Oral evidence: Asylum accommodation, HC 1000Wednesday 5 February 2014
Oral evidence, 5 February 2014.
Witnesses
Mark Sedwill, Permanent Secretary, Home Office, John Fernau, Commercial Director, Home Office, and Glyn Williams, Director of Asylum, Home Office, gave evidence.
Chair
Welcome. We are trying to keep this very tight, Mark. If we could keep it tight, that would be really good because we have got all sorts of votes—democracy interferes with the Committee. I want to start at the beginning, because I want us to understand why the Department decided to change the arrangements you previously had, which those of us who remember know took for ever to improve—it took a decade to get them up to some sort of acceptable standard. If you had wanted to cut costs, why did you not work with your existing providers either to cut those costs or to improve the arrangements? Why on earth did you go down this road?
Mark Sedwill
If you look back at the 2005 NAO Report, it encouraged us into this, really. That Report suggested that we needed to push more risk and responsibility away from the Department and on to the providers. It was clear, if you look at the savings in the business case, that the vast majority of those come from the economies of scale, so, while in general terms I am in favour of disaggregating, there are cases where it does make sense to get economies of scale. The previous providers did, I believe—obviously, this is long before my time—bid in the new round and were not successful. So I think it was right to take another look at it. The Target Contracts were the second generation. They were an improvement over the first—there had been savings there. But, as you will have seen, we are—
Chair
So was it savings that drove it?
Mark Sedwill
This was before my time, but my understanding is that they did, but it was also that we wanted to address the issue that you have just been talking to the suppliers about: the property standard. The Decent Home Standard criterion was not set in the Target Contracts, but it is set in this. Obviously, there are issues over—
Chair
But you could have done it with those existing providers. You could have made a change—I do not know when those contracts came to an end. What is telling when you read the Report and around that is that the providers who had been at it the longest—I forget the name—
Mark Sedwill
Yes, Clearel.
Chair
They were actually making money out of it and providing a much better service to a really vulnerable bunch of people.
Mark Sedwill
Agreed, and they were one of the successful bidders among the old providers for the new contracts. But the others were not. This is the nature of Government procurement: you refresh some, you do not refresh others.
Chair
Let me just come back, because this is almost a repeat of other areas we have looked at. You deliberately went for big providers. That was the nature of what you were doing. You divided the country up into six or eight areas and that immediately carved out some of the existing people who worked under the previous scheme, the Target scheme. I put it to you that you increased your risks in two ways. First, if they don’t perform and things go wrong, more people are hurt—I can’t remember my second point now, but I think that you increase your risks by having a small number of providers. You always force it. It is always the same providers coming up, time and time again. You haven’t got diversity of provision and you haven’t got experts. They say they’ve done other things, but they haven’t done asylum accommodation, except for the one group. I think you increased your risks unnecessarily by the nature of the procurement.
Mark Sedwill
It is a very fair point and a very fair challenge, but you have to balance that against the effort that was being made to save a very significant amount of public money through economies of scale. The other point it is worth remembering is that the Target contracts—the previous generation of contracts—were not providing a better standard of accommodation than COMPASS is providing. Actually, partly from the conversation you have just had, the standard was lower than we are beginning to see achieved. There will be lots of examples where it is not working; we are aware of that. They are not fully compliant—we have acknowledged that and we’re working on it—but it would not be right to suggest that the Target contracts were a better solution. It’s easy to criticise the Border Agency, but I understand why they judged that they needed to go for this.
Chair
Chris wants to come in, but I have to say that one of the reports I read was by the Joseph Rowntree Foundation—I accept that they’ve got a bit of an axe to grind, but I’ve got a lot of time for them—and it gives examples where, under the National Asylum Support Service contracts, they would disagree with you, Mr Sedwill. In Newcastle upon Tyne, they talk about how under the previous contract they had set up a dedicated team, which was working well in supporting community cohesion. Bolton had established six urban care and neighbourhood centres, which were doing a good job. Glasgow had integration networks. Nottingham housed 240 families for up to six months in permanent housing. Joseph Rowntree doesn’t spin its research, so I don’t believe it’s right to say that the previous service was poor. I think they had learned a lot during some 10 years of developing and were delivering a far better service than we’ve had so far—I don’t know about the future.
Mark Sedwill
I am not aware of the Joseph Rowntree report exactly. I don’t think the NAO Report or the earlier NAO Report quite bear that out. There were many issues over the standard of accommodation. The contracts themselves didn’t contain the decent homes standard requirement. Of course, you’re right that we could have applied that to a similar set of contracts as in the past, but as you have suggested, the big benefit to the public purse from moving to the COMPASS contracts has been a very significant saving through economies of scale.
Chair
How much have you saved?
Mark Sedwill
So far, assuming our prediction for the next six weeks is correct, we will have saved £27 million compared to the previous contracts.
Chair
That is over what period? Eighteen months?
Mark Sedwill
Yes, give or take—a little longer than 18 months. We anticipate £137 million over the seven years of the contract—assuming it is extended that far—against a total expenditure of less than £700 million, so it is a very significant saving to the taxpayer.
Chair
That is what is driving this?
Mark Sedwill
Of course; it is a very important factor.
Chair
I am just asking.
Chris Heaton-Harris
I have no problem with you driving costs down in this area and being able to use this new set of standards that you have set for the private providers to drive quality up, even though it has taken a bit longer that many of us would have liked. My question—and I shall be very blunt—is about why the companies which provide the service and have been failing have not been fined. Is it because the Home Office was a bit unfair and the data provided to the companies when they were bidding was not quite as solid as it could have been?
Mark Sedwill
I have two points on that. First, we are invoking the penalty clauses, as the NAO Report recommends, and we expect—
Chair
From when? Not in the first six months.
Mark Sedwill
Not in the transition period, but in the period thereafter, which is when the penalty clauses came into effect.
Chair
But you lost six months.
Mark Sedwill
I would not describe it as lost—I can come back to the point about the transition in a moment. I think it was probably right to give them six months to get up to that standard. They knew they had six months to do it, and we are invoking the penalty clauses from that point on—January 2013—and will be retrieving the service credits that have accumulated over that time, so they are, to use your language, Mr Heaton-Harris, paying a financial penalty for falling short of those service standards. We expect to have that settled by then. On the other point you made, I will not repeat Mr Bacon’s more colourful description of the way the Home Office may have handled that.
Mr Bacon
Go on; it would be great to have it on the record.
Mark Sedwill
Exactly. I was not involved, but I have seen no evidence that that is the case. The contracts require them to improve the standards. They knew what the decent homes standard was. I realise it is much more complex than that, but let’s be frank: these are very mature commercial organisations. The two that you described, Madam Chair, are in a lot of business with Government. I cannot imagine that anyone in this room has rented or bought a property without doing a full survey, no matter how nice they think the people selling it to them are. I know that analogy can’t be driven too far, but we were clear that the companies needed to understand the portfolio they were taking on—understand the responsibility to improve it—and, during the transition period, minimise the disruption to families, which was an important element of it. I think “buyer beware” remains a pretty important principle in any commercial arrangement between Government and the private sector.
Chair
Louise, just come in and then Chris will come back.
Louise Bladen
I just wanted to clarify the service credits, because the picture is quite complicated. The Home Office could have invoked service credits from January 2013, when the contracts became operational. They only did so for Clearel. G4S and Serco have only paid service credits from July, so it is a different picture across the contracts.
Mark Sedwill
But we are now invoking service credits across the piece.
Chair
But there was a six-month gap.
Mark Sedwill
There was a six-month gap until January 2013.
Chair
No, from January to July; that is what I thought.
Mark Sedwill
No, no, no. We have not invoked them as in recovered the money—yet—but we are invoking them. That money is going to be recovered.
Chair
Not January to July. Let us get that absolutely clear.
Chris Heaton-Harris
What I read in my research led me to exactly that conclusion.
Mark Sedwill
Can I ask the commercial director, John Fernau, to come in, because he can clarify this?
John Fernau
From January to July, we accrued the service credits, so we are recording them. We are banking them, if you like; we were not claiming them. From July, we have been in a process of claiming them and recovering them. The service credits in that period are not lost; they are being recovered.
Chair
I am sorry, you will have to speak up.
John Fernau
In the period from January to July, we accrued service credits and we lodged them in a bank, if you like.
Mark Sedwill
So in effect we logged them. We did not insist the company handed the money over. We are now getting the money—
Chair
From January?
Mark Sedwill
From January 2013, so by the end of this financial year—
Chair
So the Report is not right, Louise?
Louise Bladen
Those service credits from January to July are logged, but not yet claimed, or not yet agreed.
Mark Sedwill
That is correct.
Louise Bladen
So you haven’t got the money yet.
Mark Sedwill
We haven’t got the money yet. Your recommendation—I forget which; we are getting a little confused here. We logged them, so we knew what service credits we were owed—what money we were owed in penalty clauses by the contractors. We did not invoke those because we were in a commercial discussion with them over the other issues that they raised. We are now invoking them and we expect to have the money back by the end of the financial year, including for that period.
Mr Bacon
To be clear, you say you haven’t got the money back, but when one speaks of service credits, what you are actually talking about is money that you are not paying out.
Mark Sedwill
Exactly.
Mr Bacon
And you are getting services for it, for which they are not charging you.
Mark Sedwill
That is right. We are implementing the recommendation to do that in the Report. It had not been done at the time the Report was written.
Austin Mitchell
Surely the aim of the new scheme was to save money. The Report states: “The Department aimed to save...£140 million”. You said £137 million. The motive was to save money, wasn’t it?
Mark Sedwill
That is a primary motive of any commercial arrangement. The aim was to save money while also maintaining a level of service that was adequate for the asylum seeker.
Austin Mitchell
But you didn’t know about the state of the properties when you set out to save money. In a sense, G4S and Serco were saying they were sold a pup, because the properties were not in adequate condition.
Mark Sedwill
Had we been applying, Mr Mitchell, the same standards we are applying now, that would have been true under the Target contracts. I don’t think it is right to suggest that we sold them a pup. This was a transparent process. These are very mature companies.
Austin Mitchell
Well either you didn’t know about the real condition of the properties or you sold them a pup.
Mark Sedwill
I don’t know, Mr Mitchell. We may not have had a complete survey of the properties, but the point is that contractors were required, as part of the contract, to upgrade their quality. They were required to minimise the disruption during the transition period.
Austin Mitchell
And they hadn’t done so.
Mark Sedwill
The onus was on them to be sure they were bidding at a price that would enable them to meet that service and meet our requirements.
Chair
Can I just bring Amyas in on that?
Amyas Morse
I just want to make sure that we have not left any confusion in our minds on this January-to-July service credit point. You have claimed the service credits. You are having negotiations with the companies, which I think—without wishing to prejudice them at all—probably relate to some of the representations and information you have provided at the initiation of the contract. So again, without prejudicing them, they have some arguments. So if you were going to the bank, you would not necessarily say that 100% of those are going to be paid over at this point.
John Fernau
The January-to-July service credits are agreed with the providers and we are reclaiming them.
Amyas Morse
I understand that, but there might be some offsetting adjustments.
John Fernau
Not directly. If we are offsetting the service credit, that is the mitigation. Was there a reason why the service that we recorded as being failed wasn’t failed? We have separated the commercial dispute which they raised. That is now being dealt with separately.
Amyas Morse
Thank you; I am only doing this for clarity. So there are two things, which I won’t go into in any more detail. There is a commercial dispute going one way and there are service credits going the other. You are presenting those as separate. It may be that you find yourself talking about them at the same table.
Chris Heaton-Harris
Similar amounts.
Chair
You have had similar claims from them.
Mark Sedwill
I do not think I am going too far in suggesting that the kind of numbers—the range that you have identified—is the range we would expect to have retrieved for that period. Is that fair, John?
John Fernau
indicated assent.
Chair
What is their claim against you? Is it information?
John Fernau
Their claim is that they did not receive as much information as they were expecting in the tender process. Not wanting to go into the details of it, we have received their claims and we have reviewed them.
Mark Sedwill
They are essentially saying that we are applying the service credits—which we identified along the same sort of order of magnitude as the NAO—too rigidly. They’ve got some mitigation with that. That is a commercial negotiation.
Chair
I wish you called it penalties. Service credit is so—
Mark Sedwill
Service credits are the way you—
Chair
Of course it is a penalty, but it is a daft way of describing it.
Austin Mitchell
What I am saying is that you were attempting to save money on a situation in which you are already putting asylum seekers—a vulnerable group—into unacceptable conditions, some of which were frankly appalling. That is what you are saying. You are being mean to those who are badly treated already.
Mark Sedwill
I don’t think that is fair, Mr Mitchell. While not all of the properties are compliant, most of the problems with the properties, as the companies set out, are not putting the health and safety of the asylum seeker at risk. Now there are examples that are.
Chair
It is the chart of your own inspections that shocked me.
Mark Sedwill
Indeed; me too, Madam Chair. Some of the language in that chart is quite counter-intuitive. I struggle a bit with “immediate” being more immediate than “emergency”—
Chair
I assume it is yours. With respect, Mr Sedwill, all they do is regurgitate your categorisation.
Fiona Mactaggart
I can’t imagine that you think the repairs need to be done in two hours unless they are dangerous.
Mark Sedwill
Exactly. That is the point, so if it is within two hours, it is something that is material to the safety and welfare of the occupant of the house. If it is within 24 hours, it might not be a cracked window; it might be the central heating having failed or the boiler having gone off—something of that kind, which any of us would expect to try to repair. But repair within a day—you would not repair it within two hours; it would be seven days, and so on. I think this language comes from the decent homes standard. Personally, I find it quite counter-intuitive, but it is the language that is in the contract, so I am trying to put it into terms that I would find more intuitive.
Austin Mitchell
As a result of your inadequate knowledge of the condition of the properties that were being taken over by the new providers, you are saving less than you thought, because you are now having to inspect the properties more vigorously to enforce improvement. The savings are going to be much less than expected.
Mark Sedwill
You are right that we are having to put in more of an inspection regime. The cost of that is minimal compared with the £137 million we expect to save. We are talking about fewer than 20 inspectors, and we would not expect them to be operating at the same intensity of inspection through the lifetime of the contract—
Mr Bacon
Could we just be clear about the size of this? The contracts are for seven years and are expected to save £140 million or £137 million. Previously, providing accommodation cost £150 million a year, which over seven years is £1.05 billion. Am I right that globally now—roughly, given the ebb and flow of service credits—it is £910 million?
Mark Sedwill
It is less than that, Mr Bacon, because the number of asylum seekers and other demands on the system are different. Had we continued with the target contracts on our predictions of what we expect the demand to be, the target contracts would have cost about £826 million, if my memory serves me right—the guys can check. These should cost £687 million, I think. We will correct that number if I have remembered it wrongly.
Chair
I want to put something on the record. If you look at figure 12, which comes from your own data, point 5 refers to where “there has been an adverse effect on a service user’s health, safety or security,” and point 4 refers to where “there may be a material adverse effect on a service user’s health, safety or security,” so no one can pretend that these are unimportant or in any way minor. I don’t call the central heating going off the most important thing—you can survive without central heating—but these are serious things. I think your central heating is way up the ladder.
Chris Heaton-Harris
Would there have been similar figures on the number of faults and so on in the previous target contract you had? Housing stock does not run perfectly all the time.
Mark Sedwill
No, it doesn’t.
Chris Heaton-Harris
Perhaps it is an improvement.
Mark Sedwill
This is a very challenging area of the housing market. You may recall that more than 200,000 council house properties in this sector were defined in 2011 as being sub-standard. Under the Target contracts we did not have the same criteria. The decent homes standard had not been applied when that contract started, but the quality of the accommodation was below the quality that we now have. I could not give you exactly the same criteria because the translation mechanism has changed.
Chair
Would you send us a note on that, because I am sceptical? If you have got the data, I would like to see them, so send us a note justifying that.
Mark Sedwill
We will give you what we have.
Ian Swales
I want to talk about penalties—I will use that word, although maybe you do not want to. We have talked about the six-month period and the work you are doing on that, but I want to ask about what has happened since. Do you routinely levy penalties for failure to perform? For example, Serco in the north-west has clearly failed to provide the right standard. We only just get past June, but the figures are clear. Are you routinely levying penalties for failures to deliver KPIs?
Mark Sedwill
Yes.
Ian Swales
In all cases?
Mark Sedwill
Yes.
Ian Swales
You are; I think it is extremely important that we get that on the record. If you don’t, bidders for future contracts will bid lower, knowing that you do not mean what you say. It is important for this contract and others.
Mark Sedwill
I agree with you 100%.
Ian Swales
Leading on from that, you say you have got 20 inspectors. We know that two of the three providers we have had in the room—I think I am right in saying this and hope I don’t get myself prosecuted—are already in trouble for reporting data to the Home Office that are not true.
Chair
The MOJ.
Ian Swales
Sorry; the Ministry of Justice.
Mark Sedwill
Thank you.
Ian Swales
Be careful. They are in trouble for that. In payment-by-results contracts, there is unfortunately a perverse incentive to report the results that people want to see. Are the 20 inspectors that you referred to not just doing touchy-feely things but routinely checking KPI data against the reality on the ground?
Mark Sedwill
One of my experts can answer exactly that. There is the role of the inspectors and the role of the commercial arrangements, and I will need them to answer on the detail. May I pick up on the point about the track record of the two suppliers—in particular with the MOJ—to which the Chair correctly referred? When that happened—I referred to this briefly in the letter I wrote—we immediately commissioned our own internal audit to look at our contracts with them to see whether we were at risk. As you can imagine, I, like many others, was shaken by that news, and I worried that we might find ourselves in the same situation. They were clear that that was not the case. There has then been the cross-Government review, in which two independent auditors—PWC and Moore Stevens—were commissioned to look at a range of contracts with those two companies. As a result of the sort of concerns that the NAO has been raising about our performance management—not our financial management—I commissioned our internal auditors and Moore Stevens to do a much deeper dive into those contracts. They found that the payments had been made correctly and in accordance with the contract, with no evidence of impropriety, so we have done a fairly thorough audit check to make sure we are not subject to that. We are going to change the KPIs—John may want to say a little more about that. One of the amendments we are making to the KPIs is essentially an open-book accounting arrangement for the performance data that we get from the companies.
Ian Swales
I was going to come on to that. First, some of the KPIs—maybe we only have summarised forms in our Report—sound potentially woolly, in terms of accommodation standards. I know that you are probably working with more detail. We have had two of the providers in the room talking about this issue in general. To the amazement of some of us, they were quite prepared to have open-book arrangements for their Government contracts—Clearsprings is not a company that I am familiar with, but I am talking about the other two. They sat where you are sitting not very long ago, and they said, “Fine,” so you are following through on that and you are finding that they are willing to do that.
Mark Sedwill
John, you have been in the commercial negotiations with them, but I think the short answer is yes.
John Fernau
Currently, the performance regime is a self-reported regime. If things were working normally, we would do dip-check audits—random audits—where we ask, “Is the data what you said it was?”, so we know that they are telling the truth.
Ian Swales
To be clear, were you doing that from the start or have you started doing that in the light of recent revelations? Would it be normal for you to do that?
John Fernau
It would be normal for us to do that.
Mark Sedwill
We did the deeper dives. When I described it to our auditors, I said, “We have had a health check; I want a full medical.”
Ian Swales
Random deep dives are a very good idea, because they don’t know where you are going to look next. That is good.
Fiona Mactaggart
Mr Sedwill, you will be much more familiar than I am with the Select Committee on Home Affairs report in December, which said: “It is unacceptable that the Home Office is still over-reliant on a very small number of large providers to deliver its major projects”. It then went on to describe how they failed. Until I read the Report, I assumed that one of the reasons why you wanted a small number of large providers was to more effectively manage the interface between the Home Office and the provider. Paragraph 2.17 of the Report states: “The Department did not require outgoing providers to supply information on the condition of their housing stock”—we have heard about that—“nor did it share information on previous suppliers’ performance against contractual standards with the new providers”. It seems to me that I am reading about a kind of civil service jobsworth—“It’s your problem now”—and we are not actually concerned about the quality of service that this vulnerable group of clients gets. That seems to be the opposite of what you should be able to achieve with fewer big suppliers.
Mark Sedwill
I think the criticism of the way that the Target contracts were configured and managed is fair. One of the things that John is now working on with our contracts generally is thinking not just about the transition in, but about the transition out. There is clearly an issue that if you change suppliers, the previous supplier may lose interest in the last period of the contract. We are trying to ensure that we tie that down more properly in future contracts. I don’t really want to take issue with this, but I just must with the assertion that civil servants do not care about the quality of accommodation that asylum seekers find themselves in.
Fiona Mactaggart
I am surprised to read this. I did not assume that that was what people thought, but it does seem, from this account—
Mark Sedwill
We are very conscious. All the caseworkers I deal with when I go out on visits are very conscious that we are dealing with a population that has a large number of very vulnerable people, particularly women with young families, who have been trafficked and in many cases are still subject to abuse. People really care about that and are quite careful about how they interact with them. That goes to some of the other issues that have been raised here, but we also need to keep in mind that there is a significant proportion of the asylum seeking population who are seeking to do so simply to prolong their stay in the UK. They do not always present very differently from the genuinely vulnerable, so it is a challenging area of work for us.
Fiona Mactaggart
Mr Sedwill, you know that I know that. I am not saying that every one of your tenants is an angel, but I think that every one of your tenants, while they are a tenant, deserves proper management. I am rather shocked to discover that the companies did not have regional directors or people to talk to. They did not know what they were taking over. Frankly, if I had been them, I would not have bought this pig in a poke. Nevertheless, it seems that you failed to iron the path to them being able to provide a better service. I think that’s your job, and I think you’ve failed at it.
Mr Bacon
“Buyer beware”, you said.
Mark Sedwill
I did. I was trying to explain the point about providers needing to understand the property portfolio they were taking on. It is the nature of this kind of to and fro that one ends up emphasising a particular point in response to one question, when one is actually trying to cover a much more complex picture. Ms Mactaggart, I have accepted in the letter that I do not think our performance management of this has been as strong as it should have been—our financial management has been sound. Of course I would always want to be in a position where we had identified everything the NAO Report identifies and have already addressed it. I think we have identified quite a lot of those issues, but in accepting the recommendations of the Report, which has some challenges for the way the Departments handle this, I absolutely accept that we need to improve.
Chair
Can I take you—this is important—to the concluding comments in the summary on page 7? It is about the whole issue of transition and who gets the blame on that. You say that they should have known, and I think they say that you didn’t tell them. Look at that. It says: “Many of the issues that arose during transition remained unresolved between the Department and the providers and continued to affect provider performance once the contracts became fully operational…providers are still failing to meet some of their KPIs, notably around property standards, and the experience of some service users has suffered.” The reason we are here today is the number of letters that we got, and Sarah Teather has run a cross-party inquiry into the conditions of asylum seekers’ accommodation. It has not just been the odd person raising it with us; there has been a lot of concern among MPs who have had this in their constituencies. Looking at that, it looks to me as if there is a whole load of stuff that you still have to sort out.
Mark Sedwill
I accept the conclusion. We accept the NAO recommendations. We are sorting it.
Chair
What? Go on; tell me what you’re doing.
Mark Sedwill
I’ve set out in our letter that we have accepted the recommendations, and there is a list of all the actions that we are taking. We are applying the penalty regime, which Mr Swales talked about, to try to incentivise the service providers to deliver the service. I should say—this is worth putting on the record—that while of course it is important, if they are not providing it, that we get the taxpayer’s money back, that is not the purpose. I don’t want the money back; I want them to provide the service that we have contracted and paid for; but we will get it back if they don’t provide that service.
Ian Swales
Earlier you said that you were changing the KPIs. Is that to make them tougher? I am guessing not. What are you doing with them?
Mark Sedwill
I referred to one change, which was the open-book accounting point, but we are not going to soften the KPIs on housing standards. That is absolutely not the case.
Meg Hillier
Mr Sedhill, it seems that the Home Office is developing a reputation for being the Foxtons of Whitehall, because we heard that there was a bit of sharp practice in not providing full information. I hear what you are saying about “buyer beware”, but I have to say that there is some naivety among Government Members, possibly. What was the main driver? There was taxpayers’ money and cost-savings—you have actually outlined quite substantial cost-savings—but had you gone slower, as it was hinted would have been helpful to the providers in terms of quality, they have indicated clearly that they would have moved up to 3,000 people in one case. There is obviously an issue when talking about—as you did eloquently—vulnerable asylum seekers. What was the priority? Was it to get shot of it quickly so that you did not have that mass movement of people or to get shot of it quickly so that you could save money? Or was it just not very competent?
Mark Sedwill
To be fair, I do not think that it was any of the above. I once sold a flat through Foxtons, so I know exactly what you are referring to. They sold it very fast, as I recall.
Meg Hillier
Well there you go. What was the problem with it?
Mark Sedwill
It was a very nice flat. Sorry, we are digressing. The transition period was six months. I wondered whether one of the criticisms that we would get was whether the transition period was too long and that we had been too generous to the suppliers, because—as I understand it—we had originally aimed for a transition period of three months. We agreed to extend it because we recognised that the transition was proving challenging and complex for them. You could argue, on the other side, that we let them have a longer period than we could have done without applying the penalty clauses in the service credits, had we taken an utterly rigid approach.
Ian Swales
It’s the period for the contract, though.
Mark Sedwill
I understand the point, but I am trying to illustrate the approach that we were taking. We were not simply—
Meg Hillier
So there was six months for transition?
Mark Sedwill
You made the point that we were inclined to rush it. I was trying to give evidence to suggest that we were not and, if anything, we were being quite understanding to the suppliers in allowing them—
Meg Hillier
Can you just lay out very clearly, from the discussions at the opening to them taking on the contract, what that time period was?
Mark Sedwill
John may know the answer, but just to remind you, the old contracts were expiring so, as with any contract—
Meg Hillier
Yes, though Whitehall does extend contracts quite often for all sorts of reasons.
Mark Sedwill
I know and I am very uncomfortable whenever I extend them beyond their legitimate period because I think that that is bad practice. The old contracts were expiring and needed to be renewed and the new contracts were designed—we have gone through the points, so I will not repeat them—to address some of the issues that the NAO had raised with us in their 2005 Report. They are not perfect, but we sought at that time to address those issues.
Meg Hillier
Can we be clear on this time frame?
John Fernau
Initially we had a three-month period of mobilisation—that is when the contractors were getting their supply chain, staff and systems in place. Then we had planned a three-month period for transition, which we extended by a further three months to give us a six-month period for transition.
Meg Hillier
Can I ask, when you were doing all these negotiations, were you aware how few of the properties were being inspected physically, and was that an issue for the Home Office?
John Fernau
At the three-month point we were aware that we were not where we needed to be—that some of the suppliers were having problems with their supply chain and that we needed to extend other contracts to keep that continuity of service to the service user, which was fundamentally important. That is what led us to extend it by a further three months.
Chair
Did you arrange the contracts just on price?
John Fernau
No.
Mark Sedwill
No, there was a bidder who came in with what we considered to be an unrealistic price and they were excluded.
Chair
Am I wrong, based on the information that I was given, to understand that one bidder won four of the six regions and then pulled out? Is that right or wrong?
John Fernau
I do not know.
Mark Sedwill
I do not know. We will have to come back to you.
Chair
So there is not somebody who won and then pulled out?
John Fernau
It was before my time, but I think that was a member of a consortium who pulled out, but the rest of the consortium carried on.
Chair
So they had won and then they pulled out?
Mark Sedwill
We will have to come back to you, because I do not think that we can say anything authoritative.
Chair
The other thing is that we have given quite a clean bill of health to Clearsprings, but they did it as a joint venture and then their joint venture partner, Reliance, pulled out. Did you reflect on that?
Mark Sedwill
Well, I think Clearsprings were the lead—the prime—so in the end it was for them to work those arrangements out. Our relationship was with Clearsprings. That is why—
Q166Chair
No, it was a joint venture between Clearsprings and Reliance—Clearel is the name.
Mark Sedwill
That is right.
Q167Chair
It was a joint venture and Reliance pulls out. If you are worrying about the quality, what action did you take when you knew that one of the people who had won the contract pulled out of a joint venture?
John Fernau
When we are reviewing bids, including subcontractors, the subcontractors’ capability all counts as part of the main bid.
Chair
This was a joint venture.
John Fernau
Yes, as a joint venture, so all the joint venture partners contribute. When Reliance pulled out, that would have been re-evaluated. I would expect that Reliance were a relatively small part of that bid, given the size of Clearel.
Chair
I think it would be helpful to give us a note on those two aspects, because I think it is part of contract evaluation and then service quality.
Stephen Barclay
Can I, too, apologise? I had a three-line Whip to attend an SI meeting—the joys of that—so I missed part of the session. On a different note, if the supplier has taken on board housing stock and not checked it and done its due diligence, I cannot see why that is a fault of the Department: they are a commercial organisation who should be able to look after themselves, so I have no issue with that. Could you comment on relationship management, both on this contract and more widely? As you know, Mr Sedwill, on e-Borders there were issues with Raytheon. We see this across Whitehall with IT suppliers. Our hearing on Monday with the BBC, in essence, was all about the gap between the business and the IT department and the management of that. Here you have multi-site, sensitive clients and complex contracts. I am not sure whether open-book is a key performance indicator; I thought that was a contractual term. But you have got a range of KPIs—I am interested in this specifically and more widely as a Department. Do you feel you are devoting the right seniority and amount of resource to relationship management? What are you doing differently now, as opposed to perhaps two years ago? How do we avoid some of the disputes? I note that the Report says: “No formal contract changes have been agreed to date.” There are ongoing issues, so how will we stop those, moving forward?
Mark Sedwill
It is a really big and important question. We do not want to be in a situation where essentially we have the lawyers in the room fighting over the definitions of KPIs and so on, because you do not get the service that you want. I was out just the other day—if I may use an anecdote—with one of the suppliers who was talking about the issue of dispersal and the 1:200 question, which, as you know, is quite sensitive with some local authorities. That supplier has recognised already, with some local authorities, what the different pinch points are. In one area, the pinch point for the local authority is primary education, so they have agreed that they will not place families in that area because of that. In another area it will be something else, so although the purely contractual element of this might say 1:200, they are approaching that in an intelligent, relationship management way. We are seeking to do the same. We have established a strategic partnership council—on which Glyn, as the operational director, will represent the Department and chair—in order to have all the suppliers together to talk through the various issues and try to do this, while maintaining the commercial rigour, in an essentially intelligent way. If I can go to your wider point briefly—because this is an issue for Government as a whole—Government as a whole has not used its sheer market buying power as intelligently as we should have done. There are several very big suppliers who supply to different Departments for whom, in some cases, we are their biggest customer in the world and in others at least one of their top five or six or 10 customers, or whatever. There is the innovation in the Crown Commercial Service to appoint Crown representatives—these very senior people who are former chief executives and so on—who can be the Government’s interlocutor with these really big suppliers and on whom John, for example, if he has an issue, can call to bring that greater weight to bear. Within the Department, my commercial director now has the lead responsibility for relationship management with our main suppliers. We have different contracts with them anyway, so he oversees all of that. So John would have the conversation with G4S or Serco—or Fujitsu or whoever it might be—about the range of issues we might have with them and call on the Crown Representative, should he need to bring in that greater heft.
Chair
Mr Sedwill, how many big procurements have you done in your career?
Mark Sedwill
I suppose two, before I came into this job. As you know, I spent most of my career doing other things.
Chair
And what is your experience of dealing with these contractors in the past?
Mark Sedwill
I think if you get the point that Mr Barclay referred to right, you can get it right from the start.
Stephen Barclay
I agree that it can often raise capabilities in operation and functions, but that was not the point I was raising today in terms of Mr Sedwill. What I was trying to drive at is the escalation process internally within the Department, but also across different parts of the public sector. A legitimate issue for suppliers is often not getting a quick enough response from somewhere in the public sector—perhaps a local authority or the Department for Education—and how that is gripped. Have we got the escalation right? Do we have common working? I think you alluded to that. Is that being done on the projects? I am pleased to hear that we have one or two senior people looking in terms of owning the overall relationship, but we have been told that for three years. I am sure it is happening, but it is very hard to get visibility on that, so it might be one to take away and ask for a note about. I guess my concern is: to what extent are these issues being addressed more widely?
Mark Sedwill
Others really have the central responsibility for this, but having been involved in the cross-Government review—I was on the strategic oversight group that oversaw the work into G4S and Serco, as a result of the Ministry of Justice—I think that has been a wake-up call. I think you are seeing it in Government as a whole. Senior Ministers, the Chancellor and the Chief Secretary now lead a ministerial group dealing with the markets for Government services. There is a very senior official group at Permanent Secretary level that looks at it as well. I do not want to answer in a very bureaucratic way—“We’ve got a Committee, therefore we’ve got the answer”—but there is a level of attention on it.
Stephen Barclay
I am actually driving at the opposite, which is: who’s the person? Who is the person who is the Government’s lead with Serco?
Mark Sedwill
I can’t remember the name, but that would be the Crown representative.
Stephen Barclay
In a way, that is my exact point. For you to be here today, for a hearing that I am sure you have done some preparation for, and for us to not know who that person is—
John Fernau
It’s Vincent Godfrey, I think.
Stephen Barclay
Good, but do you see what I am saying? You are ultimately the accounting officer and Whitehall always has Committees. The start of your answer was, “Well, actually, that’s for someone else,” but actually you are allocating the money for this. I do not want to over-press it, but it is about the individual owner and how engaged they are with the escalation, whether they are seeing things and whether they are picking up on some of those issues.
Mark Sedwill
I can give you an example. There is another big supplier—a big supplier to many Government Departments—based overseas. I recently called over one of their senior vice-presidents to see me, to have essentially a pretty tough discussion about their behaviour. It was not contractual performance—I wasn’t in the weeds of that—but the behaviour they were exhibiting towards us in the way they were negotiating contracts.
Chair
Okay. Austin, very quickly—
Mark Sedwill
If I may just say half a sentence? I would expect John to lead this for us and to escalate either to me if appropriate and/or bring in a Crown representative if appropriate.
Chair
I observe that it is interesting that you oversaw the central review of the contracts, but you do not have that much experience yourself. It is not that I expect you to have, but you have not.
Austin Mitchell
The flow of asylum seekers is up slightly since the contracts were reached. I know it is difficult, but you estimate the flow of asylum seekers. I would have thought that that information is crucial for the providers, because they have to maintain flexibility and also know something about the possible balance—for instance, single men are difficult to accommodate, but families are much more straightforward—but you do not share that information with the providers. Why is that?
Mark Sedwill
We do now.
Austin Mitchell
Oh, you do.
Mark Sedwill
But it is a fair criticism, because I do not believe we did in the initial phase of the contract. That is right, Louise, isn’t it? I don’t think, “Don’t ask, don’t tell” is a very good answer in this area. “They didn’t ask and we didn’t tell them” is not a good enough answer. We should have shared it; we are now sharing it.
Chair
Good.
Austin Mitchell
I just want to put a question to Mr Williams, because he has had to sit there nodding silently through the discussion. I imagine from my experience in Grimsby that, for single men in particular, who are the most difficult to accommodate, when the verdict on their appeal on their applications goes against them, there is a tendency for them to melt into the background and disappear—not to go home or surrender themselves, but just to go underground. Do we have any figures on the proportion who just disappear from accommodation?
Glyn Williams
I think you are talking about where someone has had a decision on their asylum claim, they have gone through the appeal—
Austin Mitchell
And they get a letter saying “go”.
Glyn Williams
They then become a failed asylum seeker. They would normally be required to leave the supported accommodation—
Austin Mitchell
And they don’t—well, they leave the accommodation, but not the country.
Glyn Williams
Single men leave the accommodation, but families we continue to put up in the supported accommodation. There is a provision in the law called section 4, where we can carry on accommodating single males, for example, where they are trying to leave the UK—so, they are arranging their departure.
Austin Mitchell
Those are known facts. Do you have figures on the number who just go underground and disappear from the scene?
Glyn Williams
Yes. I think there are about 12,000 absconders.
Mr Jackson
I don’t think you collect the information properly for Members of Parliament. I have asked parliamentary questions about the number of absconders and we get a wishy-washy answer from the Minister saying, “We only collect it by postcode. We don’t collect it by parliamentary constituency.” That is not good enough. You need to look at the collection of data on a constituency basis for the number of asylum seekers and absconders. I have been in Parliament for nine years; it is always the same. We don’t get proper information, and we should.
Mark Sedwill
I have asked our chief scientific adviser, who is a statistician, to look at the data that we release and publish. An awful lot of data come out in PQ answers and other things, and then we end up with a confused picture. We are trying to get to a situation where we have a much more coherent set of data that we can publish. I absolutely take that point.
Chair
It would do a heck of a lot for social cohesion if we had the real facts, by a constituency basis.
Meg Hillier
The whole premise behind the COMPASS contracts was to go for fewer, bigger providers, but there is a drive in Government to go for smaller suppliers. For lots of housing associations and people out there, it could have been easier to inspect the properties, and perhaps it has some cost-benefit because of some support from their core business. Did you consider that at all? When you looked at the prime’s relationships with other parts of their chain, was that a factor in making decisions about the quality of provision?
Mark Sedwill
There are quite a number of subcontractors who would fit into that category. I agree in principle that we want to disaggregate and reduce our dependence in Government on a handful of big suppliers, and we need to try to make the markets more competitive. In one of the procurements I was responsible for, which the Chair asked me about earlier, we insisted that the market had more than one supplier, even though there was one supplier that was miles ahead of all the rest, simply to generate some competition in the market. The Home Office has more than 4,500 suppliers, so we are active in that area, but in this case, the judgment was made—I think rightly and soundly—by the Border Agency, as it was at the time, that the right way to achieve the best value for the public purse at a time of stringency, while maintaining the standards, was to go for economies of scale. We would get the critical mass we would get by having this number of suppliers.
Chair
Would you do that again now?
Mark Sedwill
I would not make an assumption about the right number. I would want to do the analysis and understand the balance between economies of scale and the drive to encourage SMEs and all the rest of it, and then come to an answer when I was procuring. In general, we want to disaggregate, but there will be occasions when it makes sense to aggregate—
Chair
On this one, you knocked out a lot of the small providers.
Meg Hillier
When you say “housing association”, which Target housing association—I am not sure if that is a real one or if it was set up just for this, but there aren’t any of the normal housing providers, or subcontractors, on the list in figure 2 on page 13—
Chair
Good. Are we there?
Austin Mitchell
Can I just ask one more question?
Chair
No, because we are going to have a vote soon.
Austin Mitchell
I objected, under the brutal heel of the Labour Government, to dawn raids on asylum seekers, when their kids, as they were getting ready for school, were dragged out of the house screaming, and the wife would be bawling. There were terrible scenes. Are we still doing dawn raids?
Glyn Williams
We are not detaining children—
Chair
Okay. Thanks. Oral evidence: [Inquiry name], HC [XXX] 4