UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 939-iii

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

Home Affairs Committee

The New LanDscape of Policing

Tuesday 17 May 2011

Dr David Horne

Terry Skinner and Tracey Lee

Bill Crothers, Ian Forster and Nigel Smith

Evidence heard in Public Questions 218 - 367

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Home Affairs Committee

on Tuesday 17 May 2011

Members present:

Keith Vaz (Chair)

Mr James Clappison

Dr Julian Huppert

Steve McCabe

Alun Michael

Bridget Phillipson

Mark Reckless

Mr David Winnick

________________

Examination of Witness

Witness: Dr David Horne, Director of Resources, National Policing Improvement Agency, gave evidence.

Q218 Chair: Could I refer all those present to the Register of Members’ Interests where the interests of members of this Committee are noted. Are there any other additional interests that members wish to declare? Good. This is a further evidence session in the Committee’s-

Alun Michael: Sorry, Chair, could I make the usual declaration? My son is the Chief Executive of the North Wales Police Authority.

Chair: Thank you, Mr Michael. This is a further session in the Committee’s major inquiry into the new landscape of policing. We want to specifically look at the issue of procurement today. Dr Horne, thank you very much for coming to give evidence to this Committee. Perhaps I can start with a general question. Given the amount of money that the police service as a whole has received over the last few years, including the NPIA, why have the professionals not been more keen to pool resources in order to reduce the costs of procurement?

Dr Horne: I think if you look at the progress of police procurement over the last, say, five or 10 years there is a stronger record of collaboration than may have been appreciated. Let me give some examples. There are 400 collaborative contracts, which the police service has, that is put in place, not just with the NPIA but by procurement professionals across the service working together. I think we have some real track record on the police service’s spending. The police service, I think, was the first locally managed public service to have tracked the whole of its spending across 43 police authorities and the NPIA, and one or two others as well, which has given it huge traction in undertaking where there are further opportunities to drive out savings, where there are better opportunities to work with suppliers. We have won awards for our contracts on fleet procurement, for example.

Q219 Chair: The Government still says, and Ministers have told this Committee, that there should be so much more saved, so much public money that could be saved with better procurement, so that means that a great deal of public money has been wasted. Even though there has been progress we have wasted a lot of public money over the last few years by not ensuring we had better procurement. Do you accept that or do you think the Government is just off on a wild goose chase?

Dr Horne: No, Chairman, there are real opportunities for procurement to further deliver in the challenges ahead. We think it is a hugely exciting time in the police procurement arena. We have some real heroes working, delivering further savings. It is time for those procurement professionals in the service to shine and-

Q220 Chair: How much more can be saved?

Dr Horne: The targets we have been given over the spending review period are £200 million of non-IT procurement savings by 2014-15, and in IT, not just from procurement, £180 million of savings.

Q221 Chair: That is not a huge amount, is it? In the overall police budget £380 million is not a huge amount of money.

Dr Horne: We are not starting from a clean sheet of paper, of course. This is on top of what has already gone before and this is-

Q222 Chair: How much do you think has been saved then, say in the last year?

Dr Horne: In 2010-11 we have saved £49 million against a pretty exacting measure, which is around hard cash savings, so 2010-11 our procurement savings, £49 million, and that is on a sustainable and recurring basis. Now, that will ratchet up obviously as we go through the rest of the spending review period.

Q223 Chair: ACPO spends nearly £3 billion a year with suppliers, HMIC says that £100 million could be saved through better procurement, and the Home Office have indicated that £400 million can be saved through better ICT procurement. Do you recognise those figures?

Dr Horne: I certainly recognise the £100 million from the HMIC. I think that came from last year’s report on how the police service can contribute towards £1 billion of savings. As I said, we are working towards a more stretching target than that indicated by the HMIC, the £200 million from non-IT and £180 million from the IT arena.

Q224 Chair: The problem for this Committee is people have come up with these very impressive figures and we have difficulty in knowing who precisely to believe and what to accept.

Dr Horne: I appreciate the difficulty that the Committee finds itself in, which is why within ACPO, and within the NPIA, we took steps last year to work with the Home Office and the then Office of Government Commerce to make sure that we have a very rigorous methodology for capturing procurement savings. A small example, Chairman: in the past we might have been able to capture what is called cost avoidance increases, so if prices were going to go up by 10% and you can negotiate and it only went up by 6%, you are still paying 6% more than you were. We have taken those out and our procurement savings now are on hard cash savings.

Q225 Chair: This is talking about taxpayers’ money. What is wrong with Ministers saying to the 43 forces, "You must do this and you must do that"? Why have we still left it in the hands of the chief constables to do this?

Dr Horne: Well, I think chief constables will say that they have taken strides to work together collaboratively and we welcome the-

Q226 Chair: No, I understand that, but my question is what is wrong with Ministers saying, "This is what you shall do" and the Home Office deciding that this is where people should buy all their cars or their mobile phones? What is wrong with that in principle?

Dr Horne: Nothing, Chairman. Indeed, the service was supportive of the use of mandation of regulations. We saw that on 4 March when four categories were mandated by the Home Office and done with the support of the service.

Q227 Chair: That is four out of how many?

Dr Horne: The category list is ultimately 500 strong.

Q228 Chair: So we have just had four?

Dr Horne: Well, we want to roll that out. But it needs to be done-

Q229 Chair: Sorry, let’s be clear. Only four mandations out of 500?

Dr Horne: Only four-there are 500 categories but what we have done is start with what is the most strategically important and what will be the most important in terms of-

Q230 Chair: So it is four out of 500?

Dr Horne: There are 500 spending categories.

Chair: Yes, I understand that.

Dr Horne: The mandation is simply four, but those four will firstly increase in number over time and-

Q231 Chair: What is the timetable then? If we do four a year I think we will all be pretty old by the time we get to the end. You may still be there but I don’t think I will.

Dr Horne: Chairman, the intention is that the list is updated, I believe it is quarterly, and we are in discussion with the Home Office to ensure that there is a steady rollout of that. But can I make the point that it is not just the number, it is making sure it is the strategic value of the categories.

Q232 Chair: What is the four worth? The four categories that you have mentioned, how much are they worth?

Dr Horne: Over the spending review period, just doing the maths in my head, Chairman, but it’s around £500 million.

Q233 Chair: And the rest of the 496 is worth what?

Dr Horne: Over police spending of just under £3 billion, it will be £2.5 billion still to come. But, Chairman, can I say in rolling out those regulations there are some real opportunities ahead. Perhaps if I can clarify-

Chair: I am sure we will have other questions that we will probe you on.

Q234 Dr Huppert: Can I start off by asking about what is going to happen to non-IT procurement and IT procurement? As I understand it, non-IT procurement is expected to move to the Home Office. When will this happen and have you been talking to them about it?

Dr Horne: Indeed, Chairman. The Home Secretary wrote to the Chairman of the NPIA on 21 February saying that she expected immediate progress to be made on transferring the non-IT procurement function from the NPIA into the Home Office. We picked up pretty quickly with Home Office colleagues to ensure that we have a transfer that can be done swiftly and it can be done properly and it can be done professionally. Our timetable, at the moment, has just been put on pause, pending some clarification of decisions from the Home Office, but we want to make sure that this transfer is undertaken swiftly to minimise two things: to minimise the risk in the delivery of those further procurement savings, that £200 million that I spoke about. We want to make sure that momentum continues with the service and with the staff. The second element is there are 25 staff involved who have been good public servants. There have been some real heroes in delivering for the police service and we want to ensure that they are treated with respect and dignity in this transfer.

Q235 Dr Huppert: Indeed. I am fascinated that immediate is over three months, but that tells me something about the Home Office. Do you think the Home Office will have the expertise needed to do non-IT procurement competently?

Dr Horne: The Home Office undoubtedly has strong commercial expertise. What I would say is that it still needs to develop those good relationships with the service to ensure that there is a proper appreciation of the operational requirements around policing, and the non-IT services do need those good relations with police chief constables, and increasingly police and crime commissioners, of course.

Q236 Dr Huppert: I expect I could continue to query them. We will have a chance to talk to the Home Office a bit later. Can I just turn briefly, Chair, if I may to IT procurement and what the NPIA’s comments have been on that? It seems the latest suggestion is there may be a GovCo, that we would abolish NPIA and replace it with something else by a different name to do a similar function. Is that a fair description? What is your take on that?

Dr Horne: We are awaiting clarification from the Home Office and the Home Secretary as what those proposals will be. I am conscious the Committee will be having my Chief Constable, Nick Gargan, next week. In the meantime, though, we are taking steps to ensure that the procurement contribution to delivering IT savings and efficiencies for the police service is a very strong one. The savings that I mentioned earlier, we have some good examples around, for example, purchasing of IT consumables. The contracts we have put in place will deliver, just for that one, £18 million of savings.

Q237 Dr Huppert: But in terms of the future landscape, what advice have you given to the Government about what you think should be happening with it?

Dr Horne: We said that they-where that procurement sits in that landscape is a decision for others, but we have made four key points around the future of IT procurement. The first point is that it is so closely aligned to the ISIS programme, the convergence across police IT, the big programme that is under way. Procurement is such a fundamental driver of the delivery of those savings. They need to work hand in glove, cheek by jowl.

The second point we have made is that the IT procurement function needs to have proper commercial nous, proper commercial leadership to deliver against what is a very hard-edged market. Thirdly, it needs to make sure that it is working closely with Government IT because of the huge drive and changes that will be coming forward. Fourthly, it has to make sure that it works with the service to have an appreciation of those operational requirements.

If I may just add a further point, which is to say it also needs to be very close to the CEO’s desk, or whoever is leading in that.

Q238 Dr Huppert: Where would you personally choose to put that function?

Dr Horne: If I can repeat, we have said consistently that that should be a matter for others to determine.

Q239 Dr Huppert: But if it were up to you, what would you choose?

Dr Horne: I would look at that broader police landscape and I would be concerned if there was a degree of fragmentation in that future portfolio of policing. I think, and this is a personal view, that we may see a dilution of the police service spending power if there are multiple bodies in a new marketplace. At a time where we are encouraging the service to be joined up, to operate as a single entity, to work with suppliers as a single entity, I think there are some risks in having a more crowded landscape.

Q240 Alun Michael: Can I just stick with that for a moment? I was pleased to hear you say that it has to be central and the buck has to be on the CEO’s desk, but one of the problems with procurement in the past has been unrealistic timescale and unrealistic cost envelopes at an early stage of the scheme. How confident are you that in new arrangements that will be thoroughly understood and that we won’t lose the lessons learned over many years?

Dr Horne: Quietly confident, but let me clarify because there is a momentum here around the delivery and the changes as part of that ISIS programme, which we are seeing the first fruits of already. Three examples, if I may, just to give some confidence as to why I think we are on course. The first is taking advantage of the national arrangements we put in place through those mandated regulations. Over £3 million has been put through the central supplier for that since 4 March, we are getting good management information from that, and we are on course to deliver the £18 million of savings that arrangement will bring. Another example is around renegotiation of the fingerprint contract, which will deliver £6 million each year-

Q241 Alun Michael: With respect, that is about savings. What I was concerned with is that there is effective procurement and that requires sufficient money going into the contract, realistic figures, in other words, and realistic timescales.

Dr Horne: Yes, I am conscious of that. I think those timescales are stretching, particularly for some of the work we are taking forward with forces in Essex, the Athena work, which will take time to get these things right, but I think there is a large prize to be had in ensuring that there is much greater interoperability, much better efficiency for the delivery-

Q242 Alun Michael: I have no doubt about that. My question was entirely about the realism of figures and timescales, and that is where the public sector has been bad on occasions in the past.

Dr Horne: Yes, but if I may, of the £180 million that has been set for us for IT savings, our results for 2010-11 and our early indications for 2011-12 mean that we are set fair for that, but I realise it is going to be more challenging as time goes by.

Q243 Alun Michael: Turning back to the compulsory national framework agreements, which the Chairman asked you about: how are they working in practice? I am looking more at the detail of things. Do forces still have an element of choice so they are able to call off and make choices within what is available on a national contract, or is it simply one product for each category?

Dr Horne: Forces do have an element of choice, and if I can take the first part of your question, just how are those four contracts or four areas of spend working out? They are working out very well. We took stock of these at last week’s ACPO procurement portfolio, which I chair on behalf of the service, and the feedback is very positive. The four contracts cover fleet, they cover body armour, and they cover IT hardware and IT software. £3 million put through on that IT hardware and software. The fleet contracts, we are getting some very strong results through the regional competitions, which took place last month and this, driving down further savings, and these are on whole life costs, I should say, not just on prices.

Q244 Mr Clappison: Can I take it from your previous answer that you will be well disposed towards extending the agreements to other categories?

Dr Horne: Very much so, to ensure that we can capture that £200 million with confidence, that we can work forward. We think that there are further categories that could be added in.

Q245 Mr Clappison: Can I tempt you then into indicating what those categories might be and what proportion of procurement might end up being covered by these agreements?

Dr Horne: If I can answer in two parts.

Mr Clappison: Yes, it was a two-part question.

Dr Horne: The first is around what further categories. The operationally specific categories, we think things like digital forensics, CCTV, custody, firearms, a rolling list, but the big one will be the extent to which we can adopt the Cabinet Office arrangements for what is called indirect procurement. I am sorry to use a technical term but it is essentially nine categories of indirect, in that it is not supporting our core mission. It is things like energy, it is things like office supplies, it is things like business travel and so on, where the Cabinet Office is putting in place agreements for the whole of central Government. If they can be applied into the police service we think there is a real prospect for delivering further savings quite briskly there, and that will cover the second part of your question, a good element of the police spend in terms of percentages, it will put us over the halfway mark, I believe.

Q246 Mr Clappison: At least one police force has made a submission that forces should be able to buy when they can get something more cheaply from elsewhere. Do you agree with that?

Dr Horne: I think it brings issues with that. The first point I would make is that there is an element of choice already within a limited framework. But we are not working off an à la carte menu here; it is much more down to the sort of table d’hôte or even sort of dish of the day options. But I think if your question implies that having put-

Q247 Mr Clappison: Usually the à la carte is more expensive, but it is sometimes possible to get a cheaper meal on à la carte than on table d’hôte.

Dr Horne: Perhaps more on the dish of the day. But I think if your question is that we can have a menu that we can pick and choose from and the individual forces or their authorities can dip in and dip out of as they will then I think that risks putting back and diluting some of the savings prize that lies ahead of us. I think if you look at the evidence, not just in policing but from Sir Philip Green’s review of government public sector procurement, the NAO studies of how the NHS do purchasing, the general conclusion is that when you get local procurement you get huge variations in prices for standard consumables and standard commodities, and we think that by brigading and leveraging that spending power we can harness it more effectively by working better together. Now, it is not to be arrogant and say the centre always has it right or we have invented it therefore it must be the best. That is not the case. It is making sure that there is effective feedback between forces, between authorities and the centre to ensure that we have effective arrangements.

Q248 Mr Clappison: You say the Government has made it compulsory for forces to use the national framework agreement to get the IT they need from, and I quote, "one pre-approved supplier". Do you see any problems arising from that in creating a form of monopoly supplier?

Dr Horne: I think monopolies and procurement professionals are always uneasy bedfellows. We think there are real risks around monopolies and they are only entered into, I think, with the deepest of caution. The particular supplier for IT consumables and hardware does allow subcontracting, so it brings in other multiple suppliers. It is not just forcing a single route down, for example, HP or Microsoft.

Q249 Mark Reckless: In your written NPIA evidence you hailed the Zanzibar central procurement hub, telling us it would be about linking existing systems to a common marketplace in a style similar to that of online buying. Could you be a bit more specific?

Dr Horne: Yes, it is a terrific opportunity to develop a catalogue across the whole of the police service, which allows some choice but the items you put on that online catalogue are restricted to your core suppliers. The process of rolling out that Zanzibar product is under way at the moment. Kent and Essex are the first to go live, I think it is in July, with Lincolnshire to follow. We are populating it with the supplier content as we speak, so that that catalogue can be used to generate the real efficiencies and business benefits that we are anticipating.

Q250 Mark Reckless: I thought you said Essex were going to be the first to go live with that. My understanding, having been a member of the Kent Police Authority, is there is joint procurement between Kent and Essex. So would it be both of those?

Dr Horne: Yes, correct me if I am wrong. Sorry, I should have made clear, yes, Kent is first in the queue. They did their testing in April, which worked well, and that is now being worked up and I think Kent are going to be ahead in terms of coming first in using the new arrangements.

Q251 Mark Reckless: Is there a danger that with allowing a menu of options, albeit restricting it to preferred suppliers, that is sort of a failure to make a decision between the à la carte and the dish of the day options?

Dr Horne: No, I think it is about markets and risk. I think it is understanding what works best, and if I may just give a couple of examples. For mobile phones, not on the mandated list but the service has a single sole supplier, that is with Vodafone, and that has been very useful in driving down prices, in brigading spending.

Q252 Chair: So all 43 forces have Vodafone telephones?

Dr Horne: There is a national contract, which over half the forces use. I think it is three-quarters, but one or two are holding out and because-

Q253 Chair: So it is not a national supplier?

Dr Horne: There is a national framework we have encouraged to use, but until regulations one or two forces will be able to step outside that and stay with their suppliers.

Q254 Mark Reckless: I think the Committee was interested specifically in the role of the elected police and crime commissioners to come and whether they would have a role in perhaps requiring their forces to use a particular procurement system, or is that something that we would still be looking for the centre to either mandate or otherwise, as currently?

Dr Horne: We think the role of police and crime commissioners will be very, very important. The draft protocol, which the Home Office published last week on how police and crime commissioners work-

Chair: Following our recommendation.

Dr Horne: A very helpful one, Chairman. It is rather light on procurement though because it implies that-

Q255 Chair: Do you think it should be beefed up on procurement?

Dr Horne: Very much so.

Q256 Chair: What should it say?

Dr Horne: I think there are four things that would be very useful to say to make sure that police and crime commissioners have a duty to collaborate in terms of procurement, a duty to collaborate for procurement. We think there is, secondly, a very quick win that they can do by having standardised terms and conditions across the whole of the police service to make it easier for suppliers to do business with us. It is something we have tried within NPIA and with ACPO, but were unable to deliver. We still have 43 variants of standard terms and conditions. I could go on, Chairman.

Q257 Chair: What would be very helpful is if you could let us have your views in writing on what ought to go into that memorandum.

Dr Horne: Certainly, Chairman. I look forward to that opportunity.

Chair: That would be very helpful. Yes, Mr Reckless.

Mark Reckless: I think probably quite urgently in terms of-

Chair: By tomorrow, noon tomorrow.

Q258 Mark Reckless: My final point is I understand the advantages of the standardisation of terms and conditions but could I ask, are you alive to any danger in terms of perhaps excluding some smaller competitors from supplying to police forces because of the very structured sort of terms and conditions, which some of them may find quite onerous to comply with, potentially?

Dr Horne: It is a very important point, and can I answer by saying about 35% of our spend by value is with SMEs. It is a very important part of the police business. A large number of suppliers are SMEs, and it is right that we make sure that those terms and conditions do make it easier for those SMEs to enter the market. Our proposals, which we have made to bodies but so far unsuccessfully, to ensure that there is scope for that local discretion. You could have a standard framework based on OGC conditions and a one-page appendix that allows those local variations to feed in and pick up and encourage SMEs particularly.

Chair: Very helpful, thank you.

Q259 Mr Winnick: Dr Horne, to the extent that there are monopoly suppliers, that is a very profitable form of business, isn’t it, for the companies concerned?

Dr Horne: Indeed.

Mr Winnick: Very profitable indeed.

Dr Horne: As I said, monopoly suppliers and procurement are very uneasy bedfellows. If I give a couple of examples. Our Airwave contract, although awarded in competition, and I am very conscious, awarded in competition, that was awarded 15 years ago. Yet, the costs, I, as Director of Resources, see going out to Airwave year after year are very different from what the marketplace is for mobile technology.

Q260 Chair: And it is worth £280,467,000.

Dr Horne: It is a princely sum indeed, and it is one, which because the contract was written 15 years ago, is indexed and it doesn’t take real reference to-

Q261 Mr Winnick: The inevitable response would be, I suppose, why monopoly suppliers? Why not allow more local firms to compete? Bearing in mind, as the Chair has just quoted, huge sums of money are being made by these companies, quite legitimately, I am not suggesting otherwise, it is a very, very nice business for those who are in it.

Dr Horne: They are uneasy bedfellows, but I think looking at monopoly you have to look at the market, and in the case of Airwave the size of the market meant that at that time it was value for money to have a national system, which we were used to and working. But where we have sole suppliers as distinct from monopolies-I mean, we have had some problems with police tyres and the sole supplier across the whole of the service has not been working out particularly well, not in terms of pricing but it is around service standards and delivery. So we have done exactly as you are suggesting, Mr Winnick. We are opening the framework and moving away from having a sole supplier to the service.

Mr Winnick: We will have the opportunity, Chair, of the next set of witnesses to explore this further.

Q262 Chair: Indeed, yes. We were very concerned with the reports that police officers were putting petrol into diesel engines and diesel into petrol engines. That does not take consultants to explain how that works.

Dr Horne: No, but it is a very expensive mistake and one that is made rather too often. It is made by some very senior officers as well as junior constables.

Chair: Mr McCabe will continue on police and crime commissioners.

Q263 Steve McCabe: I just wanted to ask one thing about that, Chair. Dr Horne, you seem to be suggesting that some sort of security for the suppliers would be the best way to bear down on costs and therefore you want police commissioners to have these kind of national conditions and agreements and protocols. Isn’t the danger of that that you are weighting it in favour of the suppliers, and what the Government intends by police commissioners is they want things shaken up every four years? Rather than have their hands tied, they should have freedom to say, "You have four years to get this right and give us a good deal, and if you don’t the next guy is going to change the supplier".

Dr Horne: A very good question. Let me just answer by saying a lot of our contracts work on frameworks, which allow a limited choice. Topical is around the fleet, for example, where we have been working through regional frameworks, giving suppliers an assurance of volumes, the first time this has ever happened, to say to four particular suppliers within this region, "We can guarantee you this number of vehicles over the three-year life of the contract, or whatever it is; give us your best prices on this basis". We are getting some very strong results as a result of that, and that is being able to give suppliers more certainty. It is not around diluting competition.

Q264 Steve McCabe: But in the example you just gave about the Airwave contract, that is clearly not what happened. They got tied in to quite a long term contract but they could have got a much better deal if somebody had come in at a four-year cycle and said, "This isn’t good enough".

Chair: It didn’t work for some of the time, that was the problem with Airwave. It didn’t work in the Underground, did it?

Dr Horne: It has now been successfully rolled out in the Underground.

Q265 Chair: Yes, but during that time. What is the answer to Mr McCabe’s question?

Dr Horne: Well, I think it comes back to market and risk. Airwave, huge investment needed, long term returns for the supplier over a 20-year life, letters of PFI contract, now getting quite old, starting to decay, so we need to be, within the procurement world, savvy about what are the best opportunities to drive further value in the light of the expiry of that contract. That is quite different for more sort of standardised regular items, operationally important, not quite as important as Airwave, but things like fleet and body armour, some of the IT work that we have spoken about.

Q266 Chair: Very helpful, Dr Horne. Thank you very much, you have been extremely helpful. We will write to you again on a number of these issues, because we are very keen to look at the area of procurement. You have raised a very important point about police and crime commissioners and the protocol, and we would be most grateful if we could have your thoughts by midday tomorrow.

Dr Horne: Indeed, Chairman, thank you.

Chair: Thank you very much, Dr Horne. Could I call to the dais Terry Skinner and Tracey Lee.

Examination of Witnesses

Witnesses: Terry Skinner, Chair of the Justice and Emergency Services Information Communication Association Group, Intellect, UK trade association for the IT, telecoms and electronics industries, and Tracey Lee, Head of Emergency Services, Steria, gave evidence.

Q267 Chair: Thank you very much for coming to give evidence to us. Both of you have had a career that has taken you from the private sector to the public sector and maybe back again, who knows where you will end up. Observations in 30 seconds from each of you as to why is it that the private sector appears to be doing things that the public sector can’t do. Why is it cheaper done by the private sector?

Mr Winnick: I am slightly confused, if I may interrupt for a moment. We were to have Gavin Chapman. I take it that Tracey Lee is representing the company instead.

Tracey Lee: Apologies. I am representing Gavin Chapman, yes.

Mr Winnick: Mr Chapman is where?

Tracey Lee: Sorry, he had other commitments and sends his apologies.

Chair: Right, okay. He is not available?

Tracey Lee: No. Sorry, just to introduce myself then. I am Tracey Lee, I run the Emergency Services business for Steria and I am here representing Gavin Chapman, who is our Chief Operating Officer. Apologies if that wasn’t provided.

Chair: It is just that our papers give us a different witness. You are clearly not Gavin Chapman.

Tracey Lee: No, I am clearly not Gavin Chapman.

Chair: I think we can all agree on that. Observations: why is it the private sector can do things cheaper?

Terry Skinner: In terms of procurement, I think there are two main points we want to make. I represent Intellect, which represents over 750-

Q268 Chair: Before you make your points, why is it that it appears that the private sector is able to do things cheaper than the public sector?

Terry Skinner: They look at the business problem and take an holistic view of how you solve that business problem against specific outcomes and specific objectives. I think a lot of the public sector, in particular the police, do not take that view when they come to solving a business problem. Instead of engaging with the IT industry to say, "Here is a problem we have, these are the outcomes we want, these are the objectives we want to achieve, how would you best advise we do it?" they try and do it themselves and procure bit part technology, and try and reinvent the wheel most of the time.

Tracey Lee: I think from Steria’s point of view our core business is around business process improvement, so we have a number of-

Chair: Sorry, you will need to speak up because the acoustics are not very good.

Tracey Lee: Apologies. If I lean forward that probably will assist. Our core business is around business process improvement and outsourcing. As we have a range of private and public sector customers already, we can take what represents best value and we can offer more industrialised processes in support of police. So that is what we try to do, and I guess what is also helpful, from the private sector point of view, is there is a number of procurement requirements placed on policing and natural accountabilities to the public that restrict the decision-making processes to improve.

Q269 Chair: Indeed. Is there a tendency for those in Government-and in these circumstances we mean civil servants, and we will be hearing from them after you have given evidence-that they go back to the same people they have dealt with before because they kind of understand that the people who they have used before have delivered to them on certain issues?

Tracey Lee: I am not sure that they have particular friends, but I think it is very important in the police market that whoever they choose to partner with understands the nature of their organisation, the pressures that they face, and interprets the art of the possible in an appropriate, proportional way to support policing rather than just take a generic solution and try and make it fit, because clearly that is not in the public interest.

Q270 Chair: We have a list of the top 10 suppliers of IT, obviously headed by Airwave at £280 million. The total spend last year was £654 million on IT, and that is an enormous amount of money.

Tracey Lee: Yes.

Chair: How do we know that these groups are performing their contracts adequately?

Tracey Lee: I guess within the contracts that we perform we have very stringent service levels, and requirement to demonstrate value for money, so I would expect that those provisions should be made for other contracts of that size.

Q271 Chair: Mr Skinner, are there penalties? For example, if SunGard Public Sector Limited does not perform its contract there are penalties written within that contract, which they will need to pay to the Home Office?

Terry Skinner: I can’t speak for SunGard, I can speak for-

Chair: I just use them as an example.

Terry Skinner: Yes, but almost certainly there would be, and for my company there most certainly is.

Q272 Chair: So every single IT contract would have penalties on performance?

Terry Skinner: It would for the larger contracts certainly, but for the small SME suppliers to the police service not necessarily, because if all they have done is sold component technology, hardware or software or something, to a bigger system the SMEs would probably not get penaltied. The integrator, the prime would certainly.

Q273 Chair: You have both been in the public and the private sector. You, I think, were involved in Thames Valley Police at some stage.

Terry Skinner: Yes.

Chair: Looking at this figure of £654 million, do you think that there could be savings made on that figure?

Terry Skinner: Yes.

Chair: You do?

Terry Skinner: Yes.

Q274 Chair: How much?

Terry Skinner: I wouldn’t like to-

Chair: As a rough guess.

Terry Skinner: Probably 20%.

Q275 Chair: 20% of this IT bill could be saved?

Terry Skinner: I believe that the police overspend on IT by at least 20%.

Q276 Chair: Why do they overspend by 20%?

Terry Skinner: Because of their bad procurement process, and also the way they engage with industry to supply their solutions.

Q277 Chair: What is the mechanism by which you can tell the police or Ministers that this overspend is occurring? How do you engage with them? Do you send them a letter and say, "By the way you are spending 20% more"?

Terry Skinner: No. We network with senior ACPO officers and make our views known, and at Intellect, with the membership of the 700 companies that we represent, certainly make their views known.

Q278 Chair: Is it standard that they should have contracts that go on for 15 years, such as the Airwave contract?

Terry Skinner: 15 years is rather long, but if a major company is going to make a major investment or partner with the police force then it can’t be for one or two years. It needs to be for a reasonable length of time, so that they can work together to make that a viable proposition.

Q279 Chair: If we write to you, you could write back to us and give us examples of how this money could be saved?

Terry Skinner: Our membership would be delighted to supply you with examples.

Q280 Mr Winnick: Your background, Mr Skinner, you have explained, and we have information about that, all perfectly above board, quite legitimate, but-the "but" is simply to confirm that, as the situation is at the moment, you are involved with Serco?

Terry Skinner: I am, yes.

Q281 Mr Winnick: You are employed by Serco?

Terry Skinner: I am indeed, yes.

Q282 Mr Winnick: And you get a salary from Serco?

Terry Skinner: I do.

Q283 Mr Winnick: Who of course is a very large company involved in the private sector in a whole number of fields. As to your own company Steria, Ms Lee, how long has it been in operation; the company itself?

Tracey Lee: 40 years.

Mr Winnick: 40 years?

Tracey Lee: Yes.

Q284 Mr Winnick: Its main business is providing services for the police, am I right, or are there other aspects to-

Tracey Lee: No, the overall business is delivering ICT and business process transformation. 50% of our business is in the public sector and we have a strong footprint in the criminal justice market. The business I represent is the police business.

Q285 Mr Winnick: Could you, off the cuff, so to speak, tell us the profits the company made last year?

Tracey Lee: I wouldn’t have that information available to me, but I could provide it in written form.

Q286 Mr Winnick: It can be supplied to the Committee, can it?

Tracey Lee: Yes, it can.

Q287 Chair: Thank you. The answer to my question about 20% being saved, that was not dependent on all the contracts going to Serco, was it?

Terry Skinner: Not indeed.

Q288 Alun Michael: Two things: one is looking at this issue of savings. You said there are big savings to be made. We are aware of excessive spending on IT by police agencies and lots of Government Departments, but also sometimes of unrealistic expectations in under providing for the cost of introducing new arrangements. Could both of you say how you make sure that we get this right?

Terry Skinner: I think there are a lot of assumptions. When a police force engages on a new programme or project that is IT-related they make a lot of assumptions that things will be easy to put together and deliver, and I think historically they have been very optimistic when they have been putting their programmes together. The problem, I think, the fundamental problem in the way they engage with industry is they want a new solution to solve a business problem. They think they have the expertise in-house to do that, and to be able to design it and bolt it together themselves, and then go back out and procure, as I said, bit part technology, rather than engage with industry in general-it doesn’t have to be one company, it could be a consortium of companies-that would recommend the best way of solving that business problem, because it has probably been done in the private sector many times before.

Q289 Alun Michael: The difference though is that the private sector arrangements do not come under the sort of scrutiny that the public sector has; the Public Accounts Committee is the ultimate place for grilling public sector representatives. How do we get the best of both sectors coming together, the transparency of arrangements that people rightly expect in the public sector, but the relationships being right so that you end up with the right design, timescale and realistic arrangement? Perhaps Tracey Lee would like to have a go at that first.

Tracey Lee: I think it depends on the nature of the engagement and the problem you are trying to solve. For example, if we take the Cleveland contract where the Cleveland Police have outsourced to us their control room, their criminal justice practices, many of the operational support functions and their back office, that contract is constructed very much as a partnership. You talked earlier about penalties around non-performance and so on. In that particular contract, because we are obviously accountable for the KPIs that the forces are having to report and meet, the way it is constructed is we have our own financial penalty because we underwrite the service that will be received with key milestones. We also look at the financial profile. It is a fixed price to the customer, so if we don’t deliver in the way that is right for the public and what we set out in the contract we lose significant amounts of money.

Q290 Alun Michael: Reel back one stage. We have on the one hand-and I have had experience of this from within Government as well-the requirement to get the right relationship, so that you are sharing the identification of the problem to be solved and the best means of solving it and all the rest of it, and you also have the sort of thing that the Chairman was asking earlier about how you drive down costs by squeezing out. How do you square the circle?

Tracey Lee: It is about recognising the strength of both parties, and for the police to identify when it is about core policing and for the chosen ICT supplier or business process partner to be able to show the value that they can offer about best practice and things that have worked elsewhere.

Q291 Alun Michael: Can I ask you both then what you think would be the steps that would best get us to the right arrangements between whoever takes the lead responsibility for procurement and the potential suppliers? What are the couple of things that would make the biggest difference to improve this?

Tracey Lee: I think it is-sorry, Terry.

Terry Skinner: No, you go first.

Tracey Lee: I was just going to say, I think it is about how you engage in the pre-procurement process. I think many of the forces are rightly accountable for the public money and the EU legislation, as it stands, makes people concerned about improper relationships with suppliers pre-procurement. But actually the supplier community, if managed in an appropriate market testing way, has access to all sorts of ideas about the art of the possible that will help forces to understand how they want to engage and on what and in what way, and I think that gives a lot more firmer foundation for any procurement thereafter. It also means that it stops the need to define everything to the nth degree on their own before you talk to a supplier, so it truncates the process before those benefits can be delivered and it provides a lot firmer understanding and foundation for any future contractual relationship.

Terry Skinner: I would add that the actual procurement process itself needs looking at. It is a known fact, and I have made a few notes, that the average time from a contract notice to an award of contract for a UK police force is 77 weeks. In Germany and in Italy that is about 44 weeks, so it takes nearly twice as long to procure. The reason for that is a lot of police forces, most of the ones I have certainly had any experience in dealing with and worked for, are very, very risk-averse. They will always engage OJEU process, OJEC processes, just in case there is any challenge. OJEU processes are engaged for procurements from £40,000, £50,000 up to £40 million, £50 million when in reality they don’t need to be. So the police procurement processes definitely need to be streamlined.

Q292 Alun Michael: So they need a bit of marriage guidance, do they?

Tracey Lee: Yes.

Terry Skinner: I think so. In addition to that-

Q293 Alun Michael: Who should give that?

Terry Skinner: I am not sure who should give that.

Q294 Alun Michael: It is rather a crucial question.

Terry Skinner: But the other thing is SMEs are then prohibited from applying for a lot of these contracts, simply because the OJEU process costs companies like us a lot of money. The larger companies we can afford it, but if you are-

Q295 Chair: The answer to Mr Michael’s question, who should provide this guidance? Should it be Ministers?

Terry Skinner: It should be the Home Office or Ministers, yes.

Q296 Dr Huppert: Can I look at the levels of procurement? I think it was Intellect, Mr Skinner, in your written evidence you wrote that, "Pan-government and framework-based centralised procurement has had mixed results". Firstly, is that something that you would agree with, Ms Lee?

Tracey Lee: Yes.

Terry Skinner: Yes.

Q297 Dr Huppert: So can you expand a bit on what you mean by that and should we be advising police forces and the Government when to do central procurement and when to do local procurement?

Terry Skinner: A balance needs to be struck between local and national procurement. National procurement is absolutely essential when it comes to interoperability, for example intelligence systems or radio systems or communication systems, because it needs to be interoperable across the whole country. That technology needs to be procured nationally. Local services can be procured locally. There is nothing wrong with that. Frameworks work and they don’t work. They work very well for commodity items, so if you are buying a car or handcuffs or a laptop or a computer or a piece of software that you could go down the road to Dixons and buy, great, because you can get real value for money. Frameworks are disastrous when it comes to large scale solution solving, business problem solving, where you need to apply perhaps different rules from one police force to another. Frameworks are fine, as I say, for commodity. They tend not to work when you are dealing with large bespoke system solutions.

Q298 Dr Huppert: Should frameworks be compulsory? My experience of other purchasing schemes has been it has often been cheaper just to go to Dixons and buy something than to buy something through the framework.

Terry Skinner: That is the problem. That is the problem, because some of the retail, the commercial, now you can pick up leaflets to buy laptops very, very cheap commercially whereas the Government frameworks for buying laptops sometimes are more expensive, and that is false economy.

Q299 Dr Huppert: So just to understand, and then I will check with Ms Lee if you have anything to add to this: what you are saying is that for things where you have to have interoperability it must be done nationally.

Terry Skinner: I agree, yes.

Q300 Dr Huppert: For anything else there should be optional but not negatory frameworks for small commodity goods, and for things in the middle they should be done locally. Is that right?

Terry Skinner: The things in the middle you have to strike a balance, yes. Some will need national, some will need local.

Q301 Dr Huppert: Ms Lee, do you have anything to add, in your experience?

Tracey Lee: I agree in terms of the commodity versus the complex, but I also believe that there are large elements of policing activity that are repeatable. One of the opportunities in terms of how police forces respond to the CSR budget requirements is how they brigade some of their services that are more commoditised, such as some of the back office functions, to get scale, which would require more consistency in terms of business process. I think one of the debates, which I know is ongoing in the market, is where should discretion lie and what really is about differentiating the local service to communities and therefore should stay locally, and where is there an advantage to the service to brigade some of those to benefit from some of the economies.

Q302 Mark Reckless: The Home Office tells us that these compulsory national framework agreements, firstly, will reduce duplicated bidding activity by suppliers, presumably a cost saving, and secondly, they claim it will become easier for suppliers to engage with the police service. Do you agree?

Terry Skinner: No, and that is because there is no recognised list of approved suppliers. For every procurement that is done, suppliers like ourselves have to answer a PQQ. We have to validate ourselves against a set of criteria to see if we are a reputable company the police can deal with. Again, for the smaller SMEs, of which there are hundreds of organisations out there that can really bring value add into the police service, they can’t keep affording to do all of this paperwork. There used to be years ago a preferred suppliers list, that once you got on there the police could do business with you. That doesn’t seem to exist any more. Speaking on behalf of our 300 or 400 SME members in this country, that would be a massive step forward to be able to do that.

Q303 Chair: Where are these advertised, these police contracts?

Terry Skinner: On various websites, a couple of websites.

Q304 Chair: You say "on various websites". If you are a small business and, for example, you make uniforms and you want to sell your uniforms to Lincolnshire Police, how would you go about finding out how to do that?

Tracey Lee: There is obviously the published OJEU notices and also the-

Q305 Chair: They would know where to go, would they, small businesses?

Terry Skinner: I wouldn’t be able to answer about uniforms. The IT vendors, yes, they do.

Q306 Chair: Obviously if we were selling off a prison Serco would know immediately.

Terry Skinner: Yes.

Chair: But I am talking about all these other firms you keep talking about, the 300.

Terry Skinner: They would know. They know the OJEU websites to go to to see the notice, but then they have to consciously enter a process, which is very, very lengthy and very expensive and at the end of the day it may not be worth them bidding for it.

Q307 Steve McCabe: One of Steria’s solutions for getting greater savings and efficiencies is to offshore some of the support services. I wonder if you foresee any risks in that approach?

Tracey Lee: I think the only place where we have offshored is not-just to be clear, the Cleveland Police contract is completely onshore. In fact it is situated 10 minutes up the road from the headquarters of Cleveland Police. But we have the capability to offshore and we do for a number of our customers. In fact the 50:50 joint venture we have with the Department of Health, the NHS shared business service model, that employs a large degree of outsource.

I think the risks in terms of practical delivery are marginal. We have had no problems at all in terms of our outsource. We outsource financial information, personal information, which is equally sensitive to some of the police material. I think it is more a matter of policy and confidence that restricts the ability to look at offshore, and some of the discussions around local employment. So we certainly don’t advocate offshoring in our discussions. It is a matter of if a police force says to us to consider it we would consider it.

Q308 Steve McCabe: You don’t advocate it but you say: "This approach could be extended to the use of offshore services for…back-office and support functions".

Tracey Lee: No. Sorry, just to be clear-

Steve McCabe: Sounds a bit like advocating it to me.

Tracey Lee: We provided it in our submission to show the art of the possible and to give an illustration of the kind of savings that can be provided and we are confident in our ability to deliver offshore solutions. What I am suggesting is that that is a matter for the police forces to decide whether that is an appropriate solution for them.

Terry Skinner: While it might bring some added benefit in terms of cost, although that is debatable, there is the security aspect.

Q309 Steve McCabe: Well, that is what I was asking about but, anyway, let me ask you one other thing. You specifically cite the Police Reform Act 2002, and the Proceeds of Crime Act 2002 as two pieces of legislation that are constraining the benefits of partnership working with the private sector. I wonder if you could just tell me exactly what it is you are saying needs to be changed.

Tracey Lee: I think it is more about guidance as to how to interpret section 38, which talks around how you can provide delegated authority to deliver some traditional policing functions, because we recognise, certainly in our experience in Cleveland, there is a number of supporting processes that are around analysing information, intelligence crime type statistics, which is a support function. There are other functions, which are around supporting the case management process in its widest form and administration. When you look at some of the operational policing functions you can go a lot further in terms of supporting civilianisation, but it is whether, firstly, the legislation is interpreted in that way, because certainly the conversations we have had with our ACPO customers, it is unclear between section 38 and 39 exactly what the scope of the possibility is, and I think that is where guidance would be appreciated.

Q310 Mark Reckless: Your contract with Cleveland Police Authority, outsourcing the force communications headquarters, is quite striking. My understanding is that the police authority had a very hands-on role in driving that outsourcing through. Could you explain to me why your company has not had more success in expanding that sort of model and selling it to persuade other police authorities to go down that same road?

Tracey Lee: I will split that into a tale of two halves then. I think in terms of the procurement process with Cleveland, the authority took very much the role that it was about value for money in delivering the savings and the police force was very much about the operational resilience of any future operating model and how that would work effectively with the residual part of their organisation. So they took very distinct roles in terms of the procurement process. When Cleveland started, in terms of their procurement process, they did some market testing and realised they needed to look at broader scope of supply for it to be attractive for private sector to engage and over a longer term period and to take the investments required in order to allow them to meet the CSR agenda. That is when the control room was introduced. But over the course of that procurement they also invited the various bidders who were involved in the process to provide business cases about how much further they could go to drive out savings, which was when the back offices were involved.

Now, I have to say Cleveland Police Authority and the police force have entertained a number of forces and authorities since the contract award, them personally rather than Steria, to talk about their experience over the two-year period and how that could be reduced, to share some of their requirements to help other forces. I think what many of the other forces have done is taken many of the ideas and tried to implement some of that themselves, and now they are interested in what Cleveland have to offer.

Q311 Steve McCabe: Most of us are familiar with the idea of back offices and frontline policing, but the Government has recently introduced this concept of the middle office as well. I just wondered if you were doing any work on the back and middle office savings, and if you could perhaps help us to understand exactly what this distinction is that some of us are struggling with.

Tracey Lee: I can’t comment on how the distinctions are made, but certainly what companies like ourselves are interested in is looking at how a back office is a commodity area, so it is easy to apply best practice from other areas from day one. So that is available from a number of companies as well as Steria. I think then as you move forward, HR, I think in policing is slightly different because it is a police-based organisation, it drives deployments, so that kind of straddles the line, if you like. Then in the middle office area some look at criminal justice processes, which is case management. Many of our type of organisations and the ones who are joined to Intellect-

Q312 Chair: Are you saying that everything, apart from the police officer him or herself, in the police village is capable of being outsourced?

Terry Skinner: Our view is that unless you need a warranted officer to do a function, you could have public and private partnership to do every other role, yes.

Chair: Good. On that cheerful note, can I thank you both for coming in. We may well write to you again before the inquiry is completed in order to find out more information. Thank you very much for coming.

Examination of Witnesses

Witnesses: Bill Crothers, Group Commercial Director, Home Office Procurement Centre of Excellence, Ian Forster, Commercial Director, Home Office Financial and Commercial Directorate and Procurement Centre of Excellence, and Nigel Smith, Former Chief Executive of the Office of Government Commerce, gave evidence.

Q313 Chair: Mr Smith, Mr Crothers, Mr Forster, thank you very much for giving evidence. That must have been pretty depressing for all of you. First of all we had one witness saying that he could have saved 20% of the cost of the IT budget, another witness saying that all but the warranted officers could be outsourced. We then have Sir Philip Green, in his report in October 2010, talking about the inefficiency and the waste of central Government spending due to very poor data and processes. The three of you are basically in charge of all this. It must be pretty depressing. Mr Crothers.

Bill Crothers: Well, there are opportunities. First of all, I have been in post, just to be clear, in this role since September 2010 as Commercial Director at the Home Office, although I have been a civil servant for four years before that. There are a number, and there have been a number, of activities happening, certainly since May last year, which have addressed-

Q314 Chair: No, I know all that, but what do you say about this very serious criticism of the Prime Minister’s own efficiency tsar? You then have people you deal with on a regular basis saying they could save you 20% of your budget; you are not accepting that. You are just paying them 20% more. To a committee of the House it sounds pretty extraordinary.

Bill Crothers: You have made three points. I was involved in Philip Green’s review. I worked with Green on that somewhat. Actually the Home Office came out pretty well in that. He was looking predominantly at common goods and services, not large complex contracts, and when we compared prices that we pay, for example vehicle hire, printer cartridges, even down to lots of detail, we were either matching the average or better than the lowest price. I can only speak for the Home Office.

Q315 Chair: Yes. Well, I would like you to speak for the Home Office. There is a witness who has just appeared before us who said that you are spending £120 million more than you should on IT, and presumably you have been doing that for the last few years under the previous Government as well. That will run into billions of pounds of taxpayers’ money. The Government is quite right, isn’t it, there is waste? Are you arranging to meet this gentleman to ask how you can save this 20%? That is the first thing I would do.

Bill Crothers: We are spending a lot of time tomorrow with Steria and several other suppliers. There was large activity that the Cabinet Office led over the summer to work with all of the large IT suppliers to Government and it has been widely quoted that that saved £800 million from the major suppliers, and I was one of the negotiators.

Q316 Chair: Did you negotiate the contract for e-Borders with Raytheon?

Bill Crothers: I did not.

Q317 Chair: You are familiar with what happened, are you?

Bill Crothers: I am familiar with it.

Q318 Chair: Is that still in litigation now?

Bill Crothers: It is in arbitration.

Q319 Chair: It is in arbitration. That is £188 million of taxpayers’ money that was spent on e-Borders by the previous Government and we still are not able to count people in and out. That must be a disappointment.

Bill Crothers: Yes, it is. Yes, and widely recognised as such.

Q320 Chair: Whose fault is that?

Bill Crothers: Large IT contracts going wrong tend to be the fault of both parties.

Q321 Chair: So Home Office and Raytheon?

Bill Crothers: There is probably an element of that, although in this case we believe it is predominantly Raytheon and, of course, it is subject to arbitration so I should be careful what I say.

Q322 Chair: As with Airwave and Raytheon, is there monitoring of these big contracts when you spend as much as you have done on e-Borders, £188 million of taxpayers’ money? How often do you monitor what is happening?

Bill Crothers: You typically have large teams of civil servants who are sometimes supported by contractors or consultants regularly monitoring on a weekly or daily basis, so it is a very regular monitor. The Airwave contract, as you said, is £280 million. In fact across Government it is more like £380 million, because they provide ambulance and fire. We have spent time with them trying to improve the price.

Q323 Chair: Of these companies that I have listed here-obviously you have not seen the list but it is the top 10 so it must have come from you-how much has been collected in penalties by the Home Office for non-compliance with contracts?

Bill Crothers: Which companies? Are you looking at police IT specifically?

Chair: I can show you. It is police IT.

Bill Crothers: It is police IT. I would need to get back to you by correspondence.

Q324 Chair: Give us a rough figure as to how much money has been collected in penalties from the Home Office in the last year from companies that have not performed their contracts.

Bill Crothers: For police IT I don’t know because police-the arrangements we have-

Q325 Chair: Any Home Office contracts. Do you ever collect penalties when people don’t perform?

Bill Crothers: We collect often what is called service credits, so if someone is not performing on a service we collect credits.

Q326 Chair: So how much has been collected in credits?

Bill Crothers: Do you want to give an example, Ian, of one contract, maybe without the supplier?

Q327 Chair: Give me a global sum. You are the Commercial Director of the Home Office; you must know.

Bill Crothers: I would not know that number.

Chair: Would you let me have those figures?

Bill Crothers: Yes.

Q328 Steve McCabe: Service credits, does that simply mean that the person says, "Well, we are sorry we haven’t done what we said we would do but we’re giving you a little bit of discount"?

Bill Crothers: No, there are two arrangements typically in complex IT or BPO contracts. One is before the system or service is delivered and sometimes there are penalties for non-delivery or not on time delivery, and we have occasions where that happens. Whenever a service then starts or the system is delivered and it is running, then there are service levels, so they have to deliver to a standard. If they don’t meet the standard then they pay essentially penalties, but they are called service credits, so there are two types that we get.

Q329 Chair: Could you let us have by Friday a list of all the penalties that you collected in the last year?

Bill Crothers: Yes.

Q330 Chair: Mr Forster, the Centre of Excellence, that sounds pretty grand as a title, and we were delighted to find you in Brighton. Presumably this is not excellent what is happening with procurement at the moment? What is your role in all this?

Ian Forster: My role, I have recently taken responsibility for the Centre of Excellence. It was established in 2009. Its focus is on the commodity and category management-

Chair: Sorry, could you speak up?

Ian Forster: Sorry. It focuses on commodity and category management and looking at developing strategies with regards to working with our major suppliers in those areas, so we have a number of categories that we are focusing on at the moment. Bill has referenced the work that has been done on office supplies, on travel, looking at professional services is an area where we have done some excellent work, not just in the-

Q331 Chair: What is your budget?

Ian Forster: The budget for the Centre is £1.8 million.

Q332 Chair: How many people do you employ?

Ian Forster: The resource count is 50. Predominantly we have 38 in the Centre that look after the actual buying aspect and the category management. We have a small number of people, three, who look after customer service, because it is a balance of customer service as well as just looking for lowest price. We still have to meet the needs of the customer.

Q333 Chair: How much did you save the taxpayer last year?

Ian Forster: The Centre declared savings of £38 million last year.

Q334 Chair: To the taxpayer?

Ian Forster: That was the contribution that came out of the Centre.

Q335 Chair: Would you write to us and tell us exactly how that is broken down, so we know?

Ian Forster: Absolutely, yes.

Q336 Chair: What would you say to the last witness who told us that we are spending 20% more than we should be on IT contracts, which is a total of £120 million a year? Were you surprised at that figure? Is that the first time you have heard that mentioned?

Ian Forster: It is the first time that I have heard that specific figure. What I am aware of is the initiatives that we have commenced in the Home Office with regards to looking at our IT supplies in particular, including Serco, getting a view of how they transact with the Home Office across the estate, not just in silos in individual departments.

Q337 Chair: But it is a pretty large figure, isn’t it? If I was in charge of the Centre of Excellence and I heard somebody was telling me I was spending 20% more than I should be, I would be pretty interested in that.

Ian Forster: Absolutely. One of the things that we have done with the Centre of Excellence most recently is enhanced the capability with a team in the Centre that is focusing in on strategic relationship management. So the intelligence is driven by PCOE, and that feeds into a small unit, which then engages with our strategic suppliers, such as Serco, such as Fujitsu, who again is one of the top suppliers to the Home Office.

Q338 Chair: They are on that list?

Ian Forster: They are on that list.

Q339 Chair: You have not said to Fujitsu, "Can you save us any more money than we are currently spending?"

Ian Forster: Fujitsu were subject to significant renegotiations of a contract, the IT 2000 contract, similarly with Atos, and those renegotiations were taken forward by Bill’s predecessor, John Collington, and significant reductions were made on that contract. I am happy to share those figures with you.

Chair: Please.

Ian Forster: Put them in a letter to you.

Q340 Mark Reckless: On this issue of IT procurement, I know Lord Wasserman is looking at this, and I understand one option is it could go to the Home Office, another to the NCA, or a further option would be a more sort of public-private entity, which perhaps could be more innovative in the development of IT. I wonder in this context if any of you gentlemen are aware of Project Athena, involving the co-operation of Essex and also Kent, and I think possibly the Met joined? I wonder whether you consider that could be a possible platform for national development of police IT?

Bill Crothers: I have been working with Lord Wasserman and we are in the process of giving advice to the Home Secretary in the next few weeks, and so there has not been a decision as to which route we will go of the three. There is, as you said, NCA, private entity, GovCo-type private entity, or Home Office. We have also been, in doing that, consulting with the forces and Athena has been relevant, so Chief Constable Jim Barker-McCardle from Essex was consulted; we understand Athena. Athena is the sort of construct that I think could be brought into a GovCo type arrangement. One of my observations of coming into Government in the Civil Service is that each department worked essentially in silos and didn’t share information. What we did last year on the large IT contract suppliers was we now share information across all the departments, so we have good information on each supplier, their margin, gross/net margin, overheads, what business they do where. What I initiated about three or four months ago was to bring the police forces’ IT spend into that, and I think a lot of this is about consolidating the spend and sharing information.

Q341 Mark Reckless: To the extent you are advising, will a possibility be the development of something like Project Athena, as opposed to trying to establish a new entity from the ground up?

Bill Crothers: I am not sure I am clear on the question. Athena itself is likely to be complete before the new entity would be set up, because it will take a while to set it up. Athena is scheduled to complete end of this year, so Athena itself would be finished. The ongoing service may well be incorporated into the entity.

Q342 Dr Huppert: If I can first observe that the Chairman at the beginning said that it had been suggested that you could easily save about 20% of the procurement costs and you said the Home Office was better than the rest of Government. I firstly observe that it is entirely possible for both of those to be true. It may be that only being able to save 20% does place the Home Office better than much of the rest of Government. I would like to ask you about about levels of procurement, central and local. Were you all here for the previous session?

Bill Crothers: Yes, I was.

Q343 Dr Huppert: Would you agree with the comments that were made earlier about the frameworks, national standards, and that in general often the flexibility is worthwhile? What is your take on that?

Bill Crothers: I think there is a very important distinction between large complex contracts, things of the nature of Airwave or contracts that Serco, IBM, CSC and so on provide, and common goods and services-uniforms, fleet and so on. I think you need to make a distinction and handle each differently. For the common goods and services, the approach we are taking in central Government is to consolidate the spend. Central Government today spends, on 2009-10 numbers, excluding obviously the police, £13 billion on common goods and services; £2.5 billion of that is central contracts. There is a strategic objective to increase that £2.4 billion to £10 billion, so all departments will sign up to central contracts for common goods and services. That is things like paper, envelopes and printer cartridges, and the police should do the same, I think.

Q344 Dr Huppert: What about the experience that many of us who have worked with these will have had that paper from the central contract costs a certain amount, paper from Staples down the road is cheaper? That is a common experience that happens; it happens within Parliament, it happens elsewhere. Would you mandate people none the less to buy the more expensive centrally-commissioned supplies?

Bill Crothers: Well, I think I would, yes.

Q345 Dr Huppert: Even if it is more expensive?

Bill Crothers: No, because the intention-if you get volume in there, volume brings with it discount. An example, we have under this Procurement Centre of Excellence-and I am not sure I would have used the phrase "excellence", because I think we are good, not necessarily asserting we are better than everyone else-it is unglamorous, detailed work. In office supplies last year, we saved about £1 million off about £6 million. We now buy pencils, paper and notebooks that are unbranded rather than branded. You make savings of up to 90%, 95%. Toners, printer cartridges, we buy 60% cheaper than we bought last year, £14 not £34. That is all very unglamorous and you just work through it. It is unlikely that anyone in the Home Office could systematically buy one of those things cheaper than the Centre is buying. My intention is that the police should benefit from that as we take responsibility for it, and then we benefit from central Government.

Q346 Dr Huppert: So when you are finished with this, clearly if it is cheaper than I can buy down the road, fine. If it isn’t cheaper, and if you have a police officer who says, "Look, I can just buy a pen at my local newsagent’s, wherever it may be, that is less" what would you say to them?

Bill Crothers: I would say, "Your intention is that you can’t do that, but if you can buy cheaper, then fine, go buy cheaper".

Dr Huppert: So you would say to the police officer, "You must spend more public money than for-"

Bill Crothers: All right, that would be what I would say. The goal of all of this is to buy cheaper and demonstrate that you can do, and we have many examples of where we are buying things cheaper this year than last year and cheaper than lots of other departments.

Q347 Dr Huppert: But the local police officer or chief constable, whoever it may be-I am slightly confused. You gave two answers that seem to be opposed to each other. Would they be able to go and buy their own thing locally if they felt that was cheaper?

Bill Crothers: In extremis, yes.

Q348 Chair: Mr Smith, you have now retired from your post in the Treasury, so you are free to speak your mind. I don’t think you have any golden handcuffs, do you? Looking at the way in which Government procures and looking at it from the Treasury’s point of view, because you want to save the taxpayer money, it is all rather sad and disappointing, isn’t it, that we should be talking about a procurement system that is so inefficient?

Nigel Smith: I think the straight answer is yes. I remember my first time I went before the Public Accounts Committee. We had-

Mr Winnick: Can you speak up, Mr Smith, please?

Nigel Smith: Yes. The first time I went before the Public Accounts Committee we had almost exactly the same conversation as we have had today. Now, that is not to say there hasn’t been progress, there has been progress, but you said, was it, "Did you think 20% saving off IT was possible in the police service?" I would make it more general and say, yes, that is possible across Government, not just the police service. There is a lot of evidence for that. There is good practice in the Civil Service; there is good practice in ICT contracts. I would certainly agree very much with what Bill was saying before, that when you are looking at procurement, procuring, let us say, a kilowatt of electricity is very different to procuring an Airwave contract and you need different skills and different processes, but even on the complex contracts, I would challenge that many of them you can get parts of them standardised by requirement. So the first thing you have to do is to look at where standardised requirement rather than local discretionary different requirement is a good value for money choice. For example, on ICT contracts, if you look at desktop services, it is quite possible to standardise the requirement of desktop services and there is already experience that shows 20% and 30% savings against previously bought desktop services.

Q349 Chair: But isn’t one of the problems the fact that, as with Airwave and this 15-year contract, civil servants tend to go back to people they were dealing with in the past? They form relationships with them, they form networks with them and therefore the transparency of advertising a contract-anecdotally, I heard about a Foreign Office contract that had recently been given out to someone who was prepared to do it cheaper; I think it was removals of embassies. They were doing it cheaper, but the company that had it originally complained, and therefore the Foreign Office is paying more as a result of sticking to the previous supplier. Is there a tendency just to be fixed on people you know and there is not that much transparency?

Nigel Smith: I think it is difficult to make generalisations, but it is human nature, isn’t it, particularly in a risk-averse sort of situation, but I would say that on the one hand you have that. On the other hand, you do have the OJEU process, which also has been talked about. That is about free and fair competition, so that every contract over a certain amount of money has to go to competition. It is the other side of it, so the fact that a supplier is unable just to say, "Well, okay, we’ve had it for the last 15 years. We will do a deal and we will have it for the next 15 years"; it has to go to competition, quite rightly too. There are major problems with the OJEU process, I have to say, but at least that principle stops that abuse, in my view.

Q350 Alun Michael: Yes, just following up on that, I know we are talking primarily about the Home Office but, as the Chairman suggested, it goes broader across Whitehall. There is a tendency of Whitehall Departments to learn a lesson and then forget it again; institutional memory isn’t what it used to be perhaps is the lesson. This whole area involves competition, yes, but managing partnerships, managing relationships with industries-we heard from earlier witnesses-timescales, realism of budgets and so on. As a Minister faced with this sort of issue within the Department, I went to OGC to look for help in finding a way through it, a very positive experience I have to say. Has Whitehall changed? Are some of these relational issues-because it is a mixture of a relationship and accountability and transparency-better understood across Whitehall now?

Nigel Smith: Without doubt. I came into Government four years ago and left last September, and when I came in with my Permanent Secretary colleagues, if I was to ask the group of 20 or 30 people gathered at a Wednesday morning colleagues’ meeting, "When was the last time you saw your key suppliers?" probably only about two or three hands would have gone up. At the end of it, virtually all of the hands went up and they were seeing them on a regular basis. There is a thing called a common assessment framework that is in place, where the top 13 suppliers on ICT, for example, are regularly reviewed once a quarter against a category of supply, value for money, a whole range of things. On top of that, for the really big projects that you have been talking about and the very sensitive projects, there has been instituted over the last two or three years, which I introduced, a major projects report of the top 50 projects of Government, which is regularly reported on and action taken when there are problems.

Q351 Alun Michael: Apart from that level of those involved in the procurement-we did hear a positive response from the Permanent Secretary of the Home Office when we asked her recently-is it understood that these things have to be on the desk of the Permanent Secretary, who has to not just take the advice of experts lower down the food chain but actually understand what they are managing?

Nigel Smith: Absolutely. In fact, that was one of the things that was a bit of a challenge when I first came in, a thing called a gateway report, which perhaps not everybody-

Alun Michael: Indeed.

Nigel Smith: I think most people know about, but I had a rather sweet letter that I used to send to the Permanent Secretary when I got a red gateway to me as the Head of the OGC. The letter I sent used to say, "You may want to look into this" and that has changed.

Q352 Mr Clappison: In the light of your overall experience, can you give us some indication of what you see being the effect of EU procurement rules on public sector procurement?

Nigel Smith: I think there are major problems but equally, as I said before, I think we must remember that EU procurement is there to ensure free and fair competition and availability of that. Now, the problems are twofold. One is that, in my view, the thresholds are too low. The threshold for goods and services, I think I am right in saying, is £96,000. For works services contracts it is about £1.5 million. I believe that is too low. I think it should be raised and I think we should look at how we could go to the European Commission and raise those thresholds.

The second thing is the application of EU and OJEU process, for which I think the previous gentleman from Intellect quoted some timescales from start of competition through to the placement of the order at 77 weeks. I can’t comment on whether that is correct, but generally speaking it is true that if you look at what an OJEU should take for a complex contract-remember £97,000 is very different to £50 million-is it correct that we are reducing the time to the lowest possible number? The answer is no, we are not. If you look at the minimum time it takes to go through all of the statutory periods of notification with an OJEU contract, it is around about 3½ months for a contract. I would take advice on that, but it is around about that period of time. So you have to ask yourself the question, "Where is the gap between 3½ months and, let’s say, a year?" Well, part of it is being risk-averse, part of it is over-complicating, part of it is basically not having the capability. There is work-and certainly there was when I left-going on to see how we can drastically shorten that process, which needs to happen.

Q353 Mr Clappison: But time is money for these purposes, so would you agree then that the EU procurement rules are costing money, including for the smaller contracts, which have to jump through all the hoops?

Nigel Smith: I am sorry to sound a bit like still a civil servant, but the answer is yes and no. The answer is yes, and it is costing suppliers a lot of money because if they are going through a year’s procurement there is a lot of people in a standing army to support that. The answer is no in the sense that in the absence of OJEU, which is basically there to ensure free and open competition, I believe competition is what drives value for money generally speaking. That is my point.

Q354 Mr Clappison: That is making the assumption that the EU rules are effective in doing that and do not contain-as we know from the EU-additional items that are not necessary, additional rules.

Nigel Smith: Well, that is absolutely true, but quite a number of the items you specify yourself. Can I just give you one example? One example, if you are going to contract for £100,000, do you really want public liability insurance on every case of £1 million? In my view, no. Sometimes that happens and that is about capability and getting best practice and getting a professional to do it properly.

Q355 Mr Winnick: Mr Smith, you are retired. Who do the other two witnesses report to?

Bill Crothers: Ian reports to me.

Mr Winnick: Mr Forster reports to you, yes. We have got that hierarchy right.

Bill Crothers: Yes, and I report to the Director General of-

Mr Winnick: To the Director General?

Bill Crothers: To the Director General, who is responsible for finance and commercial. She in turn reports to the Permanent Secretary.

Q356 Mr Winnick: What I have in mind to ask is, is there any sort of ministerial-obviously in theory the Minister is responsible, if there is an oral question or a debate the Minister will be around and about, but how far would there be day-to-day ministerial involvement in work that involves, does it not, hundreds of millions of pounds?

Bill Crothers: The matters you were talking about, the police and the amount of money spent on IT and non-IT, the Police Minister has been very actively involved in that; e-Borders, the relevant Minister, you would expect, has been very actively involved.

Q357 Mr Winnick: Do you yourself have contact with the Minister?

Bill Crothers: Yes, I do. My previous role was on ID cards, the National Identity Scheme, and we-

Q358 Mr Winnick: How often do you see the appropriate Minister?

Bill Crothers: Probably on average maybe once a fortnight, of that order.

Q359 Mr Winnick: To discuss the sort of matters in detail that we have been going through today?

Bill Crothers: Yes, yes.

Q360 Mr Winnick: That is the Home Secretary or the Police Minister?

Bill Crothers: Typically not the Home Secretary. The matter that Mr Reckless referred to about how to handle police IT, we are also going to talk about engagement with the private sector, outsourcing, we are due to engage with the Home Secretary. More significant items, the Home Secretary. On ID cards, because it was contentious, it was typically the Home Secretary.

Q361 Mr Winnick: So obviously these shortcomings in Philip Green’s review and what has been spoken about today and questions asked from the Chair and other members, these are matters that the Minister is very familiar with?

Bill Crothers: They would be, yes.

Mr Winnick: Or Ministers are very familiar with?

Bill Crothers: Yes.

Q362 Alun Michael: Just to be clear about the role of the Centre of Excellence, we have the non-IT police procurement functions of the NPIA becoming the responsibility of the Home Office, being nationalised, if you like. Will the Centre of Excellence then have a direct role in non-IT police procurement?

Bill Crothers: Yes. Yes, certainly.

Q363 Alun Michael: What will that role be?

Bill Crothers: As Dr Horne said, we have spent the last few months, since the Home Secretary wrote directly to the Chairman of the NPIA, defining exactly how we would incorporate that responsibility into PCOE, and we are due to complete it within another couple of months.

Q364 Alun Michael: Are you saying you don’t know yet then how that role will work or can you give us some-

Bill Crothers: No, no, I know how it will work. So, for example, the police procurement of fleet is about £97 million. We will take responsibility for that. They recently ran a procurement to reduce the number of approved suppliers from 21 to four. We will then manage that.

Q365 Alun Michael: Where will the Centre of Excellence fit into that work?

Bill Crothers: We will then take the fleet that the Home Office spends, which is a smaller number, it is about £3 million, we will take the fleet that central Government spends, which is about £260 million, and we will look for further improvements. So what you are doing is getting the benefits of aggregated spend. HMG spends £260 million on fleet, we spend about £3 million, the police spend about £97 million. Clearly if you put all of that together, over time you should be able to make even further improvements.

Q366 Alun Michael: I can see the process, but I don’t understand how the Centre of Excellence-what is its role in-

Bill Crothers: Well, what we do is we ensure that people buy off the contracts that we have defined, making use of the frameworks we have defined. We gather information and we continually look to see if there are better deals. If there is a better deal, we change the deal and then we get people to buy on that deal.

Q367 Alun Michael: The leadership in that will be with the Centre of Excellence?

Bill Crothers: Yes, yes.

Chair: Mr Crothers, Mr Forster and Mr Smith, thank you very much for giving evidence to us today. We would be most grateful if you could let us have that information by Friday. Thank you very much.