Examination of Witnesses (Questions 40-59)
HM TREASURY &
PARTNERSHIPS UK
6 FEBRUARY 2008
Q40 Nigel Griffiths: This is not
about proselytising for PFI: it is making sure that the right
guidance is being implemented and what sanctions you have when
it is not.
Mr Kingman: If you are the Department
of Health or the Home Office or whatever, you have an accounting
officer, you have procurement people, that is quite properly the
affair of the department. What we do actively do is go in, with
the help of OGC, and look at the procurement capability in departments
and where that is weak we seek to persuade the department to strengthen
it.
Q41 Nigel Griffiths: What about the
capability in schools? The Report mentions that one in six PFI
schools do not have enough staff for their PFI contracts and a
third of PFI hospitals do not have enough staff to manage the
contract properly. Is that not an indictment?
Mr Kingman: As I said earlier
to the Chairman, it is essential that people who are running complex
contracts have the capability necessary to do that.
Q42 Nigel Griffiths: But that is
another failure then, because a third do not in hospitals and
a sixth do not in schools.
Mr Kingman: It would be a good
thing if those projects had stronger capability.
Q43 Nigel Griffiths: We are in agreement
then. It would be a good thing but it is your job to make sure
it is done. What are you doing to make sure it is being done?
Mr Kingman: It is certainly our
job to try to make sure it is done but it would be wrong for the
Treasury to convince itself that it can somehow take over procurement.
The Government spends hundreds of billions a year on procuring
services. The Treasury is a small institution, we set policy and
we try to strengthen capability but we cannot run everyone's procurement
for them.
Q44 Nigel Griffiths: We are not asking
that. What we are asking is why in every PFI hospital—and
we are dealing generally with many hundreds of millions of pounds
in a PFI hospital case—it is not a requirement that there
is someone there to manage PFI contracts properly? Why is it left
to local health authorities, or PCTs or whomever?
Mr Kingman: We have guidance,
as James said earlier, that encourages people to have a full-time
contract manager but hospitals take their own decisions, that
is how it works.
Q45 Nigel Griffiths: You are responsible
and so are we for the use of public money and that is frankly
not a good enough statement to say they take their own decisions.
If they decide to waste money, we presumably rely on someone in
Whitehall to try to avoid that.
Mr Kingman: We certainly do have
a clear role which is about challenge and I believe we discharge
that.
Q46 Nigel Griffiths: Is it not desirable
to convert guidance into mandatory practice?
Mr Kingman: It can be and in some
cases we do. Going back to the example about competition, we have
a very strong presumption in favour of competition, it is widely
understood, it is enshrined in our guidance, it is enshrined in
Managing Public Money and accounting officers fully understand
that. I am not going to say that I know that there are no circumstances
in which it is inappropriate not to have a competition because
there are legitimate circumstances in which it is.
Q47 Nigel Griffiths: I am sure that
is right. The case that was given of the East Riding school that
is in here seems to be a good case. I am just wondering why people
are allowed to get away with sloppier practice. Why are they not
required to adopt best practice, rather than too often ignoring
guidance which is voluntary?
Mr Stewart: On your specific point
on contract managers the important thing is that they are put
in place before the contract is actually finalised. So there is
now very clear guidance in SOPC4 that says up to six months before
a contract is signed, please put in place your contract manager.
Q48 Nigel Griffiths: That is a nice
way of putting it. Why do you not say: "You must put in place
a contract manager"?
Mr Stewart: It is not my decision
to say "must".
Q49 Nigel Griffiths: Who should be
saying that they must then?
Mr Stewart: Speaking for PUK,
one of the things that we struggle with at the moment is continually
the balance between the role of the centre and the responsibilities
of the local procurement body. That balance has shifted over the
last 20 years, but currently absolute responsibility and accountability
for decisions sits with local bodies. We understand that, we tell
them what we feel is right, we spread best practice, we give them
guidance, we give them help.
Q50 Nigel Griffiths: Because we provide
the money from here, I think certain things should be a requirement
and that is one. That does not seem an unfair assumption, does
it?
Mr Stewart: That is a matter of
government policy that is not for me to comment on.
Mr Kingman: It depends what kind
of body you are talking about.
Q51 Nigel Griffiths: Staying with
the example that we have just been given.
Mr Kingman: I assume that you
would not contend, for example, that we should have the power
to require local authorities to do things.
Q52 Nigel Griffiths: Oh, I think
so. If you are spending £50 million pounds on a school or
something like that, there should be a certain requirement that
you have a contract manager, otherwise you get what we are getting
at the moment and that is that in one sixth of the cases they
do not.
Mr Kingman: There is local democracy;
we do not have the authority to require local authorities to do
things.
Q53 Nigel Griffiths: Well you require
local authorities to go for the PFI option.
Mr Kingman: No.
Q54 Nigel Griffiths: Yes, if they want
the funding—and I have to say I am a supporter of PFI—and
you are entitled, since the money is coming from you, to say whether
the terms are reasonable. It seems to me to be reasonable to have
a contract manager.
Mr Stewart: There are two issues
that local authorities and hospital trusts have to deal with.
These are long-term contracts and they rely on good partnerships
between the public sector and the private sector, that means good
relationships. A continual challenge is to retain people in those
contract management jobs for a reasonable period of time. When
I say "a reasonable period of time", I think five years
plus is a reasonable period of time. That is a challenge in this
environment. The other challenge they have is that the workload
of the management contract does go up and down, so by the time
of benchmarking, market testing, which this Committee talked about
a few months ago, obviously more resource is required and if there
is a big variation, again they have to supplement their resources.
Q55 Nigel Griffiths: You have thrown
up something interesting there. Obviously, yes, it can be difficult
getting people up to capacity on projects that they have never
dealt with before. Why then do we not have a central group of
people, peripatetic, who have the expertise that can go in?
Mr Stewart: We do have those central
groups. For the larger departments there are private finance units,
so, for instance, the Department of Health has a private finance
unit which is probably a first port of call for support in those
situations and if more specialist expertise is needed, then someone
like PUK might also offer support. One of the primary roles of
the helpdesk is not actually to provide the help, but often to
identify the source of where that help might be.
Q56 Nigel Griffiths: Do you have
a list of contract managers that the helpdesk can suggest people
hire?
Mr Stewart: We do have knowledge
of all the contract managers. As you say, we might often say:
"Why don't you talk to so and so who has just been doing
this before".
Q57 Nigel Griffiths: Can they hire
that person?
Mr Stewart: Normally those people
are within a public sector environment and will hopefully offer
that help for nothing. We are talking about one local authority
potentially talking to another local authority who has been through
a similar situation.
Q58 Nigel Griffiths: That is what
has led us into the problem though. Unless they can hire that
person who is the contract manager—and that generally does
not happen but you may be able to give me a case—is there
not a case for having a central pool of contract managers on these
multi, multi million pounds projects?
Mr Stewart: You cannot say there
is a general rule that one should create a pool of contract managers.
The first port of call is the existing support which comes from
within departmental units. They have the ability to come to PUK.
What we are certainly encouraging is sharing of knowledge and
expertise and help between authorities.
Mr Kingman: James is being bashful.
One of the reasons we set up Partnerships UK was precisely to
provide that kind of service, so that public sector procuring
authorities could hire PUK to help them, so that they could actually
manage these things properly.
Q59 Nigel Griffiths: Right. But we
are in the position where a third of PFI hospitals do not have
contract managers and you seem to be pooh-poohing the idea that
you might supply them and, given that these are usually more than
£100 million as contracts, if I am not mistaken, I am surprised
that health authorities, perhaps previously starved of funds,
not used to procuring new hospitals, have any expertise at all
in-house of that order; indeed that is what they tell me.
Mr Kingman: What we are saying
is that we would very strongly encourage them to hire an ongoing
contract manager.
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