Examination of Witnesses (Questions 100-119)
DEPARTMENT FOR
TRANSPORT
9 JUNE 2008
Q100 Chairman: You mention these
bonuses but can you give us an idea what a bonus might be in terms
of monetary terms? What has been the punishment? What have they
lost?
Mr Devereux: The bonuses would
be of the order of low tens of thousands, as a top bonus.
Q101 Chairman: So somebody running
this Programme could have got a bonus of how much? What are the
consequences for senior managers?
Mr Devereux: I am doing this from
memory now. I doubt if any of the senior managers in the Department
earn bonuses in excess of 20 grand.
Q102 Chairman: So they have potentially
lost, at the very top level, £20,000. Nobody has lost their
job, of course.
Mr Devereux: As I tried to answer
earlier I am not prepared to go into the territory of exactly
what has happened to individuals.
Q103 Chairman: I am not asking you
to name and shame particular individuals but £81 million
has gone down the drain and we would like to know, without naming
names, what has happened to those involved. Nobody has lost their
job, have they?
Mr Devereux: I am not answering
the question. What I am saying is that there are relatively few
senior officials on this Programme and if you invite me to anonymously
quantify how many of the relatively few have or have not lost
their role I end up in a position where I am hung either way.
Q104 Chairman: All right, you are
not going to answer that question.
Mr Devereux: That is correct.
Q105 Mr Williams: Can I turn to the
NAO for a moment? Bearing in mind our scepticism of the Gershon
figures when we first came across them, did anyone ask the Cabinet
Office how they arrived at these figures? It is interesting that
there is no witness from the Cabinet Office here. How do we know
what hard evidence gave rise to these figures of potential savings?
Mr Burr: Do you mean the Gershon
savings?
Q106 Mr Williams: The savings of
the Cabinet Office, the £1.4 billion as a result of this
exercise across the whole of local government and central government.
Mr Burr: We have produced a couple
of reports on the Gershon savings.
Q107 Mr Williams: I am talking about
these particular savings. Is the £1.4 billion better founded
than some of the Gershon figures originally had been?
Mr Burr: I do not think so, no.
Mr Devereux: Are you talking about
the Cabinet Office assessment of the total potential savings from
shared services which is not the same as £785 million that
we would set as a target ourselves?
Q108 Mr Williams: They have set a
target of £1.4 billion—the whole of central and local
government we are talking about—is that a modest, a realistic
or an ambitious programme, do you think?
Mr Burr: I do not know if I would
be able to qualify it in that way but I think those savings are
in much the same position as the wider efficiency savings we have
commented on on Gershon, some of them are harder than others.
Q109 Mr Williams: Coming to your
figures at the Department for Transport, there is a slight variation
in the briefing that we have from the figures that Mr Davidson
used, but with the total cost originally estimated at £55
million and now it is £121 million, there is a £66 million
loss and with a savings estimate of £112 million now down
to £40 million there is another £70 million loss, how
on earth did you achieve a turnaround of £136 million from
your original estimates?
Mr Devereux: As the way you have
described it demonstrates, there are two halves to that question.
There is an answer in respect of the cost first of all, and the
reasons which the National Audit Office describe that we have
been discussing this afternoon, an estimate of the cost of delivering
this service that we embarked on originally that was clearly optimistic.
We have ended up spending more on this project than we expected.
Some of that is undoubtedly additional cost and we have ended
up doing it in a rush where, had we planned it perhaps, we could
have got better savings out of it. On the benefits side, as I
have tried to illustrate a couple of times, this is still a "to
a point in time estimate", the £40 million net savings
by the end of it. I am not expecting that to be the position by
the time we have finished.
Q110 Mr Williams: Are you expecting
to redeem this loss?
Mr Devereux: I am, yes.
Q111 Mr Williams: In what sort of
timescale?
Mr Devereux: All the figure work
you see in front of you presupposes a timeline out to 2015. If
I can finally encourage the Committee to look at page 47 that
is the alternative version which the National Audit Office has
put down which shows what might be possible in the event that
we would secure, in particular, substantial savings out of procurement.
The only reason for drawing your attention to it is that on certain
assumptions you can make this quite strongly positive. The commitment
I need to make to you as a Committee is that it is very much my
intention that we will not leave this project as delivering a
loss to the tax payer; I cannot see how that can possibly be acceptable
and we will change it round.
Q112 Mr Williams: I see from another
part of our briefing that the Department has identified significant
potential savings from adding routine procurement. In fact I am
rather surprised that routine procurement is a late add-on. Would
that not have been one of the most obvious places to start and
one of the most reliable places to start rather than a desperate
last cast around for something that you will get right?
Mr Devereux: When the Board originally
thought about what it was going to put into the Shared Service
Centre one potential was to embark immediately on the procurement
as well because it is a standard thing to put in procurement.
We consciously wrote a business case which relied only on head
count savings from doing standard processes like invoice payment
et cetera. We are now in a position where actually I think we
can make some progress on that. We have quite a good track record
of procurement across the piece within the Department as a whole
and having now made some more re-organisation myself to use the
skills that we have brought in who are actually very experienced
in this, I believe it is possible to make procurement savings
now and I am more confident about that than I would have been
two years ago.
Q113 Mr Williams: With hindsight
you now accept it would have been better if you had held a competition
in the first place rather than just relying on the IBM existing
arrangement. It would at least have made you focus on precisely
what it was that you as a Department needed and it might have
tightened your analysis in various other areas. Do you regret
that you did not do that at that stage? I am not saying that in
a critical way.
Mr Devereux: Sitting here today
I think that is a very reasonable question. We have taken two
years rather than one year to deliver even the first implementation,
to get the first businesses live. As we have observed in terms
of performance, even after that we have actually managed to damage
the standing of shared services by rushing something out. So from
where I am sitting now, with the benefit of hindsight, it probably
would have been better to take longer and to potentially contract
it out but, for the reasons I have been through previously, on
the best analysis we could do at the time, we believed it was
possible to make faster progress and make quicker savings for
the tax payer. We embarked on this in order to make savings.
Q114 Mr Williams: Whitehall at the
moment proliferates Gateway Reviews. Where were yours? Why did
you not introduce a full range of external gateway reviews as
one might have expected?
Mr Devereux: If you turn to appendix
three on page 36 you will find a long catalogue of different gateway
reviews, the conclusions of which were that in February 2005,
when we decided to embark on this, the review concluded that was
a sensible thing to do. By the time we get to April 2006, the
review is essentially saying that there are a number of things
which are time critical. We had a conversation earlier where I
was saying that at that point it became increasingly obvious in
the April to July period that the things that are in these contracts
that were signed were not being delivered. The April 2006 gateway
review was saying, "You may proceed but only if you fix these
things". It is very clear that those things were not fixed.
Subsequent to that, though, we did have a gateway review; it was
called a health check and it was held in February 2007 before
the system was turned on. That health check came back on an amber
rating rather than a red rating, and an amber rating essentially
says that (subject to doing the things we say) you ought to proceed.
So we had had a succession of gateway reviews, and then as soon
as we had the Shared Service Centre open and had stabilised the
position early in 2007, we then embarked on another one. It is
those reviews which are now consistently recording this Programme
as being in what I think they call "strong recovery".
Q115 Mr Williams: We are told that
you set 18 performance targets for yourselves but you have only
achieved four of the 18. Why so few? Have you prioritised those
targets? Are the four high priority or low priority; are they
easy ones or difficult ones to attain?
Mr Devereux: I think in retrospect
the list of indicators which you see on page 20 was not as well
thought through as it should have been. The fact that I have several
of these that say I cannot measure them even today does not demonstrate
that the thought that went into them was satisfactory, certainly
for the system we delivered. In terms of priorities I am very
clear that making sure that invoices are paid properly on time
(we have a target of 98% to be paid within 30 days) is the most
important external facing one. You will see in the top two lines
of page 20/21 that in April—which goes just beyond the Report—the
DVLA got to 96%. I regard that as a very important one. It is
also important, to be honest, to make sure that the payroll works
out well to make sure that people are being paid properly; they
have an absolute right to expect that. There are two things in
there that are important. Some of the other ones that have been
measured here are, if you like, more internal processing ones,
the one that you identified earlier on about creating customer
details, the numbers of transactions going through are relatively
few, and it is not in the same league as the invoice payments.
Q116 Mr Williams: Figure seven shows
average private sector comparators. Do you think you will ever
get to those levels?
Mr Devereux: I am not sure we
will get to average private sector levels for so long as the Government
requires us to do a variety of reporting which is not done in
the same way within the private sector. In particular there are
some quite complex arrangements to ensure that we properly account
to the Treasury and through them to Parliament for the way things
are spent which are simply of a different nature to the way in
which subsidiaries would simply aggregate up their accounts. There
are things going on in the process which actually make the system
more difficult to operate. That said, when it comes to whether
we ought to be capable of processing invoices properly that is
probably going to turn simply, by the time we have finished with
the process of improvements that we are embarked on, on the question
of scale. As is observed again in the early work you did on shared
services across government, there are very different levels of
scales of operation going on here. It will always be a struggle
for a department of around 18,000 people to actually make these
become as attractive a position as it would be in the private
sector.
Miss Moorhouse: It is a scale
issue. That fundamentally is the key issue for us, and about the
policy of our own internal work, to streamline and improve on
the base we have today which, as you have heard, we are very committed
to doing.
Q117 Mr Williams: We are told that
you are not directing chief executives to implement the business
changes that are needed to achieve savings. Why not?
Mr Devereux: The chief executives
are looking at the performance of the system, and not least the
unit costs which you have just alerted us to, and are very clear
where we have to make improvements on this system. It is clear
that there are things that can be done in each of these agencies
as the system beds in, and as we develop it. I am not intending
to continue in a position where chief executives have a free vote
as to whether to participate in this. The only question we have
to be careful of is to make sure that in making any transfers
in improvement in the business processes we do not undermine the
service delivery to customers at the same time. It seems to me
that we are being asked to do both of those and that is what we
are going to try to do.
Chairman: I think Mr Bacon has a supplementary.
Q118 Mr Bacon: Geraldine Smith referred
to the consulting firm who told you it was possible within the
timetable, though it was not and you did not have the figure for
how much had been spent on them to hand. Which consulting firm
was it?
Mr Devereux: It was Deloittes.
Q119 Mr Bacon: Could you send us
a note with how much has been paid to Deloittes in total and what
it was for, if necessary broken down into different components.
Mr Devereux: Certainly.
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