Examination of Witnesses (Questions 80
THURSDAY 25 APRIL 2002
80. It was no cost to the naval base commanders?
(Mr Coles) There would be internal costs, of course,
to them. There would not be a separate additional cost.
81. That is different from saying, with respect,
(Mr Coles) It is an internal cost to the organisation,
whether they were looking at these proposals or their own proposals
or having a team in, there was no additional support. They were
in their budget for operating the naval base.
82. The bidding process, the National Audit
Office have been invited to look at the process by the management
board. Did the report endorse the process in total? Have you had
a report back from the NAO? Has it been made public and if not
can we have a copy of it?
(Mr Coles) The National Audit Office were contracted
in this case to provide myself and others with an independent
view of the process, rather like we would contract with KPMG or
anybody else. It was not a traditional NAO inquiry into how we
conducted the process, if you like, looking backwards. Therefore,
it is an internal piece of advice to the Department and therefore
to ministers and therefore not releaseable in the public domain.
83. Will this Committee get a copy of it?
(Mr Coles) I do not believe so.
84. You do not?
(Mr Coles) I do not believe so.
85. Why not?
(Mr Coles) Because it is confidential advice to ministers.
86. That is the very point because that just
leads these people at Faslane and Coulport who cannot read the
report to be a wee bit more bitter tomorrow than they are maybe
(Mr Coles) As I said we will give a debrief to the
trade unions on the process and where they fit in the macro picture
of this exercise or this activity but not the precise figures
and we have agreed to do that with them.
87. But not to this Committee either.
(Mr Coles) As I have explained, this is confidential
advice to ministers.
88. One point I did want to pick you up on,
on the consultants. The cost of PriceWaterhouseCooper, who paid
(Mr Coles) The Warship Support Agency would have contracted
89. They paid them, so there was a cost?
(Mr Coles) I said we contracted the consultants to
support the activity.
90. You paid them?
(Mr Coles) We did.
91. I do not know of many instances where the
National Audit Office comes in at such a stage. If you do not
know, perhaps you could tell us how many other instances you have
come across where the NAO, rather than looking at what happened
after a period of time, is actually there and advising. Does that
not in a way potentially compromise their position in doing an
analysis afterwards if they decide to do this unless they can
say "Well, everything that you did was absolutely in accordance
with the advice they gave and according to best practice and law"?
(Mr Coles) I believe this is the first time the NAO
have done this sort of activity. It was very much a one-off exercise.
That is why it is different from a normal NAO inquiry.
92. Did you invite them or did they invite themselves?
(Mr Coles) I think it came about by a mutual discussion
because, of course, they would in the normal process begin to
think about looking at this.
93. I think that is an important point the Chairman
has raised. Certainly it puts the National Audit Office in a very
difficult position in doing any post investigation. The other
point is about the confidential advice you have given ministers.
Why can that not be released in some format or some of the information
in that? Clearly ministers will need that to justify the actions
of taking the decisions.
(Mr Coles) I think the way we got into this with the
NAO, I have a non executive director on the WSA board and he approached
the NAO as to whether they would like to do it and that is how
it started. It was not a sort of put it out to contract, that
is the way it started. They thought it was quite a good field
they should get into. Now maybe in the light of what you have
said they may not want to do it again.
94. Yes, they could get burnt with this.
(Mr Coles) Sure.
Chairman: It is very contentious.
95. It is absolutely pivotal to the workers'
feelings. We saw them on the streets and behind the picket lines
and these are people who do not normally strike, they are very
hard working. They want some transparency to at least know the
process was value for money and that they were given a fair crack
of the whip. It is very good saying "We will invite the National
Audit Office in" and I think that is wonderful but it is
not really that wonderful if you do not show it to anybody, if
it does not get back out to the people on the front line. You
know, "We will bring in independent scrutiny but we are not
going to tell you what they said".
(Mr Coles) I understand that but the way this was
set up was much more like a consultant offering advice to us,
not as an NAO inquiry. I have said so far that is the way it has
96. I do not accept that point. Clearly this
report is being used by ministers to make a decision. Therefore,
as Mr Roy is saying quite rightly, those people who will be directly
affected by this, i.e. the workers involved, want some transparency
to the process. Again, can I ask the question, what is so problematic
in releasing this report into the public domain? If it is so good
it will support your arguments and reasons why you are going to
(Mr Coles) Ministers made it quite clear to trade
unions at formal meetings they do not intend to release it.
Mr Jones: Can we request a copy.
97. The concept of advice to ministers is a
very useful device by which they can block off any debate outside.
What I would say is you must alert Lord Bach when he comes that
we will be exploring this. Patrick and I are in a minority here
today in that we have no direct interest in the decision. I think
it would be fair to say that as much information should be brought
out into the public domain to ensure that people feel that the
right decision was made. Now if we cannot get it, I hope the Public
Accounts Committee can get it. The National Audit Office is going
to have to explain why as a partner in the process they are the
best placed to comment afterwards. All I would ask, gentlemen,
is this, or several points. One is we will be writing furtherthere
are other questions to askbecause there were clearly key
decisions that were made on process. We went to Faslane and Coulport
and we heard the arguments from the trade unions and then we went
to Rosyth and we heard a set of arguments there which were very
different. The latter said they had gone through the process of
becoming more efficient, that they were ten to 15 years ahead
of their colleagues in those establishments which had not gone
through the traumas that they had gone through so if the argument
is efficiency, that the companies can do things much more efficiently
and much more cheaply, then I would hope that information would
be made available. It would be helpful also if you could tell
us, and I am sure the unions will ask, how seriously you looked
at the proposals that they made knowing that the hatchet was about
to descend on their collective necks and that does concentrate
the mind wonderfully. Therefore, no doubt they were prepared to
do a number of things in the likelihood of their impending disaster
that they may not have chosen to have done before. What I think
it is perfectly legitimate for the Defence Committee to ask, and
we will ask more fully, is that we have more information on the
process, on evaluation, on the savings levels, on the value for
money, all of those issues, simply to prove to us and especially
to those who do not have a direct interest, one way or the other,
that the decision was the correct one. Now it is very, very likely,
I would not say very possible, that the decision that was made
was the correct one, that more efficiency can be squeezed out
of the system, that you are there to represent the taxpayers,
you had every sympathy with people who are going to have their
work practices rejected, overthrown, forced into a new environment.
I think an argument might well be made on those lines. We would
not expect everything to be brought out into the public domain,
that would be sui generis as far as the MoD was concerned
in its relationship with us. I think it is important that a lot
of information is brought out and some of the issues I raise will
be part of those. When you do debrief the unions I hope the documentation
that will be produced to them will be transported to us together
with any other documents you feel are appropriate.
(Mr Coles) If it would be helpful, Chairman, could
I take an action to look at what information I could release to
the Committee on what basis so there is a clearer view of how
decisions are arrived at. It was based on a value for money criteria
and that was the only criteria it was based upon. I will see how
much of it we can make available to the Committee.
Chairman: That is helpful.
98. I take the point you are making about the
issues we will have to raise with Lord Bach. Can we ask for a
copy of that report? Even if there is commercially sensitive stuff
in there, fine, we can do it under the usual rules of confidentiality
which we have in this Committee. Can we ask for that report. It
is going to be very crucial in affecting our opinions of whether
this process has been done properly. If it backs up what you have
been saying then surely it would help ministers rather than hinder
(Sir Robert Walmsley) I think if I could just say,
Chairman, I know I am coming with Lord Bach on 8 May and I think
you pointed out that we would be covering this ground again on
8 May. I have got that, this is the number one question to answer.
Chairman: I am sure I can negotiate
with you, Sir Robert, and with the Minister as to access to all
or part. There have been precedents. A Committee of this Committee
went to look at documents on Westlands. The whole Committee did
not look at it but the Chairman and Dr Gilbert looked at it. Perhaps
if the going gets rough we can discuss more limited access. However,
I think it would be helpful at the final stage that it is shown
that you made the decision fairly based on the right information.
I think if that case can be made, and it may well be made, then
it is in everyone's interest for this information, or most of
it, to be made publicly available.
Syd Rapson: If the initiative did not
go ahead, the advice in there would be crucial to make the yards
more efficient in the future. It is crucial that information is
in the public domain after the event.
Chairman: We have a couple more questions
now we would like to ask on this. We cannot let you go before
12.30. We do have some additional questions. Patrick?
99. Gentlemen, without renegotiating your refit
obligations, how much competition, as a percentage, would have
been possible over the next few years?
(Mr Coles) If we stay as we are, we would typically
have about 30 per cent competition in the surface warship sector.
By the time of about 2005-06, we will have moved to something
like 93 per cent. It is about 93 per cent for the surface warship.
So we are moving to a wholly competitive environment for surface
warships where traditionally we have been around about the 25
to 30 per cent.