Examination of Witnesses (Questions 60-79)|
WEDNESDAY 22 MAY 2002
60. That will be several million pounds; would
that be fair to say?
(Mr Smith) That is fair to say.
61. Let us come on to EDS. If I order a new
car to arrive on 1 April, having sold my old car to my next door
neighbour on 31 March, and the new car does not arrive on 1 April
and I start taking taxis, then I expect to charge the car dealer
for that as well as not paying for the car until it does arrive.
As yet I do not know what date it will arrive so I am taking a
lot of taxis. Who is paying those taxi fares in that analogy,
or who is paying for that delay, that 300,000 at 20 per cent,
for shorthand? Is EDS paying that?
(Mr Smith) At the end of the day the taxpayer is paying
62. So EDS is not paying that under the structure
of the contract?
(Mr Smith) EDS is not paying that, no.
63. Why is that?
(Mr Smith) Because the structure of the contract does
not provide for EDS to pay that.
(Mr Gaskell) I do not wish to be drawn on the detail
of that contract but I can say this. There is provision within
the contract for two things in relation to the question that you
are asking. The first is for no payment starting until we have
accepted the system and we are receiving a service for it.
64. So not paying for the new car until it is
(Mr Gaskell) That is correct. The second thing is
that there is provision within the contract to seek for liquidated
damages from the supplier in the event that there is delay. Clearly
those factors are matters that are commercially sensitive and
are a matter of commercial negotiation with the supplier, but
there is provision in the contract to do that.
65. Do you expect to enforce that provision?
(Mr Gaskell) I would prefer not to directly give you
an answer to that because that depends on the factors that you
play into the negotiations with the supplier because of course
the fact that it has not been delivered to the schedule that was
agreed means that clearly not only are they not receiving payment
because the service is not there but they are also incurring costs.
They are a strategic partner to the Department to deliver our
modernisation agenda and they will successfully deliver the system.
They are all factors that you take into account as well as the
increased costs to the taxpayer as a result of the delays themselves.
You play all those factors into the discussions as well as the
fact that not only are there departmental costs but the opportunity
you have for seeking liquidated damages should you wish to go
down that route. They are all factors you play into those negotiations
and no doubt the supplier, EDS, will seek the increased costs
that it has cost them because of the delay. They will no doubt
want to play that in as a factor to the negotiations.
66. Sorryis that not covered in the contract,
that they get sweet nothing if there is a delay and it is their
fault? I am not necessarily saying the delay in this case is their
(Mr Gaskell) I have said that I do not want to be
drawn into the particular details of the contract.
67. I am going to draw you into the particular
details because the whole Government history of computer contracts
is pretty ropey and this is another step in that saga and I find
it frustrating, as you can tell from the tone of my voice, when
this commercial confidentiality stuff comes up. I am not trying
to tie you down on specifics butand I am subject to the
Chairman on thisI do not want just to be fobbed off, frankly,
with this commercial sensitivity stuff. I want a little more detail
(Mr Gaskell) Okay. I am quite happy to put some of
that in a note to you.
It is just a question of how much I say publicly which is the
issue I am concerned about. There are, as I have said already,
two provisions here. One is for no service/no payment, so they
are not receiving any money at the moment because we have not
got a service that has been delivered. Clearly that is a cost
to them. There is provision within the contract should we wish
to exercise it to seek liquidated damages because of the delay,
but that then gets you into the sorts of factors that I described
68. Is there also provision within the contract
for them to seek additional payment from you if the delay is their
fault but they have had to spend extra monies since 1 April on
sorting out the system?
(Mr Gaskell) There is no provision within the contract
for them to seek additional costs from us if the delay is entirely
down to them, no.
69. If it is partially down to them is there
some kind of splitting?
(Mr Gaskell) What they might do is to say, for instance,
that if during the course of the delivery of the programme there
have been some changes to the original requirements (and there
have been) then it would be right and properand there is
provision for this within the contractfor them to seek
additional funding or payment for the changes which have necessarily
been incorporated into the system. That also gets played into
such commercial negotiations and we then submit a change of programme
or a change to the contract itself to take account of those factors.
70. You may well not wish to answer this, but
do you think the cause of the delay is primarily down to EDS?
(Mr Gaskell) As Doug indicated earlier, I do not think
this is one we could sit down and discuss at the moment and I
do not particularly want to get drawn into who is primarily responsible
for the delay. This is something that we jointly entered into.
71. Well, I kind of do, you see.
(Mr Gaskell) Yes, I can see that.
72. You and I and my constituents potentially
will have to pay for this delay directly on the £10 and all
that because the new system is delayed, but also potentially as
(Mr Gaskell) I do understand that and I can only go
back to something that Doug was saying earlier, which is that
we entered into this jointly and the timetable jointly, and we
knew the risks that were associated with it, all parties knew
of those, and we made certain provisions to try and deal with
those risks and mitigations, including building in an increased
amount of elapsed time. They were not enough, clearly, and I think
that is a joint responsibility.
Rob Marris: I am wondering, Chair, if a memorandum
would be helpful.
Chairman: It would be helpful.
Rob Marris: Officially this is a public hearing.
Chairman: Indeed. The National Audit Office
and the Public Accounts Committee no doubt will entertain themselves
over long periods in the future in going through all this but
it is of genuine interest to us and if you could help us with
a note that deals with some of these questions as much as you
can that would be very helpful because I think Rob was asking
questions that are of direct relevance to this morning's session.
Your offer of a note is appreciated.
73. Can I explore a little further the implications
of this delay on customers and some of the areas that I want to
raise have already been covered because in all of the questioning
the basic point for us as Members of Parliament is our constituents
who still come to us complaining. Can I start off with the fact
that you wrote to all of your customers only a couple of weeks
before the Secretary of State made his announcement about the
delay, so they just had these letters, hopes and expectations
raised, a brave new world going to start for them. Then the brave
new world disappears off the scene. Have you written to everybody
again and told them about this delay and said they are going to
have to wait a little while? I saw a copy of the original letter
because one of my constituents came to my surgery and showed it
to me. I have not seen a copy of any other letter that has gone
out. Have you sent one?
(Mr Smith) There was a letter sent in January which
was targeted on our existing caseload. Effectively the message
was, "You may see something in the media over the next few
months about changes to child support arrangements and do not
worry because these will not affect you. These are focused on
new clients, not existing clients". In a sense that position
has not changed.
74. But your letter also explained the new procedures
for calculating, and so people could work out for themselves what
the implications would be for them as individuals. Even though
the letter did say that it would not affect existing clients,
nevertheless the new system was explained to them and that raised
their hopes and expectations for when they were going to be brought
on to it. What have you done with those people now?
(Mr Smith) We gave them a free-phone telephone line
by which they could explore any concerns or issues that arose
from receiving the letter. We did receive a number of contacts
on that both before and after the Secretary of State's announcement.
Our belief is that the media coverage associated with the Secretary
of State's announcement for the vast majority of the people who
are currently on our books advised them that the implementation
of the arrangements for new cases was deferred and by implication
the implementation of arrangements for existing cases was deferred.
The feedback we received from clients since then is that that
message is well understood.
75. So you have not written to them? You have
just relied on them learning about it through the media and other
(Mr Smith) Indeed.
76. Can I turn to the issue of parents with
care and two separate groups of those, first of all the ones who
are in receipt of Income Support? The Committee in its earlier
report on this subject very much welcomed the fact that parents
with care on Income Support would have the £10 premium. Our
concern now therefore is that any new claimants who are on Income
Support will be assessed under the existing rules and will lose
out on that £10. Have you considered the possibility of paying
compensation to them or of bringing them in as the first group
of people who would be transferred on to the new system, because
£10 is a lot of money to somebody who is on Income Support?
(Mr Neale) We would like to get the £10 into
payment as quickly as possible because it would make a real difference
to the incomes of individual families and also to the Government's
wider policy objectives, but it is an integral part of the new
arrangements. It is integral because it provides the incentive
for both non-resident parents and parents with care to co-operate
with the new scheme. It is integral because the increased maintenance
that will flow and the benefit savings that will result will pay
for the child maintenance premium, and it is integral because
we cannot actually support payments of the premium with the existing
IT. We need the new IT system in place in order to make those
payments. We are not contemplating compensation because it is
integral to the new scheme. What does continue to be available
to families now is the child maintenance bonus and that remains
77. What is that? Tell me again.
(Mr Neale) The child maintenance bonus is a bonus
that is paid to the parents with care when they move into work
in circumstances where maintenance has been paid on a continuing
78. Looking at parents with care who are not
on Income Support, picking up on one comment that Anne Begg made,
we have all had people in exactly that situation wondering whether
or not to apply for child maintenance under the existing system
or wait until the new system comes in because at least the new
system was transparent and fair and was supposed to give them
the payments quickly. What message do you have for those people?
Should the message be, "Apply now under the existing system"
or, "Wait a little while"?
(Mr Smith) This is something people have to make their
own judgment on, to be fair, and it means that as the position
in the early part of this year when we moved towards an expected
April goes by, people had to form their own judgments to decide
whether their need was so immediately pressing that they wanted
to make an application for maintenance now or they wanted effectively
to take a chance on gaining the benefits of the new more transparent
system, which may in practice not be a direct financial benefit.
It is very difficult to make a case-by-case comparison of financial
benefit or disbenefit from the new system given that most people
will understand with some clarity the maintenance which flows
under the proposed new arrangements but understand a lot less
the maintenance which is likely to flow under the existing arrangements
because of the opacity of the present calculation requirements.
This has always been difficult as we have moved through here.
79. Can I then move on to the non-resident parent?
What sort of feedback have you had from non-resident parents about
the delay in implementing these changes?
(Mr Smith) Mixed, I think, is the answer if the non-resident
parent perceives a benefit or disbenefit from making the changes.
3 Please refer to the letter from Doug Smith to the
Chairman of the Committee dated 20 June 2002, Ev 22. Back