Q151 Mr Jenkins: I am not averse to this contract and I am not averse to taking risks. In fact, I think too often we criticise departments for not taking risks and, effectively, costing us more money. I just want to clarify this so that everyone understands exactly what we are talking about.
Mr Varney: There is always a problem with analogies but it is a bit like we have bought a flat where we have agreed what the rent is going to be, which is the facilities price. On top of that we have the option of either paying the service charge or buying the services ourselves. That is the analogy and that is why the contracts are not quite so clear.
Q152 Mr Jenkins: It is not that aspect I am worried about. The concept I am worried about is this: I have got the flat, I have got the electric, I have got the gas, I have got the management charges; it is this other element of when I want an addition to the flat, when I want a wall put in. Am I going to go out to tender and get the best tender or am I now linked with a contractor who says, "This is our contract. This is what we can do"? You are all shaking your heads but I want to know because £170 million to £311 million is a lot of money, it is double the price, so in essence what is done for double the price? How many contractors have been brought in by your estates team when you have had a contract with this company which has not met what you thought was the right price? How many contracts have you given externally where you have not gone to your main contractor?
Ms McHale: We are actually in the process of doing this and that is part of the work we are doing for bedding down the contract when we are agreeing the new framework agreement for doing those deals. We always do it on a value-for-money basis. Mapeley are our first option provider. If they cannot do it and do not wish to do it commercially then we have the right to go to the market-place and test value elsewhere.
Q153 Mr Jenkins: No, no, no, you did not say that. You said specifically that if you got a job you could go to any contractor. You did not tell me that you had to go to Mapeley and almost say, "If you did not want to contract or tender for this I can go somewhere else."
Ms McHale: It is on a value-for-money basis so part of the benefit of this contract is having a relationship with the provider. That is what we are trying to build to get the most out of the relationship with Mapeley.
Q154 Mr Jenkins: I know your relationship. The relationship is quite simple: you did not tell them about the condition of the building and they did not tell you about the offshore basis. That is a brilliant start for a partnership based on trust. So I know your relationship and that is the difficulty. You have now dropped from 300 to 160 members of staff to run your estates team. Why have you got 160 in your estates team? Surely, it should be run by the contractor?
Ms McHale: We are actually at around 152 and as the relationship beds in we are getting further efficiency benefits in our operation and we expect to see that moving over time.
Q155 Mr Jenkins: But can you reduce it if you are in fact going to start tendering for every job that is not part of the base contract?
Ms McHale: That is why we are looking at arranging framework agreements with Mapeley so that we can have arrangements we can draw upon and we do not have to go into that level of detail for each task.
Q156 Mr Jenkins: Mr Hopkins, on the back of this part, this contract has to be shared out with new contracts/new business?
Mr Hopkins: Yes.
Q157 Mr Jenkins: Now you are in this market-place, how many new contracts and how much new business have you taken up in the last three years?
Mr Hopkins: We took on one major contract in addition to this which was the entire UK portfolio of Abbey National, all their offices, shops and back-up. Between the departments contract and that, it is a very sizeable business. We have also won a couple of smaller contracts which are hardly worth talking about. The major contracts are STEPS and the Abbey National bid.
Q158 Mr Jenkins: Mr Varney, you have mentioned, maybe rightly, "with hindsight" on a number of occasions and I think personally that anyone can have hindsight but if we pay people to be there to do an analysis we expect them to have foresight to avoid any problems. However, with hindsight at the present time do you think this is a good deal?
Mr Varney: Yes.
Q159 Mr Jenkins: When they tried in London many years ago to sell the lampposts off and lease them back, it was stopped by the Government because it was a bad deal, because no-one with any sense would sell the assets off and rent them back so in the longer term they would pay more for the assets. Why do you say yes it is a good deal?
Mr Varney: Because nobody thinks that the Revenue and Customs in 20 years' time will be the same shape as it is today. It is not the main task of Revenue and Customs to manage the estate. We have got an estate of some considerable size and I think there were benefits there. We are probably always going to need lampposts but business will be done in a different way. We have got a contract which covers the uncertainty which if we did not cover it when we changed our properties that would go straight through to my costs and I would have to bear the costs of downsizing the estate.
Q160 Mr Jenkins: I understand that but surely it is not beyond the wit of even our departments to get together and establish an estates team that looks after all government buildings and can fix the size of the building as and when they require it? We know we are going to downsize certain departments as some departments run out and other departments grow up. Are you saying we could not do this and we have to hand it over to a contractor outside?
Mr Varney: It is a question of what you think is value for money with the resources which you have got. Outside the public sector people have decided that property management or telephony or computer infrastructure is better served by having a professional outsider do it and having the career prospects of people working in it being professional rather than doing one of the other tasks. In each case you have to ask yourself whether there is a value for money for the public purse. That is what I thought the Report in front of the Committee has tried to establish.
Chairman: Your time is up, I am afraid, Mr Jenkins. Mr Trickett?