Letter: Market testing: success stories

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The Independent Online
Sir: Michael Meacher's letter (2 May) claims that we have spent pounds 565m on consultants, to save pounds 10m. This is plain wrong. Mr Meacher also muddles two separate issues by wrongly claiming that this proves that the market testing policy is a failure.

A few facts. The scrutiny of consultants is not finished. There is no reliable data yet on costs or savings. Consultants provide much valuable advice, a great deal of which is not aimed at achieving quantifiable savings, for example developing training programmes. The costs and benefits of the use of consultants will be set out in a final report.

There are, however, detailed and accurate figures on the substantial savings achieved through the Competing for Quality programme. We published these in March in the Citizen's Charter Second Report. Mr Meacher says we refuse to explain how these figures are calculated. Not so. We set out in the Charter Report the costs involved, and how the savings had been calculated. We showed that the gross annual savings from market testing amounted to at least pounds 135m, and that the costs of achieving them were under pounds 20m, representing a good return for the taxpayer.

Mr Meacher says market testing is improper and unfair. Wrong again. It seeks to achieve better service and value for money in central government. We made clear from the outset that this would involve contracting out where an outside provider is the right answer, and market testing in-house costs against outside costs where that is better. Mr Meacher is wrong to suggest that staff are forced to offer changes in conditions of employment. What they can do is to suggest better ways of doing things.

The playing field is level, but this means that bids from civil service teams must incorporate a fair calculation of their annual overhead costs. No one has told private sector contractors that they should spread their costs over 10 years as Mr Meacher claims - they know they have to judge their own commercial risk in pricing a contract, which will typically run for a three- to-five-year period.

As for the DTI's use of PA Consulting Group for work on Warren Spring Laboratory (WSL), contrary to Mr Meacher's assertion, the contract given to PA was indeed won after competitive tender. PA's work identified an option, the merger of WSL's work with the environmental work of Atomic Energy Authority Technology, and the creation of a new National Environmental Technology Centre which will, over the next five years, save the taxpayer perhaps pounds 32m.

Mr Meacher has tried to produce a dramatic story. Unfortunately, his evidence does not fit the facts.

Yours faithfully,

DAVID DAVIS

Parliamentary Secretary

Office of Public Service and Science

London, SW1

5 May

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