Q21 Chairman: This whole issue has delayed including additional properties in the contract, has it not? This is causing a difficulty with the HMRC, is it not?
Mr Friedlos: It would appear that the delay in bringing one group of 11 properties into the contract is because of an "offshoring" issue.
Q22 Chairman: It is not just a political, with a small "p", own-goal it is actually impacting on the contract, is it not? You should never have done a deal like this with an offshore company because you are now filled with embarrassment as you are trying to manage this contract. That is the truth is it not? It is better just to admit it now. You were not responsible at the time. We do not hold you personally responsible, but we just want you to tell the truth.
Ms Strathie: I am not embarrassed.
Q23 Chairman: You have a very high embarrassment threshold.
Ms Strathie: You have to have in my job. I do feel that much is made of this, what the tax implications would be at the end of this contract and would be today, with issues which I am sure Dave Hartnett is much better equipped to talk on. The issue of bringing other properties in is one that we need to take a strategic view on based on the offices that we are serving vacation notices on, those that we have announced will happen over the next two to three years and what that means then for the proportion of buildings which are in this contract and the proportion of buildings which are outside it and what I believe is the best thing for HMRC and the UK taxpayer going forward.
The Committee suspended from
3.45pm to 3.49pm for a division in the House.
Q24 Angela Browning: Can you tell me why your company invoices HMRC for accounts dating back to 2001? Why were you unable to invoice in a timely manner?
Mr Friedlos: We do invoice the bulk of our charges on a very timely basis. We invoice around about £206 million a year on a monthly basis. There are occasionally items which arise outside the normal course of the contract where some specific agreement or discussion is appropriate before we bill. Those are the items which sometimes accumulate unbilled for a period of time.
Q25 Angela Browning: The period of time amounting to nine years according to this Report: £12 million dating back to 2001.
Mr Friedlos: Yes; that relates to additional services which we were asked to provide. At the time we were asked to do so, the methodology for pricing those services was not clearly agreed between the Department and ourselves. Once that agreement was reached, we then began a process of catching up on the invoicing for those amounts.
Q26 Angela Browning: I appreciate that if there is a dispute there will be some period of time for negotiations, but this does seem to be somewhat excessive. How timely were these invoices relating to this £12 million?
Mr Friedlos: The invoices relating to the £12 million were in relation to a number of individual items which accumulated over a period of years. The Department were aware that these were accumulating and once the methodology was agreed and we had done the work to substantiate and demonstrate to the Department the validity of those charges they were duly invoiced.
Q27 Angela Browning: Why is it then, if these disputed amounts were accumulating and the Department were aware of it, that it has taken so long to come to some agreement to get them paid?
Mr Bowles: I mentioned earlier that we had a number of areas where we needed to resolve longstanding commercial negotiations and I was very keen that as part of this partnership development with Mapeley we did not deal with things piecemeal. We are currently engaged with Mapeley in going through all of these to get the best result for the taxpayer. I am confident that we will get resolution relatively soon.
Q28 Angela Browning: Does part of this contract involve any element of surcharges or interest being accrued on late payment?
Mr Bowles: Not to my knowledge.
Q29 Angela Browning: So we have not paid in addition to the disputes.
Mr Bowles: No.
Q30 Angela Browning: Are you content that you have now communicated sufficiently for these not to happen again?
Mr Bowles: The answer lies in improving our processes both within the Department and with our supplier to make sure we have early visibility to these and that is what I referred to earlier in terms of overall improving the processes and capability.