Q81 Mr Jenkins: And the new Programme Director undertook further consultation with the technicians in 1999 and then found out that considerable changes were identified and they had to rejig the programme. Why did he not talk to the technicians earlier on.
Dr Pepper: The key word, I suggest, is "further". The engineers had all been involved in the earlier specification but that was probably two years before. The new Programme Director, very properly, before moving into the final stage did a complete review of the requirements. It is worth saying-because this is a very important part of what followed-the new Programme Director is a very experienced director of large programmes. He works on the basis of a very rigorous approach to very thoroughly documented requirements. He wanted to be sure that he had documented in the proper systems engineering fashion all the requirements in great detail, both to get them locked into the proper methodology, the programme methodology, but also to make sure that they were refreshed. Two years is quite a long time in our business, so he did a complete refresh on all the requirements and, not surprisingly, some of them had changed, that is the nature of our business.
Q82 Mr Jenkins: I would like to ask, following from Mr Allan's question, I was interested, Sir David, when you said that the directors knew that it was 41 million although the paper told us it was 20 million. When you said the "directors", did you mean all the directors or just some of the directors?
Sir David Omand: I am not able to say. I am afraid I cannot remember the exact nature of the discussions we had. I do know that clearly I was well briefed because I was taking the subject at the Board and at that stage the team were indeed drawing on their underlying work and that would have been available to other directors. Whether every director had cottoned on to that, I do not know. In a sense, if I might just add, that was not the critical figure. At this stage what we were looking to see was did we have a prima facie case which would justify beginning a process of testing the PFI market. This was a situation in which it had become clear that a publicly financed rebuild was not going to be possible unless we had first demonstrated that the PFI solution was not available. That was the position that the Board was faced with. We had done some work on the Benhall site, so we had some basis for looking at PFI, and we had, of course, the plans which had been drawn up for the new computer block. The question was would it not be better to have a look at a total PFI solution, and that was really what the Board was looking at, it was not about the details of exactly how much all this was likely to cost because at that stage we had no real metric for whether any private sector bidder would be able to come in with a bid which would be value for money.
Dr Pepper: If I may add, it is also the case that whether it was 20 or 40 million, that was a sum that we were perfectly comfortable we could absorb within our normal technical programme. It was not a figure to focus on; the big focus was on the commercial feasibility.
Q83 Mr Jenkins: All I am trying to establish is how we got to the end through the particular steps. My feeling is that if you had told me as a member of the Board that it was only going to cost £20 million to transfer this equipment over I would have been interested, we should have managed that quite easily, and I would have taken my eye off it.
Dr Pepper: And we did.
Q84 Mr Jenkins: I would have been more interested in the PFI construction of the building itself.
Sir David Omand: That was exactly the reason for the 40 million.
Q85 Mr Jenkins: You admit by giving the Board that information they took their eye off the ball?
Sir David Omand: Absolutely.
Q86 Mr Jenkins: Fine. You got this equipment in place, you got the structure in place, why did you not realise that it was going to cost you more to move it? Did you go down and talk to the technicians? They would have quickly realised that it was not possible to move this equipment for this amount of money.
Dr Pepper: The figure had come from our technicians. It was nobody else who dreamt it up, the figure came from the small technical team.
Q87 Mr Jenkins: I have just got this feeling at the back of my mind, being a suspicious individual reading this Report, that when you said, Dr Pepper, we would have had to have these systems anyway, that we would not have built this anywhere but on a PFI project, what we got was the government, or the minister, they started to reel him in and the project went up 20%, we had a big building and it started to grow and somebody must have known that these new systems going in would have been an expensive addition to this price, but once you got so far in you could not get off the hook and bit by bit you dragged him in and the price went up and up and up and no-one was big enough to call a halt to it.
Dr Pepper: When I said that we would have had to face up to this anyway I was speaking with hindsight. It was not remotely apparent or even dreamed of at the time, and certainly we were not in a position of, in effect, deceiving ministers, which I think is the implication. We most certainly were not doing that.
Q88 Mr Jenkins: I am reminded that in the London area you have got builders who walk in and say "Yes, I can do that for £500", and you say "£500? The last bloke quoted £1,500" and as soon as they walk in the first thing they do is lift the carpet and say, "I did not know that was there, that is going to be a bit more expensive" but you are locked, the builders are in, and it is going to cost you £2,000. Where do we get the break point? As we heard, the minister was not informed until late 1999 that the technical transition costs were £415 million, late 1999. That was a bit late to make another decision.
Dr Pepper: It was during the course of the second half of 1999 that we realised the size of the problem that we had. The figure, if I may say, of 40 million, perhaps slightly more, even with hindsight was a perfectly sensible figure if all that had been needed was to pick up a series of self-standing systems and move them. Even now, it is a perfectly valid figure. The complication came in simply because of the network complexity that we had not understood. It was a perfectly good answer to a question, it was just that the engineers were asking themselves the wrong question.
Sir David Omand: If I can just return to a point we made in answer to another question. Overall, this programme still represents very considerable value for money. Had this programme not proceeded then the department would have faced a very, very difficult situation in which the rebuilding programme would have stretched out beyond the lifetime of a large number of the buildings. To get round that the technical transition costs would have been of the same order of magnitude and it would all have been done in a very painful way and we would not have had the benefits that we can now see ahead of us in terms of the flexibility of having our engineers and our intelligence stays on the same site able to cope with the challenges of the 21st century.
Q89 Mr Jenkins: I do not disagree for one moment that you got value for money. I do not disagree with what you are saying about the requirements that we needed, etc., but all I am asking is given the government's responsibility to allocate funding on priority to the government, do you believe if you had gone in front of the minister and said, "This is going to be the total cost, we are not talking about 400 million, we are talking about 800 million", that the government would have come down and said, "Yes, of course, we will have that, it is very good value for money"?
Sir David Omand: My fear is that if we had known that, which we did not, if we had known that and the government of the day had said that amount of capital is not going to be available, I am afraid they would have left us now in a disastrous position of having a decaying system and we would now be faced with an emergency programme which would be more expensive than this to try and rectify the situation. The right decision was taken but the route by which this programme was launched at the beginning was not at all satisfactory and we make no excuses for that, but the right decision was reached.
Q90 Mr Jenkins: We got there in the end. Thank you, that is all I wanted to know, that we got there in the end. How we got there is left to our own conclusions. I am under no illusion that the ministers did not understand the full implications when they okayed that project.
Dr Pepper: I am sorry, can I just make clear that at the time we were authorised to sign the contract the ministers absolutely knew the full story. When we were first told we could explore it, they did not, but the contract was signed and the final go-ahead was given on the basis of absolutely full and final and complete information.