Supplementary memorandum submitted by the Department of Trade and Industry

Question 40 (Mr Don Touhig): Communication with Ministers

Mr John Battle MP was responsible for this project as Minister for Industry, Energy and Science from 6 May 1997. The final report on evaluation of tenders was put to Mr Battle on 11 July 1997. This recommended Laser be selected as preferred tenderer. Over the next year the Department resolved the reservations it had recognised on Laser's design in this report, so that on 17 June 1998 a submission was put to Mr Battle and the President of the Board of Trade, Margaret Beckett, reporting that officials were confident the deal could be recommended to Ministers for approval at the end of the month. The submission reported that, "In the last 12 months, the needs of the laboratory staff have been clarified, (and) the original design has been updated." And that, "Mr Battle has been continually updated on these and other developments during the contract negotiations." Duly, on 26 June 1998, a recommendation was put to Mr Battle recommending approval to sign the Project Agreement and associated documents, committing the Department to the PFI development project. This was obtained, and the Project Agreement was concluded on 31 July 1998.

Question 46 (Mr Don Touhig): Communications with the National Audit Office

The Department was aware that the project was experiencing difficulties from mid 1999, as the NAO Report makes clear (paragraph 1.10), and officials kept Ministers informed of the situation. In July 1999 Lord Sainsbury assumed Ministerial responsibility for NPL (in succession toJohn Battle MP).Asubmission was put to him in September 1999, highlighting that construction was running behind schedule, and that some output specifications were not being met. The issue was brought to a head when Laser launched the adjudication described in Appendix 3 to the NAO Report in February 2000. Ministers were kept informed about the result of the adjudication and the actions the Department was taking to mitigate the problems Laser were experiencing.

The suggestion that the Department only learnt of the project's difficulties in 2000, and from NAO, is thus incorrect. NAO began investigating the value for money of the PFI project in 2000. During the course of their enquiries over the following year, NAO realised the fluidity of the situation on site, and in March 2001 decided to postpone their studies in order to await developments in the project, rather than continue work, which they recognised may have quickly become out of date.

Question 48 (Mr Don Touhig): Advice received from the Treasury

From 2000 onwards, the Department was in touch with Partnerships UK (PUK), and with the Office for Government Commerce (OGC) through regular interdepartmental meetings,at which progress onthe NPL PFI would have been discussed informally. The Department wrote to the Treasury on 31 October 2002 when the possibility of a termination became more likely (explaining that the project was then running some two years late, and that JLC had encountered severe delays, technical problems and financial losses at Teddington).

Printed in the United Kingdom by The Stationery Office Limited
3/2007  352573  19585