badly wrong. As we have said, with the benefit of hindsight you can start to put things right, but the one value of hindsight is that it does tell you what went wrong and it does raise some interesting questions about the perceptiveness of the process of change on which Defra embarked. I think you have said fairly clearly, in your evidence to the Committee, that you were trying to do an awful lot against a background of a rapidly closing timescale, and there were policy and practical changes which also impacted on the endeavour that you were about. I think that reinforces the Committee's decision to have a further discussion with Sir Brian Bender, because clearly he put in place and signed off the Change Programme and the processes which led to the creation of the Agency as it is now, and indeed was singularly involved, to be left with a number of the issues which have arisen as you progressed towards the problems with the payment. I suppose I am still left with one question at the back of my mind and that is, in all of this, why the system was never, ever tested using seemingly live, real farmers' data. Mr Drew: That was the question I was going to ask earlier, why somebody did not get 20 cases from across the country and put the stuff into the computer just to see if actually it made sense, tying into the mapping, tying into what should have been paid out. You do not have to be a rocket scientist to work that out. David Taylor: Mr Hewett and Mr Vry are both seasoned in the world and works and methods of IT. This is not 20/20 hindsight, this is just a mental lapse from a halfway decent service. Q976 Chairman: In the interests of transparency and clarity and openness, why was not there a test done using real farmers' data to see if the system could deliver the cheques without gumming up? Mr Vry: First of all, the gumming up that was referred to earlier on was not down to the system, in terms of delays, it was to do with an authorisation process which took place, then at the end of it people were checking before they released payments, authorised them for payment. That was an issue around the authorisation process. Following, as I say, the changes that were made in the middle of March, we sat down with some front-line staff and actually worked through in a workshop on Sundays to see why that was causing problems and found ways to address that and resolved the authorisation process quite rapidly. The reason why it was not possible to complete end-to-end testing was the way in which we had to deliver the IT in bite-size chunks, in incremental steps, so by the time that actually the final envelope was delivered data had already been passed, almost all of it, into the Rural Land Register. Q977 Chairman: Did anybody actually ever ask, from any of the great Boards that were looking, the experts, "Can we test this to see if it will be all right on the night?"; was that question ever asked by some person, not if you like with their nose pressed close to the glass of the project? Mr Vry: Yes, testing was done. All the individual elements of the system were tested. David Taylor: In secret; was it a sensible way of doing that? Chairman: The point I am getting at is, if somebody says to me "I've tested it," what that means is it will deliver what it is supposed to, and it did not. Q978 Lynne Jones: We had some evidence from Iosis Associates and they said: "It ought to have been possible, during system tests, and then at any stage once some claims had been verified, to advise the system that it has a complete set of data, give it a notional sum of money in the pot, and then "those end pieces of the programme" ("the last stages of the process") as a test." Do you accept that could have been done? Mr Vry: Unfortunately, I am not an IT expert so I cannot say whether that was possible or not. Q979 David Taylor: Accenture (said that you could ?). Mr Vry: No, they did not. Q980 David Taylor: They said that you were the one with whom they had day-to-day contact? Mr Vry: As Programme Director, yes, but I was not the IT specialist. Q981 Lynne Jones: Who was the IT specialist on the RPA side? Mr Vry: We had Alan McDermott, who was our IT expert. Q982 Chairman: Hang on, Mr Vry; when you say the term Programme Director, does that mean you were responsible for the whole of the process doing what it was supposed to do? Mr Vry: I was responsible for managing the team to deliver the RPA Change Programme. Q983 Chairman: Who was the person who was actually responsible, to say "It will do what it says on the tin"? I presume that was Johnston McNeill, was it? Mr Vry: There was a process in place by which staff who were involved in the testing - - - Q984 Chairman: No, no. Mr Vry; sorry. Let us get away from a lot of the complicated speak. As a layman, a simple question: who was the person in the RPA responsible for asking the searching question "Will this system pay out cheques when it says it is going to; have we established if that will happen?"? Mr Vry: First of all, the system itself does not pay out cheques, it relies on another system. Q985 Chairman: No; sorry to be awkward. You are talking in systems. I am a simple politician, right. I come back. I was responsible in Government for self-assessment, and the question I used to ask was, "When taxpayers send in their form, will it work, will it calculate how much tax, and will it work, will it be okay?" People came back and gave me some answers and, with the benefit of hindsight, it did work. That was a simple question. It is a simple question I am asking about this. All the bits that are in the box labelled "Single Farm Payment Scheme," did anybody actually ask the question "Is what's inside the box going to produce at a moment in time, the end of February, cheques to send out to farmers?"? If the somebody said, "Well, no, we haven't found out if the box works; we've done a few bits in the box, we don't know whether if you join it all together cheques will come out," who should have done that? Mr Vry: The answer to the question is, yes, the system, the whole box, did pay out cheques in February, payments did go through and were made starting in February. The answer to your question is, that did happen. Q986 Chairman: Yes, but you did not actually run the thing with sufficient flow-through to find out that as soon as it started then it stopped. You have just said that the real problem was the validation process, right? I presume you are saying, yes, the machine produced bits of paper, then before they could go out there was another bit in the process which stopped that happening? Mr Vry: It was the authorisation process which gummed up. Q987 Chairman: Alright, let us focus on that. Why was not the authorisation bit ever tested? Mr Vry: That was tested, but obviously not well enough and, when we implemented it, it did gum up. We thought payments would be being authorised and going through; what was happening was, the way in which the payments were being batched together, when staff came to authorise them it meant that far more were stopped than we had anticipated, and that is what we went in to address. Q988 Chairman: If you like, the dress rehearsal really was not thorough enough to find out if all the actors knew their lines? Mr Vry: The point being though that the system did process and validate and ultimately authorise and, in another part of the system, pay the claims, and we started making those in February. What we got wrong was obviously that we did not get anywhere near the volume through the authorisation process that we had expected to, having validated 30 or so per cent in February. We had anticipated that those would go through in early March; because of the authorisation blockages, that did not happen. Then, beyond that, the actual process of validation took longer than we had anticipated; it worked but it took longer than we had anticipated, and that was the issue. Q989 David Taylor: Because it had not been piloted, it had not been tested, it had not had a dry run? Mr Vry: It had not been end-to-end tested, absolutely, as I said earlier on, that case had not been happening. The incremental way in which we had to deliver the system in elements meant that became impossible to do in the timeframe. Chairman: Gentlemen, it has been a long session and you have done your best to answer our questions. We are very grateful to you for the information that you have been able to give us. We are also grateful for your kindness in offering to provide specific written replies to a number of questions that we have asked. Mr Cooper, I think, on behalf of the Committee and all those who have written to us in the past, particularly farmers with individual problems, we send you our very best wishes for success in your endeavours and the sincere hope that, although we would like to see you again, it is not to go over problems in the 2006-07 or 2008 payment window that you are working very hard with your colleagues to sort out. Thank you all very much.
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