Q1 Chair: Dr Van Grondelle, my apologies. I will tell you why we switched. The officials asked to give some information to us in private, so we thought that rather than having you in public, then switching to private, and coming back to public, it would be better to switch in the way we did. Apologies to all of you who have been waiting, and particularly to you, Dr Van Grondelle.
This is a short session that we have as an innovation at the start of our investigations into issues. What we try to do is to get someone who knows much more than we do as generalists about the issues that we should be addressing to give us some support and advice as to what we should be looking at, and your take on the Report, which I hope you have read. We are not trying to catch you out. We want you to say what you think from your reading of progress made so far. Where are your major concerns? What do you think is missing in the design of the system that comes out of the Prime Minister's mandate? Where do you think things are going better, and what does your experience tell you about how the UK Government can perform better in this arena?
Dr Van Grondelle: There are quite a few questions, Chair, so I will free flow.
Q2 Chair: Yes, just free flow, and people will come in.
Dr Von Grondelle: When I speak to my professional colleagues, the impression I get is that the MPA is seen as good news in Whitehall. There is a new sheriff in town-to go for that old Americanism. We certainly hear from our clients and professional contacts that it is a force to be reckoned with, and that is a substantial change or enhancement or however we wish to describe it. It is certainly not seen as a token effort by the Government. It is seen as a credible, serious player. I think that is quite an achievement. This is a personal view, but in a very short space of time it has created a name for itself, spectacularly, which is an incredible achievement and a great positive.
I do not have a full overview of the MPA as you have, but from my encounter with it-some of the projects it is running and some contractors working for the Government-it seems to have an incredibly wide mandate, but a relatively small resource base. That is my first observation, and my first reaction. From my private sector experience over the past 20 years of running complex projects all over the world, particularly the governance and assurance around that, I can give an example or a bit of a ratio of resourcing staff versus the size of project. Before I joined the firm, I came from a project of $40 billion or £25 billion, and over 200 people were running that project's assurance across the piece from quality to-
Q3 Chair: In terms of cost, what would the ratio be? With 200 people, how much was the assurance as a proportion of the cost?
Dr Van Grondelle: It is not totally unusual to be somewhere between 0.2% of total capital cost and 0.5%. That seems to be indicative in my experience. With projects that are going terribly wrong and when there is more desire from the oversight bodies for assurance, or indeed for intervention, it is not unusual to go to 1% or 1.5%, and in a really extreme case to almost 2% of total capital cost, but that is the extreme. I must emphasise that it is not the norm; that is for projects that have gone off track, and are not delivering value, not delivering on schedule, and not delivering against cost, or need substantial re-engineering or change on the way. That is not the norm, and 0.2%) to 0.5%o or 0.7%o was certainly what I encountered in multinational oil and gas projects and infrastructure projects, and is not beyond the realm of the possible. In that particular case, there were 6,000 people on the project-6,500-200 of which were in assurance. Again, that is slightly extreme. They are all different; there is no standard.
Q4 Chair: Good start, not enough resources. Any other overarching comment? Are the powers strong enough? Is the authority strong enough? When I read it, I saw a question mark there.
Dr Van Grondelle: I declare a conflict of interest almost-not a real one, but being from an assurance background, one of the key observations I always make is that assurance should never be without consequences, particularly if there are shortcomings. I am not totally clear-that may be a lack of information on my part-how the assurance feeds firmly into the decisions taken by the senior responsible officers in the various Departments. The firmer the link is and the harder that link is, the more value is given by assurance.
You could almost think in terms of giving the MPA and the Treasury conditional approvals for projects, and stopping them or resetting them if they are not performing. A particular tool I would add to the MPA toolbox, for want of a better word, is the power to direct a reset. They do not always have to be abandoned or closed, which by definition means writing off the money, the time and the talent that have been invested. Very often, projects can be re-engineered, they can be refreshed, they can be reset- whatever terminology we wish to use. I think a really good power either for the MPA or for the Treasury, or a combination-or for this Committee-to have would be to direct a reset of the project, rather than a complete abandonment and thereby a write-off of the costs incurred.
Q5 Austin Mitchell: The Major Projects Authority says that only about a third of Government projects have delivered on time and on budget. How would that compare with the private sector?
Dr Van Grondelle: There are a whole range of databases, and they do not perfectly overlap, in the sense that there is not a hard-core private sector number that I am aware of that I can share as "The Number". It seems on the high side, but at the same time-
Q6 Austin Mitchell: A third?
Dr Van Grondelle: A third are delivering well, and two thirds are not delivering well. The two thirds seems on the high side compared with the private sector. Having said that, the private sector is not above making a hash of projects either. It is not that the private sector has the magic bullet and they always deliver their projects correctly. I come from the oil and gas industry world, and a lot of projects there are late. The difference is that, very often, it is detected a little earlier in the piece, and the action to reset them or refresh them tends to be a bit more intrusive. I would not be surprised that, on a like-for-like basis, the public and the private sectors did not differ that much, but the power to intervene either to stop a project or to put it in a more productive, safer and controlled mode tends to be stronger-in my experience, at least-in the private sector.
Q7 Austin Mitchell: I imagine that the private sector could also be quicker and more decisive to junk things, if they are not working.
Dr Van Grondelle: Sometimes.
Q8 Austin Mitchell: I mean that it is difficult to co-ordinate political things between Departments-the considerations are bigger-whereas you have a unified control structure in a private corporation.
Dr Van Grondelle: Ideally, yes, but particularly when it comes to, say, a transnational joint venture project, which is where a lot of British multinationals do a lot of their capital investment, it is very difficult to make yourself abandon a project once you have started it. You have launched it with considerable fanfare; you have announced it to your shareholders; it is part of your annual report and it is part of your growth strategy. You name all these wonderful influencing factors, and it is then very, very difficult to tell yourself to stop doing it. For example, in the oil and gas industry that means de-booking reserves, and shareholders do not like oil and gas companies de-booking reserves. In aerospace companies, it means not having full order books, which can create all kinds of issues. In that sense, it is different. There is not the interdepartmental co-ordination angle that you so correctly describe; on the other hand, there is a strong disincentive to close down a project. That is why surgical intervention in a project is often chosen-to keep it going and to be able to tell your shareholders you are still progressing with it, but to be quite decisive in resetting it.
Q9 Mr Bacon: I have a couple of questions. Based on your ratio of 200 people to cover a $40 billion project, the £376 billion that we have here would equate to-I have just done a quick sum; if you call it roughly $580 billion-about 2,890 people, which is almost exactly the size of the senior civil service. That would give you the kind of level of governance and assurance you wanted and, at the same time, create all the problems you have with big bureaucratic organisations.
The striking thing about the MPA is how it is doing a better job, and is widely recognised as doing a better job than the old Office of Government Commerce, with a bigger remit and fewer resources than the old OGC. Plainly, they are getting something right. It must also be true that there could be an increase in the level of resource that would give them more firepower if they had the right people of the right quality and the right calibre to do a much better job still and have much better coverage-for example, the number of projects in the MOD alone mean that they can only be very cursory there-but at the same time get to a point where they resist going so far that they become top-heavy and muscle-bound. How do they find where the sweet spot is?
Dr Van Grondelle: It is a very intuitive game. There is no benchmarking and no absolute number. You'll know it when you see it is always my answer when it comes to the size of assurance schemes. I think flexing is very important. First, prevention is better than cure. The whole major projects academy initiative- assuming that we can hang on to the people we have trained and that there is no erosion or retention issue-is extremely exciting, and that will contribute over years, gradually, in getting the prevention side right.
On the assurance side, I gave the example of 200 people for $40 billion; in that extreme example, two thirds of them were specialist advisers who were just there for that project. They did not form part of the core of assurance, because there is a substantial element of specialist knowledge required, which you would use only occasionally as a Government. You would not want to have those resources permanently on the Government's books.
Q10 Mr Bacon: Does that mean bringing in highly paid consultants on day rates or bringing in people on 12-month contracts?
Dr Van Grondelle: It is a combination of that sort of tool. It occasionally is literally specialist resource being brought in, which Government would not want to keep on the books, or would not want to be able to afford permanently. It is also very much on a project basis. If you talk about resetting projects, that is a discrete activity. It has a start and it has an end, and you would not want to keep the resources doing that permanently on your books.