70Whitehallbull London John A Manzoni Chief Executive of the Civil Service amp

SW1A2ASCabinet Office Permanent Secretary

Cabinet Office Telephonemiddotmiddotmiddotmiddotmiddotmiddot Web wwwcabinetofficegov uk

Email chiefexeculivecabinetofflcegovuk

Bernard Jenkin MP

By email

31 January 2018

RESPONSE TO PACAC COMMITTEE REQUEST

Outlined below is the Cabinet Office response to the additional information requests following Sir Jeremy Heywood John Manzoni and Rupert McNeils appearance before the Committee on 15th January 2018

(Q417) A timeline and details conducted on bidders for HS2 contracts including the stage at which the contract noted in Q410 was changed

Dates Milestone

5th February 2014

Initial market engagement started 5th February 2014 (PIN published inviting businesses to engage over 400 suppliers responded)

24th September 2015 - 19th November 2015

Pre-Qualification

9th June 2016 Invitation to tender issued

13th October 2016

Final tenders received for lots C2 and C3

13th October Start of Evaluation (Compliance Checks)

19th April 2017

Completion of Evaluation (amended tenders also returned 4th April 2017 following queries from HS2 Ltd)

12th June Final internal review panel

2017

6th July 2017

1Oth July 2017

11th July 2017

17th July 2017

27th July31 st July 2017

201h July

41h December

151h

December

1Sth January 2018

16h January onwards

HS2 Board review I approval

First Carillion Profit Warning

bull HS2 Sought and obtained appropriate Board level written commitments from Carillion Construction Pie and Eiffage and Kierr The commitment to continue as expressed by the other JV parties (Eiffage and Kier) was particularly key due to th~ Joint and Several nature of the contracts including the provision of individual Parent Company Guarantees

bull HS2 Finance team instructed EY to carry out due diligence checks to ensure Carillions financial standing remained within the limits tested at PQQ shy

bull The PQQ tests were re-run and the CEK JV did not fail any of the mandatory (turnover and net assets) financial tests nor perform more poorly in the discretionary ones than the basis on whichmiddot theymiddot originally

prequalified The tests applied included Liquidity Gearing Interest Cover and Dun and Bradstreet thresholds Carillion passed all of these tests

Notification I Start of Standstill

End of Standstill Award published

HS2 begins development of contingency plans working with Cabinet Office and other DfT ALBs

Formal request for contingency plan from CEK made

Detailed contingency plan received from CEK

Carillion Insolvency announced and Implementation of HS2 Contingency Plan commenced CEK JV gives assurance of 2 party continuation for HS2 coritracts Mark Thurston (HS2 CEO) and Senior Team (including Jim Crawford - Managing Director Phase 1 Steve Hudson - Phase One Commercial Director) held CEO call with Kier and Eiffage with commitment for ongoing liaison call to ensure continuity of service

bull JV Contract between HS2 and EK survives Carillion liquidation

bull Daily calls between HS2 Programme Direct and CEK Project Director established

bull Eiffage and Kier issued Default Notice to Carillion to begin process of formally excluding them from JV

bull All Carillion employees (including Apprentices) involved in C2 and C3 contracts made offers of employment with Eiffage or Kier aim to transition to EK by end of January

bull Design JV subcontracts continued under to EK

bull IT hardware and licenses transitioned to EK

bull HS2 have rerun financial tests on EK Parent Companies based on the latest reported accounts All tests passed

(Q430-1) Advice to the Government on whether the company taking on Carillion contracts can be required to pay the administrative costs of doing so

A company taking on contracts cannot be required legally to ta~ on the administrative cost of this action It will essentially be part of the commercial negotiation between the current owner (in this ~ase the Official Receiver) and the proposed new owner The company may seektamiddot reduce the price it is willing to pay for the contracts where it may be liable for the costs of bringing these into its business

Commercially if a company required continued support for a limited time following taking on the contracts they would be required by the Official Receiver to make a contribution to central services such as IT and back office systems

Why is the use of the Pivotal Role Allowance so low What reviews have been made of the use of the Pivotal Role Allowance

Pivotal Role Allowance (PRA) is a pay flexibility introduced in April 2013 as a tactical solution to retain business critical senior staff during the period of pay restraint It is aimed at those in highly specialised roles and those delivering the most significant major projects across government where there is a genuine flight risk

The allowance is removable and non-pensionable and is being strictly controlled within a financial limit of 05 of the overall SCS pay bill (currently about pound17million) Less than half is currently in payment The average payment is around pound16000 per annum During the period of pay restraint its use has been subject to tight scrutiny and control with all cases agreed by Treasury and Cabinet Office Ministers

Since its introduction 67 cases have been agreed for SCS staff responsible for delivering the Governments priorities This includes the retention of those leading major transport infrastructure projects and sustainable energy programmes key health and safety specialists those protecting the borders and national security those providing modern digital services to the public and departments and those in highly technical defence roles

The Government will continue to monitor and review the appropriateness of the PRA process including the scope for streamlining as it begins to move tmyards the new long-term pay framework for the Senior Civil Service This is as set out in this years Government evidence to the Senior Salaries Review Body httpswwwgovukgovernmentpublicationsgovernment-evidence-to-the-seniorshysalaries-review-body-on-the-pay-of-the-senior-civil-service--2

(Q482) Data on churn and turnover in the SCS by department (including any historical data)

bull HS2 have rerun financial tests on EK Parent Companies based on the latest reported accounts All tests passed

(Q430-1) Advice to the Government on whether the company taking on Carillion contracts can be required to pay the administrative costs of doing so

A company taking on contracts cannot be required legally to ta~ on the administrative cost of this action It will essentially be part of the commercial negotiation between the current owner (in this ~ase the Official Receiver) and the proposed new owner The company may seektamiddot reduce the price it is willing to pay for the contracts where it may be liable for the costs of bringing these into its business

Commercially if a company required continued support for a limited time following taking on the contracts they would be required by the Official Receiver to make a contribution to central services such as IT and back office systems

Why is the use of the Pivotal Role Allowance so low What reviews have been made of the use of the Pivotal Role Allowance

Pivotal Role Allowance (PRA) is a pay flexibility introduced in April 2013 as a tactical solution to retain business critical senior staff during the period of pay restraint It is aimed at those in highly specialised roles and those delivering the most significant major projects across government where there is a genuine flight risk

The allowance is removable and non-pensionable and is being strictly controlled within a financial limit of 05 of the overall SCS pay bill (currently about pound17million) Less than half is currently in payment The average payment is around pound16000 per annum During the period of pay restraint its use has been subject to tight scrutiny and control with all cases agreed by Treasury and Cabinet Office Ministers

Since its introduction 67 cases have been agreed for SCS staff responsible for delivering the Governments priorities This includes the retention of those leading major transport infrastructure projects and sustainable energy programmes key health and safety specialists those protecting the borders and national security those providing modern digital services to the public and departments and those in highly technical defence roles

The Government will continue to monitor and review the appropriateness of the PRA process including the scope for streamlining as it begins to move tmyards the new long-term pay framework for the Senior Civil Service This is as set out in this years Government evidence to the Senior Salaries Review Body httpswwwgovukgovernmentpublicationsgovernment-evidence-to-the-seniorshysalaries-review-body-on-the-pay-of-the-senior-civil-service--2

(Q482) Data on churn and turnover in the SCS by department (including any historical data)

This is currently being compiled by the AampI Team within Cabinet Office The Briefing Team spoke with the Clerk earlier this week andmiddot he is aware this information may take slightly longer to provide We shall of course endeavour to provide this at our earliest opportunity middot middot