Examination of Witnesses (Questions 80
- 99)
MONDAY 1 MARCH 1999
SIR ALAN
LANGLANDS and MR
TIM MATTHEWS
Jane Griffiths
80. Looking at paragraph 2.13 of the Report,
there was a number of space increases on the project, basically
more things were added to the project and that was on a constraint
side. So inevitably that took the cost up in real terms by 80
per cent. That being so, does that not mean that the original
approval in principle lapsed because the approval in principle
was based on much lower costs?
(Sir Alan Langlands) It did lapse.
81. Therefore why was it agreed?
(Sir Alan Langlands) Sorry, it was agreed and
then it lapsed. It was not followed through to the next stage.
82. The whole project carried on with those
increased costs. I am trying to get here where the accountability
was, where the checks were on the escalating costs?
(Sir Alan Langlands) The planning work continued
and, as I have said earlier, several times, I do not think the
original cost estimate of £35.5 million was realistic. Planning
work continued and as outlined here that planning work threw up
higher costs associated with the nature of the site, the specialist
nature of some of the services that were going to be accommodated
in the site and the size of the site. There is particular reference
here made to the increases stimulated by the involvement of the
medical school for teaching purposes.
83. You said earlier, Sir Alan, that you
did not believe that there was any sense of realism in this project
until 1994?
(Sir Alan Langlands) No, I did not say that. I
said that I think there was increasing realism from 1989 onwards.
I think the real management grip of this project started in April
1993. The first time I think we had a realistic estimate of costs
was around the summer of 1994.
84. How can this Committee be assured that
kind of lack of accountability and lack of realism in cost assessment
will not recur?
(Sir Alan Langlands) I think, as we have discussed
this evening, our guidance on these issues is much clearer, much
starker than it has ever been. The line of accountability which
was muddled, goodness me—we have to have very complicated
diagrams to set out what it is in this report—is no longer
muddled. The project owner is the chief executive of the Trust,
the accounting officer is me, and we are the key people to be
held accountable for the delivery of these projects to cost and
to time. We monitor across all the dimensions of these projects,
each one of them, once a quarter.
85. Okay. This project began at a time of
organisational disruption when the NHS was being reorganised.
I suspect that the NHS may well continue to change in the way
it is organised, in fact I think it would be rather bad if it
never changed again. It seems to me that there is inevitably going
to be organisational change and there will be future projects
and this project which began at a time of organisational change
has brought about uncontrolled cost escalations. How can we be
sure that will not happen?
(Sir Alan Langlands) First of all, the organisational
change at this time was very widespread. Regions were being abolished,
district health authorities were taking on new roles, trusts were
taking on completely new dynamics. Certainly for the foreseeable
future, as far as I can see ahead for the next five years, I do
not think we are going to experience organisational change on
that scale at all. Trusts will be the key players in relation
to capital investment. The chief executive of the Trust will be
the key accountable person. It is possible that these people will
change for some reason or another. I think the lesson that we
discussed earlier is the importance of ensuring that the project
sponsorer, the project management of these things, is consistent
throughout the life of the project and that is certainly something
that we strive for now and clearly was not being done effectively
at that time.
86. It is going to be more effective. Looking
back at the original brief for the approval in principle which
was drawn up by planning consultants at a very early stage, yes?
(Sir Alan Langlands) Yes.
87. That was done rather quickly, was it
not?
(Sir Alan Langlands) It was done very, very quickly.
88. Why was it done so quickly?
(Sir Alan Langlands) I do not know.
89. It seems rather rash to have done it
so hastily for a project of this size?
(Sir Alan Langlands) Well the possibility I guess
is the point that I discussed with Mr Williams earlier, or he
discussed with me, that this was a group of people who had a plan
for the development of the services on their patch and they wanted
to put a marker down, they wanted to try and force their way into
the queue for capital investment. The result was this rather quick
and dirty approval in principle.
90. That is a possibility, you do not actually
know whether that was what happened. It seems to you to be a possibility?
(Sir Alan Langlands) I think that is the most
likely explanation. I do not know the details.
91. Looking at figure 13 of the Report.
The variations to the brief were introduced which took the costs
up by nine million approximately at that time. It seems to me
that the client wanted the project to go ahead almost regardless
of what the costs were and whether or not there was a plan for
accountability. It is as if that was not taken into account when
variations were introduced, is that right?
(Sir Alan Langlands) Certainly it would be the
case that the client wanted the project to go ahead. There was
no doubt about that, that would be their motivation. Some of these
increases, the sort of things that are set out in figure 13 are
really very important. Probably there are variations there in
relation to so-called statutory requirements. There may have been
changes, for example, in fire precautions that needed to be taken
into the brief. There was the service change that we discussed
earlier, nearly three quarters of a million pounds in relation
to the Asthma and Allergy services. I think there was a combination
of slack practice, legitimate variations and some late interventions
from the client on the design of this project. All three of these
things began to inflate the cost which takes us back to the issue
of when in a project as complicated as this the design should
be frozen.
The Committee suspended from 17.40 to 17.56 for
a division in the House
Jane Griffiths
92. In February 1991 who authorised the
region and the trustees to proceed with Stage 2 of the management
contract?
(Sir Alan Langlands) No one authorised them to
proceed because they did not come back to the Department for authorisation.
The basis of the financing at that time had been agreed and had
taken account of the points I made earlier about the VAT and the
tenders for the Stage 2 works. So it was seen as a continuation
of the management contract and whilst the Department would have
been aware that it was going on, as I understand it looking from
this distance, there was no attempt to come back for an approval
and certainly no attempt to seek further financial approvals from
the Treasury.
93. Not much more than a year later in May
1992 NHS Estates urged the management executive to clarify outstanding
funding issues, did they not?
(Sir Alan Langlands) Yes, that is right.
94. What happened? It is not clear to me
whether those outstanding funding issues were clarified or if
they were they are not approved.
(Sir Alan Langlands) In a sense that was the beginning
of a chain of events that began to look at the likelihood that
the Stage 2 budget costs, which were £118 million, would
not have been sustainable so that people were uncovering at that
time the issue in relation to asthma, they were uncovering the
beginnings of the tensions between Austen's and Kentz, they were
beginning to understand some of the conflict between the anxiety
about some of the contractors and it was essentially that work
from April 1993 that Mr Matthews and his team began to pick up
and ask questions. So there was a growing understanding that there
were problems here and an absolute imperative on the new trust
coming into place from April 1993 was that they had to grip these
problems and that led to their work with Davis Langdon and Everest
to really have the first proper review of what had been going
on, how the cost increases could be attributed across the various
headings that we have been discussing today. So NHS Estates' intervention
did not have an immediate impact but it did raise awareness that
this scheme was out of control and needed to be gripped and that
was very much the tone of things when the new trust came into
place.
95. Just in time because there had been
a number of years where there had been chaotic management control
which resulted, did it not, in the project being completed three
years and four months late and £67 million over budget in
1997?
(Sir Alan Langlands) Yes.
96. In my constituency in Reading we have
got a new hospital project there which we have been waiting for
for a long time budgeted for about £75 million. I hope, and
I am not sure, that none of the people that were involved in this
one are going to be involved in that one because one of the things
I need to reassure my constituents is that nothing of the sort
will happen with this project. Do you think I can?
(Sir Alan Langlands) Yes.
Jane Griffiths: Thank
you Chairman.
Chairman: Geraint
Davies? Happy St David's Day, by the way!
Mr Davies
97. You will notice that I am wearing a
genetically modified daffodil; they last longer and smell less.
But I am a London MP from Croydon and I am very very concerned
about the misuse of resources in this case. You seem to suggest
that the real start date of this project was 1989 on the grounds
of bureaucratic structural changes in health, namely the shift
from regional health authorities to trusts. Do you think it is
a legitimate excuse for this waste of money that someone like
you can come along to this Committee and say that was when we
were changing from regions to trusts and will you be giving similar
explanations when there is other reform of the Health Service
as there is now?
(Sir Alan Langlands) I was not suggesting cause
and effect. I was merely observing that there was a lot of organisational
change and I think that did lead to changes in personnel at key
points. No, I have no intentions of coming back and arguing that.
As Jane Griffiths has said, where there is the likelihood of organisational
change in the future I do not think it will be so radical but
where it does exist we must try in these schemes to achieve two
things, constancy of purpose and continuity of key personnel.
That is our objective.
98. So it is not legitimate for gross mismanagement
to be hidden behind structural change in the Health Service—because
that is what you seem to be saying? As a person who was a regional
general manager, I noted from your CV, I wonder whether you have
got similar appalling experiences in your former role and that
you are introducing a defence that everything is changing so no
one can manage anything properly?
(Sir Alan Langlands) No, certainly not. I was
a regional general manager for a short time, as Mr Page would
remember if he were still here. I did have the pleasure of inheriting
the Chelsea and Westminster problem when I went to North West
Thames Region and just as we have done in this one eventually
sorting it out, but I do not take pleasure in either of these
things. The point is that we have got all these things on a proper
footing and our management of these things is much better than
it was through the 1980s and the early part of the 1990s.
99. In the conclusions of the internal studies
as to why there was this appalling escalation in costs and therefore
this imperfect allocation of resources, some of the reasons given
were lack of control of the design team variations, changing client
brief, etcetera, etcetera. Would you agree that those are not
particularly profound conclusions given that the management of
the project sponsorship, as it is called, was in fact changed
four times and inevitably that led to four different perspectives
and egos of these people who were paid £1.5 million it says
in the account as directors' salaries. It would be inevitable
that every time they changed one of these people they would change
the brief and add on millions of pounds to the public cost for
prevarication or the change of direction.
(Sir Alan Langlands) I do not know, I have never
tried, but I would be very surprised if we could link specific
design changes to specific individuals. I do not under-estimate
the point about the disruption because of changes of staff and
I do think that probably led to weaknesses in control.
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