Letter to the Chairman of the Committee
from the Permanent Under Secretary of State, Foreign and Commonwealth
Office
FCO MANAGEMENT LETTER
1. This letter on FCO management issues
covers the period April to June 2008.
STRATEGIC FRAMEWORK
2. Following the publication of the FCO's
new Strategic Framework, we are shifting staff so that they are
in the right places to deliver our new policy goals. We are increasing
numbers of policy staff in Africa, Russia, Central Asia, the Middle
East and Asia (especially Afghanistan and South Asia). We are
also creating new positions in London working particularly on
climate issues and conflict. We are reducing by around 70 staff
in Europe, and making a modest cut in the Americas.
CAPABILITY REVIEW
3. The reviewers came back to the FCO in
April to assess what progress we had made at the one year point
since the original review. After their data gathering phase, where
they visited one post and spent two days in the FCO talking to
a range of staff and some external stakeholders, they concluded
that the capability of the FCO to manage the challenges we face
had improved. They were pleased to see energy and focus being
applied to all four of our key action areas (FCO role, strengthening
our change management capability, more strategic use of HR and
strengthened business planning processes). They noted good progress
in three of these, and some progress on the fourth—Strategic
HR—but concluded that this was the area where there remained
most to do, including on local staff, diversity, talent management
and the long term "deal" for staff. I attach the Capability
Reviewer's one year update at Annex A.[17]
4. I continue to see the Review process
as a useful opportunity for us to get an outside check by some
experienced people that we are concentrating Senior Management
effort on the right issues. The next review will be at the two
year point (spring 2009).
UKVISAS' MERGER
5. UKvisas merged with the UK Border Agency
(UKBA) on 1 April. The FCO and UKBA operate as far as possible
as one team, both in London and in the overseas network. Staff
from both departments are working alongside each other on a variety
of migration issues; from visa issuing to working with foreign
governments to return immigration offenders, to implementation
of the Points Based System for work and study in the UK, ensuring
that we continue to attract the foreign workers the economy needs.
FCO staff continue to apply for jobs in KBA, and we and UKBA are
committed to FCO staff continuing to fill 40% of the Agency's
international positions.
6. Work has continued on the Service Level
Agreements with the Agency on finance, estates, human resources
and IT, following the Memorandum of Understanding we agreed at
the start of the year. We expect to finalise these shortly.
INTEGRATION OF
THE FCO AND
THE IPS PASSPORT
OPERATIONS
7. The FCO Board decided in February to
proceed with the transfer of ownership of full passport services
to the Identity and Passport Service (IPS) by 2011. In March we
shared with the FAC the Executive Summary on Integration submitted
to the FCO Board in February, (in response to the FAC questions
arising from the 2006-07 Departmental Annual Report).
The IPS Management Board met on 2 April 2008
to consider the strategic case for integration. They accepted
the proposal to merge operations subject to: further clarification
on the financial case; the impact on the delivery of the National
Identity Scheme; governance of the Project and subsequent business
integration. In co-operation with the FCO, IPS will submit a revised
financial case to the Home Office Investment Committee and Home
Office Permanent Secretary for approval in August.
8. In the meantime the FCO's Passports Next
Generation Programme continues to roll out a more structured and
streamlined approach to delivering passport services overseas,
where possible in alignment with IPS policy in the UK and mindful
of full integration in the longer term. An invitation to tender
issued in May for the design and delivery of a new system to issue
secure emergency travel documents overseas by June 2009. This
system will be designed to work with new IPS passport-issuing
systems and databases from the end of 2010 when all overseas passport
printing will be transferred to a central IPS facility in the
UK.
SHARED SERVICES
9. Andrew Lloyd has now taken up his position
as Director Shared Services. Additionally we have strengthened
the senior management team supporting Andrew in order to take
forward the OGC's recommendations on delivering necessary changes
in corporate service delivery to support our front-line activities
and deliver a modern flexible platform for HMG overseas. I have
asked Andrew to focus particularly on the vision and scope of
the Programme, both of which were key concerns highlighted by
the OGC.
10. One of the key elements of the Shared
Services Programme is the Facilities Management Project which
has been looking at outsourcing the cleaning, upkeep and maintenance
of our buildings in the UK and North-West Europe. This is an ambitious
project which offers considerable cost savings. The OGC recently
conducted a Gateway 3 Review of the procurement exercise for the
UK Home Estate and 14 of our posts in North West Europe commenting
that "the Review Team considers the overall project management
and communication to be examples of good practice". As a
result they awarded a Green/Amber delivery confidence assessment.
The project team are currently evaluating tender bids from two
of the leading FM companies in the UK with a view to identifying
and recommending to me a preferred bidder shortly.
FCO SERVICES
11. I welcome the Committee's recent visit
to Hanslope Park, during which members were able to see a range
of FCO Services' operations. The Chief Executive's evidence to
you on 9 July, based on FCO Services' 2007-08 Annual Report and
Accounts, provided a further opportunity for scrutiny.
12. Since becoming a Trading Fund on 1 April,
FCO Services has continued to build on the success of the previous
financial year, with a strong forward order book and excellent
prospects for the future.
13. As a customer, we will continue to work
closely with FCO Services to ensure value for money. We will monitor
closely the realisation of the £2 million year-on-year savings
to be delivered during the CSR period through existing pricing
arrangements.
14. We will also review and develop our
long-term strategic partnership through a new joint Partnership
Board, chaired by our Director General Finance, Keith Luck. This
will provide a forum for both parties to share long-term plans
and drivers, enabling both to understand and support the other's
long-term development.
PUBLIC SECTOR
AGREEMENTS AND
DEPARTMENTAL STRATEGIC
OBJECTIVES (PSAS
AND DSOS)
15. The Board conducted a thorough end-of-year
review of 2007-08 business plans. This provided an opportunity
to speak to each Strategic Priority Owner and Geographic Director
about their team's performance and to receive feedback from them.
Separately, the Board considered the format for external reporting
of our performance. It agreed that for now DSO/PSA performance
should be monitored at mid-year and end-year. This is expected
to be in line with HM Treasury requirements. The Board intends
to conduct a mid-year review of 2008-09 business plans in October.
16. In May, the Prime Minister's Delivery
Unit (PMDU) undertook a baseline assessment of HMG's ability to
deliver PSA 30 on conflict. This covers the work of the FCO (who
lead), MoD, DfID and the Stabilisation Unit. The PSA Delivery
Board chaired by me met in June to discuss implementation of the
review's recommendations. Work is now underway to produce a cross-Whitehall
Delivery plan which will cover the range of our civilian effort
on conflict. A twice-yearly reporting format has been agreed between
the three departments. We expect to present the baseline data
to PMDU for approval soon.
RISK
17. The Top Risks Register (TRR) is updated
quarterly and reviewed by the FCO Board. When updated in June,
the TRR included six operational risks (physical security, resources,
internal financial controls, IT systems, Visas, and FCO change)
and seven strategic risks (terrorist attack, Iran, Afghanistan,
Iraq, Pakistan, Zimbabwe, and Sudan). The Board also discusses
individual risks in depth at its monthly meetings. Most recently,
they focused on Zimbabwe (April) and Iraq (May), to confirm that
appropriate mitigation measures were in place where possible and
were being well managed by the respective Directorates.
18. During the last quarter, we have trained
a further 75 staff how to identify and manage risk. We continue
to build upon our level of expertise and to embed risk management
in our day-to-day activities. We have held three Business Planning
and Corporate Performance Management courses in London and one
overseas. In addition, we have provided risk training on one Heads
of Mission course and three Management Officers' courses.
SERVICE LEVEL
AGREEMENT (SLA) WITH
PARTNERS ACROSS
GOVERNMENT
19. After a slow start, we are making good
headway with the SLA negotiations with other Whitehall Departments,
which will govern the recovery of full economic costs for the
services provided by the FCO. The generic SLA, which has been
developed in consultation with Departments, is currently with
them for signature and it is hoped that we will have completed
the process and have the SLA and charging in place shortly.
ACTIVITY RECORDING
20. I advised you last quarter that we had
successfully piloted an Activity Recording System, which will
enable us to:
— Measure how effective we are at delivering
our DSO priorities.
— Provide information on time spent
providing services to other Departments to enable us to recover
charges.
— Drive forward our efficiency programme.
21. The system has now been rolled out to
all Posts and the first set of data collection will be made at
the end of July; thereafter, data will be collected quarterly.
This development is a major milestone in improving the current
level and quality of management information.
FIVE STAR
FINANCE PROGRAMME
22. The Five Star Finance Programme has
continued to make progress across a broad front. We briefed the
Committee about the programme for the 24 June visit to Hanslope
Park. We are on track to reach the next milestone of 3.5 stars
by mid-July.
23. We introduced a new structure for our
central finance function in April, reinforced with a "Finance
Direct" service which is handling more queries in less time
and with the same staff numbers compared to 2007. We are working
intensively on the quality and speed of management reports for
the Board and operational units, so that the in-year management
of our resources is more well-founded and responsive. We have
a strategy to make use of new, proprietary budgeting and reporting
tools for our management information requirements. To provide
assurance that we are indeed making progress, we are using the
CIPFA financial management model to benchmark our performance
and indicate areas for improvement. This model is being used in
other Departments and the results and action plan from this independent
study should be available by the end of September. We are also
agreeing the terms of reference for a National Audit Office study
of our financial management performance. We expect to see the
results of that study by the end of 2008-09.
RESOURCE ACCOUNTS
2007-08
24. I signed the Resource Accounts on 23
June. The Comptroller and Auditor General (C&AG) signed them
off with an unqualified opinion on Friday 27 June and the Accounts
were laid in the House on Monday 30 June (three weeks earlier
than last year: we were the first Whitehall Department to lay
our Accounts).
SR04 EFFICIENCIES
25. At the start of July I signed off our
final report to the Treasury on our SR04 Efficiencies Programme.
Overall savings came to £132 million, exceeding our target
of £120 million by £12 million. The most substantial
efficiencies were achieved by our Corporate Procurement Group
which realised savings of £23.4 million. For CSR07 we have
a target of £144 million which includes savings in areas
like Improved Procurement, Facilities Management, IT Zero-Based
Review (ZBR), Europe ZBR and Roll-out of the Europe ZBR to other
regions, as well as allocated efficiencies.
PURCHASE TO
PAY
26. Purchase to Pay (P2P) is a business
process used across industry and government which embeds controls
into the way individuals order and pay for third party goods and
services. It ensures that expenditure is properly accounted for
and controlled by requiring more than one person to be involved
in spending public money. It also ensures that commitments to
expenditure are recorded in real time in accordance with best
practice resource accounting. The FCO operates a "No Purchase
Order, No Payment" policy which means that all expenditure
on third party suppliers has to go through our Oracle based financial
system (PRISM) in order for payment to be made.
27. Recognising that the P2P process is
a critical control mechanism and accounting tool the FCO has focussed
on making sure that the "No Purchase Order, No Payment"
policy is working both in terms of accounting for payments and
recording commitments. This means that staff are required to use
the process in real time as decisions about what they wish to
purchase are made rather than simply going to the process when
they want to get a payment made. The FCO concluded in 2007 that
a panel should be set up to measure and monitor compliance to
the P2P process initially in the UK. With the backing of the FCO
Board a "zero tolerance" policy and appropriate sanctions
for non-compliance were put in place which has resulted in compliance
to the P2P process rising from 40% in 2007 to 89% in June 2008.
The work of the Compliance Panel continues in the UK but it is
also switching its attention to achieving compliance with P2P
at our overseas posts.
THIRD GENERATION
FIRECREST (F3G)
28. Rollout of our new IT system, F3G, to
staff in the UK continues on schedule, with deployment of over
3,000 desktop computers by the end of June. Posts in Europe will
start to receive their systems in late summer. The FCO Board agreed
to accelerate the overall overseas deployment so that rollout
of F3G is completed eight months earlier than scheduled. The majority
of overseas posts will now receive F3G by September 2009. A small
number of Posts will be deployed later; these will mainly be posts
who are undergoing new building works.
FCO WEBSITE
29. The FCO website was relaunched as planned
in March with a new design and lay-out, fresh content and improved
functions. Interesting new features include the FCO in Action
Google map (http://www.fco.gov.uk/en/fco-in-action/map)
which highlights examples of our work round the world. We have
enhanced and expanded our blogs (http://blogs.fco.gov.uk/)
and they continue to be well received.
We are using YouTube (http://uk.youtube.com/ukforeignoffice)
and Flickr (http://www.flickr.com/photos/foreignoffice/)
to share videos and photos with a wider audience who may not otherwise
visit the FCO site.
30. The roll-out of the FCOWeb platform
to the overseas network continues. e-Media Team and its regional
hubs have trained over 220 staff from 140 Posts to use the new
FCOWeb platform. Over 20 new Post sites are live and all Posts
will launch their new look websites by this September. The new
sites are rebranded "UK in Country" (for example, http://ukinarmenia.fco.gov.uk),
to reflect the broader work our Posts do to represent UK government
overseas. Posts offer a combination of off-the-shelf information
on core subjects like visas and trade, and content tailored for
the local audience on issues that matter in-country.
HUMAN RESOURCES
31. As members of the Committee know, we
published the FCO's first Strategic Workforce Plan in December
2007. Since then I and others have had a number of useful town
hall meetings with staff, both UK-based and those locally engaged
around the network. Feedback has been positive, with people welcoming
the clarity provided in the plan on our current and future workforce
needs. We are now in the process of revising the Plan to include,
amongst other things, a more focussed section on local staff who
are a vital part of our overseas operation. The Plan will be reviewed
by the FCO Board at the end of July and we will let the Committee
have a copy of the revised version.
32. We have carried out a full review of
the training which we offer staff in order to align it better
with what we think are the current and future needs of staff and
the organisation. We now also have promotion competitions in place
between each Band in the FCO. This, combined with an integrated
management development programme, is improving the quality of
our leadership and management and this is backed up by the results
of the recent all-staff survey.
33. We have also continued to focus on how
our diversity policies can help us to improve performance, deliver
our policy goals and become a better employer. We are currently
carrying out a Cultural Audit to identify barriers to greater
diversity and inclusion in the FCO. We have also created a dedicated
Diversity Strategy Unit to help sustain momentum. Embedding diversity
and inclusion into our performance management systems should help
us to attract and retain the best people, more effectively deliver
the Strategic Framework and serve our customers and stakeholders
better. One key change will be to strengthen the wording on diversity
and inclusion in our core competences for all staff.
THE ESTATE
34. Projects recently completed or currently
under construction continue to contribute to the broad policy
recommendations outlined in the 2005 Jack Review of security.
In May we completed new staff facilities in Kabul and in June
we moved into the new British High Commission building in Colombo
which was officially opened by His Royal Highness the Duke of
Gloucester.
35. When they visited Hanslope Park last
month Committee members toured the new ICT building. The building
was officially handed over on 18 June and staff are moving in
shortly. The High Commission in Kampala, completed in 2005, recently
won a RIBA (Royal Institute of British Architects) International
Award.
36. Last year I wrote to you about the move
of our Embassy offices in Madrid. Work continues on our new offices
at Torre Espacio. In the meantime we have completed the sale of
the present Embassy site for €50.5 million (equivalent to
£39.8 million). Under the terms of the agreement, we will
continue to occupy the present site, rent free, until our new
offices are complete. The Committee will be aware from my separate
letter that we have also recently completed the sale of Marlay
Grange (€8.25 million equivalent to £6.47 million).
37. The enclosed quarterly report lists
the properties sold and purchased (Annex B) in the final quarter
of Financial Year 2007-08 (full details on Madrid and Dublin will
be in the next report). I also enclose a full list of estate sales
and purchases (Annex C) for financial year 2007-08. As with previous
reports we have included the transaction currency, the FCO's monthly
exchange rate, and the equivalent sterling gross sale receipt.
Two of the properties sold—Lisbon and Maseru—were
the Residence of a Head of Mission. In November 2006, the then
Minister for Europe informed the Committee of our decision to
sell the Lapa Residence in Lisbon due to cost and security. The
sale of the property in Maseru follows the changes to the FCO
overseas network announced in the House by the then Foreign Secretary
in December 2004.
38. In my letter of 16 January I undertook
to let you have an independent report commissioned after the voluntary
liquidation of the contractors for the Islamabad/Karachi construction
project. This is attached (Annex D)[18]
along with an action plan commissioned to take forward the recommendations.
Action is in hand and I will report on the progress made in my
next letter.
Sir Peter Ricketts
21 July 2008
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