Oral evidence: Contract management across the Ministry of Justice and the Home Office
Oral evidence, 8 September 2014.
Witnesses
Dame Ursula Brennan, Permanent Secretary, Ministry of Justice, Ann Beasley, Director General of Finance, Ministry of Justice, Mark Sedwill, Permanent Secretary, Home Office, and Mike Parsons, Chief Operating Officer, Home Office, gave evidence.
Chair
I am going to start with a question to Mr Sedwill and Dame Ursula. Has either of you, in your civil service career, been personally in charge of managing and executing a contract—implementing a contract?
Dame Ursula Brennan
I was responsible, when I was in the DWP, for some IT contracts, yes.
Chair
Which ones?
Dame Ursula Brennan
Oh, gosh, it’s going back a long way. I cannot even remember the name of it. It was to do with data in the DWP, or the DSS as it would have been at the time. It was not a successful contract. It did not go well. I subsequently had strategic responsibility for contract issues in the DWP.
Chair
No, I understand strategic, but I am just asking about running a contract.
Dame Ursula Brennan
I was not the contract manager; I had a manager who managed the contract. We did not have the term SRO in those days, but if we had done, I was the person in IT who would have been the SRO at that time.
Chair
Probably in the days when we were making lots of money out of you and PwC on IT and DSS, but anyway—go on.
Dame Ursula Brennan
No, it was even before that.
Mark Sedwill
I suppose the closest in my case, Madam Chairman, is when I was running UK Visas, which was one of the predecessor organisations of the Border Agency, when we started the outsourcing overseas of the visa application process. I was the director of the institutions; I was not actually running the programme itself. Because it was quite small and this was a central part of the business model, I was directly involved with those suppliers and in placing and running the contract.
Chair
But neither of you has actually run a contract. I understand that in your team, there were people running contracts, but in terms of running contracts—
Mark Sedwill
I have never done a job that would say “contract manager.”
Chair
Do you think perm secs should have done that? We are in a new world, and we are having many more contracts. Do you think perm secs should now have that as part of their necessary qualifications?
Dame Ursula Brennan
From my experience, effectively, I was responsible for this contract that all went wrong, and it was a formative experience in terms of the negotiations with the supplier and understanding why it was that we thought it was going well when it was not going well. Subsequent to that, I had lots of experience of being a director and then a DG with people responsible for contracts for me. I think actually being close to contracts, whether as an SRO or as a contract manager, is certainly a very useful piece of experience to have had.
Mark Sedwill
Yes, I agree with that. It is important to have had experience of it, but this area, like others, we are increasingly professionalising and therefore we will use more specialists. We will use more people with commercial qualifications and so on. But, as Ursula says, to have had direct experience as an SRO for a big programme or for a significant outsourced part of business would clearly be a very useful set of experiences for anyone becoming a perm sec.
Chair
Okay. I think what is for me slightly depressing—and from a brief discussion with Richard, I believe he feels likewise—is that it took the tagging contract to jolt people into action. I just don’t get why both of you, in your separate Departments, needed fraud to suddenly focus on an essential, hugely important issue. It has been for years and years; this isn’t partisan. We are now in the position where 50% of spending on goods and services is through contracts, and that is likely to increase whatever Government are in office. It is hugely important, yet a whistleblower comes, we hear about fraud and suddenly it becomes an issue. Why 2013? Dame Ursula, I know that you were jumping around and you had only just come into the Department. There was a report in 2008 on tagging. Nobody took any notice of it. We did a report here on the interpreters. That might have made you think, “Crumbs, is the rest of our stuff going all right?”, but nothing happened. Why did it take so long?
Dame Ursula Brennan
It is absolutely clear that the electronic monitoring problems were a wake-up call—I do not deny that at all—but I think it was not that nobody was thinking about contract management; I think that what electronic monitoring showed us was that all the things we were doing about contract management and commercial activity were missing one area. If you take electronic monitoring and the tagging contracts, we had people who were working as operational contract managers on electronic monitoring who were seeking to reduce the costs of that contract during the life of it, and indeed were reducing the costs. The unit costs of electronic tagging decreased over the lifetime of the contract because operational contract managers were concentrating on doing that work. Meanwhile, we were building up our commercial directorate and focusing where we thought the biggest risks were, which was on letting new contracts. What electronic tagging told us was that focusing on trying to reduce costs while the contract is running, thinking about what we could do when we re-negotiated it and building that specialist skill was not enough. There was a gap, and that gap was commercial expertise in the live management of the contract. I do not think it was, “Gosh, there’s all this contract management going on and no one’s paying attention to it”; we were concentrating on a whole set of things and we missed what turned out to be an important area.
Chair
But the bidding issues there were first discovered in 2008, according to the report. That was five years before we had the whistleblower. I do not know when the whistleblower emerged, but it was about five years before that.
Dame Ursula Brennan
In practice, the problems in relation to the tagging contract and what we discovered there were discovered by the people who were making the preparations for the next set of contracts. The whistleblower came along after we had already started investigating.
Q118Chair
So what were the issues that were uncovered? The Report says that billing issues became clear in 2008. I’m right, Josh, aren’t I?
Joshua Reddaway
Paragraph 1.6 says the Ministry discovered billing issues in 2008.
Chair
Okay. I do not know what that means. You might explain it as something different, but I read it and thought, “Well, why on earth didn’t they do something in 2008, and not wait for a whistleblower and for megabucks from the taxpayer to be lost by Government?”
Mr Burrowes
It wasn’t our report; it was a cross-Government good practice guide saying this needed to be taken seriously then.
Dame Ursula Brennan
There were indeed issues around billing. One of the things it is quite difficult to talk about at the moment is that we have investigated that, and it is now with the SFO, so some of the investigation on that has had to be put on hold pending what the SFO does. It is difficult, because there was evidence that we were able to collect from what we had on paper, but they asked us not to proceed with our investigation or further interviewing pending the investigation.
Q120Chair
Okay. I understand you probably can’t talk about that, but you must be able to talk to us about why action was not taken in 2008 or with the previous reports. Why did you wait another five years?
Dame Ursula Brennan
As I say, I think the difficulty was, people’s action was focused on—in relation to billing and other issues—looking at the cost we were paying for the contract and we were looking at, how much is this costing us, how can we reduce the costs, and how can we make sure that we are getting better value for money out of this by reducing the cost. It was there that people’s attention was devoted, not into—
Mr Burrowes
Can you be a bit more specific? Whose attention was on this at the time?
Dame Ursula Brennan
The people who were the contract managers of that contract.
Mr Burrowes
In terms of the level of the civil service, who are we talking about?
Dame Ursula Brennan
There was a team within—this contract goes back a long way—
Mr Burrowes
I am trying to say, what level? Probably the underlying question is, what was the level of attention of senior civil servants?
Dame Ursula Brennan
In relation to the electronic monitoring contract, there will have been a senior civil servant who had that contract and others—a series of contracts.
Mr Burrowes
Was not one of the problems that the approval was given at a junior level, as the contracts were going along, maybe making savings here and there, but the overall risk was not under the purview or responsibility properly of the senior civil servant?
Dame Ursula Brennan
I come back to the point that I was trying to make, which was that the senior civil servant, and the contract team generally, were focused on actions to reduce the cost of the contract and they were not focused on, is there a problem here which might be leading to fraud. They were looking at—
Mr Burrowes
No, but the problem was—and this goes back to the question—that the good practice guide was not just about individual contracts, but about taking contract management seriously, and the problem is that there was only really a wake-up call in taking contract management seriously once we saw the huge bill and the problems arising from electronic monitoring. At the time, contract management was not being taken seriously at a high level.
Dame Ursula Brennan
I think I was saying that it was being taken seriously, but the effort was being put in in our commercial directorate and it is true we were not putting—with the limited commercial resource we had available to us, we were putting that in the commercial directorate, where it was more focused on the negotiation of new contracts, because that is where we thought the highest risk was. We thought with the existing contracts the highest risk was around how can we make sure that we reduce the costs of these contracts. So the energy and effort of people was at a lower level on those live contracts, and that is certainly the lesson that electronic monitoring taught us.
Mr Burrowes
But I am saying that you cannot really answer the big question about what the contract was, at the time. It is not easy for that question to be answered because of the lack of overall attention and because a lot of different pieces of the jigsaw were being dealt with by different people. There was not overall supervision that allowed those answers to be given.
Dame Ursula Brennan
There was a team responsible for the contract at the time. It is certainly the case that, over time, that contract changed. When electronic monitoring and tagging was new—when it was first introduced—that was in the era when it was still back in the Home Office and, over time, because it was successful and reduced cost for Government, we expanded it more and more. So it is true that the contract expanded—yes, that is absolutely correct—but it was not that lots of different people were responsible for it.
Mr Burrowes
But you have now come to the conclusion that the senior civil service needs to be involved operationally—it is not just a commercial function.
Dame Ursula Brennan
Yes.
Mr Burrowes
You have accepted now that, if that had been the case at the time, things would have been dealt with differently.
Dame Ursula Brennan
Absolutely. The electronic monitoring experience showed us that the effort that we were putting in was over-focused on worrying about the cost of the contract and we did not have enough commercial expertise on the operational side.
Chair
Has anybody been held to account for that?
Dame Ursula Brennan
Because this goes back a very long time, a number of the people no longer work for us and, as I said, this is an issue which is under live investigation by the SFO.
Chair
And the court facilities management. Has anybody been held to account for that?
Dame Ursula Brennan
The Total Facilities Management contracts?
Chair
The other G4S which are now with the SFO.
Dame Ursula Brennan
Yes, in relation to those contracts, those are indeed being investigated by the SFO, but we have not taken action against staff in relation to that, because we have not seen any evidence that what staff did—
Chair
But you referred it to the SFO. Who referred it?
Dame Ursula Brennan
Yes, we referred it to the SFO.
Chair
Well, you must have information.
Dame Ursula Brennan
Yes, sorry, but not information that our own staff were culpable—is what I was saying.
Nick Smith
I want to come in on this £140 million that G4S has had to pay back. I am trying to unpick it a little. Will you tell us how much has been paid back per year, in terms of over-charging, after this corporate chicanery? Just go back for the last five years on the £140 million.
Dame Ursula Brennan
Perhaps my colleague, Ann Beasley, can answer that.
Ann Beasley
G4S paid back a total of £179.4 million.
Nick Smith
Sorry; I thought we were told £140 million earlier on.
Ann Beasley
No. That £179.4 million was for the three contracts that we referred to the Serious Fraud Office: electronic monitoring and the two total facilities management contracts.
Chair
Ann, you are going to have to speak up.
Ann Beasley
Sorry.
Nick Smith
So the £179 million is two contracts.
Ann Beasley
Three contracts. We have reached a settlement that does not actually split out what is being paid back for each individual year; it is broken down by the type of repayments. It is a confidential settlement, but we have reserved the right to share it with appropriate bodies, so if you wanted more detail on that, we would have to write to you.
Nick Smith
It is just that Dame Ursula talked about the contract being long and having grown since it was first established. I am trying to work out where the connivance took place historically—was it in 2012, 2011, 2010? Can you give us some sort of picture?
Ann Beasley
There was over-billing throughout the entire length of the contract, which began in 2005, I think. In each year there was some over-billing.
Nick Smith
So it is £180 million since 2005, which is 10 years, so that is roughly £20 million a year.
Dame Ursula Brennan
It didn’t fall like that, because the nature of the over-billing was partly to do with the way in which the type of people who were being tagged changed over time.
Nick Smith
I understand that it’s complicated and that there were some new contracts along the way, but I am trying to understand a little more about it. At the moment, it seems like a big chunk of money—nearly 180 million quid. I am trying to understand when and for which contract this malpractice occurred.
Ann Beasley
There was over-billing throughout the life of the contract.
Nick Smith
Was any particular contract a problem? Was there a particular difficulty in a particular year? Or was it just that £20 million a year was leaking out of the system on this contract?
Ann Beasley
As Ursula said, it wasn’t as smooth as that, but from the beginning of the contract there was over-billing in each of the years. Some changes were made to the contract in about 2009 that were designed to save money—they related to tagging people who were on bail—and that changed the nature of the over-billing. Nevertheless, there was over-billing in each of the years.
Nick Smith
Did the over-billing reduce after 2009 or did it go up?
Ann Beasley
It increased.
Nick Smith
So we had a new system that was intended to bring costs down, but over-billing actually went up.
Ann Beasley
Yes.
Dame Ursula Brennan
And costs did come down. That is the irony: the cost of the contract came down, but underneath that, over-billing went up.
Nick Smith
The cost came down but over-billing went up.
Dame Ursula Brennan
We reached a settlement with the two companies by analysing the types of areas where over-billing occurred over that period. We reached a settlement on the sums of money concerned.
Nick Smith
How confident are you that the £170 million you got back is the right amount?
Dame Ursula Brennan
We are confident. Because it is estimating, some of it goes back a long way, but we are confident that the amount we got back is a good number. We had it analysed by PwC, which did its analysis of the numbers. We also got legal advice from counsel about what it was possible to claim. However, we are also in a position such that if the SFO uncovers further issues that we did not discover and should have taken into account, we have a reserved position. In other words, if more went wrong than we were able to identify, that number could be reopened.
Meg Hillier
I want to widen out the discussion to the issues of governance and risk, on which you touched a little, Dame Ursula, when you said, “We were looking at the wrong thing.” Although both of your Departments have been through change in different ways—we can touch on that—are you confident that you are not still looking for the wrong thing? The boxes that might be ticked by the civil service, because of political and reputational pressures and so on, seemed to obfuscate some of the main things at which you should have been looking. Is that fair to say?
Dame Ursula Brennan
Why did we not focus on this stuff earlier? I don’t think that it was because of the kind of issues you are describing. We did reduce staffing across the piece, including in contract management, so that was clearly one of the contributing factors. We had limited expertise and we were putting it in the place that we saw as the highest risk, which was the negotiating of the new ones. Why do we think now that we are in a much better position? Because the electronic monitoring was such a serious problem that we did a root and branch review. We got PwC to do an audit and we got our lead non-executive director to do a serious review. He went through it using the NAO’s criteria for what we ought to be doing. He did an analysis of where we were, and we have done a comprehensive action plan, and we have really had to tackle everything. We have re-scoped the way we do governance and accountabilities and responsibilities to get those much clearer. We have got much stronger senior leadership responsibilities, so the executive team that I chair and the departmental board that the Justice Secretary chairs focuses on those issues, not least because our lead non-executive is on the departmental board and he is very interested in the follow-up to his own report. We have changed and are improving the key performance indicators that we have, which enables us to know whether we are measuring the right things. We have got a programme where we have put every single member of our senior civil service through a one-day master class, and we are training hundreds of people in commercial skills, so we have done a comprehensive programme that the NAO says is the right thing to have done and puts us on the right track. So we recognise that we had a serious problem. We believe we have taken very serious action to transform the way that we deal with this issue.
Meg Hillier
Mr Sedwill, the Report directly compares the Home Office and the MOJ. It praises the MOJ for its progress—the root and branch and the depth of its approach. Have you learnt anything from the MOJ’s approach that you are applying in the Home Office?
Mark Sedwill
Yes. I could give you a very long answer—
Meg Hillier
No, please don’t.
Mark Sedwill
I will give a brief one. First, we went through a parallel process once the issues in the MOJ had become apparent. I was involved, as you know, in the cross-Government review. As a result of that, some of our contracts were reviewed by the cross-Government review, which involved PwC and Moore Stephens, and then I commissioned Moore Stephens to do the kind of deeper dive with our own internal audit, as Ursula just described, into those of our contracts that we considered to be at highest risk—so, 14 of our biggest contracts. We have pursued a range of other improvements to our commercial management. Some were slightly different from the MOJ’s, because we perceive our risks to be different, but as we have looked at this Report, and as you may have seen from my letter to Amyas, we have taken those areas where the NAO suggested we actually adopt some of the practices of the MOJ—for example, the score card—and that will become a feature of our commercial management by the end of this financial year. I think the comparative approach is powerful, because it enables us to learn from each other—noting that some of the risks and issues are different and the structures of the Departments are different.
Meg Hillier
So can you assure us that there are no more cases of over-billing or problems in contracts that the Home Office has—
Chair
Given last week?
Mark Sedwill
We have done a thorough audit of our biggest contracts. As you will be aware from the NAO figures, our auditors found no evidence of over-billing.
Meg Hillier
Didn’t you look at only five, compared with the 27?
Mark Sedwill
No, no; they looked across—
Meg Hillier
You wrote that in the letter, but I was puzzled as to whether—
Mark Sedwill
Mike may be able to add more detail. We looked at 14 big contracts. We have an internal audit that looks at contracts and commercial management all the time.
Chair
It wasn’t. It is only doing so now.
Mark Sedwill
No, they have always looked at project and programme management. There is a routine run of audit, which internal audit has always done. You must remember we have changed the structure of the Home Office with UKBA coming in.
Meg Hillier
Sorry, can I just be clear on the numbers you are talking about?
Mark Sedwill
If you look at the Report, through this joint process between our internal auditors and Moore Stephens primarily, we looked at the 14 contracts that our internal auditors and our audit committee, chaired by one of our non-execs, considered to be at the greatest risk. We did a deeper dive, so it was not just a health check. We did a deeper dive—you may remember I described it as a full medical, rather than just a health check—into those contracts. The exam question for the auditors was: was there any indication that meant we should do, for example, a deeper forensic audit of any one of them where you would check many more details of every billing arrangement? They concluded there wasn’t and that we had done a thorough enough job.
Meg Hillier
What was the risk measure that you used to decide on those 14?
Mark Sedwill
It is essentially an audit judgment, so it came to the audit and risk committee and they made a judgment as to the—
Meg Hillier
So financial?
Mark Sedwill
Primarily financial. The situation with the Home Office—and I talked about this at an earlier hearing—was somewhat different to the MOJ in terms of our commercial management and the sorts of issue that Dame Ursula has been talking about, in the sense of where to focus. Our commercial management had focused tightly on financial management. Our issues were more around some of the performance management and the alignment between the tight commercial financial management and the operational managers and, in some cases, that getting out of alignment.
Meg Hillier
So how can we be sure if you have just looked at those 14? How can you assure us that the other contracts are all fine? Are you planning to look at those further?
Mark Sedwill
I assure you through the same process as any Government Department. We have an audit programme. It is a risk-based audit programme conducted by internal audit. They, of course, have an independent role, straight to me as the accounting officer. That programme is overseen by our audit and risk committee, which is chaired by one of our non-executive directors—currently our acting lead non-exec. We have got the practice in place, and in the end I rely on the audit judgment and the risk judgment of the professionals who do this.
Meg Hillier
What percentage of the contracted-out work do those 14 contracts represent?
Mark Sedwill
About 20%.
Meg Hillier
So 80% of taxpayers’ money spent by the Home Office and other contracts—
Mark Sedwill
It is worth remembering that it is a very uneven distribution. So, 40% of our contracted-out money is spent with our top 17 suppliers—two of them within Government, 15 outside—50% is spent with the next 46 and the remainder with SMEs. That is the way audit is done. Audit in any institution, Government or private, is risk-based. That does not mean that we are not looking at the other 80%, it is just that we looked at these—
Meg Hillier
That is what I’m driving at.
Mark Sedwill
These were looked at in this deeper way by Moore Stephens, because these were considered be the ones that were at greatest risk in the kind of issues that have been identified.
Meg Hillier
You two happen to be here in front of us, but there are other Departments that have had problems with contracts, as we know. Of course, audit is on a risk basis, but some of these things weren’t uncovered in the past, so what is your approach to ensuring that the other 80% of public spending on these contracts in your Department will be picked up over time? Dame Ursula laid out a training programme and plan with the staff, cascading down to quite junior people. What is the Home Office doing?
Mark Sedwill
We have a commercial management improvement plan that incorporates recommendations from Moore Stephens, the recommendations from the NAO, the lessons learned from the Ministry of Justice and, indeed—because we volunteered to go first—the lessons that have been drawn out of the cross-Government review of commercial capability. That is a consolidated plan led by the chief operating officer, reporting, as in the case of MOJ, to my executive board. There is a constant, rolling programme of audit. We are improving the training and professionalism of our commercial staff—most of this is in the NAO Report. Through our relationships with the contractors, we are seeking to ensure we have the right mechanisms to align that operational and commercial financial margin.
Chair
Okay. I’m going to go to David and then I want to come in with a couple of things.
Joshua Reddaway
To go back to the transaction testing that was undertaken, I want to ask you about the way you take assurance from that. My understanding is that there were four contracts tested under the cross-Government Review and five by the internal Moore Stephens Review. In paragraph 2.33, we refer to the fact that Moore Stephens qualified their opinion there and said that they couldn’t actually find all of the information that they needed to do all of that. How did you take that into account when judging? Also, in the high-level review there were an awful lot of problems with the performance management. That was the key area that was flagged up.
Mark Sedwill
The cross-Government review looked at two immigration removal centre contracts and only looked at G4S and Serco—two immigration removal centre contracts and two of the COMPASS asylum support contracts. It was a result of their using the NAO framework that it identified some areas that were sort of flashing amber or red and that they considered were risks. They didn’t say they had found anything untoward, but they considered those to be risks. That was what prompted me to ask them to come in and to move, as I described in the vernacular, from a health check to a full medical—not only on those contracts but on similar contracts that our internal auditors and our audit and risk committee considered might have some of the same issues. That is how the 14 were chosen; they were chosen on advice from the professionals. Moore Stephens and our internal auditors reached the judgment that there were issues around the performance management of those contracts, but they did not find any evidence of the financial irregularity or mismanagement that had been my initial concern.
Sir Amyas Morse
I am sorry to make the point again, but they did qualify that by saying that they did not have the full information.
Mark Sedwill
It wasn’t that we did not share the full information with them.
Chair
You didn’t have it.
Mark Sedwill
They did a sample. I do not think they perceived the qualification they made as anything other than routine in the circumstances, and they did not qualify the overall judgment in the end.
Chair
But you did not have the information.
Mr Burrowes
Have you decided that the problem and the solution lie within your commercial directorate?
Mark Sedwill
The short answer is no. Part of the problem and the solution is there, but if you look at the examples I just quoted for the Home Office, the commercial financial management was tight, but the commercial and operational performance management of those suppliers was not as tight as it should have been. That is not just in the commercial directorate; it is in the alignment of the commercial and operational people. We have needed to bring that more closely together so that we are not emphasising one more than the other.
Mr Burrowes
Who is in charge of and ultimately responsible for those contracts?
Mark Sedwill
For each of the strategic contracts, we have a senior business owner. We are rolling that out to the tier 2 set of contracts as well. A senior business owner is in charge of the business delivery and thus of the commercial partner who is delivering either all or a component of that. That will be at different levels depending on the size and scale of the contract.
Mr Burrowes
But the governance is different from that of the Ministry of Justice.
Mark Sedwill
We have a slightly different structure. We have governance above that, but if you are asking about individual contracts, there will be an executive oversight board which brings together the commercial, financial, legal and operational people in a relationship with the supplier. Each contract has a senior business owner who is responsible for the delivery of the business and, of course, all of that is overseen by the overarching governance.
Mr Burrowes
My understanding is that there is a difference in terms of the level of involvement of a senior civil servant.
Mark Sedwill
I don’t think so. We might describe it differently, but—
Mr Burrowes
Would you say it is exactly the same level of quality?
Mark Sedwill
It will depend on the risk we associate with the contract. That risk may be the financial impact of something going wrong, but it might also be the delivery impact. Some contracts are riskier—more politically risky or more high profile—than others in delivery terms, and would probably get a more senior or experienced person than might otherwise be the case, but I do not think there is any appreciable difference in the way we are approaching this.
Dame Ursula Brennan
The same applies in the Ministry of Justice. If you look at the types of contract we have, there are complex ones like electronic monitoring and then purchasing of commodities for prisons, building of prisons and legal aid contracts. They are all very different types of contract. The level at which they are managed on a day-to-day basis will, indeed, vary, but the structure between the two of us that says there is a need for more senior oversight and executive-level scrutiny is the same. We have both—in slightly different ways, because of the different nature of our business—reached that same conclusion.
Mr Burrowes
Do you both feel that you have sufficient capacity to deal with the problems highlighted—particularly the significant spending pressures highlighted by the NAO Report—and the 2010 recommendations from the Cabinet Office?
Mark Sedwill
I think the answer is that we are on track, but I am not confident that we have exactly what we need yet. That is partly why I wanted the Home Office to go first in this CCS review of commercial capability, so as to enable me to answer that question. Essentially, what is suggested is that we have, broadly speaking, enough people, but in some areas we need to improve their levels of experience and of professional expertise in commercial management. We are ahead of some of the old OGC targets, which set a threshold of 60% of people having commercial qualifications; we are at 66%. Of that 66%, 48% actually have the level 6, which is quite an expert level of commercial qualification. We need to build the professionalism and the experience, but within the total resource pool we have enough people to be able to do that. I would say that it is about upgrading the capability rather than the capacity.
Dame Ursula Brennan
I would make a distinction between financial resources and people and capability. One of the things we have had to do is ensure that we devote financial resource to this, so we have increased our spend in this area. Another thing we have done is to start to work our way around, starting with our biggest and most risky contracts, making sure that we have the investment in the right place for those contracts. So on ensuring that we have the investment, yes, I am confident that we will continue to do that. But it is true that it is really difficult to recruit and retain commercial experts inside Government. We have a problem wherein we recruit people—we keep track of how we are doing on recruitment every month in the executive committee—and we get more people in, but at the same time people leave because they can make so much more money elsewhere. That is difficult.
Mr Bacon
It is interesting. You or one of the earlier witnesses said that the Tim Breedon review confirmed that it was possible to get better for less. All these people you have who are gaining commercial skills and then going off to the private sector will then be getting paid more—you have just said that they can get so much more money elsewhere. That will increase the costs of the private sector in providing the service. Net, net, net, at the end of the day, you pay for what you get, or, as Ms Beasley was saying, you pay and don’t get. If you strip away all the jargon—the deep dives, the forensic audits and all the rest—most members of the public watching this will be quite puzzled that it is possible to go and buy something and not check that you have got it. It is pretty basic and fundamental that if you buy something from a supplier, you check that you have got what you bought, whether it is goods or services. If it is more complex, you would expect to have to put extra resource into checking that you had got what you bought. If it is true, as the Breedon review apparently says, that it is possible for these private sector suppliers to extract better from less in a way that, broadly speaking, the in-house suppliers do not manage—although Mr Sedwill mentioned a couple of in-house Government suppliers—and yet the private sector suppliers are paying more for these skilled people than you in Government are able to, something is not computing. At the end of the day, the organisations with whom you are contracting have to make a profit. It ought to be possible for Mr and Mrs Taxpayer to buy these services using in-house resources and do it cheaper, because you do not have to pay for the profit or service shareholders in the way that external suppliers do, and you do not have to pay the higher prices for these skilled people whom you cannot retain in-house. Something is not computing. Why is it that they can do it and you can’t?
Dame Ursula Brennan
There is an interesting philosophical debate to be had about—
Mr Bacon
I am not interested in the philosophy; I am interested in the hardcore reality of the fact that for every year of the contract that Ms Beasley was talking about, systematic over-billing was going on, and that when there was reform to try to improve the situation, the amount of over-billing actually went up. That has nothing to do with philosophy.
Dame Ursula Brennan
And the cost went down. It is a complicated story.
Mr Bacon
I am really not interested in the philosophical heebie-jeebies; I just want to get to the root of this and understand at a practical level how it is that they can do it but apparently it is less easy to do it in-house.
Dame Ursula Brennan
At a practical level, you are talking about two distinct things. One is about the ability to recruit and retain people and what you pay in order to get that expertise. The second is the advantage you get when you outsource a service, which is not simply that you get the same service back for a cheaper rate. When you outsource a service, it is usually because you want something done differently in a different kind of way by people with a different set of—
Chair
Richard’s point is that you could do it differently in-house.
Dame Ursula Brennan
And there are certain services where we do do it differently in-house. If you take the Prison Service, we currently have a regime in which we have some outsourced prisons and some where we are driving down cost internally. But to come back to the point about what we pay for people, there are occasions when you are operating in the public sector in a period of pay restraint which completely makes sense across the public service as a whole, but which gives you difficulties in certain specific areas. One of the things that we have done in recent times is to create in the centre—in the Cabinet Office—a new capability to lead policy on contract management, and I think you are going to be hearing from Bill Crothers and his colleagues about all that later in the week. One of the things they are doing is looking at how we can recruit some of these people who are expensive to recruit and retain, because, otherwise, we have to pay—
Mr Bacon
My point is these private sector people are obviously recruiting and retaining these more expensive people, yet they are still able to do the job better for less.
Dame Ursula Brennan
That is because they—[Interruption.] Well, one could have an interesting debate about—
Mr Bacon
Please finish the sentence; that is what I want you to do.
Dame Ursula Brennan
That is because they structure their organisation in a completely different way, so that their pay regime includes paying higher rates of pay for extremely scarce resource and lower rates of pay for people doing more basic jobs. The pay structure, the pension structure and the organisational structure of private sector companies and the public service are quite different, so simply saying, you know—
Mr Bacon
I don’t know. If I knew, I would not be asking the questions.
Dame Ursula Brennan
I think it would be an interesting debate about why we outsource.
Chair
Right. I am going to move us on, folks.
Mr Bacon
Hang on. I don’t just want an interesting debate. This is very interesting, but I am looking for more than just an interesting debate; I am looking for some answers as to why this is, because it is a really interesting phenomenon.
Dame Ursula Brennan
We outsource to do something quite different. If you take Transforming Rehabilitation, we are not outsourcing the probation service to get it delivered more cheaply by a set of private sector suppliers; we are outsourcing it—actually, we are creating it in a completely new kind of way—to have a payment-by-results regime which will deliver us the ability to have flexibility to transform the service that we are delivering. So it is not about saying those people can pay people in a different way; it is about saying we go to the market because the market will bring a different—
Mr Bacon
You are talking about something in the future that is still experimental. I am talking about things in the past, where it is proven—Tim Breedon said so in his review—that better for less can be achieved by this outsourcing process. You make it sound like the principal problem is the pay in the public sector and the way it is structured.
Dame Ursula Brennan
No, I was not saying that the principal problem is pay, but there was a specific question about whether I thought we had sufficient resource. I was answering honestly that there is a problem at present, which we are seeking to address by looking to see whether we can create a different kind of pay structure for this particular group.
Mr Bacon
But my point is that, at the end of the day, there is only one cake. You can cut it up in lots of different ways. Of course you can have economic growth, and the cake gets bigger. But if you do not have sufficient resource, then, by definition, the amount of insufficient resource that you are handing over to these private sector contractors ought also to be insufficient, but they seem to be doing the job.
Dame Ursula Brennan
I think we are having a discussion about the economics and the strategy for outsourcing, which it would be very—
Mr Bacon
I am interested in the effectiveness, the efficiency and the economy—that is the remit of this Committee—of whichever route you take. I am interested in getting the best value for money—the most effective, efficient and economic outcome—for my tax-paying constituents that we can and in doing so in ways that mean you are not systematically over-billed and do not know about it. That’s all—it’s not that complicated.
Dame Ursula Brennan
And there is consistent evidence over many years, and over different Governments, of the extent to which private sector contracts have delivered value for the taxpayer, transformation for the taxpayer and reform. It is not just about rates of pay.
Mr Bacon
No, of course it is not just about rates of pay. But, as senior managers of the public services, you should surely be looking to see how you can mimic those improvements in your in-house services and therefore save even more money by doing things in-house.
Dame Ursula Brennan
And, indeed, there are many places where we are doing exactly that.
Chair
Okay. I am going to move us on. I want to come back to the SFO investigations. I have two or three quick questions, and then I will go to Nick, so perhaps you can answer them quickly. First, you have said to us you can’t tell us anything, because the SFO investigations are going on. Can you tell us whether you have a timetable from the SFO?
Dame Ursula Brennan
Just to be clear, the SFO said to us that they did not wish us to continue our investigation into the electronic monitoring while they were conducting their investigation. That is No. 1. In terms of timetables, the SFO do not give you a timetable of how they are operating
Chair
How are we to judge that the corporate renewal policy is appropriate and sufficient, if we cannot look at what went wrong?
Dame Ursula Brennan
In terms of corporate renewal, the—
Chair
How are we to judge? Just answer the question. Don’t give me a big spiel about corporate renewal and how great it is. How can we judge it if we—this Committee—have not got the analysis of what went wrong?
Dame Ursula Brennan
Sorry, all I was going to say was that there is a European Union policy on corporate renewal and the decision about whether we award contracts to suppliers who have created a problem.
Chair
I just don’t accept that.
Dame Ursula Brennan
Well, there is a policy and the Cabinet Office operates according to that policy in determining what evidence it has about what contractors have done and what evidence it takes into account.
Chair
You are answering a different question. How can we have confidence that corporate renewal, which has been undertaken by Government to deal with these problems of overcharging, is effective, if we cannot look at what went wrong? You are telling us that you are not allowed to do any more work on what went wrong and we certainly cannot do it because the SFO said no.
Dame Ursula Brennan
Sorry, I did not mean to say that we were not doing work about what went wrong. We did the Breeden report and the PwC report and we took from that. You asked about what we were doing about corporate renewal—what Government are doing to ensure that they do not get into that problem again, and we are really clear about what we are doing about that. In relation to the SFO investigation, there is a set of cross-Government policies that derive from European Union policies in terms of procurement directives under which decisions are made about the award of contracts.
Chair
I do not think you have answered the question. If we are to know whether the corporate renewal strategy is effective, we need to know and have in the public domain what went wrong. That is all. It is a very simple point. At the moment there is delay in the system because we are all waiting for the SFO to report. I was not asking about the SFO and whether you should be offering contracts to people who are being investigated by the SFO. Just for the record, I do not accept the argument about Europe. There are ways round that rule. I have done them myself. There are ways round that rule that you can perfectly well administer. If we are to have confidence in future in the way in which you contract, we ought to have a proper analysis of what went wrong. That’s all.
Dame Ursula Brennan
The companies concerned, in relation to corporate renewal, have had to set out for the Cabinet Office committee that looks at this issue what they are doing in order to acknowledge where problems were and to address them. Quite clearly, while the SFO investigation is ongoing, that piece of work is not complete, but the companies have said, “These are the things that we believe we are doing that address the issues that we have uncovered.” The Cabinet Office has taken legal advice to go through those propositions from the companies and has taken those into account, in line with the EU procurement procedures.
Chair
That is a really interesting answer. It makes me a little bit more worried, because what I think comes out of that answer is that you are dependent on the information that you are getting from the companies to decide whether your corporate renewal strategy is efficient. We want the partnership and co-operation with the companies. But one of the problems that comes out of all the absolutely abysmal record on contracting is that we have been over-dependent on the information that contractors who have contracted with us give us. We have not had this independent check on it.
Dame Ursula Brennan
As I said, in terms of the independent check, the companies—
Chair
You always do this. Just answer the question.
Dame Ursula Brennan
Grant Thornton provided and audited. Audit is a word used in lots of different ways. Grant Thornton audited the proposals that came back from the companies. We did not just say, “Tell us what you think and we will just note it.” There was a dialogue about what it was acceptable to expect the companies to produce and Grant Thornton did an analysis of their proposition. So it was not just them sending us their proposals.
Chair
Can I ask a completely different question, and then I am going to Nick? Do you both have a hospitality register in your Departments?
Dame Ursula Brennan
Yes. We have hospitality registers.
Chair
And can you share them with us?
Dame Ursula Brennan
I think we publish them. I think they are published every year, every quarter.
Chair
Can you tell us how much you have spent with the various people with whom you contract, and how much hospitality has been enjoyed by your top 15 contractors?
Mark Sedwill
I don’t have it to hand, but we could probably produce it. I think that, partly because of the transparency, you would not find there is that much, to be honest but we certainly publish the data.
Chair
And are you completely happy that the hospitality registers are complete?
Dame Ursula Brennan
This is something that has existed in government for decades.
Chair
But are people filling them in?
Dame Ursula Brennan
That process has become much more rigorous because of the business of publishing them. The checking of them is now much stronger than it was a few years ago. You can never guarantee that somebody has not missed something, but, yes, I am confident that people are filling in the hospitality registers.
Chair
It would be very helpful to have a note on the extent of the hospitality of your top 15 or 20 suppliers.
Nick Smith
Earlier in the session, Mr Soames from Serco talked about the value of open book as a method for understanding contractors’ ways of working, how much profit they make and where they make it. I have been trying to bend my head around it as an ordinary layman. Dame Ursula, could you tell us how open book would help you assess the performance of a contractor, and specifically how it would have helped you better to understand the leakage of between £15 million and £20 million a year that was gained by G4S out of the tagging contract?
Dame Ursula Brennan
Our standard terms and conditions with our contractors require what amounts to open book. They require that the contractor makes available to us the information that we want in order to be able to audit, and that they must allow us free-of-charge access to that data so we can examine it. The critical thing is to ask the right questions. Simply having open book takes you only so far. If you don’t have open book, that is a problem, but, having got open book, you need to know that you are asking the right question to be able to understand whether you are getting the right answer. That is why we are doing a lot of work on our contract management improvement plan to identify the key pieces of information that we think we will require in each individual contract, so that when we have an open book requirement, we are clear that if we ask for information it will be the key information that tells us what we need to know.
Nick Smith
Thank you for that. I am sort of getting a better understanding of it all. How would you have used that approach to stop the £15 million to £20 million a year leaking out of your Department on overcharging and billing?
Dame Ursula Brennan
It comes back to asking for the right information from the supplier and being able to go in and audit it.
Nick Smith
So how would you have done that? What information would you have asked for?
Dame Ursula Brennan
What information in relation to that contract?
Nick Smith
Yes.
Dame Ursula Brennan
It would have related to some technical details to do with the numbers who were tagged and the time for which they were tagged. Their IT systems recorded a lot of information, and we were collecting some information, but we were not asking precisely the right question. Probably the key thing was in relation to the length of time for which people were being tagged.
Nick Smith
I am listening intently. You used words such as “technical”, “IT” and “questions”, but could you be a bit more precise?
Dame Ursula Brennan
Sorry, on any kind of contract of this sort, the supplier will have a database with an enormous amount of information. In this case, people were having ankle tags put on them. They will have information about numbers, times, dates and money. They will collect and analyse it, and they will play it back to us in lots of different ways.
Nick Smith
I get that, but how would open book help you to understand what that meant?
Dame Ursula Brennan
Open book doesn’t affect any of that, unless you know the key pieces of information that you need. I think that at the time we had open book in relation to that mass of information, but we were not asking the right question about the key performance indicators. We did not have the right key performance indicators, and therefore the open book was giving us lots of information, but it was not giving us the piece of information that revealed the over-billing problem.
Nick Smith
Ms Beasley, do you want to add to that? It seems that you had open book at the time, but it wouldn’t have helped you in this specific case. Is that right?
Ann Beasley
Well, I think it would. Could I just correct what I said earlier? The £179.4 million was both G4S and Serco and on all five contracts.
Nick Smith
Okay. Let’s concentrate on G4S and the £140 million they talked about—
Ann Beasley
But in either of them, the key pieces of information that it would have been really helpful to have known would have been to go back to source and understand exactly how many separate individuals were currently on a tag. That was difficult because within both suppliers there was a disconnect between their operational systems and their billing systems. That was the difficulty: we were paying for orders and not individuals.
Nick Smith
This is not really about open book in that case, is it?
Ann Beasley
If we had exercised open book—eventually, we sent in PwC to look at the source data within both suppliers and identify how many separate individuals were currently being monitored and at things like the average length of time, which would have told us that we had got some very long orders. That would have then told us that we had a problem—partly within our system—with closing the orders down in a timely way and, if we had exercised our right earlier, we would have discovered that earlier.
Nick Smith
I am trying to deconstruct that a little. So you had open book, but you did not exercise it appropriately by not knowing enough about the length of time that some individuals had the tags.
Ann Beasley
Both the length of the order that the individual had been on and how many separate individuals there were.
Dame Ursula Brennan
That is the key point. We had open book, we were getting data and we needed to ask some different specific questions. If we had done that, at any rate we would have flagged an alert that said, “Something doesn’t look right here.” So having open book is step one. Step two is knowing what the key pieces of information are that enable you to know that you are getting exactly the information you need to tell you whether the thing is being run successfully.
Nick Smith
You already have open book, if you had it then. Do you think you now know what those key questions are for those important contracts?
Dame Ursula Brennan
We are working our way through contracts, contract by contract, to go through that data. Sometimes we have far too many key performance indicators: I think there is one where we had 200 and we have moved that down to 50. That is part of the difficulty: if you say—
Nick Smith
That still sounds a lot to me.
Dame Ursula Brennan
It still sounds a lot, but sometimes you are measuring complicated things and, if you have open book and a wealth of data, you can be blinded by the amount of information you have got. So we are working our way through, saying, “What are the absolutely critical pieces of information which will be key for us to understand the success of this contract?” It is that more than the open book, because we have got that already, and that will make the difference here.
Nick Smith
Can I just pick you up on something that I tried to take forward earlier? Do you know how much the bosses of Serco and G4S earn?
Dame Ursula Brennan
I suspect I have read that somewhere, but I do not off hand.
Nick Smith
Is that part of open book?
Chris Heaton-Harris
That doesn’t need to be part of it, because that is in the company records.
Nick Smith
But do you know?
Dame Ursula Brennan
I have seen that information somewhere, but I do not personally off hand recall—
Nick Smith
Do you know if they get bonuses for these deeply flawed contracts?
Dame Ursula Brennan
One of the issues that is relevant to KPIs and so on and the corporate renewal is: does the company have a bonus scheme which incentivises people to game the contract? If they do, that is an issue that we do not want to see. So one of the things that we now look at is how people are being incentivised in relation to contracts, because we do not want staff in the contractor’s company incentivised to operate in a way that will damage the delivery of value for money to the Government.
Nick Smith
How much of that have you found and what have you done about it?
Dame Ursula Brennan
It is that kind of issue that, no doubt, the SFO will look at in relation to their exploration.
Nick Smith
Did you look at that in relation to the tagging contract?
Dame Ursula Brennan
As I said, we looked at a lot of stuff in relation to tagging and it was as a result of what we identified that we referred it to the SFO.
Austin Mitchell
Let me round off the open book argument. Are you negotiating open-book access with all your new contracts?
Dame Ursula Brennan
As I said, it was already a standard term. What we are doing now is ensuring that we are using open book actively. We had it there, available to us. We were not using it as actively as we should. That is what we are now doing.
Austin Mitchell
Do you have open-book access with all your existing contracts?
Dame Ursula Brennan
I think it must apply to all our existing contracts. We have had it as a standard term for quite some time.
Austin Mitchell
What is the case with the Home Office? Do you have open-book access in all new contracts and have you negotiated open-book access to existing contracts?
Mark Sedwill
Yes, with new but not with all the existing contracts. Another point that I wanted to make in response to Mr Smith’s questioning is that the other benefit of open book is not just what direct information you can use. It is a little bit like publishing Government transparency data; it changes the rules of the game for the companies as well. It means that the attitude needs to be different because they know they are going to be under potentially greater scrutiny. As Dame Ursula said, you have got to ensure that you are asking the right questions but it is worth keeping in mind that there is a change in attitude that comes with open book. That is why we are now including in contracts—I think we have now done it in our first contract—and I think that others are too, a specific clause about whistleblowing, for example, within the companies, to get at exactly the same set of issues that Dame Ursula was talking about with their staff being incentivised to behave appropriately.
Austin Mitchell
I have one further question on the equal balance argument that I was airing earlier. People do not go into the Home Office to negotiate contracts or do commercial deals. They go in to stop people from doing naughty things and to stop people enjoying themselves. That is their motivation. People go into the Ministry of Justice to uphold the majesty of the law and seem to just get good dinners and things like that. They do not go in to become commercial negotiators. Are you satisfied that you have the staff with the commercial competence, the nous and the pay level—they are dealing with greedy capitalist organisations that will pay them more to go elsewhere—to negotiate good contracts for the taxpayer and to invigilate the performance on those contracts?
Mark Sedwill
Briefly, on the first point: you are right that people go into the Home Office because they want to keep the public safe. That is what motivates them as public servants. They recognise, to go to Mr Bacon’s earlier point, that in many areas the best way to deliver that is through commercial arrangements or, at least, components of that are through commercial arrangements. People in our commercial directorate take as much pride in being part of the Home Office and that overall ethos as civil servants writing a piece of legislation or working on a Bill team. On your second point about capability—Mr Burrowes was asking about this earlier—we think we have, broadly speaking, the right level of resources but we need to improve the levels of experience and capability in that. We are in reasonably good shape; 48% of our commercial team have the level 6 qualification in commercial and procurement management and another 18% have levels 4 and 5.
Austin Mitchell
And you can pay them enough to keep them?
Mark Sedwill
Mostly, yes. There is turnover of course but—
Chair
How many consultants have you got, Mr Sedwill?
Mark Sedwill
Not in the commercial directorate.
Chair
Any of that—you have no consultants working? You have actually. I will tell you. You have Deloitte doing your e-Borders contract. They have a heck of a lot of money out of that and took a long time to get it—37 million quid so far, I think.
Mike Parsons
In terms of the commercial directorate of 183 staff, we have 13 vacancies. We do not have consultants filling—
Chair
How many consultants are you currently employing to run contracts or to look at the commercial aspect? I don’t know what you call these guys but anybody who is involved in supporting you in letting, running or managing contracts?
Mark Sedwill
We would have to come back to you because we do employ consultants.
Chair
We are going to come back to this one, but what I have says that Deloitte has £37 million on the ghastly e-Borders contract. Then, having got you in a rotten contract in the first instance, they are now back advising you on the further solution.
Mark Sedwill
I will have to come back to you. I do not recognise that specific number. We will have to come back to you.
Chair
Thank you. Ursula, the Report says that you have 35 consultants in total.
Dame Ursula Brennan
I would distinguish between the people we have as contractors, where we have a vacancy and we fill that by employing a contractor—that is the 35 referred to. We sometimes use consultants to perform a service. That is the difference with “body shopping” a vacancy; you can’t get a civil servant to fill it, so you hire a contractor.
Chair
What was your expenditure in the last financial year in relation to the whole of procurement, management and financial monitoring of your contracts with private sector companies?
Dame Ursula Brennan
I will have to come back to you if you want to know the money we are spending on consultants and the cost of those individual contractors.
Chair
It is the consultants that support the delivery and procurement of the contracts with private sectors. I am trying to pull up how much we have in-house, and how much we are buying in expensively, à la Deloitte with Raytheon with consultants.
Meg Hillier
Dame Ursula, the NAO has been quite positive about your approach to this, but can you afford to provide the same level of oversight and management across all contracts?
Dame Ursula Brennan
One thing we are doing is investment in training. That will enable us to train civil servants who will be cheaper than contractors and consultancy support. That is No. 1 and No. 2 is that we have simply taken the view that we are engaged in a certain amount of business—contract management business and commercial business—and we need to be able to resource that, so we have re-looked at our budgets and said, “We have to be able to do that and do it properly.” If we cannot do it, we will have to curtail the amount of business we do, because we cannot say to ourselves we can do this half-resourced, so we have just taken a decision that that—
Meg Hillier
So you are telling us that momentum will not stop after the spotlight—
Dame Ursula Brennan
No. One thing we were really conscious of was that we needed to make a change that would be permanent. As I said, we have done a number of things. The fact that our lead non-exec actually did the review means that he keeps our feet to the fire on this, and regularly seeks updates on how we are proceeding. We have set up business processes so that we are not just reliant on having put some good people in place that will do the right thing and then move on over time. We are trying to put approvals systems, accountability systems and training in place so that it becomes self-reinforcing. The executives team spends quite a lot of its time on major change programmes and major contracts, and the commercial approach that we will use for contract management. It occupies a lot of our time now.
Meg Hillier
Mr Sedwill, both you and Dame Ursula run Departments with important responsibilities. You are dealing with counter-terrorism and big world issues. Will momentum on this disappear? You mentioned earlier that civil servants are equally proud to run a commercial contract, but are they really going to get the same level of promotion? Look at your route through, for instance, to becoming one of the new appointees as Permanent Secretary. Will that route continue in the civil service? Will they really get rewarded?
Mark Sedwill
I would be surprised if people who have come through my route end up in this job very often, but I think that is the general intent. It has been set out by the Minister for the Cabinet Office that, in future, Permanent Secretaries should have commercial and operational, as well as policy, experience. We both have some of that, and our predecessors 10 to 15 years ago will have come almost entirely through the policy legislative route. There are more Permanent Secretaries now with significant commercial and operational experience.
Meg Hillier
Will momentum continue on the contract management?
Mark Sedwill
Yes, it will. The way we run the Home Office executive board—by the way, Madam Chair, I now have the data so I can give you that answer in a second, or at least part of the answer—is that we look at what we call all of our enablers once a month. That includes all of our commercial operations. Once a month, we look at our big immigration, borders and other operations. That means there is a mechanism by which the top executive team—including those who are not doing this day to day, such as people running the OSCT and the crime and policing group—are engaged directly as part of the senior team in commercial management, facilities management and the other issues that essentially ensure we are getting the delivery of the Home Office objectives right.
Meg Hillier
I have the advantage, if one could call it that, of having sat on that Home Office executive board. Perhaps things now are different from those days, but I am not sure that every single directorate was as engaged with every single issue as you have just presented. If you are dealing with counter-terrorism or the political priority of immigration, there might be a tendency to think that those issues are more important than the contract management for some widget production—not that you produce widgets in the Home Office, but you know what I mean: something that seems less important than, perhaps, world matters.
Mark Sedwill
The point I am making is that even those people on the overall executive team are engaged. Below that, there are people who do this as their full-time job. Mike Parsons, the chief operating officer, does that. He chairs a new body called the portfolio and investment committee, which looks at ongoing contracts as well as new procurements, which is all its predecessor looked at in the past. We have the audit and risk committee, which he is on, I am on and the finance director is on. We have people doing this full time, but the overall executive team also knows that they have a collective responsibility as well.
Chair
And the answers to the other questions?
Mark Sedwill
I will have to come back to you on the breakout you asked for, but total consultancy spend in the Home Office in 2010-11was £64 million. In 2013-14, it was £18 million and it is anticipated to be under £15 million this year.
Meg Hillier
I have two quick questions to both witnesses. Do you think that these bodies were too big to fail? What would you have done if those contractors had either walked away or been sacked, or, if that does happen, what will you do?
Dame Ursula Brennan
I do not think that they have proved too big to fail. If you look at our Transforming Rehabilitation competition, both of those suppliers—the two biggest suppliers in the Department—withdrew from that, and we still have a very healthy market. Indeed, one of the many lessons we have taken into that contract, as well as other contracts we have recently been letting, has been to say, “If we are doing something on a big scale, we must structure it so that no one supplier can have too large a market share of the business that they are undertaking.” But no, I do not think it was the case that they were too big to fail.
Chair
It is ever more extraordinary that they were ever allowed to tender for anything when the SFO is investigating them both.
Mark Sedwill
I have the same answer: no, for exactly the same reasons that Dame Ursula set out. We seek to try to ensure that each area in which we are looking for private sector input is contestable. In the same way, although it was not possible legally to say, “You may not bid,” in the case of one contract for which one of those suppliers would be bidding we made it clear at the very early stages that we would not welcome a bid. They therefore voluntarily stepped aside from an area of business in which they might otherwise have expected to make a competitive bid. We managed to run a competitive process and bring in a different supplier.
Meg Hillier
My final question, which we always ask, is, where does the buck now stop? You have both given a description of your new procedures and policies, and you have discussed the positive views about momentum and how you are managing capacity—we will take that all as read and test you on it—but if something goes wrong, whose neck is on the block? Is it yours, or is there some underling? Or is it the executive board? Who is responsible?
Dame Ursula Brennan
When something goes wrong in a Department, the accounting officer is responsible. Obviously, if someone has done something when there were very clear rules and they have broken them, that person is responsible, but the accounting officer is responsible for setting up the framework within which people operate. If you are asking about something going wrong with that framework, I accept that that is the accounting officer’s responsibility.
Mark Sedwill
I agree with that entirely, so I will not repeat it. The only point I will add is that through the system of SROs for big projects and programmes, and through what we are adopting, which in a sense is parallel to that— senior business owners for ongoing contracts—it is and should be much clearer who has the accountability either for individual supplier relationships or for individual contracts. Of course, if something goes wrong or there is underperformance in those contracts, there are—or, potentially, if it goes very badly wrong and there has been negligence or something more serious, there may be—performance issues for the individuals concerned, but they know it is their job to make sure their contractors deliver the business outcomes, and their futures and their annual appraisals and all the rest of it will be conditioned on that.
Chair
Richard has got one and I have got two, and I think we are done then.
Mr Bacon
Chair, I have just got one more, and that is that today is a very significant birthday for you, and we thought it would be quite wrong to let this Committee not mark it officially. We have one or two things; there is one more in that bag, if you would not mind—thank you. First of all, obviously as a champagne socialist you will be needing this. You may recognise this box, but don’t say. You must open it now because otherwise you will not get the point.
Chair
Honestly, you are kind—or I don’t know, actually. Brilliant—completely brilliant. PAC mugs, fantastic.
Mr Bacon
In all the party colours. We also have a card here, and just to show how much the witnesses love coming, they have all managed to sign this card. I am afraid the conspiracy is not complete, because I don’t think the Treasury managed to sign it, but we will get a policy statement from them later. Here is the card; you will have to read what is on the inscription, I am afraid, out loud, for the record.
Chair
“Margaret had always been extremely taciturn by nature”—ask my kids that—“but she finally plucked up the courage to have her say.”
Sir Amyas Morse
I am just going to add another bit of evidence; in case anybody cannot see I am referring to—[Interruption.]
Dame Ursula Brennan
Is that an in-house cake? Who is the “Bake Off” expert?
Gabrielle Cohen
The Director of Parliamentary Relations.
Chair
Thank you so much everybody. I don’t deserve it. The only thing to say to you is I am here to stay. Oral evidence: Contract management across the Ministry of Justice and the Home Office, HC 585 34 [1] Meg Hillier subsequently requested that the transcript be amended to allow her to declare an interest that her husband is a non-executive member of a company which intends to bid for a Ministry of Justice contract.