Adapting the Foreign and Commonwealth Office's global estate to the modern world - Public Accounts Committee Contents


Examination of Witnesses (Question Numbers 1-19)

FOREIGN AND COMMONWEALTH OFFICE

  Q1  Chairman: Good afternoon. Today we are considering the Comptroller and Auditor General's Report on Adapting the Foreign and Commonwealth Office's global estate to the modern world. We welcome back to our Committee Sir Peter Ricketts, who is the Permanent Under-Secretary at the Foreign and Commonwealth Office and Head of the Diplomatic Service. Would you like to introduce your two colleagues, please?

  Sir Peter Ricketts: On my right is Mr James Bevan, who is the Director General in the FCO who superintends our estates and security work and on my left is Mr Alan Croney, who is our new Estates Director and a professionally qualified expert on estates management.

  Q2  Chairman: Sir Peter, the Committee has before it the letter that you sent us on 19 February with your estate strategy. Of course this has come in quite late so members of the Committee may not have had time to familiarise themselves with it, so perhaps you could give us an overview of this letter.

  Sir Peter Ricketts: Yes, of course, Chairman. We wanted first of all to update the Committee on some of the activities in our estates management over the last six months or so to give you a sense of the projects that we have been working on, some of which I am glad to say have been done on time or early and below budget, one or two have been more difficult and have gone over budget for reasons we can discuss, and to alert the Committee to some continuing issues we have with the estate; and also to foreshadow that in our FCO Board this month, last week, we took an estate strategy very much on the lines of the recommendation in the NAO Report. We had a long discussion on that in the Board. It is not quite finalised yet but we will finalise it very rapidly and I will send it to the Committee as soon as we have it. That is a much fuller statement of the estate that we aspire to run for the FCO and the principles that we will operate in doing that.

  Q3  Chairman: For future reference it would be helpful to have this information a bit sooner before the Committee.

  Sir Peter Ricketts: I apologise that it came late.

  Q4  Chairman: Do you have the resources to implement this strategy in full?

  Sir Peter Ricketts: No, I do not have the resources I would like to implement the strategy as fast and as comprehensively as I would want to. We are resource constrained. We can do the essential work, both in terms of replacing embassies that are not secure, refurbishing those that are old and out-of-date, and we are tackling a backlog of maintenance and security works and health and safety works, however, resources are a constraint.

  Q5  Chairman: I was a bit surprised to read that you are basing this strategy now on OGC guidelines. I would have thought that you would have always have based it on OGC guidelines. There is nothing new about this, is there?

  Sir Peter Ricketts: I think we should certainly be collecting the data the OGC require. Technically OGC guidelines have only applied to government buildings in the UK and there are some features of embassies that are always going to be different to typical government buildings in the UK. Many of them have space for representational work, for receptions, for trade promotions, for cultural work. Many of them have spaces for visa interviews and waiting rooms and so on that are not typical of Civil Service buildings in the UK. It is a not a surprise that we do not match up fully to the OGC guidelines. I think we should have been collecting the data more rigorously than we have so that we have the evidence base to see where we are short of the OGC guidelines and what we need to do. We are now putting that right to collect the data. I think an embassy overseas is not necessarily comparable to a classic government building in the UK.

  Q6  Chairman: I understand that. You now have a specialist Estate Director sitting here. Is he now going to have the information he needs? Perhaps he might answer. Have you got all the information you need to do your job?

  Sir Peter Ricketts: I might pass the floor to Mr Croney but I suspect the answer is we need to work to get him the data but that is in hand now.

  Q7  Chairman: Will you have the authority to drive through change in this far-flung empire?

  Mr Croney: We do not have the data at the moment but we are already working to fill the gaps in the data set and also to collect additional information as well. Clearly, that will take some time, but I see no reason why we cannot collect that across the network and I certainly believe that the Board has empowered me and my colleagues to achieve collecting that data.

  Q8  Chairman: And you will have the authority within the Office, will you?

  Sir Peter Ricketts: I will certainly make sure that he has my authority in following this up. I think our heads of mission out and around the embassy network are keen to get on with modernising our estate, correcting the problems with it in terms of maintenance work or it not being a sufficiently modern environment in terms of IT and open planning and so on. I do not think we have a problem of incentivising people to get on with it. We do have a problem with resources and we have an opportunity now, on the back of the NAO recommendations, to do more centrally in our Estates Directorate, to give more direction out to people as to what we expect them to be doing.

  Q9  Chairman: It seems to me that the problem is that we have a lot of unused space here, maybe for historical reasons and also because other government departments which are coming out to these places are often leasing their own properties. You are obliged to lease your property at commercial rates so they may think they can get a better deal by taking their own properties instead of using your unused space. As a result, we have the taxpayer effectively paying twice. What I want explore briefly with you and the Treasury is how we can get a commitment from other government departments to use your unused space?

  Sir Peter Ricketts: Thank you for opening up that area, Chairman. I think you are right. Our estate is not very flexible in the sense that we invest a lot of money in the security, so moving from an embassy to a smaller place is very expensive. Some government departments have been changing very fast the way they operate around the world for reasons that are perfectly rational for them. UKBA, for example, has stopped issuing visas in a lot of places around the world and is bringing that work back to some regional hubs. That has moved fast and it has meant that we have a lot of empty visa offices and waiting rooms and interview booths in our embassies around the world. Reconfiguring that into space that we can use or slimming down our buildings to take account of that is an expensive and quite time-consuming operation. That is one problem—the speed at which other departments have been changing the way they operate, leaving us with rather inflexible space. The second issue, as you rightly indicate, is that from the point of view of overall value for money for HMG I would have thought the right answer as far as possible is to have government departments all working together in the same place abroad. It is true that the Treasury's full economic cost model, which is what we have to charge for people using our space, puts them off sometimes.

  Q10  Chairman: Over to the Treasury now, how are you going to drive this process forward so that we can encourage other government departments to use this unused space?

  Mr Gallaher: I believe there is a Shared Services Group of which the Treasury is a member and it works with the FCO and other key players overseas, and we are striving, where possible, to improve procurement, IT and property management together. We hope that this group will lay greater emphasis on departments using FCO space where appropriate and avoid going into commercial deals which may be cheaper but in the long run are more costly to the taxpayer.

  Q11  Chairman: Do we have enough information that we need, Sir Peter, on the average space per person that you employ and the cost, compared to other government departments? Maybe it is not comparing like with like. The Treasury told us the Treasury had to do a lot more thinking than other government departments and they need more space. What is your thinking on this?

  Sir Peter Ricketts: We can think in a very small space, Chairman. I do not think we do have the data that we need, to be absolutely honest, to be able to show that. I think that is part of the requirement Mr Croney is pursuing to get better management information so we have that sort of information. Nonetheless, your general point is right. In some cases we have been able to agree, for example with DFID, to co-locate DFID back on to our property. In Delhi, for example, DFID are moving back into the compound, which is good, and they have done that in Africa as well. The pace at which some of the larger tenants of our space have been moving, particularly UKBA, has left us running to catch up with a rather inflexible estate with a lot of sunk investment in it.

  Q12  Chairman: I saw in your letter that you had a bit of a problem with Algiers. Is that right? You were over budget and over time?

  Sir Peter Ricketts: Yes.

  Q13  Chairman: You said it was to do with exchange rate movements but could this not have been planned for? You opened new embassy offices in Algiers in June 2009. It was late and over budget. "This was due to exchange rate movements and a change in our liability to pay tax on the project." I suppose none of this was foreseeable, was it?

  Sir Peter Ricketts: There was also a problem of terrorism and the domestic security situation which did not help, the retrospective application of VAT certainly added a lot to our costs, and exchange rate movements there and in other places such as Warsaw have added to the costs. I think the sharp exchange rate depreciation in 2007-08 did catch us out. We were not hedged and so we took a hit on the currency there.

  Q14  Chairman: What is your overall strategy in terms of new buildings for your staff? Presumably you do not want to go down the American line of moving all your staff into fortified bunkers on the edge of town. You want to keep our traditional offices, embassies and residences as much as possible in the middle of towns and you cannot always be thinking they are more of a terrorist target. You see what I am getting at. What is your thinking on this compared to the Americans?

  Sir Peter Ricketts: Exactly as you say, not to be building bunkers that completely exclude all members of the public. I am very much in favour of risk management. We have to protect our staff. That means we have to be secure but that does not mean to say we should deny all public access and build a 20-foot wall around all our buildings. In some parts of the world we can still be pretty open to members of the public where the risk is low. In places we have been building such as Sana'a in Yemen or in Baghdad or in Kabul, of course, it is going to be a very secure place. By and large, we want to be in the centre of town, modern, flexible, with as much public access as we can, given the security.

  Chairman: Thank you very much. Richard Bacon?

  Q15  Mr Bacon: Perhaps I can just continue with the point you made a minute ago about the need for greater security in certain places. Damascus would be pretty high up on anybody's list of places where you need high security. Your letter to us says that you have had to suspend work on the new embassy offices in Damascus after evidence came to light that aspects of the security of the site may have been compromised. This was presumably during the development and building phase it was compromised?

  Sir Peter Ricketts: Yes.

  Q16  Mr Bacon: But also that you have asked your financial compliance unit to investigate and report, so it sounds like on the face of it there are concerns from the security point of view and that people have got their hands in the till. Is that right?

  Sir Peter Ricketts: The second part is not right. I do not want to go too far into the security issues but I think the Committee will understand, yes, we came across a problem which seems to have meant that unauthorised access was allowed to the site when it was at a very early stage of being built, which has obvious security implications, which are very worrying. When we then dug into it and looked into the contracting arrangements, we were not satisfied with the way the contracts had been done and therefore we have asked our financial compliance people to look carefully at it. I do not have any evidence of fraud or corruption.

  Q17  Mr Bacon: It is a security problem.

  Sir Peter Ricketts: There is a problem. I might ask Mr Bevan, who has looked in more detail at this than me, to say another word but there is both a security and a contracting problem.

  Mr Bevan: There is a security problem in terms of operating in Syria and the potential threats that that might pose to our embassy, which obviously we cannot go into in detail in public on, where, as the Permanent Secretary said, there has been evidence that the site was not sufficiently guarded at an early stage.

  Q18  Mr Bacon: This is the thing I do not understand because that is what it sounded like. Surely—and this was my point at the beginning—it is obvious before you start that somewhere like Damascus is very high risk, just like Basra, just like Baghdad so why did you not get the guarding right to start with? I think this happened with the Americans. They built an embassy somewhere, it might have been one of the old embassies in Moscow, and only after it was three-quarters built discovered it was full of bugs. Is this not the sort of thing that you could risk manage? You have said you are in favour of risk management. It is blindingly obvious that that is a very high-risk location so why did you not build that risk in from the start?

  Sir Peter Ricketts: You are right and we should have done, Mr Bacon. I have absolutely no excuse. I think it was a failure there.

  Q19  Mr Bacon: How much is it going to cost us?

  Sir Peter Ricketts: We do not know yet.


 
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