House of COMMONS



TREASURY Sub-Committee






Wednesday 10 October 2007


Evidence heard in Public Questions 1 - 78





This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.



Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.



Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.



Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.


Oral Evidence

Taken before the Treasury Committee

(Treasury Sub-Committee)

on Wednesday 10 October 2007

Members present

Mr Michael Fallon, in the Chair

Mr Graham Brady

Mr Philip Dunne

Ms Sally Keeble

John McFall

Mr George Mudie

John Thurso

Mr Mark Todd

Peter Viggers


Witnesses: Mr Nigel Smith, Chief Executive, Mr William Jordan, Deputy Chief Executive, and Ms Alison Littley, Head of OGCbuying.solutions, Office of Government Commerce, gave evidence.

Q1 Chairman: Mr Smith, welcome to the Treasury Sub-Committee. Could you identify yourself and your colleagues formally for the shorthand writer, please?

Mr Smith: Yes. Good afternoon. I am Nigel Smith, Chief Executive of OGC, to my right is William Jordan, my deputy, and to my left is Alison Littley, Head of OGCbuying.solutions.

Q2 Chairman: Can I ask you all to speak up this afternoon as we have a technical problem with the sound system. If you could speak up, we would appreciate it. You are the new Chief Executive. What particular qualifications do you bring to this role?

Mr Smith: I come from private industry. That is not a particular qualification, but I think I have some knowledge of basic business process which would be useful to OGC going forward.

Q3 Chairman: What do you see as your priorities for the coming year?

Mr Smith: Our priority for the coming year is to tackle two questions. What does government want? Firstly, it wants more for less in terms of more value for less money. Secondly, it wants the right projects delivered on time and to a high quality. In addition, obviously there is a separate agenda for the effective use of the Government property estate.

Q4 Chairman: The OGC has been without a permanent chief executive for nine months. Why did they take so long to find you?

Mr Smith: You would have to ask the people that recruited me; I am sorry.

Q5 Chairman: But when was it advertised? When did you apply?

Mr Smith: I was head-hunted about four or five months ago and the panel process took about two months.

Q6 Chairman: Last year the OGC published its own report and had a separate section within the Treasury's departmental report. This year there does not seem to be a separate report; there is only a very brief mention in the Treasury's report in relation to reporting on one of the targets. Why have we got less reporting on OGC now?

Mr Smith: I am afraid I cannot answer that.

Mr Jordan: We are going to report formally as part of the Treasury group in future. It is also our intention to publish each year a report on the activity of OGC, but our intention is to publish a report in January on the anniversary of Transforming Government Procurement.

Q7 Chairman: But that means we have missed a report for 2006/2007.

Mr Jordan: I think the report we published last year covered both 2005/2006 and 2006/2007. I think we published last year's report to cover two years of OGC activity.

Q8 Chairman: How could you report on a year that has not finished?

Mr Jordan: I think you must be right, it must be the two previous years, but there was a year that went by without an OGC annual report.

Q9 Chairman: The Information Tribunal has twice upheld the ruling of the Information Commissioner that you should release documents relating to the Gateway Reviews of the ID Card Scheme and the NHS IT programme, and its last ruling stated, "We find it difficult to accept that the OGC is really convinced by the arguments put forward on their behalf." Why are you so opposed to releasing these reviews?

Mr Smith: Can I make a personal comment about my attitude to disclosing information? Firstly, I do believe in public accountability; I also believe in private accountability; but I also believe that it is important that you maintain the integrity of the processes where you have a failure, that you have an open and robust process for investigating why the failure happened and then what you do about it.

Q10 Chairman: So, what is the answer to my question? Why are you still so opposed to releasing these reports?

Mr Smith: I do not think it is appropriate for me to talk about a court case which is coming up next year.

Q11 Chairman: Who should talk about that?

Mr Smith: I believe it was a decision of government to take the case to the High Court and that is scheduled for March of next year.

Q12 Chairman: But these are your documents. You are the Chief Executive?

Mr Smith: Yes, I am the Chief Executive.

Q13 Chairman: So why are you relying on the Government's decision?

Mr Smith: Well, the decision was not taken whilst I was here, so I am afraid I cannot really add anything to the reasons for it.

Q14 Chairman: I see. The OGC has been accused of actually shredding documents.

Mr Smith: Yes.

Q15 Chairman: Is that true?

Mr Smith: As I understand it, that is not true. Having read the report and also the accusation, I believe it was what is called aversion control, but I do not have any specific detail on that.

Q16 Chairman: The Health Secretary today made a statement on the increasing funding for the Health Service, and one part of that statement said, "Improving procurement could save one billion a year." Is that evidence based?

Mr Smith: I have not specific information about the Health Service, but what I can say is that if you have a look at the effect of procurement within the Government's overall efficiency targets, the original target was to save, I believe, 7.1 billion within an overall efficiency target of 21.5 billion. If we look at where we are today, the procurement element is at 6.9 billion, which has still got about a year to go. I can only presume that there is a significant proportion of that within the Health Service, from the Health Service, yes.

Q17 Peter Viggers: Your CV describes you as a second permanent secretary at the Treasury.

Mr Smith: Yes.

Q18 Peter Viggers: Are there other second permanent secretaries?

Mr Smith: In the Treasury? I do not believe so, but I have to say, I am not too well up on government grading.

Q19 Peter Viggers: So how will you divide your time? How much time will be taken by being a second permanent secretary at the Treasury and sitting on the Treasury Board compared with the time you are spending at the Office of Government Commerce?

Mr Smith: I anticipate it will be 95% of my time on OGC business and the Treasury Board, obviously, is once a month. That is my attendance.

Q20 Peter Viggers: The Office of Government Commerce has been described by a newspaper as a shadow of its former self. It had a very grand mission statement to improve efficiency across government and now it is a buying department. Can you summarise for us the key activities for which the OGC will now be responsible?

Mr Smith: Yes. Really there are three major areas. The first is getting better value government procurement spend from third parties. That totals about 125-150 billion. Of that about 75 billion is on common goods and services and, obviously, one of the key roles of OGC is to drive the move towards collaboration in terms of procurement right across government, the second area is within the project space, making sure the right projects are there, they are delivered on time and to budget, and the third area is the better utilisation of the Government property estate.

Q21 Peter Viggers: From being an autonomous organisation with a staff of 400 you have now been shrunk to a staff of 150 with responsibility for buying. Do you regard the OGC as still being autonomous?

Mr Smith: I believe that the OGC was previously described as an independent office of the Treasury, and that was what I was told it still is, so, yes, within the Treasury it has an autonomous, independent role. In terms of numbers, it has gone down from roughly about 500 people, about 450 people, down to 250 people by the end of this year and is projected by 2010 to go down to 190 people.

Q22 Peter Viggers: The Transforming Government Procurement - First 100 Days document in January this year, I understand, refers to "new powers" to require departments to use your frameworks and collaborative deals. Are these legal powers and, if not, what is their status?

Mr Smith: I could not really say whether they are legal powers, but certainly the powers relate to comply or explain principally in the area of collaborative procurement. Could I perhaps just say, though, that my approach is that powers are really not the issue. I believe what is the issue is getting a common grip of what needs to be done across government, and that will be through engaging the spending departments in getting those targets achieved.

Q23 Peter Viggers: The substance and function of these 12 existing frameworks and collaborative deals: what do they require of departments?

Mr Smith: I think the collaborative deals you are talking about were basically existing framework deals, and these were put out to the spending departments and said, "Okay, you have got your own deals. Have a look at these deals. These deals are going to provide you with better value for money."

Q24 Peter Viggers: How do you justify telling other government departments to utilise your services when your procurement specialists, OGCbuying.solutions, have recently been criticised by the National Audit Office for lacking expertise and effectiveness?

Mr Smith: I will ask Alison to make some comment on that in a second, but I do believe that driving up capability is important, not just for the spending departments, it is also important for OGC. One of the themes of reducing the number of people within OGC partly was to take away certain responsibility, such as the efficiency programme, but also it was to have a smaller number of higher qualified, better trained people that could actually speak with authority within the spending departments.

Q25 Peter Viggers: Three of the 12 frameworks which the OGC appears to be compelling departments to use are due to expire in the first half of 2008, and you are not encouraging departments to repeat the success of the reverse e-auction which saved 100 million. How do you explain that you are you pushing departments to use frameworks which will expire but not pushing the pews of procedure which appear to be very successful?

Mr Smith: As I understand it, this was basically to kick-start the use and publicity of existing agreements. That is not the only work programme underway within OGC. We have a number of important pilots which we are engaged in at the moment, including energy, including office services and a number of others, so this was really not to be the end of the story rather than the beginning.

Q26 Peter Viggers: How do you ensure that government departments do use the OGC as you would wish them to? How do you encourage them to adopt your frameworks.

Mr Smith: I think, basically, we provide things which they see as useful, that we engage with the departments. We are with them the whole time. In terms of my responsibility, one of the most important ways of doing that is through the Government procurement service. At the moment I am head of profession for the procurement service and also for the PPM, which is the programme and project management profession, and I believe that actually driving increased skills and capability through the professions is one of the important ways of engaging the spending departments. As I said before, the issue of power is important to have there in the background, but if it is purely OGC telling the spending departments what do, in my experience, in private enterprise that does not work. You have to show real value to the spending departments and in some ways perhaps the bright, silver lining, from my point of view coming in at this stage, is that, looking forward over the next three years, there is obviously going to be a tighter control on spending, there will be an even greater imperative to get benefits out of collaboration.

Q27 Peter Viggers: How do you interrelate with the Major Projects Review Group? Are they not tasked to do what OGC was tasked to do?

Mr Smith: No, I think it is complimentary to the OGC's task. If we look in the project space, there is some extremely good practice and process. The Gateway Reviews, which I knew about before I came in, in my experience, is an extremely strong process, the Major Projects Review, basically, which I sit on and is chaired by the Treasury, is the sign-off of expenditure. It is to look at three stages: firstly at the business case, secondly at the point when you put out to tender and, thirdly, when the contract is signed. I think that is a natural process that government should have. It is exactly the same process you would have in private industry. Gateway does also look at the business case. That is a gateway process that is used by the departments in developing their business case looking at the right issues - looking at risk management, looking at value for money - and then gateway follows on from the Major Projects Review, which is saying, "Yes, spending is approved for this project", and takes it right the way through until the project has been complete.

Q28 Peter Viggers: Was not the OGC as originally created intended to cover the control of major projects?

Mr Smith: Yes, it was and it still is. The Major Projects Review Group is purely to sign off the expenditure at the time that it is put out to contract.

Q29 Peter Viggers: Are you managerially responsible for the MPRG?

Mr Smith: No, I sit on the MPRG. It is a process of the Treasury chaired by John Kingman.

Q30 Peter Viggers: I find it surprising that a second permanent secretary should not be responsible for that area.

Mr Smith: That is the organisation that has been set up. I would say also, OGC provides the evaluation and assessment of the projects to that committee. I did, in fact, chair the committee on a recent MPRG two weeks into my tenure.

Q31 Mr Dunne: Have you had an opportunity yet, Mr Smith, to review the effectiveness of the framework agreements in terms of delivering best value?

Mr Smith: No, I have not, but that is on my agenda.

Q32 Mr Dunne: Because the Public Accounts Committee report into OGCbuying.solutions was quite critical about the effectiveness of the whole framework regime, there are a plethora of framework agreements. Most of the procurement seems to have been directed through a smaller number of them and there are allegations from competitors that these are being used to featherbed OGC in terms of the revenue raising from the commissions achieved compared with achieving best value for the taxpayer. How would you respond to those allegations?

Mr Smith: I would like Alison to respond.

Ms Littley: It is true that as part of the PSA review we were asked to look at the tail, if you like, of the number of frameworks. Since the PSA review that is underway, and we will need to stop some of the frameworks that we currently do. The dilemma we have always is that somebody uses all the frameworks, and what we have to make sure is that in stopping them, if they are not creating the best value, we make sure that the people who are using them have other places to go and that we do not just leave organisations with no mechanism. So that is being done.

Q33 Mr Dunne: Your organisation receive a commission for procurement through the framework agreements. Is it right that that is point seven of a per cent?

Ms Littley: It is, on average, point seven from the suppliers---

Q34 Mr Dunne: Do you receive commission from procurement not using the frameworks?

Ms Littley: Sorry.

Q35 Mr Dunne: If you negotiate with another party which is outside the framework agreement, do you also get a commission from a government entity for helping with that contract?

Ms Littley: We only get commission on frameworks that are utilised.

Q36 Mr Dunne: Do you, therefore, have a commercial conflict of interest in the work that you are doing by encouraging government entities to buy through frameworks even if that is not the best value for the particular supply they are looking for?

Ms Littley: No, because the role of core OGC in terms of running the collaboration agenda, if you like, is about looking across the whole of government as to which are the most sensible and cost-effective frameworks for people to use, and, indeed, in the initial 12 that were spoken about earlier, they were not all buying.solutions frameworks, they were a mixture of frameworks that have been provided by many different organisations and the funding for core OGC has nothing to do with the funding that comes out of the frameworks from buying.solutions, which is in itself a trading fund.

Q37 Mr Dunne: What proportion of the costs of buying.solutions are covered by the commission income?

Ms Littley: We get no central funding at all, so buying.solutions has to stand on its own two feet in terms of making sure that we are offering things that other departments----

Q38 Mr Dunne: So you have a direct commercial interest in steering government purchasing through framework agreements. That is your whole raison d'etre.

Ms Littley: No, because buying.solutions does not do the steering. The OCG core department, which is funded by the Treasury department, does that. So, we are governed in the same way as---

Q39 Mr Dunne: Could one of you give me an answer to the question of what proportion of the costs of if it is not buying.solutions then it is the overall OGC is covered by the commission income received from the framework agreements?

Ms Littley: None of core GC is covered by any part of buying.solutions' costs, of any buying.solutions framework commission.

Q40 Mr Dunne: Where does that commission go then: to the Treasury directly you say?

Ms Littley: There is a dividend paid to the Treasury as part of our efficiencies, so that all of buying.solutions is paid by commission, core OGC is---

Q41 Mr Dunne: Right, so all of the commission from the framework agreements goes to buying.solutions?

Ms Littley: Yes.

Q42 Mr Dunne: I have not got the accounts in front of me, I am afraid. Can you clarify how much of the costs of operating buying.solutions is covered by that commission income?

Mr Smith: All of it.

Ms Littley: All of it.

Q43 Mr Dunne: All of it.

Ms Littley: Yes.

Q44 Mr Dunne: If you generate a profit, then that goes to the Treasury through dividends?

Ms Littley: Yes.

Q45 Mr Dunne: Therefore, if there is a conflict between the procurement of some goods outside the framework agreement whereby a government entity could procure more cheaply if it did not use the framework, your organisation exists to steer them away from achieving that best value and towards purchasing through your framework agreement?

Mr Smith: Chairman, may I make a comment here? Firstly, buying.solutions is one of the possible delivery mechanisms for collaborative procurement. To put some context around that in terms of numbers, the target for buying.solutions is by 2010 to have 10 billion of collaborative agreements, saving about a billion pounds. The area which OGC's overall responsibility is for is the numbers I said before: common goods and services are 75 billion. So, you can see that buying.solutions is only tackling one small part of it. Buying.solutions works under the auspices of the OGC - there is a separate, strategic collaboration unit within OGC - and certainly there will be no direction of people to go into a particular framework which is not in their best commercial interest. As I said when I said about the powers that OGC has, the power is to comply or explain. If a department comes in - and there are other collaborative departments, for instance PASA - and says, "My deal is better", they can still use that deal and, in fact, that is good because that tells OGC there is a better deal in terms of a framework or a better direct supply deal which it can use across government. So I think there is a healthy tension between having a trading fund as part of OGC but a wider strategic interest to engender collaborative procurement.

Q46 Mr Dunne: We have had evidence from one of your competitors, a supplier that is not subject to a framework agreement, who made a number of allegations, but one in particular is that the framework agreements are used improperly to distort competition, and to cite as a particular example a headline on the buying.solutions website on 1 October, it said, "Specialist solution supplier signs up to contract extension", and it was an extension to an existing framework agreement for a further seven years and the allegation is that in relation to this particular product range competition is now restricted until 2016 because of the extension of this contract. How would you comment on that allegation and whether or not the length of tenure of framework agreements acts to shut out innovation and competitive pressures over long periods of time?

Mr Smith: Alison.

Ms Littley: I think the balance of tenure of frameworks is a very fine balance, to be fair, in terms of how long it takes to fill a framework in terms of the OGC process which, as you know, is quite long, but, again, buying.solutions only does a proportion of any area of spend. I do not know what the particular category is that you are talking about, but there are other opportunities through other agencies, or other departments, for suppliers to be on different frameworks. So, not being on a buying.solutions framework in no way, shape or form prohibits that supplier from providing services or commodities to the public sector.

Mr Smith: Could I perhaps make a comment. I do not know the details of this case. I would find it surprising if a framework had a length of time of ten years. That is my personal view.

Q47 Mr Dunne: Could I suggest that you have a look at your own website then.

Mr Smith: I will indeed.

Q48 Mr Dunne: The name of the company is Specialist Solutions Suppliers. It is not clear from the brief here as what is the product categories are that they supply. One final question, if I may, Chairman. Another finding of the Public Accounts Committee was a concern that there was insufficient expertise within the senior management team and the individuals responsible for negotiating the contracts within OGCbuying.solutions. What steps are you taking to review the quality of the team and introducing private sector expertise in particular. Obviously you represent some yourself.

Mr Smith: Yes. If I can talk about OGC, I think many of the comments are related to OGC as it existed a year ago. If you look at the mix between private sector and career civil servants in OGC there is quite a large element, and certainly in terms of the collaboration area that is almost entirely private sector. I would make the point though that I do not think we should actually tar people with the same brush. The idea that private sector is good and public sector is bad is not correct, in my view. I have been here a month; I have met some extremely talented people. There may be some issues on skills and capability, there may be some issues about getting experience, but I think we can do that. We must not set up a two-status stream within OGC. There is a tremendous contribution that can be made by career civil servants in the procurement profession.

Q49 John Thurso: Mr Smith, when you were responding to the Chairman in his questions you said that one of your key objectives was more for less, I think it was. How can you ensure, in doing that, that the quality of service to tax payers is maintained?

Mr Smith: Actually what I said was more value for less, and I think that is the key. I think people's understanding of procurement is that it is buying: it is buying commodities and there is a standard commodity. It is not. Procurement covers a range of goods and services. If I can give you one example from my own experience: my daughter this year went off and worked in the care industry looking after people in their homes, people that had various physical disabilities, people that were old, people that could not do things. She worked in the care industry and the quality of service of the people she worked for was appalling. That is not value. Lowest cost is not value. It is about what service comes from that value and also right across the lifecycle. If you are talking about a car, it is not about the purchase price of a car.

Q50 John Thurso: Absolutely. As a former practitioner of the hospitality industry, I am right with you on all that, but what I am driving at is when you have not got a top line and you are in government it becomes much more difficult to measure that value, because the traditional way of measuring value in the private sector is the ability to raise your price through your brand premium or the quality of your service, or whatever, an option you do not actually have. So how do you ensure that the value is not diminished, that it does not become a least cost operation?

Mr Smith: I do believe that everything is measurable. I believe in getting the data correct and then looking at how you measure. You can measure output of service and, if you look at the way that OGC's policies are phrased, they are advice, the standards which we require spending departments to comply with. That is about actually looking at value right across the lifecycle and it will be different contract by contract, service by service, but you cannot just look at cost.

Q51 John Thurso: I am going to leave that one there because you have only been in a month, but I look forward to coming back to this next time we meet and see how you got on. It was recently reported that the Government had effectively dropped the idea of merging corporate services within central government. Why was that?

Mr Smith: I cannot really comment. This is shared services?

Q52 John Thurso: Yes?

Mr Smith: I can make a comment about my private views and my experience in private industry and also about what I found of OGC's position, because it is now part of shared service within the Treasury for its finance, its IT and its HR service, but I cannot really comment on government---

Q53 John Thurso: I gather the Government Chief Information Officer indicated the Cabinet Office and OGC had struggled to co-ordinate cross-Whitehall agreements?

Mr Smith: In terms of shared service. I am afraid I have no knowledge of that.

Q54 John Thurso: In relation to the failure of the IT framework, the shared services agenda was one of the principle causes. Is that something you have had a chance to look into?

Mr Smith: I have certainly not had a chance to look at it. It is not within my area of responsibility. Can I say though that shared service is a common process in private industry but it is not an easy process. It has to be extremely well planned. The IT systems that support it are very complex and certainly it is not something that you would go in lightly and it takes quite a long period of time for it to settle in is my own personal experience.

Q55 John Thurso: Perhaps Mr Jordan could help us here, as he was around at the time?

Mr Jordan: I certainly was around last year, but you are aware that responsibility for efficiency of shared services was one of the main work streams transferred to the Treasury on 1 April of this year.

Q56 John Thurso: Hospital pass?

Mr Jordan: We have no up-to-date information on the position of shared services. However, I believe the current plans are around the development of Whitehall where there will be some major providers of services and other buyers of services rather than a single source of shared service supplier.

Q57 John Thurso: You have not given up; you are coming back for another go?

Mr Jordan: I believe that my colleagues across Whitehall are coming back for another go, but it will be based around two or three major providers rather than a single shared service model.

Q58 John Thurso: Last year, when discussing outsourcing, I asked Mr Barratt about the possibility of outsourcing the finance functions, but he responded that one of the key rules of outsourcing is that you do not outsource a mess, you get your own house in order and then you outsource it. Has the finance function now improved to the point that it is not a mess and it could be considered for outsourcing?

Mr Smith: Within OGC?

Q59 John Thurso: Within government generally?

Mr Smith: I am afraid I could notice really comment.

Q60 John Thurso: Or within OGC?

Mr Smith: I can comment on what I found in OGC when I came in, and that is I think there were adequate financial controls. I think information systems within OGC need some improvement in terms of the finance area but they are adequate. As far as the service which we are getting from the Treasury, again, that seems adequate, although I would wish to see a very explicit service agreement where the customer, which is myself as OGC, and the supplier, which is the Treasury, have a series of matrix to monitor performance.

Q61 John Thurso: How far do you think central government is away from being able to consider outsourcing, and I am not saying it is necessarily a good thing, but being able to consider outsourcing finance activity in government departments?

Mr Smith: I have not got a feel for the finance function within government yet.

Q62 John Thurso: We noted in our recent report on the efficiency programme that, unlike the other organisations within HNT reporting unit, OGC does not appear to have set out its baseline for financial savings. Why is that?

Mr Smith: In terms of OGC's own internal efficiency programme?

Q63 John Thurso: Yes.

Mr Smith: Can I ask William.

Mr Jordan: I believe that we are using 2003/2004 as the baseline year for the vast majority of our efficiency savings, but where in some instances we were not undertaking an activity in that year, started to do it in 2004/2005 and subsequently made efficiency gains. We have taken 2004/2005 as the baseline year.

Q64 John Thurso: I find it quite interesting: if you take a fairly new organisation within government matrix, which is the Nuclear Decommissioning Agency, which is two, three years old, whatever, it is subject to those 3% a year efficiency savings in the same way as everybody else is. How can somebody that was set up in the most efficient way possible one year later be able to deliver 3% efficiency, or is that just a built-in inefficiency that you always start with so you have got some fat to give away?

Mr Smith: I have no particular knowledge of NDA, I have to say, but I do believe that year on year improvements in efficiency should become the norm. It is the norm in private industry, some are successful, some are not, but it should be the assumption.

Q65 John Thurso: The report I referred to also noted some confusion within departmental reporting documents on the targets and achievements from relocation out of London and the South East. Who was originally responsible for achieving the relocation targets and how many posts have been relocated at present?

Mr Smith: The OGC has been responsible for that within the efficiency programme. The target is 20,000 by the year 2010. As we sit here today 13,300 posts have been relocated and the trajectory that I have seen is that that target will be exceeded. When I said earlier on that OGC was no longer responsible for the efficiency programme, one part of it remains with OGC and that is for the relocation because it is so crucial to engage the property and management of the property estate in the relocation discussion.

John Thurso: Thank you very much indeed.

Q66 Mr Todd: The project that was devised to bring together a framework IT deal, Integrated Solutions, has been dropped, I believe?

Mr Smith: I am afraid I cannot comment. I have no information, I should say.

Ms Littley: That is right; it has.

Q67 Mr Todd: Can you give us a little bit of background as to, firstly, how far it went before it was dropped, the costs involved and what were the obstacles that caused it to be?

Ms Littley: I have not got the details in terms of the costs involved, but I can give you details as to why it was dropped. Following the NAO report, one of the things that we undertook to do was to review all current and up and coming frameworks and one of the things that we also had to be cognisant of was how easy it was going to be for people to use frameworks, which was one of the things that also came out of the NAO report. In looking at it as part of that review, it was felt that the spectrum of things within that framework, i.e. from buying a piece of equipment to something that was an all singing and all dancing service, was too wide and the amount of procurement capability that some organisations would need would be too difficult for them to find and therefore it was dropped.

Q68 Mr Todd: So the scope was really---

Ms Littley: Two large.

Q69 Mr Todd: ---so large that it was not possible to produce a meaningful and valuable framework agreement which could actually be presented to potential suppliers?

Ms Littley: And customers, absolutely.

Q70 Mr Todd: Was that not something which might have been identified rather earlier in the process, because it sounds almost an inevitable part of offering something across a wide range of government departments, or was there originally a vision which narrowed that scope down rather more precisely?

Ms Littley: Yes, I think it was one of those things where it certainly had some scope creep.

Q71 Mr Todd: That is what I was hinting at.

Ms Littley: Yes, and I think, with hindsight, the rigor of ensuring that in future frameworks do not become winners for everybody, if you like, which was the idea, is reviewed earlier. So I think it was an important but, as you say, probably painful learning curve.

Q72 Mr Todd: Is that not perhaps an experience which tells us something about shared services across government as a whole? Getting a clearly defined scope that does not and yet has some value is a pretty repetitive challenge which one sees presented regularly in government. Is that not right?

Mr Smith: If I could comment generally, I believe that looking at specific requirements, if we take the ICT requirement of government, I think what you need to do is to have a look at the outcomes you are trying to get rather than specify the product which you want, and, in my experience, that is a mistake which many organisations fall into. If you look at the structure, and one of the areas I spent a lot of time since I came trying to bring myself up to speed on is, indeed, the interaction between OGC and its category management teams, which includes ICT, and the CIO Council, i.e. the IT experts of government: because the important thing is that you actually have a strategy for where your technology is going, you have a forward funnel of visibility and you have a link with the supply industry. One of the things that I think I have learnt over the years in IT is that if you go out and look at buying, for example, laptops you will miss a trick. What you are actually looking to do is say: "We need a service, we need an outcome", and go to the supply industry and say, "Okay, come up with innovative solutions of how you will provide a solution to that outcome." That, I think, is something which has started within OGC and, in my view, that is the way forward.

Q73 Mr Todd: So is that where OGC intends to add value in future, rather than attempting to produce all-encompassing frameworks for purchasing which, as you say, can both be restrictive and also quite often rather out of date by the time someone is able to respond to them?

Mr Smith: I think it would be a growing trend, but I think it will continue to be a mixture of product and solution which will be procured.

Q74 Mr Todd: Does this perhaps suggest that the provision of shared services across government is going to be pretty problematic unless there is a greater willingness to produce shared business cases for such shared services? Is that what your perception is at the moment?

Mr Smith: I well understand the point you are making. It is not a responsibility of OGC but if I could try and answer your question. Quite obviously if you have a process of sharing, you have the business process understood. Then you can apply solutions to that. You do not have to spend all your time looking at interfaces, so that if you are trying to find a solution for five different organisations you have then got to make sure requirements are consistent between those five different organisations. If you have your business process combined for those five organisations, you have one solution. It is self-evident. I repeat what I said earlier, that shared services is a common practice in private industry but it is difficult to put in and it requires great rigor in terms of what you have just been saying, which is actually making sure there is an understood process.

Q75 Mr Todd: A best practice process.

Mr Smith: Yes, absolutely.

Q76 Mr Todd: And a clear business case for the project as a whole?

Mr Smith: Yes. There are processes between OGC and the CIO Council where, in fact, we are looking at these issues. It is not directly looking at shared service but it is looking at common solutions. So, I take your point.

Q77 Chairman: Mr Smith, you have been in post just over a month now. How confident are you have got to grip with range of OGC activities?

Mr Smith: I think I have a good understanding. I think there are areas of detail which I am going to learn over the next few months, but so far it is more or less what I was told was on the tin. So, yes, I am quite confident.

Q78 Chairman: When you come back here in a year's time on the basis of a proper and separate report, what is it you will expect to have achieved?

Mr Smith: Perhaps I can just say that I am no different to most chief executives that come into a new company: they have a strategic review. That is what is being undertaken at the moment. Any strategy should be at least three years and backing up that should be a one-year business plan, and I look forward to talking to you next year about the success of whatever the objectives are in the business plan but overall OGC, if it is going to justify the money that is being spent and the confidence that has been placed in it, has to make a real difference. That is why I have come in. That is what has attracted me to come in to work in government. If I do not believe I have made a real difference - and it is through my leadership of the team, and the team will do it - then there is no purpose in me being here, I will not be here.

Chairman: Thank you. We are going to leave it there. We wish you well in your appointment. Thank you very much for your evidence today.