Examination of Witnesses (Questions 310-341)
JOE HARLEY, MALCOLM WHITEHOUSE, PHIL PAVITT, AND
MARK HOLDEN
22 MARCH 2011
Q310 Chair: Thank
you very much indeed, gentlemen, for joining us to give evidence
to our Inquiry on the use of IT in Government. Can I just place
on record an informal declaration of interest that the Chairman
of Fujitsu Europe is a close personal friend? Could each of you
introduce yourselves for the record?
Malcolm Whitehouse:
I am Malcolm Whitehouse, Group Applications Director for DWP.
Joe Harley: My
name is Joe Harley; I am Chief Information Officer for DWP and
for the Government.
Phil Pavitt: I
am Phil Pavitt; I am the Director General for Change and the CIO
for HMRC.
Mark Holden: Mark
Holden; I am the Director for Projects and Programmes for HMRC.
Q311 Chair: You
are in the firing line: you get a lot of flak, don't you? Can
I start by asking why you think Government has such a bad record
on procuring IT?
Joe Harley: I
think it is patchy, Chair. We recognise that there have been
problems in the past; some things we could have done better with,
for sure. What I do believe we can do, though, is really learn
the lessons from the past, and I believe in the Department we
really are learning those lessons now. We have a very comprehensive
lessons-learnt database, which we share with the project and professional
community. We share that database and those lessons of what has
worked and what has not with new projects when they emerge. We
have strengthened our governance—I think that is a key element—through
our investment committee and our change committees, and we assess
all our key projects against the NAO's common causes of failure,
and we constantly keep abreast of that. The commercial, off-the-shelf
packages we use now as a matter of routine, and we break down
the projects into manageable components.
I think we are really learning the lessons, Chair,
and whilst there have been mistakes in the past, I think we are
starting to get a track record now of delivery. I think DWP is
recognised as a department that does deliver, and in recent times,
with the Employment and Support Allowance and more recently the
State Pensions Reform, we are starting to see an emerging track
record of delivery. There is much to do, to be honest, and capability
improvement is key in all of that. I think we are learning on
how to improve capability.
Q312 Chair: But
this has been going on for 15 years, with the pain of failed IT
projects. What is changing now that has not changed before?
Perhaps I can ask one of the other witnesses. Mr Pavitt?
Phil Pavitt: Thank
you, Chair. Like Joe has said, there are a number of things that
are going on. Government is in transition. I think there have
been failures both in the private and the public sector; we are
not immune from that. I think the challenge is to learn from
those things in how quickly you make that transition and that
learning. We had a joint programme recently with a pensions reform
programme, which we delivered to many vulnerable people in the
UK, a very successful programme. That obviously does not get
quite as good press as some of the ones that have failed in the
past. You can come to HMRC and look at selfassessment online,
which is again one of the biggest used online processes: 7 million
people used it this year, 31 January. It is one of the busiest
websites and transactional processes in the world, and a tremendous
success story used by many people.
The learning of governance, the learning of lessons
in how we procure, the learning of how we break projects into
smaller component parts is critical, and that has been going on
for the last two or three years, and some of the success rates
you will see in the last 18 months are a result of us taking on
those learnings.
Q313 Chair: But
you both have a long track record in this field. Over that period,
each disaster that occurs, is that a different lesson that is
being learnt, or is it the same lesson that has not been learnt?
Phil Pavitt: Let
me start by answering that I think there are two things: you learn
lessons both from success and from failure. We are referring
here, of course, to learning just from failure, but those programmes
that are successful provide just as much learning as those that
do not work out so well. Certainly, when you talk about how well
you procure, how well you manage programmes, how good your governance
is, they are critical to get right. The big learning for us around
the Pensions Reform Programme actually - in the previous session
there was a lot of conversation around talking to customers, users,
the business designing it - that was very much a businessled,
businessdesigned programme. We have learnt that from subsequent
programmes that have also been successful. I think there are
ways of learning from both success and failure over that period
of time.
Q314 Chair: Can
you give us examples of solutions that address previous failures
that have now proved they can work?
Joe Harley: We
may come on to Universal Credit, Chair, but one of the things
that we are trying to do in Universal Credit that is different
is to reuse as much of the IT assets that exist, rather than developing
everything from scratch. So together with the use of commercially
available packages and the reuse of existing assets we are finding
that reduces the risk to delivery. Those are the main things
that are different.
We are also in Universal Credit—and Malcolm
may wish to comment on this—using a different methodology
called the Agile methodology for projects and programmes, and
this was a recommendation from the recent Institute for Government
report that recommended Agile as a development methodology. We
are using that, we are trying to be innovative and creative, reusing
what we already have, and we have a new way of doing things, delivering
things quicker, and derisking it.
Q315 Greg Mulholland:
I think it is fair to say that there is something of a collective
feeling of anxiety over the scale of the two big projects that
are coming forward, because of the experiences that there have
been with regard to Government IT. When it comes to the Universal
Credit and the realtime information, how confident are both
of you from both departments that these very large projects will
be successful, and what are you doing differently from some of
the projects in the past that have not worked?
Joe Harley: Thank
you. Could I just say that, from a Universal Credit point of
view, the project is off to a great start. We have the team in
place; we have the executive sponsorship there. We have strong
governance now set up; we have steering groups for the IT component,
the policy component and the overall delivery. We have shared
governance arrangements with HMRC, and we have a ministerial oversight
committee.
We have recently completed with the Major Projects
Authority, the new Cabinet Office body, a starting gate, and they
have given us a good rating on that. They felt that the start
we have had in Universal Credit is impressive. So, a good start.
What we are doing differently is the Agile approach, the reuse
of components that I have talked about and the early engagement
of the supplier community in helping us move forward.
Malcolm Whitehouse:
I would like to just go back to the example that Joe referred
to, the Employment and Support Allowance, where we learnt quite
a lot in terms of both how we set out the technology to be used
at an early point in time so the engagement of our suppliers in
the programme is very clear, but also so the technology components
that would be used to make that work incorporate about 60% to
70% reuse from other activity. That gave us the start point that
allowed us to be confident in both the timescale and the estimates
that we had, so that meeting the October deadline in 2008 was
something that we had high confidence in. We have built on that
to look at the component set that we need for Universal Credit
to effectively identify those areas where we can reuse things
that are in place in the Department and things that are in place
elsewhere, and hence the relationship with HMRC for realtime
information.
Fundamentally, one of the major challenges in delivering
large programmes in Government using IT is around the engagement
with policy and with the customer base, which is why we have introduced
the use of Agile as part of the delivery programme as we go forwards.
This allows us to make sure that, during the short iterative
developments that we are working through with the known technologies,
we can engage with our customers in early testing of the customer
journeys, which are part of the development proposition. That
gives us the ability to really prove out at a very early stage
that what we are using will work, but more than that: what we
are using, what we are putting in place, will actually work with
the customer base that we are addressing.
Q316 Greg Mulholland:
And what about the realtime information?
Phil Pavitt: Let
me start, and perhaps Mark will want to join in in a moment.
There are three or four biggest lessons we have had from both
our successes and areas that perhaps have not worked as well over
the last few years. I guess the first is around governance, so
this is very much a business-led project: business are sponsoring
it, running it, developing it, and as Joe refers to, we have actually
learnt from that to extend our governance between our two organisations.
We are already heavily involved; as day-to-day work between us,
there are over 3 billion transactions that go between us
per annum anyway as two authorities. The governance structure
that goes around that is critical.
The second part we have learnt is around business
planning. Business readiness has probably been one of the biggest
areas of criticality that we have got wrong in the past, where
often IT has arrived and the business has not always quite been
ready for it, and so in parallel to doing the technology we are
actually working really hard on this and other similar programmes
to make sure that the businesses are redesigned so that they are
ready to take on all the new technology, and the new processes
that go with that are also done just as critically.
The third area of course is reusing what we have.
We have an enormous legacy system. Just to put into perspective
the sheer size of what we are looking after in HMRC, we are looking
after the income of £435 billion of tax. We have enormous
systems that are running that, and reinventing all that would
be foolish, so we are actually using many of the assets we have
today to help design this answer. Mark was the leader on that
programme, I don't know whether you want to just add to that,
but those are some of the biggest lessons that we are learning
to ensure it actually works coming forward.
Mark Holden: Indeed.
If I can just add one other dimension to that, which is we are
very much minded that we need to design our services going forward
around our customer needs as well as the departmental and wider
Government needs. So to that end we have a number of stakeholder
forums that we have already engaged in getting feedback on the
proposals. We have obviously just gone through the consultation
around the realtime information, and we even had representations
from a number of bodies on the main programme board, so we really
are putting the customer at the heart of our design and our development
process.
Q317 Greg Mulholland:
Thank you for that. Clearly the success of the Universal Credit
is partially dependent on realtime information being operational,
so can I ask how you are ensuring that the two systems will be
fully interoperable, but can I also specifically ask on the DWP
side, if RTI takes longer to develop than is hoped, are there
are contingency plans for the Universal Credit to make sure that
is still deliverable?
Joe Harley: I
think one of the things that we have put in place that will help
the overall delivery is that we are doing, next month, an end-to-end
review of the entire technology solution, from HMRC through to
DWP. This will be an end-to-end technical review, we will do
it fairly frequently going forward and we will have an independent
assessment of that. This will again add to the assurance around
the solutions that are being provided. In terms of a contingency,
maybe Malcolm will talk about that, but any programme, of course,
needs to develop contingency plans, and we are in the course of
doing that.
Malcolm Whitehouse:
Coming back to the specific question, which is the interoperability
and the connection between the two, we started working jointly
in the summer of last year to look at the requirement. The fundamental
requirement is around the data from realtime information,
which allows us to understand gross and net pay, and the deductions
that are made as a consequence will go into the calculation of
the Universal Credit taper, as it is known, but fundamentally
what people will get as a consequence of their entitlement. We
agreed the requirements set for the data at the end of last year,
which has gone into the development process, and also have started
work on the nonfunctional requirements in terms of scalability
and performance and service-level arrangements that need to be
in place.
We have developed the file transfer protocols between
the two agencies to be very clear on how we will handle and encrypt
the data transfer between the organisations, and then as part
of that planning going forwards we have a number of key integration
points at which we will test out the solution, which gives us
the opportunity to prove at an early stage that interoperability
is not a challenge. There will be a later point at which we will
then test the actual data that comes through as a consequence
of employer payroll takeup as it feeds the information into
the realtime information depository, and that will give
us the opportunity to prove out at that stage that these will
work in practice and at scale. As I say, we have a number of
key integration points planned over the course of the next two
years.
Q318 Greg Mulholland:
In terms of the suppliers who are delivering these big projects,
did existing Government contracts mean that they went to existing
suppliers automatically, whether or not they were actually the
best-placed suppliers to deliver this, or were you able to consider
alternative suppliers who might be better suited to this type
of project?
Joe Harley: The
DWP will be a bit of both. We are using some existing frameworks
at the moment for a range of suppliers to help us at this point.
Q319 Chair: Sorry,
when you say "existing frameworks", that means you have
to go through a lead supplier to access other suppliers. Is that
correct?
Joe Harley: Not
necessarily; a framework can be access to a range of suppliers
that have previously prequalified for a particular piece
of business, so we can do both. But what we are running at the
moment is an open competition, where we have been out to the market,
we hope to award that business in the summer, and that will provide
an opportunity for a new contribution from the supply community,
so it is through an open competition basically.
Malcolm Whitehouse:
What we have been working through is a capability-based framework
to ensure that the supply community have the skills, the capability
and capacity to do the work that we need in Universal Credits
and elsewhere. One of the fundamental pieces of learning that
we have found—and this was through both the Employment and
Support Allowance and more recent projects and programmes—is
that while reuse of technical capability helps in terms of setting
out the underlying infrastructure that you use to deliver the
IT to enable our business programmes, the other important element
is to have reuse of the skills and the people that have been involved
in that, and so using the framework gives us the opportunity to
engage suppliers that already have that knowledge and can bring
it to bear. The reuse is both the components that we have but
also critical knowledge that means that you can build on that
very rapidly.
Q320 Greg Mulholland:
Are you confident that existing frameworks have meant that the
procurement process has been flexible enough to engage the right
suppliers?
Joe Harley: I
think on the Universal Credit space, the open competition that
we are running now gives flexibility, so yes.
Q321 Greg Mulholland:
What about realtime information?
Phil Pavitt: In
terms of realtime, we are primarily reusing most of our
legacy systems for the core revision of the service, so that has
been procured through our framework agreement we have with Aspire,
which is the conglomerate of organisations that serve us on the
IT space. They are the experts, certainly on the legacy engines
that run PAYE and the sheer size and scale of what we are doing.
For one unique part of this we have also brought in through the
Aspire contract the use of VocaLink, which again are the world
leading experts in banking transactions at volume. So for us
in terms of getting the best of breed in what we need to deliver,
but also primarily using the systems we already have, because
most of ours is around reuse, for the majority of this space we
are using Aspire and VocaLink, although VocaLink does come through
the Aspire contract for the first time as part of this deal.
Q322 Chair: That
has been highlighted to us as rather a problem for your department:
that in order to benefit from a subcontractor like VocaLink they
have to come through the Aspire contract. That cannot be an efficient
way of purchasing VocaLink services.
Phil Pavitt: Mark
can answer the detail, because Mark has managed the commercial
process through this. But just to set out any supplier that comes
through the Aspire contract: what we gain from that is a number
of things. First of all obviously we gain Aspire; Capgemini are
the prime operator of the space I am just about to describe.
They provide us a level of reassurance that we can either provide
on our side or we can ask them to provide for us, and that is
what they are doing for us: that lessens the bureaucracy and gives
us higher flexibility in terms of how we go to market. It also
allows us, of course, to have access to quite a few suppliers
in the market.
Q323 Chair: Allows
you to have access to quite a few suppliers? You are the Government.
Surely you can have access to any supplier you want?
Phil Pavitt: We
can do, but sometimes we have to make sure they are first pertinent,
particularly of what we need to manage and deliver. We have over
240 suppliers coming through that: managing those individually
would be quite a heavy bandwidth for a Government department to
manage, so we are using Aspire to do that for us.
Q324 Chair: But
the problem is that when VocaLink want to talk to you, they cannot:
they have to go through Aspire. If you want to talk to VocaLink,
you cannot: you have to go through Aspire.
Phil Pavitt: Without
wishing to contradict you, unfortunately, we do meet VocaLink
and many other suppliers directly, face to face. They are involved
in the programme boards to run things. Commercially, when we
say "go through" it does not mean there is a wall between
us and them. VocaLink spend more time in our offices probably
meeting us and our customers face to face than even the Aspire
suppliers, so that is actually not completely true, unfortunately.
Chair: Not completely true?
Phil Pavitt: It
is not true in that there are some suppliers that have no wish
to meet us: they just provide services. But there are many suppliers
who have innovations and ideas they want to share with us, and
they can directly do that to us.
Q325 Chair: But
they cannot initiate a relationship with you: they have to go
through Aspire?
Phil Pavitt: Unfortunately
they can initiate a relationship. We have a number of ways of
placing people into the Aspire ecosystem, which is a supply chain
management process. Aspire themselves can do that because they
see some of our emerging needs over the next few years, and we
ourselves can do that. I myself have placed somebody into the
ecosystem just a few months ago; we are not only using their services
now, but we think that in the next four or five years that organisation
will be important to us, so they are now in the ecosystem, directly
through myself.
Mark Holden: I
also think it is worth adding that certainly with VocaLink, which
is a good example, although it is, as you say, procured through
that framework, I have a number of one-to-one meetings with a
number of senior executives through the VocaLink organisation.
They are able to bring ideas, solutions to the table, so it is
not filtered through Aspire. The important thing for us, for
a project of this size and the level of integration between the
UK's banking system and our national PAYE system, it would be
unwise for us to move away from the people that know those integrated
internal systems and allow a completely new person to try and
integrate those on a national infrastructure project at this level.
Q326 Chair: If
VocaLink wanted to offer you a service and a price, you could
talk to them about the service and the price?
Phil Pavitt: Absolutely.
Chair: And there are no
constraints on that conversation?
Phil Pavitt: Not
at all, no.
Q327 Chair: That
is not what we have heard from elsewhere. Why do you think that
is?
Mark Holden: I
think there is certainly some history. This is a project that
has been thought about for many years, and I know that VocaLink
have been very keen to get widespread coverage of the ideas and
concepts. I think it is only when you get into the detail of
how you integrate the national BACS transaction system with our
PAYE that some of those intricacies come out that we have to understand
where it would be very difficult and very expensive to build a
completely new standalone set of infrastructure for the project.
So I think it is only as we have got into the more detailed discussions
that it has become clear that actually we do need both sides of
the equation.
Q328 Chair: But
as we move forward to Agile development—and that was mentioned
before, and it has been endorsed by the IFG report, as Mr Harley
mentioned—surely this kind of direct conversation with a
larger and larger number of suppliers is the future, because you
are going to be breaking up and modularising the development of
your systems?
Phil Pavitt: Indeed,
and from our side, whatever methodology you use to deliver projects—Agile
or any other—it is making sure you are gaining from your
suppliers innovation, ideas, challenges, better prices, or even
having those suppliers combining themselves to come and see you.
One thing that Aspire certainly does give us is that we do not
have to go and combine two or three different supplier components
to make up a whole. In fact, they are already doing that for
us, and are presenting us a very end-to-end picture of some of
our solutions going forward.
We use a number of methods. We have innovation process
four times a year, where the businesses and HMRC meet the suppliers
in the ecosystem under Aspire and discuss needs from both sides.
But also individual organisations are forever bringing ideas;
some of them have merit, some of them do not, but they are directly
into the IT department and into the businesses themselves. Those
conversations are going on all the time.
Q329 Chair: So
Mr Harley, have you worked in this way before—in Agile?
Joe Harley: We
started a project last year.
Q330 Chair: Can
you describe exactly what is different about that project compared
with what you have done before?
Joe Harley: The
Agile methodology is most useful when one is engaging with citizens
or customers directly, where you need to have a customercentric
approach to the delivery of the product. So it involves the development,
building, testing in a rapid way, so that you deliver solutions
that much earlier. That is what we will be doing for Universal
Credit and that is what we started last year with another project
in the department called the automated service delivery project.
Q331 Chair: So
what proportion of your spend on new systems now, or system development,
is on Agile development?
Joe Harley: Malcolm,
you might be able to help me with this.
Malcolm Whitehouse:
We started the automated service delivery programme last year,
and looked at the best way to deliver the outcomes. Now, this
is focused on straight-through processing for Jobseeker's Allowance
and the very difficult areas involved in change of circumstances
for the first two releases, which is how fundamentally we need
to understand what has happened to a citizen in their circumstances,
their dependence or their earnings levels to be able to digitise,
for want of a better word, but to get more of the capability online,
so we are delivering a selfservice proposition for this
part of delivering Jobseeker's Allowance.
To make that work what we wanted to be able to do
was to engage with our customers to understand where their challenges
were in two areas. One is working with the Department: what do
they need to do in transitioning between states, but also in terms
of the usability of the interfaces that we put in place—the
user interface to make that work. That has given us a lot of
learning in terms of the approach. So far we have seen an improvement
in both speed to delivery and the underlying cost of delivery,
and that has given us the confidence in being able to use this
on a broader base.
We expect that in Universal Credits the Agile activity
will be about 60% of the development. The remainder will be on
some of the core infrastructure delivery that we need to support
it, which will take a more traditional route to development and
delivery than using Agile. But we have already seen the ability
to deliver outcomes, which means that we can see the way that
the rules base, both in the automated service delivery project
and the early work on Universal Credit, is showing us how the
policy and legislation translates into business rules that deliver
outcomes for the customer.
Q332 Chair: But
what proportion of your spend is now spent on Agile development,
as opposed to the old, dare I say, failed method?
Malcolm Whitehouse:
Can I answer that? It is 60% on both ASD and Universal Credits.
What we did not want to do was to take a blanket approach and
say, "Right, from now on every project and programme will
be Agile," because that requires quite a lot of training,
so for every person that goes into our Agile workshops we put
them—irrespective of where they have come from—through
a threeday learning activity to make sure they really understand
what sits underneath it, because it is not just a development
methodology; it is also a culture change. It requires empowerment
from the people involved.
Chair: But did you say
60%?
Malcolm Whitehouse:
60% on Universal Credit, and then when we get the understanding
of how to make this work elsewhere we will start to adopt it more
widely. But just to put it into context, in terms of delivering
IT support for our business projects, as well as our 15 major
projects, we have about 200 very small projects, about 50 to 60
medium-sized projects, and we also undertake 60 to 70 releases
against our legacy applications each year. What we did not want
to do was to say, "Let's move everybody immediately,"
which is a large learning activity.
Q333 Chair: Are
there barriers to Agile and Agile development?
Mark Holden: I
think it is fair to say that there are areas where Agile is more
suitable, particularly for that rapid development, the customerfacing
services--
Q334 Chair: But that
is a different question: do you find there are obstacles to moving
to Agile development where you can identify that it would be a
useful methodology?
Mark Holden: I
do not think it is as much that there are barriers: we could adopt
it where it is appropriate. I think a lot of our IT-enabled business
change programmes are very much based on the development or enhancement
of our legacy systems, which is not the suitable environment for
Agile. So I think it is about horses for courses.
Q335 Chair: Moving
on to Open Source and Open Standards, how much success have you
had with Open Source development and Open Standards in HMRC?
Phil Pavitt: Open
Source has been around for some time now, and in HMRC we have
been very fortunate to develop a quite extensive Open Source-based
set of solutions. Through Aspire and through the partners that
are inside Aspire, we have transformed our website—which,
as you know, is one of the largest websites in the UK, if not
in Europe—to actually become a completely Open Source technology.
This is the website, obviously, which selfassessment and
so on runs through, so that is a website on which, as I said before,
over 7 million people completed their self-assessment online.
Not only is it out there in a very large scale in terms of Open
Source, it is very heavily used. Some of the challenges around
Open Source in the past were perhaps around security, around volume,
around its ability to manage large transactions, as we have certainly
seen. We have managed to combine the heavy use of Open Source
on the website side in particular also by using Open Source through
very established vendors to make sure we have the protection and
also get the support going forward. That is Open Source.
In terms of Open Standards as far as HMRC is concerned,
we believe we are the leader in the UK Government on that. We
develop Open Standards by giving away APIs—application programming
interfaces; the ability of people to take a core piece of data
and do something with it—a standard to build to. We currently
work with just over 1,500 developers for developing those people
who are registering in terms of their end of year, in terms of
also completing their process for doing their fouryear reconciliation.
Also, of course, we use commercial software providers,
and have an extensive use of software providing things like tax
online and also VAT. Again, we gave away the core through a set
of standards to do that. So Open Source and Open Standards are
pretty much the way we do business right now.
Q336 Chair: I am
going to jump ahead to one other question. Unfortunately we are
very shorthanded today because colleagues have other duties in
the House and we are about to lose another colleague, in which
case we will have to go into informal session, and I do apologise
to you for that, but maybe we will get more out of you. Can I
just ask about the role of large suppliers? It has become axiomatic
that three suppliers completely dominate the market—it may
be more than three suppliers—and there are far more purchasers
than suppliers. HMRC, for example, have recently renewed their
contract with Capgemini; that locks you in until 2017. Given
that we are now looking at different ways of working, is this
a sensible course of action? Shouldn't we be looking to fragment
the market with our purchasing activity, rather than to consolidate
it?
Phil Pavitt: Well,
what we have done recently with Aspire, this is a contract now
that has been in some shape or form around in HMRC since 2004,
so it is quite a long-term contract--
Q337 Chair: But what
is the advantage of a long contract?
Phil Pavitt: I
think it brings a number of things: in terms of the sheer size
of what we are doing—and you have heard very briefly about
the sheer complexity in size of what we are doing—we need
stability. We need a strong assurance and a strong reassurance
about what we have and what we can do for the future.
Q338 Chair: But the
record of these long contracts is first of all that you pay them
to create the mess and then you have to pay them again to clear
it up.
Phil Pavitt: Let
me just try and understand that a bit better. In terms of where
we are, obviously we outsource what we had to the previous suppliers,
so what they are managing is what we started with in 2004. In
terms of clearing things up, there are a number of downsides that
people describe on long-term contracts: for example, locked in
cost. Now, we have seen over the last two or three years—in
fact, only in 2009—a reduction in our costs negotiated with
our supplier, Aspire; that is all the members of Aspire, not just
Capgemini. It is obviously a multiple contract. We saw a reduction
of about £161 per million for the rest for the rest of the
period of time, so that is almost a £1 billion saving. So
we are seeing that costs are not actually going up, we are seeing
those reduced, and we have things like benchmarking and value
for money, which is driving down the individual cost on a regular
basis.
What we are also seeing, of course, is the other
thing big thing about locked in: where do you get innovation from?
Where do you get some new stuff? What prevents them saying,
"This is just the way it is always going to be." I
described to you before about Open Standards and open sourcing.
We are not having that experience. Innovation is always a challenge,
because we want to make sure that we innovate and they innovate
and we do it together, particularly with a business. But actually,
we are not seeing some of those downsides. Our biggest challenge
will actually be to make sure the market can cope with someone
the sheer size of HMRC and how you manage, in this case, 240 suppliers.
We are seeing in our contract there are challenges, but we are
seeing much of the upside we want to see from it.
Chair: And yet, so little business goes
to small- and medium-sized enterprises.
Q339 Greg Mulholland:
One suggestion we have heard is that the Government could break
up its contracts into smaller pieces, which obviously would then
help the small and medium enterprises. Is that realistic, or
would that be too much of a challenge for the way Government procures?
Joe Harley: Yes,
I think there is much more we can do for small and medium-sized
organisations. We really need to try and create a level playing
field for them, and the timescale to get procurements done is
long—too long, I would say—and costly, not just for
Government but for suppliers, and that goes against helping the
SMEs. There is more to be done here, and we can break up the
contracts a bit more in a way that will help with the level playing
field. We do use suppliers, SMEs, in the Department, and some
of those are direct and some of those are indirect. But there
is more to be done, and this level playing field will help.
Q340 Greg Mulholland:
Can I ask, I do not know if this information is available, but
is information published on not only how many SMEs the Government
currently has direct contracts with but also subcontracts through
system integration? That would be very useful, because it is
acknowledged, I think, by Government that historically it has
been a very low number. Are there numbers available? Are you
going to tell us today, or if not could you write to us?
Joe Harley: I
will write to you at a Government level, for sure, on the direct
and indirect. From a departmental point of view, it is a lot
easier to measure the direct contracts, and today in DWP about
a third of all our suppliers are SMEs, so we can measure that
reasonably well. It is a lot harder to measure the indirect and
the subcontracting of SMEs, and even further into the supply chain:
second and third tier, where it is very difficult. Some SMEs
come out of being an SME because they are growing and developing,
others come into it, so it is a changing feast, and it is quite
difficult to get your arms around. But we are working with our
suppliers on it.
Q341 Chair: A very
last question: the Government has said that they are going to
mandate that the primes will have to subcontract a proportion
of the contract value to SMEs, yet the evidence that we have heard
already in our Inquiry is that this simply will not work. What
is your view about this practice? Would it not be better for
you to contract directly with more SMEs, rather than rely on prime
contractors to subcontract to SMEs, who will inevitably be subject
to the prime contractors' interests?
Joe Harley: Well,
I think we can do both. I think it depends on the nature of the
services. I think for innovative, niche services, where we do
use SMEs, direct contracts are fine. Where we are dealing with
large-scale infrastructure projects or large scale developments
it is much more difficult to see that capability resting with
SMEs. So I think that it is an area of more to be done, and in
terms of our procurements going forward we will be assessing the
quality of those bids for services against how they are going
to use SMEs in the course of the discharge of that service. So,
it is something we are going to take a real active interest in
and promote. It seems it is good business to do.
Chair: Thank you. We
will have to go into informal session. It means that we will
no longer have an official transcript, but please consider you
are continuing on the record, because our Committee adviser and
the clerk will take notes.
| 
