Session 2010-11
Publications on the internet
CORRECTED TRANSCRIPT OF ORAL EVIDENCE
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This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others. |
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Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings. |
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Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant. |
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Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee. |
Oral Evidence
Taken before the Public Accounts Committee
on Wednesday 1 December 2010
Members present:
Rt Hon Margaret Hodge (Chair)
Mr Bacon
Stephen Barclay
Stella Creasy
Jackie Doyle-Price
Justine Greening
Matthew Hancock
Chris Heaton-Harris
Joseph Johnson
Rt Hon Mrs Anne McGuire
Nick Smith
Ian Swales
James Wharton
Amyas Morse, Comptroller and Auditor General, Robert Prideaux, Director of Parliamentary Relations, David Finlay, Director, and Marius Gallaher, Alternate Treasury Officer of Accounts, were in attendance.
REPORT BY THE COMPTROLLER AND AUDITOR GENERAL
Procurement of the M25 private finance contract (HC 566)
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Examination of Witnesses
Witnesses: Martin Capstick, Director, Strategic Roads and National Networks, Department for Transport, Graham Dalton, Chief Executive, Highways Agency, and Ginny Clarke, Chief Highway Engineer and Network Services Director gave evidence.
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 and 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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