Oral evidence: Strategic Suppliers, HC 1031
Oral evidence, 11 June 2018.
Witnesses
Peter Neden and Debbie White.
Chair
Good afternoon everybody, and welcome to the Public Accounts Committee on Monday 11 June 2018. We are here today to look at the Government’s relationship with major strategic suppliers, particularly in the light of the collapse of Carillion. To remind others, there were 28 strategic suppliers—of course, there are now 27, because Carillion is no longer one of them. Those are companies that have business across central Government of more than £100 million. We are talking today to G4S and Interserve, two of the companies that provide important public services paid for by the taxpayer but delivered through private companies under outsourcing, which various Governments have pursued over time. I welcome our colleagues from the Ugandan Parliament, who are here to see how we operate; thank you very much. I am looking forward to meeting you more formally tomorrow. I hope you enjoy our session. We are not here for entertainment; we are here to get answers from our witnesses. Peter Neden is the CEO of care and justice at G4S. I have had a couple of job titles for you, Mr Neden. What are you actually doing now? Can you describe it?
Peter Neden
I am the divisional CEO of our care and justice business, so I am responsible for all our Government services globally. The vast majority of that is in the UK.
Chair
So you are UK-focused in your work.
Peter Neden
We run operations in a number of countries, particularly Australia and the UK. The vast majority is in the UK.
Chair
So you cover Australia as well as the UK.
Peter Neden
Yes.
Chair
Debbie White is the chief executive officer of Interserve. I think you arrived at Interserve in November last year.
Debbie White
In September 2017.
Chair
So not so new then—nine months in. Our hashtag is #outsourcing, for anybody who is following on Twitter. Before we move into our main session, I just wanted to ask you, Ms White, whether there is any update on the Financial Conduct Authority’s investigation into the way you have handled inside information and market disclosures on your energy from waste business. Has anything new happened since we read press reports about that?
Debbie White
No, there is nothing new. Just to remind the Committee, the FCA have commenced an investigation into the reporting at Interserve between the middle of 2016 and early ’17 on the loss-making energy from waste contract.
Chair
We are aware of that. So there’s no update?
Debbie White
There’s no update. The investigation has commenced, and we are co-operating with them fully, as are the previous executive and the board.
Chair
Have they given you any indication of how long it will take to conduct that investigation and when we might hear something?
Debbie White
No, they haven’t, although I have been informed by our advisers that it can take quite a considerable period of time. They have told us not to expect anything until the end of the year.
Chair
Okay. We will keep an eye on that one. Thank you very much indeed. We are really hoping to get short answers from you today. We have obviously briefed up on this, so we don’t need the whole narrative history of your companies and the contracts you are running. Colleagues will be asking direct questions, and we are hoping for clear and direct answers. We are particularly keen to explore some of the individual contracts you are running, but also the relationship you have with Government, how it is from your perspective, how things could be changed or improved, and what is working well. I am going to hand straight over to Mr Lee Rowley, who is going to kick off. Can you answer the questions directed to you, please?
Lee Rowley
Mr Neden, can we start with some context? How many contracts does G4S have with the UK taxpayer?
Peter Neden
We have about 70 contracts with UK Government, and about 20 of them are with central Government Departments.
Lee Rowley
And the value of those?
Peter Neden
The total value of those is £660 million—so about 9% of the group as a total.
Lee Rowley
Has that been going up or down in the past few years?
Peter Neden
It has been reasonably flat.
Lee Rowley
In your view, or in your company’s corporate view, what proportion are performing well, and can you define “well” for me?
Peter Neden
The vast majority of the contracts we have are performing well. By “performing well”, I mean meeting our expectations, meeting the expectations of our client Departments, and providing services to the users of the public services we provide.
Lee Rowley
With the vast majority being what, approximately?
Peter Neden
We have a very small number of onerous contracts that are not performing well, from our point of view. There are two contracts in particular that are operationally very challenged in the custodial area. As I think people are aware, the custodial environment is particularly challenging at the moment, with much higher levels of violence than we would like to see.
Lee Rowley
So two out of 70 are challenging, and a minority are not performing well. What would be the rough number on that?
Peter Neden
I think it is probably three or four.
Lee Rowley
If you take the average set of contracts—let’s pick a dozen of those contracts—how many, through their lifecycle, would fall into a “not performing well” definition?
Peter Neden
Our contracts range from a typical five years to the PFI contracts, which are obviously 25 years. Within a 25-year cycle, there might be perhaps two periods when we are in a very difficult operational environment. That is about what I would observe. If we are in a five-year contract, I would expect the contract to perform well throughout. Our expectation is to make sure that we only take on things that we can manage.
Lee Rowley
Your position would therefore be that, as a Committee, we should expect longer-term contracts to become dysfunctional at points, and that it is not their becoming dysfunctional, but your ability to get them out of being dysfunctional, that you should be judged on?
Peter Neden
I am not sure that I would describe them as dysfunctional, but the two prisons that I am thinking about are in a very challenging operational environment. It is no different for other large local prisons, such as Exeter, Liverpool or Nottingham. I am not sure that that means that the contracts are poor in and of themselves. The operating environment is very challenging.
Lee Rowley
So there is no expectation that they automatically become dysfunctional at some point in the cycle?
Peter Neden
No.
Lee Rowley
There is no definitive expectation that that will occur?
Peter Neden
No.
Lee Rowley
So for the two that you referenced—perhaps you can name them for me—why do you think they have got to the place that they have got to?
Peter Neden
In all cases where we have challenges, the environment is more difficult, including the level of violence that we are experiencing. The cohort of prisoners that we are looking after are more prone to violence. That places an additional burden on staff—we have had challenges recruiting and retaining staff, which we need to attend to—and it has also placed pressure on our leadership team.
Lee Rowley
Your note, which you gave us relatively close to now, says that you only offer services where you have appropriate expertise. Presumably you have the appropriate expertise to manage those kind of issues in the prison environment, which is why you are contracted to do them.
Peter Neden
Yes, we do.
Lee Rowley
So why do you think those contracts are specifically in the place they are in?
Peter Neden
As I just said, we are experiencing much higher levels of violence than expected. For instance, in the children’s estate, there are now only 900 children in custody. When we first took the Oakhill contract on, there were 3,000 children in custody. That is a great thing for society, but it means that the children we are looking after in custody are from the most damaged backgrounds and are the most demanding children. The same management team is running Oakwood prison, where I think we are doing groundbreaking work in peer-to-peer support for prisoners, to help reduce reoffending.
Lee Rowley
When was the last time that you reviewed the Oakhill contracts with the Government? You can’t seriously be telling me that you are baselining everything from 2004, when Oakhill opened, or 2008, when you took it over.
Peter Neden
No. With all our Government contracts, we have a regular and robust review process every month. We sit down with our client and go through a very detailed pack of information that provides service levels on key indicators, such as time out of cell, purposeful activity, levels of education, drug testing and so on. We review that every month. I also review performance with the management team every month within the G4S business. We are also quite rightly subject to inspection by the inspectorate, and there is also an independent monitoring board, so the contracts are very regularly reviewed and scrutinised.
Lee Rowley
If they are very regularly reviewed and scrutinised, presumably they are reviewed and scrutinised in order to avoid problems being created, so why has Oakhill gotten into the problems it has gotten into?
Peter Neden
As I have said, the cohort of children that we are looking after are just more difficult than they were three or four years ago.
Lee Rowley
Are you seeking a contract renegotiation on that basis?
Peter Neden
No, we are not. We seek over time to make sure that the contract is operating in the way that it should and that we are focused on the right thing, but we are not seeking a contract renegotiation in the way you describe.
Chair
You say they are more difficult or challenging. Can you give us some examples of what you actually mean by that?
Peter Neden
Secure training centres were originally designed to hold younger children who had typically stolen cars. We are now dealing with 900 children in custody, and they tend to be at the more serious end of the spectrum of crime, so by their nature they tend to be more demanding.
Chair
Are they of a similar age range?
Peter Neden
We now hold children who are up to 18 in that facility.
Lee Rowley
If you are not seeking a renegotiation of the contract, presumably you believe that you are competent and able to deliver that contract.
Peter Neden
Yes.
Lee Rowley
If you are competent and able to deliver that contract, why is Oakhill in the place that it is in? I ask that question again. You have explained to me that there is a problem with a different cohort of youngsters, but by definition, if you believe you are able and competent, you must be able to deal with those youngsters. Otherwise, you would not be able and competent. How can you argue that you are able and competent on the one hand, but then tell me that the problem is the result of the people going through the system on the other?
Peter Neden
I am saying that the nature of the children has changed and we need to respond to that in a sustainable way.
Lee Rowley
If that response is not a renegotiation of the contract, that means you accept that you can deal with it, but you’re not dealing with it. So what is the problem?
Peter Neden
We have an improvement plan that has involved changing the leadership of the centre. We are changing the way in which we recruit and train staff. We are changing the way the centre operates. We are improving the education facilities. We are changing the regime for the children. We are doing an upgrade of the facility to make the physical environment better. There are a number of things we need to do to make the Oakhill operation better, and we intend to do that.
Lee Rowley
But probably none of those came out of thin air. Given that you just told me that you are doing very regular reviews, which I would expect you to do on an almost day-to-day basis as a corporate entity, and you are doing monthly reviews with the Government, how did you manage to get to the place where you are? Surely it should have been arrested at an earlier stage.
Peter Neden
I wish that were the case, but we did not manage to do that.
Lee Rowley
And the responsibility for that was with people, the processes, management or what?
Peter Neden
I think the responsibility for that is primarily with ourselves as management.
Lee Rowley
At what point should I, as a not particularly expert individual, determine that you are incapable of managing Oakhill? Where would you say the service has to go before you demonstrate a lack of competence and a lack of ability?
Peter Neden
If we were unable to implement the improvement plan that we are working on, but we are making good progress. We have a number of indicators, such as the use of force and the levels of violence, and all those indicators are going in the right direction at the moment.
Lee Rowley
So your position, just so I am clear, is that it is absolutely fine for me to see lists of “requires improvement”, and I should not judge you on that, but on whether they change next time.
Peter Neden
No, that is very disappointing and I regret that, but we need to put that right.
Lee Rowley
So if they are not changed next time, can I judge you as incompetent and unable?
Peter Neden
I think you would have to look at the circumstances at the time. As I say, we intend to put Oakhill right. We have the same team of people who are managing some very high-performing custodial facilities. Our intent is to make Oakhill operate to the same high standards.
Chair
If you are not renegotiating the contract, are you pumping money in from G4S, or are you planning to do it on the same money that you were originally contracted to do this on?
Peter Neden
There is no constraint on our management team in coming up with what they need to do to make the contract run effectively.
Chair
So are you putting more money in to keep your reputation intact. It will cost you and your shareholders money, presumably.
Peter Neden
If it costs us money, it costs us money. For instance, we have increased the salaries of the staff, and we have had to do that at our expense.
Chair
So are you still making a profit on the contract?
Peter Neden
We don’t give information on individual contract profitability, I’m afraid.
Chair
Okay, but would you be prepared to run a contract at a loss in order to protect your reputation?
Peter Neden
We have a small number of contracts that have been running at a loss. In no instance have we failed to deliver the service. We have a set of obligations to deliver service to a certain level, and we must fulfil those obligations. We have an expectation that we will make an acceptable return. If we’ve got that bit wrong, we’ve got that bit wrong, and we have to live with the consequences of that. That is what we have been doing on all our onerous contracts.
Chair
If you are making a loss on a contract, would you then perhaps decide not to bid for it when it comes to renewal time?
Peter Neden
We look at every single bidding opportunity on its merits. We seek to take on business where we have the skills and competence to provide the service, where we believe that we will have a client who is happy with that service, and where we have a risk profile that we deem to be acceptable. If we can meet those requirements, we will bid for that work. If we cannot meet those requirements, we will not bid for that work.
Lee Rowley
Just following up on that point, have you ever bid for a contract knowing that you will make a loss on it?
Peter Neden
No, never.
Lee Rowley
If you won’t tell us the individual profit margins on individual contracts, which I understand, are your total circa 70 contracts currently making a profit or a loss?
Peter Neden
We are making a profit on our current portfolio of Government contracts.
Lee Rowley
Page 1 of the note that you gave us says, when talking about external providers and outsourcing, “the costs to the UK taxpayer have reduced…and this can only be a good thing”. Can you tell me how you have determined that that is the case?
Peter Neden
In nearly every competition that I have been aware of, one of the tests that we have informally understood the Government to apply is that the costs would be lower than the alternative provision. Sometimes that is explicitly stated, but often it is more of an informal assessment. We have also looked at the information published by the CBI, where the CBI estimate that savings to the public purse are typically in the range of between 10% and 30%.
Lee Rowley
So the methodology you have employed to make that assertion is the fact that the contracts are being proposed for outsourcing, rather than your objective assessment that that is correct?
Peter Neden
In some cases, there is an objective assessment; we know for some of the prisons that we operate what the objective assessment is. We know for police custody suites what the objective assessment is.
Lee Rowley
What is the objective assessment for Oakhill?
Peter Neden
I am sorry, I don’t have that information.
Lee Rowley
Do you have one?
Peter Neden
I have one for the Lincolnshire police, where we took on the whole of their back office.
Lee Rowley
Yes, you sent that as a case study. There are a lot of benefits in there that are projected rather than actual. Do you have one with actual benefits?
Peter Neden
That 13% saving was a joint assessment made by us and Lincolnshire police.
Lee Rowley
But it is jam tomorrow, not jam now, isn’t it?
Peter Neden
No, this contract has been running for a number of years. That is what is being delivered.
Lee Rowley
All 13% is being delivered?
Peter Neden
Yes.
Lee Rowley
Excellent. In terms of the mature commission of services, which you have stated in your position, how do you think the Government become more mature in terms of what they do?
Peter Neden
There have clearly been mistakes made over the last few years; we have certainly made some mistakes. What we need to do is focus on sticking to the principles, quite well defined by the Cabinet Office, on clarity of objectives, on making sure that risks sit with the organisation best able to manage them, on proportionality of risk and reward, and on using a contract form that is appropriate to the contract. I can give you an example from the Department for Work and Pensions, who have just run a very successful competition to renew their security arrangements. Instead of just running a competition for the price of security officers, which it would have been very tempting to do—we employ 3,000 security officers on that programme—they ran a competition based on the skills and expertise of the management team in putting in place an appropriate security regime, using a number of the Jobcentre Plus sites as test cases. They have now made a decision to appoint us to provide their new security regime, and we will put in place a whole technology change of access control, patrol and response, alarms and so on, and reduce the overall cost of security provision, while also improving the security of people who work in the Jobcentre Pluses and the people who use those Jobcentre Pluses.
Lee Rowley
One final set of questions from me for now. Do you deem yourselves a fit and proper supplier to Government?
Peter Neden
Yes, we do. We have been operating for over 20 years in this environment.
Lee Rowley
At the point of corporate renewal, a number of years ago, did you deem yourselves a fit and proper supplier when that happened?
Peter Neden
No, I think we had lessons to learn, and we went through a very constructive process with Government to improve the way in which we were operating.
Lee Rowley
If there were lessons to learn, does that mean you did not deem yourselves a fit and proper supplier?
Peter Neden
No, it meant that there were lessons to learn, and we went through a constructive process with Government to improve our operations and governance.
Lee Rowley
Let’s take an academic scenario—let’s not call it G4S or Interserve or Carillion. When would a corporate entity providing services to a Government not be fit and proper? What would they have to demonstrate in terms of behaviour?
Peter Neden
I cannot speculate on that. I believe that we run good-quality services for the Departments we provide those services to.
Lee Rowley
Let me give you a few. If that company was acting unethically?
Peter Neden
I cannot speculate on what that would be.
Lee Rowley
But you can. You are the expert; I am not. That is why I am asking you for your view, as a company, as to when you would consider a peer not to be fit and proper.
Peter Neden
Government has a set of tests—we go through that process every time we contract with Government, through the pre-qualification process—around our financial standing and the ethics under which we operate. It is appropriate that companies abide by those.
Lee Rowley
That is what the Government do. What is your personal view?
Peter Neden
It is in line with that. We operate under the City code; we have a set of standards and values that we operate to. As I say, we only wish to take on work where we have the skills and competence to provide a good service to our clients.
Sir Geoffrey Clifton-Brown
On the two contracts that are going wrong—one in prisons and one in the children’s service—to what extent have they gone wrong because you have not been able to recruit sufficient staff?
Peter Neden
Staffing is an issue whenever we have challenges in our custodial environment, so it is a contributory factor.
Sir Geoffrey Clifton-Brown
But you would never restrict the number of staff required in order to make a bigger profit; you would give your managers on the ground sufficient staff to be able to manage that contract.
Peter Neden
No, we would never do that. It is absolutely not in our interests; nor is it right to do so.
Sir Geoffrey Clifton-Brown
In reply to one of Mr Rowley’s questions, you said that you would not seek to renegotiate the price on these contracts, but surely if there had been a material change—there has been a material change in both—you would be entitled to renegotiate the price of the contract. Is the reason why you are not doing so because you want a reputation for never renegotiating a price on a contract in order to bid for future contracts?
Peter Neden
We would look at each contract on its own merit, and if the contract we had entered into allowed us to go back and make changes, and there was cause to, we would do so. If we were in a contract that did not allow that, we would not. We will stick to the agreement that we have with our client in all cases.
Sir Geoffrey Clifton-Brown
Could I ask you two other questions? What is the average time you take to pay your suppliers?
Peter Neden
I think 80% of our suppliers are within 60 days, and we are signed up to the prompt payment code. We absolutely recognise the importance of paying our suppliers on time. They sit behind a number of our critical services, such as our asylum seeker programme and our employment support services.
Sir Geoffrey Clifton-Brown
For that 20%, would that be because invoices are disputed?
Peter Neden
There would be a whole range of reasons for this. I think the most important thing is that we pay to the terms that we have agreed and, of course, the number of days is just one aspect of those terms. It could be that we have negotiated a deal with the supplier on longer terms.
Sir Geoffrey Clifton-Brown
On pension fund deficits, the Pensions Regulator is taking a tougher attitude to pension deficits, particularly in light of the Pensions Act 2004. Is that placing you in a difficulty in negotiating? Are you in dispute with the Pensions Regulator over how you fund your pension deficit?
Peter Neden
No, we are not. We employ 570,000 people in 90 countries around the world. We have a whole range of pension arrangements across the world and in the UK. We have agreements in place with all our pension trustees, and we are in the process of fulfilling our obligations to the pensions.
Sir Geoffrey Clifton-Brown
That does not quite answer the question. The specific question was: are you in dispute with the Pensions Regulator at the moment as to how you are funding the deficit?
Peter Neden
Not to my knowledge. I am very happy to check and come back to you on that.
Chair
It would be very helpful if we could have clarification, if necessary.
Gareth Snell
Last week we heard from Baroness McGregor-Smith, who talked about her time at Mitie. She talked very candidly in one instance about low-balling contracts to win them and then potentially having to look at additional costs going up. I am not asking you whether you have come into that practice, Mr Neden, but from a cultural perspective within commissioning with Government, have you come across that, where expectations of a contract are so low that it is inevitable that you will have to increase in-year costs simply to meet demand?
Peter Neden
I cannot speak for others; my experience is that competition is always fierce, and that there is a right and proper emphasis on charges and therefore price—I think we are all taxpayers, so it is absolutely appropriate that price be an important part of any competition—but, as I said earlier, we have never, in your language, low-balled a contract. What I have read on Carillion just reinforces my view that we need to make sure we take on risks that are appropriate, and that we can manage, and that we price those risks appropriately.
Gareth Snell
I do not disagree with that, but one of the themes that I think is emerging from the evidence we have been privy to, and from the oral evidence we have heard in Committees, is that strategic suppliers benefit from collecting contracts from Government by being the most economically advantageous bidder, secure in the knowledge that at some point there may have to be new negotiations. Have you ever come across a situation in your organisations—Ms White, you might have had such a situation in Interserve—where you have looked at the tender specification or contract opportunity with Government and thought, “That is too little money. There is no way that they could deliver that service with that amount of money”?
Peter Neden
I do not think it is about just making a judgment about the money; it is about the whole basket of risks that we are expected to manage. In a number of cases over the last two or three years, we have simply made no bid for contracts that perhaps five years ago we might have bid for. It would not just be about looking at the money; it would be about the whole basket of risks.
Debbie White
I am happy to add something.
Chair
I think we will come to you in a moment.
Debbie White
Mr Snell did ask me—
Chair
Sorry, carry on.
Debbie White
Particularly where you are the incumbent and you know what the current vision is, when the RFP is put out that has a different service provision requirement, there is an estimate made of whether the services will be required under the new contract. You will see variations—not necessarily contract negotiations—as a result of the service specification being different from what is expected on the ground. That happens not just in the public sector but in the private sector.
Gareth Snell
Mr Neden, you said that there are things that you would not bid for now that you may have bid for five years ago. What has changed in that five-year climate that means that something that would have been seen as a viable potential contract with manageable risk five years ago is no longer something you would entertain?
Peter Neden
I think we have learned a few lessons about what we should and should not take on, and the terms under which we should do business. We are more sensitive to making sure that we only take things on that we have the skills and expertise to manage, and that we are managing risks that we are able to.
Gareth Snell
That does not really answer my question. What has changed? Presumably, you were doing that risk management appropriately five years ago as well as today. Has the risk profile changed in those five years?
Peter Neden
No, I think we made some mistakes.
Gareth Snell
Five years ago you were making mistakes.
Peter Neden
I think we made some mistakes, hence we have a number of onerous contracts.
Gareth Snell
When you are looking at contracts that come forward with risk management, without going into the commercial arrangement of your organisation, what is the thought process now that has changed specifically?
Peter Neden
I am not sure the thought process has changed. I think we are more sensitive to the risks that we might be taking on. We are much more sensitive to volume risk and what might happen as volumes go up and down in a contract. We are more sensitive to the scale and the nature of change that we might be taking on. If we do not feel that we are the best organisation to manage those risks, we will not bid.
Gareth Snell
On the source of contracts, we have discussed the very different nature of a contract that is hard or soft facilities management, where it is “build this” or “clean that”, from where you have a target to get so many people into work or through a capability assessment. Is the organisation’s approach to risk profiling for those different, or is there one risk profile that is applied to any contract for Government, because it is a Government contract?
Peter Neden
We ask ourselves the same question, whether it is a contract with the private sector or a contract with the Government. Clearly, there are differences between the risk of assessing the efficiency of cleaning a hospital, which is a risk that it is right and proper that we would be able to back ourselves on, and the risks associated with something like the Work programme.
Gareth Snell
When you look at contracts with Government, how amenable do you find Government to conversations about how contracts could be delivered? I often fear that in the public sector, both national and local Government, there is a potential for saying, “We have always done something in a particular way, so we want to repeat that,” rather than, “We want an outcome, and there might be new ways of doing that could be better value for money for the taxpayer.” As an organisation that has a significant number of contracts, how viable do you think that those conversations are with Government?
Peter Neden
I think that varies over time and by Department. In general terms, Government is a very sensible and mature commissioner of services, but equally, I don’t blame Government for being very demanding in asking us to step up and take on risk.
Gareth Snell
Mrs White, Interserve has a number of varying contracts; if you saw a contract opportunity arise and you thought, “Actually, the Government have completely misplaced what it was they wanted to achieve”—a particular outcome—would you feel that Government were willing to have that conversation before they started to write contracts?
Debbie White
In principle, yes, but again it depends, Department by Department, and on who is letting the contract. In private sector contracting, you see much more dialogue taking place before contracts are put to the market, and that is something that could be learned by Government. You also see in the private sector the willingness to do pilots, rather than going in fully, 100%. Those are two things that could be practiced more in Government processes.
Gareth Snell
How much of that would you say is pre-tender conversation, as opposed to co-creation of an outcome once you have chosen a supplier?
Debbie White
You don’t see very much co-creation of an outcome in Government contracting. You normally get a tender, which you reply to, in my experience.
Gareth Snell
Mr Neden?
Peter Neden
I think that’s right. Generally, by the time Government Departments go to market, they have had those discussions, to the extent that they wish to engage in pre-procurement discussions. I think that is getting better—we see more pre-market engagement—but once we are into the tender process, we tend to be bidding on the specification given to us.
Gareth Snell
May I ask something of everyone? The social value Act is a piece of legislation that allows the Government to look at the wider economic impact of their work, rather than just at the bottom dollar—or bottom pound. How confident would you feel if you wanted to engage in a conversation with Government about a broader piece of work on their commissioning to deliver greater potential benefits outside the very specific remit of the contract? How much do you think that Government would listen to those sorts of conversations?
Peter Neden
If Government want that to be part of the assessment—we have experience of that from America—they should just put it in the set of requirements, and we will respond to it. I see no philosophical difficulty with that.
Debbie White
I would agree with that. I think that the social value Act was a great thing to be implemented. Personally, as a taxpayer, I would like to see more of it used.
Gareth Snell
Finally, Chair, may I ask about the Crown rep system? How useful do you think that the Crown rep system is, in terms of providing a continual dialogue between Government and strategic suppliers?
Debbie White
Shall I go first?
Gareth Snell
Oh, it’s that good, is it?
Debbie White
I personally found the Crown rep system very helpful in facilitating the dialogue. I am sure that there will be more follow-up questions, given that Interserve, over the last eight or nine months—
Chair
There will be a bit more conversation with them.
Debbie White
Yes. Even before my time at Interserve, I was with a supplier to the Government. The Crown rep system has worked very well. I think it has matured over time, and it facilitates the right level of dialogue. Certainly, in my personal experience over the last eight months, it has been a very robust process to be involved with Crown rep.
Gareth Snell
Good. I think that’s me for now.
Chair
Okay, I shall go to Ms Mahmood, if I may. Mrs White, you will get your moment in the spotlight.
Shabana Mahmood
Thank you very much, Chair. Mrs White, this line of questioning is about your dealings with the Crown representative. First, to go back to the beginning of your story with Interserve, you were brought in after the profits warning of September last year. What was your initial assessment of where things were going on with the business?
Debbie White
I joined Interserve for a number of reasons; I did not know of the financial situation of Interserve before I joined. I joined Interserve because of their values—they have very strong people values—and because I thought they had very strong core businesses. What I found when I got to Interserve was that that was exactly right, and that has played out over eight or nine months: the values of the organisation are very strong and very centred around people and service, and there are three very strong core business lines. What was not clear was that the average net debt day by day was increasing. That is what we found—I say “we” because the group CFO joined at the same time as I did.
Shabana Mahmood
And what was your assessment? You get into the business, and it is obviously a difficult point for the company. What is on your list of things to immediately get sorted? There must have been a series of underlying issues. A bit of further detail on your previous answer would be helpful.
Debbie White
Sure; apologies for that. The first thing was to make sure that the company had enough cash to keep trading, and the second was to make sure that it was performing against its contracts. Interserve has three different business lines; it has its support services business, its construction business and an equipment services business, and all three businesses provide things for the UK Government. The first thing was to make sure that we had enough cash to keep on trading. The second was to make sure that our contracts were performing well. The third was then to build a business plan that would provide the basis on which further long-term funding could be provided.
Shabana Mahmood
Are you now confident that you have got to that point?
Debbie White
Yes. We presented our business plan to our lender population at the beginning of January. It was tested enormously by a whole host of advisers—advisers to every single part of our lender population. It was agreed that the business plan is a very sound, solid business plan, predicated not on driving margins up or growing enormously in areas that we do not have skills and capability for, but basically on doing what we do better and more cost-effectively, particularly in terms of overheads, and on disposing of small, non-core businesses that have sat around the outskirts of Interserve for a long time. The financing was agreed at the end of April. We announced on 30 April our results for 2017, and we are now into implementation. We did start implementation in October/November, as you can imagine, because it had to absolutely be a self-help programme to make sure that Interserve could continue to fulfil its commitments to all its stakeholders, but most specifically our clients.
Shabana Mahmood
In relation to this population of people who were testing your rescue package or business plans going forward, how much involvement did you have with the Crown representative and were they able to test in the same way that your lender population were able to test your plans?
Debbie White
Our engagement with the Crown rep started in October—I say “our”; I’m saying “my” engagement as the new CEO—and I took on direct responsibility for interaction with the Cabinet Office and with the Crown rep. We ended the year with fortnightly meetings with the Crown rep and other members of the Cabinet Office, and we proceeded to weekly meetings, including ad hoc phone calls and other meetings and calls, from the beginning of January. In terms of them testing our business plan, we provided them, weekly, with an updated cash-flow forecast, which they did evaluate. They do have advisers within the Cabinet Office on restructuring; there are people employed within the Cabinet Office to look at that. They fully evaluated our—they had our business plan and all the feedback on it and our cash-flow forecasts and, obviously, the expected out-turn for the year. They had every bit of information that our lenders had been provided with.
Chair
Did they discuss with you the RAG ratings?
Debbie White
Yes, and I just want to correct something in my written submission; I think it implies we don’t know what our rating is. Actually, we do know what our rating is. We don’t know how it is derived. That was really what I was trying to communicate—not terribly successfully, I’m afraid. So yes, they do discuss with us our RAG rating, and we were told when it went to amber and when it went to red.
Chair
A very quick question from Mr Chris Evans.
Chris Evans
I was looking at the weekend, Ms White, at Interserve and especially investor tips, and a number are betting on Interserve’s share price going down. Also, the same people—I think it’s Marshall Wace—hold a large short position on your company at the moment. How concerned are you by the market at the moment, with that sort of news?
Debbie White
The Interserve investor portfolio is split roughly into three components. We have Coltrane Asset Management, who have been a long-term shareholder and have added to their shares over this period of time; they own about 27% of the company. We have Farringdon Asset Management, a Dutch-based organisation. It split into two funds recently, and they together own roughly 10%. The remaining 63% is held by retail investors. That is not an investor dynamic that you would want to see in the longer term, because the share price is dependent on very small changes in mood. The share blogs say x, y and z—there is a lot of speculation on the share blogs—and that tends to drive the share price. It is certainly not being driven by our larger investors, or by any new investors coming in. Part of the recovery plan is actually about talking to new investors—the funds you would expect to see owning parts of a UK plc—about joining the shareholder base. I am not that concerned about it, actually. That might sound a bit flippant, but I am not being flippant. The variation is principally driven by retail investors. Our plan is very robust. We announced the first of our disposal sales in the last two weeks, which has brought in a significant amount of cash, and we are on track with the things that we are doing. We have to deliver our recovery plan, and I think the share price will respond accordingly.
Chair
Mr Neden, are you aware of the changes in your RAG rating?
Peter Neden
Yes, we are, but as Debbie said, we are not given the papers or the detail behind them.
Chair
You are just presented with it?
Peter Neden
Yes.
Sir Geoffrey Clifton-Brown
Were you given any opportunity to make representations against the change in RAG rating? That question is for both of you.
Peter Neden
No.
Debbie White
Within the red, amber, green system, no, we are not.
Shabana Mahmood
Ms White, let me go back to your meetings and discussions with the Crown representative. Going back to before you joined the company, when was the first time, to the best of your knowledge, that a representative of the company told the Crown representative about issues relating to the financial health of the business? Pre-profit warning, when were any issues first mentioned?
Debbie White
Before my time, I don’t know. What I do know is that there were regular monthly meetings with the Crown rep and the Cabinet Office. We also have a dashboard, which provides all the KPI data on our contracts with the Government. They have daily access to that.
Shabana Mahmood
I appreciate that they know how the contracts are going and have an overall sense of performance. I am just wondering—
Debbie White
Before my time, I don’t know. Of course, a UK plc is governed by the market abuse regulation, and that presumably dictated what my predecessor would have said to the Cabinet Office.
Shabana Mahmood
I think you joined at the point at which the monthly meetings became fortnightly.
Debbie White
We started the fortnightly meetings in October, yes.
Shabana Mahmood
And then they became weekly as you started to get into the rescue package. Did you yourself make a representation about a potential high risk rating?
Debbie White
We had a letter sent to us—not dissimilar to the Carillion letter, which I have seen in the papers from another Committee—about moving us to high risk, and we made a representation. I wrote back to the Cabinet Office explaining why I did not think it was appropriate—not least because we had already at that point established full transparency with the Government on everything that we were doing and on the financial situation that the company was in. We were then informed that we would stay at red.
Shabana Mahmood
Thank you; that is helpful. You just said “full transparency”; I am interested in trying to understand the differences in transparency between before your profit warning was issued and afterwards.
Debbie White
We do a 14-week cash flow, which is updated weekly. We provide the weekly cash flow statements and an update on all our conversations with shareholders and lenders. We also provide them with the business plan. You would not expect to see a business plan or a financial plan presented to the Government. All of that was shared together with all the information. That is probably out of the ordinary, but we had no issue at all with having that dialogue with the Government. We also provided things about our work in progress and things like that with the Government. Those things perhaps should have been more front of mind beforehand but became very front of mind as we joined the company and started to look more deeply.
Shabana Mahmood
Presumably, as you were trying to avoid being in the high risk category, it was in your interest to be more transparent?
Debbie White
Yes, I agree, but that is not why I would do it. My approach to doing business is to be as transparent as we can. The Government—the Cabinet Office—do not want to be insiders. For a period of time I guess they were, to some degree, because of the financial difficulties that Interserve was in, but I have no problem at all with being transparent with the Government.
Shabana Mahmood
What is your current intensity of contact with the Crown representative?
Debbie White
I had a quick call with him this morning. We had our formal meeting last Thursday, where we discussed what the progress steps should be to get us from red to amber to green and what evaluation criteria the company suggests that the Cabinet Office holds us accountable to as it evaluates our position.
Shabana Mahmood
Did you discuss your forthcoming appearance at the Public Accounts Committee with the Crown representative this morning?
Debbie White
I think I asked what the last account he visited was, just so I was really sure about which it was, because I knew he had visited about 10 or so since I had been here. I just wanted to be crystal clear about which account he had visited, because he is very active in our contract base.
Shabana Mahmood
You are quite fulsome in your positivity about the process of the meetings with the Crown representative in your evidence. You then go on to say that the meetings with the individual Department teams for the individual contracts are much more limited. I am interested in that. I appreciate that your business has been in trouble, so I would expect the Crown representative process to be more intense. However, in the normal run of things, surely your discussions with the individual Department teams, for whom you are running the contracts, should be more intense and regular than your monthly contact with the Crown representative?
Debbie White
At contract level, of course, they are; they are our clients front and centre, from a contract perspective. I think it is much more difficult to engage with Departments at my level, for example. It is very difficult to work out where to go and who to see. Unfortunately, you only ever get contacted when things are not going well. Personally, I—and, I think, the leadership team of the support services business—would like more engagement. Going back to the conversation about dialogue and understanding where the Department might be going, that would be very helpful.
Shabana Mahmood
Sorry: let me just get this right. Let us take, for example, your CRC contract—the transforming rehabilitation contract—where you are part of a consortium called Purple Futures. You are saying that the individual team within your business running that contract has the day-to-day contact with the Ministry of Justice, but you, as the head of the business, don’t have a good enough engagement with the Departments?
Debbie White
Yes, I think that is fair to say.
Shabana Mahmood
Do you think there is an onus on you to put that right?
Debbie White
Absolutely, although, as you say, we have been somewhat busy. I am in regular contact with the CEO of the Defence Infrastructure Organisation, for example, to talk about our MOD contracts and so on. So it does happen in some places, but I think more open dialogue with the Departments on where they are going and so on—more about the strategic direction—is really what I was talking about, rather than day-to-day contractual challenges.
Shabana Mahmood
Would you agree that the day-to-day contractual challenges probably give you a feel for where the sector is going?
Debbie White
Yes.
Shabana Mahmood
Okay; that is helpful. On your contracts with Government, I particularly want to talk about the Purple Futures piece of work. That contract has obviously run into trouble and the Government have had to bail out all the businesses involved in that procurement exercise. What is your current take on how that is going and what the progress is to date?
Debbie White
I think these are very challenging contracts and that there are quite a lot of things to be learnt from the outsourcing of the CRCs. Interserve does have a forward loss provision on a couple of the contracts within the CRC because they are loss-making. Again, with permission, this is something I want to share with the Committee: I think it is one example where having really good data is very, very important when you are outsourcing and I am not so sure that there is really good data available on all aspects of the services that were outsourced through the CRC programme. For me, the biggest takeaway there is making sure that there is really good data for everybody to see and for it to be transparent and visible.
Shabana Mahmood
Which is something we have heard before, and obviously we will pursue that with the Departments. However, as one of the companies who has bid for those contracts, where do you think the fault of the companies is? Not just the Government making mistakes with data—do you think there has been too much low-balling in this part of the exercise?
Debbie White
I am not sure it was clear what was being outsourced and what the expectations were. There is a real challenge when you are contracting using both inputs and outputs—that is quite challenging.
Shabana Mahmood
That is a significant problem—not really understanding what is being procured. So why, in your experience, do companies such as Interserve across the sector play this game? Why do they still get into the business of bidding for these contracts when the data is bad and there is no sense of what is being procured and what the outcomes will be? What is the point?
Debbie White
It is not necessarily clear that the data is not clear or complete when you are doing it. And, going back to social value, there is a genuine social value mission here to improve things—to make things better for offenders. A lot of the companies who went into this, including Purple Futures, genuinely want to make things better for society and for offenders.
Shabana Mahmood
I appreciate that sentiment. But if you think about Ministry of Justice contracts, this Committee hears on a regular basis about issues where the data has been wrong. Obviously we only see things when they go wrong, but we have never known all the data to be complete and perfect. How many times does the Ministry of Justice, for example, have to continue to get the data wrong before the companies say, “Do you know what? You never have your data right. We are not going to play this game until you have got your data 100%”. It is not ever a shock when the Ministry of Justice does not know how many windows are in a prison, or some other important detail to allow you to do your contract.
Debbie White
As I said, I think there are lessons to be learned from the CRC outsourcing processes for everybody.
Sir Geoffrey Clifton-Brown
Could I follow that up? You say in your evidence, “The quality of data provided by the procuring party is often sub-optimal; this can result in inaccurate pricing”. I know you were not there when your predecessors bid for this contract, but why would they have bid for the contract? Was it that they did not fully understand what they were bidding for?
Debbie White
I wasn’t there—I will start by saying that.
Sir Geoffrey Clifton-Brown
I have exempted you; I am just asking for your opinion.
Debbie White
My interpretation is that people believed they understood what they were bidding for.
Sir Geoffrey Clifton-Brown
Fair enough.
Gareth Snell
Is it possible that it was a case not of the company not knowing what it was bidding for, but of the Government not knowing what it was procuring?
Debbie White
The strategic intent of what the Government was trying to do was clear: it wanted to reduce reoffending, and it thought this was one of the ways of doing it. But I go back to saying if you do not have robust data, it is incredibly difficult to measure progress, or not.
Sir Geoffrey Clifton-Brown
Have you, either in your present job or previous job, recommended that your company did not bid for a Government contract on the basis that either you could not make a profit on it or the intent was not clear?
Debbie White
Not in my current job, but in my previous job, yes, I have recommended that we do not bid for some contracts.
Sir Geoffrey Clifton-Brown
May I ask the same question of you, Mr Neden?
Peter Neden
Absolutely, yes. We have turned down bidding on a number of occasions in the last few years.
Sir Geoffrey Clifton-Brown
Two other questions, Ms White, which I asked Mr Neden and which you will have heard: although your pension deficit has come down a bit since 2016, it is still quite high. The Pensions Regulator is becoming more aggressive with companies that have pension fund deficits. Are you in dispute with the Pensions Regulator at the moment over that matter?
Debbie White
No, we are not. They were party to all the financial restructuring we did over the course of the last six months.
Sir Geoffrey Clifton-Brown
Thank you. What is the average length of time you take to pay your suppliers?
Debbie White
This is an interesting one for Interserve. When I joined the company, supplier terms were a little bit dispersed, if I can use that term. In October, we decided to aim to pay all our suppliers on 30-day terms, which is what we have signed up to do. That has stood us in very good stead as we have gone through our financial restructuring, as our suppliers have stood by us. Our goal is 30-day terms, unless there are disputes or explicit differences to that—for example, in the Middle East, where the terms are slightly different.
Sir Geoffrey Clifton-Brown
What percentage of your contracts today are being paid beyond the 30 days of your policy?
Debbie White
I cannot give you the exact figure; I would say it is very small. We are paying absolutely on 30 days.
Lee Rowley
Just a quick question on what you have both said about the types of arrangements of contracts from Government. I am getting a slightly different view from both of you, which is potentially legitimate, but I want to explore it a bit more. Mr Neden, in your written statements you define the Government as “mature” and “effective”. You say, “Government is, in general terms, very clear on what is required by individual contracts and is effective at ensuring this is delivered.” Yet a moment ago you were just talking about how there were some serious deficiencies in the quality of data provided by Government as part of that set-up. Why do you think you have different experiences in that regard?
Debbie White
I am not sure I used the words “serious deficiencies” in data. It is possibly because we bid on different things; it could be that. My background is, a long time ago, financial, so I am very big on KPIs and data and understanding things like that. We also see a lot of contract variations because of poor data. That is the basis on which I made my comment.
Peter Neden
I reflect on Government and our private sector business, and in Government I would say that the rigour with which contracts are managed is very high. Possibly, we have chosen not to bid on a number of things where we were not satisfied that the risks were appropriate for us to take; the CRC programme, for example, is one of those that we chose not to bid on.
Lee Rowley
If I were to ask about the clarity of information provided to you in the last dozen specs that you have looked at as a company, what would be your description of that, from your individual perspectives—in one word?
Peter Neden
A single word would be “variable”. It ranges, but what I would say is that there is never any malice in that. We live in an uncertain world, and Government Departments are dealing with a lot of uncertainty themselves. One answer is to make sure that the contract is in a form that deals with and recognises that uncertainty. You could have pilots, you could have a period of learning, you could have grace periods before service credits are involved or you could have caps and collars on the particular variable that people are most nervous about. There are lots of mechanisms to deal with that in the contracts.
Lee Rowley
Do you think Government is flexible enough to employ those mechanisms?
Peter Neden
I think in the past, we have taken on risks that we should not. We have certainly done that.
Lee Rowley
But now, as in the last 18 months?
Peter Neden
I would say the dialogue on this is improving, and Government is willing to talk and listen.
Lee Rowley
That is a very relative statement. Can I push you a little bit? Is it good or not good? It is important that you tell us. I know you are being careful in your choice of words, but it is important that we know whether what you are being asked to do is reasonable.
Peter Neden
It is absolutely right for the Government to be a demanding customer, so it is reasonable for the Government to ask. All the providers will draw their red lines in slightly different places, I am sure. It is completely reasonable for the Government to ask. If we are asked to do things that we don’t think we can take on, we will say no. I happen to think that it is in the interests of the Government to end up in a place where the risks are appropriately managed, but it is not unreasonable for them to be demanding.
Chair
Do you tell the Government why you are saying no?
Peter Neden
Yes, we do.
Chair
Robustly?
Peter Neden
Yes. I would say that our primary relationships are with the client Departments. We consider ourselves very much part of the systems in which we operate. We are very much part of the police family in Lincolnshire and we are very much part of the prison system. We have a good dialogue with senior officials.
Chair
It is interesting that Baroness McGregor-Smith described in similar terms to you why Mitie said no to the CRC contracts—whereas Interserve went for it. However, at that point, it would have been almost too late for the Government to withdraw from that approach. It would have been a major policy reversal at the very least. By then people would have spent money on bidding, so there would have been a potential loss of faith with contractors. Earlier, Debbie White talked about that interaction with suppliers involved in discussing how to shape a contract. Do you think that, when you give that feedback, it is too late in the day? Is there any point in the system at which you are able to give feedback that could actually shape a contract or the approach, which would perhaps make it better for the taxpayer?
Peter Neden
My encouragement to the Government is not to put themselves in processes so that they then lose flexibility in getting to the right answer, because we sometimes find that we are too far down the process, and that it has been set up—
Chair
Sometimes or often? You are both being very careful, but as Mr Rowley says, this is our chance, as a Committee, to push the Government to get better at outsourcing or to do something better than what is happening now. This is your chance to tell us candidly.
Peter Neden
I would say sometimes, and my encouragement is to always maintain flexibility, to have the right contracting model and to make sure that we stick with the principle of the risk sitting with the organisation best able to manage it. If we step away from that, the taxpayer will be the loser.
Chair
Debbie White, do you want to answer that?
Debbie White
I agree with Peter—it should be always, not just sometimes. The reason I am focusing on the data point is because if the data isn’t right, the price is wrong. It is as simple as that.
Lee Rowley
Can I ask a different question? I accept the framework within which you are operating as commercial suppliers, so without mentioning any names or telling me which Departments or telling me the timeline, give me an example of a really poor spec and say why it was really poor.
Debbie White
There was a recent outsource where the number of buildings that were to be included changed fairly regularly.
Chair
The actual number to do or the number that they thought they had?
Debbie White
I cannot comment on the detail.
Chair
Did they miscount the number of buildings or did they just decide to add more in or take some out?
Debbie White
The latter, from what I understand.
Chair
We have come across the other as well.
Debbie White
Getting details of employees was also incredibly challenging. I have a very strong view that, when we take on a contract, we should have at least spoken to all the people who are TUPE-ing to us before they join us. I think that is good practice. There was also a significant variation from day one in the number of people we thought we were going to get and the number of people we got. All of that creates variations and disputes, and it creates suppliers not being paid while the variations are being processed. It is a very challenging situation with contracts like that.
Lee Rowley
That is an example of the spec not actually reflecting the actuality. Do you have an example of a poor spec that asked you to do something that wasn’t reasonable or was too complex?
Peter Neden
I will give one very simple example, if I may. We pulled out of a bid recently after a year of effort. The spec was very detailed but it also had a set of clauses that effectively said that we were undertaking to back the client changing its mind on what it wanted, in many ways. In the end, we cannot be experts in guessing what our client may choose to want in the future, so in the end we chose not to bid. I will give you a smaller example.
Chair
Roughly what ballpark figure are you putting into a bid that you are spending a year on?
Peter Neden
Up to £1 million.
Lee Rowley
When did those caveats appear? Were they there at the beginning?
Peter Neden
They were there at the beginning and we were hoping that—through the discussion process and the negotiation process—that position would change. We were unable to win those arguments, so in the end we had to withdraw. I think that is a shame. I will give you another small example, which illustrates the point, and would not have changed the outcome of whether we bid or not. We were recently asked to take a bet on what the level of council tax would be. I do not set council tax. I do not think it is appropriate. That is one where I think there should be a pass-through element for that particular component of the cost structure. That seems a perfectly sensible thing for me to do, because we do not set council tax.
Lee Rowley
When challenged—without breaking confidence—what was the response?
Peter Neden
In that case, we were too far down the process.
Lee Rowley
Did they explain to you why they wanted to structure the contract in that way? What was the thinking behind that?
Peter Neden
I understand that the client’s desire is to know exactly what the charges are going to be, which, as taxpayers, I am sure we would all wish to be the case.
Sir Geoffrey Clifton-Brown
In that example you just gave us of your year’s abortive work, how many other companies were bidding for that contract and have the Government successfully let it?
Peter Neden
As I say, Government are, I think, robust commissioners of services. They are generally very good at keeping us in the dark as to the competitive field.
Sir Geoffrey Clifton-Brown
The gossip on the street would tell you. Have the Government let it or not?
Peter Neden
I do not know. I do not deal with that.
Anne Marie Morris
Corporate governance is, clearly, very important these days for any business. I was intrigued by the comment that you do not think the Government really use the Social Value Act, which is related, in the way that they might. Mr Neden, did the Government ever look at your approach to corporate governance before they instructed your contracts?
Peter Neden
Only through our process of corporate renewal, if we go back around four or five years, when there was a very thorough review of our corporate governance.
Anne Marie Morris
Ms White?
Debbie White
My understanding is that it is looked at annually through the review of strategic supply process.
Anne Marie Morris
But not, in a sense, that you can look at a piece of paper, but if you didn’t engage with a business—
Debbie White
No.
Anne Marie Morris
Because the whole point of this corporate governance and social responsibility is what you, as businesses, are taking responsibility for above and beyond making money for shareholders. For example, how are you treating your employees? The pensions piece has been mentioned. What are you doing in your local community? I am surprised that you were not asked at any level, because a paper review is not really meaningful.
Peter Neden
We do a monthly review with the Cabinet Office, where we provide data on the service delivery of our contracts and any developments from a corporate perspective. Once a year, we provide an annual return to the Cabinet Office, which talks about service outcomes for the people who we serve, and the financial standing of the company and its governance.
Anne Marie Morris
That still sounds a bit superficial. It seems to still focus very much on the contract and the outcomes of the contract. Tell me, Mr Neden, in terms of your corporate responsibility, what steps have you actually taken with regard to the communities that are affected, where many of your employees are sourced from?
Peter Neden
We consider much of the work we do to be absolutely at the heart of the community. If we are running a prison in Bridgend in Wales, we are absolutely part of that community. We are offering employment.
Anne Marie Morris
What are you doing in Bridgend to help that community?
Peter Neden
We are a very significant local employer. We are working with local companies that are often small to medium-sized enterprises. We have a large range of voluntary sector organisations that we work with from within the prison. Of course, there is the work that we are doing with the men in our care in that prison.
Anne Marie Morris
Ms White?
Debbie White
We are very active in working with small and medium-sized enterprises. About 60% of our supplier base is SMEs. We also encourage volunteering within our organisation to give back to the communities in which our people live and work. Sustainability has been a very core part of Interserve values for many years.
Anne Marie Morris
What could the Government do better? I think it was you, Ms White, who said in response to a question from one of my colleagues that the Government do not take the social value Act provision as seriously as they might. We are looking at a contract for public service, and we are looking to see what part of it provides overall social value; that is in addition to the financial piece and the service being done. What could the Government do—it sounds like they are not doing it—to make sure that they take advantage of that opportunity in the 2013 legislation?
Debbie White
It could be contractual, rather than voluntary.
Anne Marie Morris
How would that work?
Debbie White
By requiring you to do certain things—to work with the third sector. There could be requirements in the contracts that are let.
Anne Marie Morris
Do you think it is necessary for it to be contractual, rather than something that companies like yours, dealing with the public sector, would do as a matter of course?
Debbie White
Personally, I don’t think it should be contractual, because my values are in that space, but I can’t comment on other suppliers in the sector.
Anne Marie Morris
Mr Neden, what is your company’s take on this social value piece?
Peter Neden
Our view is that if Government want that to be part of the arrangements between us and Government, they should put that into our contracts.
Anne Marie Morris
So you would only feel obliged to take it on board if it was in your contract as a legal obligation?