Examination of Witnesses (Questions 320
WEDNESDAY 23 JANUARY 2002
320. So the technical capacity simply was not
(Mr Sykes) Yes.
321. I wonder if I could draw your attention
to the last sentence of your written evidence to the Committee
in which you say, "We would also welcome greater emphasis
on OGC's strategic role in assessing key PFI markets and how they
might more effectively . . .", and so on. First, to give
us some factual base, what sort of involvement do you have directly
with PFI programmes, given that your own spend is roughly 1 per
cent or soless thanof the Department's total spend?
(Mr Acheson) Most of the PFI projects in the Department
as a whole are Highways Agency, and, as we have identified already,
they are the big players in this arena. At the moment, we have
16 signed PFI contracts and four still in procurement.
322. Out of a stock of 20?
(Mr Acheson) Yes.
323. What is the value of those? Is that the
(Mr Acheson) I can tell you the total figure of the
which is £8,681 million
of audited PFI deals.
324. That is the highways so here we are talking
about road schemes' improvement and new construction?
(Mr Acheson) That is primarily the case but that also
includes the Channel Tunnel Rail Link, which is approximately
half of that figure.
325. Well, that must be an interesting one.
It certainly keeps your finance and accounting systems chugging
(Mr Acheson) Indeed. The key point we want to make
here on PFI is that, as I say, nearly all the PFI schemes are
Highways Agency in number terms and whilst we talk to the Highways
Agency we have a monitoring role, not a direct involvement.
326. So here we are talking about supervising
a relatively small number of very large PFI schemes of a large
per unit value. Against that background, which of course is rather
different to the background of our last set of witnesses, what
does this last sentence then mean? What is OGC's strategic role
in that context and what are the key PFI markets that still need
to be assessed?
(Mr Acheson) The other part of the overall departmental
agenda is a local authority one, which we touched on earlier,
where there are all sorts of things in a local authority arena
which we as a Department will look at coming from local authorities
to see whether they are sensible and it is this bigger field that
this sentence is aimed at. We have got different markets. There
is the central bit, the agency bit and the authority bit, and
they are all different and they all have their own governance
and so on. So the strategic feel of key markets is really talking
about the whole shooting match and there, there are all sort of
issues where a central view would be helpful about what government
as a whole, central and local, should be doing, and sometimes
that is not clear.
327. Right. So how is it not clear?
(Mr Acheson) It tends to be bottom up. An authority
or an agency will say perhaps, "We will do this", and
it is filtered through the project review group and so on but
there is no strategic sense that anybody is looking at the market
generally to see that this area has not been tackled and to say
perhaps we should look at that, talk to industry and see if there
is some scope for significant improvement in that particular area.
At the moment it is the wrong way round. It is easy to say that
but there is not anybody that is doing that.
328. What you are saying to us that you would
like OGC to do is to say, "The best PFI possibilities are
in these fields"?
(Mr Acheson) It would be helpful.
329. Then you would give guidance to your agencies
and to local government to encourage them, or direct them if you
have got the authority to do that, in those particular directions?
(Mr Acheson) Ultimately, yes, that is the ideal world.
330. Has local government been asking you to
(Mr Acheson) The honest answer to that is no. I would
guess in many cases they would welcome that but I do not actually
331. Briefly following that, you have a tremendous
purchasing power from the contracts you are putting out. When
you are dealing with companies, is it part of the OGC Guidelines
to encourage companies to innovate in whatever you are dealing
with? Is that part of the process, to bring that into account?
(Mr Acheson) Yes, in a general way certainly. What
we would try not to do, for example, in any kind of specification
of requirement for an individual contract is to say, "We
would want you to put so many people on the job and do this work
so that we get precisely where we want to be in terms of input."
We say, "This is what the end result is. You tell us how
you are going to get that." We can then assess that alongside
other bids to see who has got the best solution. So innovation
falls within that envelope in the sense we would look at the end
result rather than the inputs and many specifications some years
ago tended to focus on input where we knew best and we dictated
what contractors had to do, which stifled innovation.
332. Do you, for instance, in letting a highways
contract, look to the contractor to take a step forward in improving
the quality of the road surface so that you do not have to maintain
it so many times, those kind of things?
(Mr Acheson) Those kind of discussions do go on between
the Highways Agency and highways contractors.
333. Is that sort of injunction, to try to push
things on and innovate and not just buy something you bought 20
years ago, part of the OGC guidelines?
(Mr Acheson) The general concept of best practice
in procurement across the board is to do exactly that and work
with contractors to get a better deal and continuous improvement.
334. Could we move to estates and property.
You say that the OGC has an important and continuing role to play
on property and estate matters. In your memorandum you say you
fully support that and "would not wish to see it diluted".
Who is threatening to dilute it?
(Mr Sykes) I think in positioning itself for the future,
the OGC has directed its resources in an advisory way to promote
achieving excellence and best practice of construction and for
some departments and agencies has withdrawn providing the supervising
officer role for work.
335. Could you explain what that means? I am
not sure what it means.
(Mr Sykes) In the past PACE would have actually acted
as the expert client for some smaller departments and agencies
and, of course, some of the bigger departments and agencies, it
would have been a repository of expertise in estate and construction
matters. As I say, in repositioning itself to address achieving
excellence it has withdrawn from some of those services. We think
they should retain leadership across government in estates and
336. Who is the cause of them not retaining
(Mr Sykes) I think it is a matter of them deciding
within the resources that they have where their priorities are
and focussing the resources in that direction.
337. The way your memorandum is phrased it does
not sound as if it is a natural consequence, it sounds as if somebody
is having a turf war and they are losing.
(Mr Sykes) I do not think is a question of a turf
war and their losing I think it is a question of encouraging them
that they should maintain this central co-ordinating role.
338. Have you put that to them?
(Mr Sykes) Yes.
339. What is the response?
(Mr Sykes) The response is positive.
8 Note by witness: The 16 PFI deals total £5,516
Note by witness: The £8,681 includes DTLR's PPP/PFI
deals and other PPPs where there was a funding link to DTLR at
the time the deal was signed, e.g. local authority light rail
schemes part-funded by DTLR and contracts now held by Transport
for London. Back