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Official Report (Hansard)

Session: 2007/2008

Date: 28 November 2007

COMMITTEE FOR FINANCE AND PERSONNEL

OFFICIAL REPORT

(Hansard)

Performance and Efficiency Delivery Unit Capital Realisation Task Force Public Procurement

28 November 2007

Members present for all or part of the proceedings:

Mr Mitchel McLaughlin (Chairperson)
Mr Mervyn Storey (Deputy Chairperson) 
Mr Roy Beggs 
Dr Stephen Farry 
Mr Simon Hamilton 
Mr Fra McCann 
Ms Jennifer McCann 
Mr Adrian McQuillan 
Mr Declan O’Loan 
Mrs Dawn Purvis 
Mr Peter Weir

Witnesses:

Mr Des Armstrong ) 
Mr Brendan O’Neill ) Department of Finance and Personnel 
Mr Leo O’Reilly ) 
Mr Richard Pengelly )

The Chairperson (Mr McLaughlin):

We now move to the evidence session on the performance and efficiency delivery unit (PEDU). We are joined by Mr Leo O’Reilly and Mr Richard Pengelly from the Department of Finance and Personnel (DFP), who are both very welcome.

Mr O’Reilly (Department of Finance and Personnel):

Thank you, Chairman. We have sent you a brief note on the background to PEDU and its progress to date. We are still working on finalising the arrangements, consulting with various organisations and groups — including the Prime Minister’s Delivery Unit at Whitehall, which might provide a model for PEDU.

The Minister of Finance and Personnel first highlighted his belief that there is scope in the system for such a unit as PEDU during a speech to the Chartered Institute of Public Finance and Accountancy conference in Newcastle in September. The conference’s theme was living with restricted resources — it was called ‘Surviving the Big Squeeze’. With that in mind, the Minister believed that, as well as the structures that are in place to ensure good practice and value for money in the delivery and funding of services, there was scope for some additional organisation or unit that would serve effectively to create a focus on issues where there is concern about performance, value for money or efficiency. He wanted to ensure that such areas could be identified and become the focus of a period of analysis and review so that they could be resolved.

Nationally, such issues as hospital waiting lists, crime levels in areas of England and attainment in schools have become a focus for the Prime Minister’s Delivery Unit. The initial approach has been, first, to reach a consensus that the issue needs to be looked at — and I stress that there needs to be a consensus between the Departments and the Ministers involved. Once that is achieved, a period of intensive analysis is undertaken to understand the facts behind the figures. The clear focus of this type of unit is on establishing what the problem is and where it is occurring, rather than decrying the problem or engaging in rhetoric about how awful things are in schools or how the level of crime on the streets is becoming intolerable. The next step is to establish what might be the causes of the problem. Once those are identified, action plans can be developed and targets set for addressing the issue or concern.

The unit takes an analytical, objective approach. It is not intended to be — nor would anyone want it to be — confrontational. They do not set out to investigate why individuals or groups are not doing their jobs properly. The causes of underperformance in the public sector are often complex, and there can be a vast number of factors feeding into why areas of the public sector underperform against the standards that the public, Ministers or elected representatives expect. Therefore, there is a need for a strong analytical approach.

It is also important to avoid creating a blame culture. Rather, the culture should be one of identifying problems, sharing them, and working with the Departments concerned to seek ways of resolving them. Ultimately, as in any part of the system, it is only the Departments and public-sector agencies with responsibility for a particular service that can address and resolve the problems.

Translating that into our local environment, we are still working through the detail. No particular personalities have been confirmed as yet to undertake this work. However, the broad vision for the unit is that it will probably be headed by an individual from outside the Civil Service — outside the public sector, even — with a proven track record of delivering organisational improvement and ensuring that organisational change happens in a productive way. That person might not be a household name; it could be someone who has worked in local government or in the private sector here or elsewhere in Ireland or in the rest of the UK.

We envisage that the unit will be staffed by individuals with strong analytical skills who can look at issues in an objective way and produce reports and analysis that support the organisations concerned. Additionally, and reflecting the point about engagement, we also envisage that for particular tasks, or particular areas of investigation, staff and individuals from the Department or organisation concerned will also be directly involved in the review of a particular area of concern. The focus will be on working in partnership.

We will also focus on targeting particular areas, rather than having too broad a focus. To take the point that I made earlier about street crime in England, analysis of that situation revealed that the problem was concentrated in a relatively small number of inner-city-areas. That meant that, rather than resources being spread across the entire system of policing in England, they were able to be focused on a relatively small number of areas. In that way, rapid results were achieved in reducing levels of street crime. Similarly in education, the process of focusing on particular areas is important. Although numbers have not yet been finalised, the unit will comprise no more than 10 people at any one time; perhaps few less than that. Its resources will and should be limited, because it is not meant to add to the existing structures and bureaucracy in the system.

Questions have been asked about the likely relationship between this unit and the spending divisions in DFP, which also have a general mandate to monitor and report on the efficiency and effectiveness of public expenditure. We envisage that, when the unit focuses on particular areas that are the responsibility of particular parts of DFP, it will work closely with the DFP teams on the investigation of particular problems.

That is a broad outline of our current thinking on how the unit will operate. The Minister intends to confirm all the details of the work that we are doing by the time he makes his final Budget statement to the Assembly in January. We are happy to answer any questions from members of the Committee, or, more usefully perhaps, listen to any suggestions or concerns that the Committee may have.

Mr Weir:

It may be that some areas that have not been entirely drilled down. I want to know how the unit will work in practice. You say that the unit will examine specific areas, rather than using a broad brush. Presumably, the unit could have a cross-cutting function in the sense that it could focus on one Department or on an activity that relates to a number of Departments. Is that correct?

Mr O’Reilly:

Yes.

Mr Weir:

How will the unit identify what topics to consider? Will it operate in broadly the same way as the Public Accounts Committee? Will it concentrate on one or two topics, or might many topics be considered separately at any one time? For example, will it focus on and complete one issue before moving on to the next?

Mr O’Reilly:

Identifying topics for consideration will probably have to start with engagement between Ministers, as it is important to secure a consensus on the areas of concern. This Committee and other Committees will probably ask at some stage why performance in one area seems to be less efficient than in others, or why improvements cannot be secured in X, Y or Z. The initial stage will probably be a fairly wide trawl of views — particularly those of Ministers, Departments and Assembly Committees — to find areas of concern that can productively be considered to find the problem behind underperformance in a particular area.

On the question of a comparison with the work of the Northern Ireland Audit Office in its value-for-money reports, and with the role of the Public Accounts Committee, there are three points to make. First, the Audit Office reports are post hoc in that they tend to consider problems or difficulties that have occurred in the past or where there has been underperformance in a broad area. However, they do also make recommendations for better practice in future. The difference is that we envisage these studies being “within the system”, in the sense that that they are within Departments and within the existing system. Secondly, the unit will engage directly with those involved in an issue to identify the nature and reasons for the problems and any solutions to them. Thirdly, the unit will ensure that a matter under investigation is focused and targeted, and it will conduct relatively short-term exercises: six months would be the absolute maximum.

If the unit’s focus is to be kept relatively narrow, it should be selective in what it deals with and focus intensively on that, rather than engaging in a broad-brush programme that covers a wide range of topics.

Mr Weir:

Say, for the sake of argument, that the unit starts its work on 1 January. It could be decided, after consultation with Ministers, that its focus for the first three months would be on hospital waiting lists. Once that had been completed, presumably another topic would be selected.

Mr O’Reilly:

Yes.

Mr Weir:

Will the unit’s work be both qualitative and quantitative, rather than focusing simply on figures and whether targets are being met?

Mr O’Reilly:

Yes.

Mr Richard Pengelly (Department of Finance and Personnel):

As Mr O’Reilly said, the unit is a work in progress. Colleagues in the Prime Minister’s Delivery Unit told us that when they looked at improving performance in education, for example, they seconded teachers and head teachers on to the team that was investigating the issue. It is not simply working by numbers or looking at the quantitative aspect; it is a matter of involving people who know the service and who are familiar with the needs of the client group. It focuses on those qualitative dimensions too, and we will bear that in mind.

Ms Purvis:

When will the unit be up and running?

Mr O’Reilly:

The work on refining its terms of reference and membership structure is ongoing. The Minister envisages that he will be in a position to set out the details to the Assembly and the Committees by the time that he makes his final Budget statement in January. We hope, therefore, that the unit will be under way by the beginning of February at the latest. We may have some people in place before that.

Ms Purvis:

Why must the unit be led by an external figurehead? Is there no one in the Departments with the appropriate expertise?

Mr O’Reilly:

There is expertise in the Departments, but there is a belief — based on experience — that this type of unit benefits from an external perspective. However, there might be suitable people involved in the wider public sector either here, in Ireland or in the rest of the UK. The intention is to bring in people who have some other perspective beyond the particular framework within which DFP, or civil servants generally, work. There is an advantage in bringing in someone who is able to bring experience and wider perspectives to the problems that are faced in the public sector.

Ms Purvis:

Will the job be advertised?

Mr O’Reilly:

A final decision has not been made on that.

Ms Purvis:

Where will the small core of staff come from?

Mr Pengelly:

We are still discussing that with the Minister, but, as the nature of the organisation is about delivering efficiency and delivery, his starting point is probably going to be to look at redeploying staff; this is not a job creation agency.

Mr O’Reilly:

We envisage that there will be a small core of permanent staff who have analytical skills. “Permanent” does not mean long term; the positions will be for, perhaps, a year or two at the most. As Mr Pengelly said, PEDU will also second departmental employees or professionals involved in the delivery of front-line services, such as teachers or health professionals, to work on particular exercises and pieces of work.

Ms Purvis:

To whom will the unit be accountable?

Mr O’Reilly:

In the first instance, it will report to the Finance Minister, but I am sure that he will want to ensure that its work is endorsed and supported by the Executive, and, ultimately, the Assembly.

Ms Purvis:

Will this Committee have the opportunity to take evidence from PEDU?

Mr O’Reilly:

I am sure that that will be possible.

Mr Weir:

We do not want them evaluating us for performance and efficiency.

Ms Purvis:

Do not even go there.

Who will identify the areas to be examined by PEDU?

Mr Pengelly:

That process will need to be moved forward in the short term as we crystallise the arrangements for it. There are a number of different dimensions. With regard to efficiency, for instance, colleagues in DFP who work day to day with Departments could, at very short notice, produce a long list of areas in which there are good and bad performance. The more important aspects are performance and delivery, and the key starting point for the consideration of the Executive will be the draft Programme for Government and the 23 public service agreements — they are a manifestation of the key performance areas that are important to the Executive. That would be a good starting point for improving performance across the system.

Recent work carried out by Departments must also be taken into account. Not so long ago, Professor Appleby carried out a significant piece of work for the Department of Health, for instance, and the Bain Report was undertaken for the Department of Education. Should PEDU go in and look at how to crystallise that work, or should it start elsewhere, because those pieces of work have already been subject to a recent review? That is a discussion that we still need to have with Ministers.

Ms Purvis:

Public servants often associate the word “efficiency” with job losses. What assurances can you give staff that this initiative is not just another chopping board?

Mr Pengelly:

The unit is definitely about making services more efficient and releasing the resources for reinvestment within Northern Ireland; it is not about taking money out of Northern Ireland. The staff reduction targets under the “fit for purpose” heading in the Gershon efficiency review were pretty ambitious and caused great fear among public servants that there would be redundancies. Although we are on track to achieve those targets, experience has shown that there is flexibility in the system of more than 5%. The system has proved to be more dynamic than we thought. With the Programme for Government prioritising economic growth, the private sector will start to grow, and that will introduce more dynamism into the labour market in Northern Ireland. Therefore, we are confident that this will not take us into the territory of redundancies. It is about efficiency, flexibility and focus on service delivery.

Mr O’Loan:

I take it that, in so far as anything can be considered to be permanent in this life, the unit will be a permanent body owned by the Department of Finance and Personnel.

Mr O’Reilly:

I can only speculate, as the Minister is still working through the detail; but there is a case for placing an initial time limit on the body of, say, three years. The danger is that such bodies can become institutionalised and slowly morph into being part of the bureaucracy themselves, whereas part of their job is to ensure that the systems are delivering. It might be appropriate to set an initial time frame and then review the body’s effectiveness.

Mr O’Loan:

I said in yesterday’s debate on the draft Budget that the Minister of Finance had suggested to the Minister of Health that he might like to avail of PEDU’s services. That made me wonder where the activity comes from and how they relate to continuing departmental work. To what extent is it seen by Departments as an intrusion? If PEDU says that it will consider a particular issue, the first instinct, quite naturally, of Ministers and officials will be to say that it is theirs; that they have been working on it and do not want someone else coming in. Nobody should think that getting the relationships and responsibilities right is simple.

This idea has a great deal of potential, but, at its worst, it could descend into silliness and run away with trivial themes. It could start taking its themes from the front page of the ‘Daily Mirror’ or the ‘Sunday World’ or ‘The Stephen Nolan Show’. The media play an important role in democracy, but they do not always focus on the right targets; there is a pack mentality in the media. The spotlight can turn on an issue and make it seem the dominant issue of our times, even though it may not be the most important issue. It may reflect something that is to the side of an important issue rather than homing in on the right thing.

Mr Weir:

Are you looking for a spot on the ‘The Stephen Nolan Show’ tomorrow morning? I can see the headline: “Assembly Member denounces show”.

Mr O’Loan:

There is a big issue about the identification of themes. Will they come out of Departments or Committees? That ties in with the issue of accountability, which Dawn raised. Who will PEDU be answerable to? Will its accountability be post hoc? Will we be reading its reports after it has done its job? There are also questions about how the Assembly and its Committees can raise issues for investigation by PEDU. There is a stack of issues to consider. The unit has a lot of potential, but there is also potential for it to grind to a halt and be seen to not be doing very much.

Mr O’Reilly:

All those points are very pertinent; those are the very issues that we are considering at the moment. Part of the reason why we do not want to rush out a detailed statement on how the unit will operate is that we want to address some of the specific concerns that you have identified.

With regard to buy-in from Departments, Ministers and Committees, the simple fact of life is that if a Minister is not signed up to the idea of the unit’s involvement in his or her Department, it will not work. If the civil servants or the officials or the employees of the organisation do not come on board, it will not work. They have the capacity to stymie any investigation. That is why there has to be an emphasis on identifying areas on which there is a shared agreement among Ministers, the Department of Finance and Personnel, and at least one, if not several, of the Committees of the Assembly that there is a genuine concern that some aspect of public-service delivery is not operating as well as it should do. The purpose of this is to focus on those areas. Rather than engaging in a rhetorical blame game about why things are not working, the unit will provide an objective analysis of the reasons why they are not working and of what might be done to address the problem. It will draw on both analytical work and, as Mr Pengelly said, the work and experience of people involved in the delivery of front-line services. The unit will also draw on input from elected Members of the Assembly and its Committees.

You are absolutely right that, if the unit came to be perceived as a negative influence that blamed people for things that have gone wrong, it would not get very far. It would rapidly run into the sand.

Mr Pengelly:

The points are well made, and will be worth bearing in mind in our discussions with the Minister of Finance and Personnel and the Executive on the programme of work. As Mr O’Reilly has said, the unit will have only a small number of staff. It is therefore important that it should retain an absolute strategic focus on what it is trying to achieve. I made the point earlier about the links to the draft Programme for Government and the public service agreements. That is not to say that the unit will not — at times, within a strategic work programme — go into detailed elements. Mr O’Reilly mentioned an example that was given to us by the Prime Minister’s Delivery Unit about regional crime units. There are 300 of them across GB; to improve performance across the board, the delivery unit focused on 10 or 15 units whose performance was appalling. It was an attempt to address strategic improvement in service, albeit at a low level of detail.

On the question of the media driving the agenda, there are other mechanisms, such as the Audit Office, to deal with particular problems. In addition, Departments have internal audit mechanisms. We have to look to those bodies for the main response to a situation, leaving the unit to maintain a strategic focus and lift performance in line with the Executive’s overarching priorities.

The Chairperson:

Will this unit take as its initial compass the 3% target that each Department has signed up to, given that, as we were told last week, those efficiency savings have been taken away from the baseline allocation, which means that any slippage at all will have a direct impact on the delivery of front-line services? Is it the role of PEDU to ensure that those slippages do not occur and that the efficiency targets are met on an ongoing basis, or will it concentrate on other areas of work?

Mr Pengelly:

The starting point will be to look at the additional elements of work. All Ministers are signed up to delivering the 3% efficiency savings, and Departments are advanced in producing robust delivery plans, which will be published on the departmental websites alongside the final budgets. Therefore, there is a plan of action to deliver those, and it has been quality-assured by our colleagues in the Department of Finance and Personnel. That process of engagement and challenge will continue.

It is not anticipated that PEDU will initially get involved in the 3% efficiency savings, but efficiency savings beyond that might come onto the radar of PEDU. It is possible that, six or eight months down the line, a particular problem or some external factors might emerge — notwithstanding the robustness of delivery plans. At that point, Ministers might decide to ask PEDU to go in and do a short-term look at a piece of work to try to get the efficiency delivery back on target. However, that would only be in response to a problem. As things stand, PEDU will not be involved in the delivery of the 3% efficiency savings.

The Chairperson:

You said that Ministers would ask PEDU to get involved. Do you mean one Minister or the Executive?

Mr Pengelly:

The Minister of a particular Department could issue the call for help. There are two dimensions to the 3% efficiency savings. It is easy for DFP to tell a Department that it must deliver 3% efficiency savings and that there will be a problem with its budget if it only delivers 2%. We will be concerned about whether that 1% gap represents a gap in the delivery of public services, which individuals need and rely on. It is not a departmental issue: problems that impact on public services are an issue for everyone. Therefore, it is up to the Minister to identify a problem with delivery, and for the Executive to sign up to an immediate response.

Dr Farry:

Is it anticipated that PEDU will operate on a statutory basis, or will the unit draw upon existing statutory powers? The audit process operates within a fairly robust legal framework. Furthermore, the UK’s system of government is different from ours in that it is a single-party Government, and the legal structure is also different. It is much more cohesive; our Departments are free-standing units. As the Finance Minister reminded us yesterday, we have a four-party mandatory coalition. He may have mentioned that once or twice in his speech.

The Chairperson:

It trips off the tongue.

Dr Farry:

Will Departments be obliged to co-operate with PEDU, or will it be voluntary? Can anything be done within the system to address the problem of Departments resisting the involvement of PEDU?

Mr O’Reilly:

There is no intention to put PEDU on a statutory basis; it will be part of the administration of the system, and that is part of its ethos. It is not intended that PEDU will become some overly bureaucratic system. The intention is to create a small organisation that is focused on improving results and helping to improve performance and efficiency in the public sector. Dr Farry’s comments about the differing structures of Government in Northern Ireland and Whitehall are obvious — and highly relevant when seeking to take forward something like PEDU. A unit like this in Whitehall can draw upon the authority and power of the Prime Minister to secure results and benefit from his authority over his party colleagues — all of whom are in Government. There is no other party in Government, so that, to some extent, creates a different context for a unit such as PEDU.

We cannot translate the model straight across to our local context, because it would not work in our circumstances. That is why the emphasis must be on building consensus, particularly around the issues that need to be looked at. I suspect that, if each public representative in this room had five minutes to come up with issues of delivery about which their constituents were concerned, there would be at least 20 different areas. There will not be any problem with identifying topics, but, they have to be isolated and prioritised. Furthermore, Departments, Ministers and other bodies will have to be engaged and agree that the issue in question is of concern and should be looked at.

Dr Farry:

With regard to the results that come from the process, how will that fit in with the three-year Budget? If the unit achieves results in the short-term within the time frame of that Budget, will the additional savings that emerge automatically go to the Department from which the savings arose, or will they be thrown back into the pot to be reallocated through a monitoring round?

Mr O’Reilly:

The general principle in DFP is that reduced requirements and savings in the system should always go back to the Executive and they should decide how those should be used. That is a strong, basic principle for us. However, we are not pushing it as a cost-cutting exercise, which is why, in choosing the title the Minister wanted to include both the words “efficiency” and “performance”. It is about making best use of existing resources rather than seeking to cut back on resources in a particular Department — it is more about securing performance.

You made a comment at the beginning about the unit “achieving results”. We envisage that it will not be the unit but the people who are responsible for delivering the services who will ultimately achieve the results. Improvements will only happen if the people who are responsible for delivering the service can make them happen. The unit will simply seek to identify ways that that may happen, but the results will be achieved by the people on the ground who deliver the service.

Dr Farry:

Finally, in order to wind up Mervyn Storey, I must mention the Deloitte report into the cost of division, which Mervyn thinks is my bedtime reading.

Mr Storey:

I was just going to mention that.

Dr Farry:

Yesterday, the Minister was keen to stress in his Budget speech that that is one of the areas that the unit will look at, in the short term. Could you give me an indication as to how quickly that work will begin, and the approach that it will take?

Mr Pengelly:

As part of the initial scoping exercise, the Minister has asked officials to do a further analysis of the report. Large elements of the savings in the report fall to the Northern Ireland Office (NIO) through the law and order budget, and are outside our scope. Similarly, there are elements that fall to the local authorities. There are significant savings in education, many of which were addressed by the Bain review. It is important to understand where and when those parts might fall within the Executive’s remit and factor that into the unit’s developing work programme to the greatest extent possible. We need greater clarity about those issues.

The Chairperson:

In relation to the comment about attempting to take that forward on a consensual basis, how will we know if the unit is worth its room? How do we measure that?

Mr Pengelly:

One answer is that the success of the unit may be that you never hear of it again. One of the biggest achievements of the Prime Minister’s Delivery Unit, if you were to drill down, was to work with the Department of Health in Whitehall to make massive improvements to waiting times and access to healthcare. However, if you did a Google search for Prime Minister’s Delivery Unit and improvements to waiting times, I suggest that there would be no hits. All the credit went to the relevant Department, and, to build on earlier points, that is one of the key ways of ensuring that there is no friction between Departments and the unit coming in.

At an internal level we will want to understand the areas that the unit has looked at and the subsequent improvements; however, it will be in terms of how the unit has worked with the Department to facilitate the Department to capture savings and improvements. The National Audit Office publishes a measure that for every £1 that it spends, it saves the taxpayer £7 or £8. We do not want to be in that territory, as that creates tension between the unit and the Departments.

The Chairperson:

If the unit puts to a Minister a recommendation that is not accepted, does the unit simply withdraw?

Mr Pengelly:

It is difficult to know the answer to that question until we get there. Our sense, which may be naive but is influenced by the discussions that we have had with the Prime Minister’s Delivery Unit, is that we will rapidly get into a scenario where everyone buys into it and works and pulls in the same direction to deliver those quantitative and qualitative efficiencies.

Mr Weir:

A couple of points have occurred to me. First, the principal responsibility for the conduct of an internal review of a Department’s activities lies with its Minister. PEDU operates under the authority of DFP: does that mean that the Minister of Finance and Personnel will be made aware of any blocking tactics by a ministerial colleague?

It may be that Ministers will want to embrace the opportunity to find greater efficiencies in their own Departments. There may be a strong consensus around the Executive table that a particular matter merited investigation. However, human nature dictates that some Ministers may occasionally recoil from the idea of an investigation of their Departments because it might lead to embarrassment or information being leaked.

Mr Pengelly mentioned the comparison with the Prime Minister’s Delivery Unit. I am not entirely surprised that it enjoys a high degree of co-operation. If the Secretary of State for Health in England tried to block an investigation, the Prime Minister could remove him. In Northern Ireland, however, the same incentive for co-operation does not exist. That poses a number of problems.

The Chairperson:

Would a Department retain any additional resources identified as a result of the work of the unit? Is that an incentive?

Mr Pengelly:

As Mr O’Reilly said, the starting assumption is that if resource capacity is being generated anywhere in the system, the normal rule of thumb is that the Executive should decide where the best interests of Northern Ireland are served. We may reach a point at which some form of incentivisation is introduced. As we will discuss shortly, a similar situation may pertain in the case of the capital realisation task force.

The members of the Committee have made many valid points about the focus on efficiency. As we move forward, there may be a greater focus on performance and delivery. There is scope for conflict with regard to efficiency, because Ministers may feel that the unit is there to reduce their budgets. However, if the unit’s purpose is to improve performance and delivery, the debate, without a review of the budgets, is about how to create a maximum level of public service within a relatively constrained public expenditure envelope. The debate may differ depending on the perception of the unit’s work. As we move forward, the performance and delivery aspects may become much more material, compared to the efficiency aspect.

Mr O’Reilly:

A member raised the possibility that a Minister might disagree with an investigation into his or her Department. Ultimately, if there is resistance or disagreement from a Minister, the work would not get very far, because the unit needs the co-operation of the area being examined. The difficulties caused by that lack of co-operation would have to be worked on at a political level.

Mr Storey:

Other members have made many relevant points. I am concerned that we will have to pursue a consensus before PEDU begins its work. Once PEDU is established, do we go to the Executive and ask them to outline to Departments what efficiencies they must make, in light of PEDU’s objectives? Given that we have a four-party mandatory coalition Executive, as we have been reminded, is that where the emphasis must remain? As Mr O’Reilly said, we cannot duplicate what has been done by the Prime Minister’s Delivery Unit because of the nature of the arrangements here. At that stage, PEDU would have an idea of the areas of work that it would be engaged in over a period. A wealth of data has been produced over the past months and years that tells us of the inefficiencies that exist in a range of Departments.

There will be resistance from some of those — Stephen referred to the Deloitte report. We must face up to the fact that we are unfortunately doomed for having a five-sectoral educational system. However, we can still have massive savings within that system by doing things differently, but that will only be achieved if the Minister and the Department buy into that particular process. That would give us a clearer focus, because we do not want to end up with a situation where, yet again, we focus in on the things that we cannot do that we know will bring us efficiencies. We must focus on what we can do that will bring better efficiencies, so that they can be released to the enhancement of public services.

Mr O’Reilly:

I am not sure that I can qualify that. Everything that the member has said is precisely right. It is unlikely that people will say that we should not improve waiting times, or turnaround times, or some other aspect of public services. Hopefully, it is self-evident that that is what is desired. Where the difficulties arise is how to do that and the best ways of doing that.

Sometimes there are fundamental disagreements as to what the underlying problem is. For example, a few years ago there was the issue of hospital waiting lists in Northern Ireland. However, there was a clear political will to address it, and it was clear that at a political level that it was not acceptable and would not be tolerated any longer. Once you have that momentum and agreement in the system, things can happen very quickly, as they did in that case. That is a good example, but the result was not achieved by anyone at the centre; it was achieved by the people on the ground delivering the service. It is important to build the consensus around the need to secure improvement in a particular area, but to try to do it by understanding why it is not performing, and identifying ways of addressing the problems, rather than by placing blame.

Mr Storey:

If a need or efficiency were identified, but the Minister decided that the Department could achieve the efficiency in another way, you would still end up at the same destination, having achieved the objectives of PEDU?

Mr O’Reilly:

Yes.

Mr Beggs:

In principle, I support the concept, which has huge potential. We have been talking about a specialist team, fresh thinking, and drawing on knowledge of what has happened in GB in the Prime Minister’s office, which may already have provided some lessons.

I support the idea of an independent outsider, in the style of Varney — someone who has done that in large commercial organisations, and can bring in fresh thinking. If that person could only deliver the proposals, that would help. Sometimes, a fresh approach is needed from someone who can walk in, see things differently and challenge the organisation by asking about performance and how delivery is achieved. It is important that that challenge is there.

It is vital that a blame situation does not arise. How can you ensure that it will be voluntary and for mutual benefit? There is a danger that conflict could exist, and the situation may then backfire with no one benefiting. How can that be avoided? I hope that it will be moved forward in a positive way as there is huge potential in helping Departments to meet their Gershon targets, which will be demanding.

With regard to the Prime Minister’s Delivery Unit, how long has that been in place? You say that it has made a major input to the reduction in waiting lists; have those lessons already come across to Northern Ireland, and is that one of the reasons that we have had a reduction in our waiting lists? Have the lessons that were picked up in GB been passed across to Northern Ireland already, and are there other lessons that could be applied?

Mr O’Reilly:

Richard will deal with the history and contribution of the Prime Minister’s Delivery Unit. You mentioned that Sir David Varney might lead the unit, but I would like to see the contents of his forthcoming report before I comment on that.

Mr Beggs:

It looks like he is providing analysis for the politicians to make decisions on.

Mr O’Reilly:

We have been told that one of the characteristics that the leaders of these types of units should have is a high level of humility, and there are a number of reasons for that. If the unit or the individuals involved seek to become “the success story”, that will immediately have a negative effect on the people who are delivering the services. They will feel that they are making all the effort, and other people are receiving the credit. Therefore, credit should always go to where it belongs — to the people who are delivering the services. It is important that the leaders of the unit do not become the story. Some people who have an interest in this sort of area might know who the head of the Prime Minister’s Delivery Unit was, or is — and I suspect that very few people will know who it is now. Holders of such positions are not household names; they do not appear in the media. Any media work is left entirely to the Ministers in the Departments. To be successful, therefore, it is important that PEDU will operate in that way.

Mr Pengelly:

The Prime Minister’s Delivery Unit was established in the early years of new Labour’s Administration; I am not sure of the exact date. New Labour wanted to place greater emphasis on delivery. The Prime Minister’s Delivery Unit has had success with the Department of Health in respect of hospital waiting lists. Where possible, lessons have been learned and transported to Northern Ireland. Colleagues from the Department of Health, Social Services and Public Safety liaise closely with their colleagues in the Department of Health in Westminster, but lessons learned from those experiences touch on another point that was mentioned earlier.

The focus of the unit is not so much about policy scrutiny; it is about operational delivery of that policy. Although we can learn lessons from Whitehall, the circumstances are different here. Our education system, for instance, is structured differently. Therefore, there is a limit to how far lessons can be imported. We need to take a fresh look at the structures in our delivery of operations. We still see strong value in that.

Mr Beggs:

Have there been other experiences in the Whitehall unit, which could be applied but have not been brought across?

Mr Pengelly:

We would encourage and cajole all Northern Ireland Departments to liaise more closely with their Whitehall counterparts and the local authorities in Great Britain that have responsibility for the delivery of particular services. We continually push them, and it is part of our challenge role to ask what lessons they have learned and to bring in any improvements in efficiency and delivery that have been made across the water. However, there is a limit to what can be done, because of the different structures.

The Chairperson:

Especially with regard to securing confidential data.

Ms J McCann:

I apologise for missing your briefing. Everybody wants more effective and efficient public services, but there are concerns, particularly around the issue of the 3% efficiency savings. Some people are concerned that the objective of achieving the efficiency savings targets will be to the detriment of social outcomes. On occasions when public services are told to cut back, services that are delivered by the community and voluntary sector are among those that are usually cut. They are the front-line services that make a difference and enhance the quality of people’s lives. There is concern that the financial outcome will dominate, and not the social outcome. What are your thoughts on that? How will you convince people that that will not be the case?

Mr O’Reilly:

The point that the member makes has been made directly, and indirectly, by representatives from the voluntary and community sector. There is a concern that the first thing that will be cut will be funding for the type of services that it provides, if Departments are under pressure. That has been relayed to me on quite a few occasions over recent years.

There are two ways to address that. Richard referred earlier to the drawing up and publication of efficiency delivery plans, which are meant to set out in detail how the 3% cumulative efficiencies will be delivered, which provides a basis for scrutiny by departmental Committees, who can go through them with individual Departments. Those plans also provide a basis for ongoing monitoring to ensure that what is meant to happen will happen and that there are no unintended adverse consequences for other sectors.

The other way to address that is through continuing monitoring and scrutiny, particularly by Ministers and relevant Departments, when there are allocations of funding. The best way to address that is for Departments to ensure that funding streams for voluntary and community sector activities are built into departmental budgets, and published and profiled over a three- to four-year period. We have done a lot of work to try to provide the sector with greater security of funding, and longer-term funding streams. We are not entirely there, but we have done a substantial amount of work over recent years in seeking to work with the sector.

During a period of contraction of traditional funding routes, particularly the previous European structural funds programmes, which had a large segment of funds allocated to the sector, we worked with it on the challenge of redirecting its activities into delivering public services. There are areas where the voluntary and community sector is recognised as generally being better than other types of statutory agencies delivering services. Childcare is an obvious example, and in work with offenders, and young offenders in particular, it has been shown that voluntary and community organisations are more effective, for various reasons. It is important that the funding streams to those organisations continue.

The final way is that the organisations continue in the way that they have done in the past, both in initially raising concerns that they may have directly with the relevant Minister, and also with us in DFP. I am conscious of that because I have an engagement with one of the leading members of the voluntary and community sector soon to discuss the matter and the concerns at the moment.

Mr F McCann:

To pick up on a point that Jennifer made, I know that a number of years ago the former Government initiated a series of percentage efficiency savings over a period of some years, which had a direct impact on the services that were delivered. I am concerned that we give recognition to the harm that the 3% efficiency savings may do to Departments. Can we reverse that? Will the finance be there to reverse any damage that may be done?

Mr Pengelly:

Looking across the three years of the draft Budget, the position is that all the resources available to the Executive have been allocated, including the anticipated release of efficiency savings. If efficiencies are not delivered there will be no pot available to deal with that. There would have to be some form of intervention to address the failure to deliver.

Against that, and picking up on last week’s points, we do not have a contingency fund. There is an in-year monitoring process, which gives some flexibility if the failure is due to external reasons or other factors. However, we will be driving hard with Departments to crystallise and deliver the efficiencies. I do not wish to be pejorative to our colleagues across the Civil Service — and I include DFP — but do we all believe that we are operating at efficiency levels at or in excess of 97%? We have scope to become more efficient and to release the money for reinvestment in front-line services, whether through the medium of the voluntary and community sector, or through the public sector.

Mr O’Reilly:

At the previous meeting of the Committee, members raised the issue of overcommitment. The Minister wants to reduce the level of overcommitment precisely for the reason mentioned — to give the Executive and the Committees of the Assembly greater scope to examine issues as they arise, and deal with them by allocating the resources that are freed up accordingly.

Mr F McCann:

What are the set-up costs of the unit? Does it have a budget, and should we expect that budget to grow as the unit grows?

Mr O’Reilly:

We have not yet finalised a budget for the unit, but there will have to be an allocation of resources to allow it to do its work. The overall pot of resources will not increase, so it will have to be found from within existing funds, either from DFP or from other Departments. We do not anticipate or wish to see its costs growing. I am sure that this Committee and others will keep a wary eye on that.

Mr F McCann:

The old saying is: who monitors the monitors?

Mr O’Reilly:

The Committee does that.

The Chairperson:

I hope that Hansard has captured the admission by Leo that there is fat in his budget.

It seems to me, on the basis of the information that we have been given, that there is some degree of overlap of function and effect between the role of DFP Supply and the performance and efficiency delivery unit. If there is scope in the budget, will PEDU examine the Department of Finance and Personnel, and the role of Supply?

Mr O’Reilly:

Absolutely. Members have mentioned two potential interfaces — DFP Supply, and the Northern Ireland Audit Office. You are absolutely right, Chairperson. There is potential for an overlap of work, but that should not be a negative overlap, in the sense that the work of the unit complements rather than contradicts or cuts across the work of DFP Supply. We anticipate that when PEDU looks at a particular area, Supply staff would act as an additional resource to enable the unit to do its work properly.

The way in which DFP carries out its functions, particularly within the central finance group, is always under review, but I can say that it is specifically under review at the moment. Having come through the draft Budget process and six months of devolution, my colleagues and I are looking at whether our structures enable us to do our work in the best way possible. We may be able to come back to the Committee early in the new year to explain the changes that we propose to make.

The Chairperson:

We would like to follow those developments. I am sure that you will be pleased, judging by the comments that have been made, that most members seem to view the unit as having potential. I have no further questions, but just before we close this session, I will remind members that the Minister has reaffirmed his previous offer to brief me and the Deputy Chairperson on the composition of PEDU. As his thinking advances, members will be content that we take up that offer and report back.

We will now move to the next agenda item, which is our discussion of the capital realisation task force. You are both starring in that, so perhaps you would like to stay in your seats.

Mr O’Reilly:

The Committee already has some background information on the task force. I will not go through its terms of reference in detail again. As part of the work to be done between the draft Budget and the final Budget, and because of the difficulties that arose in identifying all of the areas in which Departments required additional capital infrastructure investment, the Executive agreed to a proposal from the First Minister, deputy First Minister and the Minister of Finance and Personnel to have a concentrated look at what assets might be available for realisation and thus enhance the capacity of the Executive and the Assembly to plan for a greater level of capital investment over the next few years.

The task force, which has been working intensively over the last few weeks, has engaged with all Departments and has already identified a range of potential areas and assets that might be realised for reinvestment. I can anticipate the questions that some members might ask — this is not intended to be a fire sale. The key concern is to ensure that, first, scope for asset disposal is identified, and secondly, that it is planned in an orderly fashion. By that I mean a proper programme of asset disposal over three to seven years. It is important that the planned disposal of assets is managed in a way that does not distort wider markets. Also, it is essential that one part of the public sector does not dispose of an asset that another part of the public sector might need in a few months’ or a year’s time. Important work must be done behind the scenes. If even £100 million to £200 million could be anticipated from additional asset sales over the next three years — in the context of our anticipated annual budget of £1·6 billion — it would go a long way to addressing some of the concerns that Ministers and Departments still have about their capital allocations in the draft Budget.

Mr Beggs:

I am glad to hear that the asset sales will not all happen at once. The value of the sales would be affected if attempts were made to sell all the assets at once. Will you, where necessary, be getting outline planning permissions so as to maximise value, rather than leaving developers with the opportunity to benefit? How will you encourage the better use of underutilised assets through interdepartmental co-operation or even exchanges within Departments? A classic example from my constituency of East Antrim is the park-and-ride at Carrickfergus railway station. That facility is at capacity while there is an underutilised Roads Service depot, but agreement cannot be reached between Translink and Roads Service to transfer the assets between two publicly-owned organisations for the benefit of the public. How will the Department encourage public organisations to exchange property so that the public benefits, rather than have needs remaining unaddressed? That issue affects traffic congestion, pollution and the quality of life for many people. Will Departments be required to consider issues such as that professionally?

Mr O’Reilly:

Mr Pengelly is the DFP representative on the task force and has been involved in its deliberations to date.

Mr Pengelly:

I had hoped to get away with that.

We are trying to trying to enforce a two-stage process on planning permission. The first stage is for Departments to identify an asset that is either underutilised, over-specified or surplus. We recognise that Departments have their day jobs to do; they are not estate agents in the business of selling assets. Therefore, expertise is needed centrally to deal with such issues, but the first stage is to get the assets from the Departments into central oversight.

The issues about planning permission and working with other Departments must then be considered. One of the big successes may not necessarily be the sale of assets, but the identification of pockets of land that are owned by the public sector and are, for example, good sites for the development of social housing, rather than having to purchase those sites on the market. We will examine issues relating to redeployment within the wider public sector, and planning permission. If a site has planning permission, will we get the best value by selling it this year or next year? We do not want to flood the market.

The immediate focus of the task force will be to draft a report by early December looking at the immediate Budget period and any surplus assets that might come into that. Better utilisation is an important issue for the report. You quoted a very good example: it is strange, because those are not even two massively different organisations. They sit within the same sponsor Department. The establishment of better links within and between Departments and across the public sector should be a key part of our work as we go forward.

Ms Purvis:

I am concerned that this is not really a capital realisation task force: it is more a “selling the family silver” task force. Therefore, I welcome your comment that it is not necessarily about selling off assets. In my own experience in East Belfast, a former youth club owned by the education and library board was referred to the Department of Education and then went round the houses to see if it could be used by any other Department. At the same time, a community organisation was crying out for facilities. That process has taken almost a year, and the community organisation, which was interested in buying the property and retaining it for community use, has nearly lost interest in the whole affair. That situation should be examined in the context of cross-departmental work. The use of properties should be properly considered.

I also welcome your comments about land used for housing. I am being selfish again by talking about East Belfast in particular, where there is a real lack of public land for social housing. The onus has fallen on the community to identify closed public buildings in order to claim them back for the Department for Social Development to build houses. I will be interested in how that part of the task force unfolds.

Will resources that have been released be kept within departmental budgets? To soften the blow of the loss of public assets, will those resources be spent on front-line services?

Mr Pengelly:

The answer is no. We discussed a similar point about Departments retaining the proceeds of investigations by the performance and efficiency delivery unit. That money would have to be referred to the Executive for their consideration. In the wake of the launch of the draft Budget and the associated investment strategy, social housing has been acknowledged and identified by many Members of the Assembly as the single biggest issue in relation to capital expenditure. In that context, it would be perverse if, for example, through the transport holding company, the Department for Regional Development sold off surplus assets when there is a clear need, expressed by the Executive, for capital for social housing.

Against that, we recognise that this work is difficult, and that it comes on top of the day job. We are asking Departments to think outside the box and examine new ways of working. Some form of incentive might be for the greater good, as long as some element comes back for central consideration. The Executive will have to focus on that issue when they receive the task force report from the Minister of Finance and Personnel. I do not rule any approach out at this stage.

Mr O’Reilly:

The point is well made. People might be more reconciled to the concept if they knew what the proceeds of the sale were going to be used for, rather than hearing us saying that the matter is being referred back to the Executive for consideration. DFP is certainly open to proposals by Departments to retain the proceeds of the disposal of assets. We will look at such proposals on a case-by-case basis. People should know what happens to the proceeds of disposed-of assets.

Dr Farry:

Are the proceeds from capital sales exclusively used for new capital projects, or are there any circumstances where a capital sale can be used for revenue purposes?

Mr Pengelly:

It must all be used for capital purposes; that is a Treasury rule.

Mr O’Reilly:

If it were not, it would be our rule.

Dr Farry:

It is important, and I wanted to establish that we are rigorous in that respect.

Ms J McCann:

I have the same concerns as I raised at the last Committee meeting — that assets will be sold off for purely financial reasons. In an era when efforts are being made to decentralise Government, public services that have been based in the community for some time will be taken away. For example, in my constituency of West Belfast a Housing Executive office, the Dairy Farm, has been there for 30 years. They have been told that they will lose that building, and that they will be redeployed in a more central location. That will result in staff cuts, and in local area partnerships losing the benefit of having someone there from a statutory organisation. I have no doubt that that will also happen to other statutory organisations. Face-to-face contact with people in the local community will be lost. My concern is that the main focus is financial, and those social outcomes will not be taken into consideration.

Mr Pengelly:

That is a valid point that should be borne in mind as we go forward. We are looking at identifying assets that are mostly sitting idle or unused, as opposed to asking whether a service is being provided in a property that, because of market reasons, might be valuable, an thinking “Let’s sell it.” The work that the task force is doing with Ministers is not in that territory.

Ms J McCann:

Do you see that people think that that will happen down the road? You must convince people, because those things are already happening in the community, where statutory bodies provide a public service, and it is important that people be given guarantees. As Dawn says, if assets are taken then people must know where the resources will go. Those resources must go back into the community. People are taking the view that the Government are centralising again instead of decentralising and making services available in the community.

Mr Pengelly:

To try to take a positive out of that — the sort of example that you quote is driven by the extreme pressures on individual Departments to release resources for investment, as all Departments are facing a range of pressures. The task force was created because we are aware that while there are many unused and surplus assets, it has been difficult to release them because of issues such as obtaining planning permission. If we can push on assets that are completely unused, or underutilised, pressure is taken off the need to think about those examples. However, I take the point, and we need to factor that in. We must bear in mind not to focus only on asset realisation, but also on face-to-face contact.

Mr O’Reilly:

The member has identified genuine community concerns. I hope that, when the interim report is published in early December, its content will reassure the Committee and others about the scope and the areas that the task force has been looking at. Once you have the interim report you may have —

The Chairperson:

When did you say that that was coming?

Mr Pengelly:

It is due to go to the Minister in early December.

Mr O’Reilly:

You may want to have other members of the task force here, in addition to Mr Pengelly, in order to go through those concerns when you have the interim report.

Mr O’Loan:

Can we get an assurance that the proceeds of the recent sales of any NIO lands will remain in Northern Ireland and, preferably, stay with the Executive? Will NIO lands be looked at by the task force?

Mr Pengelly:

The task force will look solely at assets that are being underused in connection with devolved services. With regard to the proceeds of any asset sales on the part of the Northern Ireland Office, I can say no more than what I know from the public expenditure framework: those proceeds will remain with the NIO, but I think that those decisions are for NIO Ministers at this stage.

Mr O’Reilly:

It is on an ad hoc basis; the Treasury has not given the same sort of blanket guarantee as has been provided to the Executive. However, we anticipate that as and when responsibility for those functions is transferred to the Assembly and Executive, the same rules will apply to any further disposal of those types of assets in the future.

Mr O’Loan:

So there is no guarantee that proceeds already realised will remain in Northern Ireland?

Mr O’Reilly:

There is no absolute guarantee; it is a matter for the NIO and the Treasury to decide what happens to the proceeds from the disposal of particular assets associated with law and order functions.

Mr O’Loan:

Is there any pragmatic work being done to ensure that proceeds already realised are staying here?

The Chairperson:

There are examples of bases that have been practically sold back to us.

Mr O’Reilly:

On the specific issue of military bases, if that is what you are asking about —

Mr O’Loan:

No.

The Chairperson:

It is an example of the range of options before us.

Mr O’Reilly:

There is no general guarantee at present, because the matter is dealt with between the NIO and the Treasury; we do not have direct involvement.

Mr O’Loan:

And the task force is not currently looking at NIO properties?

Mr Pengelly:

The task force has been established by the Executive to look at devolved services. Devolved Ministers do not have the legislative capacity to ask the task force to look at NIO assets.

Mr O’Loan:

We should be very conscious of that area of concern.

The Chairperson:

There is a lot of work to be done there.

Mr F McCann:

Further to Declan’s comments, I received a letter a number of weeks ago about land owned by the Ministry of Defence. If it is sold, the proceeds go to the Treasury rather than the Executive. I fear that we will wake up one morning, and there will be nothing left to sell. When people talk about realising assets and looking at surplus land, it usually means that the land will be sold; that is one of the difficulties. Dawn mentioned social housing, and that relates to what we are talking about now. One can do more with land than simply sell it; for instance, deals can be made to build social housing. In areas of social need, particularly, there is a lack of playing spaces, playing surfaces and green spaces. There is a fear that land that is being sold that could be valuable in assisting communities to grow. Is that ever taken into consideration? Do things like this ever go out to consultation? Do the people involved ever look at how the sale of land in a community will impact on that community? Are the local people asked for their opinions?

Mr O’Reilly:

Mr Pengelly will respond on the detail of what the task force is currently doing. It was not merely for the sake of semantics that the task force was called the “capital realisation” task force and not the “asset disposal” task force.

Mr F McCann:

It depends what happens with it.

Mr O’Reilly:

I appreciate that it is what it does, rather than what it is called, is what really matters. The reason for calling it the capital realisation task force was precisely because of the concern that it would be about selling off and getting rid of assets as quickly as possible. In fact, it is about making the best use of the capital assets that currently exists in the public sector. Sometimes, that can mean that assets are sold off, but it can also mean doing the very sorts of things that you are suggesting, such as using the assets for other purposes and achieving deals.

The Chairperson:

When I hear about realising the best value or end use, I think back to work that the Public Accounts Committee has done recently in relation to the bundling of land for PFI contracts in the education sector. Will there be a baseline requirement that the planning potential of any land be considered before either its disposal or reallocation to another Government priority?

Mr Pengelly:

The first priority is to assemble the land that has the potential —

The Chairperson:

Yes, to map what is potentially available.

Mr Pengelly:

The first stage of that will not be to assess how much the land would be worth with planning permission. The first question will be: are there any organisations or public services that could usefully use the land to deliver priority public services? Only if that test is failed will we be in the territory of considering how much we could get by selling it, and whether planning permission would be advantageous. One of the points that DFP has particularly made to the task force is that the measure of its success is not in the value of proceeds from asset disposals; it is in the value of land that is used for alternative purposes. Some of the land may be disposed of, but if we free up land for use and save another organisation from buying a plot of land in five or six years —

The Chairperson:

That is clear and, although it does not always happen, that is common sense and is what should happen. In fact, the Department should get the first bid but, in the event of a situation in which there is land that could be sold on to a third party outside the Executive’s area of responsibility, will it be a requirement that the planning potential be assessed before the land is released to the market?

Mr Pengelly:

We certainly want to consider the potential for planning permission, but that would also take into account the qualitative factors. I am not answering your question specifically, because each case is different and will be considered separately. The task force has discussed the possibility of cases in which, although we want to sell land to free investment, we might want to sell it with some form of restrictive covenants on it to protect the environment and the space. In different places, different approaches will be adopted.

Mr F McCann:

When a decision is taken to sell land that may affect a community, is the community ever consulted? Earlier this month, a community project in Connswater received £23 million in lottery funding, and I fear that if the land had been under our control we would have been considering selling it. It boggles the mind that communities can see their assets being stripped away.

Mr Pengelly:

That sort of issue has to be considered in the round with the management of the asset base. At this stage, the work is about identifying what capacity there is and how that is taken forward. Community dialogue and consultation need to be considered for individual assets, but there is not a black-and-white answer for when it will or will not happen.

Mr Weir:

It is vital that, when there are sales of land, all the factors are properly considered to ensure that the sale gets maximum value. At both Public Accounts Committee level and other levels, there has been, at times, rightful criticism of Government agencies and Departments in their selling-off of land because they have not got the proper value for it. In particular, there is an issue from a social development point of view about the level of funding that is available. One of the criticisms that can be made at times is that the Housing Executive, for instance, has not always been the wisest at selling off bits of land. It has not always got the highest level of value.

The sale of some land in Dundonald was recently highlighted on the radio. Additional land was sold off on a secondary level, which, in the space of a year, was worth 30% more. The loss to the public purse was massive, as the proceeds could have been reinvested.

I want to pick up on the points made by Dawn and Jennifer. All of us will have some sympathy for the effects that things have on communities. There is also concern about centralisation — and not just in relation to land sales. Sometimes it is services as well. In my own constituency and in the neighbouring one, there have been problems with social security appeals tribunals. On the other hand, the sale of land is not just a question of swelling someone’s bank account. The idea is to try to get the best possible return on an asset and to ensure that the proceeds are reinvested in services.

I appreciate that when assets are realised, the proceeds go into a central pool. However, a great deal of thought must be given to selling of this, because the regeneration of unused resources into direct public services is a good idea. Although the capital realisation task force should be the body through which the sale of assets is conducted, the realisation of that money should be announced separately, so that people can see where assets have been realised and can appreciate their tangible benefits. For example, if an announcement is made that £25 million has been raised through capital realisation, and, of that, £18 million has been put into social housing and £5 million into sports grounds — any maybe there is a slight degree of fiction within that — it is important, from a public relations point of view, to show the tangible benefits of realisation.

Ms Purvis:

Are you doing public relations now too?

Mr Weir:

No, I am just saying that even if an asset is not being used by a community, for whatever reason, and has to be sold off to a private third party, the realisation task force will carry a degree of community blame for that. The fact that the proceeds of that sale are going towards funding public services must also be made transparent.

Mr O’Reilly:

We have not been as good at public relations and professional communications as we could have been. That is quite a straightforward statement to make. There has been a disjointed approach to asset disposal. Frankly, as Mr Pengelly said earlier, it is a difficult professional area. Departments are engaged in other important activities, and asset disposal is often regarded as a secondary activity. Therefore, the whole process is not managed as well as it should be.

One of the potential outcomes of the work of the task force could be to create an ongoing source of co-ordinated and professional support for Departments and agencies when they contemplate asset disposal. There have been instances in which assets have been disposed of, and very soon after it is realised that a much higher sale price could have been secured had the process been managed in a different way. We hope to avoid those difficulties in the future.

Mr McQuillan:

I am not sure whether we are talking about some unused assets or all assets. At what stage do you envisage the task force engaging with the local community?

Mr Pengelly:

There will be a longer-term, more comprehensive piece of work in the future. Initially, given the time pressures, the task force will scan the asset base of all Departments in an attempt to identify assets that are idle and not being used for any form of public service, in order to examine whether an idle asset will meet a future public-service investment need during the 10 years of the investment strategy, or whether it could be sold off and the proceeds used to meet needs. There is a second-order issue about better utilisation and deployment of assets.

For reasons that Leo outlined, Departments do not have expertise in securing planning permission — I am thinking about various bits of site assembly. The task force will want to put in place a central source of expertise for that process.

In relation to the issue of engaging with the local community about assets, we will look to the Departments to maintain that dialogue at local level.

Mr Beggs:

At present, do the various Departments and agencies report only the unused assets? How do you ensure that you gather information to make you aware of underutilised assets? For example, a Northern Ireland Water depot that is not regularly used, but is occasionally used for storing large pipes may be said to be in use. How do you get that information if the agency or Department does not want to give it to you?

Mr Pengelly:

There are a couple of ways. As part of the requirement to publish annual accounts that are subject to scrutiny and audit by the Northern Ireland Audit Office and presented to the Assembly, Departments must produce a balance sheets that are underpinned by a register of all assets, so that complete list, which has been audited on an annual basis, is a starting point. The ownership of assets is transparent.

The Chairperson:

You know that the assets are there, but Roy’s issue is whether the usage is essential and proper.

Mr Pengelly:

The first stage is that there is a complete list of everything that is owned, some of which is evidently in use. The task force also uses Google Maps and aerial photography. For example, the task force has identified a plot of land used by a hospital that is sitting as a greenfield site, on which nothing has happened for years. It is on a balance sheet, but, as you say, it is part of larger hospital estate and no one knows whether it is being used or not, so the task is to match up all that information.

Mr Beggs:

Do you need to engage with the community so that people can volunteer ideas, or are you satisfied with your process?

Mr Pengelly:

That is a strong point, which I will take back to the task force.

Mr O’Reilly:

The question also asked about what are categorised as underutilised assets. The asset, or building may be used but if the activity were moved two miles down the road, the building could be used for a much more productive purpose, which is a further layer of investigation that lies below simply saying that the asset is surplus and is not used for anything. Sometimes assets are used, but for purposes that are not ideal, or optimum.

There are specific examples, which it may be best that I do not quote here for commercial reasons, of stores being identified in particular locations that are considered to be “prime sites”, for various reasons. There is no reason why such a store could not be moved two miles away to another location.

Ms J McCann:

Are you talking about land as well as buildings?

Mr O’Reilly:

Yes.

Ms J McCann:

If the task force identified a piece of land in an unused area, and sold it to a private developer, how would you have any influence over what that private developer would put there, if the land were in a housing estate? Are there safeguards to prevent the developer from building apartments in the middle of a housing estate where people may not want them, for instance? Is there a built-in safeguard when you sell off assets to a private developer?

Mr Pengelly:

The initial point is that if that surplus land is identified there would be contact with all Departments — the Department of Social Development may have a strong interest in such land for social housing, or other purposes. As part of the process, there will be constant dialogue between Departments and the Planning Service, which would provide professional advice. There will be planning considerations at the point of any disposal. We do not rule out the possibility of selling land with some form of restricted covenant on it.

The Chairperson:

Therefore you will address the stated priorities of the Executive or the Programme for Government before the land is put on the market.

Why are there so many members of the strategic investment board (SIB) on the task force?

Mr Pengelly:

Perhaps one DFP mind is worth six SIB minds. The majority of SIB members on the task force are there to provide secretarial support. Furthermore, a couple of people have come in to work on short-term projects, and they are badged as SIB but they are not permanent members.

The Chairperson:

SIB is represented by its chief executive officer. The make-up of the task force seems very in-house; have you considered whether its balance is right and whether there should be more external expertise?

Mr Pengelly:

In the longer term, more external expertise will be required. There is a difference in what will be required for a piece of work that has to be completed by November — which is more like a scoping exercise — and the requirements for the 10-year planning period for the investment strategy. However, you have made a fair point on which further consideration will be required for the medium and longer term.

Dr Farry:

There are not too many women on the task force.

The Chairperson:

You beat me to it. This meeting is being reported by Hansard, so our comments are noted.

This session has overrun slightly, but it is an interesting discussion. What are the reporting arrangements for the task force? Will it be accountable to OFMDFM, DFP or the SIB? Which Assembly Committee will scrutinise its work?

Mr O’Reilly:

The chairperson of the task force was appointed jointly by the First Minister, the deputy First Minister and the Minister of Finance and Personnel, so that will be the immediate reporting line. There will also be a further reporting line to the Executive.

Mr Pengelly:

I think that the three Ministers who appointed the chairperson will be kept abreast of the progression of the task force.

The Chairperson:

Which Committee will scrutinise the task force? Has that been catered for?

Mr Pengelly:

It has not been catered for. However, given that those three Ministers have an interest, the scrutiny could be carried out by any interested Committee between the First Minister, the deputy First Minister and Finance and Personnel.

The Chairperson:

Has that been prescribed?

Mr O’Reilly:

No, but there is a working assumption that this Committee will want to talk to members of the task force when it produces an interim report. That will probably be early in the new year.

The Chairperson:

I suppose that we will see the interim report soon. We could have talked about some of the emerging themes or priorities, but we will hear about those soon enough. We will write to you if any queries arise from Committee discussions. Thank you for attending.

We move to item six on the agenda — public procurement delivering best value for money. Leo O’Reilly is joined by some colleagues who are, I am sure, fed up waiting. We are running behind schedule, and for that I apologise.

From central procurement directorate (CPD), Department of Finance and Personnel, I welcome Mr Des Armstrong, director, construction advisory division; and Mr Brendan O’Neill, director of the policy and support division. I thank both of you for joining us. I invite you to address the Committee.

Mr O’Reilly:

I will just make a brief opening statement — you have heard quite a bit from me this morning already. The director of the central procurement directorate, Mr David Orr, is unable to be here. He is national president of the Institution of Civil Engineers this year and had a commitment today in respect of that. Given the relatively short notice, he was unable to attend this morning.

Mr O’Neill and Mr Armstrong will set out the key issues relating to procurement in Northern Ireland, which include procurement policy, value for money, the draft Programme for Government and the draft investment strategy for Northern Ireland (ISNI). Before handing over to my colleagues, it might be useful to provide an update on progress made in the past few years in public procurement, as I understand that this is the first time that the Committee has engaged with the procurement function in DFP. Procurement forms a large part of the Department’s responsibilities and activities in Government.

In May 2002, the Executive endorsed over 80 policy recommendations contained in a review of public procurement that had been undertaken at that time. Those recommendations related to the production of a revised procurement policy and the establishment of new institutional arrangements to take forward public procurement in Northern Ireland. There was also a focus on improving operational procurement processes and the integration of economic, social and environmental policies into public procurement.

The Executive — the procurement board at that time — agreed a target date of 31 March 2005 for the implementation of those recommendations, and during that time, all of the structures and recommendations were put in place, as envisaged by the original review team. Since 2005, the procurement board, which had been chaired in the previous period of devolution and is chaired now by the Minister of Finance and Personnel, included senior representatives of all Departments and external members. That procurement board has been engaged in a wide range of activities, which Brendan will outline. It has also been involved in monitoring the target of achieving £250 million of value-for-money gains in public procurement by 31 March 2008.

There have also been more detailed progress reports in implementing the review team’s recommendations, and the procurement board’s activities have been reported in successive annual reports, which have been published on the directorate’s website. Copies are also available in the Assembly Library for Members.

In looking to the future, the procurement board is currently in the process of drafting its key targets for the next strategic planning period of 2011. That will take account of the draft Programme for Government and the draft investment strategy, both of which will underpin the public service agreement (PSA) targets. I will be happy to forward the strategic plan once it is available; the Committee may want to have another evidence session on that subject.

That is the general context and background. I will now hand over to Brendan O’Neill, who will speak about procurement policy, value for money and the draft Programme for Government.

Mr Brendan O’Neill (Department of Finance and Personnel):

On behalf of the central procurement directorate, I thank the Committee for the invitation to attend this session and the opportunity to give members an insight into the work of the central procurement directorate and the public procurement process. As Leo has said, this is our first opportunity to meet the Committee.

The Northern Ireland Executive’s legislative responsibility for public procurement extends to procurement covering all devolved matters carried out by contracting authorities, which are defined within procurement regulations, but are in essence public bodies. Those bodies include Departments, agencies, non-departmental public bodies (NDPBs) and local authorities.

Public procurement itself is guided by a clear definition of the term, which is the process of the acquisition, usually by means of a contractual arrangement after a competition, of goods, services and works.

It covers all types of procurement, both conventionally funded and more innovative types of procurement, such as PPP and PFI. The procurement process spans the whole life cycle from the mutual conception and definition of a need to the useful life of an asset or the end of a contract. The key aspect of the policy is the concept of best value for money, which covers not only value for money but allows for the inclusion, within the public process as appropriate, of social, economic and environmental goals — the three pillars of sustainable development.

Public procurement policy is governed by 12 principles, which are listed in the background note that was sent to the Committee. The Northern Ireland public procurement professionals strive to meet those principles. When the principles have been satisfied to an acceptable level, best value for money can be said to have been achieved.

Leo O’Reilly mentioned the procurement board. As well as comprising the 11 permanent secretaries, the Treasury officer of accounts, the director of CPD and two external experts, the board also has two observers, one from the Northern Ireland Audit Office, and the other from the strategic investment board. The second institution that governs public procurement is the central procurement directorate and the centres of procurement expertise. CPD was established after the review in 2002, and it supports the procurement board in the development and implementation of public policy. It also provides a centralised professional procurement service to the Northern Ireland public sector.

In addition to CPD, there are seven centres of procurement expertise. Those are: Roads Service and Northern Ireland Water, which covers infrastructure; the Regional Supplies Service of the Central Services Agency and health estates, which looks after the health sector; the Housing Executive, for the housing sector; education and library boards for education; and Translink for transport. In line with public procurement policy, all Northern Ireland Departments, agencies, NDPBs and public corporations are required to carry out public procurement by means of documented service-level agreements with CPD or the relevant centre of procurement expertise.

The third institution that governs procurement is the procurement practitioners’ group. It comprises the heads of the centres of procurement expertise and provides direction to the centres in ensuring the integration of the procurement board’s priorities and monitoring their delivery. That group meets twice a year under CPD direction. One example of the output of the group was the development of a methodology to calculate and report on value-for-money savings in respect of operational procurement activity. That methodology, which takes account of guidance from the Office of Government Commerce, has been incorporated into CPD guidance and was approved by the Audit Office. The components of the methodology have been selected on the basis of being simple, robust and auditable. Application of the methodology across the public sector ensures a uniform approach to measuring the savings. The common principles and the specified processes also allow for aggregation of the data and details how we are achieving savings against the £250 million value-for-money target that was set by the procurement board.

Although each Department is accountable for its own budget, and how that budget is spent, the central procurement directorate and the centres of procurement expertise work with the Departments to assist them in obtaining best value for money and delivering their Programme for Government commitments through the application of our procurement policy and best practice.

A cross-cutting theme of the draft Programme for Government is sustainable development. CPD and the centres of procurement expertise have a key role to play in the drive towards the integration of sustainable development objectives in the procurement process, and by assisting public-sector bodies to embed the sustainable considerations into their spending and investment decisions.

One of the objectives of the Northern Ireland sustainable development strategy is:

“To make the Northern Ireland public sector a UK regional leader in sustainable procurement”.

A key target in taking that objective forward is the production of a sustainable procurement action plan. CPD has been tasked with the delivery of this action plan by 31 March 2008. A draft of the action plan is due to be issued shortly to key stakeholders for consultation.

We think that public procurement will have a direct impact on the delivery of a number of supporting PSAs, in particular PSA 11, which supports the strategic priority of driving investment and sustainable development. That includes a number of targets that are linked to the development of the sustainable procurement action plan, and there is also reference to our work to encourage small and medium-sized enterprises to compete for public-sector business.

The second PSA, PSA 21 — enabling efficient Government — sets out three targets that focus on: obtaining value for money from procurement spend; increasing the level of Government spend through centres of procurement expertise; and increasing the capability of each centre of procurement expertise. Those three measures are under consideration by the procurement board as part of its strategic plan. That is a quick résumé of public procurement. I understand that we are short for time, but Des Armstrong may cover several areas in relation to construction.

Mr O’Reilly:

Chairman, I suggest that Des focuses on the interaction between CPD and the investment strategy, and the achieving excellence initiative.

Mr Des Armstrong (Department of Finance and Personnel):

With regard to the delivery of the investment strategy, over the last few years, we have worked on a key initiative for construction procurement, namely the achieving excellence for construction initiative, or achieving excellence, as we refer to it.

The achieving excellence initiative has been developed to improve the performance of Government as a construction client. The review of public procurement contained the recommendation that a Northern Ireland version of achieving excellence would be developed, and that work was undertaken by the Government’s construction clients group. A group of senior officials that represented all of the Departments undertook the task, and achieving excellence for Northern Ireland was launched in May 2002.

It is considered that the implementation of achieving excellence can deliver significant value-for-money gains from construction procurement. After a slow start, the lack of reporting on the initiative was criticised by the Northern Ireland Audit Office in its report ‘Modernising Construction Procurement in Northern Ireland’.

The Departments are fully committed to the achieving excellence initiative, and central procurement directorate provides twice-yearly reports to the procurement board on progress against the initiatives. The procurement board has agreed that the initiative would be extended until March 2008 to support the delivery of the first phase of ISNI.

In relation to the impact on the investment strategy, achieving excellence requires Departments to focus on the following key, critical factors for success: the involvement of key stakeholders throughout the time of the project; an integrated approach in which design, construction, operation and maintenance are considered as a whole; consideration of issues such as design quality, health and safety and sustainability in projects; and to develop procurement contract strategies that ensure the provision of an integrated team of designers and contractors. Contracts will be awarded on best value for money and no longer on the lowest tender price.

The outcome of the achieving excellence initiative is to increase the capability of Departments to successfully deliver different sorts of projects. To further support the delivery aim, Departments are required to comply with policy framework for construction procurement, and that policy framework brings together a number of best-practice approaches and initiatives that are aimed at delivering best value for money and improving client/Department performance.

Mr F McCann:

Forgive my ignorance, but I am not sure of the procurement procedure. There has been some discussion on procurement in the Committee in the past, but my impression of procurement is that it usually means putting work out to tender, forcing people into competition and giving the job to whoever can do it the cheapest. That always has a knock-on effect and an impact on the smaller businesses that are not in the position to apply for tenders. I raised the question of procurement at another Committee. In the area of construction, particularly, major companies that are in the position to tender, do so; they then get the job, take 15% off the top and subcontract it out to a smaller contractor. Is there any way to ensure that that does not happen, because it should not happen? Not only does it impact on the service, but it impacts on the quality of the work being delivered.

People are encouraged — as much as possible — to buy local. Is there anything in the contract to encourage local labour or the buying from local contractors and businesses, because that would also maintain local employment? That is particularly relevant now as, under European directives, contracts must be put out widely.

Mr D Armstrong:

The achieving excellence initiative is designed to address the type of issue that you have raised. In the past, the industry has been driven by clients who take the lowest price — as Mr McCann said — without considering the standard of quality delivered. The achieving excellence initiative then moves away from the concept of taking the lowest tender to looking at how the contractor proposes to deliver the project and what sort of other added benefits he can deliver as part of the delivery process for the contract.

With regard to your comments on subcontracting, we have been in discussion with the local construction industry through the Construction Industry Forum, and we have agreed a code of practice for supply chains that take on board the 12 principles that we had outlined for public procurement, and added three more — the delivery of which the construction industry feels is important to deliver the quality infrastructure and projects that we need going forward. One of those principles relates to how subcontractors are treated in respect of fair pay and terms and conditions, and consideration is also given to how the conditions of a contract will be passed down the supply chain from the client to the main contractor and, subsequently, to the subcontractors. Those issues can be addressed through the supply-chain management.

In addition to that, we are working with the construction industry group to look at a set of proposals that will address the three pillars of sustainability: social; economic; and environmental. Within the economic pillar, we are — through the construction industry group — looking at how opportunities for local businesses in the industry will arise. That will apply equally to new players from outside Northern Ireland, as European directives mean that tendering competitions must be put out widely.

Mr F McCann:

Has any work been done to assess what impact the lumping of most of the contracts into one will have on local businesses?

Mr D Armstrong:

The investment programme shows that we have not gone with the idea of a single contract.

Mr F McCann:

Even the contracts put out by the Housing Executive do that.

Mr D Armstrong:

It reduces the number of players in direct contract —

Mr F McCann:

To one?

Mr D Armstrong:

I am not sure of the detail of that, but the number of contractors is generally reduced. Those contractors then have to find a way into the supply chain, which is a reasonable place to be, as the client database shows.

Mr Storey:

I will be brief: I appreciate this opportunity, because this is an important issue that we will want to come back to again. We are disadvantaged, unfortunately, given that one of the principles that we will use is legality. I say that for all the right reasons, given that we are tied into European directives. We have to face up to the fact that those directives put local businesses at a disadvantage.

I would like more clarity on the issue of framework agreements. There has been a great deal of discussion, for example, about the education and library boards. The size of some of the bidders has meant that local subcontractors, who have been used down through the years to supply and deliver good projects, will not be in the game at all, and will disappear. One company in my constituency that has carried out immense work for the education and library board sector is no longer at the table. The framework agreements contain elements such as major works, professional services, minor works and maintenance, and there are worries now that the latter two elements will be put together. People are telling me that they have serious concerns about where this is heading.

Mr D Armstrong:

One of the issues is that the level of infrastructure expenditure has risen steeply over the past few years. Three or four years ago it was £676 million; the draft investment strategy forecast puts the latest figure well above £1 billion. The problem with that level of activity is that one can be made very busy by the tendering process. When single contracts are put out to tender, anything worth more than £3·5 million has to have European approval, which creates a lot of activity in the tendering process.

The advantage of the frameworks is that they produce a great deal of the procurement activity that is required by European law in advance of the client’s requirements. That can shorten the project delivery time frame by up to eight months, compared to the normal process of going out for a designer and then back out again for a contractor. It produces delivery, but we do recognise that opportunities must be created within the supply chains for those contractors who have the experience in delivering the work, but have not been successful through the competitive process, which has to be transparent and legal.

Mr Storey:

Do you not accept that these are crumbs on the table? We have moved to such a different way of achieving these objectives that offering the contractor a place on the supply chain is little consolation compared to the core project that they could have delivered had they not been restricted by the framework agreements.

Mr D Armstrong:

The benefit is that the level of activity in that sector will increase dramatically. Therefore, experienced contractors and suppliers can find their way into the supply chain.

Mr O’Reilly:

One of the main reasons for going down the framework contract route, particularly with regard to the education sector, is that in recent years there have been a significant number of delays, leading to significant levels of underspending on capital investment in schools. That problem had to be addressed.

We hope that these arrangements will result in a rapid escalation in spending on the ground for investment in schools. The money had been earmarked in the past, but it was underspent. Previously, we were able to carry that money forward but now that we are in a slightly different regime, delivery is important. That is part of the drive behind the framework contract arrangements.

Mr O’Loan:

In your briefing paper, you say that:

“Northern Ireland Public Procurement Policy applies to all Central Government Departments, their Agencies, Non-Departmental Public Bodies and Public Corporations”.

The policy identifies 12 principles, and I particularly want to mention “Fair Dealing” and “Integrity”. Do you have a clear role in ensuring that those two principles in particular are observed throughout the public sector? If someone had concerns about a particular sphere of activity, how would they get something done about it?

Mr B O’Neill:

The 12 principles are applied by the centres of procurement expertise in conducting procurement. There is a formal complaints procedure within the central procurement directorate and the centres of procurement expertise, should anyone wish to follow it, if they think that the principles or the processes have not been followed properly. However, we would expect that we could discuss and resolve complaints without taking them to the formal process.

Ms J McCann:

Your briefing paper says that £5·6 billion of new infrastructure will be delivered over the next three years. The draft investment strategy says that social outcomes will be embedded in the procurement of major infrastructure. The draft Programme for Government talks about tackling disadvantage and poverty. The procurement of major infrastructure provides a perfect opportunity to do that. However, I am bit confused. You say that public procurement must, under EU regulations, be put out to a tendering process. Is it written into contracts that priority can be given to local companies if they fit the quality of service that is required? Is there anything written into contracts that says that local unemployed people should get the jobs that come from infrastructure projects? My experience of the major works on the Westlink, for instance, is that the jobs went to people from outside the area despite the volume of unemployment in west Belfast. Those people need jobs as well, but how can the specific consideration of social outcomes in procurement processes be ensured? Can it be written into a contract, or is it merely an aspiration?

Mr D Armstrong:

Those would be conditions of contract. In addition to the delivery of the hard infrastructure, there would be specific requirements within the contracts to address whatever issues are appropriate for the type of contract. We have run a pilot to consider how unemployed people can be brought back into employment through Government contracts, and that seemed to be greeted with a fair degree of welcome and success. That is a model that we would try to build on. For example, we have introduced requirements that all operatives must have at least basic, minimum health and safety training before they go on site. Contractors must have accredited health and safety management systems to work on Government sites. That has led a decrease in accident rates on Government sites relative to spending.

Apprenticeship is one issue where we could agree a requirement with the industry — £x produces one apprentice. We need to talk to the industry about the outworking of that, but we are engaged in that type of discussion.

Mr B O’Neill:

Under European rules and regulations we cannot be specific about locus. We can use the contract to help the unemployed, or to create apprenticeships, but we cannot confine it to a local area, because the subject matter of the contract must relate directly to the social, economic or environmental objective that we are trying to achieve. The rules do not allow for local sourcing or local employment. Inevitably, the use of that concept to achieve the aim means that workers are quite often from the local area, but we cannot specifically restrict it to a local area in the tender documentation.

Ms J McCann:

Can you make specific use of the Noble indices of social and economic deprivation? Can you factor that in when you consider employing people from those areas because they are the most disadvantaged, and are therefore the people that social outcomes in the procurement process should benefit?

Mr B O’Neill:

No, we cannot be specific, and the terminology that we use must be general. We are not able to confine it to local areas.

The Chairperson:

In the area of construction skills and trades, as part of the value for money concept we could examine outcomes, and whether the approach — creative and well-meaning as it is — results in the creation of employment or apprenticeship opportunities for local people. The outcomes could be monitored to see whether we are sufficiently focused in our approach.

Mr D Armstrong:

One thing that we can ask for is an employment plan.

The Chairperson:

You can ask for that?

Mr D Armstrong:

Yes. You cannot draw around a clear area, either in Northern Ireland or a specific region of Northern Ireland. However, you can use contracts to create demand, and then help the contractors, through activity in local areas to make contracts known. A good example would be the work that happened at Coolkeeragh, where the contract was awarded to a company outside Northern Ireland, but the north-west marketing model was used. They were able to sell skills back into that contract. That type of activity creates a demand within contracts for that resource to be made available. It is necessary that other sectors come in, in order to provide the push and pull.

Mr B O’Neill:

We also encourage corporate social responsibility in the contracting firms, and we can encourage and promote areas of specific need so that the contractor is encouraged by the contracting authority to try to address some of those areas, albeit outside of a condition of contract. We can use our influence to try to address that.

Mr F McCann:

That is interesting. There have been horror stories on television about people who have travelled from other countries to work here, and about the rates that they are paid. Is there anything built in to those contracts to ensure that people are paid the proper rate?

Mr D Armstrong:

We have been in discussions with the trade unions and the construction employers about an approach that would allow us to take the working rules agreement that applies across the construction industry and make the terms of payment within those rules a condition of contracts, which would create a level playing field where minimum standards would be applied with a contract.

The Chairperson:

That assumes that the local construction industry will play the game as well.

Mr F McCann:

You do see horror stories about how people are treated when they come in to work, especially the discrepancy in the rates of pay. Many people will not complain because they are totally reliant on the job.

The Chairperson:

In your briefing paper you describe the efficiency savings and the value-for-money gains. I assume that there is also preparation for the ongoing target, particularly over the Budget period. When will there be a report on that?

Mr B O’Neill:

Our procurement targets are set by the procurement board. We have submitted draft targets, similar to those included in the public service agreement, to the board, and the board is considering those. The procurement board is due to meet, hopefully before Christmas, in a subgroup, to set targets in time for the new financial year in April 2008. At the moment we are working through the £250-million-pound target, which takes us up to March 2008.

Ms Purvis:

It is important that when any private business wants to do business with Government, it is lucrative for it to do so. It is important that Government maximises the value-for-money aspect for themselves and for the benefit of the community. In relation to tendering for contracts, you mentioned the three pillars of sustainable development. Are any, or all, of those three pillars conditional on entering into contracts, or are they merely encouraged outside of the negotiations for the contract?

Mr B O’Neill:

The three pillars can be conditional on contracts, as long as the consideration that one wants to achieve is related to the subject matter of the contract. If, for example, you want to encourage apprenticeships and it is an electrical installation contract, you would be expected to require apprentices who are electricians, and not plumbers. There must be a relationship between the aim and the subject matter of the contract. That can be a condition of the contract.

Ms Purvis:

How many contracts are conditional?

Mr D Armstrong:

There are currently a number of conditions on contracts, particularly in the environmental area, in which there are requirements for contractors to produce waste-management plans and to consider recycling material on site. There are requirements for the design of facilities to achieve an excellent rating for environmental performance. The Department has already used conditions for contract in that way. We are considering increasing the requirements and we are talking to the industry to agree a set of proposals to go forward with that will specifically detail social, economic and environmental issues.

Ms Purvis:

In recent years, for example, DFP has been involved with the programme for change within the Civil Service, and some lucrative contracts have been negotiated. Can you find out whether any of those contracts were conditional?

Mr B O’Neill:

Yes.

Ms Purvis:

Jennifer McCann touched on the point that £5·6 billion of new infrastructure is planned over the next three years. I disagree with Jennifer about social need not being prioritised in the draft Programme for Government and the draft Budget.

I would be interested to find out the priority that is given to social, economic and environmental objectives in this £5·6 billion of new infrastructure. Saying these things is well and good, but I understand that delivering them is much more complex and difficult. I should like to see, through an open and transparent tendering process, the exact benefits in terms of social, economic and environmental objectives. I would appreciate some drilling down into contracts and what has been delivered, or what it is hoped will be delivered over the next three years through the £5·6 billion of new infrastructure.

The Chairperson:

That brings the Committee meeting to a close. Dawn has referred to one issue, and there may be others that we will write to you about. Thank you for you time and patience.

Mr B O’Neill:

It is our intention to organise a seminar on public procurement for MLAs. We held a similar seminar in 2002, which was successful. We are in discussion with the University of Ulster to draw up a programme, and we will be in touch with the Assembly to arrange an appropriate date.

The Chairperson:

I am sure that that will be helpful, thank you.

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