Consultant costs rise because of lost expertise

Normally, when ministers ask for an independent review of a policy, they ensure that some lickspittle ex civil servant is given the task and the result is suitably safe and dull, produced to justify the intended outcome. This is not the case with the report by Sir Andrew Foster, the former head of the Audit Commission, into the Intercity Express Programme.

It makes for enlightening and even entertaining reading, as Sir Andrew does not mince words, and even though the Department apparently sent back his report several times in an effort to try to soften the criticism, his report is both damning and very informative. Indeed, read it carefully and you can see the bits which Sir Andrew has obviously added to mollify criticism which tend to be tacked on rather obviously at the end of a particularly hard-hitting sentence!

 The IE Programme, remember, was initiated by the government which became aware that the InterCity High Speed 125 trains could not last forever and would eventually need to be replaced.  Fair enough, but then muddle ensued with a staggering £20m being spend on consultants. The specification became more and more complex, with the need to run trains on both electrified and non-electrified lines, and with the requirement that through trains from London should still be able to run on all the existing routes and possibly others. Therefore there was to be five types of trains, including a bi-mode that would operate on both electric and diesel power.

The complexities of this would take up more than the length of this column but suffice to say that Sir Andrew has found that the Department’s procurement procedure lacks coherence and, though he does not quite put it like that, is utterly incompetent.

One area he picks up on is the Department’s constant changes of requirement, many of which have made the ‘business case’ worse. This is a common complaint about the public sector and major contracts,  and highlights the fact that the Department is, in effect, the ministry for railways staffed by civil servants which is an unsatisfactory way of running a railway. He goes further, though, suggesting that the methodology that the Department uses is inappropriate because it relies far too heavily on benefit cost ratios.

 This is a issue I have raised frequently and why I used inverted commas for ‘business case’. The decision on whether to go ahead with schemes is based on an analysis of the costs and benefits, and most of the latter consist of small time savings made by millions of people compared with the ‘do nothing’ alternative.  Relying on this narrow and theoretical mathematical exercise is ludicrous. The decision needs to be based on a much wider analysis of whether the scheme is viable, what its societal benefits will be and whether any alternatives exist.

 Here, too, Sir Andrew is critical. He says that the Department was too easily convinced that the existing HST trains could not have their lives extended beyond 35-40 years, presumably because politicians like the idea of shiny new trains rather than refurbishing old ones.  Moreover, he says that not enough consideration was made to running electric trains only to the present limit of electrification and then making people connect onto other services. At present, this is considered undesirable but provided the connecting train is standing at an adjacent platform and waits if there is a delay – something the daft performance system often does not allow for at present – people will be happy to use the service even if it is not direct.

The publication of the report had the interesting side effect of showing that the new transport secretary, Philip Hammond, is already doing what his civil servants want, which is to protect them from accusation of incompetence. Rather than highlighting Sir Andrew’s very strong criticisms, he picks out the fact that the report says the IEP was ‘positive and attractive’ but then fails to mention the wide-ranging criticisms of the Department in the next paragraphs of the report in which Sir Andrew expresses surprise that such a big investment scheme is viewed negatively within the industry.

Sir Andrew suggests this is a result of widespread scepticism about the technical aspects of the train and that ‘there are issues about the Department’s engagement and communication with the industry’. Indeed, any conversation with senior railway executives will soon lead to moans about the way the Department tries to run the industry. One reason for the lack of trust between the industry and the Department is the latter’s widespread use of consultants. Sir Andrew says: ‘I also ask a number of questions about arrangements for managing the costs and coherence of independent advice within the Department’ because, he says, there is a tendency to call in consultants rather than rely on industry expertise.

Of course many of these criticisms are familiar but coming from such an experienced  and impartial source, they may prove to be very valuable in reforming the industry. The IEP itself is now definitely dead, but there will be a need for new trains. They should be procured in a much simpler way by experts and with much less use of the consultants of which Sir Andrew is so critical. The answer, I’m afraid, is one that I have argued for many times before. The railway cannot be run by civil servants who for the most part flit in and out of jobs every three or four years, but also are far too beholden of the latest whims of their political masters. The railway needs to be taken out of the Department for Transport and handed to an independent organisation over which ministers do not have direct control. A former BR boss, who incidentally at one point ran InterCity services, put it to me very succinctly. In his day, BR used to be given a figure annually which was its budget, but then left to its own devices as to how to spend it. The railway was run by experts and it showed. They would not have needed to spend £20m on consultants only to get a confusing set of answers.

The ConLib government has said that it wants less interference from government in running the railway. The Conservative element means this to allow the private sector greater control, but for the Libs it means greater freedom for the railway managers who know best how to run the industry. This is an argument the Libs could and should win. The railway needs to be returned to those who know it best.
The report is at http://www.dft.gov.uk/pgr/rail/pi/iep/fosterreview/pdf/report.pdf

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