Well Dodgy

TUESDAY, SEPTEMBER 22, 2009

Well Dodgy

Crooks or idiots - either way we lose

Dodgy building contractors have always enjoyed a fruitful relationship with our local councils. Sometimes it's been out-and-out T Dan Smith (pic) corruption*, but more generally the problem has been our old friend the Simple Shopper.

Today, the Office of Fair Trading (OFT) announced the outcome of its long-running enquiry into bid rigging among contractors supplying councils and other public sector customers. It has fined "a total of 103 firms £129.5m for colluding with competitors on building contracts", mainly via a practice known as "cover pricing".

The fined companies include some very well known plc names, with big public sector contracts elsewhere - Balfour Beatty, Carillion, Kier, and a host of others (full list here). But despite the guilty verdicts, the fines are quite small, and none of the contractors has been blacklisted for future contracts.

We've blogged this enquiry before. As the OFT explained it then, cover pricing is:

"...where one or more bidders collude with a competitor during a tender process to obtain a price or prices which are intended to be too high to win the contract. The tendering authority, for example a local council or other customer, is not made aware of the contacts between bidders, leaving it with a false impression of the level of competition and this may result in it paying inflated prices."

It has long been a widespread practice, known to all in the industry. Indeed, when the Chartered Institute of Building asked over 1,000 insiders for their views on industry corruption, it got the following response on cover pricing:

In other words, the practice is so widespread that nearly four in ten insiders reckon it's perfectly OK.

Now, if you're Tescos wanting to build a new store, you know all about this. So you employ guys who've been round the loops a few times, and who know pretty well what the work ought to cost. And when you send out your tender invitations you only send them to contractors that you trust to give you kosher bids. And just to make sure, you might phone them up and say "on no account should you quote if you do not want the work, and if you take the piss you will never get a crack at another contract with us ever again; plus, we will dock you 50,000 points from your Tesco Clubcard, and we will break your legs".

But in publicsectorland it doesn't work like that. In publicsectorland the emphasis is on ticking boxes, not getting good value. And the Simple Shopper in charge of tenders knows he can tick the required boxes simply by publishing an RFP in theEuropean Journal, ensuring he receives and files at least three tenders, and stopping himself accepting too many douceurs. Job done.

So although these contractors have been very naughty - and they certainly deserve more than their pretty derisory punishments - once again, the real culprit is the Shopper. As we've blogged so often, the Shopper is simply not up to being trusted with our money.

And how much have we taxpayers lost?

As per, we don't know. All we do know is that the OFT enquiry was looking at £3bn's worth of contracts. So you'd have to guess our losses run into hundreds of millions.

*Footnote Not everyone thinks T Dan Smith was A Very Bad Man, a man who not only brought disgrace to his native Newcastle, but also inflicted a concrete brutalist hell on its citizens. Oh, no. Even today, the BBC clearly admires the cut of Big Dan's Big Government jib and tells us: "Smith's legacy still lives on in the streets of Newcastle. Today T. Dan is as much admired for his vision as for his concrete achievements. Smith remains an old-style 'city father' whose visions are now being reclaimed by a younger generation." Hmm, yes... and while we're back on the BBC, you should check out Newsnight's Classic Interviews. They reckon they've got six classics, four with media celebs, and two with politicos. And the two with politicos? Yup, you guessed it - the Paxo repeated question"interviews" with Michael Howard (1997) and William Hague (2007?). Not that Pax has never subjected Labour or LibDem politicos to such treatment. Oh no, no, no... there was that time when he... er... ummm... well, there was definitely thatother time when... ahhh... well, last night he did humiliate poor old Vince over his half-baked "mansion tax". But then again, now that the entire world has started to scrutinise Vince's pronouncements properly and found them wanting, the poor chap has suddenly aged 20 years. Last night he looked like a confused old man at a bus stop being terrorised by a yob.

MONDAY, SEPTEMBER 21, 2009

The University Of Real Life

We've blogged Labour's appalling record on higher education many times (see all posts gathered here). In summary:

• Taxpayers now spend £12bn pa on higher education, up around 50% in real terms since 1997; the students themselves spend a whole lot more


• There are 2.3m students, or 4% of the entire population (including 27,000 doing the Major's favourite, the degree in media studies)
  
• The 50% participation target is "aspirational" - ie entirely arbitrary (admitted to the PAC by the Chief Executive of the Higher Education Funding Council for England - see this blog)


• The average HE participation rate across the OECD is 35%: ours is already 40% and heading for 50%


• Courses have been dumbed down and grading standards slashed - the proportion gaining first class degrees has nearly doubled under Labour


• Thousands of graduates now do non-graduate jobs, and that number is growing rapidly- their M Mouse degrees have simply not equipped them to do anything else (according to HESA, 75% - yes, 75% - of 2002-3 graduates were still in non-graduate jobs four years after graduation; what's more, 26% weren't in full-time jobs of any kind


• The average financial return to a degree is plummeting - according to PWC, the gross return to an Arts degree is now only about £30 grand, and that takes no account of the costs of study and the earnings foregone - net net an average Arts degree almost certainly reduces lifetime wealth.

A madness like this could never continue, and now the money has run out. Reality has finally intruded.

So what to do? How is higher education going to take its share of the pain?

One obvious step is to charge students the full cost of their government funded loans. That has already been proposed in the TPA/IOD cuts paper and the earlier cuts paper from Reform. It would save taxpayers £1.2bn pa.

Now the CBI is recommending the same thing, only it would increase university fees at the same time. If fees were increased to say £5,000 pa (from the current maximum of £3k), university funding could be bolstered without costing taxpayers a bean. Everybody's happy... well, everybody except the students, that is.

Naturally, there's been a huge outcry from students and the lower tier unis, who reckon it would put a lot of people off university altogether. To which taxpayers might say a good thing too.

But when you read the CBI report, you realise its concerns run far deeper than simply the current waste of taxpayers money.

For one thing, they are very concerned about the dearth of so-called STEM graduates - ie people who've chosen to do the "hard" subjects in Science, Technology, Engineering, and Maths. It seems the CBI does not value media studies any more than the Major.

Second, the CBI worry that the present cap on fees is starving our top unis of the resources they need to remain world leaders. World leaders? Sure. As things stand, the UK has a disproportionate number of the world's top unis - at least according to the Times Higher Education - QS World University rankings:

The names of the 17 UK unis in the world top 100? You don't really need to ask, but they are (in order) Cambridge, Oxford, Imperial, UCL, King's, Edinburgh, Manchester, Bristol, LSE, Warwick, Glasgow, Birmingham, Sheffield, York, St Andrews, Nottingham, Southampton. (Hmm... you say... where's Leeds? 104th. And Durham? 122nd. Hmm...). None of our former Polys make the top 500.

The CBI reckons it is far more important to sustain our top unis, than to continue the mad pursuit of Labour's arbitrary 50% participation target. Indeed, it goes further. It:

"...does not believe that the push to increase participation in higher education to 50 per cent of 18-30 year olds in England and Wales should continue to be a target in the current economic environment. The priority should be to ensure that those who go to university continue to receive a quality education. This should go hand-in-hand with greater efforts todeal with educational disadvantage at the secondary school level, and to support young people through apprentice and other vocational training programmes."

Which could easily be Tyler talking. Or Tyler senior. Or indeed, virtually anyone you meet out here in the real world.

The overwhelming educational priority is not more M Mouse degrees, but to fix the dire state of secondary education for low achieving kids and to help them into the real world of real work.

To summarise, real universities are academically elitist, and we should value and support them for precisely that quality. They should charge realistically high fees, and the students who attend them should be expected to pay the full cost of their funding: after all, they're the ones who'll reap the bulk of the benefits.

Meanwhile, we need a radical improvement in secondary education for less able kids, something we can achieve via real parental choice (ie school vouchers) and awarding higher value vouchers for lower ability pupils.

Footnote warning from HypocrisyWatch - Yes, it's true, Tyler did receive full taxpayer funding for his degrees from not one, but two, of the unis listed above. And yes, he undoubtedly benefited hugely. And yes, he does feel a tad uneasy about that, even though he has since paid humongously sick-making amounts of tax. So yes, he is making some financial contribution back to his old unis, albeit not exactly on a JP Getty scale.