1.  Between 2001-02 and 2005-06, the Home Office planned and designed a purpose-built accommodation centre for asylum seekers at Bicester. It was an innovative pilot project and formed part of a wider Home Office initiative to cope with rising numbers of asylum applications by speeding up the processing of asylum claims and reducing the social tensions and the potential for fraud which were inherent in the asylum dispersal system at the time. Of the £33.7 million spent by the Home Office on the wider accommodation centre project, around £29 million was spent on designing and planning the Bicester centre and £4.6 million on site searches at up to 40 other locations. The Department accepted that the accommodation centre policy had not worked. No development took place at the Bicester site and the site is now semi-derelict.[2]

2.  When preparing the Bicester business case, the project team assumed correctly that the application for outline planning permission would be referred to a local planning inquiry. The team did not, however, consider the likely impact of a judicial review on the cost and delivery of the scheme. Planning delay was a major risk to this innovative but controversial project, requiring strong project management and monitoring to mitigate the rising costs and falling potential benefits that could arise from deferring work on site once the contract had been let. That the business case did not fully recognise these risks was surprising, given that the Home Office bought in specialist planning consultancy advice.[3]

3.  In December 2003, the Home Office Gateway 3 Review set the status of the project as Red because the case for accommodation centres had not been developed into a fully articulated programme.[4] The Gateway Review concluded that the Bicester business case needed updating with the latest cost estimates and benefit assumptions, as well as for the policy developments and performance improvement measures introduced since the project was first announced. In February 2004, when the project team submitted the business case to the Home Office's Group Investment Board, the Board asked the project team to amend it to include wider benefits, such as faster removal of unsuccessful applicants. When the full business case was resubmitted to the Group Investment Board in May 2004 with the results of the benefits realisation exercise included, no mention was made of the policy developments or the performance improvement measures.[5]

4.  From the outset, the benefits forecast for the Bicester accommodation centre never outweighed its expected costs. In May 2004, the Department's Ministers and Accounting Officer were briefed by the Project Sponsor that Bicester did not constitute value for money if only the most narrow and easily quantifiable benefits were taken into account. The January 2004 business case calculated the net present cost of the project, excluding benefits, at £179 million (around £18 million a year at non-indexed prices). Only high level work had been carried out on potential benefits, which were heavily qualified and estimated at around £10.6 million a year at non-indexed prices. The more detailed benefits realisation exercise carried out in May 2004 identified savings from narrow benefits of £22.3 million a year for Home Office and the National Asylum Support service budgets, as well as broader benefits for both organisations of £18.1 million. Not all of the narrow benefits identified were true savings or efficiency gains in the sense of being "cashable", and the nature and timing of the broad benefits were probably unrealistic, given the other measures in hand to speed up asylum applications. Even with these broad benefits, the cost of the project still exceeded the forecast benefits by £39 million, or some £4 million a year.[6]

5.  Operationally, the Home Office expected Bicester to provide a more economical and efficient means than the existing system of processing asylum applications and housing applicants. The Home Office treated these efficiencies as benefits and quantified them in money terms. The business case was based on a broader set of estimates about the benefits. These benefits included an estimate of the impact on the overall budget of dealing with asylum applications more quickly, of not having to house them for so long, and of being able to deport unsuccessful applicants more quickly. The business case did not state the actual cost of asylum applications under the existing arrangements. Nor did it explain how the potential efficiencies would be derived. The Home Office told us that the exclusion of this analysis was because of the Department's belief at the time had been that it was not possible to establish accurately enough how much it cost to handle an asylum application. The Department considered that other unquantifiable benefits were likely from the use of accommodation centres, such as the impact on putting asylum applicants in one place, rather than dispersing them into local communities.[7]

6.  The Home Office employed agency staff to act as procurement and financial advisors on the project (Figure 1). Over five years, it paid over £1 million to buy in these skills, which it did not have in-house. Whilst the use of agency staff met the Department's short term needs, recruitment of staff with appropriate skills would have been a better investment. We endorse the views of our predecessors that key posts on projects should be held by in-house staff, and that departments should take a medium to long term look at their recruitment and training needs.[8]

Figure 1: Details of Home Office Civil Servants pay (including Agency staff) 2001-02 to 2005-06

Source: Home Office

7.  Whilst a project of the size and complexity of Bicester required expert input, the Home Office failed to demonstrate to this Committee that it had a firm grasp on the risks associated with the appointment, use and management of consultants expected of a major government department. It did not analyse payments made, such that it cannot now say how much was spent on each site search. It has had to rely on apportionment of costs between Bicester and other sites, as it did not record this information properly at the time. Nor could it demonstrate that its consultants added value by helping the Department mitigate risks arising from the nature of the project. In all, £6.3 million of the resources spent on Bicester was spent on consultancy (Figure 2).[9] This included £0.7 million on planning consultancy, even though the business case did not anticipate the impact and duration of planning opposition. It also included around £4 million on project management, including architects and cost consultants, even though the Department signed the main contract before obtaining detailed planning permission, and incurred a £7.9 million termination payment when the project was cancelled.[10]

Figure 2: Other consultancy payments 2000-01 to 2005-06

Note 1: Includes £101,265 for planning
Note 2: Includes £613,266 for planning and some £4 million for professional works advisers including
Core Project Team costs.

Source: Home Office data

8.  Bicester accommodation centre was vulnerable to changes in the trends of people seeking asylum, to unplanned impacts from other policy changes elsewhere in the organisation and to operational improvements which reduced the need for the scheme. These risks were identified in the Gateway 3 Review in December 2003 but were not acted upon by the Department. The risks associated with undertaking an innovative project like Bicester at the same time as changes were being made to the existing application processing system had not been fully thought through. In addition, no account had been taken in the design brief of the need to "future proof" the accommodation by asking the consultants to consider possible alternative uses for it, should asylum numbers fall. The Department considered that had Bicester's 750-bed facility been built, it would have been in use now to house asylum applicants. It acknowledged, however, that its thinking had evolved in the period since Bicester was first planned. The Department now favoured secure detention centres in preference to the open establishment planned for Bicester, where residents would have been free to come and go as they pleased.[11]

9.  The Department planned and granted the contract for the design, build and operation of Bicester without considering the need for an exit strategy. Whilst the contract with its main contractor, GSL, allowed both parties to walk away at no extra cost if the project did not obtain outline planning permission, this was insufficient to mitigate against the risk that the Department might terminate the contract after outline planning permission was obtained, but before building work could start. In part, this exposure and the Department's failure to recognise and consider its impact on the cost and delivery of the Bicester facilities, reflected a lack of realism in the Department's business case assumptions. It was also symptomatic of a wider failure to revisit the need for the Bicester facilities and to acknowledge the risk that detailed planning permission might be opposed by the local planning authority. This omission was to prove costly, and should have been foreseen, given that the Department employed several firms of consultants to advise it on planning issues.[12]

3   Qq 40-41; C&AG's Report, Executive Summary, para 6 Back

4   Gateway Reviews are carried out on major IT-enabled construction and procurement programmes and projects. These can be reviewed at six stages of the procurement lifecycle. Gateway 3 is the Investment Decision and the OGC Gateway Review methodology defines Red status as "To achieve success the project should take remedial action immediately". This does not necessarily mean stop; it indicates that there are issues which need to be addressed straightaway. Back

5   Qq 13-14; C&AG's Report, paras 17-20 Back

6   Qq 10, 109-112; C&AG's Report, paras 21-24 Back

7   Qq 2-4 Back

8   Qq 117-120; Ev 15 and Ev 17; Committee of Public Accounts, Thirty-first Report of Session 2006­07, Central government's use of consultants, HC 309 Back

9   For details, see Ev 16 Back

10   Qq 19, 41, 46, 99-103, 121-129; C&AG's Report, Figure 11 Back

11   Qq 24-28 Back

12   C&AG's Report, para 28 Back