Examination of Witnesses (Questions 220-227)
SIR NICHOLAS MONTAGU KCB, MR JOHN YARD CBE, AND MS LIS ASTALL
MONDAY 3 DECEMBER 2001
220. That is the point I was seeking to clarify, whether or not operating that contract under EU rules added any value to the process?
(Sir Nicholas Montagu) What, the original competition?
(Mr Yard) I think, as one of the earlier reports has said, we got a good value deal from the original competition for NIRS back in 1995.
222. Was the fact that you got a good value from that deal because it was conducted properly and so on and so forth or was it specifically because it was conducted under the European procurement rules? Did the European Procurement rules, as distinct from any other system you had chosen yourself, add any value to the exercise?
(Sir Nicholas Montagu) It is difficult to say that they do. Essentially what the Procurement rules say is that for a contract in excess of a certain amount there must be a competition with an advertisement in the official journal of the European Communities. What I think we got, as again the National Audit Office's earlier report showed, was very good value for money from the competition held for the original contract. 10
223. I know that. Again, fascinating though it is, it is not a response to the question I asked you.
(Sir Nicholas Montagu) I answered that I am not aware of the European dimension in itself adding any specific value. It simply says "You must hold a competition" but value for the first contract came from the competition.
224. You would have had a competition under almost any circumstances and the European procurement rules are constructed in a particular way. I was seeking to clarify whether or not operating this competition by that set of rules, as distinct from any other set of rules you might have chosen to, added value to the process? A simple "I don't know, guv" would be sufficient.
(Sir Nicholas Montagu) Now you have clarified, I think the answer is no. What the European rules say is hold a competition. If you hold a competition you are conforming, obviously there are details, to European rules. The value came from competition, not from its being held under a particular set of rules.
225. I just wanted to come back briefly, Sir Nicholas, because you said something in answer to one of my questions about Accenture's proposal being the best even without taking into account the break costs according to figure seven on page 15. I challenged you on that. Then you repeated exactly the same to Mr Williams which seemed to me
10 Ref footnote to Q 54.
indicated you missed the point I was trying to make which was that you have four lines here on the left hand graph without break costs. The one which is clearly the highest is the framework rates and there are three lower lines relatively close together. You have the industry average, the dotted line, which is rather above the outsourcing rates and Accenture's proposal which are very similar, although Accenture's proposal, for the most part, is marginally below the outsourcing rates. What I was sayingand I still think holds trueis the dotted line, the average industry rates, must actually be the average of a whole series of other lines, the other costs that might have been charged to you by a number of other firms had you gone ahead and asked them for some sort of estimate of what they had been charging. In other words, had there been a full competition you would have had not one line there but five or six lines and some of those lines, inevitably since that is the average, would have been somewhere below that. So saying that the Accenture proposal is clearly the cheapest, to my mind is not at all clear because the likelihood is if you had asked another five or six firms, at least one of them would be below the Accenture rate.
Chairman: We have a division in the House. Think about your answer for ten minutes while we go and vote, then we will wrap it up.
The Committee suspended from 7.01 pm to 7.08 pm for a division in the House
226. Yes, Sir Nicholas?
(Sir Nicholas Montagu) Chairman, before we go on, could I make absolutely clear, because some of my colleagues think it may not be in what I have said so far, that the estimated £100 million which John Yard gave to the Committee is for the cost of the extension to the contract. If I can now try and answer Mr Rendel's question, I do so with some difficulty, I confess Mr Rendel. The answer is, yes, of course, if the average figure is that dotted line then it is certainly possible that an individual line contributing to that average might be below the Accenture one. We do not know whether that is so or not. We think it is probable that the EDS line, which as you pointed out is marginally above the Accenture one, is probably towards the bottom end of the scale; it is certainly theoretically possible. It is unlikely, I suspect, that any would be appreciably below that Accenture line and then, of course, you do factor in the break costs and you get the admittedly very dramatic difference on the right hand side of Table 7.
227. Thank you very much, Sir Nicholas, Ms Astall and Mr Yard, for coming and answering our questions this afternoon.
(Sir Nicholas Montagu) Thank you, Chairman.