UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1679-iv

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Justice Committee

the budget and structure of the ministry of justice

Tuesday 7 February 2012

Richard Morris, Tony Leech and Charlie Bruin

Andy Keen-Downs, Sarah Payne, IAN BARROW, Bernadette Byrne and Diane Cheesebrough

Evidence heard in Public Questions 214 – 281

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Oral Evidence

Taken before the Justice Committee

on Tuesday 7 February 2012

Members present:

Sir Alan Beith (Chair)

Steve Brine

Jeremy Corbyn

Nick de Bois

Chris Evans

Mr Elfyn Llwyd

Seema Malhotra

Yasmin Qureshi

Elizabeth Truss

Karl Turner

________________

Examination of Witnesses

Witnesses: Richard Morris, Group Managing Director, G4S Care and Justice Services (UK) Ltd, Tony Leech, Managing Director, Sodexo Justice Services, and Charlie Bruin, Business Director, Central Government Business Group, Liberata UK Ltd, gave evidence.

Q214 Chair: Mr Bruin from Liberata, Mr Leech from Sodexo Justice Services, and Mr Morris from G4S Care and Justice Services-we are in for an alphabet soup of names this morning-we are very glad to have you with us and are grateful for your help. As you know, we are looking at the Ministry of Justice as an organisation and a Government Department-how it functions, how effective it is, how carefully and efficiently it spends its money and how it organises things such as the contracting process, which is assuming an increasingly large part of its responsibilities. We are particularly glad to hear the experience of organisations that have contracted to the Department and have some inside experience of how it works. How do you think the Ministry of Justice has handled its outsourcing? How does it compare with other Departments that you may have dealt with?

Richard Morris: I am happy to offer a view on that. From our point of view, there has been significant progress by the Ministry of Justice, probably over the last three to four years, in terms of its professionalism on tendering and procurement. We saw that in 2008, when a unit within the National Offender Management Service was disbanded and the Ministry of Justice procurement directorate was given responsibility for a much greater proportion of the tendering and procurement for offender services. From our point of view, it is a lot more professional, with more structure, more clarity and forward visibility in its procurement and tendering opportunities.

Having said that, we still believe that there is significant opportunity to improve. That comes in a number of areas. On some projects and some procurements, the pace of progress is painfully slow. From our point of view, it means that we have to keep guessing when tenders are actually going to start. It seems that a lot of time is taken to get to a point where they can agree a specification and then move forward on that specification. That is one observation; it is something about pace in the process. Of course, the slower the tender or procurement process, the more missed opportunity there is in putting in place a new service that could give better value for money for the taxpayer.

The other observation, and then I will hand over to the others, is that at times there is a tendency to over-engineer and over-complicate the approach to procurement. A great real-life example that we are working on now is the use of what is called the competitive dialogue procedure for a £4 million-a-year contract to provide juvenile escorting. That is the secure escorting of young people. That £4 million a year is relatively small in the grand scheme of things. I think the Ministry of Justice will end up procuring something that is broadly similar to what it has in place now, and yet it is embarking on a process that will take the best part of a year and consume huge resources, both on the side of the bidder and the Department, in terms of the procurement process.

Q215 Chair: What is the nature of this process?

Richard Morris: Competitive dialogue is based on the premise that, at the outset of procurement, the Ministry of Justice does not have a clear view of what it wants to buy; it therefore makes sense to go through an iterative process where, incrementally, it builds up a view of what it wants to buy, with input from prospective bidders along the way. In practical terms, it means a series of regular meetings and at times quite resource-intensive activity for bidders where you have to assemble a team, and you have to get that team moving down to London on a regular basis to have conversations about all sorts of different things. My view is that competitive dialogue has a place, although if you are buying aircraft carriers and the like it does not particularly have a place.

Q216 Chair: It did not work very well for them either.

Richard Morris: Maybe not; maybe it would have done. Using it for something that is relatively straightforward, of quite small value and of low risk is the wrong way to go. We welcome what seems to be the trend in the Ministry of Justice to move away from competitive dialogue towards something called negotiated procedure, which, in theory, should allow a more streamlined approach to procurement and tendering.

Q217 Chair: Does anyone wish to add to that?

Tony Leech: I would agree with Richard. Having first begun a contractual and partnership relationship with MoJ back in 2003, there has been a huge advancement in the process, given the length and complexity of what was a very laborious process four or five years ago. One area where it was extremely costly and took a huge amount of time was that of contract negotiation. Contracts, especially for PFI deals, were extremely complex. You would expect to see a time frame of maybe three, four or five months after a preferred bidder announcement before you were ready to agree a contract that you could move forward on.

In some ways that has improved the process dramatically, but in others it is very much now a matter of saying, "Here is the contract." There is very little discussion these days on the contract, and some of that has been the result of good work that has taken place through Partnerships UK and the SOPC guidelines that have been established. Now, most people pretty much know where they stand with the contract form. For me, that would be one of the improvements. Like Richard, however, I believe that for large, multiple-bid, complex contracts there are still better ways than currently exist to streamline that process; for most of us, the process around that bidding time is still approximately 12 months.

Q218 Chair: If you were to place contracts yourselves as private sector organisations, as I am sure you do a lot of the time, how different would the process be from what you experience with the MoJ?

Tony Leech: I definitely think that there is a very clear understanding about what is required up front, so discussions on exactly what you are looking for are there. We still have experiences where, at some stage, our process will hit a hurdle, and all of a sudden it will stop. If you look at the current climate, where there are large pieces of outsourcing going on, a lot of that is to do with the transfer of undertakings and pension issues. They are very complex issues, but they come up in certain periods of the process; some are very much towards the back end of the process, and it would be far better if they were sorted out at the front end. Everybody would know where they stood, and the process then would move more quickly.

Charlie Bruin: I would like to echo the comments of my colleagues, in that there have been good improvements in the Department’s procurement process, particularly with the supplier engagement that happens before the procurement process formally kicks off. In some of the events that I have attended in recent years, there is an engagement with a wide supplier base where they set out the broad objectives of what they hope to achieve with the procurement. That really does enable suppliers to qualify, and qualify quite hard, whether it is an opportunity that they feel able to go for, hence the amount of money that they are prepared to spend in going for that procurement.

The other point that I would make about the MoJ is that there is a rich source of information and experience that it can draw upon, not only within its organisation but within its suppliers. Again, all the suppliers here have a fair amount of experience in tendering with the MoJ, and when the Ministry embarks on procurements exercises it can draw on that experience. Suppliers have a decent understanding of the core business of the MoJ, and often as much as the Ministry’s internal staff and civil servants.

Q219 Elizabeth Truss: As external observers of the Ministry of Justice, if you had to recommend changes to save costs and still achieve the same output, what would you do?

Charlie Bruin: Liberata is primarily involved in back-office support services; for instance, we pay invoices on behalf of the Department and we run its payroll, so we are very much into ancillary and support services for the Department. There is no great science in what we do as a private sector organisation in terms of saving costs. We would make adequate investments in the underlying systems and ensure that those systems are connected to each other so that there is no opportunity for the manually intensive and expensive processes inside an organisation to perpetuate or to be a drag on costs of the organisation.

By its nature, the MoJ is a large and sprawling organisation. It is highly diverse, managing prisons and disparate courts and tribunals estates, so there is a lot of opportunity among a diverse and sprawling organisation to have lots of manual processes at its periphery. As a private sector organisation, we always recommend and advocate investment in core systems, and ensuring consistency and compliance among the officers in those organisations is one of the key factors that enable them to save money. One area where the MoJ has made progress and has shown a fairly mature attitude to compliance is in its willingness to accept non-compliance charges from suppliers that are running processes when its own offices and staff do not comply with processes that have been agreed centrally. As a result, it demonstrates where the core of some of the costs can occur through non-compliance with the processes that have been laid out.

Q220 Elizabeth Truss: May I ask the same question of the other two members of the panel? Where do you think the great escape is within the Department to improve efficiency and lower costs?

Tony Leech: One is obviously the outsourcing of services. You can use the analogy of the different utility organisations digging up the same patch of road for things like gas, water or electricity. You have that sprawling estate, and, if you start looking at regional issues, there is an ability to outsource a range of services that link together rather than picking them one at a time; but you might go back in three years and find that a range of other services could have been linked as part of an outsourcing process.

Q221 Elizabeth Truss: Could you provide us with a list of those services because that would be very useful?

Tony Leech: From our perspective, we are dealing with a very large prison estate, and you are talking about a probation and parole estate. As we move towards a structure of payment by results, where you can work in a region and you have a large group of people where the interface is solely with your organisation, there will be much greater clarity about the risk that you are willing to accept because you have the individual going from prison to the community.

Q222 Elizabeth Truss: What is stopping that happening within the MoJ at the moment?

Tony Leech: It is its size, scope and pace. We have seen improvements in both the number of senior people and the calibre of those people within MoJ, but we are now embarking on a very large path in terms of outsourcing, and we are market-testing it within the prison estate. It is about learning from that and moving quickly so that we can move from one process to another, understand what has worked well and change what has not, and continue with the process. With that, you will see a greater speed in outsourcing and market testing, which will lead to greater savings.

Q223 Elizabeth Truss: Mr Morris, where do you see the big opportunities?

Richard Morris: The biggest opportunity is prison market testing. Savings have been delivered through competition with the last round of prisons; we have saved the taxpayer £140 million to run HMP Birmingham over 15 years. The Ministry of Justice, having realised that, has clearly started to press its foot on the accelerator with the launch of a second phase of that competition programme.

The key word is competition. It is not necessarily about outsourcing or the public or private sectors; it is about introducing competition in the delivery of services, including prisons, but also the transformation of how probation services are delivered is a big opportunity for the Ministry of Justice, in terms of both effectiveness and efficiency. No doubt, we will hear later this month what the proposals are in that regard. Our strong encouragement is that the Ministry chooses to find a way of introducing effective and meaningful competition into the delivery of probation services. That is an opportunity. As Charlie mentioned, looking at back and middle-office activities, particularly in areas such as the HMCTS, and seeing how they can be reconfigured and redesigned to be delivered in a more simple and streamlined way, is another big opportunity.

Q224 Elizabeth Truss: Mr Bruin, at our last session we heard that £4 million had been spent on additional accounting services, partly because the Department was not achieving its year-end target. Was that with your company? What is wrong with the finance process that it is incurring these massive extra costs?

Charlie Bruin: We are the private sector company that is providing assistance to the Department in the production of its statutory accounts; that is correct. As for the figure that you mentioned, the contract that we have in place with the Department is flexible. We provide assistance on a month-on-month basis, so that is not the total amount of money spent to date but the amount of money that might be spent throughout the contract run to July; the Department has the flexibility to decrease or increase that spend as we go along.

As for the finance processes that have led to statutory accounts being late two years in a row, these are some of the things that we are doing to assist with the process this year. As part of the assistance that we are providing to Ann Beasley and her team, we are engaged in three key activities. The first is micromanagement of the timetable to get to the point where they can lay their accounts on time. We are providing project management support on a working-day basis, because every working day between now and the point when those accounts need to be laid is important. The second is dealing with the technical accounting issues as they arise. There are a number of them, some of which have been discussed before the Committee, including aspects on fixed asset accounting and so forth. The third is ensuring that there is enough time to liaise with the National Audit Office, which obviously has to audit the work that has been done as part of the statutory accounting process. We were retained relatively recently, in late December, to provide assistance with this process, and that is ongoing.

Q225 Elizabeth Truss: From what you are saying, it sounds as if the capacity to deal with these matters is not necessarily being put in place in the Department. If we are talking about a figure of £4 million, that would pay for quite a lot of accountants to do that work in a timely fashion rather than the Department incurring additional expenditure through the use of contractors. Is there a failure at the Department’s management level to get a grip of the problem early enough, because this is the second year in a row?

Charlie Bruin: One thing that we have been able to do is bring in a number of well- qualified resources at short notice to augment the existing capacity that resides within the Department.

Q226 Elizabeth Truss: Are you saying that it does not have enough qualified people?

Charlie Bruin: The Department is making an ongoing effort to hire full-time staff and qualified accountants in the various accounting posts, and that process is ongoing. In terms of its existing capacity, we are providing additional qualified capacity at short notice in order to help it with this year’s process.

Q227 Elizabeth Truss: I have a question about work with other Departments. Mr Leech, you mentioned that efficiencies could be gained essentially by letting lots on a regional basis across prisons and probation, but do you see scope in the work that your company might do with other Departments? Could there be more cross-departmental contracts rather than only with the Ministry of Justice? How do you think the structure would need to change in the Ministry of Justice in order to achieve that?

Tony Leech: Having worked at senior level in Government, I know that Governments are often like organisations and that learning across Departments or divisions may not always be as smooth or as easy as possible. We have very large contracts with the Ministry of Defence, with various PCTs, with education authorities-in a number of sectors across the country. There are those opportunities, especially in organisations that are co-located in large town centres, where hospitals and other facilities may be joined up. I do not think that there is an issue or problem with that. You can end up with a different scope of services being required at different times and different levels of service, so it can add a level of complexity. From a timing perspective, the most important thing is to ensure that, as each of these things takes place, there are good learnings from what has occurred. New innovations have happened; that is essential. For instance, our organisation is disparate; we have 440,000-odd people across the globe, and making sure that you have ways to share that good practice and get that information out is the key. Once you have done that, you can start looking at efficiencies that may go across to partners.

Q228 Elizabeth Truss: In your dealings with the various Departments, how would you rate them for effectiveness and efficiency without losing any of your contracts?

Tony Leech: My main dealings are with the MoJ, but my fellow managing directors work across other Government Departments. Their discussions would be similar to mine. Over the last four or five years, right across our business we are seeing very good improvements in the way that outsourcing and contract management has been going, and I think my colleagues would share that view.

Chair: Because we have three witnesses with plenty to tell us and we have a certain amount of ground to cover in a limited time, we shall have to cut back hard on supplementary points for the moment, although we may be able to pick them up towards the end.

Q229 Chris Evans: There seems to be a fluctuation in your experiences of working for the MoJ. Mr Bruin, your company gave as an example to the Committee your automated expense claims process, which was delivered within the four-month deadline, on budget and with annual savings of £300,000. Your company, Mr Morris, has given us your experience of the transition of HMP Birmingham from the public process, which took nearly three years. Why do you think there are such wild fluctuations in your experiences?

Richard Morris: I think that every project and every service that is procured can be quite different. The two examples that you give have some fundamental differences, in the sense that running a competition for a public sector prison for the first time had with it many complexities to do with pensions and the risk associated with industrial relations. The fact that there was a general election in the middle of the process would no doubt have had an impact on the progress of the procurement. However, there is no obvious reason. I would encourage the Ministry of Justice to have more structure in relation to determining what level of resource and what type of approach it should be undertaking, given the complexity and value of a particular service. There does not seem to be any clear link between complexity and value and the procurement approach that is taken. It seems to be a little ad hoc in that sense.

Q230 Chris Evans: Did you foresee any of these obstacles before you took on this project? It took three years, affected the morale of staff and prisoners and, from what I saw, was a grandstanding mess. How did that come about? Whose fault was it? Was it the MoJ or your company? What was the main reason why it took nearly three years to bring about that contract?

Richard Morris: It certainly was not any of the bidders. It was out of our control. The procurement is run by the Department. Let’s face it, the process was politically very sensitive. I am sure that, out of view of the bidders, there were all sorts of discussions and tensions in place to do with taking a public sector prison and putting it up for competition. Having done Birmingham, having set it up, and got it up and over the fence, if you like, through the process, in the second phase of competitions I would expect the Ministry of Justice to take much less time.

If you want to map that out, the nine prisons that are now being put through market testing were announced in July 2011; the competition is well under way and it will conclude in October 2012, with commencement for successful bidders in early 2013. You could argue that that is still a long period of time, and it is; it perpetuates the uncertainties and anxieties that employees in Birmingham prison would have faced. However, I imagine that the Ministry of Justice will continue to improve the process as it goes through and gets more experience; bidders will also get more experienced, and we should be able to start compressing that time scale.

Q231 Chris Evans: What concerns me is that the obstacles that you mention should have been foreseen. You say that there was a general election in between, but we knew that it was coming. Why were those factors not accounted for before you went into the project? Why did it take three years, and how much did that eventually cost the taxpayer?

Richard Morris: I do not know how much it cost the Department, but I know how much it cost G4S; it was a considerable amount of money because you have to have a big team running for a long period. We want to work with the Ministry of Justice to see how we can compress and shorten time scales further.

Q232 Chris Evans: This is a question that you may not want to answer. Did you at any point regret becoming involved?

Richard Morris: In the process for Birmingham specifically?

Q233 Chris Evans: Yes. You were halfway through, it was delayed for three years, and everything seemed to be going wrong. Did you ever regret getting involved?

Richard Morris: No, we did not. As a bidder, we always had the option to pull out if we thought that it was not worth pursuing any longer. Indeed, with other Government projects we have taken that decision. With this one, however, we could see there was a level of determination to see the process through, both by the Labour Administration and whatever Administration followed. We therefore believed that it was worth continuing with it.

Q234 Chris Evans: Mr Bruin, you had a far better experience. Would you talk us through why the process of automating the expenses system worked far better? I understand that it was a smaller project.

Charlie Bruin: It is a good example where you are in control of a number of the variables that enable the process to happen more quickly and to realise the benefits sooner.

In respect of the expense management claims, it was a service that we already provided to the Department via a manual expense claim service where we would charge the Department for a manual claim circa £4 a claim. As a result of implementing the electronic expense claim management service, we reduced that from £4 to £1 a claim. We were able to do that because we were leveraging an existing system that was already in place; it was the enterprise resource planning software that we used in Liberata to maintain the finance systems. We were able to do it via a change control to the contract as opposed to a new competition. It was a combination of all those things. First, the process and services were already provided by Liberata; secondly, we could essentially pass those savings back to the Department within Liberata’s contract; and, thirdly, there was no need for an external competition at that point, which enabled the lead time to realise those benefits as being relatively short.

Q235 Chris Evans: This is a question for all three of you, and then I shall leave it there as time is ticking on. Do you think that these wild fluctuations, with good and bad experiences, would discourage the private sector from becoming more involved with MoJ projects?

Richard Morris: As I said at the beginning, the Ministry of Justice has come a long way in the last three years, and we see it now at the very forefront. If we surveyed the whole of Government and asked which Departments we found it relatively easy to do business with and to bid for contracts with, the Ministry of Justice would be right up there.

Tony Leech: There will be no hesitation from us in terms of continuing with that partnership and relationship and looking at new business.

Charlie Bruin: There are huge opportunities within the estate that we operate across the Courts and Tribunals Service to make further efficiency savings through electronification, the removal of paper and the consistency of processes across that estate. We have been in the business for 13 years, and we find every month interesting; we like MoJ, we like working with MoJ, and we find it a progressive Department.

Q236 Nick de Bois: I would like to touch on how your companies work with SMEs and voluntary organisations, which is one of the goals of the MoJ. Are you contractually bound to place work with SMEs or voluntary organisations? If so, and if you are prepared to say, how much of your business with those sectors is contracted with the MoJ, and do you have a view as to how that might look in the future?

Richard Morris: In answer to the question of whether we are contractually bound, I cannot think of any contractual obligations saying that we must source from SMEs or voluntary organisations. However, it is extremely clear that, in order to be competitive and to bid successfully for offender services, we need to harness the talents that exist across the whole range of SMEs and voluntary organisations. For example, if we want to bid for a prison, we know that to get it right and to be able to deliver a compelling solution we must be able to source local services-and those local services are usually provided by SMEs or voluntary organisations in the locality. We see it as core and fundamental to our ability to win business. There does not need to be a contractual obligation; the self-reinforcing reality is that, unless we harness the capabilities of the voluntary sector and SMEs, we will struggle to compete with those who do.

Q237 Nick de Bois: At a slight tangent, when talking about rehabilitation programmes, does the governor have a say or is it defined by your contract with the MoJ? We have some very good examples of governors having made the decision to bring in local companies to work with reoffenders, who ultimately go on to employment. At the moment, would they have the flexibility to do that under the contract, or would you have to agree to it?

Richard Morris: It is not one or the other. It is both in reality. We would have a more strategic approach to building partnerships with small organisations, but governors-or directors, as we call them in our prisons-absolutely have the autonomy to go out and look at worthwhile partnerships to build with SMEs. For example, in some of our prisons, where we have developed the concept of a working prison, bringing employment and real commercial activity into the prison, the directors are responsible for going out and building relationships with the SMEs that provide that employment.

Q238 Nick de Bois: Thank you. Would you like to add anything, Mr Leech?

Tony Leech: Again, I agree. Our prison directors have the flexibility to be encouraged to purchase what they do locally, supporting local business surrounding the facilities that we manage. It is very clear, when we look at the range of opportunities out there, that the voluntary sector has enormous reach and has been strongly involved in assisting offenders. We have a partnership relationship with a very well known not-for-profit organisation that assists offenders. Even though it is not a contractual requirement, I believe that it is clearly seen as being highly beneficial by the MoJ for a whole range of reasons, including good business reasons. It is an extremely solid reason why we should be involved with those organisations. From my experience, they enhance whatever services you can provide and offer.

Q239 Nick de Bois: Organisations such as St Giles Trust.

Tony Leech: St Giles Trust, Nacro and a range of organisations.

Q240 Nick de Bois: There are two questions on that point. First, I would be interested to know what that is as a percentage of your contracts or agreements. Secondly, going back to the contractual point, you spoke of very onerous contracts from MoJ that are at times inappropriate. Are you required to impose onerous contracts on SMEs as a result of your prime contract with the MoJ, or can you make it less burdensome on them?

Tony Leech: If you are looking at someone who is providing a specific service, then good business practice would suggest that you look for back-to-back contracts because the organisation has to take responsibility for what it is delivering. It is very clear to us that you cannot work with the voluntary sector and say, "By the way, if you’re providing 10% of the services that we are paid to deliver, somehow the expectation of you and your trustees will be that you will take on that risk." It is very clear from the MoJ, and rightly so, that business organisations should have the capability of providing the necessary back-to-back provisions within a contract for services but that, with the voluntary sector, we should look to ways of working with our partners to ensure that we deliver the service that we are contracted to deliver. However, the prime is that we retain the risk and not the voluntary sector organisation.

Q241 Nick de Bois: That brings up the matter of competition between the voluntary and private sectors. We will not go into that at the moment, but I imagine that back to back is, by implication, somewhat onerous.

Tony Leech: It does not have to be. The service level is clear, and the requirements are passed down to that organisation. For the most part, being an organisation that provides a broad spread of services across Government and the private sector, our level of direct outsourcing against the contract is not high; however, our level of purchasing from SMEs is quite substantial.

Q242 Nick de Bois: Can you put percentages on that?

Tony Leech: It depends on the level of the service that you are providing or the type of service. Within a prison environment, the vast majority of services are directly provided. We provide the FM services and we provide the custodial services; we may also have contracts for nursing, and that may be done through the commissioning of a PCT or privately. Those are the types of services, and medical services are also part of that, but they would not be large within our prison contracts.

Q243 Nick de Bois: Do you wish to add anything, Mr Bruin?

Charlie Bruin: I reiterate what Tony and Richard have said about the opportunity to work with SMEs. It tends to be around the locale. For instance, in Liberata’s case, our main delivery centre in Newport in south Wales will engage with a number of SMEs in that locale; 15 or 20 small suppliers will service Liberata, which is a direct flow-down of the business.

Q244 Nick de Bois: What is it as a percentage of your business with MoJ contracts? Will you identify how much might be with SMEs or the voluntary sector?

Charlie Bruin: Rather than give a figure off the top of my head, I can certainly provide something to you.

Q245 Chair: If any of you have any helpful figures that would be of use to us, please let us have them later.

Charlie Bruin: I shall give them to the Committee.

Richard Morris: I would make just a quick point. A useful example of where we use SMEs and VCS organisations is on work programmes; so the vast majority of our supply chain is made up of voluntary organisations and SMEs. Does that mean it is onerous for them? Through that model, we definitely help the smaller organisations to win work without having to go through burdensome and overly complex Government procurement processes. As Tony said, we are not in the habit of getting into onerous contracts, but we would always seek to flow down obligations and risks to our partners.

Nick de Bois: I understand that.

Q246 Yasmin Qureshi: I wish to explore the question of payment by results. I am not sure how many of your companies have been involved in some of the pilot projects or are likely to be so in future.

Basically, I want to explore with you some of the concerns expressed by various individuals and organisations in the criminal justice system, in particular the Howard League for Penal Reform, which, in evidence to this Committee, was sceptical about the benefits of payment by result. It said that "payment by results threatens to be an example of a system based on poorly conceived outcomes, and therefore one which will waste rather than save public money." It was concerned about two particular areas. One was that the complexity of the application procedure produced inefficiency, in that payment by result encourages a one-size-fits-all approach that prioritises those individuals that generate the highest income and disregards those who may the most problematic. Secondly, of course, it would lead to cherry-picking, in the sense that some people will be easier to work with and others will be more difficult.

If your companies are going to be involved in these things, what practical steps would you put in place to ensure that those sorts of problems do not occur, that people are being properly looked at and that difficult clients are not ignored or marginalised?

Tony Leech: For all of us, everything that we do is payment by results. Our contracts are based on payment by results; if we do not achieve what we are there to achieve, we do not get the revenue and the concessions that we should.

From my perspective, the principle of payment by results in respect of reducing reoffending is very good. There have been examples in many other jurisdictions globally of it being tried in the past and it has not succeeded. There can be a range of discussions about a binary model as against everyone coming through and there is not a selective process, or there is not a process to measure the level of harm that the individual may cause on reoffending. Having sat on the side in senior Government and looking at ways to reduce reoffending and recidivism, from my perspective it is a good starting point where there is a clear measure. The lower you go the harder it gets, and often the more expensive it gets. But you are right that a clear, simple model will say that, yes, if you provide this amount of effort, a certain group will more than likely have a good chance of not reoffending.

The main issue is that you are seeing a reduction in the level of reoffending after release from 12 months in prison. As you move into the more difficult cases of those that require far more assistance and far more help, yes, it becomes more expensive, and the challenge to deal with those people and work with them becomes far more complex. If you are looking at a triangle, those at the top should be relatively easy against the others who will be more difficult; it would be an inverse, so you have a group across the top.

Q247 Yasmin Qureshi: My question was what are you going to do in practice to ensure that that does not happen? It is very easy to say that, if 100 people go through the system, you can manage to deal with about 50 of them as they will not reoffend, but they are probably the easier ones in the first place, and you will probably be able to deal with them. What about the 20 or 30 that are the complicated cases? What will you do to ensure that those people are dealt with properly and that they are not forgotten? So far, you have said that your aims are laudable. What are you going to be doing to ensure that they get some help?

Tony Leech: There are a number of innovative ways. It almost goes back to the previous question about working with a number of organisations and voluntary sector bodies in partnership on PbR to reduce reoffending. You have a target, which should be substantial, to show that you are reducing the reoffending level for those who are released from the facility for which you have responsibility.

With organisations like ours, and I am sure with Richard’s, it is not about taking our eye off those that need far more assistance and help; we are looking at working with a range of organisations to make sure that that assistance is still very much provided. It is not about cherry-picking and saying, "We’ll just work with that group and totally forget about the others." Even outside this particular PBR measure against reoffending, that is not currently the case. A huge amount of effort is being put into working with the most vulnerable and those most likely to suffer issues such as mental health problems, ensuring that we have support mechanisms on the outside for them, and for housing and their ability to gain employment; all those factors are there.

Again, I can speak only for our organisation, but we are very clear about making sure that we work with those offenders to provide the best possible support. However, it is clear that we have to have relationships with organisations that are best placed in the community to provide that assistance. We are looking at ways within our contract delivery to ensure that those organisations are at the front and centre and that they are being supported and paid to provide that support to those offenders.

Richard Morris: The best designed payment-by-results systems will address the particular issue of what is called creaming and parking. We want to get it right. We need to design payment-by-results systems that allow the segmentation of different cohorts of offender, according to the different factors that determine how difficult the offenders are likely to be in changing behaviour. If you draw a comparison with the work programme, there are different segments or groups that attract different levels of reward to reflect the fact that different groups require different amounts of effort to get the outcome. It would be a big mistake to say, "Every offender is an offender", and that you get paid £10 from x% changing behaviour, whatever that offender’s background or circumstances. A payment-by-results system that will work needs to allow for that segmentation.

The other point is that we need to accept that not all offenders will be suitable for payment by results because some have extremely intractable problems and issues, and to put them into a payment-by-results system would cause a risk. Even if you allowed providers to receive a premium for working with them, there would still be the risk that they would drop off the radar as a result of the way that providers are being incentivised.

Q248 Chair: In saying that, are you not saying that you do not want to take the most difficult cases?

Richard Morris: You have to accept that there are some cases where the issues are so complex and difficult that you need to take the view that you should just focus on designing and delivering interventions and services that will work with that offender, but at the extreme edges. I am talking about the extreme edges of the overall offender cohort, where payment by results may not be appropriate.

Q249 Yasmin Qureshi: May I pick up on a couple of things that you have said? You draw an analogy with the work programmes and the fact that they have different levels, but I have a question on that. You have someone, say Mr A, who is being looked after by yourselves, who is also going to the DWP to look for a job; he may also have mental health issues and is also going to the hospital. If we take the hospital out of the equation and deal only with the work, under your system, if this person finds a job and readjusts his life and so on, two agencies will be paid for the same person.

Richard Morris: In the example that you describe, it is not inconceivable that the two agencies will both have played a part in achieving the outcome. To get the person ready for employment, you may have had to help them get housing or deal with substance misuse, or help them rebuild relationships with their family. They then move into a stage of desistance where they can start to think about changing their offending behaviour, and they can then move into employment.

Q250 Yasmin Qureshi: That is a double payment; so the Government and the public purse are not saving. One person is going to various different agencies that are all being paid for saving this person.

Richard Morris: I take the point. It is a valid point in the sense that you need to design carefully how different systems integrate with each other. Equally, it is not inconceivable that different providers can play a valid and reward-worthy role in getting an offender to a certain position.

Q251 Yasmin Qureshi: My final point takes up what the Chair was saying. You accept that there are people who are going to be difficult to help. We should bear in mind that the system at the moment is about reoffending within one year, whereas anyone who has worked within the criminal justice system knows that one year is too short a period to judge whether someone has been successfully rehabilitated. Realistically, it is at least two years, and that does not come into the equation. Again, do you see savings for the public purse? Are there savings from such projects, given the reality that it will take two years?

Richard Morris: It is pretty compelling that, if you get someone to reduce their offending behaviour or to stop offending, it will produce savings for the public purse.

Q252 Yasmin Qureshi: That is for one year; the current schemes are that they are going to see changes within one year, but everybody knows that in reality it takes a slightly longer period to see whether somebody has been rehabilitated successfully. Therefore, where is the public saving?

Richard Morris: I think you would get a public saving just on reductions in the occurrence of offending. I take the point on whether it is a sustainable reduction, but moving into the territory of asking people to take a risk on someone never offending ever again is probably not that feasible.

Tony Leech: At the moment we are talking about the 55% or 60% who reoffend in the first 12 months. Obviously, any reduction in that must ultimately mean a saving and an improvement in what has occurred. In other jurisdictions where the two-year method is used-and these are many of the jurisdictions in which I have worked in Australia-the two years is a recidivism rate and not a reoffending rate. Those that often use two years will measure whether they have returned to custody and not whether they have reoffended.

Chair: I would like to take some more sequential points, but we have another group of five witnesses to hear, so I must thank you for your help. I invite our other witnesses to the table.

Examination of Witnesses

Witnesses: Andy Keen-Downs, Chief Executive, Prison Advice and Care Trust, Sarah Payne, Chief Executive, Wales Probation Trust, Ian Barrow, Head of Business Development, Wales Probation Trust, Bernadette Byrne, Group Client Services Director, thebigword, and Diane Cheesebrough, Chief Operating Officer, thebigword, gave evidence.

Chair: It is a rather crowded witness table, but I welcome you to the Committee this morning. Because there are quite a lot of you, please do not feel that you all have to contribute to every question. Between you, you can tell us quite a lot about the work and effectiveness of the Ministry of Justice. I welcome Mr Keen-Downs from the Prison Advice and Care Trust; Ms Payne and Mr Barrow from the Wales Probation Trust; and Ms Byrne and Ms Cheesebrough from thebigword. Thank you all for coming here this morning. I invite Mr Evans to begin.

Q253 Chris Evans: Before I start, Sir Alan, I have to declare an interest. My sister works for the probation service in Wales in Pontypridd.

Ken Clarke, the Secretary of State for Justice, is very keen on competition. What is your view of the Justice Department’s competitive process, and what does it mean for public sector organisations?

Sarah Payne: Prior to becoming Chief Executive of Wales Probation Trust I was chief executive of a charity, and my experiences reflect what I have already heard this morning in that the Ministry of Justice is on a journey and it is learning. I have found it very receptive to feedback and constructive criticism, but my experiences at the hands of the Ministry of Justice are pretty similar to what I experienced when competing for business from other Departments. My charity did a lot of public sector business.

Q254 Chair: What was the field of your previous charity?

Sarah Payne: It is now known as Platform 51, but it was the YWCA in Wales, the women’s charity.

Q255 Chris Evans: When you say that the MoJ is on a journey, that means there are going to be mistakes and that money will be lost. I am worried that there seems not to be any clear process right down the line and, because of that, things are going to go wrong and money will be wasted once again. You say that is it going on a journey, but can you develop that idea? Do you mean that it is still making mistakes and getting things wrong? We have information before us about the LSC. Can you give us an idea of that journey?

Sarah Payne: My most recent experience has been the unpaid work competition. I found the initial briefing to be very helpful, although that was not how everyone perceived it-but I did. Having come most recently from an organisation where I was used to competing for business, I expected the briefing to be clear, and it was; the time scales that were known were clear; and I found the process of working in my lot with other chief executives really interesting and a very positive experience. The competition was announced last January and we are still only on lot 1 being completed. So there is a delay, but we understand why that is. There are a lot of other policy developments in the background, but in truth our dealings with the authority have been reasonably straightforward.

Q256 Chris Evans: From what I have read, it seems that the MoJ often plucks deadlines out of the air without any regard for the processes in place. Is that a fair comment? I base this on the fact that the Legal Services Commission’s tendering process was given a six-month deadline that was achievable. Do you think that it is fair to say they are plucked out of the air?

Sarah Payne: My reading of it is that they do not come out of the air; when they are set, there is a genuine belief that that is what people are working towards. What has changed is that it has brought in some delay; there is now a massive review about the probation service and its future. Until that reports and the consultation has been completed, I do not want to be in the position of setting out on a particular road and then find that I have spent an inordinate amount of time and resources on it and have to go and do something else.

Q257 Chris Evans: What I am trying to get at is where the genuine belief comes from that these deadlines can be achieved, when I hear that they are failing and going way overboard and costing money. Why do they believe that something can take six months but then, all of a sudden, they realise halfway through that it cannot be achieved and everything goes wrong?

Sarah Payne: I wish I knew the answer to that. In running my trust, we have a business plan with deadlines, and we pretty much stick to them. If there are complicating factors, we re-evaluate, we understand why, and we continue on that basis.

Q258 Chris Evans: May I ask for any other comments on that?

Ian Barrow: This may lead back to earlier comments this morning by Mr Leech on some of the issues on TUPE and pensions, and what comes at the end of the process rather than the front. From our point of view, relative to feedback on competition, one of the things that is beneficial for us as an organisation-we have not yet got to the competitive stage-is that learning is taking place on lot 1, and it is doing quite a good job. Hopefully, the delays will not be significant.

Q259 Chris Evans: The frustration that I have is that things like TUPE and pensions are things that can be seen two or three years in the future. Why are they not being factored into these tendering processes right from the very beginning? A TUPE or a pensions transfer is a lame excuse; they should be foreseen and factored in. Why are they not being factored in? Does anyone know?

Diane Cheesebrough: The landscape changes as you go through the process.

Q260 Chair: Could I ask you to speak up as much as possible because the acoustics are not easy in this room?

Diane Cheesebrough: I will shout. The OJEU process is quite a complex one. Sometimes, as you go through, particularly on things like competitive dialogue, questions come up that perhaps could have been thought of right at the beginning, and, because of that, changes then have to be made to try to improve the process. Sometimes the OJEU process itself is not easy to get through quickly, and some of the questions that come up change some of the answers or outcomes that are required.

Q261 Karl Turner: What structures and capabilities does your trust have that enable it effectively to compete for Ministry of Justice contracts? Why is it that some trusts appear to be in a weaker position?

Sarah Payne: The decision to merge four trusts into a single entity predates my arrival, so I obviously was not part of that decision-making process. However, the merger of the four smaller trusts and the creation of a single identity meant that we made quite a lot of efficiency savings through the nationalisation of the headquarters, the estates, the senior management teams, the boards and internal processes. That has enabled me to create a small commercial team. As we are in this competitive marketplace and I am now an NDPB that is required to compete, that is what I will do. I have recruited someone with a great deal of expertise in this area. It is also important to acknowledge that the experience of living through that amount of change has created a sense of adventure and endeavour in the people of the organisation, who embraced change.

I lead a really good organisation, and we have very frank conversations about what the future might look like. All of us understand that we have to live with a degree of ambiguity-everybody does-but I see it as my job to encourage healthy conversation about what that might mean for us. We are also doing an awful lot internally to make sure that we are as efficient and effective as we can possibly be. We have also seized opportunities to bid for new business as subcontractors and also in partnership with the private sector; and, in partnership with those Wales Government services that join up, we have seized the opportunity to commission services-for example, in drug provision in a large part of our patch.

Q262 Chair: Does Mr Keen-Downs want to contribute on that point?

Andy Keen-Downs: Our experience as a relatively small voluntary organisation is quite limited, so I shall pass on that question.

Karl Turner: To be fair, Sir Alan, the answer has probably covered any supplementary questions.

Q263 Steve Brine: In a way, this question follows on from Mr Evans’s point about the journey that the MoJ is taking with its commissioning. Previous witnesses in the first group are working with the MoJ right now, and it is a matter of common sense that it would give rise to a certain diplomacy in some of their answers. That is what you would expect.

I am pleased that thebigword is here. I am pleased you are all here, but I am curious, to say the least, about the journey that you have been on with the language services framework agreement. Having been unsuccessful in a competition, I am very interested in your experiences and your reflections. There were four stages to this competitive process, and it seems that the last man/woman standing got the gig because they were the last man/woman standing. That is an interesting position to be in. If that had happened in my business, I would have expected my board to ask me questions. What are your reflections on the process? Was it a very robust four-stage process? The initial pre-qualification questionnaire was not a very robust process, because it did not weed out problems further down the line that left the last man standing.

Bernadette Byrne: I think that you are right. The pre-qualifying questionnaire clearly did not do its job. It should have weeded out on financial robustness, ensuring that only those suppliers with the ability to deliver the service went forward. Following on from what others have said in the previous panel, the competitive dialogue for this particular framework was cumbersome and overcomplicated, and it had numerous stages; it lasted well over nine months. As you rightly say, we got to the penultimate round, and, although it was made very clear when the stages would take place and whether it would be a written response or a dialogue, we were never really clear about what was expected at each stage. It was a process of elimination, but you did not realise who had gone or why or what they were being assessed on. When we got confirmation that we had not made it to the final round it came as a surprise, because we were still expecting at that stage that the final evaluation would take place and there would be other organisations involved. It seemed strange that you could have a final round with only one organisation.

Q264 Steve Brine: That was a great place for that organisation, was it not? It was rather like expecting to be in the final of the World cup with no opponent.

Bernadette Byrne: But it took them a year to go live on that. Even though it was a great place, I still have some sympathy with the organisation being awarded it and it taking a whole year to go live.

Q265 Steve Brine: Why do you think you were unsuccessful?

Bernadette Byrne: If I am honest, that is probably a question to ask the panel that made the decision.

Q266 Steve Brine: You must have had an internal process under which you sat down and did some soul searching, which any organisation does when they compete for a tender and do not succeed.

Bernadette Byrne: We did, and, even though we were given some limited feedback, we were still unable to put the finger on the reason why we were not successful.

Q267 Steve Brine: That, in itself, is very telling. What chance have you had as an organisation to feed back your thoughts other than through the opportunity of this Select Committee today?

Bernadette Byrne: We met two of the panel after we had written a letter, not in a disgruntled way, but just expressing the fact that we would like some feedback, but it was still fairly vague.

Q268 Steve Brine: If I may, I shall move on to Andy from PACT. Juliet Lyon of the Prison Reform Trust came here a few weeks ago and described to us the process, with which you have had an unhappy time, to do with visitor centre services across the London prisons. Tell us your reflections on your experience. Particularly as a smaller charity, did you feel that you were disadvantaged when it came to taking the sort of risks that Spurgeons, which went on to get the work, were able to take?

Andy Keen-Downs: There seemed to be a level of risk that was difficult for us to take and some ambiguity in the language on the kind of results being required; we did not seem able to please the commissioners in terms of the language on that. We engage a lot in policy work, and we thought that we had an understanding of the general thrust of the payment-by-results agenda, evidencing some causal link in reducing reoffending or recidivism. However, something like 20% or 30% of the contract value, which was in itself set at around 70% of our previous cost of delivering those services, was at risk on the basis of being able to demonstrate results. The results were not stated in the tender; we were invited to suggest what those results might be. It was a tortuous process trying to come up with a logical process for looking at how services such as a visitor centre, a children’s play service or a tea bar in the visits hall might demonstrate some genuine outcomes, because that is the focus of our charity.

Q269 Steve Brine: Of course, you have proven experience in that field.

Andy Keen-Downs: We invented many of these services.

Q270 Steve Brine: Even better.

Andy Keen-Downs: We have spent many years funding them ourselves. In partnership with the Tudor Trust, we funded the building of three visitor centres in London, including the new centre at Wormwood Scrubs. We raised £1 million to build that centre, and it is now an MoJ asset. That was in excess of the value of the entire contract for all the services that we were running in London. It was something of a bitter pill, given the contribution of added value, which did not seem to come into the equation.

Q271 Steve Brine: Is it true to say that a number of the staff working for you under TUPE arrangements went on to work for the successful organisation?

Andy Keen-Downs: Yes.

Q272 Steve Brine: Do you take any comfort from that?

Andy Keen-Downs: We are driven by our charitable mission. From our point of view, we played a role over more than a decade by inventing services and establishing a really good understanding within the MoJ that family relationships and maintaining family relationships during custody can have a massive impact on reducing reoffending. We played a big part in that and those services that we innovated have now been mainstreamed. It is difficult for us that we are not the organisation running those services, but we are delighted to have achieved that outcome.

Q273 Nick de Bois: Before moving on to another subject, may I ask a supplementary? It is more to get something on the record than anything else. Am I right in thinking that, as part of this rather laborious tender process, there is no acknowledgment that there will be a formal wash-up for losing candidates-in other words, if you lose, you would at least have the advantage of knowing what you got wrong or where you went wrong? You asked for that information, if I understand you aright. Was there no provision for it laid down in the guidelines?

Diane Cheesebrough: Not that I can think of.

Q274 Nick de Bois: Mr Keen-Downs, was that your experience too?

Andy Keen-Downs: We were invited to meet one of the commissioning and procurement panel following the loss of the work.

Q275 Nick de Bois: Was that at the commissioning panel’s invitation?

Andy Keen-Downs: Yes.

Q276 Nick de Bois: It seems a bit hit and miss, judging from the evidence. Thank you.

Moving on a little, we have been talking about the role of SMEs and the voluntary sector, and some of the challenges. Given where we stand today, it seems that most roles for the voluntary and charitable sector and SMEs are going to be subservient to a prime contractor. I do not want everyone to answer, as we do not have time, but could you tell me if you think that that is a viable way to go forward for the SMEs and the voluntary sector?

Diane Cheesebrough: I personally think that, yes, there is a viable way for the private and voluntary sectors and SMEs to work together, predominantly because we do that. We have experience of doing that. Thebigword finds that it gives us a good geographic spread, it gives us real responsiveness, and it supports the value-for-money agenda. I look to Bernie here, but I do not believe that the voluntary sector people that we work with have ever come back to us and said that that is not viable for them.

Q277 Chair: Would you make that last point again but a bit louder?

Diane Cheesebrough: I do not think that anybody that we currently work with from the voluntary sector or an SME has turned to us and said, "I am sorry, but we cannot continue working with you. It is no longer viable." I am checking that with Bernie, who has been with thebigword for longer.

Bernadette Byrne: That is true.

Diane Cheesebrough: Therefore, there must be some viable ways of doing that.

Q278 Nick de Bois: Do you think that that strikes the right balance in terms of value for money? There is always the risk of top slicing or subcontracting, and the costs hidden in that. Shall I move on and take a second opinion? I saw you agreeing with me there, I think, Mr Barrow. Do you think that is right?

Ian Barrow: There is always that potential. From the Wales Probation Trust point of view, we are spending in the region of £3.5 million or £4 million a year, or about 7% of our budget, on contracts with third sector and private sector providers. Again, that is a reflection of some of the evidence that you heard earlier. In terms of getting delivery right for the end user, engaging that cross-section capability is vital. In terms of the contracting arrangements, there is always an issue with contracting costs the more providers that you have. Again, from the Wales Probation Trust’s point of view, one of the benefits that we have achieved through occasionally taking an all-Wales approach is that the delivery of services, for example in Cardiff, may be with the same provider that delivers services in Aberystwyth and the contract management can achieve some efficiencies that way.

Q279 Nick de Bois: Do you find that the contract arrangements with the third sector particularly are complex? Do you have any way of stopping them being complex so as to encourage more to step up to the mark? I understand that some aspects can be quite onerous, including the sharing of risk and the back-to-back implications of the contract. Do you have thoughts on that?

Sarah Payne: Since I have been chief executive, we have conducted a thorough review of all our contracts looking at precisely those things but also making sure that, in getting value for the taxpayers’ pound, we are absolutely clear about what we want the contract to deliver-the outcomes. It might be the description of a service, and it might be a measurable outcome. Again, there is lots of learning. There were contracts let in Wales that were not that precise, and we needed to revisit them. Some contracts were duplicatory, and we are trying to ensure that everything is much better aligned.

Q280 Nick de Bois: May I ask a final question? As I understand it, there is no contract requirement between the MoJ and its prime contractors to use the third sector or SMEs. Am I right that it is entirely needs-based? It is entirely down to the prime contractor to do this, hopefully for practical and sensible reasons, but that is it, basically.

Sarah Payne: It is, but, if you are committed to delivering the best service possible-

Q281 Nick de Bois: You will use them.

Sarah Payne: You would have to, because we just do not have the expertise in every nook and cranny.

Chair: Thank you very much indeed. We are grateful to you. You have all been very concise but have helped us a great deal. Thank you.

Prepared 13th February 2012