Public Administration Select Committee - Minutes of EvidenceHC 123

Back to Report

Oral Evidence

Taken before the Public Administration Committee

on Monday 13 May 2013

Members present:

Mr Bernard Jenkin (Chair)

Alun Cairns

Charlie Elphicke

Paul Flynn

Robert Halfon

Priti Patel

Mr Steve Reed


Examination of Witness

Witness: Rt Hon Francis Maude MP, Minister for the Cabinet Office and Paymaster General, gave evidence.

Q535 Chair: Welcome to today’s sitting on two of our current inquiries-Government procurement and the future of the Civil Service. I wonder whether our witness could identify himself for the record, please.

Mr Maude: Indeed. I am Francis Maude. I am Minister for the Cabinet Office.

Q536 Chair: Thank you for being with us. We are going to start with procurement. The Cabinet Office is being praised by many for its reforms to public procurement, but some commentators have suggested that the Government need to be more ambitious about implementing reform. Do you think this is ambitious enough, and if not, why not?

Mr Maude: No, I do not think it is. Well, I think we have not done everything that we aim to do, even under current plans. I still find examples of very old-fashioned procurements, even in central Government, where, theoretically, our writ runs.

Q537 Chair: And what does an old-fashioned procurement look like?

Mr Maude: Long, expensive and militating massively against the ability of small, newer, younger, innovative businesses to bid at all, let alone to win the business, with long contracts, very locked-in, very expensive, very opaque. There are still too many of these procurements happening in that out-of-date format, so we need to drive that.

We are committed to buying commodity goods and services, or common goods and services, centrally-not necessarily at the centre, but in one place, for the whole of Government-so we can leverage the scale of the Government as a customer to reduce cost and price. That has not happened to the extent that it can and should. There is a lot of inertia on that front, so we need to drive all that further.

There is a general view that we should be doing more procurement on a common basis across Government, and not necessarily just the real commodity goods and services. If you look at IT procurements, which are complicated, you need the same sort of skills in one part of Government as you do in another to manage an IT procurement, but we manage procurements separately in different Departments. Having new people learning on the job all the time is not a very good way to do things.

Chair: But this bid to do more at the centre is seen by some, and reported in last week’s Daily Telegraph, as a power grab, which is meeting some resistance. The headline was "Even the Whitehall bonking machine is in revolt"-that was a reference to a stuffing and stamping operation.

Paul Flynn: Bonking machine?

Q538 Chair: You will have to read the article, Mr Flynn. They take a giro cheque, stuff them into an envelope, seal them and-bonk!-stamp them. I am told they are known as licking and bonking machines.

Mr Maude: It sounds much more interesting than it actually is.

Q539 Chair: The point is that you are caricatured as the odds and sods Department, "aka the Cabinet Office".

Mr Maude: Is that the Sue Cameron article?

Q540 Chair: The Sue Cameron article: that you are trying to micro-manage very complicated big contracts, by insisting on approvals for £5 million or £10 million tranche draw-downs; that you are trying to extend your remit beyond the basic commodity contract, as you say, and this is interfering with the running of Whitehall Departments, and causing a lot of resentment.

Mr Maude: Yes it is, very beneficially, and it is interfering in the running of Government Departments to the tune, in the last financial year, 2011-12, of saving £5.5 billion of taxpayers’ money; and in the year just ended we have said that we expect, when the numbers are complete, that the savings, most of which come through the application of these controls, will be more than £8 billion. So we are saving billions of pounds of taxpayers’ money through doing this.

Actually, those two things are interesting examples. This stuffing machine that is referred to: it sounds like a very trivial thing, but we have done a deal with a single provider of recycling and paper supply. It has actually not been done by the centre; it has been done by the commercial department of the Revenue, but for the whole of Government. At the moment our recycling paper goes to Germany to be recycled, because there is no suitable recycling mill in Britain. If we can get the volume of recycling through the same supplier across the whole of Government in what is called a closed loop recycling deal-we get all our paper from them; they take all of our recycling-it will trigger the operation or the opening of a new recycling mill in Britain, which will create new manufacturing capacity in Britain and several hundred jobs, and be much greener as well as cheaper.

The reason we have not got to the volume? Because senior mandarins, as I believe they were referred to in that Sue Cameron article, are obstructing what is agreed Government policy by maintaining that their machines-which actually wouldn’t have been taking that paper anyway-cannot accommodate it.

Q541 Chair: You may want to recycle The Daily Telegraph; but the objective point here is that some of these machines inevitably require a certain quality of paper-otherwise they get gummed up. So how does your one-size-fits-all contract fit the different requirements of investment that has already been made in machinery around Whitehall?

Mr Maude: I am told that actually that machine that is referred to there-which I think must have been in the DWP, because it refers, I think, to posting giro cheques: the ordinary standard copying and printing paper wouldn’t be used in that machine anyway. So, as far as I can tell, that is a completely bogus pretext, in any event.

Q542 Chair: So judging from your response-your letter to the Telegraph of a day or two later-you refer to most civil servants being hard-working and deserving "the support of ‘senior mandarins’, rather than being trashed in poisonous anonymous briefings." Who do you think is responsible for these "poisonous anonymous briefings"?

Mr Maude: I have no idea, but they are referred to by Sue Cameron as senior mandarins, which is a kind of catch-all description. It is such a pity. It does such damage to the Civil Service, because I come across so many really brilliant civil servants, who absolutely have the interests of the taxpayer and the citizen at heart; who work really hard, go well above and beyond the call of duty and do difficult things, to which there is official resistance.

Chair: Is this-

Mr Maude: Let me just finish. To see them being traduced in this way in the public prints is very unpleasant.

Q543Chair: But is this not an example of where there is inevitably friction generated by change programmes? The key to containing this friction and succeeding with the programme is leadership. Are you confident that the leadership is effective? It would suggest that you are not carrying Whitehall with you on this change. Do you have enough authority, and are you getting enough backing, for people to understand that this is the direction the machine wants to go?

Mr Maude: There was a meeting not long ago where exactly this issue was addressed. I asked why a decision that had been made by a Cabinet committee some 12 months before had not been implemented. One of the officials there said, "Well, we didn’t think it was a very strong mandate." It was an absolutely clear mandate decision made by a Cabinet committee chaired by the Chief Secretary and myself, so it is quite hard to see what stronger mandate could have been needed.

Q544Chair: If there can be a meeting of a senior group of officials in Whitehall who do not understand that a considered decision has been reached and requires implementation, what is wrong with the leadership? Isn’t there something wrong with the communication? This does not happen in well-functioning organisations, because people feel they want to be led. What is wrong with this system that it does not want to be led, and what has gone wrong with the leadership? In the end, if an organisation is not functioning, it is down to the leadership. I am not just pointing the finger at Ministers or officials; I am pointing at the collective, because this is a common feature across the whole Whitehall machine.

Mr Maude: We have effective official leadership in the commercial function. I think you have had Stephen Kelly and Bill Crothers in front of your Committee. They are both extremely experienced operators in the commercial world, but relatively new in the Civil Service. I think Bill has been some years in the Civil Service now, but most of his career has been in the private sector. They give a very clear direction to the commercial service, but it is very dispersed. In all these functions, such as procurement, commercial directors have a relatively weak reporting link into the head of the commercial function at the centre of Government.

That is changing. That mandate is being strengthened, and rightly so. That is a decision made jointly by myself, Bob Kerslake and Jeremy Heywood. The ability for leadership exercised from the centre to be felt through the system has been strengthened, but it needed to be, because you cannot have, as you say, a functioning organisation where people in the Departments feel able to ignore a decision made collectively.

Q545Chair: So who do you think these officials who do not understand the mandate feel they are actually responsible to? They must feel that their responsibility does not lie towards this process, but why do you think that is?

Mr Maude: We have a very dispersed structure. Permanent secretaries are accounting officers. Finance directors, commercial directors and HR directors, at present, have a solid reporting line to their permanent secretaries, and the very sketchiest of reporting lines-

Q546Chair: But permanent secretaries are responsible to their Secretaries of State, and Secretaries of State are responsible to the Cabinet, in which you sit. There is something wrong that they do not get the message that they are all meant to be on the same team working towards the same objective. What is wrong with the structure of Whitehall that people do not feel this? Is it a structural problem, or is it a different problem?

Mr Maude: It is a very dispersed structure.

Q547 Chair: So you are a centraliser?

Mr Maude: Not centralised, but more collective responsibility right through the system. We have a very siloed system.

Q548 Chair: This is an interesting conversation and I hope the Committee will forgive me for extending this point. We have had a siloed system of government that has got us through world wars, economic crises, the 1970s and the 1980s, and no one has ever questioned it. Why do you now feel the need to do so? Is the siloed system really the problem, or is there some other problem that is challenging the effectiveness of our Civil Service? We are getting into the second half of this session already. Do you accept that there is a legitimate question?

Mr Maude: A question about whether it should be-

Q549 Chair: Is the diagnosis structural, or is it wider than structural?

Mr Maude: These things are never just structural. We are making a lot of demands on the system that have not been made before. The Civil Service is already at its smallest since the second world war and it will get smaller still. The old ways of doing things, with a lot of masking of things not being done well, can no longer persist. There are no hiding places any more. We need to do things better, in a way that there has not been the compelling necessity to do things better before.

Chair: We will return to that in the second half of our session. That is an interesting set of answers, and I am grateful to you.

Q550 Alun Cairns: Taking what you just said in response to the Chair, Minister, what are your views on a Crown procurement agency? That is the logical conclusion to centralising issues, is it not?

Mr Maude: It does not all have to be done in one place. As I said, the closed loop paper contract has been negotiated and run by HMRC’s commercial director and his team, but it has been done for the whole Government. My point is not that everything has to be done in some centralised agency, but that it must be done once for Government, not in a lot of different places, which is where a lot of the extra cost is coming from.

Q551 Alun Cairns: How would you see such a Crown procurement agency operating, if it was not to centralise everything in one place? Do you see that there is merit for a body? We have had conflicting evidence about that. Or do you see some other logical solution that comes out of the evidence that we have received and that you have gathered yourself?

Mr Maude: I think there is a case for a much more cohesive Crown commercial service. We have an agency-the Government Procurement Service-which is based mostly in Liverpool. They do a certain amount of actual buying for Government. They buy, for example, 75% of the energy that is bought for the whole public sector. Quite a lot of what they do is in the arena of doing framework contracts, which is a concept not known outside the public sector. Over time, it will move more towards buying for the whole Government and for some of the wider public sector, to the extent that wider public sector bodies want to participate.

There are large numbers of people involved in procurement across the Government-many more than you would have in an organisation of comparable size, because a lot of the functions are duplicated in different parts, which is why we end up with the phenomenon that Sir Philip Green identified: different parts of Government paying massively different prices for the same, bog-standard commodity.

Q552 Alun Cairns: How do you square your view with that of the Government’s chief operating officer, who was quite sympathetic towards the establishment of a Crown procurement agency?

Mr Maude: I think we are talking about a much more unified and cohesive service; it is not a single agency. Things would still be done in some Departments, but smaller Departments should not have their own commercial service-that does not make any kind of sense.

I do not think that there is a standard, one-size-fits-all approach. No one would suggest that you would want to take the purchasing and commissioning of very specialised services or goods into the centre. With commissioning new prisons and Chris Grayling’s rehabilitation revolution, these are very specialised things. Rail franchising and a lot of defence procurement are very specialised, but a lot of what is done is much more common and identifiable.

Q553 Alun Cairns: I accept that and I do not necessarily disagree with what you are saying. Are you saying that your response closely concurs with what the Government’s chief operating officer gave as evidence to this Committee? His report showed sympathy towards a Crown procurement agency.

Mr Maude: It is not a Crown procurement agency; it is much more-

Alun Cairns: That is the point I am making. Is your view absolutely at one with that of the Government’s chief operating officer?

Mr Maude: Absolutely. We are talking about whether we should end up with something much more like a Crown commercial service, which would be more cohesive with a stronger mandate to the centre, and where we would not have the same sort of duplication that we have currently across the system. We are completely on the same page.

Chair: We will move on. Mr Reed.

Mr Reed: Minister, the Government have set themselves a target-

Chair: Mr Reed, I apologise. Mr Elphicke wants to come in on the Crown agency.

Q554 Charlie Elphicke: Just on the Crown procurement agency idea, is it possible to go faster with the centralisation of procurement standards? There have been, and still are-for example with IT procurement-disasters, particularly with places such as HMRC. These Departments can go off and do their own thing and everyone else can get lost, and it ends up as a complete car crash. The more one has a centralisation of standards, the more efficiencies there can be and the more control of the contractor, because the relationship is in essence less cosy and less provider-captured. I urge you to go faster on that and focus on it, so that we can make even more efficiency savings and have even better contracts that are more cost-effective and effective, and actually work.

Mr Maude: We do need to go faster and we have some controls to prevent the Revenue, to take one example, from going off and completely doing its own thing, because of exactly the controls that "senior mandarins" were complaining about to Sue Cameron in The Daily Telegraph last week. We have a hideous legacy of incredibly expensive and opaque IT contracts and an oligopoly of multinational IT suppliers, with systems that are both expensive and insulated from each other.

The kinds of things that we need to have are much more visibility into contracts, with the contracts broken up so that you can see what you are buying and what you are getting, and smaller contracts so that some of the very disruptive-in the best sense-new suppliers can compete effectively. The standards that we should be militant about are standards of interoperability so that there is proper connectivity. Across the criminal justice system, for example, there is little connectivity between the IT systems and their different parts. Data have to be entered and re-entered at every stage in the criminal justice process, with a huge amount of error coming in along the way, as well as redundant cost.

Q555 Charlie Elphicke: May I very briefly say how much I welcome these complaints by "senior mandarins" and how I hope we will see more of them in the future?

Mr Maude: I think I take that as a compliment.

Charlie Elphicke: It is indeed.

Chair: We are going much too slowly, which is entirely my fault, because I am chairing this meeting. I must now do something about it. Mr Reed, as quickly as you can.

Q556 Mr Reed: I thought you were going to carve me out then.

Minister, the Government set themselves a target of directing 25% of procurement spend through small businesses by 2015. How are you doing in progressing towards that target?

Mr Maude: It is not a target; I am not sure that it would be legal for it to be a target. It is an aspiration, because if we said it was a target, that would mean that we would have to skew procurement in a particular direction, which would be contrary to EU law, and perish the thought that we would even contemplate such a thing.

Mr Reed: Let’s not go there.

Mr Maude: And we are making progress. We started from an uncertain base because the data were not at all clear. There were no clear data on how much of the spend was with SMEs, but some of the data are becoming clearer as time goes on. The baseline from which we were starting has been a somewhat moving target, but we are doing better. Will we get there? I don’t know, but I hope so.

It is crucial that there is a full engagement from the Departments that carry a huge proportion of Government buying-the MOD is the biggest, but it is not the only very big Department. Of course, we can look down into the supply chain-this is not just at the top level. There are some areas of purchasing where there will be quite a long supply chain, and the further you get into the supply chain, the more likely it is that there will be SME suppliers. I suspect there will always be a higher degree of SME participation than is easily measured. They key thing from my point of view is that we make it as easy as we can for SMEs to be able to bid and to be able to win the business. I still hear of too many small businesses that do not even try because word of mouth says that it is very difficult to win the business.

Chair: I am sorry, but we must have shorter answers because otherwise we will not get through, which might be your objective, but it is not mine.

Mr Maude: I never want to talk myself out.

Chair: Quite.

Q557 Mr Reed: On the data that are available, over the past two and a half years, procurement through SMEs has risen from 6.5% to 10% in Government overall-a 3.5% increase. On that rate of growth in the next two years, you will be way short of the 25% aspiration, and the picture is not consistent across the whole of Government. In the Department of Health, over that period, the percentage of procurement through SMEs has fallen from 18% to just 9%. What remedial action are you taking to push all Departments towards the stated aspiration?

Mr Maude: We have asked them all to come up with a plan-a strategy for how they do it-and it is fair to say that those are mixed. If there are particular problems in a Department, we will work with them. The figures will always look a bit lumpy, because there will be one Department for which the figures may go down in one particular quarter or one particular year, so it will never be an absolutely consistent even flow. The key thing for me is that the general direction is towards more being spent with SMEs, which is not about skewing it in favour of SMEs. Generally, SMEs will give us very good value for money, as well as being good for growth and jobs.

Q558 Mr Reed: I am worried, Minister, from your opening gambit to the initial question, that if Ministers do not have a total grip on this and other areas, it will never happen. Are you comfortable that you know who is responsible, by what deadline they are to meet what targets, what monitoring processes are in place, and what reporting mechanisms are in place so that you can get a grip as a Minister?

Mr Maude: We have much better data than we had, but they are far from perfect. There were virtually no data at all when we started. What we inherited was a position where there were no central data on spend; most Departments did not know how much of their spend was with SMEs, even at the top level of the prime contractor, let alone deeper in the supply chain. I give fair warning that these numbers will do some odd things over the years ahead, because we are still only able now to start to bottom out what the numbers are going to do.

Q559 Chair: So you do not trust the numbers.

Mr Maude: Yes, a fairly common feature in Government is that the quality of data is not good. It is better than it was, but it is still not good.

Q560 Chair: Just at the risk of making this meeting topical, you did mention the EU thing. In a word-yes or no-

Mr Maude: I sense a trap.

Chair: Do you think the EU procurement regime has helped public authorities in the UK to purchase more effectively-yes or no?

Mr Maude: I cannot give you a yes or no. It is quite bureaucratic. We have made it over the years, in terms of the way we have implemented it-not in the way we have put it into law, but the way we have implemented it through guidance-more bureaucratic and complex that it need be. I am glad to say that the European Commission is in the process of reforming public procurement directives in a way that will streamline the arrangements and make them more flexible and simpler. They will still be pretty complex, but those arrangements are currently undergoing scrutiny at the European Parliament. The Commission and the Council of Ministers are very content with the simplifications, but they are not yet through the European Parliament.

Q561 Chair: We had some briefing on that when we went to Brussels. Basically, you are saying that we might have made it more complicated for ourselves.

Mr Maude: Yes.

Q562 Chair: And it might be our fault if it has been made more difficult.

Mr Maude: Some of it is, absolutely. We have stripped it right back.

Q563 Chair: It seems that the EU procurement regime plus our administrative system has made it more difficult for public authorities, not less difficult.

Mr Maude: Yes, absolutely.

Q564 Robert Halfon: The Social Value Act came into force this year-in January, I think. What are you doing to make use of its provisions in terms of procurement and to enact the Act, in essence?

Mr Maude: My recollection of the Act that Chris White took through Parliament-great credit to him-is that it is permissive rather than mandatory, in that it enables public authorities, particularly at the pre-procurement stage, to build in an assessment of social value as well as pure financial value. My predilection generally is that you should not load procurement with values and requirements other than getting what you want at the best price. There is always a temptation to use procurement to deliver other desirable objectives. My preference always is to keep it as stripped down and limited as it can be. This is a permissive rather than a mandatory regime, so it is very much for public contracting authorities themselves to see how they want to use this, rather than for us to require it.

Q565 Robert Halfon: Are you saying that you are not in favour of using procurement to promote apprenticeships?

Mr Maude: Yes.

Q566 Robert Halfon: You are not in favour.

Mr Maude: I am not, no.

Q567 Robert Halfon: The DWP changed its contracts in July 2011 to encourage, but not require, its supply chain to hire apprentices as at least 5% of the work force of any contractors and subcontractors. Some 2,000 extra apprentices have been hired including, as you know, many young people. Are you aware of that programme, and what do you think of it?

Mr Maude: I am. My view is that where it does not interfere with good value for money, it makes every kind of good sense. It can be appropriate for a contracting authority to look at the wider value that can accrue to the economy through a particular supplier with a particular approach to, say, apprenticeships. You would always want your suppliers, where that is relevant, to be committed to training and the quality of the work force so that it can do what you want reliably and resiliently.

Q568 Robert Halfon: Given that those 2,000 extra apprenticeships have been at very little cost and that this has not impacted on procurement costs, do you not think that that should be rolled out across every Government Department, as guidance from you, so that every other Department has the same kind of procurement contracts?

Mr Maude: It is kind of horses for courses, really. There are places where that will be relevant and places-kinds of contracts-where it will not. I am generally wary when taking what is a desirable objective, which is to promote the use of apprenticeships-we have just launched an apprenticeship scheme in the Civil Service itself, and it is early days but it looks encouraging. I just think that our primary-not the sole-objective that we are serving through procurement is buying the goods and services that are needed for the citizen at the best price.

Q569 Robert Halfon: And you think that outweighs the possibility of thousands of people getting skills and apprenticeships, with the opportunities that that would bring? Most of these companies would be up for it if they knew it was part of their procurement contract.

Mr Maude: I do not think it should be allowed to trump value for money. I do not think, to slightly mix a metaphor, that it is an ace you can play to clinch it. Other things being at all equal, obviously one would prefer suppliers who add social value by committing to take on apprenticeships.

Q570 Robert Halfon: Would you object to greater transparency in the Whitehall supply chain, so you could, for example, ask Whitehall contractors to report once a year on the number of apprenticeships and young apprenticeships or whatever that they may employ who are working in Government contracts?

Mr Maude: We could do, and I am certainly happy to look at that as an option. Again, I am wary about imposing ever more burdens on suppliers when the key thing I want them to do is to do what we pay them to do cheaply and well.

Q571 Robert Halfon: Going back to the DWP contracts, would you look at extending that to other Departments?

Mr Maude: I will have a look at it. It is something I know you have promoted very vigorously and eloquently, and I will absolutely look at the experience with DWP to see whether there is something we could apply more widely.

Q572 Chair: Could I ask, Minister, if you would accept a memorandum from Mr Halfon that he has prepared for the Committee, and provide a response to it as part of our evidence base?

Mr Maude: Absolutely.

Chair: Thank you very much. Moving on, Mr Flynn-data and transparency.

Q573 Paul Flynn: Your Department sought to address the problem of the lack of good-quality procurement information in Government by a spend analysis. Three years into government, it is not complete yet; it is still 10% short, I understand. Why is it so difficult for the Cabinet Office to collect procurement data from Government Departments?

Mr Maude: It is a whole range of different things. They have different systems in different Departments. The first problem is that a lot of Departments did not collect in one place what they were spending and with whom. When we formed the coalition Government three years ago, we did not know who our biggest suppliers were. I had to write to the chief executives of the 20 companies we thought were the biggest suppliers to Government to ask them how much business they were doing with Government. When the returns came in, the results were very different from what we had speculated about. In one case, the actual amount of business a particular company was doing was about 15 times more than we had thought.

Q574 Paul Flynn: Stephen Kelly has quoted one Department where the lawyers had advised against sharing data with the Cabinet Office on the grounds of the privacy of contractual information between the Department and its contractor. Is that on? Is that reasonable?

Mr Maude: No, it is completely unreasonable.

Q575 Paul Flynn: So what are you going to do about it?

Mr Maude: We are addressing the issue.

Q576 Paul Flynn: What is it?

Mr Maude: It is objectionable that one part of Her Majesty’s Government, which is the Crown, should be withholding information from another part of the Government.

Paul Flynn: Thank you. When you get information-

Q577 Chair: May I just press that point for a minute? Surely the Attorney-General would agree that the Crown is a single legal entity, that the Government is a single legal entity? How can part of a single legal entity withhold information from itself? It is a nonsense.

Mr Maude: There are different contractors. The Crown is not the contracting authority. The relevant Department will be the contracting authority, or an arm’s length body, or a quango or whatever it may be.

Q578 Chair: There is only one Secretary of State. In law, the Secretary of State is the Secretary of State.

Mr Maude: Be that as it may, there are different legal personalities and the contracting authority is the Department. Notwithstanding that, it is a nonsense that one part of Government should feel it is acceptable to withhold information from another.

Chair: I am sorry to have interrupted that point, Mr Flynn. Carry on.

Q579 Paul Flynn: When you discover that unsatisfactory situation and get the information on it, which you are not happy with, what can you do to persuade the Department to change behaviour?

Mr Maude: Make an enormous fuss and invoke better legal advice to require the Department to do what people would assume is its obligation anyway. We are a very dispersed system.

Q580 Paul Flynn: Baroness Greengross’s Transport Forum and the International Longevity Centre told us, "Too much vital information by which the public can judge the value of public procurement is hidden behind the curtain of commercial confidentiality."

Under your leadership the Government has mandated the publication of Government contracts. Should the Government remove the barriers so that all data can be published, including data that are currently withheld or redacted as being commercially confidential?

Mr Maude: Our default position now is that we should not have provisions that create commercial confidentiality. That can’t be universal. There are plenty of circumstances where you have to have confidentiality, maybe for national security reasons, and maybe there are genuine commercial reasons. However, the presumption should be against that, and is. We now publish many more of the contracts than have ever been published before, and that is a trend that will continue. We do have a massive legacy, a backlog of contracts, negotiated in terms that would make it legally, sadly, questionable to publish them.

Q581 Paul Flynn: Are you happy that there is one contract about which the public are being kept in the dark that involves a future spend of £99 billion to a foreign Government-to a company that is £33 billion in debt, at double the price originally proposed-which is the contract for the nuclear power station at Hinkley Point? The public have no knowledge of what is going on. In a future market, where energy prices are falling-spectacularly in America, frankly-is it sensible to contract a fixed price for 40 years? That is what EDF is demanding.

Mr Maude: I am not familiar with the detail of that contract, because that falls outside the range of things for which I have responsibility. The Government in that case is not the customer.

Q582 Paul Flynn: Taxpayers are the ones who will be paying for a long time.

Mr Maude: Well, electricity customers.

Q583 Paul Flynn: You did stress that the Government is one unified entity.

Mr Maude: No, I didn’t say it was one unified entity. That is far from being the case.

Paul Flynn: We will check. Okay. Thank you.

Q584 Charlie Elphicke: Briefly, on that point, do you not think that Government has a legitimate interest in ensuring that there is security and continuity of power supply in this country, rather than just massively and woefully neglecting power stations, so that the lights would go off?

Mr Maude: I would point to something where we, as the Government as customer, have done something to stimulate this. In our first Energy for Growth project, which we announced the result of recently, we are effectively using the Government as a long-term purchaser of electricity to sign a 20-year power purchase agreement at a fixed price. That will give us cheaper electricity without volatility because we are buying UK-based renewable electricity, so it has neither currency volatility nor carbon fuel price volatility. On the back of the Government’s purchase agreement and the Government’s credit, it will unlock investment in new, green, UK-based generating capacity which will create jobs and new generating infrastructure.

Chair: This is slightly energy-oriented. Can we move on to skills please?

Q585 Charlie Elphicke: Moving on to skills, Minister. The Civil Service capabilities plan recognises that procurement and commercial skills are a priority area for improvement. The Committee was told by the chief procurement officer that he is currently compiling a register of procurement thresholds across Government. How can you determine how to reform the Civil Service and the skills that are needed if you do not have a detailed understanding of the existing skills base, and how do you ensure that you can get better procurement skills so that smaller businesses get a better slice of the contract pie?

Mr Maude: You are quite right that we do not absolutely know how many procurement professionals there are across Government. Our estimate is that there are in the region of 3,500. Too many of them are people whose expertise is in procurement process, rather than in the commercial outcome. I have on too many occasions heard, or heard reports of procurement people in Government saying, "Well, of course we are not allowed to make a judgment about choosing a supplier. It is all reduced to some sort of mechanistic process." You would never do that in a commercial setting. You would be making a commercial judgment about what is the best overall value. Part of this is that it is done in too many places and the commercial expertise is spread far too thinly.

We probably need over time to have fewer but better people. Many of them will be people who are already here and are capable of being skilled up with more commercial knowledge and confidence. Part of that will be through our commissioning academy. Commissioning is about much more than procurement. It is about knowing the market of potential suppliers. Procurement is the relatively narrow, and should be very short, technical part in the middle. And then there is contract management. But we have too few people in the Civil Service who have the confidence and the knowledge to engage with a market of suppliers and potential suppliers and then have the knowledge and capability to manage contracts after they have been awarded. That is a serious deficiency which has been long recognised. But over a long period too little has been done to address it.

Q586 Charlie Elphicke: Can I press you a bit more on the small business side of things? The Government have done well in that on one measure they have doubled the amount of small business procurement from about 6.5% of the total to 10% today. The target is 25%. The fact is that small businesses account for six out of 10 jobs in this country. In terms of job creation, small businesses have created a couple of million new jobs over the last decade or two, whereas large businesses have not created any more jobs whatever overall, so can I urge that we look even harder at how we can get more contracts to small businesses, particularly as they seem to be at the cutting edge of innovation, want the work, and want to do a decent job?

Mr Maude: I completely agree. We had a fairly recent example where a hosting contract for one part of Government was being retendered. The incumbent supplier bid £4 million. A UK-based SME bid £60,000 for it, so we got the thing done at a 98.5% saving. Too many procurements have been done with restrictions built in that automatically exclude many contenders. If you say that you always have to have three years’ audited accounts, most of tech city would be excluded from the very outset. They would not even get to the starting gate. Being required to post massive performance bonds and to show at the very earliest stage all of your insurance cover and such, even to get into the bidding race, those are big constraints that we need to strip away. We need to do it in a way that focuses on the right commercial outcome, because that is what will help smaller businesses, which will often be younger, newer and, as you say, innovative and disruptive-in the best sense-to give them the best chance of getting into the race and winning it.

Q587 Mr Reed: That is an excellent point, but it is no good just as an aspiration. Can you give us a date by which those things will be stripped away and we can start to contract with these small, innovative organisations?

Mr Maude: Yes, I can for central Government. It should be the case now. I suspect that, because we do not actually exercise total central control-freakery on this front, I cannot guarantee that none of it happens, but we do say to bidders, "When you see a procurement that is being done in that old-fashioned, restrictive way, please tell us," because-certainly for central Government-we will get it changed straight away. If it is in the wider public sector, we will engage with the contracting authority, which may be a local authority, a police authority, an NHS provider or whatever, to try to persuade them to do it the modern, progressive way. I cannot guarantee that it will all change, even in central Government, but we want to hear of the examples where it is being done in the old way and we will get on the case very quickly.

Q588 Chair: It is a slightly odd way to run an organisation to ask your suppliers to blow the whistle on the customer, who is working for you. This is a last-resort technique to try to improve the procurement method, rather than managing and improving the process internally.

Mr Maude: I will take any means there is of stimulating change.

Q589 Chair: So we are desperate.

Mr Maude: This is not at all uncommon in the private sector as well, because in big organisations, where you might easily have distant parts that are less responsive to new strategic directions from the centre, you want to know whether such things are being pursued.

Q590 Chair: It is not the way that the purchasing function worked when I worked for Ford, but there we are.

Mr Maude: When I was in embarking on this process way back, Lord Browne, our lead non-exec, recounted how when he was chief executive of BP he personally picked up the phone to one of its biggest suppliers to say, "We don’t know how much business throughout BP we do with you, but we do want to know and I would like to get your judgment and clear numbers on that, so that we can check them against our own." Our knowledge of what gets done right across the whole of Government is not perfect. This is far from being a unified system. It is very dispersed, more so than almost any other that I know of. Our information at the centre is far from perfect.

Q591 Priti Patel: Coming back to the point about skills, in particular commercial skills, clearly there is a capability plan in place, but notwithstanding the fact that we have had, for example, the west coast issue, which was a failure in one Government Department, what can be done to address the short-term skills deficit that exists in the commercial sphere within the Civil Service?

Mr Maude: There is no single answer to that. Some of it is upskilling existing people by putting increasing numbers of senior leaders through the new major projects leadership academy at the Saïd business school in Oxford. That helps. We have just recruited half a dozen Crown commercial representatives, who are senior figures from the private sector, mostly on a part-time basis, to act as our interface with the major suppliers. They will work with Departments, and our aim is that the expertise that they bring will rub off on permanent officials in those Departments. We can do some upskilling and some mentoring, but we will also need to do some recruiting, which we should be clear about. There are actually some very good commercial people around Government-I have been enormously impressed with some, but it is mixed.

Q592 Priti Patel: Do you sense that there is a real appetite-a real hunger and desire-to learn new skills in this particular area and commercial sphere among those in the Civil Service who have not so far had experience in this area?

Mr Maude: Again, it is mixed, but with some, absolutely. I have seen some, who have been lifer, mainstream civil servants, exposed to the commercial world and interacting with suppliers and potential suppliers, and they absolutely light up and discover a commercial part of their DNA that they did not know existed. That is great, because people generally like knowing stuff; they like knowing how to do things and having new skills. However, some will feel intimidated by it, because it is a different world and one that can be quite scary. There has been a bit of a sense that everyone from the private sector comes along and immediately fleeces the Government. That has happened in the past-not universally, by any means-but there has also been some tough negotiating by the Government, and exposing more existing civil servants to that, alongside experienced commercial people, like Stephen Kelly and Bill Crothers, who you questioned, is great experience.

Q593 Robert Halfon: Do you mind if we go back to the apprenticeship issue? If the Government had said, "This is our policy. This is something that we believe in: companies that have contracts with Whitehall should promote apprenticeships, and that is a central plank of our policy," do you not think that companies would cut their cloth accordingly, because they would be desperate to win Government contracts?

Mr Maude: Rightly, you won an award as campaigner of the year for your tenacity in pursuing particular causes. You are probably right that that would have that effect, and I absolutely undertake that I will look really carefully at the experience at the DWP and see whether it is more widely applicable.

Q594 Chair: May I ask a question about skills? We have known for years that we have a skills gap in the Civil Service. We know that there is not consistency in the responsible ownership of large contracts over the period of those contracts. Why is it taking so long to address these problems? Why is a Minister having to force civil servants to address these problems? What has gone wrong with the system so that it is not addressing these problems itself?

Mr Maude: I am probably the wrong person to ask.

Q595 Chair: You are-or rather you speak for-the Minister for the Civil Service, who is the Prime Minister.

Mr Maude: I do have day-to-day responsibility for it. As for why it was not addressed before-

Q596 Chair: More particularly, why has the system not addressed itself-why is it having to be fixed?

Mr Maude: I really am the wrong person. I think you had Lord O’Donnell in front of you-it is really something that you should be asking him.

Q597 Chair: Okay. Are we going to be able to promote skilled people in post so that they can develop their career managing one contract or one project?

Mr Maude: Yes.

Q598 Chair: At the moment that is not possible.

Mr Maude: We are introducing a specific change to make it easier to do that. I cannot remember what it is called, but it is a special provision, which I do not expect to be used in a huge number of cases. It is for precisely the position you are talking about, where you have someone in a key role on a major project that carries a big financial, operational and reputational burden. If someone is able, and has an opportunity to move on and do something else, we will now be able to say, "We want you to stay in that job, and we will pay you more in post to stay and do that job."

Q599 Chair: And increase their grade so they get their seniority?

Mr Maude: That should be possible too. It is possible at the moment.

Q600 Chair: But it requires a change in the regulations, doesn’t it?

Mr Maude: It doesn’t require a change in the regulations.

Q601 Chair: I was told that it can’t happen.

Mr Maude: Well, a lot of things you are told can’t happen, when it comes to it, turn out that they can happen.

Q602 Chair: Could you send me a note about that, because we regard it as absolutely crucial?

Mr Maude: I will.

Chair: Finally, the question about-

Mr Maude: When people really want it to happen, it can and does happen, I promise you.

Q603 Chair: Well, that is encouraging. The Ministry of Defence is introducing a GoCo. It is proposing basically to contract out its procurement. Why isn’t that proposal being considered elsewhere in Whitehall?

Mr Maude: The potential GoCo is for much more than procurement. DE and S covers quite a lot of operations in dockyards, for example, and other areas. So it isn’t just procurement. You could contemplate-

Q604 Chair: Do you favour this? Are you a radical? Do you support this?

Mr Maude: I am generally thought to be reasonably radical.

Q605 Chair: But do you think it is something that could be extended across Whitehall?

Mr Maude: It could be, but we are making a lot of progress with procurement anyway. It could well be that the right answer is some sort of mutual or a mutual joint venture. The scale of what we do through, for example, the Government Procurement Service is much smaller. It has many fewer people than you are talking about in the MOD.

Q606 Chair: Almost the sole justification for having a GoCo or a private company doing procurement and facilities management for the MOD is that it is impossible to recruit and retain the necessary skills on public sector contracts’ limitations of pay and that sort of thing. Wouldn’t it be better to address that problem directly, rather than go through the elaborate business of setting up an arm’s length company, which may or may not be owned by an existing defence contractor, may or may not be more effective than the existing set-up, and certainly will be under less ministerial control and less accountable, despite the fact that it is responsible for spending very large sums of public money?

Mr Maude: Of course we can recruit people at higher rates of pay, and we do.

Q607 Chair: So why do we need a GoCo then?

Mr Maude: That is not by any means the only reason for doing it. You would need to talk to-

Q608 Chair: But you are saying it need not be a reason at all. You would have flexibility of contracts and terms of employment and be happy to pay Levene-style salaries to recruit the necessary public sector skills to be able to do this. That is not a reason for going for GoCo?

Mr Maude: It is more of a hassle to get agreement to hire at commercial pay rates. It really isn’t just about it being easier. It is definitely easier in that kind of arrangement to hire people at competitive private market rates; that is undoubtedly the case. It is certainly not impossible, but it is more difficult, to do it within Civil Service constraints.

Q609 Chair: So what other gains do you get from a GoCo? You actually lose control over the contracting process as a Government or a Department. It will all be done at one remove, which is what we thought went wrong with IT procurement-handing over to the systems integrators instead of controlling it ourselves.

Mr Maude: You would need to talk to Philip Hammond, Jon Thompson and Bernard Gray about how it will work in detail. I have been a bit involved, but really only tangentially, but I think the case for getting a hard boundary, with a clearly defined contract, and a management highly incentivised to drive out cost, is quite a strong one.

Chair: There is a lot more that we could pursue there, but we will not for now; we will move on to our next session.

Prepared 18th July 2013