Examination of Witnesses (Questions 40-59)
CABINET OFFICE
AND OFFICE
OF GOVERNMENT
COMMERCE
27 NOVEMBER 2006
Q40 Dr. Pugh: Okay. The CBI, in a
pamphlet called "Improving Delivery", says that a mechanism
should exist to identify flaws in procurement from the supplier
side. Do you agree with that, and would you like to comment on
it?
Mr. Oughton: I think that there
needs to be an improvement in the procurement process, both on
the Government side and on the supply side, to be frank. I think
we have a commonality of interest in making progress there.
Q41 Dr. Pugh: But the CBI is suggesting
there should be mechanisms whereby suppliers can raise concerns
about the way procurements are progressing. Do you agree with
that?
Mr. Oughton: Yes, I do, and they
can do that now. I have suppliers who approach me, as representing
the Government's centre of excellence on procurement—the
Government's repository of procurement knowledge—if they
have concerns about individual procurements. That is a perfectly
reasonable thing to do.
Q42 Dr. Pugh: Okay. May I raise two
specific areas of concern? One is the length of time procurement
can actually take. I hear complaints often from small and medium-sized
enterprises that it penalises them. They simply cannot stay the
course and in the end the contracts go to the usual suspects,
who are cash rich and can stay in the process. Do you have sympathy
with that point of view?
Mr. Oughton: Yes. I think some
procurements do take a very long time. We have tried to do two
things to tackle that issue. The first is to remove some of the
barriers and the difficulties that particularly affect small and
medium-sized enterprises when they wish to bid in Government.
A lot of the process is tied up in the prequalification questionnaires,
the answers that small companies have to give to requests for
information from Government, and then the lengthy process of advertisement
and tendering. All those processes are disproportionately burdensome
for small companies, so what we have done is to introduce a package
of measures to remove some of those burdens to make it easier
for small and medium-sized companies to get their foot through
the door and to compete on an equal basis with larger firms.
The second thing we have done is to look at
the whole of the procurement process from end to end to see whether
it can be shortened. There are particular issues, which I think
are most worrying, around the time it takes from down-select to
preferred bidder, and then to negotiate the final contract. That
is process that we would wish to see accelerated, so I agree with
you: we need to move as swiftly as we can.
Q43 Dr. Pugh: On another level playing
field issue, it is put to me that one reason why American companies
are fairly unsuccessful in bidding for Connecting for Health
is that, according to American legislation, they need to display
the risk they are bearing. Japanese companies, for example, are
not so disadvantaged. Does that cause you concern?
Mr. Oughton: No. It does not cause
me concern and I do not think it has caused the programme concern.
I think the procurement process for Connecting for Health
was an exemplary example of procurement. It was run to a very
tight and rapid time scale; it started when it was intended and
completed when it was intended; and it produced a very good result.
I do not think any of the suppliers were disadvantaged in that
process.
Mr. Watmore: I think also that
a number of the companies that did succeed were US-domiciled Sarbanes-Oxley-controlled
companies. As far as I know, the majority were.
Q44 Dr. Pugh: Right. You have expressed
a preference for a partnership approach in procurement—more
hand holding, more user involvement and so on—rather than
gold-plating the initial tendering process, which the CBI also
has reservations about. The obvious objection to that, though,
is in controlling costs. Obviously, if you have a fixed contract
that is delivered on a specific day and states everything that
is involved, you can cap the costs. How do you address the obvious
criticism of a partnership approach, which is more open ended
and the costs of which are more difficult to control?
Mr. Oughton: It is about how you
manage the risk. I think that we should be trying to achieve two
things: first, a very rigorous and competitive selection process,
so that the client—the Government—have confidence
that they have selected the supplier that is best placed to undertake
the work. Then, at the point when you select that supplier and
place your trust in them to work with you to deliver, you need
to build a relationship so that both client and supplier are working
together. Some of the best examples of projects that have run
to time and controlled costs have been those in which the risks
have been shared. The construction of Terminal 5 at Heathrow is
a very good example of that: clients and suppliers worked together
in a partnership. It was not a soft and sloppy arrangement by
any means, it was a tough and very hard thing to do, but building
those relationships meant that everybody was equally responsible.
They all had skin in the game—they were equally responsible
for ensuring that the risks and costs were properly controlled.
That is a good model.
Q45 Dr. Pugh: In the NAO Report,
the Department for Work and Pensions has come out with a gold
star, as it were, for high-style, good-quality procurement. You
must have some feeling for which Government Departments are not
quite so capable and competent in the IT procurement game. Are
you willing to name any of them, or some of the bottom performers?
Mr. Oughton: I do not think that
you can really do it on a league table by Department. You have
to look at the individual programmes and projects in turn to see
how successfully they are delivering. One of the most important
features in the Department for Work and Pensions is that it has
a strong commercial function, with a commercial director who is
situated close to the top of the organisation and has a direct
line to the board and to the accounting officer. We were talking
earlier about the importance of initiating programmes and projects
soundly. Having such a commercial dimension available at the start
of a programme is extremely important. That is a good feature
of the way in which the Department does business.
Q46 Dr. Pugh: Apart from that, are
there other things that correlate with good procurement—for
example, the extent to which a Department has IT expertise of
its own in-house? Is that a key factor?
Mr. Oughton: As Mr. Watmore said,
one of the challenges that we have had has been to rebuild the
internal capability of the Government so that as a client, we
have sufficient expertise in the procurements that we are undertaking
to ensure that we get a good deal.
Q47 Dr. Pugh: So if we compare a
Department that has very strong in-house IT specialisms and another
that relies very heavily on consultants, which, in your experience,
does the job better?
Mr. Oughton: I do not think that
I would narrow it down just to IT specialism, actually, Dr. Pugh.
It is about having a range of skills in a Department, including
good business acumen, good commercial skills, and good programme
and project management skills. Good IT specialist skills would
certainly be part of that, but all those skills are necessary
and need to be available to the client. In many cases people with
those skills are and should be permanently on the books of a Department.
We should have staff in Departments who are capable of doing those
things. However, there will always be circumstances in which it
is necessary to buy in and reinforce the skills available inside
Government with specialist, expert knowledge from outside. I see
nothing wrong in that, but I think that to rely only on external
skill would not be an appropriate way in which to proceed.
Q48 Dr. Pugh: Without asking you
to name any particular enterprise or Department, can you think
of examples in which there has been IT specialism and consultants,
but project management has let the whole process of procurement
down?
Mr. Oughton: As I am sure the
Committee will be aware from the reports that it has had before
it, there is a range of performance across Government. As I said
a minute ago, all the skills that I have identified—programme
and project management skills and all the others—are essential
ingredients for ensuring success in the delivery of a programme.
Q49 Mr. Mitchell: Sir John, I always
get suspicious when we are asked to examine success stories, because
I wonder what is behind them. What proportion of those in the
Government in particular—there are four private sector organisations
and some utilities in the 24 studies—can be rated as success
stories and what proportion can be rated as failures? We need
to put that into perspective.
Sir John Bourn: We did not approach
the exercise in that way. Given the great catalogue of programmes
and projects that had run into difficulties and had a large IT
component, the purpose of the exercise, and what we thought we
would do, as an innovation, was to look at projects that had succeeded,
with the idea that you can learn lessons from success just like
you can learn lessons from failure. That was the genesis.
Q50 Mr. Mitchell: Okay, but there
are 120 high-risk or mission-critical contracts, so 20 is not
a high proportion.
Sir John Bourn: No. We did not
seek to say that x% are okay and y% are not because, as has come
out from the witnesses, they are not IT projects; they are programmes
and projects, almost all of which in government today have an
IT component. Tempting though it is to say that the total number
of projects and programmes is x and that 50% are okay and 50%
are not, it would be a very difficult thing to do, but I take
the point of your question and will think about it and come back
to the Committee with a response.[1]
Q51 Mr. Mitchell: Thank you. I would
be grateful for that.
Another thing that strikes me is that you have
given the criteria for success and the recommendation of success—what
has worked and what has not—but a common factor seems to
be that although a couple of projects are around £1 billion,
most are fairly small and straightforward. Is that the main criterion
for success?
Sir John Bourn: That is certainly
one of the main criteria for success because, in our experience,
many of the difficulties have arisen when a project with many
elements is sometimes taken forward with a large number of partners,
and the client does not have a full understanding of what he is
trying to do and alters it as he goes along. In those circumstances,
you can say that many of the projects and programmes have run
into difficulties. As Mr. Watmore and Mr. Oughton said, lessons
are being learned, but certainly many of the difficulties arose
for the reasons that I outlined.
Q52 Mr. Mitchell: Let me turn to
Mr. Watmore, Head of the Delivery and Transformation Group, which
sounds like a cross between a maternity ward and a lifestyle change.
I wonder whether there is not a problem. There
is an enthusiasm for initiatives, which I think the Prime Minister
and the Government share—this is a Government of initiatives
launched from on high, backed, as we said, by notes from No. 10
saying, "Get with it"—and for then pushing them
across the whole spectrum of the public service. Is there not
a danger with these kind of projects—this missionary enthusiasm—that
Departments are led to believe that they are under pressure to
go for IT and other things described in your agenda, which inhibits
cool consideration of what will work and whether it is better
to hang on a bit and let other people make mistakes?
Mr. Watmore: The Delivery Unit
often gets described as bringing pizzas to No. 10. That is how
people usually refer to my job. The transformation part of the
agenda is primarily what we are talking about here. We published
the strategy last November, and I think people have found that
strategy compelling because it is simple.
Q53 Mr. Mitchell: Does it not impose
a pressure on them?
Mr. Watmore: I absolutely concur
with your premise that programmes and projects that are complex,
difficult and overly ambitious from the outset create problems
in delivery downstream. We tried to keep our strategy simple with
two broad themes. One was to keep it focused on the end citizen
or the business customer of the Government. The second was to
share across our boundaries and reuse what we already knew and
had built rather than to reinvent the wheel and build it again
for the 25th time. I think that those two principles are beginning
to permeate all the change that we are trying to grow.
Q54 Mr. Mitchell: Let me put it another
way. If I were in charge of a Department and I knew that that
enthusiasm was coming down from you as the missionary propagating
it, I would want to embark on some high-flown IT contract to shine
in your eyes and those of the Prime Minister, safe in the knowledge
that if it was a cock-up I would have moved on to something else
within two or three years and would not get the blame for it.
It is the pressure that I am worried about.
Mr. Watmore: I have two comments.
First, I do not recognise the idea of a technology project. If
it is a technology project, it is doomed to failure. It has to
be for a purpose that is backed and delivered by Ministers and
the Department. Without that, it is doomed to failure. Secondly,
if that business ambition is the right one, whether it is a policy
initiative or an efficiency initiative, it will survive the change
of personnel that inevitably occurs. I personally think that there
is too much rotation of officials in roles and that people should
last the course longer so that they can deliver the tasks that
they set themselves, but even if they change their roles, if the
business mission of the programme is clear and it will deliver
benefits to the citizen, I think that it will outlast a change
of personnel.
Q55 Mr. Mitchell: Let me put it another
way. You were a poacher before you became a gamekeeper. In your
recollection, was it your impression as a poacher—to reincarnate
your previous experience—that the Government were an easier
sell, perhaps too easy?
Mr. Watmore: No, it was not, actually.
It was exactly the opposite. I used to look for any private sector
business first and do the Government only if I had to. That was
because, as the questioner said earlier, the procurement regime
was time-consuming, costly and very difficult to read.
Q56 Mr. Mitchell: So you did not
think that the civil service could be more easily conned?
Mr. Watmore: On the occasions
when I worked in the Government sector as a supplier, I had two
experiences. Both of them were in places that were fantastically
important and therefore really valuable projects to undertake,
not small and insignificant.
In one, the computerisation of social security
in the late 1980s and early 1990s, I found absolutely superb teamwork
between Ministers, officials and suppliers. The programme that
was delivered in that era lasts to this day, nearly 20 years on.
In the second, one of the ill-fated Government Private Finance
Initiative contracts, I found the opposite. It became legalistic,
contractual and adversarial, and in the end, public administration
suffered. I come back to the idea that if you want to have a successful
outcome for citizens, you must first of all set it in that guise;
secondly, you must have the skills to do it; and thirdly, you
have to have a partnership climate in which to deliver it.
Q57 Mr. Mitchell: Let me turn to
the Office of Government Commerce. There was an interesting article
in yesterday's The Sunday Times colour supplement, which
you may have read. Did you read it?
Mr. Oughton: I did indeed.
Q58 Mr. Mitchell: It gave the impression
that the Office of Government Commerce was the representative
of some kind of consultant mafia in the Government, and that you
were there to get them all in rather than to exercise any control
over the industry.
Mr. Oughton: That was not how
I read the article, Mr. Mitchell. I think that our position is
pretty clear, as I explained to Dr. Pugh. There will be occasions
when it is necessary to acquire external assistance and support
to deliver major programmes and projects. There is a range of
skills that we have to buy in. Some of them are research, some
might be implementation of major systems, and some of them will
be strategic-level support for Departments' main boards in setting
strategy in major reorganisation of the Departments, but most
of what is bought in is project delivery support.
Q59 Mr. Mitchell: Is it your job
to arrange marriages, or to control and select?
Mr. Oughton: There are two ways
of employing consultants from outside. One is to go out into the
marketplace, place an advertisement in the Official Journal, run
a competition and select a supplier to provide support. That is
a very straightforward way of doing business, but it is time-consuming,
and the transaction costs for both parties are sometimes considerable.
Another way of doing it is through my office's
framework agreements, or Catalist as they are called. That is
the process whereby we run competitions and pre-select a range
of suppliers who have to demonstrate value for money and who then
sit on a list on the framework contract and can be employed—
1 Recommendation in Report. Back
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