Examination of Witnesses (Questions 1-19)
DEPARTMENT FOR
TRANSPORT
9 JUNE 2008
Q1 Chairman: Good afternoon. Welcome
to the Committee of Public Accounts where today we are considering
the Comptroller and Auditor General's Report Shared services
in the Department for Transport and its agencies. We welcome
Robert Devereux who is the Permanent Secretary of the Department
for Transport. Would you like to introduce your colleague please,
Mr Devereux?
Mr Devereux: Certainly. I have
brought with me Barbara Moorhouse who is my Director General of
Corporate Resources.
Q2 Chairman: This was not a very
happy story was it, Mr Devereux? It was supposed to cost £55
million and save £57 million; in fact it has a net cost of
£81 million. If you look at figure one you will see it set
out that it was supposed to cost £55 million, as I have said,
and it ended up costing £121 million. It was going to save
£112 million. What went wrong?
Mr Devereux: I think I would like
to clock that this Report is basically a work in progress as far
as I can see. What the National Audit Office are assessing—particularly
in the benefit line as they made clear—is the value of the
savings that we have absolutely identified and can bank right
now. I have not come today to suggest that that is the position
the project should remain in. In the second part of the Report,
the National Audit Office have pointed to the various things that
my colleagues and I are doing to secure better savings. So there
is a conversation to be had about how we got to be where we are
today; but I do not regard it as the end of the story and, therefore,
to say that this is the final forecast is not right.
Q3 Chairman: It is quite a recent
Report, it is quite up-to-date, is it not? It is a snapshot of
what is going on at the moment.
Mr Devereux: It is a snapshot
that is based on—
Q4 Chairman: This money has been
spent; it is not going to be recovered, is it?
Mr Devereux: Not all this money
has yet been spent, but most of it has. The reason we need to
be careful of the overall net present value assumption of an £80
million cost to the tax payer is that that is before some assumptions
that we are developing now around what savings we might make.
Q5 Chairman: It has caused a lot
of trouble.
Mr Devereux: Yes, it has.
Q6 Chairman: I do not want to make
a lot about this point—the press did make a lot of it of
course—we can see on page 43, this was really one of these
minor glitches when staff tried to access these computers and
the computers replied to them in German and that sort of thing.
It is enough to make you weep, is it not?
Mr Devereux: Yes, it is.
Q7 Chairman: Let us try to get to
the bottom of this. Although the press had a field day with this,
we are trying to learn lessons for good government so it does
not happen again. Let us look at paragraph 1.7. What comes out
of this is that you were clearly in a bit of a hurry to implement
these shared services and I wonder this was the root cause of
your problems and whether, if we are going to do this sort of
thing again, we are not going to be too demanding of the staff
we employ and imagine that we can bully them into making something
work.
Mr Devereux: I think that is absolutely
the key lesson I take out of this. We spent quite a bit of time
in the course of 2004 looking carefully into what we thought was
possible by way of delivering savings in our shared services.
By the time we got to the outline business case, which is referred
to in paragraph 1.7, there was a very deliberate decision on the
part of the Board and my predecessor that—if you are going
to embark on some changes of this variety—you positively
do not want to allow too much time for the institution to get
into inertia about the whole project. As the paragraph records,
the programme deliberately put a challenging timeframe down in
order to drive the businesses to get to the right answer against
an assumption otherwise that work would fill the time available.
There is a quote which I brought with me from the Board paper
which says, "We do not believe there is any advantage in
planning for a longer detailed design and later first migration
although we recognise that some slippage may turn out to be unavoidable".
Essentially what that is saying is that we set off on an aggressive
timetable by design, quite deliberately as the Report explains
in the Department's approach in paragraph 1.4. The safety valve
for that was intended to be potential slippage in migration in
due course.
Q8 Chairman: Sorry, what did you
say just then?
Mr Devereux: The quid pro quo
for an aggressive timetable was the recognition from the outset
that go live might have to slip to the right if that turned out
to be necessary.
Q9 Chairman: If we read paragraph
1.12 we can see within two months you knew your assumptions were
wrong. Let us look at paragraph 1.25, it seems that you recognised
what were the principal risks but having recognised what were
the principal risks you then ignored them.
Mr Devereux: I do not think we
ignored them. If we go back to 1.12 for example, to the particular
version of SAP that we bought, as you will see from the footnote,
the version that was actually being used at DVLA at the time was
going to time-expire at the end of 2006. There was a choice to
be made. The Programme Board went into some detail to work out
whether or not simply to upgrade with an ordinary version of SAP
was a sensible thing to do, or whether it would be better to take
advantage of the so-called SAP enterprise resource planning system.
That is still the best practice choice to make; it is the thing
that gives you scope for further development over time rather
than tying yourself to a system which was manifestly going to
be out of date quickly.
Q10 Chairman: There are various things
I do not understand about this. If we look at figure five, for
instance, "Shared Service Centre Key Performance Data",
I understand the NAO have drawn this up in this way and you had
not done this. If you look down there, for instance, there is
one job description: "Create and maintain customer details".
According to this, this is extraordinary. As opposed to this 95%
within one working day, in December 2007 they were achieving 81%;
if you look at the next line to January 2008 they were achieving
1.8%. Did they all go to the Christmas party at the Department
for Transport or something? What went wrong? How can you be achieving
81% in December and 1.8% in January? Look at the line below: 100%
within two working days. For some reason you achieve 100% and
get the green "Pass" in December 2007 and it is down
to 56% in January. What is going on? It does not look like a department
that actually knows what it is doing.
Mr Devereux: These are all the
performance indicators for the Shared Service Centre itself situated
down in Swansea. As you can tell from the extraordinarily low
numbers at the start of the year we created this system in a rush,
which is very clear from the National Audit Office Report.
Q11 Chairman: You would expect to
start with fairly low numbers and you gradually get better and
better. What I cannot understand is how you achieve 81% of a particular
job in December and by January, a month later, it is down to 1.8%.
What is going on?
Miss Moorhouse: I think it might
be helpful if I put the performance of the Shared Service Centre
into some context. There are many aspects to the history of this
programme which no doubt will get teased out in the next hour
and a half. I think the issue that I would like to draw the Committee's
attention to at this stage is that the Shared Service Centre itself
was set up in a very rapid way right at the end of 2006/early
2007. Therefore when it went live in April 2007 with the first
two departments coming on, this was a Department which the word
"immature" might still be generous. It was very much
struggling to get its act together; there was a degree of the
blind leading the blind in the sense that here were a group of
people who were trying very hard to work systems that were new
to the Department and to guide and support relatively inexperienced
customers through a new technology implementation. I think a lot
of the variability in the figures is simply because at various
times there has been enormous pressure on the Shared Service Centre
which indeed lacked management when it was first set up. Therefore
to some degree these figures reflect an organisation finding its
feet. I think the trend over this period of time is actually very
commendable in terms of the human level of performance of the
Shared Service Centre although, as we will no doubt come on to,
there are many structural questions about the scale and the performance
and the way in which that Shared Service Centre can be optimised
within DfT.
Q12 Chairman: Given the difficulties
that we can see outlined in this figure here, are we ever going
to get these remaining agencies joining up?
Mr Devereux: Yes, on the plan
we have currently published. We started the central Department
in April this year as planned.
Q13 Chairman: Why have you dropped
the migration of the Maritime and Coastguard Agency then? I am
looking at paragraph 2.8.
Mr Devereux: I have not dropped
it; it is going to happen in October.
Q14 Chairman: Did you not change
your plans on that as well?
Mr Devereux: Yes.
Q15 Chairman: There was a last minute
decision to drop it.
Mr Devereux: No, it was not a
last minute decision.
Q16 Chairman: Yes, it was moved from
April to October, presumably because everything was going wrong.
Mr Devereux: No.
Miss Moorhouse: It was not a last
minute decision. I took over as SRO arriving in the Department
for Transport in August. At that stage it was very clear that
a programme that was recognised by the OGC Gateway Review as "struggling
to catch up and just about delivering in time" (I think that
is a quote from the OGC Report) would be quite challenged against
the immaturity of the Shared Service Centre that we have just
discussed to handle two more go lives in April 2008. From the
moment I arrived I had detailed discussions with both the chief
executive of the Maritime and Coastguard Agency, the Shared Service
director and other members of the team to determine whether or
not it was the right decision to continue with April or to defer.
We eventually decided to defer, notwithstanding all of the efforts
the Maritime and Coastguard Agency had put in to preparations—which
was extremely commendable—because we felt that the Shared
Service Centre was too immature to handle two more customers hitting
it, effectively, at the same time in April.
Q17 Chairman: "Immature"
is certainly an understatement.
Miss Moorhouse: Yes, it was an
understatement.
Chairman: I think I will have to stop
you there and let other members get in. Austin Mitchell?
Q18 Mr Mitchell: I was feeling sympathetic
under the assumption that you were pushed into the Gershon efficiency
savings but in fact it seems from the Report that you actually
rushed into it with an amazing enthusiasm. The Cabinet Secretary's
letter was sent on 27 March 2007 but you have taken the initiative
on this two years earlier. Why were you rushing in?
Mr Devereux: We did it because
we thought it was the right thing to do and we were ahead of Whitehall
in doing so. It was a very conscious decision.
Q19 Mr Mitchell: You wanted to show
off.
Mr Devereux: No, we actually wanted
the savings. The work dates back to the 2004 spending review and
the work that Peter Gershon did. The fact that it became de rigueur,
and we had a letter from the Cabinet Secretary in 2007, is another
fact. We actually took this, seized it and ran with it. It was
known to the Cabinet Office to be a pathfinder attempt to do this,
and we deliberately did it because we thought it was the right
thing to do. I still think it is the right thing to do; this project
will turn round.
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