25 November 2022 – Vincent Gaskell and Adrian Montague
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(10.00 am)
Ms Kennedy: Good morning, Chair.
Sir Wyn Williams: Good morning.
Ms Kennedy: Our first witness today is Mr Vincent Gaskell.
Sir Wyn Williams: Thank you.
Vincent Gaskell
VINCENT GASKELL (sworn).
Questioned by Ms Kennedy
Ms Kennedy: Would you confirm your full name, please.
Vincent Gaskell: Vincent Gaskell.
Ms Kennedy: In front of you, Mr Gaskell, should be a copy of your witness statement. Do you have that there?
Vincent Gaskell: Yes, I do.
Ms Kennedy: Have you read through this statement recently?
Vincent Gaskell: Yes.
Ms Kennedy: If you turn to the last page, is that your signature there?
Vincent Gaskell: Yes, it is.
Ms Kennedy: Is it true to the best of your knowledge and belief?
Vincent Gaskell: Yes, it is.
Ms Kennedy: Your statement is now in evidence. Everything that I ask you will be supplementary to that. Can I start by thanking you for coming here and giving evidence to this Inquiry.
I’m going to start by asking you a few questions about your background. It’s right, isn’t it, that you retired from the Civil Service in 2010?
Vincent Gaskell: That’s correct.
Ms Kennedy: Prior to that, you held a range of roles within the Civil Service?
Vincent Gaskell: That’s correct.
Ms Kennedy: Those range from junior to senior management across government; is that right?
Vincent Gaskell: Yes.
Ms Kennedy: And you held a role in the Benefits Agency?
Vincent Gaskell: Yes. Specifically in relation to this particular Inquiry, yes.
Ms Kennedy: Yes, and that involved programme management for the Agency’s Customer Accounting and Payment System which is referred to as CAPS?
Vincent Gaskell: Yeah.
Ms Kennedy: After that, you went on to work for the Home Office before retiring; is that correct?
Vincent Gaskell: Yeah.
Ms Kennedy: Prior to 1997, you didn’t have anything to do with the Horizon project?
Vincent Gaskell: No, I didn’t, or CAPS.
Ms Kennedy: But in 1997 you were asked to be programme manager for the Benefits Agency CAPS?
Vincent Gaskell: Yes, that’s right.
Ms Kennedy: Can you explain what that role involved?
Vincent Gaskell: Yes. I mean, briefly CAPS was a programme that was initiated to bring together or initiate a common set of personal details across all the Department’s benefit systems that had all been developed independently and separately, and those systems also had their own unique payment, ways of paying benefits at the end of it, in terms of order books and giro cheques, but they had their own modules for doing that. CAPS was about bringing that together, producing a common module at the back end, a common module at the front end and implementing that across the benefit systems.
My role was quite specific to start with, in that my job was to make sure all of that happened and to time, to complete the replanning process that had been initiated between POCL, ICL Pathway and ourselves, and to just make that end of things happen.
Ms Kennedy: Prior to taking that role, did you have any technical expertise with computer systems?
Vincent Gaskell: No, I had no – I was not a technical person. What I had was quite a bit of experience in technology enabled change management, and I think it’s for that reason I was asked to take on this role, that involved understanding what the technical capabilities were that IT could help with, what it meant for the business in terms of its impact on staff and on customers, and also quite a bit of experience in managing multidisciplinary teams of technologists, external consultants and internal operational people.
Ms Kennedy: In early 1999, I think you say February 1999, you went on to become programme director for the Benefits Agency and the BA/POCL programme. So was that a promotion?
Vincent Gaskell: Well, no, it wasn’t, except that I’d been gradually brought – the programme director, George McCorkell, had been broadening my role in the run-up to the end of 1998 and I think it was a natural progression to just take on the programme director’s role, which I did.
Ms Kennedy: Can you explain what that role involved?
Vincent Gaskell: Yes, at that time, things had – there was a lot of discussion with the Department and with ministers about future progress on the overarching programme, and my role then was to be involved in those discussions with the Department with ministers to try and find a way through to make the programme work and, at the same time, still keeping an oversight of the CAPS programme to keep that on schedule.
I also then took over George’s responsibilities for some of the commercial aspects of the overarching programme.
Ms Kennedy: So it’s fair to say that between 1997 and 1999 you were on a number of boards and committees involving the Horizon project; would that be fair?
Vincent Gaskell: That’s right, there was the CAPS programme board, which I chaired, but then there was the CAPS and card programme board, which George McCorkell chaired, that involved ICL Pathway and also the Post Office, so that took an overarching role – view of the programme as a whole.
The other board that I was on really was focusing on CAPS itself.
Ms Kennedy: I think you also mention in your statement something called the release authorisation board?
Vincent Gaskell: Yeah.
Ms Kennedy: Perhaps we can pull up an example minute of that, at POL00028496.
Can you explain a bit about what the release authorisation board involved?
Vincent Gaskell: Yes, I mean, typically, if there was to be a software release or a major change, there’d be a – something called the release authorisation board, which was really meant to judge the state of readiness of each of the organisations or contributors to that particular stage in the programme to gauge their readiness to – for implementation of anything that was under discussion.
Ms Kennedy: Thank you, that can come down now.
Turning back to the time you became programme manager, I think when you start you say that the interfaces and data links between CAPS and ICL were in place and working; was that right?
Vincent Gaskell: Yes, that’s correct.
Ms Kennedy: Can you explain what your feelings were towards the project, or your first impressions, when you first started in that role?
Vincent Gaskell: Right. I mean, at that time there’d been, as I’d been given to understand, quite a bruising experience between the three parties and my job then really, as I saw it, was to keep the CAPS team completely focused on what they were doing, to build strong relationships with the programme design – personal relationships with the programme design authority, with my opposite number in the Post Office, and also establish good relationships with ICL Pathway.
Ms Kennedy: As part of your role, you had sight of the Horizon business continuity reports; is that right?
Vincent Gaskell: That’s correct.
Ms Kennedy: If we could pull up one of those at POL00028601, please, and this interim report related to the period between 5 and 12 November 1997.
I think you say in your statement that these were reviewed by the Programme Delivery Authority?
Vincent Gaskell: That’s right.
Ms Kennedy: These interim reports, were they produced on a weekly basis?
Vincent Gaskell: From memory, certainly initially, I remember seeing some of these in the first few weeks of taking up the role. As the programme developed, I think I saw few of these and I can’t remember whether these continued to be in operation during the whole of 1998.
Ms Kennedy: But this particular – if we look at this one –
Vincent Gaskell: Yeah.
Ms Kennedy: – between the 5th and 12th, this would have been shortly after you assumed your role as programme manager?
Vincent Gaskell: I think this is probably the first report I received.
Ms Kennedy: Really? Okay.
If we could turn to page 2, please, and scroll down, we can see there that there was a grading system; is that right?
Vincent Gaskell: Yeah.
Ms Kennedy: If we look over the page – or can we scroll further down that page, please.
If we look at 3.2, we can see under that “ABED” it says:
“There has been an unusually high occurrence of incidents at the ABED interface.”
Do you remember what that stood for?
Vincent Gaskell: No, I don’t, I’m afraid.
Ms Kennedy: But it goes on to say:
“This has been formally registered as a ‘Problem’ and a solution is being sought from ICL Pathway. The incidents have caused time delays and additional work in the POCL Transaction Processing arena. This can be contained in the current low volume environment but gives cause for future concern.”
So from the first report that you saw, issues were being flagged?
Vincent Gaskell: That’s correct, and, indeed, in each of the subsequent reports, that was the case too.
Ms Kennedy: Perhaps if we look at the next report, which is at POL00028600, please, and this relates to the period between 13 and 19 November, so the following week. If we go to page 2 of that report, and scroll down again – sorry, page 3, please, and scroll down. Thank you.
We can see again this issue being picked up and it states:
“An item of deep concern is that ICL Pathway have reported two incidences of duplicate payments being made, however, this has not been evident from any reports received, and ABED are awaiting further details.”
Was this something that concerned you from the very beginning?
Vincent Gaskell: I think, from my point of view, given my quite specific role on CAPS, what I was looking for in reports like this were the view to be taken by POCL themselves about the seriousness of these issues, and also of the programme design authority, where the Department and the agency had some very strong technical expertise. I would also look to my own team to say “Are these issues that we should keep an eye on, are we going to keep looking for a pattern, are these things that are just in the normal course of live running”, as it turns out in this case.
Ms Kennedy: For completeness, if we turn to the next interim report, which is at POL00028599, this relates to the period ending 26 November 1997. If we turn to page 4, please, and scroll down, again we can see under one of the bullet points, under 3.4.2, that there is an issue there in terms of transaction processing and an error against the cash account. Do you see that there?
Vincent Gaskell: Yes, I do.
Ms Kennedy: I appreciate that you say that you would look to people in your team but isn’t it self-evident, on the basis of this report, that that would be a problem going forward?
Vincent Gaskell: Yes, when you say a problem going forward, what we’re looking for at this stage, we have a limited number of cases that are live, we have a small number of post offices that are live, and what we’re looking for is a number of things at this early stage in the programme, is the seriousness of an issue like this – and these were serious – the frequency of them and how quickly they were being resolved, in this case by ICL Pathway, and whose responsibility was it to make sure that that happened. They’re the sort of things we’re looking for at this stage.
Ms Kennedy: Turning then to a Horizon service report, which is from December 1997, so shortly after that, POL00028596, and these reports, were they done on a monthly basis?
Vincent Gaskell: The service reports, initially when I took on this role, I remember them being almost weekly. Then I think there seemed to be an increasing gap between these reports being produced, but I can’t swear to that. And I certainly don’t recall seeing reports of this nature, say, by the middle of 1998.
Ms Kennedy: If we could turn to page 5 of that report, and if we could look at the section “Lost Transactions”.
Vincent Gaskell: Yeah.
Ms Kennedy: It says:
“There has now been 46 lost transactions, 8 of which resulted in duplicate payments being made with a total value of £254.75. The responsibility and liability for these payments lies with ICL Pathway.
“ICL Pathway’s preferred option for resolving this problem, is to enforce the commitment of transactions at the point of terminal timeout. The disadvantage of this approach is that there is a chance that a transaction is forcibly committed although the clerk intended to void the transaction. If this were to happen then a repudiation would inevitably be made by the beneficiary who would be initially denied payment because the system had falsely registered an encashment. Historical data suggests void transactions are minimal.”
So the same issue or similar issue is being picked up again. Can you explain, in the grand scheme of things you were dealing with, where did this land in the pecking order of things that were on your mind or concerning at the time?
Vincent Gaskell: I think from the – and speaking personally – well, I’ll do both for the Agency and for myself. When I saw issues like this, what was of immediate concern to me when I saw that there were duplicate payments and these were potentially relating to benefit payments, is the impact on the customer: would they be asked to refund the amounts of money that had been overpaid by way of a duplicate payment? So there is an issue there about customer service and the impact on individuals.
There is an impact then on the integrity of the system and – in terms of what we’re looking at. So, in that case, what I’d be looking to is our finance colleagues, both in the Agency and the Department, to say “Is this something at this point in time we should worry about, is this something that we’re content that ICL Pathway are getting on top of to resolve, are we – again, are we seeing a pattern?”
In this case, in terms of duplicate payments there was a period in which we saw some duplicate payments, but, if I recall from mid-1998 onwards, that was less evident, if – I don’t recall any after that.
Ms Kennedy: You mention or we mentioned previously the Programme Delivery Authority and I believe you say that you attended some meetings from the beginning as George McCorkell’s deputy.
If we could turn one of those up at POL00028310, we can see your name there.
Would you often attend these meetings as a deputy for George McCorkell?
Vincent Gaskell: No. No, George usually took this role on himself.
Ms Kennedy: How did you find those meetings?
Vincent Gaskell: I think they were quite challenging, is the best way to describe it. I think this is where the – some of the more serious issues on the programme, both in terms of timetabling and any issues that were coming up through programme delivery, would actually be challenged at this senior level. So I would say these were – I think the best way I can describe it is challenging: professional but challenging.
Ms Kennedy: Various witnesses have said that they found this process frustrating or difficult. Did you sense that when you attended these meetings?
Vincent Gaskell: No, I didn’t. I actually found this is where things got a real focus, in terms of whether things were actually being done to schedule and were there any significant issues arising. When you’re in a forum like that and those issues are coming to the fore, where people are actually feeling challenged, I can see how others would find that uncomfortable.
Ms Kennedy: Turning then to issues regarding testing, I think you say that there were disagreements about testing requirements between BA and POCL; is that right?
Vincent Gaskell: When we got to middle to late 1998, that was the case. Not in the early stages but in middle to late 1998, we had a different approach and a different thought process, is the best way I can describe it, as to the extent of testing needed and how testing should be conducted.
Ms Kennedy: If we can pull up a board minute from that time, POL00028395. So this is a “CAPS and Card Programme Board Action Notes” minute –
Vincent Gaskell: Yeah.
Ms Kennedy: – from 12 June.
If we turn to page 2, we can see under “Detailed Testing Requirements”:
“There are still a number of uninvolved differences between BA and Pathway over the Detailed Testing Requirements. Dave Miller explained that there was a need for a senior level meeting to determine exactly what the testing requirements are going to be. Peter Crahan said that the issues should be tabled at the Formal Management Review Meeting on 18/6/98. The Chair sought and received assurance that if this was not the case, escalation routes were in place and that there was the facility to resolve this issue.”
So is this around the time that these issues start appearing and are starting to bite?
Vincent Gaskell: Yes, I think there was a quite – I’m going to use the term “philosophy” when it comes to approach to testing. We were certainly, having been involved in considerable number of system developments within the Department, we had a particular thought process about what testing was needed for a large scale development of this kind, and that view was not shared, it’s fair to say, by both POCL and by ICL Pathway.
So, therefore, trying to agree – and I don’t mean that in any critical way of anybody, we just had a different approach. And we felt that the testing should be more comprehensive and thorough, in our terms, than looked to be scheduled. So that’s where we started to begin to part company on testing.
Ms Kennedy: In your view, were those differences fundamental?
Vincent Gaskell: I think they were, and I think that – that came to a head in early 1999. But yes, they were quite fundamental.
Ms Kennedy: If we could turn to page 6 of that same document, please, this is “Input into CAPS Programme Board Report for Meeting on 10 July 1998”, and if we could look, please, at “Live Operations”, we can see that it says:
“The current Release continues to provide a Benefit Payment Service and Order Book Control System for Child Benefit Payments in 204 outlets (119 in the South West & South Wales Region and 85 in the North East Region). From an operational point of view, there are no major threats to business continuity.
“During May, there were approximately 60,000 encashments (including foreign encashments) with a total value in excess of £2 [million].
“However there are concerns that current levels of lost transactions (at 4 per 10,000 encashments), although presently manageable, may not be acceptable to POCL when large volumes of encashments are returned by newly automating post offices. Reducing the level of lost transactions therefore remains a prime focus for POCL Service Management. The Priority Level 1 assigned to these problems is focusing the Contractor towards activity addressing POCL concerns and providing remedial action.”
So, at this stage, was this really POCL’s concern regarding lost transactions, rather than BA?
Vincent Gaskell: Yes, it was, and that was, as you – in some of the other papers that I was sent for this Inquiry, that was increasingly the case during 1998, where POCL were increasingly concerned about the number of lost transactions, and that’s – that featured at most of the reports that I saw.
Ms Kennedy: If we turn to page 7 of that same document, please, and we scroll down, we can see the “Testing” there under “ICL Pathway Release 2”. Under the second paragraph it says there:
“… some concerns and issues that need to be resolved if End to End and Model Office testing are to start on 3 and 10 August respectively …”
So both the testing issue and the lost transaction issue are coming to a head at this stage?
Vincent Gaskell: Absolutely.
Ms Kennedy: If we could look at the Horizon service report from, again, a similar time, which is at POL00028589, and if we turn to page 6, we can see, in relation to the Benefit Payment System, that “Incomplete Transactions” is given a whole page for discussion here, isn’t it?
Vincent Gaskell: Yes, it is.
Ms Kennedy: Is your memory again, at this stage, this is a POCL issue rather than a BA issue?
Vincent Gaskell: I think there was a lack of certainty about what the lost transactions were. As I recall, and my memory may be faulty here, but if – as I recall, during the course of 1998 there was much discussion about what these lost transactions were. I think ICL Pathway had a view that some of these, if not a lot of them, were down to user error. I think the Post Office contested that, and, from our point of view, we just wanted resolution, because we were worried about what would happen when we began to scale up the system during 1999. So this became quite an issue during 1998.
Ms Kennedy: If we turn to page 8 of that document, and can we scroll down and perhaps flip the graphs so we can read them. This is the breakdown of the incomplete transactions that were reviewable at that time; is that right?
Vincent Gaskell: Yeah.
Ms Kennedy: If we turn over the page to page 9, we can see again under “Incomplete Transactions”:
“The transaction Processing & ICL Pathway interface remains on ‘Amber’ status, with incomplete transactions having a large impact on this.
“Other factors which are of concern are:
“unmatched exceptions
“cash account errors.
“Last months report included a statement from TP detailing the impact of incomplete transactions within their domain, in addition, a report has been furnished showing the projected effect in monetary terms to the TO environment.”
Vincent Gaskell: I think it’s at this time that it prompted me to ask ICL Pathway for a detailed breakdown of what they knew about lost transactions at that point. I think it was at this point, rather than later. And ICL Pathway provided such a summary, which included what had been done to resolve earlier issues and what outstanding fixes and subsequent actions were needed to resolve any remaining issues as they saw them at that time.
Ms Kennedy: If we turn to page 23 of this same report, under “Concerns”, we can see:
“Lost transactions form 70 per cent of incidents received this month. Concerns therefore remain and service management is specifically tasked towards resolving the underlying causes. An action group has been specifically targeted at this for resolution.”
At this stage, were you still of the belief that BA would proceed with the project and be party to it?
Vincent Gaskell: Yes.
Ms Kennedy: In spite of all of these issues, you thought that –
Vincent Gaskell: Absolutely, and I can say that the CAPS team, in particular, were entirely focused on making that happen. That was clearly in our mind that that’s what we were going to do.
Ms Kennedy: If we move forward, then, to November 1998, if we could pull up POL00028433, and if we could zoom in a bit, please, and down. This is a letter that you wrote to David Miller at POCL, and you tell him that there are three issues that are outstanding. You can see the first at the bottom of that page, which is about the provision of test condition analysis for end-to-end testing.
Then if we go over the page, the “analysis of PinICL clearance and prioritisation” and, thirdly, “formalisation of the weekly progress meetings and pre-run checkpoint process for the start of testing”, which you describe as “absolutely essential before we enter the final runs of testing”.
At this stage, what is the relationship like between you on the one hand and David Miller on the other, or POCL and BA?
Vincent Gaskell: I would have said we – David – I had a very good working relationship with David Miller. It was professional, again challenging, when we needed to be challenging of each other, but thoroughly professional and I thought it was a good relationship to the point where we could phone each other up if there was an issue that was brewing that we wanted to forewarn each other about, might come up in a meeting. It would be that type of relationship but testing, challenging.
Ms Kennedy: In the last paragraph of this letter you say:
“I also understand that during current phases of testing significant problems are being experienced with the TIP interface and that investigations are underway to determine their severity. Could you confirm that my understanding is correct and if so what proposals are being considered to address the problems and how will they compact on the current phases of testing and on overall progress towards the NR2 release. It would be helpful to have a response to this particular set of issues before 13 November.”
Would you say that reflects what you’ve described, the difficulty with testing?
Vincent Gaskell: Yeah, it was, and we were getting early indications that things weren’t going well. We’d had early indications that there were timetabling issues, we’d had early indications that the testing was not going well, which is actually just fuelling our concerns about the state of progress at that point.
Ms Kennedy: If we could turn to page 3 of that document, thank you, and if we could scroll down, this is Mr Miller’s response to you on 10 November 1998, and he takes each of these three issues in turn. If we look at, over the page – if we look at the final bit in relation to TIP, it says:
“The problems you refer to with regard to the TIP interface are of concern. Simon Rilot has made that issue his first priority, in order to resolve any problems that may prevent POCL and BA having confidence in the end to end accounting and reconciliation process. He has organised workshops later this week in Chesterfield and you should be aware that the output of those workshops may change the shape of the final phases of testing. You can be assured that Carol will be directly involved in these discussions.”
So, at this stage, there is still quite a lot of back and forth, trying to resolve these issues; is that right?
Vincent Gaskell: Yeah, that’s correct.
Ms Kennedy: If we could then turn up the Horizon programme’s issues register from December 1998, which is at POL00028377, and if we could zoom in on 10003, it says:
“[The] Inability to achieve satisfactory cash account balancing.”
If we also look at 10024, we can also see that there’s a reference to the EPOS element. Thank you.
So this risk register, was this something that you generally had sight of?
Vincent Gaskell: I can’t specifically recall. I think I probably would have, but I can’t specifically recall.
Ms Kennedy: If we look over at page 3, please, and if we could zoom out a bit, thank you, the bottom email we can see an email from Sue Muddiman(?), do you remember who that is?
Vincent Gaskell: Yeah.
Ms Kennedy: It says:
“Below is a list of the questions that Dave Miller may be asked by Vince Gaskell at the CAPS and Cards Programme Board …
“We need to provide the answers for Dave so he can be prepared so I suggest that this is passed to the attendees of the HMT meeting tomorrow for that very purpose.”
It goes on to list a number of issues, and it’s a number of things that I think, if we scroll back up, we can see that you did ask for these things. Can you explain a bit about your thinking at the time as to why you asked for these things?
Vincent Gaskell: Yeah, I think the issue continued to rumble on about the nature of the testing, the scope of it, definitions for entry and exit criteria from testing to judge whether it was a success, all of these building towards whether things were acceptable or not, so what was the acceptance specifications that we’d be looking for. And the absence of those or the lack of clarity of those was quite a worrying thing because how would you know that the testing had been successful, unless you’d actually agreed those upfront, knew what outputs or outcomes you were looking for. Those things still at this seemingly, to me, late stage were still outstanding, so that’s why I think these were being raised in my name because these were quite an issue for us.
Ms Kennedy: If we look at number 2, we can see you raise the issue of inability to achieve satisfactory cash account balancing. So, at this stage, would you say that comes within the scope of those things you were saying –
Vincent Gaskell: Oh, yeah.
Ms Kennedy: – at this late stage should have been resolved?
Vincent Gaskell: Yeah.
Ms Kennedy: If I could ask you to look at the second Project Mentors report – I think actually it’s the third one. It’s at POL00031114. If we could scroll over – well, actually, staying on that page, we can see that this was sent to George McCorkell, who would have been your boss at the time?
Vincent Gaskell: Yeah.
Ms Kennedy: If we scroll over on to page 2, and down, did you receive a copy of this report at the time? I appreciate we only sent this to you last night and gave it to you this morning, but –
Vincent Gaskell: No, I didn’t, and indeed, on the front page, it does say that it’s not to be shared beyond the addressees. So no, I didn’t receive a copy of that. I think before I took on the role of programme director from George, George gave me a verbal briefing and mentioned this but I never saw the report.
Ms Kennedy: When he gave you that verbal briefing, did he tell you the content or the gist of what the report had said?
Vincent Gaskell: The gist, yes.
Ms Kennedy: So you were aware of its critical findings?
Vincent Gaskell: Absolutely, which tended to reinforce my view about what we needed to do on the testing front.
Ms Kennedy: So you would have become aware of this report in February, when you took over –
Vincent Gaskell: Yes, that’s correct.
Ms Kennedy: Turning back, then, to January 1999, if we could pull up POL00028410, and if we could turn to page 3, in the middle of paragraph 8, there’s discussion about functionality, and then you’re recorded as having said:
“Vince Gaskell said that before the CAPS Programme agreed the entry criteria for End-to-End testing and Single Benefit Model Office an assurance was required on BES functionality, it was agreed that there was a need for further discussion on this subject outside of the meeting.”
Then if we scroll further down onto page 6, please – sorry, staying on that page, paragraph 12, we can also see that you’ve said:
“Vince Gaskell said that it was the CAPS Programme’s perception that Cycle 1 had not gone well because it had generated 20 high/medium PinICLs which had not arisen in the earlier stages of testing. Andrew Simpkins said that some PinICLs had been expected and that they would all be cleared before Cycle 2.”
At this stage, are you starting to feel like things are not going to improve or were you still hopeful that they would?
Vincent Gaskell: No, I was – we wanted this thing to improve. What we were concerned about is that there were signs that things weren’t going well and that each of these cycles of testing where we were expecting less PinICLs to be generated, then that’s not what we were seeing. So we never got to a stage where we saw what we would regard as a clean run of testing.
Ms Kennedy: Turning then forward to February 1999, so this is when you’ve taken over as programme director, if we could pull up POL00028408, please, this is a CAPS programme board report and, if we scroll down, please, we see here, again, the raising of the issue of incomplete transactions:
“Historically Incomplete Transactions have been reported a month in arrears due to the frequency of ICL Pathway’s reports. However, because of their importance the current status of ITs will now be reported based on the latest information produced by the BSM Incomplete Transaction Workshop.”
So again at this stage, this late stage of February 1998, this is being reflected in the notes of the board meetings?
Vincent Gaskell: And what we were looking for there, I mentioned we were looking throughout the process about trends, and there’s a reference here to what had happened the previous month, and the numbers in the previous months. So these were things we were just keeping a careful eye on.
Ms Kennedy: If we turn over the page to page 2, then scroll down to the bottom, we can see that testing is raised again as an issue, and if we scroll on to the next page, can we have two pages – yes – saying that this needs to be resolved, essentially?
Vincent Gaskell: Yeah.
Ms Kennedy: Moving then forward to March 1999, there was a meeting between BA and POCL teams, and if we turn it up on HMT00000018, and we can see that you were in attendance there.
If we scroll on to the second page, it mentions that you’re feeling positive about a new approach. Could you explain whether that reflected your attitude at the time?
Vincent Gaskell: I think that rather overegged it. I think what I was desperately keen to do is that there had been quite a lot of discussion already taking place about the future of the programme, and I’m more action orientated, and this was an opportunity to say how could we at least try and get a grip on one aspect of this, which is what they were referring to in this particular paragraph.
So this was an opportunity to do some work that might help us progress to a point where we could make a decision on a way forward. That’s what I was keen to do and I think that’s what was reflected in my enthusiasm to take up this approach.
Ms Kennedy: In April 1999, it was decided that BA CAPS would not be undergoing the live trial, and this decision was confirmed, if we turn up POL00028405. Can you explain a bit about why that decision was taken?
Vincent Gaskell: Okay. Just first of all, to explain Val Curran actually took over the programme manager’s role from me, working to me as the programme director. So this was where we’d had increasing concerns – as reflected in the CAPS and card programme board minutes, that you’ve already alluded to, that George McCorkell chaired in January – where issues to do with what we had seen from the evidence from testing was not good. We’d not got to a stage where we’d seen a clean run of testing, and yet we were being asked by POCL and by ICL Pathway to progress to the next stage, which actually quite worried us, because we were then worried about what did that mean for timetable – the timetable overall.
I’ll start with that point first of all, because the timetable had not been adhered to, even since the re-plan in 1997. So we were concerned then about what that would mean for the timetable for work on our major benefit systems that would need to be involved for the multi-benefit stage during 1999. That was the first point.
The second stage, and perhaps most crucially, we didn’t have confidence that sufficient testing had been done to make sure that we weren’t going to experience further problems and, therefore, further delays during the next stage of testing. It’s a difficult one for us to conceive of a situation in which you would progress to the next stage of a live trial and possibly towards acceptance because – possibly towards acceptance and therefore exchanging large amounts of money, public sector – public money into ICL Pathway, if we weren’t certain that it was the right decision to proceed and we were far from certain that it was the right decision to proceed, regardless of all the other considerations that were taking place way above us in terms of ministerial discussions.
This was at a programme level: was it sensible to progress with the timetable that was being put on the table, given what we had seen from the earlier stages of testing and the lack of resolution of some of the outstanding matters.
One specific is that, to move from one stage of testing to another, even though we were assured that the PinICLs were being resolved during the previous stage of testing, that might have been the case but you get to the next stage, you worry whether the resolution of those PinICLs has actually undone something as you move to the next stage of testing.
So that’s why we wanted to get to a point where we could see a cleaner run of testing, which we never got to, and therefore we concluded it was more realistic to pause and that’s why we’d decided not to progress.
That decision was not taken by Val Curran, it was taken in discussion with myself with the Agency chief executive, with the Department’s Permanent Secretary and also with the Secretary of State.
Ms Kennedy: It’s been suggested that one of the reasons why the BA didn’t undergo the live trial was because it knew that the DSS was halfway out the door and didn’t fully intend to go through with the project. What would you say in response to that?
Vincent Gaskell: I would say I don’t accept that, certainly not at the level I was working at, and certainly not with my intention to try and make this programme work.
The efforts that we’d gone to, to work with POCL to try and resolve the outstanding matters in terms of testing, the efforts we’d gone to with ICL Pathway to adjust our dates to try and make things happen, none of that is – all those efforts – none of that is consistent with that point of view, so I reject that point of view.
Ms Kennedy: If we could turn up POL00028406, please. This is a letter from David Miller to you on 8 April 1999 dealing with issues that you’ve raised in respect of the project. But if we could turn over the page to page 2, the “Stability of the Solution”, and looking at the first paragraph, he says:
“We cannot understand the assertion that the ‘level of risk of new faults arising is unknown’. Clearly there is progressive evidence from each of the test cycles and acceptance reviews. We cannot of course be certain that no new faults will arise but that is the nature of the process. The CAPS/Benefit Payment System … areas have performed consistently as testing has progressed, with the later faults arising from specific conditions and not from underlying design flaws. We believe the BA itself recognises that the BPS elements of the system are stable.”
Was that your position? Would you have accepted that those aspects of the system were stable?
Vincent Gaskell: Yes, I think I would. I think it was just the wider picture that we were concerned about, and the scale of issues facing POCL and ICL Pathway in particular, from the test results, so – and we were therefore about what impact that might have on the quality of the system that was being – as we entered into live trial, and what impact that might have on timetable subsequently to put things right.
Ms Kennedy: What was your relationship with Mr Miller like at this specific time, April 1999?
Vincent Gaskell: Still I would say quite professional. I think we both were able to express disappointment that we couldn’t agree, but that’s quite natural in a situation like this. I would still say it was professional and good natured.
Ms Kennedy: On 11 May 1999, you proposed that Child Benefit customers be removed from the Benefit Card Payment. If we could turn up DWP00000007, yes, that’s the one, and if we could turn to page 6, please, and scroll down, please. This is a memo that you wrote to Bruce McNiven at the Post Office and Tony Oppenheim at ICL, and you say:
“Further to discussions last week regarding the removal of Child Benefit Customers from the [Benefit Payment Card], I undertook to provide you with some further details on the CAPS view of how this might be performed.
“In order to successfully remove all customers from Benefit Card Payment, ensure continuity of benefit payment and avoid adverse publicity full co-operation would be required from ICL Pathway, POCL and DSS. In order to be fully prepared, should a decision be taken to remove customers from card payment, we would recommend that early meetings are held with all three parties to:
“understand the overall framework for the removal of customers;
“develop and agree the detailed processes which need to be undertaken;
“develop and agree a testing and implementation plan, which would be used to remove customers from card.”
So at this stage what’s happening? What discussions are happening in relation to the Child Benefit customers being removed?
Vincent Gaskell: I think – I’m trying to recall where this sat with the discussions between ministers and – of both departments and with the Treasury. But, clearly, if cards were not going to continue, then we would need to work out what we needed to do about existing customers on Child Benefit. So, again, this was a preparatory piece of work to understand what we would need to do.
Ms Kennedy: If we turn back to page 1 of that document, and this records the Benefit Payment Card being cancelled, how did you feel about that at the time?
Vincent Gaskell: It was mixed feelings, to be honest, because I was relieved, the programme team were relieved, we’d got a decision, and we could move on to, towards using what we – the work we’d already gone to prepare for ACT. But disappointment that things had come to had a head like this.
Ms Kennedy: If we could turn up POL00028730, this is a letter that you wrote to – sorry – to John Bennett, and if we read the first paragraph, we see:
“We reject your allegations that we are in breach of our obligations to Pathway under the Related Agreements. We do not agree that all of the CCNs listed in the schedule to your letter are waiting for a response from us.”
What is the relationship like at this stage?
Vincent Gaskell: With ICL Pathway?
Ms Kennedy: Yes.
Vincent Gaskell: I think that it was quite difficult by now. I think they were understandably feeling pretty sore about the decision that had been taken to cancel the Benefit Payment Card and pretty sore about the – I can’t remember at what point we had reached in trying to get a settlement of commercial matters with ICL Pathway at this point, but they were pretty sore about the way things were looking.
Ms Kennedy: If we could turn to page 3 of that document, and scroll down. Sorry, this is the letter that you wrote to Bruce McNiven, which states:
“As I indicated to you during our [phone] conversation yesterday, the reports I have received following the Data Centre Migration differ to the information you have now provided in your letter about the scale of the problems that have arisen.”
What was the scale of the problems at that time?
Vincent Gaskell: A number of – I can’t remember the specific number, but it was a significant number of Child Benefit customers had been affected by the data centre migration. I think it was affecting the likelihood that they would not have continuity of payment through the Benefit Payment Card, so we needed to take remedial action to put that right.
Ms Kennedy: Around this time, KPMG prepared a report, if we turn up HMT00000008, thank you. If we look at page 5, and if we scroll into and down, please, we can see that you contributed to this report. Can you explain what that involved?
Vincent Gaskell: Yes, I mean, the – by this stage, the Department and other government departments were heavily involved in working out what to do next, not just in terms of the Benefit Payment Card but what it would mean for continuity of payment by order book in the short-term and movement towards ACT. So my role, therefore, on behalf of the Benefits Agency, was to co-ordinate input to that, some of which was more data specific in terms of flows of – and projected flows of order book payments, and so on. So anything technical about CAPS and what we would need to do was input to that too but this was more about supporting the Department and the – and Government ministers on trying to find a way forward, or to provide them with information that would help with the options that were under consideration.
Ms Kennedy: Subsequently, you received various letters from Mena Rego at the Post Office. If we could turn up NFSP00000041, please, and if we could scroll down.
Sorry, if we could go to page 6 of that document, and scroll down, please.
This is a letter that she wrote to you regarding acceptance, and it says:
“Following our discussions on Acceptance on Wednesday 23 June – when I believed we were on the same wavelength – I was not a little surprised to hear from my contract team that we had now received a draft schedule 16b. This seeks (amongst other things) to impose a full blown Acceptance process on POCL for the OBCS service which effectively replicates and enhances the previous arrangements between POCL and ICL.
“Given the stage we are at on acceptance with ICL, and bearing in mind your own Team’s heavy involvement (and Leadership) on the definition and development of the solution as well as the early stages of the Acceptance process, I believed we had agreed that the way forward was to carry on informing and consulting you regarding the OBCS service whenever appropriate.”
Can you explain what’s going on here?
Vincent Gaskell: Yes, I think Mena and my memory of what we’d discussed clearly diverged. We were still looking for acceptance, understandable acceptance, for what was to happen with the Order Book Control Service and how we were going to be satisfied that was going to be working okay in the short term.
Ms Kennedy: What did you think about the Horizon project going forward and whether or not it would be viable for POCL? Was that something that you thought about at the time, after BA withdrew?
Vincent Gaskell: I think things that I’d discussed with Dave Miller and others were that, on the back of the view that we took about the state of readiness to move into live trial, my concern for them was whether they were going to continue to face ongoing issues of timetabling and also quality of the software that they were going to be operating.
Ms Kennedy: Thank you.
Chair, I don’t have any further questions for Mr Gaskell. Do you have any questions at this stage?
Sir Wyn Williams: No, I don’t, thank you.
Ms Kennedy: Sir, I’m not sure whether any of the core participants have questions.
Yes, Mr Stein does.
Sir Wyn Williams: Right. Over to you, Mr Stein.
Questioned by Mr Stein
Mr Stein: Thank you, sir.
Mr Gaskell, my name is Sam Stein and I represent a large number of ex-subpostmasters, mistresses and managers.
I will take you, if I can, please, straight to a document, which is FUJ00075730. We should be seeing there, as you can see on this page, this is a document saying:
“Presentation/Demonstration to [Right Honourable] Frank Field MP, Minister for Welfare Reform [and then the date] 16th July 1998.”
You should have been provided with, I think, some of these materials beforehand and hopefully you have had an opportunity to read them?
Vincent Gaskell: I only saw them first thing this morning.
Mr Stein: In that case, I will take you slowly to the point I’m about to make.
Can we go to page 18 within the Relativity pagination. Thank you. If we look at this document, which, you see at the top, it says “Eyes on The Future”, the bottom strapline says “Feet On The Ground”. Under “Fraud Savings”, it says this:
“Positive authorisation of all payments
“Counterfeit/lost/stolen cards
“Cardholder verification
“Pick Up Notices …
“Extended Verification Procedure …
“Signature and card detail checks.
“Fraud Risk Management Service
“Monitoring, trend analysis
“Investigation support.”
So we can see what’s being discussed here, which is the need for particular aspects of the system in operation. Now, this appears to be in reference to the time period when we’re looking at the involvement of BA, the Benefits Agency, yes?
Vincent Gaskell: It does look that way, because we’re talking about, really, cards and replacing paper-based methods of paper.
Mr Stein: Exactly and that was the desire of the Benefits Agency, which was to move to ACT, the card system; is that correct?
Vincent Gaskell: Well, it’s to move to the card system, in the first instance, and ACT eventually.
Mr Stein: Yes. Now, my question in this aspect of things is that we can see that this relates to the Benefits Agency, we can see what’s being said about fraud savings, we’re aware, or the Inquiry is aware, that there was a considerable concern within the Benefits Agency about millions being lost through fraud, yes?
Vincent Gaskell: Absolutely.
Mr Stein: Right. So let’s look at the other side of things. What information did you have at that time about the Post Office’s prosecution service or Post Office prosecutions more generally?
Vincent Gaskell: I, personally? None.
Mr Stein: Were you even aware that the Post Office prosecuted its own cases?
Vincent Gaskell: Only as a general member of the public.
Mr Stein: Were you aware that the Post Office had its own investigation team?
Vincent Gaskell: No.
Mr Stein: Thinking back, can you help, then, with this: what discussions were you involved in or knew about between the Post Office, Pathway and Government? What discussions were ongoing about the prosecutional needs of the Post Office?
So this is the BA, the Benefits Agency; what was the Post Office saying about their issues with investigations and prosecutions?
Vincent Gaskell: I’m not aware there were any and, just from memory, thinking back to the CAPS and card programme board, which is where the overarching programme was reviewed by the Agency, that was never an issue that came up, that I can recall.
Mr Stein: Now, the same question, just departing slightly from prosecutions, which I’ve said so far. The Post Office also deals with its own civil cases in relation to monies that they decide that they should, at that time, seek to recover through the civil courts. Again, what discussions were there from the Post Office as to its needs regarding the use of material from the Horizon system for civil actions?
Vincent Gaskell: None that I’m aware of. And I can only – just in order to try and be helpful, when the issues cropped up about incomplete or lost or duplicate transactions, issues like that were never mentioned.
Mr Stein: If we can cap this off, then, did you ask any questions about it? They weren’t mentioned but did you say “Well, what’s going on with your side of all of this?”
Vincent Gaskell: Only insofar as what was the impact of the lost, missing and incomplete transactions, where the suggestions were being made that this could be down to user error by subpostmasters. That was where the focus was.
Never was it suggested or even mentioned, for instance, that there might be something inappropriate taking place. This was more about whether the system was performing or whether the staff who were operating the system in sub post offices were doing it in the right way.
Mr Stein: All right. So if summarise this, then, essentially, you don’t recall there being any discussions from the Post Office about the needs of their own systems for investigations for civil actions or prosecutions?
Vincent Gaskell: No, at no stage.
Mr Stein: I’ll take you to a separate document, please, which is POL00028530. Now, we will see this one at – if we can just go down to, I think it’s the second page, yes, there we go, right.
Does this come under the same heading of a document you looked at this morning or had this morning?
Vincent Gaskell: You’ll have to show me more, I think.
Mr Stein: You can see what this is, “BA/POCL Automation Project, Interdepartmental Working Group Report To Ministers”, okay? So the date of this is 13 November 1998, so if that helps orientate ourselves.
Can we go to the top of page 8, please. Now, at page 8, therefore, under this document, described as being “Restricted – policy and commercial” at the top there, if we can highlight, please, the third – no, sorry, before we do that, let’s just read the first couple of lines. It starts with:
“the ability of the Post Office to manage changes to the network under each scenario.”
So they’re talking about the various possible ways forward. Then the next bit is “Keys issues will be”, okay? Now, the first one is:
“how to maximise POCL’s existing customer base as benefit payment switches to ACT …”
Fine. Then next one:
“how to maintain relations with existing clients who are looking to automation to improve services …”
I’m going to concentrate on the third one. Third bullet point – and if you could highlight that, Frankie, I’d be very grateful. Thank you:
“how to ensure that the subpostmasters (private agents who run the majority of the post office network) perceive that post office business can provide a viable future and do not voluntarily exit the market (reducing the ability of the [Post Office] to manage network closures and migrate business to other offices).”
Then next paragraph, please, paragraph 21, if we can move just slightly down to that, so it’s centred in the page we’re looking at – thank you, and highlight paragraph 21 this time, please. Thank you.
Paragraph 21:
“Under all options the Post Office will be seeking to manage a reshaping of the network, against a background of commitment to a nationwide network of post offices. Their objective is to retain the current levels of access, especially in rural areas, but to reduce overprovision in some urban and suburban areas, replacing some physical offices with electronic access points. Current trends would in any case see a reduction in the rural network by some 200 offices each year, and a gradual shift to ACT-based methods of payment over time (by 2009/10 almost 50% of claimants are expected to have switched to ACT). Compared to the current network of 19,000 offices, POCL believe that their vision for the future could be served by a network consisting of around 11,000-13,000 full service offices supplemented by 5,000-10,000 electronic access points, many of which could continue to be sited in existing post offices. In practice however we recognise that any network of the future will be constrained by the same combination of history and politics that has shaped today’s network.”
So we can see mentions here of the potential impact of Horizon system, we can see that there is reference to ACT matters, to which you’re very familiar.
Now, can we start, therefore, with the third bullet point:
“how to ensure that the subpostmasters … perceive that post office business can provide viable future …”
Were you aware that the Post Office was seeking to ensure that subpostmasters and mistresses and managers could perceive that the Post Office business could provide a viable future?
Vincent Gaskell: I think we were – all of us that were associated at a particular level in the programme were well aware that one of the reasons we were doing the Benefit Payment Card was about the future viability of the Post Office network, we knew that. I mean, that was just common knowledge. And even when we came to the decisions about cancelling the Benefit Payment Card, from the work I was doing with ministers and with the Treasury, was looking about how we could smooth the transition to ACT, to help the Post Office network.
So we knew there was an impact on the network, there would be an impact on subpostmasters, we knew that, so this was about – by the way, I never, I was not involved in producing this document and I didn’t receive it at the time but they were the sort of things that were on our minds. We were aware about the impact on the Post Office network about decisions that were being taken.
Mr Stein: As it says here, that “subpostmasters (private agents who run the majority of the post office network)”, you realise, of course, that subpostmasters are running a small business that they’ve invested their own time, energy and funds into, yes?
Vincent Gaskell: Yes.
Mr Stein: You’re aware that these are individuals that, no doubt in order to have purchased the physical premises, will have taken out loans and mortgages and the like, yes?
Vincent Gaskell: Yes.
Mr Stein: You’re aware that these are small businesses that depend upon the Post Office income in part and also, of course, on any footfall coming through their post offices as to any other aspects of things that they sell; you’re aware of all of that?
Vincent Gaskell: I know of talking to them. I also consulted(?) subpostmasters about matters, yes.
Mr Stein: Because this appears to be saying to those receiving this “Private and Confidential”, commercially marked, restricted document, this appears to be saying to everyone that “What we’re about to do with the Horizon system is move towards the cutting, by a huge number, of Post Office branches and let’s make sure that the subpostmasters and mistresses don’t realise that that’s about to happen when we’re going to implement Horizon”. That’s what it appears to say, doesn’t it? Otherwise the word “perceive”:
“how to ensure that the subpostmasters … perceive that post office business can provide a viable future and do not voluntarily exit the market …”
Vincent Gaskell: You’re asking me to offer a personal opinion on this document that I saw this morning, and reading into that literally, it does – it does look that way.
Mr Stein: Yeah.
Vincent Gaskell: But from – again, I think trying to keep this in perspective about what the programme was trying to achieve overall, there were two conflicting – not two conflicting; there were two sets of requirements here. There was the Department of Social Security’s requirements and needs, in terms of payment modernisation, and also the needs of the Post Office network, and I think most people recognised that there was always going to be a tension between those two things. And I think whoever prepared this document, I think to some extent, was reflecting the reality of the coming together of those two requirements.
Mr Stein: Because this seems to be setting out that to achieve a reduction from 19,000 post offices to something like 11 to 13,000 offices – I mean, if we look at that at a rate of some 200 a year, then that’s going to take 35 years. That can’t be right, so this is looking at a reduction to get it within these sort of timescales, being a very fast reduction of – I can’t work it out, but it’s well over a third of the post offices that exist.
What were you aware of, in terms of making sure that subpostmasters, you know, knew about this intention?
Vincent Gaskell: It was not my role to make sure that subpostmasters –
Mr Stein: That wasn’t my question. What were you aware of?
Vincent Gaskell: I wasn’t aware of what steps the Post Office were taking in discussion with subpostmasters.
Mr Stein: You see, this appears to show that, by the subpostmasters committing themselves to work with the Post Office on the rollout of Horizon, in a timely fashion, that these were essentially turkeys working their way towards their own Christmas. What do you say about that?
Vincent Gaskell: I think, again, you’re asking me to offer a personal view in hindsight, and all I can say is at the time these were – the impact that was going to happen to the Post Office network was entirely a matter for the Post Office network and for their respective ministers, and not the Benefits Agency.
We were aware of it and, therefore, there were factors that we took into account in trying to manage the migration to ACT but that was it.
Mr Stein: Mr Gaskell, this is a briefing to ministers, so this appears to be the Post Office setting out its intention and setting out what it wants to do, “Let’s keep it away from subpostmasters”?
Vincent Gaskell: I don’t know what was in the minds of the people who were preparing that submission to ministers.
Mr Stein: Excuse me one moment.
(Pause)
Mr Stein: Thank you, Mr Gaskell.
Sir Wyn Williams: Are there any other questions?
Ms Kennedy: Sir, I’m looking around, and I can’t see that anyone else is about to stand up.
Do you have any questions?
Sir Wyn Williams: Fine.
Thank you, Mr Gaskell, for, firstly, making your witness statement and, secondly, coming to answer Ms Kennedy’s and Mr Stein’s questions. I’m very grateful to you.
Vincent Gaskell: Thank you.
Ms Kennedy: Chair, could I propose that we take a 20-minute break now before the next witness –
Sir Wyn Williams: Certainly, yes.
Ms Kennedy: – coming back at, shall we say 11.35?
Sir Wyn Williams: That’s fine by me, thank you very much.
Ms Kennedy: Thank you.
(11.12 am)
(A short break)
(11.37 am)
Mr Blake: Sir, can you see and hear us?
Sir Wyn Williams: Yes, I can.
Mr Blake: The next witness is Sir Adrian Montague. I should say, we may well be finished before lunch. If we’re not, we may go through lunch with your permission, sir.
Sir Wyn Williams: I am more than happy to complete Sir Adrian’s evidence, provided that can be done reasonably, and then we break for the day. All right?
Mr Blake: Thank you very much.
Sir Adrian Montague
SIR ADRIAN MONTAGUE (sworn).
Questioned by Mr Blake
Mr Blake: Can you give your full name, please.
Sir Adrian Montague: Adrian Alastair Montague.
Mr Blake: Sir Adrian, thank you very much for coming today. As you know, I ask questions on behalf of the Inquiry.
Do you have in front of you a witness statement?
Sir Adrian Montague: I do.
Mr Blake: Is that dated 16 September of this year?
Sir Adrian Montague: Yes, it is.
Mr Blake: Could I ask you to turn to the final page or page 12. Is that your signature on that page?
Sir Adrian Montague: Yes, it is.
Mr Blake: Is that statement true to the best of your knowledge and belief?
Sir Adrian Montague: It is, but I have to make two comments on the statement. Firstly, there’s a small factual error in paragraph 10.
Mr Blake: Shall we bring it up, it’s WITN04000100. Thank you.
Which paragraph would you like to begin with?
Sir Adrian Montague: Paragraph 10.
Mr Blake: Thank you.
Sir Adrian Montague: Roughly halfway through that paragraph, you will see I describe the composition of the panel, including Bill Robins and Alec Wylie, and then I say that, respectively, they were the former head of the Northern Ireland Social Security Agency and the former Director General of Communications and Information Services at the MoD. I’m afraid I transposed their affiliations.
So Bill Robins, I think, was the former Director General of Communications and Information Services at the MoD and Alec Wylie was the former head of the Northern Ireland Social Security Agency. I apologise for the mistake.
Mr Blake: No apology required. Thank you very much. There is one other change that you have. Do you want to deal with that now or do you want to deal with that at an appropriate time?
Sir Adrian Montague: It concerns paragraph 11 but, as we discussed before, before starting, I think it makes more sense – more sense in the context of the flow of my evidence – to take it when we come to paragraph 11.
Mr Blake: Thank you very much. That witness statement and the exhibits will go into evidence and the matters that I’ll deal with today are supplementary to that. But I’m going to start with your background. You trained as a lawyer and became a partner at Linklaters; is that right?
Sir Adrian Montague: I did. I did.
Mr Blake: Your expertise was advising on big projects like the Channel Tunnel?
Sir Adrian Montague: Yes.
Mr Blake: You then moved to Kleinwort Benson as head of project finance and later global head of project finance; is that correct?
Sir Adrian Montague: I did.
Mr Blake: Then you joined the Private Finance Initiative Taskforce in the Treasury in 1997 until 2000?
Sir Adrian Montague: That’s correct.
Mr Blake: After that you have returned to the private sector, you have been chairman of Friends Provident and then chairman of Aviva; is that correct?
Sir Adrian Montague: Among other jobs, yes.
Mr Blake: I’m going to start today with some very broad questions and they relate to you as somebody with significant commercial experience. Can I ask you: what was your view of how the Post Office was run during your involvement in this matter?
Sir Adrian Montague: I’ll start with three general comments.
Mr Blake: Absolutely.
Sir Adrian Montague: Firstly, like many other witnesses, I’m very aware that the events we’re discussing took place 25 years ago. Before I received the papers from the Inquiry’s legal team, frankly I had very little residual knowledge of the events of 1998. Those papers have prompted a lot of recollections and I’m using those recollections as the basis of my evidence today, but I’m also conscious that there are still a lot of gaps in my memory.
Secondly, in circumstances like this, there’s a very strong temptation to comment in hindsight, partly because of the terrible distress suffered by the subpostmasters and subpostmistresses, I have dipped into the testimonies from the first phase of the Inquiry and, to be frank, I find them very distressing. So, speaking to counsel for subpostmasters and subpostmistresses, they have my sympathy.
That’s the reason why you have to struggle against hindsight, and there is also one comment that we’ll come to where I think I was speaking in hindsight. That apart, I have tried to speak from my memory of the facts as they stood at the time.
Then, thirdly, in preparing for this evidence today, I have read the evidence of Mr Copping, who you – who the Inquiry interviewed earlier in Phase 2, and I found some of his evidence unexpected. It’s also a little awkward because, in some of my recollections, I do differ from Mr Copping and, therefore, I will try put especially the role of the panel in context as we go through this morning.
Mr Blake: Thank you very much.
Trying as best you can, without the benefit of hindsight, what was your opinion at the time of how the Post Office was run?
Sir Adrian Montague: Well, I had, I think, limited engagement with the Post Office, because the panel heard from the Post Office on a number of occasions, I obviously saw the Post Office’s performance through the documents that we had at the time and, I mean, they appeared to me to be reasonably well organised, struggling, I think, with this procurement. I think both the Post Office and the Benefits Agency in different ways struggled with the procurement.
I think it was clear that, even if they had been in accord at the outset, by the time I became involved, the Benefits Agency and the Post Office were in different places, and that made life inconvenient for everyone.
Mr Blake: When you say they struggled, was that a matter of expertise or an issue to do with technical knowledge or something else?
Sir Adrian Montague: I think … I think it was partly their grip over the procurement and the way in which they were supposed to be overseeing the performance of ICL. I think they had – they had failed to develop a comprehensive and effective approach towards managing the project. But beyond that, it was quite difficult for me to comment on the rest of the Post Office.
Mr Blake: What were your views of the level of government involvement in the Post Office at that time?
Sir Adrian Montague: It was not apparent to me. I mean, what we saw were a limited number of people from the Post Office and from Post Office Counters. On the different working groups there were obviously representatives from the DTI, the Post Office’s supervisory Department. I had no ministerial contact with anyone except, I think, briefly, Stephen Byers.
Mr Blake: Was your view of the Post Office one that was independent of government or not?
Sir Adrian Montague: I saw – I saw no evidence that the Post Office was being constrained by government in its handling of the procurement.
Mr Blake: How about ICL, what was your level of involvement with ICL and your view as to how that was run as a company?
Sir Adrian Montague: Well, again, I spent a lot of time with ICL over the period that the panel was involved. If I can just take a step back and think about the chronology here. For the period from sort of March until the summer break, I was quite intensively involved –
Mr Blake: This is 1998?
Sir Adrian Montague: It’s 1998. I was intensively involved through the panel proceedings and preparation and, as it were, mopping up afterwards. In the autumn between September and just before Christmas, there was intensive engagement between the public sector and the Post Office, and the Benefits Agency and ICL, and I came to know ICL, I think, probably better then than I had during the period of the panel’s engagement. Then after Christmas, the baton really passed to Steve Robson, who was the man in charge of the final negotiations with ICL.
Here it’s difficult to avoid hindsight. I mean, the impression I had at the time was of an organisation, frankly, struggling, I think, to see its way through technical solutions, commercially an adept organisation, presentations they made to Government were quite slick. But, overall, you know, they were competent people but I think they were being let down by, again, their organisation on the project.
Mr Blake: Are you talking about a managerial level, below the managerial level, any particular –
Sir Adrian Montague: It’s really only the managerial level I had contact with, and board members of ICL.
Mr Blake: I’m going to begin with procurement, something that you weren’t involved in. The tendering process took place in April and May 1996 under the Conservative Government. Am I right to say you had no involvement at that time?
Sir Adrian Montague: You are correct.
Mr Blake: Did you become aware at some stage that there had been three shortlisted suppliers, Cardlink, IBM and Pathway?
Sir Adrian Montague: No, not really. I’ve obviously become aware of it since in looking at some of the testimony.
Mr Blake: When you say “since”, is that because of the Inquiry rather than knowledge at the time?
Sir Adrian Montague: Yes. I mean, what the panel – the panel took the view that we were there to try to help the parties in expressing a view on technical viability, then trying to sketch out a way forward, and I think we’d consciously steered away both from any pre-contractual negotiations, which frankly didn’t feature at all, and also from trying to attribute blame. This was a panel focused on trying to find constructive solutions to the difficulties that the parties found themselves in.
Mr Blake: Were you aware to any extent that, as a technical solution, Pathway was the least preferred bidder at that stage?
Sir Adrian Montague: No.
Mr Blake: Were you aware – and for the record, they may have been documents that you’ve seen brought on screen for other witnesses, just for the record, it’s POL00031237 and POL00028451 – that the risks that were identified at that procurement stage relating to Pathway were that it could prove unreliable and had a fragile software system?
Sir Adrian Montague: We weren’t. Perhaps I need to explain how the panel functioned, because I think that would be helpful. So the panel was created in March and April 1998. Bill Robins and I, I think, were strangers to Horizon at that stage. We’d had no previous contact with it. I believe I’m right that Alec Wylie had had a previous contact with it, I’ve seen him referred to in the papers somewhere, I think as part of the programme delivery board, or some such. And it’s evidently an extremely complicated procurement.
I think it had been badly negotiated, if I’m honest. We had seen, in the taskforce, a number of IT procurements. They are among the most difficult of the PFI projects, because they require a very crisp and complete definition of the sponsor’s requirements. PFI, after all, is supposed to concentrate on outputs and outcomes rather than anything very specific in terms of technical specification. But the contractor in this project has to understand precisely what the software is, the hardware and the software is that it’s trying to connect to, so ICL would have needed a very precise understanding both of the Benefits Agency’s systems and of POCL’s systems.
And because, you know, the balance of commercial advantage switches from the procurer to the contractor, once the contract is signed, it behoves the procuring authorities to be absolutely specific and categoric in what they’re seeking from the contractor, and we know that there were big gaps in some of the contractual documentation. So acceptance testing, model testing, none of these things were specified in detail, and so, I mean, almost the two procuring authorities went into this contract with their hands tied behind their backs. There were big gaps which made it very difficult to control ICL and to push the contract to an easy completion.
I’m not sure it would ever have an easy completion, but it was a very difficult commercial situation.
Mr Blake: You say “badly negotiated”; who by?
Sir Adrian Montague: Well, by the procuring authorities. You know, they initiated the procurement, it was their requirements that the contractor was responding to. When you go into a procurement like this, as I say, your requirements need to be very, very specific, because that way the contractor knows what he’s going to have to deliver, and you’ve got a decent chance of holding him to account. If a lot is left undefined, it’s much, much more difficult.
Mr Blake: One aspect of the procurement exercise that is highly relevant to PFI is that Pathway was close to the risk transfer sort and would secure PFI clearance but the other bidders wouldn’t.
Can you explain for us why this risk transfer is relevant and important in PFI?
Sir Adrian Montague: I mean, PFI was, at that stage, still a novel way of procuring goods and services for the public sector. Its philosophy was that the public sector needed to define its requirements specifically, then the risk of meeting those requirements was transferred to the contractor. As a result of that risk transfer, the contractor would usually have a great deal of authority to define his own methods of working, against a specification dictated from the public sector side, and payment would only usually start once the goods or services had been successfully delivered.
So that – I mean, at one stage in his evidence Mr Copping contrasts PFI with a build and supply arrangement, in which you would expect the procuring authorities to have a much greater interaction with the contractor, more control over the detailed stages of the procurement. But, in this case, in the PFI case, much of that will be left to the contractor, which simply underlines the importance of a precise definition of the procuring authority’s requirements at the outset. And from the contractor’s perspective, his incentive is to get to the end of the construction period as quickly as possible, because that’s the point at which he starts to receive payment.
So there is a great difference in risk profile between a PFI procurement and a more traditional build and supply arrangement.
Mr Blake: Looking at this particular exercise – we’ll look at PFI in slightly more detail shortly – but is there a risk that the party that takes on the highest level of risk will be the one that’s selected rather than perhaps the best party for the job?
Sir Adrian Montague: It should not work that way, because the procuring authority’s appraisal of the competing bids should focus on the level of risk transfer, and you’d expect the procuring authorities or their advisers to comment adversely if one of the contractors was too, if you like, too gung-ho regarding this transfer. I don’t know whether it was the case in this situation.
Mr Blake: Did you have any views at the time about whether Pathway might have been chosen because it was –
Sir Adrian Montague: I had no views.
Mr Blake: No.
I’m going to move on to the Horizon Project Review Group, and can we look at BEIS0000104, please. This was the first meeting of the Horizon Project Review Group. Can you tell us, looking at those who were present, we see names from HMT, DTI, DSS, were those the three Government Departments that formed that group?
Sir Adrian Montague: I believe so, yes.
Mr Blake: How is it that you were selected for that group?
Sir Adrian Montague: I think perhaps you ought to ask Steve Robson that question, because he was the man who – he or Harry Bush, perhaps Harry Bush, asked me to attend this meeting. I think it was because the taskforce, my taskforce, had a mandate primarily to focus on new projects, projects pre-financial close, but also they were asked to interest themselves in projects in difficulty, and this was clearly a project in difficulty. And I think it was probably Harry Bush who asked me to attend.
Mr Blake: Who was Harry Bush?
Sir Adrian Montague: He’s an official in the Treasury who worked to Steve Robson and was responsible, I think, for this project in the first instance.
Mr Blake: Thank you very much. Can we scroll down to the section under “The Review Programme”, please. This describes two separate stages that the review group would pursue. The first is a “Project Assessment”, and it says there:
“The first stage would be to determine the viability and potential costs of continuing with the Horizon project. The assessment would need to determine whether Horizon could be delivered, when it could be delivered, what the total costs of delivery would be and the level of risk associated with these assessments. The Benefits Agency, POCL and ICL would need to be involved in this stage.”
The second stage: “Contingency planning for cancellation”.
Can we go over the page, please, and look at paragraphs 6 and 7. I’m going to read those for the purposes of the record. At paragraph 6, it says:
“One approach to this work would have been to commission a firm of external consultants to perform the complete review. But because a decision was needed quickly it seemed probable that PA, who had produced the last report on Horizon, would be the only consultants able to undertake the work. However, there was a significant risk that because of the subsequent work that they had done for other parties involved in the Horizon project, PA would not be in a position to make the judgement required.
“After discussion it was agreed that the best solution would be to appoint an assessment board, under an independent chair, to conduct the project review. The board would interview all the interested parties, commission any further work it thought necessary, and then report back (with recommendations). If necessary the panel could use external consultants to do more detailed research under their direction. It was likely that PA might be in a position to do this sort of work without compromising their position.”
So, starting with paragraph 6, it seems as though this task needed to be done quickly. Is it your view that there was limited time in which to undertake this project? Was it sufficient time?
Sir Adrian Montague: Erm … I think the time requirement dictated the panel’s approach to the mandate it was given, but within – within that constraint and with the support of PA, I hope we did a satisfactory job.
Mr Blake: Did you view it as a quick snapshot, a deep dive or something else?
Sir Adrian Montague: No. I think it’s … well, we were given the mandate to consider the technical viability of the project. As I think I said earlier on, two of us on the panel were strangers to Horizon. Doing full justice to that, with the members of the panel directly engaged in inquiry, would have taken a very great deal of time. I don’t think any of the members of the panel were free enough from other obligations to devote that much time to the inquiry.
So what the panel decided was that it needed to use PA, really, as its devil, to go and make enquiries on the panel’s behalf, and I think it’s worth just recalling why it was that PA were the obvious people to do this work.
In his testimony, Mr Copping describes their qualifications for doing the previous Horizon review, which concluded at the end of 1997. I don’t think it’s necessary, unless you wish to, to bring up the evidence. It’s on pages 108 to 110 of Mr Copping’s testimony.
But when you look at his evidence, it’s clear that in that first assignment, in Mr Copping they had a vastly experienced team leader. He said that he’d conducted himself over 30 interviews with the – I think the ICL staff, perhaps others as well, and there were – although, for all his experience and expertise in telecommunications and IT, nonetheless there were areas where he needed a team of specialists.
So, from the panel’s perspective, PA had three powerful recommendations in their favour, you know. They had the expertise, they had the knowledge in depth of the Horizon procurement, and they had resources they could deploy to cover the ground effectively.
Now, that’s in the context of their review that concluded at the end of 1997, but you can see that from the panel’s perspective, the expertise, the resources and the knowledge that PA had, were huge advantages. In fact, I think only through PA could the panel have concluded in the way that they did. PA was the essential tool to allow the panel to do its job.
Mr Blake: Perhaps we could go over the page to paragraph 16, page 3. It says there:
“DSS ministers had envisaged the project review being turned around in a period of two to three weeks. The group agreed that this timetable seemed unrealistic – finding and appointing an external assessors might take two or three weeks.”
It says over the page:
“The timetable would become clearer once the review board had been appointed.”
From that, it sounds as though there was significant time pressure to complete the job?
Sir Adrian Montague: Although that’s true, I don’t want you to get out of proportion this question of pressure, because, you know, with great respect, ministers often have ideal notions of how long tasks are going to take, and part of the job of the panel was to say, you know, “We need the time we need”, and therefore it was two or three months, I think, rather than two or three weeks.
Mr Blake: At that stage, you considered that PA Consulting was the best for that role?
Sir Adrian Montague: As that note envisages, certainly the best, probably the only.
Mr Blake: Can we look at your report, that is at POL00028094, please. So that’s the first page. It was produced in July 1998, and you’ve mentioned those two others who assisted you. Are you aware of any IT experience of the other panel members or indeed yourself?
Sir Adrian Montague: Well, starting with myself, I have no training in IT or in engineering. I’ve never managed an IT project. I mean, I have acquired some experience over the years. I think probably exposure to IT projects rather than experience would be a better way of describing it. Because in the various boards I sat on and as an adviser, we’ve had to oversee IT projects, for better or for worse, and often for worse. But I have had no direct – I have no direct qualifications or expertise.
Now, Mr Robins and Mr Wylie were appointed to the panel by the Treasury, and all I can say is I developed a high regard for their technical capabilities. I think it’s true that Mr Wylie had had a previous connection with the Horizon project, Mr Robins had had none, but their day jobs, I think, involved significant responsibility for the functioning of an IT system and, therefore, I think they were in a good position to complement any expertise that I was able to bring, which lay more in the PFI area than it did in IT.
Mr Blake: You have suggested that all three of you were also busy doing other things at the time?
Sir Adrian Montague: Indeed.
Mr Blake: So although they had experience, were they getting into the weeds or was that somebody else?
Sir Adrian Montague: No, I don’t think it was our function to get into the weeds. I mean, because of the constraints of time, the panel effectively functioned as a review panel, so we looked to the parties to make submissions to us regarding issues that they wanted to examine – and perhaps we can come on to this in a minute – and then PA were mandated by the panel to make the investigations and report back to the panel on their findings.
Mr Blake: Can we look at the “Executive Summary”, that’s page 3. I’ll start with the third bullet point. It says:
“In light concerns over progress, this Panel, chaired by the head of the Treasury Task Force on Private Finance, was set up to make an independent assessment of whether the programme was technically viable, if so how quickly it could be completed and at what cost.”
Pausing there, technically viable is a term that we’ve focused on over the past few days; what did you understand “technically viable” to mean?
Sir Adrian Montague: Capable in practice of delivering the contracted outputs, but I think the emphasis is on “capable”, so we were making a judgement on the ability of the project over time to be developed in a way that would answer the specification.
Mr Blake: Is it similar to feasible, perhaps, or is that something different?
Sir Adrian Montague: I’m not sure that I can very precisely distinguish one from the other.
Mr Blake: Yes. Let’s look at the “Findings”. If we could scroll down slightly, I’m going to look at the second two bullet points. So it says there:
“Our view is that the programme is technically viable. There must be some risk around scalability and robustness because the system has had to be tested at the level of component parts, but we are satisfied these risks are being well managed by Pathway.
“There is good evidence of future proofing at all levels. The basic infrastructure is very robust for the future and, in the main, industry standard products have been used. The system should allow POCL to compete for new business in a variety of markets, including banking and financial services. New applications based on smartcard technology should be relatively straightforward and economic. If online applications are required, they may take longer and require more investment.”
What did you mean there by “The basic infrastructure is very robust” or “robust for the future”?
Sir Adrian Montague: Well, again, let me go back and explain how the panel and this report were put together.
As I said, the – I think perhaps it might be instructive to go to – let me see – I think section 2.4 of annex A to the report. 2.3 and 2.4 is –
Mr Blake: Do you have the report in front of you?
Sir Adrian Montague: I do.
Mr Blake: If you were able to give us a page number, that would be very helpful.
Sir Adrian Montague: This is 28.04, I think it must be page 30. If I may, I’ll perhaps read it out.
Mr Blake: Absolutely.
Sir Adrian Montague: “The first full meeting of the Panel will be attended by all the Parties and the Consultants. The Parties will not be legally represented (either by external or employed lawyers) at this meeting or at any subsequent meetings. At the first meeting the Panel will invite the Parties to make short presentations to the Panel about the outstanding issues and how those issues can be resolved. The Panel will, in its absolute discretion, determine the order in which the presentations are to be given, the number of presentations and the time limits for the presentations.
“Following the first meeting the Panel will establish a list of issues to be investigated. It will invite further submissions from the Parties and will instruct the Consultants to investigate the matters in dispute. The Consultants will ask the Parties to provide any information the Consultants think could be useful to the investigation.”
Then:
“The Parties shall at all times give such assistance as may be reasonably be requested by the Consultants to enable the investigation to be completed.”
So there you have, I think, in a nutshell, how the panel intended to work. So, we asked the parties to make presentations to us regarding the issues, we were going to ask PA to go and investigate those issues.
Now, I think we will perhaps need to go into this next point in some detail. PA gave us a report, and that report formed the basis of the panel’s own report. So many of the judgements in this report were adopted by the panel, but originated in PA’s own investigations.
Mr Blake: Can I just pause you there for one moment?
Sir Adrian Montague: Yes.
Mr Blake: I think Peter Copping’s evidence was that there was no separate report and that this report was effectively taking on board the points they made. Am I right in saying that there was a different – there was, in fact, a separate report from PA?
Sir Adrian Montague: Well, I think this is obviously an important matter. Now, I think in his witness statement Peter Copping acknowledges that it was likely he submitted to the taskforce some working papers, but he couldn’t recall what they were. I don’t think he was ever asked whether he had made a report as such and I think that’s understandable, because no document has survived, and the panel’s report has come to take a very high profile in these proceedings.
Now, on this point, I do want to be clear that there was a document from PA, whether it was working papers or a report – perhaps there’s a slight nuance in this case – but there was a document from PA which laid out in terms the bulk of what appeared in the panel’s own report.
The panel obviously met to discuss the PA report, and when the panel report came to be prepared, it incorporated the vast bulk of PA’s technical advice.
Now, I can be quite precise on that because I produced the first draft of the panel report, and I recall taking the document we had received from PA and making minor editorial changes to it. I mean, there were definitions that needed to be changed, nomenclature of the parties needed to be harmonised and I made some changes to the order to bring out the sense, the powerfulness of PA’s conclusions.
But the backbone of this report was PA’s own advice to the panel.
Mr Blake: If we go back to page 3, the findings there, that it’s technically viable, is that your language or is that PA’s language?
Sir Adrian Montague: Well, I think that is probably my language, because I think I wrote the conclusions, but it was on the basis of the later paragraphs in the panel’s report which were adopted from PA’s own findings given to us.
Mr Blake: The finding that the programme is “technically viable”, and then in the next bullet point that “the basic infrastructure is very robust for the future”, is there an intentionally different form of words used in those two bullet points?
Sir Adrian Montague: I think if you go further into the report – I mean, this is essentially a summary of the findings of the report. If you go further into the report, you’ll see on pages 11 and 12 – you may want to go there, but it’s helpful to look at it now.
Mr Blake: Yes, perhaps paragraph 22 might be the starting point.
Sir Adrian Montague: Very good. It’s – to go back to the provenance of this report, as I said, the members of the panel were slightly distant from the detailed investigations, because it was PA that carried out those investigations, and so these detailed points would have required a very precise understanding of the panel – of the project. You know, it’s not something – these are not judgements you can make without very close interaction with the different contracting parties in a way that the panel could not itself have achieved because of the time constraints.
So that these are judgements that came from PA, we discussed them with PA, we saw no reason to depart from those judgements and because there was a concern to have a panel report rather than another report from PA, as you’ve already highlighted, we adopted those conclusions for the purposes of our panel report.
Now – so if you look at most of the text of the report, from memory now, I think from paragraphs 14 to 99, these were drawn from PA’s findings. As I said, I prepared the front few pages, the introduction, and the summary of findings, and annex A, which deals with the way forward. I had also – I did prepare that, again including some findings from PA. But the text of the report broadly comes from PA.
Mr Blake: So if we go over the page and look at, for example, paragraph 25, that says:
“The main architectural issues are scalability and robustness.”
Or the paragraph below, the final sentence:
“We therefore assess the risk of the entire solution failing to operate as expected to be as low as could be achieved in the circumstances.”
And the following paragraph, which says, for example, that:
“… there is a concern that the system is (necessarily) heavily dependent on the third party middleware product ‘Riposte’.”
Are those kinds of findings ones that were made by PA rather than yourself?
Sir Adrian Montague: Yes.
Mr Blake: Would you have scrutinised PA’s report in that respect?
Sir Adrian Montague: Yes, obviously. So we had this report from PA, there would have been a dialogue between me, in the first instance, and then the panel around the observations and the conclusions, and then, as I said, I would have prepared – I did prepare – the first draft of the panel report, and that would have been circulated to the other members of the panel for their comments, and then sent to the sponsors, the inter-ministerial committee.
Mr Blake: Those kinds of issues that are highlighted on this page that we see now, were they a cause for concern at all at the time?
Sir Adrian Montague: Erm … no, I think we’ll come to this. I think that the prevailing mood, I think, in the sponsors and in PA and in the panel, was of concern at the way the procurement was progressing, but I think none of the very severe dysfunctionality that came to dog Horizon in its later years, that was not apparent, I think, to any of us.
If you remember, I said that the methodology of the panel was that we relied on the sponsors to make presentations to us. We would have created this list of issues and then we remitted those lists of issues to PA for detailed investigation. And so, I think, there was concern as to the way that the procurement was progressing, but none of the technical issues that came to dog the project were apparent to us or brought to our attention, I mean, either by the parties or by PA.
Mr Blake: Did you think at the time that PA were carrying out a thorough enough investigation?
Sir Adrian Montague: Well, I mean, we were slightly comforted and reassured by the fact that PA had conducted a very intensive investigation into the project a few months previously, and, I mean, I think my expectation was that Mr Copping would have refreshed those conclusions in dialogue with the sponsors. I mean, I think in his evidence quite a lot was made of the fact that he was not specifically asked to make any enquiries. To be honest, I think I find it difficult to believe he did not make any enquiries, because he knew the project so well. He was going to give the panel a report on technical viability, and, therefore, I think he would have at least needed to have refreshed his discussions with the sponsors and with ICL.
Mr Blake: What is your view of the evidence that he has given to the Inquiry in respect of the production of this report?
Sir Adrian Montague: Well, I don’t think he was specifically asked whether he had produced this report or the report on which the panel’s findings were based. You know, it’s 25 years ago. I think it’s perhaps a case that recollections may differ. I mean, he’s a very experienced consultant. It’s many years since I’ve spoken to him but he was very professional, and I think he did do a good job for the panel.
Mr Blake: You say recollections differ; how so, in relation to this particular event?
Sir Adrian Montague: If you recall his evidence, I mean, he was asked specifically a number of questions regarding his interaction with ICL and BA and POCL during the process of his investigations, and he said, I think in answer to all of them, that he made – he had not asked any questions. He’s a very experienced consultant, he has a mandate from the panel to produce a report, affecting – regarding technical viability; personally I’d have thought it was likely he had a dialogue with the – in fact, I think at one stage he does say he had a number of meetings with the project participants. I think there must have been a flow of questions to and fro.
Mr Blake: I’m going to ask you about the use of your report. Can we look at BEIS0000418, please. I don’t know if you saw Mr Sibbick’s evidence at all, from earlier –
Sir Adrian Montague: Briefly. Briefly.
Mr Blake: This is a letter from Peter Mandelson, Secretary of State for Trade and Industry at that time, to Stephen Byers, who was the chief secretary to the Treasury.
If we go over the page, please, he says there:
“There is still some way to go to complete the Horizon project, but the basic development work has been thoroughly evaluated by independent experts who have pronounced it viable, robust and of a design which should accommodate future technological developments.”
Then in the next paragraph it says:
“I believe the only sensible choice is to proceed with the Horizon project. It is the way forward which offers the least commercial and technological risk.”
Starting with that first paragraph there, if that is a description of your report, do you think that that is an accurate summary of the findings that you made: “viable, robust and of a design which should accommodate future technological developments”?
Sir Adrian Montague: I think what the report – the panel report said was that we thought that the project was “technically viable”, I don’t think we specifically comment on its general robustness. And we said it had been future proofed. Now, that may be consonant with a description that the design should accommodate future technological developments, but I think this is a minister writing to a colleague, and I think some licence with the conclusions is only to be expected.
Mr Blake: As an Inquiry, we’re interested in how this phrase “robust” keeps on cropping up over the years. Is it your evidence that your report did not pronounce it as “robust”?
Sir Adrian Montague: Yes.
Mr Blake: In relation to technological risk, did your report say that it offers the least technological risk?
Sir Adrian Montague: I don’t think so. I don’t recognise those words. If you can point me to something that says the opposite, I’ll consider it, but I don’t think so.
Mr Blake: In relation to the reference to independent experts, are you aware of any other independent experts having pronounced anything in that kind of a period, so summer to December 1998, or is it likely that that is a reference to your report?
Sir Adrian Montague: I think the chronology suggests it is a reference to my report. There was subsequently a review by, I think, KPMG at Mr Corbett’s behest, which came to conclusions on all fours with the conclusions that the panel came to.
Sir Wyn Williams: Sir Adrian, Mr Blake has told you we’re trying to find the origin of the word “robust” in the context of Horizon. This may be an impossible question, and please tell me if it is, but do you think that the word “robust” in your report is a word you would have chosen or a word you would have adopted?
Sir Adrian Montague: I think it’s probably a word that I would have adopted, sir, but, you know, if we take a step back for a minute, what I think we saw was a procurement in – if I’m honest, in disarray and difficulty. I’ve read some of the technical evidence submitted to the panel, and I find the lack of professionalism in ICL quite disturbing. I think it was not obvious to us that that was the case. I think ICL had a tendency to play its cards quite close to its chest and I think it was feeling slightly defensive about its ability to see this through to the end.
But, again, I’d say that the defects that became apparent later in the process were not obvious to people at the time we made the report, certainly were not obvious to the panel, and I think, if they had been obvious to the parties, in the list of issues they were going to prepare for the panel, I can’t see any reason why they would not have mentioned it.
And I believe that PA itself had no inkling of these issues, so that they may have been – they may have been brewing in the undergrowth, but none of them were apparent at this stage in the process.
Mr Blake: While we’re on that, perhaps I can take you to FUJ00080690. This isn’t a document that was in your pack before the hearing today. It’s not a document you would have seen at all at the time, and it may be something that you’ve seen following this Inquiry, and it’s a report of something called the EPOSS PinICL Taskforce at ICL. It was a taskforce that, as it says there, took place between 19 August and 18 September 1998, and a PinICL is effectively an incident report within ICL.
Can we very briefly look at page 4, please. In the “Introduction” there, this should give you enough flavour. I don’t know if this is something you have seen mentioned at all during this Inquiry or –
Sir Adrian Montague: No, I have not seen this.
Mr Blake: No. I’ll take you to it very briefly and, please, if you want to spend more time on it, I’m happy to, but I don’t think I need to for the purposes of the question.
It says about halfway down that second paragraph:
“During the course of the Task Force it became clear that there are significant deficiencies in the EPOSS product, its code and design, and these are also presented in this report.”
If we go down to the “Management Summary” – these are just examples to give you a flavour of this report – it says:
“Before the EPOSS Task Force was initiated [so that’s pre-August 1998] the Counter Development Team were immersed in a seemingly impossible task of dealing with PinICLs [so incident reports] that were being raised faster than they could be cleared.”
Then perhaps we can go to page 7. There is a section on the “EPOSS Code” that we’ve looked at in quite a lot of detail in this Inquiry:
“It is clear that senior members of the Task Force are extremely concerned about the quality of code in the EPOSS product”, et cetera, et cetera.
Were these kinds of concerns brought to your attention in the summer of 1998?
Sir Adrian Montague: No, I think, to be clear, the taskforce here is a different taskforce from the Treasury taskforce –
Mr Blake: Oh, absolutely.
Sir Adrian Montague: That’s just worth clarifying.
Mr Blake: Yes.
Sir Adrian Montague: The answer is no. No, these were not brought to our attention. I mean, I think again it’s worth a comment, because I think in processes of developing, you know, software and detailed design, incidents will occur and, you know, they have to be dealt with in order of priority, and there’s clearly an avalanche of incidents for ICL here. And I think it perhaps takes time before how they interact together becomes apparent.
Now, this was the sort of information which it would have been very valuable for the taskforce – sorry, for the panel to have, and it is the sort of information which one would have hoped, had it been available at the time, the parties brought to the panel in the list of issues to be considered, but it was not the case.
Mr Blake: Thank you. Perhaps we can look at page 18 of that report to give you a little more flavour. It says:
“Whoever wrote this code clearly has no understanding of elementary mathematics or the most basic rules of programming.”
That’s in reference to one example of code.
Can we go back to your report at POL00028094 and look at page 32. This is a list of meetings that you had with ICL and POCL. So am I right to say that, as your panel, you sat – and I think you’ve referred today already to presentations that were made. So on 11 May there was the initial presentation by all parties; there were then private presentations of issues by parties on 11 May; 19 May, presentations of parties’ business cases; 28 May, demonstration to the panel of Horizon products; 8 June, final presentations by the parties; and then, 11 June, presentation to parties of panel’s initial findings.
Did ICL give you any inkling, at this time – so quite close in proximity to that taskforce – of those kinds of issues that they were experiencing?
Sir Adrian Montague: No, they didn’t.
Mr Blake: Should they have?
Sir Adrian Montague: I think it depends on their state of knowledge regarding these incidents. I mean, I note that the report you referred to a moment ago was dated in September. This was five months previously. Things probably developed quite quickly. If there had been, I think, a significant possibility that the code could be dysfunctional, you would certainly have hoped that, in all candour, they would have mentioned it. And you would have – if the parties had had that inkling, you’d have expected them to mention it. I mean, I think the difficulty is the panel – the panel was a recipient of all these advices from the parties and our job, with the assistance of PA, was to try to assess them overall.
I think there was probably an element of salesmanship, defensive positioning on ICL’s part. I don’t recall the precise interactions between us and the parties in those sessions that you referred to. Unfortunately, I don’t think any of the documents have survived. But I expect they were, you know, reasonably detailed presentations. But I think – in ICL’s case, I think it will be natural that they put slightly a positive spin on events.
Mr Blake: Were PA Consulting tasked with finding out, under the spin, the truth of the matter?
Sir Adrian Montague: Well, you know, we asked them to give us material that we could use in the panel report in the areas that they’ve covered in their own report and, you know, they were tasked with advising the panel regarding the technical viability of the project. I think – I think they were themselves, you know, looking at it with the benefit of the detailed report they’d done the previous year. As I’ve said, I think that, in order to complete the report that we had, they’d have needed to interact, to use a neutral word, with ICL, and they were much closer to the detail than the panel could possibly have been.
But, equally, you know, they’re not all seeing, all knowing either, so they’re rather dependent on what people tell them. I mean, they could have and clearly they did make detailed enquiries because, otherwise, you know, the detailed list of recommendations could not have been produced by the panel. So they’ve obviously had an interaction with Pathway. And, as I say, I don’t think – I don’t think it could have been disclosed at this stage, (inaudible) at this stage.
Mr Blake: I want to ask you about further monitoring after your report was produced. Can we look at HMT00000021, please. Thank you very much. This is a note from you to Harry Bush, Harry Bush being in the Treasury?
Sir Adrian Montague: Harry Bush being someone who reported to Steve Robson who was, I think, in charge of this project and who was the person who had invited me to attend that first meeting in March.
Mr Blake: Thank you.
So this is 6 July 1998, and your report was produced in July 1998, this came after your report was provided?
Sir Adrian Montague: Certainly after the initial findings had been communicated to the parties. I’ve seen somewhere a suggestion that my – the panel report is not available until 22 July. It was some time in July. There may have been a draft available at this point.
Mr Blake: Thank you.
I’ll just read a little bit from paragraph 1, it says:
“This minute addresses three issues what we should be doing to try to stabilise the Horizon programme in the short term to prevent any further deterioration pending Ministers’ decisions, whether there is any compromise between Option 1 and Option 2 which might command the support of both BA and POCL, and who the troubleshooter might be.”
We have heard a lot about this period, I don’t want to spend any time on it really, can you briefly summarise for us what was going on at a political level in July 1998 with regards to various options?
Sir Adrian Montague: I think the political level was not visible to me. I mean, I think that the background to this note was that I think we must have had a meeting with POCL and the Benefits Agency as a follow-up to the meeting when we told them about our initial findings. I think it’s clear – and to be clear, you know, the way forward that we suggested was going to involve some pain on the part of all three of the parties to the transaction.
And what we were trying to do was to find a way forward that was – kept the greatest value for money and involved the least disturbance, and so we did opt for what’s known as option 1, the continuation of the project with some changes. And I think we must have discussed this with the Benefits Agency and, not to put too fine a point on it, they were having none of it. You know, we had got to the stage where the Benefits Agency were far removed from their – the support they must have given the project at the outset, because it was a joint procurement, and had moved to the point where they had a strong preference for ACT, Automatic Credit Transfer, and they weren’t going to willingly compromise.
So I think, you know, after that meeting, I was really rehearsing with Harry Bush whether there was any alternative that might allow us to cut through this logjam on the public sector side.
Mr Blake: Can we look at the first bullet point, please, if we could scroll down slightly. I’m going to read what it says there for the purpose of the record, it says:
“The Panel report has a list of actions which need to be completed by the end of July. Some of these presuppose ministerial decisions one way or the other, and will therefore have to be put to one side for the time being (essentially those affecting the ‘strategic issues’), but many of the actions relating to the critical or operational issues will adversely impact the future timing of the programme if they are not pushed through on a timely basis. We need to frogmarch the parties into resolving these issues. To encourage them to do so, we discussed a weekly forum to monitor progress. This might meet [for want of a better alternative] under our chairmanship, and might be informed by a hands-on monitoring role on the part of PA. I have spoken to Peter Copping about this and he has sent in a proposal, which I attach. The price is significant, and we need to consider whether the role represents value for money.”
So you’re there proposing a hands-on role by a technical expert, is it?
Sir Adrian Montague: Erm, I think it would need – it would need to have had direct official input to command the right degree of authority, but clearly a technical expert would have been invaluable to help the chairman, whoever it was going to be, conduct the forum effectively.
Mr Blake: Do you know if that role actually was established?
Sir Adrian Montague: I don’t know. I mean, I think I was a bit outside my brief in making this suggestion. You know, I think with the conclusion the panel report, the leadership in the discussions switched back to the officials in all three Departments who had had the conduct of it prior to the panel, and I think this was slightly outside my brief.
Mr Blake: It may have been outside your brief but it looks there as though you are suggesting that there needs to be more follow-up once your report has concluded; is that a fair summary of that paragraph?
Sir Adrian Montague: Well, it is indeed a fair summary. You know, I think that the Treasury’s way of working tends to sit over the Departments and check that the Departments are handling things effectively. It’s quite rare for the Treasury to take the lead in assuming control over the process, and I think I was perhaps outside my brief in assuming that that could be done.
Mr Blake: When you wrote your report, did you see that as a snapshot in time, or did you see it as something that could be used for the next six months, a year –
Sir Adrian Montague: I think it was inevitably a snapshot in time, because, you know, the fundamental tenet of that report was that it interacted with the submission of the parties and the report of PA, and things were moving evidently quite fast and, therefore, I think it would need to have been refreshed over the months that followed.
Mr Blake: Do you think that that was clear to those who were involved in the project?
Sir Adrian Montague: I honestly can’t tell you that. I mean, I think one of the challenges of the public sector is that, sometimes, these reports occupy a terribly important part of the debate and you don’t continually ask yourself how the situation has evolved. So – but I think it did come to have a slightly totemic value.
Mr Blake: Can we look at page 4 of this note, please, and it’s the final paragraph. Thank you.
We have heard a little bit about the role of Graham Corbett. Can you tell us a little bit about that and how he was chosen?
Sir Adrian Montague: Well, I think recognising that any of the options we had considered would require some difficult decisions to be taken by all the parties, I thought we believed that the intervention of a third-party troubleshooter with a mandate to try to provide an acceptable way forward for all parties – or an acceptable way forward, not an ideal way forward – would be a useful contribution. And so the troubleshooter was recommended, suggested in the panel report and then the question was: who should the troubleshooter be?
As I said in this note, Steve Robson came up with the idea of Graham Corbett. I had known Graham Corbett quite well in the past, because he had been the finance director of – CFO of Eurotunnel, and he’s a very robust character – he was a very robust character, so I thought in terms of someone who’d be able to immerse himself in the detail, financial details in particular, of the procurement at the time that it’s – it was – you know, at this time. I thought he would have, potentially have a very positive influence on the outcome.
Mr Blake: You have said that he may be able to “knock heads together if the parties are unable to hammer out a detailed commercial solution for themselves”. I think you also noted that he wasn’t, in brackets, about halfway down that paragraph, he’s not, as far as you know, in the IT field. Was his report intended to be a look into the IT side?
Sir Adrian Montague: Not so far as I’m aware. I didn’t see his terms of reference. Indeed, I wasn’t connected – I wasn’t concerned with his report. I do not believe he would have held himself out as having any capability to address technical details, but he’s fundamentally a financial and a commercial man, and his role could have been very decisive, I think.
Mr Blake: Thank you very much.
Can we look at POL00028098, please. Perhaps we could go to page 3. This is his report. Did you see his report at the time?
Sir Adrian Montague: I can’t remember. I may have done.
Mr Blake: Okay. I’ll only look at it very briefly. It starts there with “Background”, it says:
“On 17 September [this is to the chief secretary to the Treasury] you appointed me as independent adviser to this project with the terms of reference set out in annex A … and B [and something] with a reporting date of 16 October.”
So, again, this is a very short timescale for a report, similar to yours in many ways, in terms of the timescale?
Sir Adrian Montague: In terms of timescale, I think he was under probably even greater pressure than the panel was to come up with some findings. I think it has a slightly different focus, because, as he says in that first paragraph, he had been unable to reach agreement on a commercial basis for proceeding, so I think that was clearly the focus of his efforts.
Mr Blake: Can we look at page 6, please. At the bottom of that page, it sets out another role for PA Consulting. It says:
“Soon after my appointment we established a working group of the programme directors from each of the parties working under the chairmanship of the Director of the Horizon Programme Office … now situated within POCL, and with PA Consulting keeping close to and guiding their discussions. PA’s final report as of 14 October is attached at Annex E together with the HPO’s high level end-to-end plan for the programme which has been signed off by all parties. Attention is drawn to the generally encouraging overall summary at the end of the PA report, but also to the continuing high risk area of acceptance procedures, both the definition of the tests themselves and the consequences of failure.”
Perhaps we can look at their report, it’s at page 32. I don’t need to go into this in any detail, but perhaps we can look at this very briefly and also over the page.
Were you aware, at that stage, that PA had carried out this work?
Sir Adrian Montague: Erm … I don’t have any very clear memory of it. I may have been.
Mr Blake: It looks there to be quite a high level analysis. Could we look at the page before, please? Thank you very much. Did you have in mind something more significant than this kind of work when you referred to hands-on monitoring?
Sir Adrian Montague: Yes. I mean, I’ve had quite a lot of experience with troubled – projects in difficulty and, generally speaking, you know, the parties are a long way apart commercially. You know, there may be unclear technical issues, and, I mean, I think it’s characteristic of those projects, shared by this project, that there’s a sort of denial, a refusal to get down to basics and understand precisely what the issues are.
And I think what you need is what Graham Corbett provided on a commercial basis for a short period of time, which is a heavyweight who takes the chair, forces people to confront the issues, and does bang heads together. That’s the way you rescue a project. I didn’t see any of that, well, at any time really, in the autumn of 1998. That’s what was required. That’s essentially what the panel had suggested.
Mr Blake: Thank you.
Can we look at POL00031114, please. Now, you – well, I’ll ask you actually. Are you aware of a further report that was carried out by Project Mentors? Perhaps we could go over the page. This is a summary of the report, and it says there:
“As you will see, all three of Andrew’s team [that’s Project Mentors] are (I quote from Andrew’s letter to me) ‘deeply concerned that their findings show a serious problem with the way in which ICL Pathway have developed the system. The impact of this is likely to be that there will be failures to meet essential user requirements, causing the need for extensive re-work before the system can be accepted and, potentially, operational problems if the system is rolled out.”
That is eight days after the letter that I showed you earlier from Peter Mandelson, referring to the system as “robust”.
Were you aware at this stage or at any other stage of a further review being undertaken into Horizon, a further technical analysis such as this?
Sir Adrian Montague: I was not aware of the Project –
Mr Blake: Mentors.
Sir Adrian Montague: – Mentors report, until it landed on my desk last week.
Mr Blake: Yes. Were you aware of any other significant report, prior to the rollout of Horizon, into the robustness or reliability of Horizon?
Sir Adrian Montague: I was not. But I don’t think I could be expected to, because, you know, in the autumn of 1998 my involvement was significantly less than it had been during the summer.
Mr Blake: To what extent were you involved in late 1998 and into 1999 with the Horizon project?
Sir Adrian Montague: I noted from some of the papers that I had been asked to act as a commercial facilitator at one stage. This is in December, I think, 1998. And … I’ll go back slightly.
I think there were four attempts to secure a financial accommodation with ICL during the autumn. Graham Corbett’s was the first. There was then a letter from the chief secretary, I believe, to ICL saying “You’ve got to come up with some sensible proposals”. ICL responded. The proposals were not regarded as sensible or acceptable. There was a last ditch negotiation, which I think I was involved in. I have no memory of what happened in that – at that stage. And then, finally, just before Christmas, probably under extreme pressure, ICL volunteered some further reductions. But these were negotiations really conducted at a high commercial level, and did not involve any recalibration of the technical assessments.
I think this is quite an interesting note, again I hadn’t seen it, but I think it’s a sort of pre-litigation note. It’s written under the cover of the legal advisers’ correspondence. I’m sure it’s accurate. I mean, I think it’s perhaps – viewed from a litigation perspective, you’d expect it, I think, to be quite critical of ICL, it obviously is quite critical of ICL. I think some of the evidence I have seen since, in the earlier phases of this Inquiry, now suggest that the observations may well have been accurate. But, as I say, I had not seen that report until last week.
Mr Blake: Thank you.
Sir, I have about ten more minutes of questions, so I’m going to continue, unless you feel we need a break.
Sir Wyn Williams: Well, as it happens, I would quite like a short comfort break, but I literally mean short, so all wait for me to disappear and then return in a minute or two, if that’s all right.
Mr Blake: You may not be the only one. Perhaps if we break for ten minutes, but then we’ll sit through lunch, because I won’t be very long at all.
Sir Wyn Williams: Are there any questions other than yours, Mr Blake?
Mr Blake: I think it’s unlikely. Mr Stein looks like he may but, if he does, it will be brief, I’m sure.
Mr Stein: Sir, if I can just add, we may have one question but I may be able to discuss that with Mr Blake so that we can deal with it.
Sir Wyn Williams: Let’s have five minutes for my comfort and everyone else’s who needs it, and then we’ll carry on.
Mr Blake: Thank you very much.
Sir Adrian Montague: Perhaps I may join you, sir.
(12.56 pm)
(A short break)
(1.03 pm)
Mr Blake: Thank you very much, sir. Can you see and hear me?
Sir Wyn Williams: Yes, I can, thank you.
Mr Blake: Thank you.
I’m going to ask you a few questions about PFI. Was this the largest PFI project you dealt with?
Sir Adrian Montague: No, there were quite a few larger than this, it was probably the largest IT project.
Mr Blake: A witness that we’ve heard from, Mr Folkes from the Post Office, has described PFI as creating a black box where the service provider’s job was to ensure it created the right output but the contents of the box weren’t available, so how it worked, how it was built. Do you agree with that?
Sir Adrian Montague: No, not really. I think I said earlier on that the task of the procuring authorities in a PFI project is to be absolutely specific regarding their requirements. Now, I think the philosophy of PFI is, with a very specific output specification in front of them, it is for the contractor to decide how to achieve that specification.
But that does not mean that the procuring authority sort of goes away and comes back again in four years’ time. The procuring authority should reserve to itself rights to check progress, to be informed as to the way in which the detailed engineering phase is being undertaken, and there should be check points where the contractor has got to produce evidence of testing or evidence of how the specification is being undertaken.
So the essential difference is that the contractor has probably a greater influence over its methods of working than you would necessarily expect in a conventional procurement, but it should not mean that the procuring authority has no control of it.
There was, as an example, in PFI a very strong procurement, at around the same time, handled by the Treasury taskforce, and it concerned the Department of Treasury, the National Savings.
It was a business transformation project, it was not of the same scale as Horizon, but it was very complicated because it involved the transfer to a private sector contractor of the majority of national savings business processes, so a large element of re-computerisation, a large transfer of civil servants into the private sector.
This transaction was reviewed by the National Audit Office and was commended as the right approach to transactions of this sort. It’s clear that Horizon was, you know, conducted at an earlier phase when there was less understanding of what made for a good PFI project, but I think “black box” is too simplistic a description.
Mr Blake: I think you explained at the beginning of your evidence that you were quite critical of the negotiation process. Did you think at the time – were you aware of concerns about the sharing of information –
Sir Adrian Montague: No, I think I was – I mean, you asked me general questions, which didn’t specifically focus on my state of knowledge regarding the negotiations but, in view of what I know now, I would have been critical of them because I think they were – they failed to take advantage of the fact that, in a PFI project, until the contracts are signed, the balance of negotiating advantage is always with the procurer because the contractor wants the business. Afterwards the balance shifts a bit towards the contractor.
Mr Blake: So is it your view that contractual provisions regarding the sharing of information should have been agreed at an early stage?
Sir Adrian Montague: I think the full scope of the intervention that a procuring authority might want to make during the course of production of the platform, production of Horizon, that ought to have been specified.
Mr Blake: Were you aware at the time of concerns about the sharing of information or –
Sir Adrian Montague: No.
Mr Blake: – lack of sharing?
Sir Adrian Montague: No.
Mr Blake: There were renegotiations about the contract when the Benefits Agency had pulled out of the project. Was increasing access to information from ICL something that was raised with you at the time or discussed at all?
Sir Adrian Montague: I wasn’t a part of those negotiations, so I’m afraid I can’t answer the question.
Mr Blake: Do you think that a project of this kind was suited to PFI?
Sir Adrian Montague: I think the experience of PFI generally – I’ll come back to the specific question – the experience of PFI generally is that it required a good deal of sophistication on the part of the procuring authorities. Dealing with PFI was not a job that many civil servants had training in or experience of and, therefore, a very important role was taken by the financial advisers to help them structure a procurement effectively, and there were some procurements where the Treasury taskforce acted as a sort of in-house adviser to the Department concerned, and when you had the right combination of experienced civil servants, the right calibre of financial advice, and sometimes the involvement of the Taskforce, then I think projects could come to fruition very successfully.
I mean, an example is the Prison Service, which conducted PFI procurements to the same model over five or six different, usually, prisons and, by the time they got to the end of this, they were a cracking good procurement unit because they had all the experience, they had all the contacts, they were very effective.
But first time procurements with inexperienced civil servants, perhaps with the wrong calibre of financial advice – I don’t know who gave the financial advice on this project – and a lack of determination to extract maximum advantage from the opposition as the procurer before signing, that’s a recipe for a bad outcome.
Mr Blake: The Chair will, in due course, be considering recommendations to make to avoid problems in the future. Is there something that you can identify in that regard, with regard to the PFI project, that should be avoided in the future or that should be done better in the future?
Sir Adrian Montague: I can think of lots of things. I mean, PFI has rather fallen out of fashion, I think because of indifferent quality of execution of these projects. I think that the well-executed projects are outstanding, the badly executed projects have attracted all the adverse commentary. I think it is a combination of experience in the Civil Service to manage these procurements, the right calibre of financial advice, an understanding of the risks you’re trying to transfer, and an awareness of how you control this transfer during procurement. I might point you perhaps to the National Savings outsourcing, where the NAO reviewed it in detail and came up with a number of positive recommendations.
Mr Blake: We discussed earlier that part of the PFI contract was for the contractor to bear the risks, and that, as we’ve heard, was one of the reasons why ICL won the project in the first place. Were you aware in 1998 of ICL demanding a positive return on their investment and a shift away from that risk-based model?
Sir Adrian Montague: Well, the financial negotiations in the autumn of 1998 clearly showed that ICL wanted to repair its finances and secure improvements in the financial terms to achieve a positive NPV, and I think the interactions that Graham Corbett had with ICL were quite important because they showed a reluctance on the part of the public sector parties to go as far as ICL was seeking.
Mr Blake: Do you think that, ultimately, ICL obtained the benefits from PFI, in respect of determining the solution but without ultimately bearing the risks?
Sir Adrian Montague: I think you’d have to ask ICL that. I’m afraid I can’t comment.
Mr Blake: Did you have an opinion at the time?
Sir Adrian Montague: Well, you know, I wasn’t surprised that ICL were projecting to suffer a considerable loss on the contract. They had clearly underestimated the risk. I mean, the Project Mentors report shows that they were ill prepared for the size of the task that faced them. They were unprofessional in the way they handled it.
None of this was apparent earlier in 1998 and so it’s not a surprise that they were going to suffer a loss. It’s not a surprise that they were trying to recover it. I think, you know, successive rounds of negotiation were quite robust in denying ICL the extent of the improvements in their finances that they were claiming, but ICL was on the hook for this contract.
I can comment until, I think, Christmas 1998. When Steve Robson took over the baton in early 1999, I had – I was copied in on some of the documents, although I really had no continuing involvement with their discussions.
Mr Blake: I want to ask you about prosecutions. Did you give any thought as to the Post Office’s prosecutions of individuals using data from Horizon during your involvement in the project?
Sir Adrian Montague: None at all. I mean, I – I don’t think that we were aware at this stage – I don’t understand if there were prosecutions at this stage but, if there were, we were certainly not aware of them.
Mr Blake: Was the reliability of accounting data something that you were asked to look into as part of your report?
Sir Adrian Montague: No.
Mr Blake: You left the project in the New Year of 1999, and Steve Robson took over, as you’ve explained. Who was Steve Robson?
Sir Adrian Montague: Steve Robson, I think he was the Second Permanent Secretary at the Treasury.
Mr Blake: Why was he a suitable person to take over?
Sir Adrian Montague: Well, I mean, the panel will be taking evidence from him in a few days’ time, you’ll make your own judgements of his suitability. He is an extraordinary civil servant, very senior, very experienced, very clear in his judgements. I think if anyone had had the opportunity to turn this around, it would have been Steve Robson.
Mr Blake: Thank you. I don’t have any further questions. Is there anything that you would like to say at this stage?
Sir Adrian Montague: No, I’ve already, I think, expressed the sympathy I feel for the subpostmasters and subpostmistresses. Some of the evidence in the first phase was truly distressing, and painted a very vivid picture of the way that they had suffered under this procurement. They have my sympathy.
Mr Blake: Sir, do you have any questions?
Questioned by Sir Wyn Williams
Sir Wyn Williams: Well, only to ask you, Sir Adrian: you gave a brief summary of what might be called the hints of recommendations in respect of PFI contracts in general terms and what we might learn from the Horizon PFI in particular.
If in due course I were to ask you to make a written statement about such matters, would that appal you or would you co-operate?
Sir Adrian Montague: I would certainly co-operate, and it would be a pleasure, sir.
Sir Wyn Williams: Thank you.
Sir Adrian Montague: I have some very firm views on what makes for a good procurement and a bad procurement.
Sir Wyn Williams: So I’ve gathered.
Thank you very much for making your witness statement and for coming to answer the questions this morning. I’m grateful to you.
Sir Adrian Montague: Thank you.
Mr Blake: Thank you very much, sir, we’re back on Tuesday.
Sir Wyn Williams: I believe that is the case, Mr Blake, and 10.00 on Tuesday, yes?
Mr Blake: Thank you very much.
Sir Wyn Williams: Thank you very much, everyone.
(1.17 pm)
(The hearing adjourned until 10.00 am on Tuesday, 29 November 2022)