Q1 Chairman: Welcome to the Committee of Public Accounts. I apologise for the late start. Today we are considering the Report of the Comptroller and Auditor General The Procurement of the National Roads Telecommunications Services. We welcome back to the Committee Mr Archie Robertson of the Highways Agency and also a delegation from the Accounts Chamber of the Russian Federation. Thank you for coming. Mr Robertson, you are leaving the agency soon, are you not?
Mr Robertson: I finish my term at the end of this month.
Q2 Chairman: Do you want to tell us what lessons you have learned from this and other procurements you have overseen that you can pass on to your successor with all the weight of your experience?
Mr Robertson: Just to pick this one, this is a very successful public-private partnership which has a bit of an angle inasmuch as it has a framework call-oV contract which I think oVers to others some lessons to learn. It has taken some time to get it through as the NAO points out, but it is probably the better for that. It is absolutely fundamental to what I and my successor try to do which is to continue to deliver a focus and improvement on the management of traffic rather than the narrow building of roads and maintenance about which we have spoken in the past. I think that in this Report there is quite a bit to commend the thoroughness with which it has been approached by some determined, not novel, thinking about getting things right. I believe that the term of 10½ years will be seen to be appropriate for this kind of PFI when often one hears that it entails the making of commitments for a very long time into the future. This is a technology PFI which is absolutely vital in order to use the capability of anything from a fault detection meter right through to active traffic management as we are currently developing it and it stands to enable us to get benefits of anything up to £2.8 billion, which was in the business case.
Q3 Chairman: That is a very rosy picture, but I should like to press you a bit on the benefits of a PPP rather than traditional procurement. Presumably, you went down the PPP route because of worries about cost and time overruns, but that was exactly what you ended up with, was it not?
Mr Robertson: With every challenge we have to look at how we shall deliver it. The alternatives available to me are: to do it myself by hiring the people and buying the materials, but that is not the sort of agency we are; to embark on a series of contracts for construction and then operation and maintenance of the equipment, which is a set of options that falls within conventional procurement; or to look at whether a PPP-type solution is right in this case. The reason I think it is right, apart from what is shown in the numbers and the £30 million advantage, is that it is a solution that enables the technology risk to be borne by people who are knowledgeable about it and also enables private sector flexibility to be brought to this challenge which is relatively unusual for us.
Q4 Chairman: I always understood that the whole point of a PFI/PPP was that the public sector, albeit perhaps at greater cost, would have a degree of certainty. In this Committee we look at value for money. Why is it good value for money to have a procurement that takes five years, not two years, project costs that are nine times higher and adviser costs that are three times higher than you started with?
Mr Robertson: It is good value for money because when you take all of those issues together you get a solution which, when the risks are factored in, gives you a better response than if you were doing the public sector comparator. That is exactly what this shows and what I expect to see demonstrated as the project rolls through.
Q5 Chairman: We do not necessarily accept that the public sector comparator is a true comparator, and if you read in particular paragraphs 2.33 to 2.35 of the Report you just increase the risk in the public sector comparator to come out with the right answer. We have seen this in previous PFIs and are very dubious about public sector comparators that appear, frankly, to be fixed against traditional procurement.
Mr Robertson: Having observed a number of other PFIs I can understand your scepticism particularly in cases where PFI enables a project to be taken off the balance sheet. This is the agency's 12th PFI; we are now working on our 13th, and all of our projects are on the balance sheet. The capital and resource funding has to be provided in the same way as if it were a conventional procurement. Therefore, I am able to make the assessment simply on the basis of the advantages and disadvantages of traditional procurement, if we can call it that-contracting-the flexibility I can achieve and the risks I can transfer to the private sector. The risks that are helpfully set out in the appendix to the Report of the National Audit Office are significant and real as far as concerns this comparison because there is no mysticism involving off-balance sheet treatment.
Q6 Chairman: I would have greater belief in that if it was not for the very interesting figs 16 and 17 on pages 28 and 29 of the Report. The left-hand page is what we were supposed to get: "The initial bid documents required the contractor to increase the fibre optic cable network by 278 kilometres in the first two years of the contract". We know that we did not get that. If we read across the page to fig 17 we see: "After the affordability review, the Agency focused on removing gaps in the core 'figure of 8'. . .", so under this scheme you ended up with 110, not 278, kilometres. If we look at the footnote on that page we see that under traditional procurement you installed 168 kilometres. Therefore, the PPP whose praises you have been singing for the past 10 minutes or so delivered you only 110 of the 278 kilometres it was supposed to provide and for the rest you had to rely on traditional procurement which you have just told me was so risky.
Mr Robertson: The kilometres are important but not significant in the sense that what really counts is what one puts down the cables and enables by providing this network. What is in the PFI that we are now progressing is a core addition of 110 kilometres to give us the core figure of eight network in illustration 17 and, associated with that, the framework document which enables us then to buy at fixed prices the additional parts of the network we will need in order to roll out the other services we are putting in, for example ramp-metering, active traffic management, weather detection and safety incident detection. That is when this investment enables the benefits to be gained. There is no point in putting in all of that network ahead of the need for it.
Q7 Chairman: If we look at the top of page 53 we see helpfully set out in clear form how the procurement timetable progressively increased from 21 months to over five years. Further down the page we see how you appear to have spent more and more on advisers. If you were spending so much on advisers why could they not warn you earlier of the risks involved in this? What was going wrong? Surely, they should have told you that you could not afford the original project in the way it was devised. That is the point of having advisers.
Mr Robertson: It would have been great if they could have told us of two of the things we would have to deal with after we began the project. The meltdown in the telecommunications industry meant that the original vision that some income might arise from this became completely redundant overnight. The agency and government did not become exposed to that because the project was developed; nor were the advisers in a position to anticipate just what it was government would be looking for in terms of delivering the traffic services that we were asked to develop from 1998 culminating, most importantly, with the roll out of the traffic officer service from 2004. Therefore, the advisers could not have told us that. The advisers' budget was certainly more than had been anticipated because the problem we were trying to solve certainly changed during that time which was a risk in itself, but I believe that it has been managed positively and we have a very good project coming out of it.
Q8 Chairman: You have appeared before this Committee in the past. If you look at the front cover of this Report you see a picture of a motorway. You have hard-shoulder running, variable speed limits, speed cameras and variable signs. All of these are recommendations we have made to you in the past. But can you assure us that if we are to have better managed roads we will need fewer new roads and, therefore, we will get better value for the taxpayer?
Mr Robertson: Thank you for your encouragement in getting services rolled out as far as concerns our original report. They are indeed rolling out everything from high-occupancy vehicle lanes to everything that is on the front page, that is, ramp-metering and other detection systems beside. The government's strategy that I am implementing continues to be one that looks at construction where road capacity is already beyond its nameplate capacity and it is under severe pressure, like the M1 and M25. The second strand of that is exactly what we are talking about here, which is to make better use of the network, sweat the asset harder, as I still call it, and help people to move better. The third strand is still to introduce congestion pricing as a means of controlling demand at hot spots. That is not directly within my remit, but you will know from the recent statement of the Secretary of State that she is progressing that and we are contributing to that strategy.
Q9 Mr Touhig: Mr Robertson, I see that you are married with three children. Do you sometimes do the weekly food shop?
Mr Robertson: I have been doing it recently, yes.
Q10 Mr Touhig: Therefore, you will know that when you buy in bulk you can purchase more cheaply?
Mr Robertson: I know that sometimes you can be induced to buy in bulk when you do not need to.