Q81 Mr Jenkins: Okay. You were locked into Capita.
Mr Lewis: We were locked into Capita in this sense, and this sense only, once we had gone through an exhaustive process of due diligence, of examination, including a very particular examination of whether there were any reasons to think the Capita bid should be rejected notwithstanding the very substantial price difference between that and the more expensive bids. At that point it was very hard to see that there was any logical or rational or justifiable reason for taking a bid, an alternative bid, which on the face of it was going to be more than £100 million more expensive over 10 years.
Q82 Mr Jenkins: I understand that now, that clarifies the situation as to why Capita got the bid. People went on about the lack of consultation and the stakeholders said in 3.13, page 23 "In particular they questioned: The Bureau's proposed use of a call centre when customers' preferences were for paper and on-line routes". There are four individual points there. Later on it says, "The Bureau responded . . . by holding the Customer Forum . . . and implementing a service improvement plan after go-live when problems become evident". What is the point in holding consultation before to try and sort the problems out when you were told what the problems were going to be and did not implement that until it was on-line.
Mr Lewis: First of all can I say in answering that question there should have been much more extensive consultation much earlier, that is absolutely clear, it is brought out in the NAO Report and it is something which on behalf of the Home Office I unreservedly accept.
Q83 Mr Jenkins: Mr Pindar, can I ask you, you are now the contractor who has to deliver this system, you were out on the road show, you got this information as well, what did you do with this information because you could see a disaster staring you in the face? What did you do about it?
Mr Pindar: Point one is we could not see a disaster staring us in the face; point two, the response that we put in to the tender, as Mr Lewis said, it was important that our response was compliant and the tender documentation set out the assumptions against which we were to bid; thirdly, it was clear to us that the Agency had undertaken some consultation and undertaken some work in terms of verifying the assumptions they made; fourthly, it seemed to us a very reasonable strategy at the time because there was a new government agenda towards modernising government and there was a wish to encourage an electronic channel; fifthly, there was also a marketing campaign behind the e-channel in order to influence as far as possible customers' behaviour. For a combination of reasons we felt that the approach which had been taken early on was reasonable.
Q84 Mr Jenkins: Using your professional judgment as a company you went along to a client, the client gave you the contract, you understood the contract totally and you said that you could implement it. There was no doubt in your mind at all, even after the road show, there was any difficulty at all?
Mr Pindar: I think it is very important to cling on to the fact that when this contract was underway the customers were not given the chance of having a paper channel, that was something which was introduced part way through the implementation process. At the time the assumption that 80% to 85% of customers would choose the call centre option struck us as a very reasonable assumption to make because it was largely their only option. The fact that the paper-based channel was introduced and again to respond to some of the earlier questions, the principle reason why the price escalated to the extent that it did was the job which was delivered at the end of the process was a fundamentally different job than the one which was started. It is not a case of being a sprat to catch a mackerel or anything else, it was the introduction of the paper forms, which was introduced halfway through the implementation, it was a fundamentally different business process which Mr Herdan did in response to his customers' demands. I think Mr Herdan's response was entirely rational given the situation he faced.
Q85 Mr Jenkins: If I employ a professional contractor and then they do exactly what I suggest or lay down knowing that it would cause difficulty further down the line I employ them because they are experienced, they have professionalism and the ability, one of the things I would expect them to operate, especially on my behalf, is to say "I need a pilot scheme to see what will run and what will not run". Did you suggest that?
Mr Pindar: It was always the intention in the programme that there would be a pilot scheme, you generally run a pilot scheme prior to go-live, not right at the start of the implementation process because that would be inappropriate. There was a pilot scheme in place at the end of the programme, again I would agree with my colleague Mr Lewis on my left that one of the learning processes for us I think is the pilot scheme should have been longer and therefore from a perspective of things to learn for Capita the one fundamental thing was, and again I would agree, the go-live date should have been deferred for a few weeks simply to give ourselves more time to actually undertake that piloting. At the time the programme was implemented at the start blank form discussion had not taken place therefore with the best will in the world we responded to the tender documentation in the most professional and the most studied and most considered way that we could.
Q86 Mr Jenkins: You walk into it and the system did not run well. What professionalism do we pay for if you cannot deliver it?
Mr Pindar: We went into the bid in a very considered and very measured way. We have been running operations of this type for 17 years and generally speaking we have a high reputation and a high track record. We have a 95% retention rate of our customers which I think provides some evidence of the fact they respect the professionalism we have. Again I would repeat the comment I made earlier, the reason why the nature of the project changed during the implementation was the introduction of the blank form Channel. At the point that was tendered we tendered for the contract and at the point that we started the implementation of the blank form Channel had not been something which had previously been conceived.
Q87 Mr Jenkins: Mr Lewis, can I ask you one thing, you now have the Strategic Delivery Board, we have in front of us different departments over time and one of the things we always insist is if all of the risk reduction strategies have not been developed and not been implemented and you give the go ahead which then causes an overrun on cost and time-this is the only Committee which instils this in the public sector unlike the private sector, is your committee strong enough and tough enough to stop this disaster hitting the rails again?
Mr Lewis: I very much hope so. I chair it myself. My own background is actually a delivery one. For six and a half years until a year ago I ran the largest executive agency in Government and have personal experience of delivery. The role of the Strategic Delivery Board which I now chair, with the Home Secretary's agreement, inside the Home Office is precisely to ensure that before a major new development is launched we have taken the maximum number of steps that are possible to reduce the risks of failure to an absolute minimum.
Q88 Mr Jenkins: Are you personally responsible in the future?
Mr Lewis: I am personally responsible to the Home Secretary for the effective working of that process.
Q89 Chairman: Mr Pindar, we know that you put in by far the lowest bid and we all know about all of the problems that subsequently transpired, why did you not stand by your bid? Do you not think that would increase your reputation as a supplier to government business?
Mr Pindar: The reason why we did not keep to the same price was because the job we were eventually asked to deliver was a very different one than the one we tendered for.
Q90 Chairman: Your competitors put in a higher bid because they were far more realistic about the number of paper applications?
Mr Pindar: Our competitors put in a higher bid because they have higher daily fee rates and their profit aspirations are higher than ours and the cost of running their business are higher than ours. We have been tendering for the same sort of business for 17 years, we have a considerable amount of experience at it. We never engage in loss-leading bids because it is a very bad business practice. Again I will reinforce the comments I made earlier, we have a 95% retention rate of our customers. Indeed in our history we have only lost one material contract on renewal. Those sort of statistics indicate we do not go into a bid situation with a view of taking advantage of our customer.