Q31 Chair: What did you reduce to in 2010, when Mr Devereux, the previous Permanent Secretary, cut staffing by a third?
Michael Hurn: The team of eight had a few vacancies. Some of them were not people already in place; there were a couple of vacancies. In 2011, we did not fill some of those vacancies. We lost one or two posts and maybe one vacancy. I cannot remember the exact details, but we did lose a few people.
Q32 Chair: What were you down to?
Michael Hurn: We went down to five.
Q33 Chair: You went down to five, and you have stayed at five, so all the stuff about strengthening your team-
Michael Hurn: No, we have had a number of people leave over the past couple of years, and we had to recruit for those posts. Also, we have had to change the skill sets as well, focusing very much on the systems integration side of things that I mentioned earlier. It is not purely about staff numbers; it is about having the right skill sets.
Q34 Chair: The rumour was that nobody, or only one person, knew about rail in the Department for Transport. How many people have you now got? How strong is your rail cohort?
Philip Rutnam: From memory-I am not sure the number is absolutely right-the rail group in the Department is about 250. That includes a good many people who have got an industry background or have worked with the industry in a context other than just being in the central Department for Transport. If you were to meet a cross-section of our people from the rail group, you would find many people with not a policy background but a very practical background as project managers or commercial managers who in one way or another have grown their professional career in this industry.
Q35 Meg Hillier: Welcome, particularly to Mr Hurn. I think it is your first Public Accounts Committee hearing. As you can hear, we are very pro good senior responsible officers in this Committee. Apart from what the Chair has already raised, we want to focus today on some of the other issues around procurement, rolling stock and the franchise. I am going to kick off on some of the further issues on procurement. The Department took over this responsibility in 2006-sorry, 2005. Why did the Department take it over at that point? What criteria should apply for a big project like this to be taken over by the Department rather than run by other bodies? What criteria would normally apply? What made the Department think that this was a project that should be led by the DFT?
Philip Rutnam: I think Michael is probably best placed to speak.
Michael Hurn: I will answer your question, if I may, in terms of the project as a whole rather than just the rolling stock, but of course I will address the rolling stock.
Meg Hillier: Talk about the project as a whole.
Michael Hurn: The simple fact is that in 2005 the Strategic Rail Authority, which at the time was responsible for this project, folded into the Department for Transport, so the responsibilities of the SRA were taken over by the Department for Transport, including major projects. The Department for Transport became what we call a sponsor of Thameslink, responsible for the outputs of the projects in terms of what it means for benefits, securing of funding, agreeing with Network Rail the scope of the infrastructure works and obviously working with the rail industry to commence the procurement of the trains as well.
We took over direct responsibility for the project, and it was very much about co-ordination of the infrastructure, the trains and the franchises: those three elements all need to be integrated. Obviously, the train franchise for the train operator is the way to actually realise the benefits of the project commercially and contractually. You have to have alignment of the franchise, infrastructure and trains to deliver the overall benefits for the project.
Q36 Meg Hillier: Was it particularly helpful having all that co-ordinated by the DFT rather than by another body, even though the SRA had existed before then?
Michael Hurn: The SRA had that responsibility. As I said, in 2005 it moved to the Department for Transport. Being in the Department for Transport gave it greater focus, because we had control of the funding very much closer within the project, rather than its being at arm's length with the Strategic Rail Authority. It gave a lot more focus and clarity about the project and its objectives and time scales.
Q37 Meg Hillier: In your professional opinion, and maybe in Mr Rutnam's as well, is it better when a complex project like this is run by the DFT, bringing together all those complexities? Maybe you can comment about that?
Philip Rutnam: One other observation, which is perhaps just stating the obvious, is that the Government of the day had decided to abolish the Strategic Rail Authority and to fold its functions into the DFT, so there was no obvious way of continuing the project outside the DFT. Michael has also outlined the benefits we think have come from having co-ordination within the DFT.
The point I would make is that there is a real challenge for us, as a Department of State, in doing these things. There is a real challenge-we have touched on it already-in making sure that we assemble the commercial skills and commercial insights necessary to manage and oversee large, complex projects. I think Thameslink, and I could cite other examples as well, shows that we can do this successfully, but I am not going to pretend that it is not a challenge for a Department of State. Often you will find that the dominant skill sets in Departments of State are oriented more towards policy than project management and commercial. As a Department we have to recognise that we need policy skills but, critically, we need these other skills as well. To be frank, far more of my management time and attention goes on making sure that we acquire and retain those skills than on the purely policy skills.
Q38 Meg Hillier: This was a very complex project. Mr Hurn laid out lots of different strands. In the current climate, without an SRA and with Network Rail and the other operating bodies, do you think there are other bodies that could, in your professional opinion, manage this process as well as it has now been managed by the DFT? Is there an equivalence in the private sector?
Philip Rutnam: In the present industry structure, the DFT has to do it. The funding ultimately comes from taxpayers, and we have to account for that. Critically, we are the only party that has the relationship with the franchise on the one hand and the providers of infrastructure and rolling stock on the other. So at the moment, in the present industry structure, we have to do it. One could always imagine alternative structures in which roles were different, but at the moment we have to do it. I suppose I would point not just to the record of Thameslink but other wider evidence on the rail industry to show that overall nothing is perfect but a number of things have gone in the right direction in the last 10 years.
Q39 Chair: We are going to come back to the rolling stock, but I do not understand why you have to buy it. I cannot for the life of me understand why that is within the DFT. The evidence from this project is that if there is one thing that has gone really badly wrong, it is the buying of the rolling stock. We have the MOD talking about outsourcing the procurement of defence equipment, which is scary for all sorts of other reasons, but this would seem to be an area where I am not sure the skills exist within Government to do it properly. Why are we carrying on pretending that we can do it well when even here we cannot?
Philip Rutnam: Do you want us to say something on that now or come back to that later?
Meg Hillier: I was not going much more into procurement myself. I do not know whether other members might want to do that.
Chair: Let's just deal with that.
Philip Rutnam: Why are we procuring the rolling stock? That is a good question. I have been in the Department a bit over a year and I have asked that question a number of times myself. Pragmatically, the answer to that is that this is rolling stock which in the present structure will be used by several different franchises. It is not as though one franchise alone has a need for the rolling stock, so it spans multiple franchises in the present structure. It is also on a scale that exceeds the capacity of any of the individual rolling stock companies, so it is a transaction on a scale that just exceeds what the private sector itself would be able to procure and commission. Michael, do you want to add to that?
Michael Hurn: Just to say that the scale of this procurement is over 1,000 railway carriages-a very significant procurement. Most private sector transactions are of a much smaller order. As Mr Rutnam has been saying, the ability to raise the finance for this large order is why the Department of Transport is involved.
Q40 Chair: Who buys their rolling stock in France?
Philip Rutnam: Principally SNCF-