Spiralling GCHQ costs attacked by MPs
The Commons Public Accounts Select Committee has raised serious concerns about the management of GCHQ’s move to new accommodation.
Though specifically concerned about the GCHQ experience, MPs also cast doubts on the validity of the controversial Private Finance Initiative (PFI) model, warning the Government that: “Departments should not uncritically accept that PFI is the only way to improve on past construction performance.”
In 1997 GCHQ decided to relocate to a single site in Cheltenham under a (PFI) deal. The contract was signed in June 2000 with IAS to provide serviced accommodation at a net cost of £489 million over 30 years. This building was completed in September 2003.
GCHQ retained responsibility for moving the technical equipment for security reasons. Cost estimates for this rose from £41 million in 1997 to £450 million in 1990.
The Treasury refused to fund the large increase, but agreed to a revised budget of £308 million with the technical move being done in stages.
The committee’s chairman, Edward Leigh, said: “There have been unwelcome cost increases on the programme to provide new accommodation for GCHQ and it was astonishing that GCHQ did not realise much sooner what would be involved in moving its technology.”
Negotiations surrounding the PFI contract were sharply criticised by the MPs. They said it was “unwise to enter negotiations with a preferred bidder when key requirements have not been settled and priced.”
With the GCHQ contract there was a 21 month period of exclusive negotiations with IAS before the contract was signed, during which time the cost increased by 21 per cent, or £85 million.
GCHQ’s management is criticised for perceiving the move as a “building project” for too long and not considering the additional changes required, notably the development of IT networking, which effectively meant that a technological up grade was required.
MPs claim that “the GCHQ Board was principally concerned with the feasibility of testing the PFI market for a new building and lost track of the scope and cost of the technical transition.”
Turning to problems with the controversial PFI model itself, the report says: “GCHQ made a highly uncertain assumption that a conventionally procured building would have over-run its budget by 24 per cent.
“That alone accounted for the comparative cost saving that GCHQ estimated the PFI deal would offer, but was simply an average over past projects and hides the wide range of outcomes.”
Mr Leigh recommended that: “Departments should settle key requirements and negotiate prices before selecting a preferred bidder otherwise the contractor will always have the upper hand, and the taxpayer will lose out.”
