Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 80 - 99)

MONDAY 12 NOVEMBER 2001

MR JOHN GIEVE CB, MS EITHNE WALLIS, MR RICHARD CRADE AND MR PAUL SLEIGHTHOLME

  80. In paragraph 3.15 it says, "The Home Office was told "presumably by its lawyers, "that although the enabling agreement was entered into in 1994 . . . the Year 2000 problem did not emerge until around March 1996. Bull had failed to meet industry best practice by continuing to provide non-compliant equipment". You continued to provide it after it had become a problem which was generally understood "and had failed to provide an assessment of the extent of the Year 2000 problem before January 1998". Do you agree with that statement?
  (Mr Crade) I agree to a certain extent. What we were trying to do was to get warranties from software suppliers about their Y2K performance and in the absence of those warranties before we could come up with a strategy on how to take action on that, we were continuing to supply those systems.

  81. In summary I think you have told us that the interface could pose a health and safety problem, CRAMS failed, you were not very proud of it, you continued to provide equipment which did not comply with Y2K after it had become an industrywide problem and you failed to provide an assessment of the Y2K risks by January 1998 as the industry expected you to.
  (Mr Crade) We did provide an assessment in early 1998.

  82. January 1998.
  (Mr Crade) Yes.

  83. Was that by January 1998 or was it early 1998; January is not necessarily early 1998?
  (Mr Crade) That is my understanding from the report.

  84. The NAO report stands and I have just read it into the record. I think you have been an extremely poor contractor. You must be delighted that you have found an even worse client. What is your evaluation of the way in which the client has operated in relation to all this?
  (Mr Crade) In dealing with the Home Office it has been quite variable over the seven different programme directors.[3]

  85. I think "variable" is a euphemism for being even worse than yourselves. I want now to turn to the Home Office and ask one or two questions about the quality of procurement advice which you have received and presumably have been continuing to receive until quite recently according to the evidence here. The procurement function seems to have failed on every count. First of all you failed to find who the client was inside the department. It is inevitable that you failed to get a detailed client specification. You then failed to receive adequate legal advice and then you failed to project manage the system for the installation of this in an adequate way. Once you were in the hole you continued digging. You continued to let further and further contracts to a contractor who by his own confession, according to how I read his words, was failing. Do you think that is an accurate summary of the situation?
  (Mr Gieve) No, I do not think it is a summary of the whole situation, although there certainly were failures.

  86. You were in the middle of a contract, you were in a hole which it seemed to me you had to continue digging because you were dependent on hardware and software which only one supplier could provide. Then you suddenly discovered that legally you had no power to continue to let the contract. That is barely competent. Can I ask whether the legal advice comes from within your department or is it provided from elsewhere in the Civil Service?
  (Mr Gieve) This legal advice came from outside the Civil Service. It came from Bird & Bird, from chambers.

  87. Private sector legal advice.
  (Mr Gieve) Yes.

  88. What kind of cost would the Home Office have incurred in receiving that legal advice which was clearly not correct, was it?
  (Mr Gieve) I meant the advice that we may have breached the contract.

  89. No, I was trying to find out how you got into this mess.
  (Mr Gieve) The original advice. I do not know who advised us on that. I would guess we would normally have relied on our own lawyers.

  90. Let me take you back to this famous paragraph 3.15; famous because I have just read it into the record. This Y2K problem. It seems to me that you had two options: one was a short, quick fix, which would have been relatively inexpensive and one was to dig a huge great further hole inside the hole you were already in. The legal advice you were receiving seems to me to have been fairly nebulous. It was not clear whether or not you had an enforceable case against Bull. Is that how you see it? Am I reading that paragraph right?
  (Mr Gieve) Yes. It was a slightly `either/or' opinion. As I read it, it said that we did not have a legally enforceable case against Bull at the time, but on the other hand if they continued to run a system which did not work we would have one. It was a case for negotiation. In terms of quick fix versus digging deeper into the hole, what we decided to do was first of all to make sure we were Year 2000 compliant and secondly, in the process to upgrade some of the functionality of the system and that upgrade worked. We did upgrade it and that was useful so I do not think we regret investing in improvements around Y2K.

  91. It does make it clear that you get some benefit from doing the two things together. Nevertheless Bull by their own confession just now accept that they were not providing the highest quality service imaginable, particularly at this time, post-January 1998, certainly post-1996 when the Y2K problem emerged. Legal advice the department was receiving does not seem to have been very good in relation to Y2K problems, does it?
  (Mr Gieve) I am not criticising the legal advice here. It was probably correct as it says here.

  92. You get lawyers saying on the one hand this and on the other hand that and leaving it to the client to make a decision. The fact is that the contract they were interpreting in that way had been poorly framed, it must have been to leave you as the client at the mercy of another £15 million hit, or another £15 million hole, to continue the analogy. That is what it cost you, did it not?
  (Mr Gieve) It did. As a non-computer person, I think it is a bit odd that in 1993 and 1994 people had not foreseen that the date was going to change and the implications of that. Nonetheless that was the situation right across industry as well as in government and we did not have a choice about whether to make the system compliant. It is not a problem of our legal advice.

  93. It is the nature of the contract which you entered into with Bull, which I might describe from their point of view as a sprat to catch a mackerel. Whatever they say about the contract, they started off with a relatively small contract and ended up with a fairly large contract. From the point of view of the Home Office though, this was a relatively small contract which became a very large one and caused a great deal of embarrassment to the Home Office, yet it is failing still to deliver everything which it is required to do. I notice that CRAMS has cost another £1.6 million to bring it up to Year 2000, notwithstanding the fact that it barely works anyhow.
  (Mr Gieve) It works in some areas.

  94. To some extent it works in some areas. It is not working as it was intended in every respect in any single part of the country.
  (Mr Gieve) That is true, especially as regards the intercommunication of case work, but there are some areas which are using it extensively.

  95. Yes, but not fully. It is back to this question of procurement function and legal advice when you get locked into a single supplier, as you were with Bull. That cannot have been a contract which was enforceable; it clearly was not, judging by the advice which you have received subsequently. Do you see Bull as partners or sharks?
  (Mr Gieve) We have now just signed a further agreement for the next two and a half years. We see them as successful and we hope collaborative contractors.

  96. That is not how this document reads. I just wonder whether you feel on reflection that your words sound slightly complacent.
  (Mr Gieve) My words now?

  97. The whole of your presentation since you sat down, to be honest.
  (Mr Gieve) I am not trying to be complacent. I said right at the outset that there are many lessons to be learned from this and a lot of things went wrong and that is absolutely right.

  98. Do you accept the point I am making which is that the procurement function itself inside your department or wherever you received that advice in legal technical terms and then in project management terms was fundamentally flawed given the state of this contract?
  (Mr Gieve) The procurement was faulty at two points. Clearly the contract management and project management was faulty too. I would just say that when we set out on this and indeed up until April this year, we were holding a framework contract but the actual contracts for the kit were with the separate local probation services.

  99. My own view is that to describe a contractor/client relationship in the way you just did as "collaborative" . . . Certainly it is collaborative, but it must be more than that as well. I just do not get the impression that you have been sharp enough here. I just worry still that the culture which I think you are partly expressing, reflects more emphasis on the collaborative part and perhaps less on the eagle-eyed part, which any good client function should exercise.
  (Mr Gieve) What I was referring to was the fact that we have now let a new contract starting in January for two and a half years, extendable. That is a very different sort of contract from the one which is just coming to the end. We have enormously increased our investment in our procurement and project management capability within the National Probation Service. We have now put right the mistakes. We would not have chosen Integris as the company for that contract if we had not believed that they could offer us good value for money. Clearly we do believe they offer us good value for money. I was talking about the future contract at that point.

  Jon Trickett: My record is in the minutes.


3   Note by witness: Bull has met all of its contractual commitments under the NPSISS framework agreement, and the implementation of the IT was described by the NAO as "a notable success". Back


 
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