STEPS CONTRACT MANAGEMENT -(POST APRIL 2001)

The committee asked specifically about tax advice received, the departments did not obtain any external advice in this respect.

Questions 139 -143 (Mr Williams): I am not talking about that. I am talking about when he heard, not when he got before the committee. I look forward to reading it. I would look forward even more to reading the source evidence you collect before I read which of it you care to let us see!

There is no record of Mr Broadbent's reaction when he first learnt of the off shore structure of Mapeley. His comments thereafter are well documented, for example in the Minutes of Evidence taken before the Treasury Sub-committee, 11 December 2002 where he said:

"Yes, I think they should have told us. I think it is regrettable that they did not. I have a degree of understanding for them."

Question 147 (Mr Williams): Could we have an outline of the nature of these problems in a note, not an outline here and now but if the three of you could put a note in to explain to us precisely what it is.

STEPS Contract PMS -A detailed PMS was included within the STEPS contract. By its nature, the system is complex to reflect the range of services and performance levels that need to be managed. Although scenario testing was carried out prior to contract go-live, it was recognised that the true effectiveness of the PMS would not be known until a period after the contract start. In recognition of this, the contract allows for both Mapeley and the Departments to propose and agree changes to the PMS.

Although the basis of the contractual PMS remains sound, it was found that a number of elements within the process were not delivering in line with original expectations, either in terms of the financial penalties that Mapeley were being subjected to or as an incentive for service improvement gains. The following specific points were identified within the contracted system as causing problems:

 -  the system is overly complicated and requires significant resource from both Mapeley and the Departments to operate;

 -  the resulting outputs do not always provide meaningful management information to either party;

 -  Mapeley believe that failure points awarded under the system accumulate too rapidly, leading to unfair deductions (which Mapeley consider to be punitive);

 -  the structure and nature of the Mapeley Help Desk, which forms the basis for much of the PMS generated data, focuses primarily on reactive tasks rather than the necessary balance of planned preventative and reactive tasks;

 -  the waiver process, which allows performance deductions to be by-passed in certain circumstances (eg where the Departments' own actions have prevented Mapeley from delivering services) are not applied consistently.

During the first year of the contract, action was taken to address some of the problems that had arisen. A joint review was undertaken, resulting in Mapeley making a number of changes to the original system. Further progress has been made since.

Question 182 (Mr Williams): To save time can you let us have a note on this arrangement. I am relieved to hear that you are sharing the profit.

Background -Development Gain can apply to any property vacated and disposed of under the terms of the STEPS contract. The gain is calculated by reference to the IPD (Investment Property Databank). If the increase in value is in line with these indices and no higher, then the departments would be ineligible to obtain any % of the increase.

Detail -If there is an increase in value over and above the IPD indices between the base value and Mapeley disposal then the provisions within the contract take effect. In this case, the departments are entitled to a % share of the gain less reasonable STEPS Contractors costs incurred.

The Departments share is: -

 -  30% of any Development Gain less than £1,000,000;

 -  40% of the whole of any Development Gain between £1,000,000 and £4,999,999;

 -  50% of the whole of any Development Gain between £5,000,000 and £9,999,999; and

 -  60% of the whole of any Development Gain in excess of £10,000,000.

There are also provisions which deal with further Development Gain. The provisions are essentially claw back measures to deter the STEPS contractor agreeing back to back deals with developers which reduce benefit to the departments.

Sharing the profit -The properties subject to development gain being discussed with the department are:

 -  Custom House -Southampton

 -  Portcullis House  -Southampton

 -  Kew Sorting Centre -London

 -  Towergate -London

 -  Pope Street -London

30 November 2004