Examination of Witnesses (Questio Numbers
20-39)
DEPARTMENT FOR
TRANSPORT AND
LONDON UNDERGROUND
PPP ARBITER
19 OCTOBER 2009
Q20 Mr Touhig: So it came to your
Department at the time.
Mr Devereux: We were responsible
for the contract.
Q21 Mr Touhig: Who was responsible
for deciding the successful contractors?
Mr Devereux: London Regional Transport.
Q22 Mr Touhig: Did it have to come
to your Department?
Mr Devereux: I think the answer
is yes.
Mr Collins: Yes.
Q23 Mr Touhig: So the interpretation
of a latter-day Pontius Pilate which you have just given the Chairman,
"Nothing to do with me guv", the buck stops with you,
does it not?
Mr Devereux: No, I am not going
to accept that, I am afraid, because I started this by acknowledging
that there was a loss, and I was taking responsibility for it.
Q24 Mr Touhig: It is easy to acknowledge
a loss; we as the taxpayers are picking up the bill. Your Department
has a responsibility—I personally accept that you were not
there at the time; I understand all that but your Department was
responsible—for this whole process and the buck must stop
with you surely.
Mr Devereux: It does.
Q25 Mr Touhig: We have established
that. We know from paragraph 1.34 on page 17 that there was a
shortfall of £1.8 billion in Metronet's bid. Why was that
not noticed at the start? I assume you looked at the bids even
though you were not responsible for giving the contracts out at
the end of the day.
Mr Devereux: I think you will
find that figure refers to what was actually bid and subsequently
what emerged.
Q26 Mr Touhig: There was a shortfall
of £1.8 billion and did that not ring any alarm bells?
Mr Devereux: It was not known
at the time the contracts were let.
Q27 Mr Touhig: It was not known?
Mr Devereux: No because the bid
was £1.8 billion less than that. Figure 5 demonstrates what
the company expected to spend, that is the column called Source
on the right-hand side, and the column called Spend is what they
subsequently realised they would need to spend.
Q28 Mr Touhig: So none of this was
known by your Department. That is what I am trying to establish.
Mr Devereux: At the time the contracts
were let, by the time the contracts were let.
Q29 Mr Touhig: In paragraph 1.22
on page 15 of the C&AG's Report it tells us that in 2007 the
average cost of refurbishing each station was twice what they
had budgeted for. Did that not sound any alarm bells, any warning
lights?
Mr Devereux: That sounded alarm
bells, yes, because we were now into the period of the contract
and these were facts that were coming to light as the contract
progressed.
Q30 Mr Touhig: So what happened then?
Mr Devereux: What happened then
is what is recorded in the C&AG's Report.
Q31 Mr Touhig: Did you not intervene
then and say something is going wrong here? The average was twice
the budgeted figures; some were three times higher than the original
figures. All these red warning lights and your Department does
not notice them?
Mr Devereux: The Department does
notice them. I have explained what the Department's position is
in these contracts. Let me also explain the fact that a particular
cost is increased in one area does not of itself lead inexorably
to there being a loss for the taxpayer. Tube Lines has, for example,
already incurred substantial additional costs on its stations
and that does not necessarily mean there is a loss which the C&AG
is going to assess as uneconomic and inefficient.
Q32 Mr Touhig: Surely any housewife
will tell you that if she has less money coming in and
she cannot manage her household budget, there is a problem. This
is much more complex than that of course but here are warning
lights and your Department does not take any action.
Mr Devereux: Any housewife would
indeed say that. The Transport Select Committee, having looked
at what Tube Lines has done congratulated them, for example, on
their ability to reduce the time to refurbish escalators from
nine months to nine weeks. They congratulated them on reducing
the time to introduce station modernisation by 40% and they congratulated
them on things they were doing in this contract. These people
bid for a contract, they then sought to bring their expertise
to it and in the process they learn about how to do things and
how to make savings. It is a characterisation of this story which
you can even find here in Metronet; even while some things were
costing more there were other areas where they were indeed making
savings below what they thought they would.
Q33 Mr Touhig: There has been a huge
loss to the taxpayer.
Mr Devereux: Yes.
Q34 Mr Touhig: Your Department had
overall responsibility for this.
Mr Devereux: Yes.
Q35 Mr Touhig: You do not seem to
want to accept that responsibility.
Mr Devereux: I am sorry; I do
not see how you understand I do not want to accept it.
Q36 Mr Touhig: Has anybody been sacked
as a result of this? Has anybody been dismissed in the Department?
Surely somebody has to have responsibility for this? Yes or no?
It is a simple question. Has anybody been sacked as a result of
this debacle?
Mr Devereux: I am not going to
go there.
Q37 Mr Touhig: You do not know.
Mr Devereux: I am not going to
go into what has or has not happened.
Mr Touhig: Chairman, are we entitled
to ask these questions?
Q38 Chairman: We can ask. If you
do not know the answer you can send us a note.
Mr Devereux: I will send you a
note.
Q39 Mr Touhig: That would be helpful.
The C&AG's Report tells us that though the Department itself
was not a party to the contract, as you have made clear, it had
the job of securing two particular objectives. First of all protecting
the taxpayer from potential financial liabilities and, secondly,
you were responsible for ensuring that in delivering the improvements
which the taxpayer funded they were operating effectively. You
failed on both counts.
Mr Devereux: If the C&AG concludes
that there is a loss to the taxpayer the answer to that question
must be yes.
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