Government And IT - "A Recipe For Rip-Offs": Time For A New Approach - Public Administration Committee Contents

Examination of Witnesses (Questions 310-341)


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.

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