Wednesday, 30 March 2011

"On the Nod" No More?

This statement came from Senator Philip Ozouf:

It is with considerable regret that I have to announce that Baroness Ford has decided to withdraw her candidacy as Chairman of SOJDC. Margaret Ford could have been a very strong leader of the new SOJDC Board and could have brought a fresh and experienced approach. Whilst the States have an absolute right to call any matter into scrutiny, such matters do need to be handled sensitively, properly and in a manner that ensures innocent parties are unaffected by politics. Sadly, the events of the last two weeks have undermined confidence and lead to this extremely unfortunate situation. We will consider all options concerning the appointment of a replacement Chairman over the next few days. However, I am concerned that we may find it increasingly difficult to identify people of calibre who are willing to put their names forward against such a background as this. I express the hope that the Scrutiny Review will be concluded speedily. And that the Review will confirm not only that the recruitment process was robust and fair, but lessons will be learnt about the way such matters are handled in the future. I have written to all the Board candidates expressing my confidence in their candidacies. And to Baroness Ford, expressing my deep regret at her decision but wishing her every success in the future. (1)
I've been looking at Senator Ozouf's blog, and what he doesn't seem to consider is that the major lesson is that "more needs to be done to engage a greater number of States Members in decision-making and policy-making, without undermining the Scrutiny system and going all the way back to the pre-2005 committee system" (2), to quote one politician.
Just proposing names and hoping they will get through "on the nod" because someone recommends them is no longer enough. There has to be a proper investigation to ensure that there are no vested interests, or conflicts of interest involved in any appointments process.
According to the proposition in the States:

"Baroness Ford was selected after a comprehensive recruitment process both locally and nationally. The process was overseen by the Jersey Appointments Commission. Interviews took place earlier this month."(3)

But there was not much in the way of transparency about what criteria were used in the selection process, who they were looking for, and how much local knowledge was needed. It's a familiar pattern. When Jersey and Guernsey looked for a review into the machinery of government, Guernsey looked for local expertise and local knowledge, on the basis that the Island had enough bright people of sufficient calibre to find them internally; when Jersey did so, they called in Sir Cecil Clothier, who with the best will in the world, really came from a very different political background, and tried to impose a complete vision of what he thought would work.

The JEP noted  the whole proposal for the composition was to be reviewed:
Now the whole proposal for the composition of the board is to be reviewed by the Corporate Services Scrutiny Panel, chaired by another rather formidable lady, Senator Sarah Ferguson. That is a sensible decision of the House which will be welcomed by the Island public if not by the Council of Ministers, who have been presented with another challenge to their authority as well as another obstacle on the rocky road towards establishing the JDC as a replacement, and one with even wider powers, for the unlamented Waterfront Enterprise Board. (4)

The contribution of the Waterfront Enterprise Board towards the States coffers can be given exactly. It has returned zero pounds to the States. This can be seen very clearly from its accounts. It has taken land from the States at a nominal sum, and sought to develop them at no cost to the States. But unfortunately there is no return either; all the monies have been consumed by the Waterfront Enterprise Board's expenses, including directors' remuneration of £329,089 (including Mr Izzat) and employees emoluments of £501,159 in 2009.

So it is not surprising that the whole composition of the Jersey Development Company, which would remove even more property from direct management by the States, needs review. But as the JEP leader comment noted:
It need not, though, be seen as any kind of slight towards Baroness Ford. If the high-flying Labour peer has done the necessary research into Jersey's postwar history of both property development and the management of public resources, particularly on the St Helier waterfront, she will understand fully why many politicians, reflecting the similar concerns of their constituents, should be so wary about handing so much control over so many community assets to anyone, let alone someone from outside the Island.
The Scrutiny Panel, and by extension the rest of the States, will rightly want to explore whether Baroness Ford's experience as chairman of the London 2012 Olympic Park Legacy Committee and Scotland's Irvine Bay Regeneration Company and as a senior director of Serco, the private company now engaged in the outsourcing of public services around Britain, does indeed make her, as the Treasury Minister suggests, an ideal candidate for a tiny island with a fragile environment already facing huge pressures generated by the interplay of politics and property development. (4)
Serco, of course, has featured from time to time in "Private Eye", although to be fair Baroness Ford has not been mentioned in this connection. Peter Smith, of Procurement Excellence, who has considerable expereinec in the field (he has been Procurement Director for the Department of Social Security and the NatWest Group, as well as holding senior positions in the Dun & Bradstreet Corporation and the Mars Group), makes these comments:

Serco's Chief Executive Chris Hyman apparently races Ferraris in his spare time; and is (according to Private Eye) sponsored by three large firms who have been Serco suppliers; White & Case, Provecta, and Arval.  But its OK, Serco say, they have procurement processes in place that ensure nothing untoward could happen....

But is it acceptable?   I'm sorry,  but on balance I don't think it is.   Even if he keeps well away from supplier selection decisions, his actions must put some pressure on the Serco procurement people.  I wouldn't want to be sitting in procurement at Serco telling ARval they've just lost a contract. And is it really just coincidence that 3 suppliers are his sponsors? Why do you think suppliers do this sort of thing?  Why do they take Chief Execs (not suggesting this applies to Serco here..) to Wimbledon and Ascot?  It is all about influence, overt or otherwise. (5)

Meanwhile, another blog highlights what it calls the "parasitic" nature of Serco:

SERCO holds 40% of contracts for the Home Office, making a mint out of 'control orders' and 'anti-terrorist' legislation, has run some of the most abusive and repressive detention centres, and will certainly be bidding for the control of the new "GP-led" health authorities. But what does SERCO actually do? By itself, nothing. It is a parasitic entity that accumulates immense profits by telling other people what to do, or rather by contracting other suppliers to tell other people what to do.(6)

and there is another mention of "Private Eye" of Serco:
Serco, the company that provides services for Government and the Military, formed a partnership only last year, with Guys and St Thomas' Hospital, to undertake pathology work for itself and other Hospitals. A year down the line, concerns are being voiced about governance, security, and other problems, especially one of cost increases, that had to be paid to the new body as a result of increased demand, amounting to some £2 million (as reported by Private Eye). (7)

Given that the Waterfront Enterprise Board, the predecessor of the Jersey Development Company, has been cheerfully accumulating profits with no return (the States actually pay WEB for rental of Liberation Station), it functions very much as a corporate body which provides a kind of outsourcing service to the States of Jersey, as a facilitator. That is not to say the idea is bad - the States would certainly not have been that efficient at managing the Waterfront either - but it does mean that the structure needs to be in place to ensure that the States gets a proper return on its investment.

On the newspaper front, Serco was also mentioned in the Financial Times:

Serco has fuelled the row over pay levels at companies that run public services by awarding bumper packages to senior management at the FTSE 100 outsourcing group. In remuneration levels that unions derided as "obscene", Chris Hyman, chief executive, enjoyed an 18 per cent annual rise to £1.86m ($2.97m), while Andrew Jenner, finance director, saw a 7 per cent improvement to £948,295. The figures, disclosed in Serco's annual report released on Tuesday, exclude pensions and long-term incentives, for which comparable figures were not immediately available. (8)

Given that WEB is well known for the high level of remuneration paid to its Managing Director, which is not under States control, there is a sense in which reading the Financial Times article, that one feels a kind of sense of "deja vu".

The Daily Mail also comes in with a list of what Serco delivers, and also what it has failed to deliver:

Another big outsourcer is Serco. In some parts of Britain it has taken over so many local services it is virtually indistinguishable from the council. In Canterbury Serco collects rubbish, trims trees, maintains road signs, cuts grass and looks after public toilets. Surely a company with such close ties to the shrinking public sector is going to be feeling the effect of government spending cuts? Not according to the company's chief executive Chris Hyman. Serco's profits grew by a fifth last year, and the company reckons to have an order book of £16.5 billion.

But surely these state-created outsourcing barons deliver a better service? Try telling that to anxious parents in Bradford, where Serco took over the education service in 2001.  The company promised to hit very ambitious targets and missed them. But it managed to persuade the council to lower the targets, which meant that Serco was awarded £5 million in 'performance bonuses'. Today, after ten years of Serco's schools contract, Bradford is still well down the Ofsted league table and its contract will not be renewed amid criticism that the deal was a failure that represented poor value for money. Serco, however, maintains: 'We have honoured our commitment to close the gap at Key Stage 2 Level 4 and above.' (9)

Serco's record, as reported by these newspapers, does not inspire confidence in this kind of outsourcing, and it must be questioned whether Baroness Ford, as a senior non-executive director, has any input into these problems. I'm not saying she is responsible, because I don't think she was.

The question I would ask is simply that if she was not able to prevent these kinds of problems - as detailed above in both blogs and newspapers - with Serco, then it has to be questioned how much she would be able to provide oversight into the Jersey Development Company, which is a kind of outsourced organisation, and how effective she would have been as its Chairman. Wouldn't a "robust" recruitment process have looked at precisely that sort of thing?

If there is a lesson to be learned, it is surely this. It may be increasingly difficult to recruit candidates who are not prepared to face critical, searching questions. What of Senator Ozouf saying that "lessons will be learnt about the way such matters are handled in the future."? I think the lesson is greater transparency with the States over the recruitment process is needed, and perhaps liasing with Scrutiny beforehand, rather than just presenting a "fait accompli" and expecting it to get through "on the nod".

The old days in which appointments just went through by default have gone. The lesson to be learned must surely be, to quote again, that: "more needs to be done to engage a greater number of States Members in decision-making and policy-making, without undermining the Scrutiny system and going all the way back to the pre-2005 committee system" . And who said that? Senator Philip Ozouf himself.

Jim: As you know I have to appoint a new governor to the Bank of England. I'd welcome your views.
Sir Desmond: Well I certainly think you should appoint one. If you go for the sort of chaps that chaps trust, then you can trust him to be the sort of chap to see that the chaps don't get involved in any scandals.

(Yes Minister)



Anonymous said...

I do hope that our politicians read your blog Tony. You can be relied upon to provide objective and mature analysis of often complex issues.

This latest post is, or should be, a timely reminder for our Ministers!

Keep it going ......

James said...

We should be so lucky...

Actually, my one experience with Serco (which was one very small contract to run a training building for a civil service agency I worked for) was extremely good: the Serco employee in question was incredibly helpful, nothing was too much trouble. It was in marked contrast to the company who took over from him. But the story is always the same: the principle of outsourcing tasks that companies think are peripheral to someone else looks attractive, but the way things turn out is entirely dependent on who is actually doing the job.

On the larger issue of doing things on the nod, isn't that why we are now paying the hospital director an excessive salary? And that last phrase isn't mine but that of the Comptroller and Auditor General, whose report reveal that Mr McLaughlin's contract was negotiated by an interim HR Director sourced from the same agency as he was...