Q21 Mr Williams: They only started at about £60 million and went up to £120 million so they were modest by comparison with your failure. Treasury, surely you were alarmed that the bells had rung but apparently not across Whitehall as far as this was concerned?
Mr Glicksman: Certainly the Treasury was concerned about the increase in costs and did explore very carefully with GCHQ the reasons for it. I cannot comment on how similar the case was to Pindar because I do not know the details of Pindar, but certainly we did look very closely with GCHQ at the reasons for the increase in costs, and indeed, although, as the Report makes clear, we did reduce them with GCHQ down to just over-
Q22 Mr Williams: But no-one seems to have been alerted. Everyone was passing the buck here and no-one seems to have identified a problem that had existed previously and was about to be replicated. I switch now to page 17. From 1998, that is a year later, GCHQ started to consider the impact of the year 2000, and then it got a dose of the millennium bug. That is what happened. You had to divert 150 man years into trying to fend of the effects of the millennium bug?
Dr Pepper: That is right.
Q23 Mr Williams: Had you anticipated that?
Dr Pepper: Yes. Like all departments, we were working systematically through our IT systems and that is exactly what was going on in 1998. We had started before 1998.
Q24 Mr Williams: To go back to where we started, you needed this new facility urgently and yet for two years you effectively had to take nearly all the manpower that should have been working on the technical transfer to deal with the millennium bug.
Dr Pepper: I do not think we really had much choice. The millennium was going to come. We really had no choice but to put our engineers on to preparing for the millennium. I would suggest that it would have been quite irresponsible to do otherwise.
Sir David Omand: That period was also the period in which work on the PFI was going on, so, notwithstanding the fact that GCHQ was very anxious to press on with this, it just took a long time to get together a PFI.
Q25 Mr Williams: Yes, but different people would have been doing the work. You would not have the same technical team working to the same extent on the PFI, so that is not much of an excuse. The reality is that there has been a major mess-up here and everyone is trying to duck for cover and no-one is going to accept responsibility. Did anyone eventually get reprimanded for the failures of the early days when everything was grossly underestimated, got transferred or did not anything happen to anyone?
Sir David Omand: I can certainly assure you that my predecessor as Principal Accounting Officer made it very plain indeed to the then Director and his team that the increase in costs was unacceptable.
Q26 Mr Williams: He wrote him a strong letter, did he?
Sir David Omand: It was very clear indeed that this-
Mr Williams: It must have been the most expensive letter in history, one and a quarter billion.
Chairman: I will now call on Mr Nigel Jones, whom we welcome back to the Committee after a long illness and who is, of course, the local Member.
Q27 Mr Jones: Thank you, Chairman. Yes, this wonderful new building is in my constituency and I have been in it. Could I turn to Dr Pepper, although it was his predecessor, Sir Francis Richards, who was involved in most of this as Director? I want to concentrate on Part 3 of the Report where, in paragraph 3.2, you say that there were two possible locations for this building, the Benhall site and the greenfield option at Gloucester Business Park in Brockworth. In paragraph 3.5 you say that the initial financial analysis slightly favoured the Gloucester Business Park site. Could you talk us through what went on to change the balance in favour of Benhall?
Dr Pepper: The calculation that led to that initial comparison was based simply on the cost of doing the work, and there was, as you say, a very small, only a couple of million, difference. We then realised, however, that two things were missing from that. First, there was no account taken of the different environmental costs of the two sites. In particular, had we gone to Brockworth it would have involved many thousands of extra miles being driven every day by staff simply because most of our staff live in Cheltenham and Brockworth is considerably further away, so in terms of environmental impact that was a very significant factor which would weigh against Brockworth in favour of Benhall.
Q28 Mr Jones: Is it true that GCHQ would have had to pay mileage allowance to stay?
Dr Pepper: We would for some time but not indefinitely. Even without that, though, we felt it was still right, and ministers confirmed this, to take account of the impact on the Government's environmental policies of that difference. There was a second factor which was taking account of the impact on staff more widely-again because large numbers of staff would have had much longer journeys to work. We were then, and we are now, very keen to ensure that we have good policies on diversity to give very good opportunities, for example, for part-time working. The much longer journey to work would have made it much more difficult for many people to adopt a part-time mode of operation. That, together with the psychological impact, if you like, of staff moving from buildings which were on the margins of Cheltenham and hence close to the town to a site which was right out in the middle of nowhere very much between Gloucester and Cheltenham were all factors which were taken into account.
Q29 Mr Jones: Some of the old buildings on both sites are pretty old and have been described to me by some of the staff as squalid. This must have affected morale. What impact has the new building had on the morale of those staff who are now working there?
Dr Pepper: Wholly positive. It is a wonderful working environment and even before staff started working there, once we were able to start taking staff round, and a few months ago staff were able to take their families round, the impact on morale has been enormously positive and there is a great sense of excitement about the place.
Q30 Mr Jones: Were you happy with the way that the local authority dealt with your plans? Were they helpful or did they get in the way?
Dr Pepper: I do not think it would be right to comment in too much detail, but we had quite long and tense negotiations with the local authority to get to where we wanted to, but in the end it came out okay.