Public Administration Select Committee - Minutes of EvidenceHC 123

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Oral Evidence

Taken before the Public Administration Committee

on Tuesday 12 March 2013

Members present:

Mr Bernard Jenkin (Chair)

Paul Flynn

Kelvin Hopkins

Greg Mulholland

________________

Examination of Witnesses

Witnesses: Tim Heywood, Director, Public Sector & Procurement, Burges Salmon LLP, Tim Cummins, Chief Executive, International Association of Commercial and Contract Management, and Dr Paul Chapman, Academy Director, UK Government Major Projects Leadership Academy, gave evidence.

Q277 Chair: Can I welcome our panel to this evidence session on procurement? Could I ask each of you to introduce yourself for the record please?

Tim Heywood: Good morning, Mr Jenkin. I am Tim Heywood and I am a Director in the law firm Burges Salmon. I specialise in public procurement and projects.

Tim Cummins: Good morning. My name is Tim Cummins and I am Chief Executive of the International Association of Commercial and Contract Management.

Dr Chapman: Good morning. I am Paul Chapman and I am a Fellow in Operations Management at the Saïd Business School, University of Oxford. I am the Academy Director of the UK Government Major Projects Leadership Academy.

Q278 Chair: Thank you for being with us today. Ever since the Gershon Review, which was-believe it or not-in 1999, which is a long time ago, people have been talking about the issue of the lack of commercial skills in Government. Do you think there is any evidence that Government has more commercial skills than it had then? How far away are we from having enough commercial skills in Government? What do we mean by commercial skills?

Tim Heywood: My own impression, and I worked for 15 or more years in the civil service on commercial deals before I returned to private practice, is that since Gershon there has been an improvement and a noticeable scaling up of commercial and, in particular, procurement skills in the civil service. If I were to anticipate the second question-which might be: are there enough skills currently?-I would have to say that there are lots of centres of excellence. There are lots of civil servants who are very, very good in terms of commercial nous, procurement skills and so on, but there are not nearly enough of them for the scale of procurement being undertaken.

Q279 Chair: What do you think commercial skills actually are? I heard of a very senior diplomat who was doing an audit of their skills and who ticked the box that they had commercial skills because they had worked for six months with DSO. I would not count that as having acquired commercial skills.

Tim Heywood: It is a good question. To have any sensible claim on a commercial skill set, one would have to say that one had spent quite a lot of time in one’s career negotiating major contracts, understanding what the bottom line is for the supply side, writing the contract terms themselves and renegotiating them. That is, in other words, dealing with all the nuts and bolts of the whole lifecycle of transactions and getting a balanced view of what matters to the purchaser and what matters to the provider, so that you can make it a winwin relationship.

Tim Cummins: I would say that the challenge postGershon is that we are on a moving platform; the world has not stood still. We have moved from an environment, and continue to move from an environment, where we were perhaps largely product based in what we did, to a world where we are increasingly focused on services and solutions. We are dealing with new levels of complexity: globalisation, new technologies and new regulation would all be good examples of the increased complexity of the commercial environment. I would say the skills have certainly advanced but the overall gap between Government and, in a general sense, the private sector has probably not closed.

Chair: I think that was a no.

Tim Cummins: I would say that they have enhanced but not in the sense of closing the gap overall.

Chair: Okay. Mr Chapman?

Dr Chapman: It is Dr Chapman.

Chair: I beg your pardon.

Dr Chapman: Not at all.

I was unfamiliar with the level of skills at that time. If I could make a broader point, I think that it would be very difficult to measure accurately. It would be easy to fall into anecdote and nostalgia as a broad concept around the amount and level of quality.

Q280 Chair: Is this the wrong question to ask?

Dr Chapman: No, I think it is the right question to ask. Unfortunately, there probably was not a benchmark at that period of time and it is difficult to measure now. You are also asking the right question around what are commercial skills. It could benefit from being seen in a wider context. If we are talking about the private sector, any chief executive should have commercial skills, although not necessarily specific ones, which they would look to people with a financial or commercial contracting background to support them in. Commercial skill starts at that highest level-what is trying to be achieved? Then it will probably break down into some more specific skill sets that specialists may be required for.

Q281 Chair: What do we mean by commercial skills? We all have in our mind’s eye what we mean by commercial skills. You say it cannot be quantified. Is this actually a futile line of questioning? We know when somebody is really commercial. Is it about things you can learn to do or is it about developing an aptitude and an instinct? I would say it is the latter.

Tim Heywood: I would agree.

Q282 Chair: Can that be taught? Can a civil servant learn it after they have been indoctrinated with our system of public administration, caution and risk aversion?

Tim Heywood: A good proportion of what we call commercial skills is about having a natural aptitude and a natural commercial nous, which is about knowing how to get a deal done, understanding what value for money looks like and being comfortable managing risk.

Q283 Chair: So the word "risk" comes in. It is about understanding and being comfortable with risk. The civil service tends to be very risk aware and loves enumerating risks on submissions, when in fact most commercial people look at the top three risks and ignore everything else. That is commercial nous, is it not?

Tim Heywood: It is. But I think the civil service is very good at managing risk.

Chair: Really?

Tim Heywood: All sorts of different types of risk. There is a subset of risks that come into play when a contract is being negotiated.

Q284 Chair: Can I challenge that? Isn’t the evidence that the civil service is so determined to manage risk that they add risk? They are so risk averse they actually add cost and risk to projects. They add delay, add complexity and add risk.

Tim Heywood: That is often the case but if you are looking at risk in its broadest sense, there are risks when you are developing a brand new policy and there are all sorts of risks in one’s everyday life. Actually, the civil service is quite good at managing complexity in my experience.

Chair: Really?

Tim Heywood: I think so. In a commercial context, the nature of the risks changes and that is where there is not the normal familiarity. It is outside the comfort zone of most civil servants because the civil service is essentially an administrative organisation.

Q285 Chair: In the case of managing risk better, is it about changing processes, is it about changing the perception of the people who are in charge of the processes, or is it about something else?

Tim Heywood: It is about culture and recognising that because so many major policy initiatives are dependent on private sector relationships for their delivery, which has been the direction of travel for 15 years or more, there has been a growing demand for contract management skills, negotiating skills and the broader set of commercial skills we have been talking about.

Q286 Chair: Are there any other comments on risk and risk management?

Tim Cummins: I think you are absolutely correct to highlight the point of risk and risk allocation. We do in fact do quite a lot of research trying to look at the impacts of risk approach to results. If we look specifically at the public sector, our research suggests that, firstly, the actual incidence of project failure within public service is not higher than in the private sector. Obviously, there are some very different dynamics, not least of which is the reality of public audit. Unfortunately, if it is public sector failure, everybody knows about it, whereas not too many CEOs go around talking about private sector failures, so we do get a somewhat distorted view here. What our evidence suggests is that the public sector does pay a significant premium and suffers some loss of value because of its rather constrained view of risk. It does not do a good job, and this goes back to your point on commerciality, of balancing risk and opportunity-risk and counterrisk, if you will. A consequence of its risk-averse behaviour is that it finishes up paying a price premium. It tends to finish up with relationships that are adversarial. That in turn tends to lead to suboptimal results, from the point of view particularly of innovation or creativity.

Dr Chapman: I think there might be two different levels of what we are referring to as commercial skills. One might be around contract negotiation and financial control, but there is another broader set, which is about what we are trying to achieve here. That will require a commercial understanding of how to achieve those objectives. At a higher level there will be some issues, and then at a delivery and operational level there will be a separate set of skills. They may require specialists, but there are some general skills. I do not see the public sector being any less capable than the private sector in that regard.

Q287 Chair: We have had evidence from a procurement expert who now works for the Federal Government of the United States. He has done an analysis and says that if you look at the data, it is all very simple: the shorter, the cheaper and the less complicated the project, the more likely it is that the outcome will be in line with what was originally intended. You can use any metric you like-the number of people involved, if that goes up; the amount of time the project takes, if that goes up; the amount of complex technology, if that goes up; the amount of money and the time the project takes-and whichever metric you use, there is an exponential tailing off of effectiveness of procurement. Isn’t the answer to encourage procurement to be done with far fewer people, much more quickly, much more cheaply and in a much less complicated way? He would argue that the Virginiaclass submarine has been purchased more quickly and under budget in just such a manner. It need not necessarily just apply to small projects. What do we think of that?

Dr Chapman: Could I lead off on that one? I think that is a phenomenon of project size.

Q288 Chair: Well, the Virginiaclass submarine would seem to disprove that; it is a very large project.

Dr Chapman: I am not familiar with the details of how that was procured.

Q289 Chair: But it is obviously true, is it not? That curve on that graph is obviously, ineluctably true.

Tim Heywood: I would agree with my colleague that it is a function of a well designed and managed project, to keep the project, whatever it is, as short as it can sensibly be.

Q290 Chair: And with a nice really small project team that has to do it in a hurry. If you give people too long to think about things they will make things too complicated, won’t they?

Tim Heywood: I am not a great fan of doing things quickly just for the sake of doing them quickly, personally.

Q291 Chair: It would save a lot of money.

Tim Heywood: Not in the long term. What we are all after in procurement is value for money, not just cheap.

Q292 Chair: Maybe I have three witnesses in front of me who are addicted to process, when actually process is not what we want; we want outcomes. Maybe this is part of the problem in the whole procurement world: the more we think about it, the more we think about process, and the less we think about outcomes. We always think the outcome is a product of the process. Well, it is. The more process you have, the less outcome you have.

Tim Heywood: I am not a fan of overengineered process at all.

Q293 Chair: We have an awful lot of that in the public sector.

Tim Heywood: Yes, heaps of it.

Q294 Chair: So should we not get rid of some of it?

Tim Heywood: The answer must be yes, but which bits of it? Therein lies the skill.

Q295 Chair: Are there any other comments?

Dr Chapman: My concern with the example that you gave-not being familiar with the detail-is that it may be better to break a project down into smaller chunks and procure each one separately, which would then require a smaller procurement team that could be done quicker, so instead of one £1 billion project, it would be five £200 million ones. That is probably a better way of doing that project, both to procure it and also to deliver it. An example-this is not a real one, apologies-is if you are doing a railway line. I am sure that Crossrail was not done this way, but if you procured the stations separately and then each section of track, as long as you were using some common standards that allow them to connect, that is probably a better way to procure it than to do one big, £16 billion procurement.

Q296 Chair: Was LOCOG one massive single procurement or was it split into lots of separate procurements?

Tim Heywood: My recollection of it is that it was a programme divided up into sensibly proportioned projects.

Q297 Paul Flynn: Do you think there are any particular Departments that are better at procurement than others; the Ministry of Defence perhaps?

Tim Cummins: I think there are pockets of excellence. Unfortunately, perhaps, there is limited replication of those things that work well.

Q298 Paul Flynn: I am listening with astonishment to what you are saying. Could I give you an example that is not in the past but is happening now; it is happening today. According to The Independent newspaper we have done a deal, although others say negotiations are carrying on, to pay £30 billion to Électricité de France, who are €33 billion in debt anyway; if they were not nationalised the company would be bankrupt. A deal has been done for 35 years involving £150 billion in subsidy to pay for new nuclear power stations, the only two examples of which in the world are in Finland and Flamanville. One of those is four years late, one is six years late. One is 3 billion over budget; the other is 4 billion over budget. That deal is being done in secret now, in spite of the fact that the Coalition said they would not have any subsidy for nuclear power. They are tying us in, without Parliament’s approval, to a deal that will be a burden for the next 35 years. Does this sound like a sensible negotiation in procurement?

Tim Cummins: No.

Q299 Paul Flynn: Okay fine, but it is going on. Anyway, let us take the other one. I have read the Gershon report, and was around when the Gershon report came out and decided it was fine, yet all the weaknesses found by Gershon have been reproduced in the West Coast rail franchise. Everything was repeated, if you read the headings of the Gershon report. Here we are 13 or 14 years later and we are repeating the same errors. What would your explanation be of the failure of the West Coast franchise?

Tim Heywood: That was a massively complex franchise award, one of great importance obviously.

Q300 Paul Flynn: And the result was an utter disaster.

Tim Heywood: I would focus on one of the comments in the report on that from the Chair of the Public Accounts Committee, which was that there was inadequate sourcing of external commercial and procurement skills. I think Margaret Hodge said they had not brought in enough legal and commercial consultancy, bearing in mind, on that particular project, there were not sufficient inhouse commercial and procurement skills. That was one of her comments. I do not know, as I was not involved in the project.

Q301 Paul Flynn: The Government are against outside contractors; they denounced the previous Government for excessively using contractors and consultants from outside. I presume they are biased against that, so they use their own inhouse contractors and make a mess of it.

Tim Heywood: All I would observe is that one has to get the balance right. It does not matter what the job is, if one does not have the skills and resources available internally, one must purchase them externally.

Q302 Paul Flynn: The Laidlaw report highlighted the failure in the Department’s analysis of data and evaluation of bids, and lack of adequate Government arrangement and assurance work, which would have identified errors at an earlier stage. What exactly did they get right? Anything? From start to finish, in virtually every respect, this was an utter mess and disaster.

Tim Heywood: I have to say that I am not competent to comment on the ins and outs of that particular procurement.

Q303 Paul Flynn: But you have just been praising the quality and saying it was better than in the private sector.

Tim Heywood: Only in general. That is one of the exceptions that might prove the rule, Mr Flynn.

Q304 Paul Flynn: How about two aircraft carriers without any aircraft to go on them? Was that an example of brilliant procurement?

Tim Heywood: Thousands of public procurement exercises are undertaken by the civil service every year. I completely agree with you that one can always point to unfortunate exceptions. As Tim said, those are always public in nature. The public sector do not have the luxury of keeping things to themselves in the same way. It is important to be fair and even-handed with taking an overall "helicopter" view of public procurement. A heck of a lot of it is undertaken. Most of it is done really well and there are no problems with it. Can it be improved? Well, what process anywhere in the world cannot be improved? Are there exceptions to the rule that, basically, this is competently undertaken?

Q305 Paul Flynn: Can you give me an example in the private sector that is on the scale of the losses and ineptitude of the West Coast franchise, the new nuclear procurement, and the two aircraft carriers? I think the aircraft carriers were £8 billion, I think, the aircraft carriers were.

Tim Heywood: I am not sure I would be privy to the details because it is not public knowledge.

Q306 Paul Flynn: If the private sector was involved in this and lost billions of pounds-and these are billions; tens of billions in the new nuclear area-they would not be in business any more. How can you possibly claim, which you have, that-

Tim Cummins: If I may, I would suggest that a parallel we could look at, and a very current one, is the Dreamliner. Boeing are obviously a much respected international company and have been very successful for many years, yet the Dreamliner can hardly be gauged at this moment to be a commercial or public relations success. There is an interesting parallel because what management at Boeing did in the mid1990s was make a fundamental strategic shift away from what had previously been done largely on an internal basis towards much more of an outsourced model, without an adequate understanding of the shift in skill, capability and competence that they needed as an organisation, to manage that different environment. That goes interestingly to the comment you made, Mr Jenkin, around subdivision of projects. They really struggle with the challenges of managing this multivendor model and integrating and aggregating activity. They have also behaved in a traditionally very risk averse way, without understanding the impacts it was going to have on supplier behaviour. They finished up with a project that ran many years late, substantially over budget and a fleet that is now grounded.

Q307 Paul Flynn: How much was involved? How many billions?

Tim Cummins: I do not recall but clearly there were several tens, including the development project.

Q308 Paul Flynn: One of the many complaints made in the West Coast Main Line disaster was that they were too involved with other schemes, such as High Speed Rail and so on, and they had too much on their plate. Presumably they could not get more people in because of the cuts and the aversion to employing outside contractors. Does this strike you as a serious problem-that they were trying to punch above their weight and above their capabilities?

Tim Cummins: I think it is a very real challenge for businesses everywhere, whether public or private sector. Unfortunately, when you go into some of these new or more innovative models there is often a lack of appreciation of the implications and the nature of the skills and resources you are going to need. It would appear, certainly in this case, that there was a misjudgement in that regard.

Q309 Kelvin Hopkins: On the West Coast Main Line issue, in 2011 the Cabinet Office established the Major Projects Authority to oversee and direct the effective management of all large-scale projects that are funded by central Government. The MPA gave the investment decision for the West Coast Main Line procurement a green rating in July 2012, stating that the Department was well placed to award the contract. Something has gone horribly wrong. I suspect there might be some political mischief involved and the Department wanted to allocate the contract whatever the costs. How on earth can the Major Projects Authority give a green light to something that turned out to be a catastrophe?

Dr Chapman: That is a very specific question and I personally would not be able to answer it.

Q310 Kelvin Hopkins: I have another question, which I have put to other panels of people giving evidence to us before: isn’t the reality that, as you said yourselves, franchising is complex and difficult? Isn’t it a complete nonsense and driven by ideology rather than common sense? This sort of thing could not happen in the nationalised, integrated railways systems on the continent of Europe, which are much cheaper to run, by the way.

Tim Heywood: Pass.

Chair: There is silence on that.

Tim Heywood: Again, it is a very specific question.

Q311 Chair: Can I chip in at this point? Some relatively junior civil servants seemed to get it in the neck for the failure of the West Coast rail franchise competition. Do we think that is fair? Do we think that it was senior civil servants responsible for downsizing the Department and allowing key skills to walk out of the door or Ministers who restricted the use of consultants? Do we not think that this reflects some strategic failure rather than some, relatively low down the chain operational failure?

Tim Cummins: Turning it back to the core of the discussion today-the issue of skills and their adequacy-all that you are depicting goes straight to the point. There has perhaps not been an understanding of the skill sets and capabilities needed within the organisation to deal with today’s business models. I was talking with the general counsel of one of the major rail contract providers recently who said, "Ten years ago I was always busy involved with contracts to sell trains. Today we are involved with contracts to sell networked systems. We are putting together creative financing. We are putting together infrastructure. We are managing outsourcing arrangements where we are taking ongoing responsibility for an output or an outcome. It is a dramatically different world, and this means we have had to transform our business model." I think back to my first observations: perhaps that transformation within the public sector has not really happened.

Q312 Chair: That sounds like an understatement to me. Can I ask the question again: do you think it is fair to blame two or three officials who are down the command chain and make them bear the full responsibility? Isn’t there a greater strategic failure in terms of leadership, governance and overall guardianship of the skills of that Department? The answer is yes, isn’t it?

Dr Chapman: I will give a tangential answer; I apologise. I started my career researching the aerospace industry and working in a number of companies there. If there is an accident to do with that industry, people refer to the failure chain. There was never one thing that went wrong, it was always several things. The air industry has got to a point where you can no longer blame the pilot, because that was too easy to do; the fault lay elsewhere. The point you are coming to is that there may have been someone specifically on a spreadsheet who made an error but actually, the issues may have been more systemic.

Chair: So it is a yes.

Dr Chapman: Yes.

Q313 Kelvin Hopkins: In the mischievous, scurrilous press-the sort that I read with interest-there is a suggestion that what the Government was doing on the West Coast Main Line was trying to give the contract to FirstGroup because they needed upfront cash and, one way or another, they were determined to get the contract through. So they pushed every door and made sure that it happened. Of course, Virgin got upset and created hell about it. That is what really happened. Anyway, that is a suggestion. If you know anything I would be interested to know.

Paul Flynn: Are you giving evidence, Kelvin?

Chair: Order. Moving on.

Kelvin Hopkins: My real question is why, in your view, has the public sector failed to recruit and retain staff with the necessary skills and experience? That follows on from what the Chairman has been saying, in a sense. Is it deliberate?

Tim Cummins: I think there are a number of challenges and we have probably just touched on one of them. There is this perception of a culture that is a little bit inclined to point fingers and create a blame environment. The challenges, probably around procurement, are in part to do with relative status. They are partly to do with confidence over career path and career potential. Of course, they are somewhat related to perceptions around salary, particularly the correlation between salary and contribution. There is often a feeling by more talented people that they will just operate within an environment where their particular contribution is not necessarily acknowledged or rewarded.

Q314 Kelvin Hopkins: One suggestion that has been made many times is about churn. The fact is that in this particular contract, as we were mentioning just recently, staff were constantly moving on. You are experienced people who really know about procurement. That long familiarity and gaining that kind of experience and skill takes time and continuity. They do not get the continuity in the civil service. Is that the case?

Tim Heywood: I would agree that it is an issue. One specific context in which this really has a negative impact on procurement and contract management is the transition from the procurement process. From the point of advertising the proposed contract to signing it, it is traditionally run by one set of people: the procurement officers. Then you transition to the delivery phase and the contract management phase and that is handled by a completely different team. They often have very little contact. There is an issue about managing that interface. I agree that general churn within the civil service can have an impact. Personally, I have worked on quite a lot of Government projects, and I have not seen that being a particular problem-a general widespread problem of churn.

Q315 Kelvin Hopkins: You yourself have worked in both the public and now the private sector; you obviously moved on. Why did you decide to leave Government, if I may ask?

Tim Heywood: That is a big question.

Kelvin Hopkins: It could be simple, such as a bigger salary. I do not know.

Tim Heywood: Working within the GLS is really working for one client: the Crown. What I was looking for was experience of working for a variety of clients in both the public and the private sector. I thought of that, in part, as a way of ensuring that my own skills are finely tuned and honed, and that I have a good understanding of what drives the public sector, the supply side, on the one hand, and what drives the purchasing organisation and what matters to them.

Q316 Kelvin Hopkins: It would have been very helpful, presumably, to the public sector to retain your services. How could the Government have retained your expertise and kept you or the skills you have acquired?

Tim Heywood: It is very kind of you to say so. I am not sure that it could deliver that particular objective over a sustained period of time, of working closely with clients in the private sector. What is happening now, through efforts of ERG, Cabinet Office and all the rest to bring procurement centre stage for central Government, which is unprecedented, in living memory at any rate, is a huge step forward and one that I applaud. To have a Minister driving that over a considerable period of time is a big, big plus. It is a big plus for the procurement professionals in the civil service, I would have thought, and it is the way to ensure that the policy initiative of leaner procurement in Government is delivered. If that had happened before I moved back to private practice-who knows?-I might have thought twice.

Q317 Kelvin Hopkins: It is clearly very damaging to lose expertise of your kind. If this is happening all the time, and there is a constant drain of skilled and experienced people leaving the civil service to take up posts in the private sector, is that not damaging and is it not one of the causes of the problem? How do we retain the kind of expertise that you and other colleagues might have?

Tim Heywood: I agree that it is important that the public sector has access to skills wherever they lie. That is being aware of what skills and expertise it has across the whole of the civil service. How do you know what skills the civil service has and can they be brought into a particular project? That is about resource management across the civil service. If skills only exist outside the civil service, then they are available.

Q318 Kelvin Hopkins: We have argued in other reports that the civil service ought to build within it a very strong commercial expertise, particularly in IT, to be able to look at the private sector eye to eye, and with similar levels of expertise, and not be in a position where it does not have sufficient skill to deal with them. Should we attempt to build commercial expertise within the civil service or is it more practical to buy it in, or even outsource it? I have a view myself.

Tim Heywood: My own view is that yes, Government should continue to build its own commercial expertise. I have no idea about what target levels or quotas it should look at. I do not know quite what enough is. Should it outsource the whole thing? I do not think that is practical or desirable because, as you say, it is about both parties to a negotiation being able to look each other in the eye and regard each other as equals in the negotiation. On the purchasing side, it is very important that the people at the table understand the ways in which what they are doing, at project level, help deliver the strategic objectives of the whole Department. It requires understanding of the purchaser, if that makes sense.

Q319 Kelvin Hopkins: A final question is about whether there is another dimension to working in public service, which is loyalty and commitment to the public realm, rather than simply being about, "They are offering a better salary. I will go from one company to another", which is the way the private sector works to an extent. People have loyalty to companies as well but by and large, if somebody is offering you a job at IBM and it is a good salary you will take it. The public sector is rather different. That sense of commitment to the public realm and to the public interest gives it another dimension.

Dr Chapman: I would agree with that point. My reference is the people we have seen coming on the Major Projects Leadership Academy. There is a very genuine sense of public service. My experience of senior civil servants has been exactly that. Government should not be at all ashamed and should actually emphasise those points. Doing something good is one of those things that a lot of people get pleasure from and will commit themselves to. Machiavelli’s advice was not to trust mercenaries; they will take all the success but, on a hard day, they will be the ones wandering off most quickly.

Kelvin Hopkins: Very good. Plato also regarded the men of bronze as the commercial merchants and the men of gold as the philosopher-rulers, whose only interest was good government. Even 2,500 years ago, people were talking about these matters. I have finished, thank you.

Chair: Very erudite.

Q320 Greg Mulholland: I am not sure what Plato would say about the Government’s Major Projects Leadership Academy but I would certainly like to hear what Dr Chapman thinks about this particular project. You are running it; it was announced last year. This is clearly something that the Government is doing to try to deal with some of the issues that we have heard about today. Can you give us a sense of how you think that is going, how it is working and what are the main gaps in expertise that you will be seeking to address through it?

Dr Chapman: The Major Projects Authority referred to it as being the fastest procurement in Government. It is an example of fast procurement. I believe the results are very positive. It is still early days. We committed to 340 people over three years. We have our first cohort who look set to complete the course in June. It is early days. What we can say so far is that we have been able to put the Academy into operation. We have the participants on it. Most of them have been through an initial journey and we have scaled up to deliver the remainder. I think it has been very well received. The Civil Service Project Leaders Network seems to be coming together and there are some benefits in terms of the capabilities that developed on the Academy, some of them technical and some of them commercial. We emphasised leadership quite strongly as well. Then some of it is the network that is building across Government. There is an experience of individuals in fairly senior roles within Departments thinking that they are facing the same challenges. The network and the ability of share best practice is a really strong component.

Q321 Chair: How much time would a civil servant be expected to give to the year-long course over the period of the course?

Dr Chapman: We think it is 30 days over 12 months, so it is quite considerable.

Chair: Will they get day release for those days?

Dr Chapman: It is three one-week residential courses, so about 15 days. The other 15 days are things that they will be doing a lot of in their own time. We are including preparation and assignments that they have to do. They also have to review other major projects.

Q322 Chair: It is a management training programme; it is not a degree and you do not finish up with a qualification.

Dr Chapman: No, it is not an accredited programme.

Greg Mulholland: To some extent, Chair, you are asking my final question.

Chair: I am so sorry.

Q323 Greg Mulholland: Is that length of time sufficient for dealing with the issues we have heard about today? Will 15 days a year deal with the lack of expertise in procurement?

Dr Chapman: The honest answer is that it is a good start. To take senior civil servants and put 30 days into their diary over the next 12 months is almost too much to ask. Yet to develop their capabilities to take on the challenges they are asked to do, it is the least we can ask. We are probably in about the right place. I do not think we could get more unless we do things for longer. One of my other roles is that I run the University’s Masters programme in Major Programme Management, which generally attracts people from the private sector. That takes about two years and about 120 days of commitment.

Q324 Greg Mulholland: My final question is to the whole panel. Is this focusing on the real problem? Clearly the lack of training is part of the issue but is it the most significant one or is there more of a cultural issue? Is there a structural issue in the civil service, or indeed is there a problem with the political dimension? In the end, are we avoiding the elephant in the room and blaming people who are procuring, when actually decisions are made above them by people who are around for a shorter period of time, with a very different agenda? To what extent do you think this will really deal with the issues? That is for all three of the panel.

Dr Chapman: I will have a quick stab at that. The issues are about risk. Some of it is about framing the role. We look at people who run major projects as being like chief executives of temporary organisations. They have a similar role where they are responsible for a large number of people and a large budget; a CEO is someone who is responsible for an entity that keeps going over time and theirs has a defined limit. There are a lot of commercial skills required from a CEOlike person. There are big risks baked into projects, generally as they are conceived, which only emerge when they are delivered. My colleague Bent Flyvbjerg refers to the "political sublime"-wanting to do things that impress other people. Some of it can be the political will, which others are then asked to take forward.

Tim Cummins: I think in response to your point, the experience I have had from the private sector, which would be analogous to this, is that there is a real risk that skills development can be, in a sense, a sticking plaster as opposed to a real remedy or cure. In answer to your observation about whether this is really addressing the true underlying problem, my suspicion is that it may not. It may be creating a group of people who will, in a sense, be frustrated by their inability to shift the organisation. You mentioned the underlying cultural issues, the approaches to risk, etc, and in a way what we are equipping them to do is fight the system. Despite the focus on things like leadership, of course it is extraordinarily difficult to be running a project and trying to transform an organisation both at the same time. If I may again give an analogy with the private sector, at the moment we are seeing more and more of a shift towards executive thinking around how we build broader commercial competence in the organisation and across the organisation, rather than purely investing in a particular function or skill-set in a limited number of individuals. I believe that at least both of those things need to get tackled to make this a sustainable effort.

Tim Heywood: I think, like many other parts of the public sector, the civil service is having to adapt, and this has been true over a number of years, to a role that is more focused on commissioning and procuring the delivery of services, goods and such like, as opposed to being a delivery organisation itself. I think the skill sets have not kept pace. If there was one thing I would change, to try to bring about that cultural and other structural change, I would make commercial skills, commercial awareness and procurement skills one of the core skills for being employed in the civil service. I do not know if they still have the Professional Skills for Government initiative but if it still exists, I would add commercial skills to the list so that people are recognised, rewarded and promoted partly on their demonstrated ability to do a deal sensibly and in the taxpayers’ interest.

Q325 Chair: Dr Chapman, we are taking evidence on the future of the civil service and one of the issues that has arisen is that, culturally, the civil service does not man Government Departments with a training margin in mind. Are you up against that? You are perhaps in charge of training a cadre of civil servants across Government Departments at all levels who are skilled in procurement, but I think you are telling me that they do not spend enough time on the training. Yes?

Dr Chapman: Yes.

Q326 Chair: This is not just producer interest talking.

Dr Chapman: There is that conflict of interest, which we will try and discount.

Q327 Chair: How can you explain this lack of training margin objectively to me now? That would be very helpful.

Dr Chapman: Generally, in the squeeze for efficiency, training is one of the first things to go. It is always something you can put off to a later point. Understandably, experience is valued. That was part of the discussion earlier. Sometimes experience can be thought to replace professional development.

Q328 Chair: Experience has been lost in the downsizing too, through natural wastage instead of selective redundancy. The civil service has haemorrhaged experience and skills as a result of that.

Dr Chapman: The general point is that training is an essential component of a role. It can also be something that attracts and retains the best people.

Q329 Chair: What about salary caps, pay restraint and general frowning upon paying more commercial salaries to people with the requisite skills and experience? Do you think that is damaging the civil service’s capabilities?

Dr Chapman: I think it presents a challenge but not one that is insurmountable. The civil service brings other benefits, which people value.

Q330 Chair: If the civil service seconds somebody to the private sector to give them commercial experience, the likelihood that they come back is slim.

Dr Chapman: I am not aware of the statistics, but it may equally reinforce their experience in the civil service-about it having a higher purpose.

Q331 Chair: In the Major Projects Leadership Academy, in a nutshell, can you give us four headings about what it is you actually try and teach and inculcate into your students?

Dr Chapman: The quick one is: you are the leader of a temporary organisation, so behave like one and recognise the contributions of your team.

Q332 Chair: Recognise that it is temporary or that you are a leader?

Dr Chapman: Recognise that you are the leader, and that it is temporary in that it has to deliver and benefits have to be realised.

Chair: Within a limited time frame.

Dr Chapman: Yes, within that limited time frame. It is about taking accountability as well. That would be a key point. There is a lovely question, asked by others, which we use, which is, "Why would anyone be led by you?"

Chair: Ouch.

Dr Chapman: We ask people to really explore the idea why this is important and you are trusted with it. As a tangent, I spent many happy years at Cranfield School of Management under Martin Christopher. He seemed to invent supply chain management, which was as simple as: it is not companies that compete but supply chains.

Chair: It is neat.

Dr Chapman: The procurement side is essential but so are the relationships that go up the chain as well.

Q333 Chair: How much do you think lack of trust between decision makers in Government and the civil service undermines efficient procurement? Is that something you deal with in your course?

Dr Chapman: We do look at how you develop trusting relationships. For civil servants that is with the politicians in their Departments. Equally, we will look the other way as well, which is how you develop a federation of buyers and builders.

Q334 Chair: My final question is to all of you, really. I am looking to the lawyer. Maybe he loves the EU procurement directives because they make things so much more complicated, and make agreements and processes much more protracted and therefore better for lawyers. Sorry, we always have to have a go at the lawyers. If you could wave a magic wand, what would you do with the EU procurement regime to make life easier for public procurement in the United Kingdom, given that most of the procurement directives are about trying to inveigh other countries to do things like us? They are to stop France from buying Renaults for all their public service vehicles. We have a very open and competitive procurement system in this country, which we would like to see replicated across the EU. The burden of all this does not really benefit British procurement very much.

Paul Flynn: This is the Chairman’s obligatory antiEuropean question, which he does at every meeting.

Chair: And this is Mr Flynn’s ritual attack on my question.

Paul Flynn: That is right, absolutely. I attempt to bring some balance and sanity to the debate.

Tim Heywood: At the risk of speaking for my colleagues, we did have a discussion in the corridor before that went along the lines that there are lots of things wrong with the EU public procurement rules and yes, the regime is quite complex, but if they did not exist we would have to write them.

Q335 Chair: For ourselves or for the rest of the European Union?

Tim Heywood: The rules are there to ensure fair play for all the players. As a country we are quite good at fair play, but just looking domestically, if the EU rules were not there, there would be pure UK regulations.

Q336 Chair: But it is the ambiguity about some of the EU rules that creates uncertainty, and then creates this very risk averse culture, particularly in the public sector, where people cite EU rules, perhaps unnecessarily, not to do things. We know about gold plating. What is wrong with the way we interpret EU rules that ties us up in knots and makes us take 70 days to do something that only takes the Germans 40 days?

Tim Heywood: I think we do generally miss a trick sometimes in the way we specify what we want to buy.

Q337 Chair: When you say miss a trick, you mean that we do not specify the exact width of the train doors, so we finish up with French or German trains, instead of trains made in Derby.

Tim Heywood: Whether it is procurement in the public or private sector, the more time and effort that goes into specifying exactly what you are looking for on this occasion-

Chair: I am told that the reason you will never see anything but a French train running on a French railway is because they have a very particular measurement for the sliding doors on all their trains. Nobody builds those except the French, so they always finish up with French trains. Should we be doing more of that sort of thing ourselves?

Kelvin Hopkins: Yes.

Tim Heywood: Or taking a pop at the French companies. I do not know. One of those two perhaps.

Q338 Chair: Who would bother?

Tim Cummins: If I may, I would say that one of the slight challenges here brings us back to where we began, which is that commercial skill is very often about managing and dealing with ambiguity and uncertainty. Perhaps part of our challenge with EU public procurement rules is simply because we are not applying good commercial skills to proper judgment of how best to manage within them and apply them.

Q339 Chair: Do you think the Government legal advice to public procurers is much too risk averse?

Tim Cummins: My experience of it is that that is the case. I am sure it is not universally so. It does seem that we often focus far too narrowly on risk consequence, the assumptions of things going wrong, rather than trying to look at how we manage risks to increase the probability that things will go right.

Q340 Chair: Dr Chapman, do you have any comment on this?

Dr Chapman: I will take up your invitation with the magic wand. I think that past performance should be brought into procurement, where good suppliers are rewarded for what they have done historically and, for those who have failed to perform, that is taken into account. That is with all the caveats about allowing organisations and increasing the pool of suppliers, particularly SMEs, and all those good things. It does seem that there is an interpretation of procurement rules that prevents that. Organisations can perform badly in one contract and then are on the list and are simply judged by the tender they put forward, which seems unreasonable.

Tim Heywood: I would just like to come back on the GLS point.

Chair: GLS?

Tim Heywood: Sorry, the Government Legal Service. Conventionally and traditionally the Government Legal Service are advisory lawyers. The particular skills that are needed in a procurement project or a programme are transactional, commercial legal skills, which are not so universally available in the Government Legal Service. They have traditionally been asked to do different things from private sector lawyers.

Q341 Chair: With great respect to our lawyer, when you receive legal advice you do not have to accept it and act on it. You have to take it into account.

Tim Heywood: Absolutely; it all goes in the risk matrix.

Chair: Gentlemen, thank you very much indeed. It has been a helpful session and we must move to our next set of witnesses. I am very grateful for your help today, thank you.

Examination of Witnesses

Witnesses: David Noble, Chief Executive, and Andrew Coulcher, Director of Business Solutions, Chartered Institute of Purchasing and Supply, and Peter Smith, Managing Director, Procurement Excellence Consultants, gave evidence.

Q342 Chair: May I welcome our second panel today on public procurement, and could I ask each of you to introduce yourselves for the record, please?

David Noble: I am Chief Executive of the Chartered Institute of Purchasing and Supply, which is based in the UK. It is a global institute.

Andrew Coulcher: I am the Director of Business Solutions for the Chartered Institute of Purchasing and Supply.

Peter Smith: I am an ex-procurement director in public and private sector, and a past president of the Institute. I have been a non-exec in a couple of Government bodies, done some consulting, and now I edit the Spend Matters website and I write about 30,000 words a month about procurement, public and private.

Q343 Chair: Excellent. I think you were all listening to the previous session. Are there any reactions you want to give us straight away?

Peter Smith: I think these two came in halfway through; I was there from the beginning. I would be very happy to hold forth on West Coast rail if people want to ask questions on that.

Q344 Chair: We might come to that, but perhaps we should just move on. The Cabinet’s Efficiency and Reform Group have implemented a number of reforms in order "to make it easier to do business with Government". How ambitious is this strategy and how effective has it been?

David Noble: I was partly involved in that as an adviser on the advisory group for the Cabinet Office procurement team. I think they have made some major steps forward on Government procurement. I was listening to the end of the last debate and there have been significant steps forward, particularly in Crown Representatives and in consolidating what I would call commodity spends. My comment would be that it does not go far enough across all of Government-that is all Government Departments, whether local, NHS or MoD etc.

I spent most of my career in the private sector, and one of the advantages is that you can mandate across the entire entity or the operation, whatever the operation is. There is a need for that in the public sector that does not necessarily happen. Our profession lends itself to volume and to aggregation. It is frustrating to see very good deals in the centre that are not followed through in local areas; for instance, IT potentially as a regional contract, with a central contract that is employed and taken by all the users in that particular region. I guess my response is mixed.

Andrew Coulcher: There has been some progress in terms of lowering barriers to entry and eliminating the need for prequalification up to a certain threshold, which is making it easier, particularly for small and medium sized enterprises, to compete for Government business. However, I still feel that the weight of the system is against the smaller to medium sized players. It is still very complex and it is still costly to try to participate in Government business. Although there is a perception that the field is being levelled, it is, by far, very much more difficult for smaller players to participate in an active way in Government business.

Peter Smith: I should start by saying that I think the Cabinet Office have done some good stuff generally. I am not so sure about getting rid of PQQs but I do not want to go down a very detailed procurement rabbit-hole there. There is an inherent tension between a lot of the centralising initiatives and doing national contracts in Whitehall and in some other sectors as well, and the SME agenda. You cannot get away from that. If you are going to do national contracts, however hard you try to some extent to break them up and so on, you will end up with fewer companies doing business with different bits of the public sector. I do not have an answer to that but we have to recognise that there are agendas pulling in different directions.

Q345 Chair: Do we think that we need to address the continuing shortcomings in Government procurement with structural changes, or are they skills and cultural?

David Noble: From my perspective, and clearly from the Institute’s perspective, the answer is that there is a skills issue. We see that and we believe that far more can be done in the skills area, but I think it is both. It was commented when I was listening to the end of the last debate that there are clearly some structural issues around public sector procurement. A lot more can also be done on the skills side, and I am very passionate, as a professional in this area for many years, that we get this profession far better recognised and licensed-that what is seen is what it does-which means defining what it does clearly, so that it has the same kudos as accountancy or other activities or functions. I think that time has come, whether it is licensing at a base level or licensing at higher levels for specialist skills.

I heard the debate on commercial skills. I think there is more that can be done to recognise and define the profession, and certainly to get kudos behind it. I would say we are not great at selling ourselves. That is part of one of the problems for this profession, wherever it is. That was a bit of a roundabout answer.

Q346 Chair: I think the procurement industry is selling itself very well. Everybody wants to talk to the procurement industry, whoever the procurement industry is, whether it is lawyers or consultants. Are we getting better outcomes as a result of all this discussion?

Andrew Coulcher: I was reading the NAO Report into Government procurement. There clearly have been some major advances in spend coverage and the amount of savings and spend management that have taken place. I have the benefit, however, of working with a number of different parts of Government. We work very closely with the Cabinet Office and we work with the National Health Service, with local government and with devolved government.

My observation in terms of structure is that there is no single blueprint for success in Government procurement. All the transformation and reform activity that we see going on around us is highly fragmented at a local, national and regional level. There is little communication between the National Health Service, local government and higher education, for example. Whilst it is easy to hide behind the argument that our sector is different and, therefore, we need our own sovereignty around procurement, more attention needs to be put into "but what is the same?" A significant amount of Government spend is for common categories of spend.

Q347 Chair: That leads me very neatly to my next question, but Mr Smith first.

Peter Smith: Sorry, I thought we were going to come on to the Crown procurement service.

Q348 Chair: The key question is should the Cabinet Office, or the centre, have more power to determine procurement policy across Government Departments, or do we remain with these sovereign Departments that can opt out of central procurement policies? Francis Maude’s favourite example is how the Ministry of Defence argues that their independent purchasing of photocopier paper is a strategic issue.

Peter Smith: That could be true.

Chair: It could be true.

Peter Smith: I did challenge one of the things that was quoted when Francis Maude talked about that. I challenged a head of procurement who is a friend of mine, who said that what was reported was not strictly accurate. I think the Cabinet Office probably has enough levers to pull in Whitehall. The problem, once you go beyond that into the health service, universities and local authorities, is that those organisations have been set up to be independent. The whole wider strategy-not just procurement-is about independence and localism, and even competition between, say, hospitals or maybe even academy schools.

The first rule you learn when you do your procurement examinations is that procurement strategy has to be aligned with the wider organisational strategy; otherwise, you will come unstuck-you will be fired as the head of procurement. I do not think it is realistic to start talking about complicated procurement structures and forcing collaboration and people working together, when the organisations that the procurement teams are sitting in are totally independent and becoming more so every day.

Q349 Chair: Centralised procurement is a very good way of adding hidden costs, my favourite story being Land Rover brake-pads for a British Army base in Germany, which cost hundreds of pounds to come through the procurement system, but cost a few Deutschmarks down at the local garage.

Peter Smith: There are some great examples where collaboration is happening from the bottom up, because people want to do it. Last week, I spoke at the London Universities Purchasing Consortium’s first conference for their members; they are growing because universities want to use the deals they are putting in place. You have the regional buying consortia in local authorities that are all growing and doing well-NEPO and so on. Health is a tricky area but there are some things going on there. There should be more collaboration, identification of common categories and, arguably, more centralisation than there currently is, but it has to happen for the right reasons, and I just do not see that there are mechanisms whereby we can impose it from the top down.

Q350 Kelvin Hopkins: What are the main causes of delay to public procurement, and how can they be addressed?

Peter Smith: On big projects, it is Ministers, generally, in my experience. On smaller projects, it tends to be the risk-aversion discussion in the last session. There is an issue where procurement people and project managers want to get everybody involved. We want to get everybody’s buy-in to this project or that procurement, so you end up with a list of stakeholders this long and I have to go round and get everybody signed up to what I am doing. It just takes so long, and then you get to number 43 on the list and they want something different from number five, so you go back to square one again.

I have worked on some big programmes. I am not sure whether I should admit this, but I was the interim commercial director for a while on the ID card programme, just for a few months. In the time that programme was running, there were four different Home Secretaries, and every one of them, I guarantee, had a different vision of what the ID card was for. There were junior Ministers as well. The programme was constantly changing and going in different directions, and I think most of the civil servants involved never thought that it would happen, for various reasons. That is not atypical on major projects. I have not worked much in MoD, but I think it is a big issue in MoD. The aircraft carrier given as an example of poor procurement was, I think, nothing to do with procurement. Political decisions on things like aircraft carriers and nuclear energy are not procurement decisions, but ministerial, political decisions.

Q351 Kelvin Hopkins: That is most interesting. I voted against ID cards, so I was most interested to hear about that. In a sense, you say that decisions have to go to various people individually. Would it not be better to have all the stakeholders in a room and say, "Let us make a decision now", rather than having a constant referring from Department to Department and from individual to individual?

Andrew Coulcher: Yes, that would be an advantage. Some of the work that CIPS has been doing with the Cabinet Office to try to implement more of a Lean process around procurement is aimed at trying to do a lot more in parallel, rather than have this highly strung-out serial process of decision-making and building consensus. I would just like to elaborate on one of the points that Peter made. I think it was about accountability. One of the things that we hear is that there is a bit of a revolving door when it comes to management of major programmes.

Our concern is that there is a lack of transfer of what we call corporate knowledge from senior responsible officer to senior responsible officer and a lack of accountability for delivering a programme on time, which might make it more useful to hide behind, let us say, some of the bureaucracy built into the process, rather than deliver to time and on budget. In terms of accountability at senior levels, we heard a little about leadership and the need to build those skills and capabilities in Government. This will have a significant bearing on the success of some of the larger programmes.

Q352 Kelvin Hopkins: You mentioned the Lean model. The Cabinet Office has trained hundreds of staff in the Lean operating model. How far will training civil servants in the Lean operating model address weaknesses in procurement capability? You have touched on this, but my thought is that you would perhaps want something more than short courses for handfuls of civil servants.

Peter Smith: I did my little picture of what I think the procurement skills map looks like, and Lean cuts across a few of the things I have down as technical skills, so it certainly covers elements of programme and project management, and a certain amount around getting your way through the EU regulations and things like that. It is, however, a subset of the total picture of procurement skills that really good people need. It is 10%-20%. It is a useful initiative, and I think the initiative of trying to reduce the average time taken for procurements is a good one. I applaud the Cabinet Office for that, but it is far from the whole picture. There are a lot of other training and development initiatives going on around Government, CIPS and others. MoD and DWP all have their own programmes. Lean is not the only game in town, as it were.

Q353 Kelvin Hopkins: My anonymous civil servant informants tell me that cuts are having a serious effect, and one or two suggest that there may be three people in an office doing a particular job. Two go, and one finishes up doing three people’s jobs, which causes difficulty. Is that a factor?

Andrew Coulcher: We have not seen a massive decline in the number of members we have in the public sector. In the UK, about 6,000 of the 28,000 members are public sector, and that has remained remarkably stable over the years. That does not mean to say that public sector employees are not finding themselves either out of a job or moving into the private sector but, if they are, they are not changing their data held on our system. The decline in headcount within Government has to have an effect on capability and capacity-there is no doubt about that-but I am not sure that it is as big an issue as that. As Peter alluded to, a lot of collaboration is taking place at a local level within the health service and local government, which, I think, is quite often triggered by the very scenario that you described: a Department is being downsized, and the only way that it can continue to provide a service is to collaborate with the people next door.

Peter Smith: I have heard similar stories, particularly from "Local Authority Land", where you might have a small local authority that only has only a handful of procurement people in the team. It is the "there were four and now there are only two, which is a bit of a stretch." The recent NAO Report identified that there was a reduction of 17% in central Government procurement people over the last couple of years, although CIPS has increased its market share, so your number of members probably remained about the same. It is having some effect.

Q354 Kelvin Hopkins: There is also this problem of churn, which is mentioned many times: the fact that civil servants are in post for too short a time and are always looking for promotion and moving on to the next job; therefore, they do not really take ownership of projects.

Peter Smith: I do not see that as a huge problem in the procurement community, which maybe relates to something that is a problem, which is that the procurement community is not seen, perhaps, as candidates to go all the way through to become Permanent Secretaries. They probably stay in jobs for longer than the generalist civil servants who are on the fast track up the ladder, and who tend to get moved too frequently, possibly, for the general good. I was procurement director in the DSS back in the mid 1990s, and I am quite surprised at how many people I worked with there are still in DWP procurement now. It is not the biggest problem for the procurement community; I think it is a wider problem for the civil service.

Q355 Kelvin Hopkins: What about technical expertise? You need engineers and scientists as well as economists: people who are comfortable making judgments about procuring technical equipment-even motor cars, for example.

David Noble: That is a significant issue. The profession is changing, as I referred to earlier, from traditional, back-room "just go and buy it" to going upstream and identifying opportunities and complexities that were not necessarily there or seen before. That is my concern with this short-termism, because of the skills, particularly in big contracts, to then see them through post-contract, which is often where the money is lost. We put a lot of effort into pre-contract and putting the deal together, but managing it through is where, I am sure, many big contractors see themselves making their money, because it is not managed through on a consistent basis with the skills that are there to do that in post-contract claims etc. I do have a concern that there is a need for technical skills and, as I said earlier, defining what this profession stands for as it changes. As the world changes, this profession is changing more quickly than any I know of in terms of both the private and public sector, and what it is defined as and what its value-add is defined as.

Q356 Kelvin Hopkins: With the previous group of witnesses, I talked about loyalty to the public realm, which clearly is fundamental-if you are really concerned to make sure that it is the best deal for the public, for the taxpayer and for the country. How important is that kind of commitment?

Peter Smith: It is important and you have people who do have that commitment. If you look back to the Gershon Review, I have no doubt now that there are more very capable senior people in procurement across the public sector, and I could reel off 20 names just in central Government. A lot of them have come from the private sector, interestingly, and a lot of them, without a doubt, could put 50% on their salaries if they left tomorrow. I do think, however, that a lot of them have that loyalty and feeling for the public sector. I cannot say that every civil servant I have ever worked with has that; some, frankly, see it as a nice environment because you are not under the pressure you often are in the private sector, and it is very generous towards work/life balance etc. I think a lot of people, however, do still have a genuine spirit of public service.

David Noble: It is fascinating to me. We are involved with a lot of countries and a lot of public procurement people in many countries around the world. They often talk about the UK as being the great example of public procurement, so it is interesting that there is a very strong perception-and I include China-that UK public procurement is ahead of the game, so to speak. I do have a concern, though. I agree with Peter that there are some great people now in the commercial sector in public procurement, but there is complexity and there are skills needed that you cannot necessarily get with those types of people. You have to bring them in. We are working with central Government on getting senior individuals in the private sector to share some of their skills on a very ad hoc basis. We need a complexity in the public sector that sometimes is not inherent within it. We are not geared to giving the best training, because it often comes down to huge experience in large IT or construction contracts.

Peter Smith: I think there are good people at the top level. There is a bit of an issue a little further down, where we get into this deep category expertise. If you are a really good "category manager"-someone who is leading on IT, professional services or construction for a big private-sector firm-you are probably being paid £70,000 to £90,000 plus benefits. Those subject matter experts in the public sector will struggle to get anywhere close to that, quite honestly. There is definitely a skills and capability gap, although, again, it is improving. The Government Procurement Service has developed some deep category skills that just did not exist a few years ago, so while it is moving in the right direction, I agree with David that there are definitely still issues.

Q357 Paul Flynn: Could you help me out further by educating me on the difference between procurement and politics? Procurement is involved in dealing with the price of brake-pads, and politics is involved in throwing away billions of pounds, presumably. The position at the moment on nuclear power stations is that-

Chair: This is the ritual question on nuclear power stations.

Paul Flynn: Indeed, yes. Centrica, E.ON and RWE have stampeded away from the contract. One of them lost £200 million in it. The only one left is a nationalised French company that has a record of atrocious failure and is in deep debt. Surely, that is a procurement issue. Someone has to decide where best value comes in. Does it mean that procurement deals with the minnows and lets the big fat salmon go by unhindered?

Peter Smith: Shall I start, because I made the comment earlier? You are quite right that it is a procurement issue and a procurement process, but there are some procurement issues that are so big and important and have such wider ramifications that they are inevitably taken up to the political realm.

Q358 Paul Flynn: Let me give you another example. About two years ago, there was a controversy involving a member of the Royal Family who scoffed at the idea that we did not give bribes to certain contractors in some parts of the world. There was an argument at the time that we should give bribes, because this is the system that lubricated big international contracts in aircraft. The other argument put forward is that Britain had a reputation for integrity and straight dealing, and that that was more important than just getting the odd contract. Where would you stand on that? Is bribery a legitimate arm of procurement or not?

David Noble: As the professional body, our code of ethics says very clearly that we will never, ever engage in that type of behaviour, so absolutely not. There is no question: we stand for integrity. I talked about other parts of the world; they see the British piece as the integral piece. If there is any value-add for us, it is integrity. I do not and will not compromise on that, and we should not.

Peter Smith: It is one of the reasons why we have the EU regulations, which I know come in for a lot of flak, but they are designed, in part at least, to make corruption, bribery and fraud much more difficult; hence, in the previous panel, the chap who said, "If we did not have them, we would have to invent something else." Otherwise, frankly, we would see more bribery and corruption in the UK. I honestly believe-touch wood-that there really is not much in the public sector in the UK, generally, and less than there would have been 30 or 40 years ago.

Q359 Paul Flynn: The CBI has suggested that procurement should be considered as part of the policy development process. Where and at what level in the civil service do you think we need to build procurement expertise? Should policy teams be trained in procurement?

Andrew Coulcher: I think they should. What tends to happen is that policy is created that ends up having a huge commercial impact on the way services are delivered. The first that the procurement organisation sees about that is a specification that is often over-engineered, over-complex and over-expensive. There is an opportunity to have a much earlier and closer involvement of procurement and commercial teams in the policy-setting process, but I also think that the policy professionals need a better commercial understanding of the implications of those policies and knowing when to get the professionals engaged at the right time.

Peter Smith: There is no point in turning policy people into procurement professionals, and we do not want that. I think Andrew used exactly the right words: it is about getting enough commercial understanding into the policy people, and other functions-IT managers and HR managers etc-so that they understand the role that they play when they are budget-holders, and understand when to engage procurement and not to take decisions early on in the process that create a monopoly in the market or something like that. That level of understanding is still pretty poor, I would say, in the public sector.

Paul Flynn: You volunteered to enlighten us about the West Coast rail fiasco.

Q360 Chair: We will come to that in a minute. It is somebody else’s question, if you don’t mind.

David Noble: Could I just add to the points? This is, again, from my private sector experience. The difference that I see in the private sector is what I call "upstream": it is procurement becoming involved in the identification of the need, rather than the specification. As Andrew commented, that front-end involvement is absolutely fundamental to the success of procurement and supply.

Paul Flynn: Thank you. I think you have answered my other question.

Q361 Greg Mulholland: I want to ask specifically Mr Coulcher and Mr Noble about the qualification structure provided by the Chartered Institute of Purchasing and Supply. I want to raise with you a concern about the changes, which, I believe, are coming in this month, March, and you might be able to tell us where they are up to. The concern is that dedicated public sector units are not required. Considering the whole basis of our inquiry here and the concern that has been raised around a number of major procurement projects that have gone wrong, as well as the lack of a culture, this seems, on the face of it, an extraordinary development.

To quote from Peter Smith’s blog, Spend Matters: "The steer from" yourselves "was very clear that dedicated public-sector units were not required. This view seems to be borne out by the very poor examination numbers we have had…over the last five years. In fact, the largest number of public-sector students that chose these units were, in fact, international students from Sub-Sahara Africa, who are predominantly working in the police force."

You could scarcely make it up. Is that an accurate portrayal? Is the rationale for your changes-you have to make changes on the basis of demand, to an extent-that no one is going forward and wanting to improve their training, despite this huge problem and the dearth of appropriate skills in the public sector?

Andrew Coulcher: To put it into context, what CIPS was offering as part of the qualification series that has just been replaced this month was a series of optional modules at the higher end of the qualification. Our experience since developing those modules, after they were commissioned by OGC a number of years ago, was that the appetite of UK public sector students to opt for those modules was extremely low. I cannot remember the exact numbers but it was an unsustainable number of students on an annual basis to keep those options viable and updated.

As part of the extensive consultation process that we commenced two years ago on the new qualification, where we consulted over 5,000 organisations and individuals, including public sector, the overall steer from public sector was that those optional units, or those units specific to public sector, were not in demand. There was no need to recreate or update them, and the sector was content with a broad commercial qualification, which the CIPS qualification is designed to deliver. We have had extensive consultation, as I said.

The other thing we do is to work very closely with the Cabinet Office to make sure that the network of study centres that deliver our qualification to public sector students have the ability to contextualise their learning around the subject matter. We have had people from the public service talking to our study centre network to help contextualise the qualification and the learning for a public sector environment, but the need for those units just was not there.

David Noble: In addition to what Andrew said, we are developing what we call Masters awards, which are a higher level than MCIPS, so it is beyond the standard. It is very discrete on customer demand. We are already talking to various public sector Departments about the very specialist niche skills that I talked about earlier. There is always going to be an offering from the Institute, where the demand is there for very discrete skills, but as Andrew said, it was not there at the MCIPS level.

Q362 Chair: Can I ask Mr Smith if he has a comment on any of that? This seems very much "wood for the trees" stuff in that we are somehow missing a big-picture point.

Peter Smith: I was surprised when I heard what was happening, and I did a bit of investigation. I agree with these guys that if the demand is not there, you cannot force people to do it. I wonder whether that means that a lot of people in the public sector taking the exams think that they will not stay in the public sector, which is a bit worrying. I do also think that there are some very technical elements in public sector procurement that I would like to train new people in.

Q363 Chair: There is, however, no cultural hunger for the skills that people require in order to be good procurers. There is something lacking at the leadership level that makes people not want to do these courses.

Peter Smith: The number of people doing CIPS shows there is that hunger, but what they did not want to do is identify themselves as public sector specialists perhaps quite early in their career; most of the people doing CIPS are relatively young. That is maybe a bit of a worry about the appetite for bright young people coming into the profession thinking they want to work in the public sector. As I say, I was a bit surprised, but you cannot put on courses if nobody wants to do them. I think there is an onus on Cabinet Office, CIPS and all of us in the profession to think more about what is still needed in terms of skills and development, but it will not be just the CIPS qualification, clearly.

Andrew Coulcher: That is a very good point. We are often asked about and comment on the capability of Government procurement. I think the question that ought to be asked is, "What is needed in terms of capability and capacity within Government procurement?" Again, I see a lot of fragmented pieces of work going on to set up competency profiles and to understand the skills, knowledge and experience required in public sector, but, again, there is no overarching or standardised approach to assessing what is required. If we are asked to comment on whether we are doing enough around skills, the first question is, "What have we done to understand what skills are required?" That is an opportunity for Government to do a piece of work to really understand what it wants now and what it needs in the future, and to have a fairly significant piece of work done to ensure that we can deliver those skills over a sustainable period of time.

Peter Smith: That is a good point. I hear there is talk about a health sector procurement academy. We have the Commissioning Academy, which the Cabinet Office is starting to get going. There are initiatives all over the place, but it is a bit unco-ordinated, let us say.

Q364 Chair: It is extraordinary, isn’t it, that procurement is 25% of Government expenditure?

Peter Smith: Thirty per cent.

Q365 Chair: Yet the people at the top push this down and say, "Sort out the skills. This is peripheral; this is secondary. I am concentrating on something much more important." There seems to be a lack of political focus on procurement from the very top.

Peter Smith: There is no Permanent Secretary that I am aware of who has come through the procurement route, in any sense. There might be the odd one who has done a bit of programme management, but we do not have anyone who has come all the way through procurement.

Q366 Chair: We have Stephen Kelly now.

Peter Smith: He is not a Permanent Secretary and he is not a procurement man; he is a commercial man. Maybe we should leave DfT. DfT have recreated the Rail division and put a generalist civil servant in charge, who is not a procurement person, a programme person or a rail person.

Q367 Chair: There is, then, a lack of strategic awareness of this lack of skills.

Peter Smith: Yes.

Q368 Chair: I am sorry, I am piggybacking off your question, but what does the Government need to do to address that so that people do want to come and do your courses?

Andrew Coulcher: The number of people who come to do our courses is just one dimension of this. I talked earlier about what the Government’s blueprint for procurement success really looks like. There isn’t one. There needs to be an overarching view of how Government procurement needs to organise itself. I am not talking about this from a centralist point of view by any means, because there is a lot of value delivered by procurement locally around the social and economic agenda, but I do think we need to be far more joined up than we are at a national, regional and local level in order to deliver a service that is more capable, provides better outcomes and better value for money, and is more sustainable than it is today.

Chair: That is what we are trying to find out in our Committee-answers by email to pasc@parliament.uk if you can, please.

Q369 Greg Mulholland: Apologies if you have provided this, but could you give us the numbers of UK public sector students who are taking the qualification? They opted not to take the specific public sector units while that was available, so can we get a sense of how many UK public sector students are doing it at all? If those numbers are very low, there is clearly a serious problem. If those numbers are high but they are deciding that they do not want to make that differentiation, that is a different thing. I am not asking for the numbers now, but if you could, it would be very useful for the Committee to get a sense at that level. Clearly, as we heard with things like the Academy, it is important to be putting senior officials in training programmes, but if you want good procurement, it has to be something that is part of people’s training and education all the way through. If you could provide that, it would be very useful.

David Noble: Yes, we could.

Q370 Greg Mulholland: Thank you. You are experts in providing this kind of training across the board. Is there not a need, do you think, regardless of demand, for specifically having differently focused training for public sector students? Are there not different skills that people need in that very, very different environment and different culture? Therefore, do you not think we should be encouraging people to pursue that?

Andrew Coulcher: I would say, first of all, that we made it very clear during our consultation process that the door was never closed to Government on the development of specific public sector modules if the demand was there. What CIPS tries to do through its qualification is develop a level of capability that can be applied in a number of different commercial settings. The degree to which somebody needs to have additional skills and additional learning and development is, I think, part of the progression of that individual within the civil service. As they are exposed to more complex projects that require a different type of commercial skill-perhaps programme or project management skills-then I think the notion of continuing professional development and continuing to build individual capability is essential.

Far too often, our members achieve the qualification and stop their learning. One of the things we are trying to push with Government is this notion of continuing professional development, providing a resource that enables them to capture the additional learning that they are doing. I go back to my point that we need to understand the skills and where the gaps are, and to make sure that we can provision all of that learning and development over the career lifecycle of a civil servant.

David Noble: Let me be very clear from the Institute’s side: we are a charity. We exist for the public good ourselves and we will always want to encourage and prioritise, where we can, the public sector, because that is our ethos. The cost of producing courses and exams is huge for us as a charity. It is not insignificant. We have to take business decisions to address that, and it is not an easy decision. As I said earlier, we are developing very discrete areas; for instance, enterprise development is a great strategic procurement area where you use the function to create market opportunities, start-up companies and SMEs. That is fantastic and that is where the profession needs to have skills to do that. It is happening in other places in the private sector, but I think it can happen in the public sector. We would put something around that but it has to be a business proposition.

Q371 Greg Mulholland: The door is always open and the need is very clearly there, so the message then is to create the demand, and the Government and public sector organisations should do that.

Peter Smith: The Office of Government Commerce did have an area of their organisation that looked specifically at capability and skills across Government. I think it is a shame that that is one of the areas that got lost in the transition from OGC to ERG in Cabinet Office.

Q372 Chair: Do you think Ministers are entitled to say, "This is a technical matter. We should be able to delegate this to the civil service. We should not have to drive it ourselves"? The logic of what we are concluding is that until Ministers at the most senior level grip the issue and concentrate on it on a cross-governmental basis-more than just one Minister in the Cabinet Office-this problem is not going to be solved.

Peter Smith: At the very minimum, Ministers have to get their Permanent Secretaries interested. The Minister does not have to be involved in this every day for the next five years, but it has to be on the list of priorities they are giving the Permanent Secretaries, the boards and the non-executive directors to say that this is really important. If it gets in at that board level, things will start happening.

Chair: Welcome news, then, that Dr Chapman from the Major Projects Leadership Academy is welcoming a bunch of Permanent Secretaries to Oxford for a seminar on Thursday afternoon.

Q373 Kelvin Hopkins: The Crossrail procurement invitation to negotiate includes requirements for "responsible procurement". What training do we need to give civil servants so that Departments can routinely use public procurement to support UK economic growth while staying within the bounds of the EU directives? Other countries seem to do it. The point I have made very simply at various meetings is that the Germans buy German, the French buy French, the Italians buy Italian, and we buy imports.

Peter Smith: There is very little hard evidence of that, I would say. There are a lot of apocryphal stories.

Q374 Kelvin Hopkins: How do we look after the UK interest while staying within the bounds of the EU directives? I must say that I am not so worried about EU directives, rather like the Chairman. On the other hand, how do we stay within those bounds? It strikes me, I must say, that there are civil servants and, indeed, politicians, who are driven very much more by the free trade ethos. They think it is a very good idea to support these directives, whereas other countries pay lip service to free trade but do not practise it.

Peter Smith: It is a difficult and complicated area. It is an area where the public sector has been risk averse, I think. I am not sure it is driven by any philosophical love of free trade; I think it is more often driven by the lawyers or the procurement people saying, "You cannot do that, because we might get challenged by someone from another country." There is an element of risk aversion. There are things you can do; for instance, you cannot stipulate that it has to be a British firm, but you can have a criterion in the evaluation that says, "Tell me how you will provide support within 30 minutes" or "We want to be able to meet your managing director at eight hours’ notice. Tell us how you will achieve that", which might just favour local firms rather than somebody from the other side of Europe.

Q375 Kelvin Hopkins: We could also say that because of the pressures on traffic and passengers through the city of London, we have to have slightly wider doors and they have to be British-specification doors.

Peter Smith: There was a File on 4 programme a while ago, and I talked to the producers a bit about it. They had two examples of unhappy British companies. The first was unhappy because it had a cheaper product-it was wheelie bins in the north-east, where I come from, so I remember-but the evaluation process had favoured quality and service, in which some foreign company had a longer track record and a higher-quality wheelie bin. The British company said, "You should have chosen us, because we were cheaper." The other example was the other way round: it was the British company saying, "We were more expensive than the foreign import, but we are of much better quality and service, so they should have chosen us." Of course, what you cannot do retrospectively is go back and re-engineer your evaluation process to get the answer that you know you wanted only now that you have got to the end of the process.

Q376 Chair: That does happen, though, doesn’t it?

Peter Smith: Re-engineering the process?

Q377 Chair: It is not unknown for an intelligent procurement process to engineer the process in order to get the intelligent outcome. Michael Heseltine has waxed eloquently about how we should be tailoring our procurement in order to sustain our industry.

Peter Smith: You can engineer the process, but if you run through that process and you still get the wrong answer, you cannot then go back and redo it.

Chair: No. I understand.

Peter Smith: You can engineer it. I do a little bit of work for firms who are bidding for contracts and, despite all the talk about SMEs, I was looking at one at the weekend in the health area, where there is just no way a small company can possibly win that tender, because of the way that the evaluation process has been set up. Maybe that is the deliberate aim of the organisation-they want bigger firms on this framework-but it has been engineered to do that. A skilled procurement person could have engineered that differently to make it much easier for small local companies or Greek companies, or anything you want, to win it. There is some engineering that you can do, but you cannot, generally, go back and change the answer once you have got to the end of the process; hence Siemens/Bombardier.

Q378 Kelvin Hopkins: I have asked previous witnesses this question as well. The macro effect of all this is that we have a manufacturing and goods trade deficit with the European Union of getting on for £1 billion a week. It is enormous, so something clearly is going wrong. There could be other macro factors, like an overvalued currency or something of that kind, but it looks like something is going wrong with the way we order, because we are buying so much. A high proportion of what we buy in, of course, is not just private but public as well. Any thoughts?

Andrew Coulcher: I think the process that we use is really only ever going to be as good as the inputs that we put on the front end. We still see far too much emphasis within our profession on recruiting and hiring people who can manage a compliant process. A lot of the conversation that we have had-the previous three witnesses as well-has all been about how we raise commercial awareness and commercial skills, not just at the sharp end where the procurement is done but throughout the civil service. The process at the end of the day is just an enabler to get good value. There needs to be far more emphasis on the periphery of the process. If we get it right and we get enough people aligned with commercial skills and who really understand the socioeconomic sustainability value of what Government procures, outcomes will improve.

Q379 Paul Flynn: Just to get back to the West Coast Main Line-I am sure you are going to enlighten us on this-the Public Accounts Committee said that the loss was at least £50 million but was likely to be a great deal more than that. We could buy a great pile of wheelie bins and brake-pads with £50 million. How did that process fit in with Gershon recommendations?

Peter Smith: Quite clearly, it did not fit in with the Gershon recommendations. Do you want to say anything before I launch into this?

Chair: Here is your opportunity.

Paul Flynn: We are waiting for your party piece.

Q380 Chair: What do you think we should really learn from it?

Peter Smith: There are a number of things. The technical mistake in the procurement process, in a sense, was not a huge mistake; it was deciding to do something in a certain way and then telling the suppliers something different, which is fatal in a fair procurement process. You just cannot do that. Then there was a huge failure of governance, planning and basic project management-taking notes and minutes, referring things up for approval when they should have been referred. There was a huge failure of programme management, governance and management, and some procurement stuff that started the whole process. I was one of the reviewers of the Department for Transport on a Procurement Capability Review for OGC, as it was, in 2008. They had some very strong senior people-Mike Mitchell, Jack Paine and others-who all retired around 2010. They were not replaced and they changed the structure of the Department. They got rid of the Rail Directorate and split the responsibility between two directorates, simply, I think, to save one director general post. It did not seem logical to me at the time.

Q381 Paul Flynn: When was this done?

Peter Smith: It was done, I think, around 2010, when Mike Mitchell retired. It could have been in 2011. They lost, as somebody said, this huge corporate knowledge and experience. Mike Mitchell and Jack Paine were not just both very commercial people but they were also from the rail industry, so they understood things. You had this structural problem, a problem of skills, and a problem that they were restrained in the amount of external support that they could have, which a colleague in the first session mentioned. I was shocked, when I read all the reviews, that a lot of the work was going on at such a junior level. They were talking about Grade 6s and 7s leading projects, running meetings and making decisions, and I would have expected something of that significance to have had director general oversight on an almost daily basis. He or she should have been running meetings.

I think one of you asked before whether it was fair to blame the people at the coalface, and I think the answer is "no". I think certain people-Ministers and Permanent Secretaries-are very lucky that there was such a high turnover of Ministers and Permanent Secretaries in that period, quite honestly, because accountability should go up to that level. Then there were some people, clearly, at a working level, who did not fulfil their roles particularly well either, and I still think there may be a couple of people who will, eventually, carry the can for some of it.

Q382 Paul Flynn: It was new Government, new chaos.

Peter Smith: I think that was part of it.

Q383 Paul Flynn: Could we get used to the idea of Governments of all parties coming in to sort out the sins of their predecessors and creating their own ineptocracies?

Peter Smith: Aircraft carriers are the same.

Q384 Paul Flynn: Indeed. Absolutely.

Peter Smith: I think the original decision under the last Government looks like a pretty poor decision; the new Government comes in, wants to review it and maybe does that too hastily.

Q385 Paul Flynn: Wasting £8 billion is a poor decision. We would agree on that, I think. Thank you very much.

Q386 Chair: Finally, do you think that there is too much process? I asked the previous panel about evidence we have received from other witnesses, particularly somebody now serving in the Federal Administration in the United States, who points to a direct correlation between the lack of effectiveness of outcomes and the length and size of a project, the number of people involved with a project, the time taken over a project and the expense of a project; as any number along the bottom scale gets bigger, the project comes down the effectiveness scale on the vertical and tails off to nothing. Don’t we need shorter, simpler and quicker projects run by far fewer people, under much more time pressure, in order to deliver much better outcomes?

David Noble: Yes, we do. I am going to try to answer that question in a roundabout way and say that, for me, you will get that when you have the right people in procurement in Government who can do that.

Q387 Chair: Who have the confidence to do it.

David Noble: Yes. To do that is attracting the best. It does not have to be a dyed-in-the-wool procurement person but someone who can be brought across on a fast track and who can be trained in the skills and define what those skills are, and make into a career which becomes seen. There is a bit of "chicken and egg": until you get the best people coming through on a conveyor belt, almost.

Q388 Chair: Also the continuity of senior responsible owners.

David Noble: Yes.

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Q389 Chair: That seems to be a ubiquitous gripe.

David Noble: Then you get the innovation and the initiatives that you see often in the private sector, which do something totally different in that they come to an outcome that is far better than the processed outcome could have been. That is just an observation from my time in the private sector. My answer is yes, although I do understand, and have, over the last three years in this role, come to understand very clearly, that the constraints in the public sector in procurement are significant. It is a tough world for a good procurement person because, whatever they do, they are damned if they do and damned if they don’t, because it becomes headline news within minutes. What does that do? Human nature says, "Let’s be cautious". In terms of innovators and risk-takers, while you cannot go too far that way, you need more of that, in my observation, than you have at present within Government.

Andrew Coulcher: I would agree with David. The rank and file people within public service who are doing procurement are trained to apply their knowledge in a commercial way, but conditioned to apply it in a very conservative way. The system around them creates unnecessary delay, too many approval cycles, specifications that are over-engineered, overcomplicated and overpriced. The only way to address that in the long term is to inject a lot more of the type of skills that David is alluding to: a better understanding of different business models, a different commercial mindset, and the ability to take risk and to apologise rather than ask for permission all of the time.

Peter Smith: Apologising is a bit of an issue in the public sector when you are on the front page of The Daily Telegraph. I agree that the tighter you can keep things, the better. There are examples I can think of in MoD, under war conditions, and even DWP, where they have done very complicated procurement very well and very quickly, when they had to or when there was the imperative that things just had to be done. There are some good examples of that. I would be all for keeping things as small, simple and fast as possible.

Chair: Thank you very much. Unless there is anything else you want to add-or if you think of it later, please send it in in writing-thank you very much indeed for being with us this morning. It has been extremely interesting and helpful.