Examination of Witnesses (Questions 80-99)
HM TREASURY &
PARTNERSHIPS UK
6 FEBRUARY 2008
Q80 Mr Burstow: But we have established
that the guidance does not have much traction in a number of areas.
We have established from some of the questioning about these project
managers that the guidance is not being followed by all accounting
officers and providers in that respect. To go back to that point
about monitoring of compliance of the guidance, whilst perhaps
accepting that you cannot monitor every single PFI contract that
is being let, how do you satisfy yourself that in the generality
of PFI contracts there is compliance with the guidance that is
being issued?
Mr McKechnie: Let us take specifically
the standardisation of PFI contracts, because there are some elements
of that which are mandatory. We have a system of those mandatory
things and one of them now is that there will be no SPV fees being
paid. Those have to go through a system which is run for us jointly
with PUK and if a project is unable to satisfy those criteria
or does not want to satisfy those criteria, it either does not
go ahead or comes to get a derogation. Those derogations are carefully
considered as to whether there are appropriate project circumstances.
Q81 Mr Burstow: Presumably that process
adds additional time to getting a change through and approved.
How much extra time does that process of seeking derogation take?
Mr McKechnie: It depends. Some
projects do not seek any derogations at all. Some projects do
seek derogations and it may add some time but I hope it does not
add too much.
Q82 Mr Burstow: Given that one of
the points made in the Report, on page 17, paragraph 2.19, perhaps
identifies a skills gap, particularly in respect of public sector
managers when it comes to making assessments about the lifecycle,
what steps are you taking to address that apparent skills deficit
there to ensure that, when it comes to these sorts of processes,
a proper assessment is being made of the lifecycle costs?
Mr McKechnie: Again I have to
say that this is something that is being addressed in the training.
The operational taskforce is doing some of that. The 4ps, which
is the Local Government Association entity that looks after PFI
projects, is doing some of that. The NAO itself does training
programmes, the departmental PFUs assist in this. There is a number
of different areas where training is provided to support the guidance
which is issued on these subjects.
Q83 Mr Burstow: Over what period
of time has that training been? When did it start? Was it before
this Report was commissioned, after this Report was commissioned?
Mr McKechnie: It goes back a very
long way; I do not know when it started.
Q84 Mr Burstow: Was it before 2006?
Mr McKechnie: Yes.
Q85 Mr Burstow: So given that it
is training that has been around for some considerable time, how
come the National Audit Office has found that this is still a
deficiency? What is being done to react to this finding rather
than just relying on what has been done in the past which clearly
has not been sufficient?
Mr McKechnie: It is a question
of rolling it out more, getting better traction with the training.
Q86 Mr Burstow: In the same way that
the guidance gets traction when it comes to ensuring you have
the right number of people monitoring contracts?
Mr McKechnie: Again, the training
should address these issues. As John said earlier, we cannot enforce
it but we can encourage it.
Q87 Mr Burstow: So it may not actually
result in any change at all?
Mr McKechnie: I hope it will.
Mr Kingman: It would be wrong
to think this guidance just disappears into the ether. We have
good reason to believe that people do take notice of our guidance.
I cannot tell you, because it is not the case, that there is 100%
adherence to it.
Q88 Mr Burstow: But in a way you
cannot tell us anything about compliance with the guidance because
you have had to rely on the NAO Report to flag up these issues.
I have not heard that there is a mechanism in place that actually
enables you to know about compliance.
Mr Kingman: There are mechanisms
and the SPV fees point we discussed earlier is a very good example
of one that we dealt with well before the NAO began their work.
Q89 Keith Hill: I would just like
to put a question to the NAO on this thorny issue of the presence
or not of full-time management. Is there any correlation between
the absence of full-time management and the performance of PFI
projects in relation to the cost of change?
Mr Burr: May I just ask the study
director?
Mr Robertson: We are not able
to do that precise calculation but what we are observing is a
wide range of staffing, particularly in larger projects, ten as
the Report says, with annual unitary payments of more than £3
million each not being managed on a full-time basis. So while
we cannot draw any systematic conclusions, it is our strong feeling
that that is a risk to value for money. We cannot put a figure
on it but it is undoubtedly a risk to value for money.
Q90 Keith Hill: So you have a feeling
that it is a risk?
Mr Robertson: It must be in large
projects, in these particular cases paying £3 million a year
each, not to have a full-time manager.
Q91 Mr Bacon: I just have a couple
more questions. First of all, I asked you Mr Kingman whether Mr
McKechnie was indeed not a burden on the public purse, to which
you answered, "We have a contract with Deloitte, as you would
expect". Am I to take it from that—I do not want to
use the word "burden"' because it is tendentious—am
I to take it that the contract entails the Treasury paying Deloitte
money for Mr McKechnie's services?
Mr Kingman: Yes.
Q92 Mr Bacon: How much?
Mr Kingman: That is a contractual
matter between us and Deloitte I am afraid.
Q93 Mr Bacon: It is public money,
is it not?
Mr Kingman: It is indeed public
money.
Q94 Mr Bacon: Why can you not tell
me?
Mr Kingman: It is not a figure
I can disclose without discussing it with Deloitte.
Q95 Mr Bacon: Why not? The contract
for the Treasury PFI building, for example, involved a lot of
consultancy, all kinds of consultancy, and you paid a lot of money,
many millions of pounds for it and that was public money. You
disclosed that. Why is this any different? My salary is a matter
of public record and that of all MPs.
Mr Kingman: It would not be appropriate
for me to disclose; I am not in any way embarrassed about the
number.
Q96 Mr Bacon: It might represent
good value for money but it seems to me it is public money and
we ought to be able to know what you are paying Deloitte for the
Head of PFI Policy. It seems to me a perfectly reasonable question.
Somebody else is nodding behind you.
Mr Kingman: I am very happy to
discuss with Deloitte whether it is something they are willing
for me to disclose.
Chairman: When you have discussed it,
send us a note.[2]
Q97 Mr Bacon: I would like to go back
to the net present value, £91 billion going forward, of annual
unitary charge payments. How much of that is capital?
Mr Kingman: I am afraid I do not
have that figure. I would be happy to send you a note on it.[3]
Mr McKechnie: The total capital
value of the PFI programme is £56.9 billion.
Q98 Mr Bacon: So roughly £34
billion is other stuff of one kind or another. Is that right?
Mr McKechnie: You could say that.
Q99 Mr Bacon: So that is £56
billion in net present value terms, is it?
Mr McKechnie: £56 billion
is the capital value. It is not a net present value figure, it
is a capital value.
Mr Kingman: I am not sure that
is on the same basis as the £91 billion.
2 Note by witness: The Committee asked how
much public money was paid to Deloitte under the contract covering
Gordon McKechnie's secondment to the Treasury. The Treasury pay
Deloitte £150,000 per annum for Gordon McKechnie's full-time
services as Head of PFI Policy. Back
3
Ev 12 Back
| 
