Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 100 - 119)



  100.  You do not know how many are involved and you do not know what the special arrangements are?
  (Ms Lomax) No. We have a great deal more work to do. We have two years before we get to the point at which we start to move to ACT, and that is rolling out over two years beyond that. A great deal of research and work needs to go into this.

  101.  You hope that the use of bank accounts is going to reduce some of the risks of fraud, and I accept that it almost certainly will, what increased risk of fraud will there be following the use of bank accounts?
  (Ms Lomax) The research we have done does not suggest that people who are paid by ACT at the moment are particularly different in their capacity to commit fraud. The risk that we do need to take very seriously is less interaction with the customer and the possibility of payment being paid into inactive or the wrong bank accounts. We have quite a lot of money earmarked to research that too.

  102.  Let me ask one final question, I think it was Mr Oppenheim who said, "This was a project which was vital to the smooth functioning of society", I may not have your exact words, it was something of that sort, and the Chairman complimented you on your evidence in saying so. Ms Lomax, if that is correct, and I believe it to be correct, does that not mean this sort of project is one which is never going to be suitable for PFI, because you cannot transfer to the private sector, at the risk of something going wrong, something which is so fundamental to the functioning of society?
  (Ms Lomax) The Department has always got to retain responsibility for the smooth running of the business.

  103.  Therefore you cannot transfer the risk.
  (Ms Lomax) Some risks can be transferred. What you cannot do is completely transfer everything. The business risk remains with the Department. In this particular case, I note, although the NAO report did note there was no interruption or any inconvenience to any of our customers, the Department did successfully discharge that responsibility.

Mr Griffiths

  104.  Good evening, Mr Oppenheim this is difficult for you. You are a company that has, I think, multi-million if not billion pound contracts with the Government; is that right?
  (Mr Oppenheim) Yes, it is.

  105.  You have to maintain your relations with government departments on a civilised basis in order to win further contracts.
  (Mr Oppenheim) Yes.

  106.  Before a Committee like this, which is trying to tease out who is to blame, you would not want to point the finger too much at people who you may depend on for future business?
  (Mr Oppenheim) You are right. It is a difficult question, if you are inviting me to say, were it not the case, I would say something different, then no.

  107.  I will not have the Chairman remind you of your responsibilities here, because I am sure you know them. You did say in answer to him earlier something which, I think, members of the Committee found fairly astonishing, that was, the requirements that were placed on you in this contract and how it was structured were not clearly expressed by the DSS, the DTI and others[5].

  (Mr Oppenheim) Yes. I think that has been identified quite clearly in the NAO report. There were a large number of agreements to agree, some of those were quite crucial in the design system.

  108.  That must have hamstrung you?
  (Mr Oppenheim) Yes.

  109.  Are you saying that the DSS did not know what it wanted?
  (Ms Lomax) There was a lot of clarification needed right across the piece.

  110.  Give me an example of that?
  (Mr Oppenheim) The determination of the rules for benefit encashment would be one.

  111.  That is how somebody is claiming social security.
  (Mr Oppenheim) Let me explain, not claiming Social Security, this is all to do with encashment. There are some very complex rules as to precedents and limits of the amount that can be paid in one go. There are limits to how many so-called foreign transactions you can make at post offices other than your post office, your nominated post office. There are complex rules about proxies and other kinds of agents.

  112.  These were paper rules previously, were they?
  (Mr Oppenheim) Yes, they were. As we now understand it a lot of those are enshrined in various regulations which, it turns out, the Department need to adhere to.

  113.  Your phraseology there says a lot, were you not given an indication that here was a manual that the Department had to adhere to and you would be required to do it as well? (Mr Oppenheim) There was no manual.

  114.  There was no manual provided to you, why would that be?
  (Mr McCorkell) The situation we are talking about here is one where the difficulty is that when you are going to an entirely new system the contractor, the supplier, in this case ICL Pathway, would wish to make a set of assumptions on the business rules that will apply and that will simplify the overall system.

  115.  I do not think you have grasped the point. I think if Parliament and/or the Department has got manuals, and I have seen them, and these are not handed over to the contractor who is designing the software you are heading for a disaster?
  (Mr McCorkell) Those manuals, if they were to help the process, could have been handed over. During the process of doing the detailed development of the requirement the precise rules were handed over.

  116.  My question was, was that an example of what did not help the process? We have established that did not help the process.
  (Mr McCorkell) I am trying to explain what it is that did not help the process. We started with a set of rules which could have been handed over and the contract would have to design something which met that set of rules based on paper methods of payment when we were going to an electronic method of payment. What we wanted was an electronic method of payment and a set of rules that would fit the electronic method of payment. What we found when we got to the detail was that there was certain things that were enshrined in legislation and hence we could not change it, even though it might have been simpler to change it, or where there were customer service aspects we felt we could not accept. That was part of the process of attempting to simplify the system. Again, it was PFI philosophy, he has the right to make assumptions if this can be made much simpler. When you get to the detail you find we cannot make it that simple.

  117.  This is nothing to do with PFI. This is to do with the fact that when the minister made a statement in 1994—who was the minister then?
  (Ms Lomax) Peter Lilley.

  118.  When Peter Lilley made the statement in 1994, months, if not years, went by with the DSS not, apparently, knowing what was legally required by Parliament of them, and handing that over to the contractor, but saying, "The contractor might come up with a better system". If the contractor spends £180 million he had to write off developing a better system we could have come along and said to them, "We did not bother checking before". That is what you just told us.
  (Mr McCorkell) What I am trying to tell you is that the process that was agreed was we would work on the basis of a high level business requirement, work that down through the detail and then find out the problems we were getting at a detailed level. You are quite right, the Department has lots of sets of rules, manuals and manuals and manuals of them. I think to give those over to the contractor, and to go through a process that goes through every single one of those and check it would stretch the procurement process, bearing in mind this is costing the Department and the contractor lots of money, and it would delay the eventual implementation of the project and would take forever. Look at what you need to change. Some of the things you would like to change you find you could not change, and that causes difficulties.

  119.  You would have known from day one what you could change and could not change. The contractor was not told that.
  (Mr McCorkell) We would not have known from day one what we could and could not change throughout a massive set of rules and regulations.

5   Note: DTI was not, in fact, a party to the contract referred to. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 11 July 2001