Examination of Witnesses (Questions 1-21)
DEPARTMENT OF TRANSPORT AND HIGHWAYS AGENCY
1 DECEMBER 2010
Q1 Chair: Can
I welcome you all to our Committee hearing this afternoon and
say immediately that we're probably going to have to adjourn soon?
We've all been told there is an imminent vote, so apologies for
that because that distracts us and we lose the flow of things.
I've got to start by saying to you, we've now been
meeting as a Committee for about six months and I think when I
read this Report, and I know it's a view shared by Committee members,
it's probably the most shocking Report I've read in terms of failure
to provide value for money for the taxpayer; we have a whole range
of concerns. I'm afraid it's not going to be a pleasant Committee
meeting for you. I apologise for that because we do try and be
constructive but I think the cost and delay and failure to provide
value for money is pretty shocking. As I read the Report, the
Department commissioned consultants back in 2000 to deal with
the issue of the M25, and the contract was only let in 2009—nine
years later. Which of the many delays, which are set out in the
NAO Report, do you think were avoidable?
Graham Dalton:
The Department started consultants on doing the ORBIT Study back
in about 2000. That was quite a free-ranging study that looked
at many aspects, not just about getting on and widening the motorway.
That was just one of them.
Q2 Chair: Can
I just ask you to please the answer the questions? There were
a whole load of delays. The consultants was one—they took
two years to report—but there were a whole load of delays.
What I actually asked you was which of the delays were avoidable?
Graham Dalton:
I'm not sure that I can put my finger on any of these specific
delays and say they were avoidable. The final one was with the
credit crisis and the longer term to raise finance, which was
much longer than we expected.
Q3 Chair: That
was probably the least avoidable.
Graham Dalton:
That was a factor of the market.
Q4 Chair: You
think the rest were all completely acceptable: nine years' delay
from the start of looking at the M25 to letting a contract? You
think, apart from the credit crunch, which I would have said is
probably the one thing that was unavoidable—well, it was
avoidable, because you could have signed the contract before the
credit crunch—everything else was unavoidable?
Graham Dalton:
Madam Chairman, with respect, it was not nine years' delay; it
was nine years to get from the initial need to do something about
congestion on the M25 to having a contract let.
Q5 Chair: Well
what's so difficult about widening a road?
Graham Dalton:
Once you've decided that's what you want to do and that that's
value for money, you can get on and do it. There was time spent
on getting the procurement together, and that was going through
from about 2004, when the widening entered the programme for improvements—sorry,
2003.
Q6 Chair: To
2005. It took you two years to just put the ad in.
Graham Dalton:
And determine the procurement route and how it would be bought.
Q7 Chair: Two
years.
Graham Dalton:
And one should remember there was a Comprehensive Spending Review
in the middle of that time as well. October 2004 was when the
funding—
Q8 Chair: Two
years—two years to decide. You'd done a load of PFIs anyway.
You are probably a Department more than any other, and an agency,
used to doing PFIs. So two years, just to put the ad in the paper.
And I can't see what's complicated about widening a road.
Graham Dalton:
With respect, it's two years in which putting the ad in the paper
was the easy bit. It's determining how it was to be procured
and what the job was to be and the sequence that it would go.
Q9 Matthew Hancock: You
said, determining how it was going to be procured. In paragraph
1.15 of the Report it says, "The Agency's preference was
for a single private finance contract. It did not assess a single
conventional contract." Were any other procurement options
tested?
Graham Dalton:
Yes; we looked at multiple conventional contracts.
Q10 Matthew Hancock: Which
in particular?
Graham Dalton:
It's about the scale of what one's putting out. The design construction
market is established such that around £250 million
is a size of contract to go for. A single conventional contract
was not assessed because that was determined very early on to
be something that was far too big for the market.
Q11 Matthew Hancock: So
coming back to the original question, do you think that there's
anything that the agency could have done to have made this happen
more quickly?
Graham Dalton:
I'm sure in hindsight there would have been some things that could
have been done. There could have been some earlier decision taking.
Q12 Matthew Hancock: So
which of the delays could have been shorter? You've just said
it didn't need to take nine years, so which of the delays could
have been shorter?
Graham Dalton:
I think the various stages could possibly have been run a little
bit faster.
Q13 Matthew Hancock: Which
stages?
Graham Dalton:
I'm afraid I'm not in a position to say. Any—
Q14 Matthew Hancock: Sorry,
no—hold on. You've just told me that various stages could
have been done quicker. The Chair's first question was "What
could have been done more quickly?" You've told me various
could have been done and I asked you which ones and you've told
me that you can't tell me. That doesn't make sense. How could
you have done this quicker?
Graham Dalton:
I apologise if I seem to be—
Q15 Matthew Hancock: Not
answering the question.
Graham Dalton:
There is a lot to be done in each stage. If these phases go through—
Q16 Chair: Do
you want to go to appendix one?
Graham Dalton:
I'd be happy to.
Q17 Chair: I
think that's the right one. Appendix one, page 32. In 2000, you
commissioned the report.
Graham Dalton:
That's right.
Chair: Now, what could
you have done more quickly so that we didn't end up with a contract
that hit the credit crunch and we didn't spend nine years from
deciding something had to be done to actually just letting a contract,
not even completing the work?
Graham Dalton:
I think there was probably time at around decision making after
the report was published and time selecting when to go in, between
2002 and probably 2004, when it went into targeted programme for
improvements. So there's a question around there. Certainly
between 2004 and 2005, there was a lot of initial design, a lot
of assessments so as to work what was the optimum procurement.
There was a lot of time then spent between 2005 and 2006, between
OJEU and tenders actually going out, on preparing those tender
documents. I think that was time well spent. There is always
a question of whether it could be done more quickly, but also
whether that would have been at the expense of the quality of
the documents that went to tender.
Q18 Mr Bacon: Well,
they were expensive enough. Most of the documentation was done
by consultants, wasn't it?
Graham Dalton:
Much of the design and the preparation of documents was done by
consultants. That's right.
Q19 Mr Bacon: So
it was, and you spent an enormous amount of money doing that.
There is a section specifically on the use of advisers. You
spent a total of £80 million—this is figure 9—and
there was £14 million on lawyers. The technical working,
excluding the design works, was £21 million and £41 million
in total excluding the design works, then another £24 million
just on technical advisers and design works. So I'm not quite
clear why, if you were spending all this money on getting all
this external help, it should have taken so long. Why, when you
were buying in this help, couldn't it have been done more quickly?
Graham Dalton:
I think there's a question of the sequence to be worked through.
It's not just a question of putting more and more people on and
running an infinite number of people all at the same time to come
up with an answer; but it was about preparation of tender documents
and contract documents, and those were being done in parallel
with preparing the technical scopes and specifications.
Q20 Mr Bacon: On
which you spent a total of £80 million. The point about
this is, going back to the Chairman's first question: this is
a bit of road widening. There's a map here showing where it is—it's
not even the whole M25; you're talking about two chunks. Even
from the decision to do it, when the Government publicly said
we are going to do this, which was two or three years after the
original study, it still took you the length of the Second World
War after that to let the contract. Why?
Graham Dalton:
The construction work, the improvement works—absolutely
right. That is some road widening; it's two sections. Actually,
the contract and design were done for the four sections that are
there, including the later upgraded sections as well. This is
also about the contracts for the maintenance for a period of 30
years and getting the performance specifications right for maintenance,
and it included setting up for transfer of the Dartford Crossing
also to go into the contract.
Chair: You're telling
us what happened, you're not telling us why. We've got to go
and vote. I'm going to come back and ask you the same question.
Q21 Ian Swales: Maybe
you can work through it, because my first question would be, what
was in the ORBIT Report? I wasn't around at the time. How detailed
was that? It took two years and two months to do. What did it
tell you? How much work was already there at that point?
Chair: So perhaps whilst
we vote—and we will try and reconvene as quickly as we can—you
can think about what you could have done more quickly.
Sitting suspended for a Division in the House.
On resuming—
Chair: Apologies for that;
we would be better delaying because I think otherwise, it will
be too disruptive and I think the issues are really important
in this. Are you okay with that, everybody? We'll have to reconvene
and you might, by the time we reconvene, be able to answer some
of our questions. So apologies to the witnesses and apologies
to the public, but I just think if there's four Divisions on the
trot, it's madness.
Mr Bacon: Okay.
Chair: Sorry.
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