New it systems for Magistrates' Courts: the Libra project (HC 327) Public Accounts Committee 10 Feb 2003

Examination of Witnesses

Mr. Steinberg: Sir Hayden, one of the organisations I least like to deal with are the Magistrates' Courts because generally I find them very aloof and quite unhelpful at times, so it did not surprise me to learn that they work in their own outdated sort of systems. Yet you wanted to introduce a new IT system without any agreement on uniformity. Was that a disaster in the making?

Sir Hayden Phillips: No, I do not think necessarily it was, nor as it were, I would argue, have we got a disaster now through the roll-out of the infrastructure and the plans for the core application, although not all the processes are the same. We are dealing with 96 separate bodies, and they were being amalgamated. We had 15 years of criticism from PAC and others about inactivity on the part of the department. I had to make a judgement about whether it was sensible and balanced to go ahead without full standardisation procedures or not.

Mr. Steinberg: So how on earth could you devise a system which included all the different procedures that were being used throughout the country in different Magistrates' Courts?

Sir Hayden Phillips: Procedures I think were not as disparate as that implies, point one. Secondly, in the process of putting in new systems, if you are successful you can modify processes so that they are more in common than they were before the process of amalgamation, the involvement of lots of representatives of the Magistrates' Courts on user groups has enabled some of that to be done.

Mr. Steinberg: What was the attitude of the Magistrates' Courts? Were they helpful? Were they co-operative? Did they present problems? Were they keen to help you? Were they obstructive?

Sir Hayden Phillips: I think there was a balance here of the difficulty of getting 42 separate organisations as it turns out to agree on things, but I think we have made progress and I think there is a general degree of eagerness on the part of the Magistrates' Courts and their staff to get on with this, to get it in place, and then to adapt the system as we can as it develops.

Mr. Steinberg: I hope you are right. Changing the subject, when I read the report I have to say that I was quite amazed that you even considered ICL in the first place as a partner in a PFI. If you turn to page 14, figure 9, this is ICL's involvement in the Benefits Payment Card project. I am not going to read it out because we can all read it ourselves. This company totally failed to deliver the previous contract with the then Department of Social Security. They demanded a 30% increase in prices. They demanded five years' extension to the contract for them to deliver it. Rather than giving them a further contract from another department, should they not have been sued in the first place?

Sir Hayden Phillips: I can tell you what we did in relation to this. Before signing the contract I made sure that we found out what was going on. The advice I got, which seemed to me absolutely fine at the time, was that the contract referred to here involved the development of new and innovative software which would have been more sophisticated.

Mr. Steinberg: You were aware of the fiasco that had gone on with the Benefits Card. Am I right?

Sir Hayden Phillips: We knew in 1998 that there were problems, but do not forget that it was deemed technically viable by review and the contract was extended and negotiations went on until 1999. My principal concern there was as it were -----

Mr. Steinberg: Why did you negotiate with them when you knew that they could not deliver another government contract?

Sir Hayden Phillips: Because we genuinely believed that the problems they were then facing were of a different nature from problems they would have to solve under our contract, and my principal concern was then with the impact on financing of ICL if this other project went wrong. Of course, do not forget that that was not the only contract ICL had at the same time that we were doing this. The DTI had entered into a big contract in 1998, Customs and Excise in 1999, other departments were entering into big contracts with a major company. The fact that it was having problems on one contract, which we thought were different, did not seem in itself to us at that time to be sufficient reason for not going ahead.

Mr. Steinberg: So you negotiated with them. How long was it before they then adopted the same tactics with you that they had adopted with the Department of Social Security?

Sir Hayden Phillips: If you are saying at what period of time did they come to us and say that the way -----

Mr. Steinberg: Because they came along and asked you for £38 million, did they not?

Sir Hayden Phillips: ----- the contract was structured was going to cause a serious loss, I think it was about a year to 18 months after getting into the contract, and that is why we did the 2000 negotiations.

Mr. Steinberg: So they had this appalling record with the Department of Social Security. You then decided to disregard that to go into a tendering situation with one company and within 18 months they were back again demanding more money for a contract which they could not deliver which you had both signed up for. Is that a fair assumption?

Sir Hayden Phillips: You then must look not just at that description of the history, which I think we would not contest, but also at what we did in 2000 which was to buy a different level of service over a different period and the nature of the contract in that respect changed. It was not just a question of saying, "We will hand them some more money". What we were quite clear about was that if we were going to co-operate in a growing spirit of partnership, which is what is now the best practice, we were going to have to see what we could buy for additional money, and we bought more for that money in, I believe, a justifiable way.

Mr. Steinberg: You see, Sir Hayden, when I read the report I got the feeling that they were the only contractors who were bidding. As soon as they knew that they were the only contractors bidding they put up the prices, and (and I am very much a cynic) I suspect they thought, "Here we are: another government department, another set of mugs. What we will do is we will put a very low price in, we will get the contract, and then within 18 months we will be back again and up prices will go and the British taxpayer will have to pay for it".

Sir Hayden Phillips: No, I think we tried to deal with this on the merits as they arose at the time and tried to make sure that we got the most satisfactory deal in terms of the services being delivered.

Mr. Steinberg: History repeated itself, did it not, because they did exactly the same with Social Security and they did exactly the same with you. Mr Christou, if you look at appendix 3 on page 34, there seems to be a little bit of a play on words here, if you look at "The contract", "The review team found that the contract was widely (though not unanimously) regarded by the Department as unworkable", and at the bottom it says that ICL disagreed with this statement and that the current ICL team regarded the deal as undeliverable. Whether it is undeliverable or the contract should never have been signed, why was it signed?

Mr Christou: It goes back to the point I made at the beginning, that PFI contracts for these large bespoke developments as they were then understood is not in my view the correct vehicle, and I stand by that. I do not think it is the correct vehicle. In those days it was current policy, in 1998, that that was how those contracts should be let, and I think the then management naturally wanted business; they were not trying to take a low price and then come back, I can assure you.

Mr. Steinberg: Are the same people there now or is it a totally different management now?

Mr Christou: Totally different.

Mr. Steinberg: Nobody there now that was there before?

Mr Christou: No.

Mr. Steinberg: That is a little bit of reassurance anyway. I like your description of the PFI. Would you agree therefore that if there are any profits in this scheme they should be shared with the department?

Mr Christou: Profit sharing frankly is something that -----

Mr. Steinberg: You do not agree with?

Mr Christou: No, I do not disagree at all. There are many models in the new PPP where profit sharing or cost savings can be shared.

Mr. Steinberg: And you were coming back to suggest this to them?

Sir Hayden Phillips: We have in the contract a profit sharing arrangement.

Mr. Steinberg: But the contracts are not worth the paper they are printed on, are they, because within ten months you can come back and say, "We do not like this contract and we want to change it", so I am not all that confident that the contracts are all that worthwhile, to be quite honest. On page 20, this is an absolute horror story, is it not, if you read the whole text? To me it just shows that the company was a total fiasco.

Chairman: The company or the contract?

Mr. Steinberg: Well, both, to be frank. How much has your company received up to now? How much have you been paid?

Mr Christou: On this contract?

Mr. Steinberg: Yes, on the contract.

Sir Hayden Phillips: If you turn to paragraph 2.69 it tells you what the position is there in payments to the company.

Mr. Steinberg: This is the report, so that up to now £60 million has been paid. Is that right?

Mr Christou: Yes.

Sir Hayden Phillips: The present position, to give you the up to date figures, is where it says £50.8 million, that should read now £68.2 million. Where it says "£36.4 million for acceptance of the infrastructure", that should read, I am told, £54.8 million, and at the end therefore the figure should be £63,412,000.

Mr. Steinberg: £63 million has been paid out. What has been produced for that? If I were to go to the magistrates' court locally, what would I see for that?

Mr Christou: You would see at the front end of the office computers which are linked into a network.

Mr. Steinberg: I have them in my office and they cost me £2,000.

Mr Christou: It depends on the complexity of the network, the resilience, the things that you need to do over it, the size of the files that you have to transfer. That is a serious network, as has been described earlier.

Mr. Steinberg: That is in every magistrates' court in the country now?

Mr Christou: 90 per cent, well on time to target.