Examination of Witnesses (Questions 100-119)
CABINET OFFICE
AND GCHQ
1 DECEMBER 2003
Q100 Jon Cruddas: Late 1999, okay. Can
I just ask a question on this three year horizon for strategic
planning. Does that mean that in 1996 you would not have had the
Millennium on your three year strategic horizon?
Dr Pepper: In 1996, although it
was not built into the financial modelling, we were already starting
to say "It is coming".
Q101 Jon Cruddas: "And we should
begin to act accordingly"?
Dr Pepper: Yes.
Q102 Jon Cruddas: I have only read the
NAO commentary on the Burton report but it says here—
Dr Pepper: Can you just give me
a paragraph number?
Q103 Jon Cruddas: 4.19. It talks about
the management arrangements to achieve the successful implementation
of the project, recognised the changes in GCHQ's management procedures,
which you began to talk about, and proposed some more, "However,
it identified high level planning and management weaknesses and
made recommendations to address these". The next sentence
is the one I want to focus on: "The failure to co-ordinate
the development of the PFI deal and the transition process at
strategic level was a symptom of such weaknesses". So the
actual PFI problems that we have been discussing today were symptomatic
of a failure of strategic direction across the whole organisation.
That is what it says, is it not?
Dr Pepper: That is what it says.
Q104 Jon Cruddas: Your emphasis on the
technical problems, given this revolution in information communications,
global technologies and the like that was occurring throughout
the 1990s, and the imminence of the Millennium, the two issues
that we have talked for the last hour and a half on, were not
the real issues according to this Cabinet Secretary's commissioned
report, the real issues were symptomatic of the failures of the
organisation as a whole, namely its whole approach to strategic
management?
Dr Pepper: Can I link the two
in what Sir Edmund was saying. We have talked about the initial
failure to recognise the true cost. What compounded that is what
Sir Edmund was talking about which was having started the project
the way we did, having a project team that was focusing on the
building which concluded, wrongly as it turned out, that the technical
transition was going to be relatively straightforward, they then
carried on focusing on the building project. What we did not have
in the organisation was a programmatic approach which would have
forced them to look at the whole job, both the building and the
technical transition, and keep making sure that they were being
managed properly together. Had they done that, and had the people
who were doing that also been talking in the appropriate way to
the rest of the technical organisation, I think it likely that
the problem would have come to light sooner.
Q105 Jon Cruddas: So, therefore, it is
symptomatic of a systemic problem within GCHQ?
Dr Pepper: Absolutely.
Q106 Jon Cruddas: Only reversed from
May 2000 onwards.
Dr Pepper: Absolutely.
Q107 Jon Cruddas: I make my point that
that rests uncomfortably with the arguments you have been putting
forward about the technical problems associated with it and the
imminence of 2000 as the primary reasons for the cost overruns.
Again, I have not read the report but this seems to take a different
route to it which sees these cost overruns as symptomatic of a
deep malaise within the organisation.
Sir David Omand: If I can add
a comment there. I think what it is saying is that a large part
of the explanation why we did not pick up on this earlier was
because of the way the project was run and was symptomatic of
an older way of running an organisation which had grown up, as
Dr Pepper said, facing the old Soviet target and where individual
parts of the organisation could largely run as separate components.
The concept of the total enterprise, which is what we are talking
about here, had to come in at this period.
Q108 Jon Cruddas: Are you entirely confident,
given the Burton report and its 43 identified changes and the
problems he has identified in terms of anticipation of information
and communications revolutions, etc., that despite all of these
problems you have somehow got the perfect building?
Dr Pepper: Perfection is a hard
concept to grasp. What we have is an exceptionally good building.
Q109 Jon Cruddas: Despite, or rather
because of, the management process? Maybe that is too harsh.
Dr Pepper: The building design
itself was never a problem. The problem was linking the building
to the technical transition. The building itself as a working
environment, and as an environment to install our IT, is excellent
I think.
Sir David Omand: The rigorous
implementation of Edmund Burton's recommendations has rebalanced
the whole thing and means, as has been pointed out, the programme
has been delivered on time and cost.
Q110 Jon Cruddas: Can I just ask one
final question on that because I have just read your update memorandum
to the PAC and a couple of sentences jumped out at me and I wondered
what lay behind them. In terms of detail, paragraph two: "IAS
delivered the originally-contracted construction and fit-out work
in late June, but the Independent Engineer required that a number
of faults be rectified before the work could be accepted as complete."
A bit lower down: "GHCQ required further work in the form
of contract variations to be completed by IAS before the decant
could begin." At the bottom: "IAS completed almost all
the work required by 17 September . . ." I do not know what
lies behind those sentences but it could be interpreted as reflecting
still some concerns about the actual management of this project.
Sir David Omand: No.
Q111 Jon Cruddas: Minor marginal issues.
Dr Pepper: Would you like me to
explain a bit more?
Q112 Jon Cruddas: Yes.
Dr Pepper: The problems in June
were not much more than the normal snags that you get with a new
building. They had been rushing to finish it by the middle of
June, they had done a 99.9% job but there were inevitably still
things to be done before we could move in. The variations reflect
the fact that we are in a volatile business. The specification
for the building had been finalised three years ago and a lot
has happened in the world in those three years, including 9/11,
and we have necessarily had to make quite a lot of changes to
our organisational configuration. Consequently, before we could
move our people in there were changes that had to be made from
the way it was originally specified to the way we wanted it. We
could not force IAS to incorporate those changes in the building
process because that would have put the achievement of their bonus
at risk and so on, so they would not take it on. What we wanted
to do, therefore, what we had to do, was to get those changes
made at the last minute. What we worked towards in the methods
as we describe in this update memo was a way of getting those
done but still getting in on time on 17 September.
Q113 Mr Bacon: Dr Pepper, how many directors
have there been of GCHQ since January 1998?
Dr Pepper: Since January 1998,
Francis Richards and myself.
Q114 Mr Bacon: I have got the CV of Sir
Kevin Tebbit here, which I got when he appeared before us when
he was at the Ministry of Defence, which says that he became Director
of GCHQ in January 1998.
Dr Pepper: For six months, that
is right.
Q115 Mr Bacon: Then he left in July 1998.
Dr Pepper: That is right.
Q116 Mr Bacon: Since then there has just
been Francis Richards and yourself. You have been there since
April.
Dr Pepper: Yes.
Q117 Mr Bacon: You are not expecting
to go anywhere in a hurry?
Dr Pepper: I am not expecting
to go anywhere in a hurry.
Q118 Mr Bacon: I would just like to continue
the point Mr Cruddas was making. If you continue down on page
19, paragraph 4.21, it is talking about the recommendations of
the Burton report and it says: "The remaining recommendations
addressed issues of leadership and management; communications
between different types and levels of staff . . .". That
probably covers a multitude of things. ". . . capture of
information for planning; investment in people and staff training;
project management; and the oversight and control of programmes
of work". That paragraph covers just about everything one
way or another. It is written in that exquisitely understated
NAO style. It sounds very much as if the management of your organisation
has been very poor, as Mr Cruddas was saying. Do you think that
is fair?
Dr Pepper: No, I do not think
it is fair. Although the Burton report—
Q119 Mr Bacon: I do not mean that it
is now.
Dr Pepper: No, no, even then.
The Burton report did indeed address all those but it did not
address them by saying "all these aspects are a complete
disaster, GCHQ is a shambles, you need to put something in place".
He made recommendations to improve all of those things. Some of
them were worse than others. As I have said, the planning mechanism
was too stove piped and not far enough looking ahead and that
was seriously flawed. On the others he was making points that
existing systems could be improved.
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