Select Committee on Work and Pensions Minutes of Evidence


Examination of Witnesses (Questions 60-79)

MR DOUG SMITH, MR VINCE GASKELL AND MR MARK NEALE

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 that.

  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 delivered?
  (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. Sorry—is 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 fault.
  (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 but—and I am subject to the Chairman on this—I do not want just to be fobbed off, frankly, with this commercial sensitivity stuff. I want a little more detail on that.
  (Mr Gaskell) Okay. I am quite happy to put some of that in a note to you[3]. 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 earlier.

  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 proper—and there is provision for this within the contract—for 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 taxpayers.
  (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.

Mrs Humble

  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 means?
  (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 in place.

  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 basis.

  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


 
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