Basil Woods at Baz Practice draws attention to a report by the UK’s Public Account Committee into an appalling case of incompetence regarding a major project.

The post and the report are worth reading.

One thing that captured my attention was this statement by the Chairman of the Committee:-

“Clearly this project was handled badly, it achieved poor value for money, many of the causes of delays and cost overruns could have been avoided. I could make some grand eloquent statement about how we never expect to see this happen again in the Civil Service but I suspect I would be wasting my breath.” – Edward Leigh

Mr Leigh has looked into other projects that have gone wrong. Many of us in work in the project arena have their own war stories to tell in this regard.

In my recent ISACA presentation, PROJECTS – Key Issues in Success/Failure,  I noted:-

These figures were drawn from the Standish Group Chaos reports. These studies and others have been reporting  poor statistics regarding projects for many years now. Whilst some dispute the Standish numbers, there is generally no argument that many projects substantially under achieve in terms of costs, time line, functionaliy and benefits. Not all as spectacularly as the one cited in the UK, but in one or more of the previously mentioned areas.

Much has been written about the causes of project failure. Indeed, cynics like my self read some accounts of project success and are tempted to wonder how that success was achieved and were the judgement criteria changed along the way.

Yet still it happens, despite the methodologies and frameworks designed to stop it happening.

Indeed as Chairman Leigh stated at the outset:-

“I have had all this before and I just do not know whether there is any point really carrying on frankly…Why did these problems re-occur, the same old lessons have not been learnt; over ambitious, weak project management and all the rest.”

There we have it in a nutshell:-

Why did these problems re-occur, the same old lessons have not been learnt; over ambitious, weak project management and all the rest

That comment to a greater or lesser extent could probably be made whenever a poorly performing project is examined.

I accept that weak project management can be a factor, but based on my own experience I venture to suggest, based on my experience – including running a major Project Quality Office, that a number of  factors play a significant part in many instances, these include:-

• pro-active and committed involvement of executive management from the outset
• alignment of project objectives with business strategy and objectives
• setting objectives which are achievable within the time and budget
• providing a sufficiency of time for completion, rather than setting dealines which are not realistic
• recognition that projects are no longer in many cases IT projects, but are in fact Business Change projects which are enabled by IT and incorporating this into all aspects of the project
• rigourous and on-going assessment of benefits and costs; coupled with a willingness of all involved to take action when situations alter
• rigourous review of risk both project and business, including an assessment of organizational capability to undertake the project
• clear and unambiguous reporting of project performance, against project standards and the business case
• dedicated, trained and capable resource*
• establishing the project appropriately**
  

* as at least one commentator has noted – chopping and changing resources has significant adverse impact on projects

** major projects should be established as programmes , with a number of component projects. The interdependencies being reviewed and all parties being made aware of them. Further, projects should be broken into constituent parts which are capable of management.

If these are lacking, why should we be surprised when problems emerge. In fact if any of the above are deficient they should be warning signs. But, again many have highlighted these issues. Indeed, all the above have been written about before in various guises, blogs, academic magazines and books by gurus. So what are we to do?

To achieve an improvement will take a culture change in many organizations.

One of the reasons for ‘failure’ in many instances, and/or problems arising is I suggest the prevalence of organizational cultures where ‘bad news‘ is unwelcome and ‘shooting the messenger‘ is common. This may well be coupled with situations where senior management/executives are not closely involved. Interestingly, when I comment in this vein when giving presentations many in the audience often nod knowingly, and in conversation afterwards I have often been asked how it is that I knew that was the problem with Project X or Y. Of course I did not know,but such comments go a long way to substantiate my view on some of the siiues which exist.

In that regard, I am heartened by the advent of ISO 38500 – Corporate Governance of information technology, which may assist in creating a climate for change. This will be assisted as well by the increasing emphasis in both the public and private sectors on ensuring value is delivered for the investments made.

At the end of the day though, there can be no substitute for rigour at all stages from the moment when a project is conceived to the point, possibly many years later when the application/process or other deliverable is ‘retired’. This requires the inculcation in an organization of a set of core values where good practice, rigour, integrity and transparency and communication are the natural order of things rather than the exception.

RAF Chinook HC2

“Wokka” is the RAF nickname for a Boeing Chinook helicopter (you’d know why if you heard one).  It’s a heavy lift helicopter, vital for RAF logistical support in difficult territories such as, currently, Afghanistan.

So what is the connection between wokkas and lawyers?  There are two cases involving RAF Chinooks that demonstrate that occasionally the use of appropriately experienced lawyers should not be avoided.

ZD576 Crash Site

Our first example is the sad case of RAF Chinook HC2 ZD576, which crashed on 2 June 1994, killing all twenty five passengers and all four crew.  The two pilots, Flt Lts Jonathan Tapper, 28, and Rick Cook, 30, were found by the RAF to have caused the accident by their “gross negligence“, despite that fact that the initial RAF Board of Inquiry did not find any evidence to prove pilot error to any standard (civil – balance of probability, criminal – beyond all reasonable doubt, gross negligence under RAF Manual of Flight Safety – absolutely no doubt whatsoever).  From our reading of the case, it would appear that the air officers who reviewed the Board of Inquiry findings and made the gross negligence finding were either extremely badly advised on the legal aspects of what they were doing as reviewing officers, or, as we suspect, did not take appropriate legal advice.  The result is that the families of the pilots continue to live under a deeply unsatisfactory finding, heavily criticised by, amongst others, the House of Lords. (For an excellent legal analysis, see the Opinion of Michael Powers QC and, for balance, the MoD reply.)  As a result of the gross negligence finding, as Powers QC describes in his opinion, it is arguable that other possible causes of the crash of ZD576 were not properly investigated, including engine run away as a result of failure in the engine control system software, FADEC, which itself may not have been properly specified and certified to UK military standards for safety critical software.

The second example is the case of the procurement of eight RAF Chinook HC3s in 1995, which are only just coming into service by being retrofitted to be HC2/HC2As, despite being desperately needed to support operations in Afghanistan.  The eight HC3s were supposed to cost £259 million and be in-service by November 1998 (defined as delivery of the first six). They were in fact delivered in 2001, but could not be granted airworthiness certificates as safety critical avionics software could not be certified to UK military standards, mostly as a result of serious omissions from the procurement contract (as determined by the National Audit Office).  The final programme is likely to cost in the region of £500 million by the time the helicopters enter service.  It is exactly these sorts of contractual omissions that experienced commercial/procurement lawyers involved in all stages of major procurement projects are trained to spot.

The National Audit Office has developed a board evaluation questionnaire to help boards identify their strengths and areas for improvement. Boards can use the questionnaire as a self-assessment tool or as the basis of a facilitated exercise. How Boards use financial management information is critical to delivering value for money from public funds. Good financial information available to key decision makers at the right time has a beneficial effect on organisational performance.

http://www.nao.org.uk/what_we_do/other_specialist_expertise/financial_management/support_for_boards.aspx

Indicators – Gold output rose 13.4% yoy YTD. New bank branch apps rejected by CBRC because of low CAR. Inflation expected to begin to rise in Oct or Nov (Nomura), 2.5% in 2010, 3.5% in 2011. New loans in July totaled 356B yuan, down 77% from June. Might be a loan surge in Sept. The Big 4 represent half of outstanding loans, yet their new loans issuance shrank significantly in July. The only new loans seem to be consumer loans which made up 66% of new July credit. Personal loans may reflect returning RE purchases, though higher prop prices will hurt individual credit. Many Chinese banks may face a lack of liquidity as reserves decline and loan-deposit ratios rise. Avg cap reserves may fall below 11% for comm banks. Small banks have a 10% CAR requirement, and are trying to issue rts or subordinateds to supplement capital. Deposits in H1 seems to have come from loan proceeds; but increasing cash flow into the real economy, a reduction in new loans, and cap market adjustments means that sustained deposit growth is uncertain. CB fin through short-term notes and bonds may help liquidity. Syndication is on the rise as multiple weak banks join forces to issue  more loans. If the global ecnomy improves, these smaller banks credit may improve. CCB has lent 7.3T yuan in new loans for H1, while showing more caution earlier in increasing its loan-loss provision to 150%. Earnings are down though and the markets fear NPLs are in the future, despite hopes for a stable lending base. The increased lending served to decrease NPL ratios, along with settling old NPLs. CCB seems to have both decreased NPLs while recovering twice the decreased amt. China Merchant and CITIC have been hit hard by decreasing NIMs and an inability to cover the loss by increasing loans. NIMs will not recover in H2 as it is unlikely that a stable increase in int rev from borrowers is possible. May be worsened by potential IR increases to control inflation. Stock market may influence lending as greater equity inv will hurt deposit growth. Rising loan-loss provisions by regulators will also hurt short-term profits. Coal prices to remain flat this month. Car sales rose 29% YTD, and will hit 10M units sold by Oct. Tax cuts on cars with 1.6L engine and subsidies for rual buyers of small vehicles and motorcycles have juiced sales. Vehicle exports have plunged 50-59% this year. Outward inv rose 111% to a record $56B in 2008. Fin inv surged 741% to $14B, nonfin $41.9B. Most inv was by the SOEs (85%). Mostly in services, fin, mining, and transportation. Economists believe recovery accelerated in Aug with faster indus output growth and retail sales, and strong growth in inv, though inflation concerns are emerging. CPI is expected to have fallen in Aug. Oil products sales up in Aug by 3.2% yoy. Steel traders call for lower prices from steel mills. Q4 will be difficult part of yr for domestic mills as weak demand can’t absorb growing output and inventories. UBS predicts 8.5% growth in 2010. Exports should improve and fiscal policy will not be tightened. GDP will grow 9% in Q3, 10% in Q4. Apartment sales fell 10% in Beijing for Sept, mom. High prices are hurting demand. October sales will be a barometer for the market as inventory enters the market. Qinhuangdao coal price rises ahead of National Day. Thermal power plants increased inventories in preparation for power demand.

Strategic Oil Reserve – NDRC says the 3rd phase will hold 169M brls. Reserve will be finished in 2020. Facilities will be built in Hainan, Hebei, and Chonqing municipality. 1st phase is finished and hold 102M brls. 2nd phase construction begins next year and will take 4yrs to complete. In Gansu, Jiangsu, and Guangdong.

Derivatives – SASAC is responsible for overseeing derivatives trading, but its supervision is limited to govt SOEs conducting trades in oil-related structured options. SOEs generally lack credit lines on the international market and need Chinese comm bank help before signing contracts w foreign inv banks. COSCO lost Bs in yuan; most SOEs in I-E and forex also probably lost money in derivatives. China Railway, Eastern Air, Air China have also disclosed losses. Deficiencies in SOE corp gov and risk control complicates investigations. No public market price. OTC trading of interests has also occurred in secret. Only 31 licenses issued by CSRC for overseas commodity hedging.

Trade – Anti-dumping duties on styrene butadiene rubber from Russia, Japan, SK for 5 more yrs. 38% tax. Tengzhong’s bid for Hummer blocked by MinComm due to lack of detail. MinComm plans to develop service outsourcing and improve China’s inv environ via greater foreign investor participation in clean energy and power-saving tech. MinComm vows to support tire industry against US tariffs via improving industry structure and raising technological standards. Tire Q4 earnings are expected to plummet due to the tariffs, increased domestic supplies cutting prices, and stockpiling.

Yuan – 6B yuan treasuries will include a retail tranche of 2B yuan; 2yrs for individual investors, 5yrs for institutions.

SSE – Red chips wil be the first to list on SSE’s international board. Red chips are incorporated outside the mainland and listed in HK. Investors have been buoyed by govt proactive fiscal policy and moderately losse monetary policy.

SFE – Shanghai Futures Exchange. Widens trading band prior to Oct 1 to 7%, by 2pp.

Shenzhen SE – Completes test of GEM board for IPOs, stock trading, and settlements.

HKSE – 19 IPOs planned to raise HK$117B by yearend. Traders worry about a capital drain from other stocks.

GEM – Chongqing Lummy Pharma plans to issue 23M A-shares on the new exchange, to be used for 8 production lines. CSRC approves 6 more candidates including Beijing Toread.

QDII – No new products for 2009, though 2010 should see some entries. GEM is the current focus.

National People’s Congress – Wu Xiaoling (deputy dir of Fin and Econ Affairs Committee) wants to keep controls on lending and deposit rates.

MinFin – Issues 200B yuan local govt bonds as part of an effort to channel funds to less-developed regions, market did not eagerly take them.

SAFE – Raises quota for QFII program from $800M to $1B.

NDRC – SMEs will be encouraged to pursue foreign inv opportunities and set up trading entities and research opportunities overseas. Will also support small private VC firm via tax breaks and will encourage them to invest in SMEs (less than 2K employees, rev <300M yuan, A < 400M yuan). Refuses to interfere in power-coal negotiations. Players want electricity price reform. Proposal to institute market trading for coal and railway transport capacity, separate grid and transport by setting up distribution and transport businesses for the power grid and rail network separate from firms that market power, coal, and transport, standardize I by setting fees collected by local govts, transport links, and power distributors, while instituting a resources tax, system oversight by eliminating gradually planning targets and pricing approvals. Industry leaders want to raise prices. Coal trading is still separated into 2 markets; Key Order Contract Transactions (for coal), the other exchanges. KOCT accts for 60% of coal burned for electricity through fixed contracts signed at coal order conferences, which usually end in NDRC intervention. At the 2009 conference, the power firms proposed a decrease in coal prices, while coal firms demanded an increase. Coal and power markets are affected by market fragmentation via KOCE. Logistics links btw coal and power firms are enormous, management is laissez-faire, efficiency low. Railways transport is split into planned and market portions. Non-core subsidiaries affiliated with coal and power firms profit from insider status. Arbitrary changes are added before supplies reach downstream, increasing already high costs. Prices for non-liberalized power are set by govt, while electricity is distributed by plans. Power trading is handled by monopoly grids, which increases trading costs and reduces fairness. Need a nationwide coal exchange market based on short-term and long-term contracts. Intermediaries make up 30-60% of costs; railroad is a major bottleneck. Rail also has its unplanned and planned portions. Next round of reform would allow govt to check and ratify a basic price for railway coal transport. Railway affiliates and intermediaries would be solidated into a coal transportation sales firm, and its transport capacity would be traded on the national coal exchange market. Grids in change of transmission would leave power trading and instead charge for use of a grid. Power generation scheduling currently follows a planned quota, while grids buy capacity from power firms and sell it to consumers; the grids enjoy monopoly in this system. March liberalizations have resulted in problems. Lacks indpendent electricity transmission and distribution pricing.

SASAC – Investigating loss-making fuel option deals made by SOEs, who may recover losses from their trading partners. Only 31 firms are licensed to conduct cross-border futures trading. 1T yuan worth of derivatives were entered into by SOEs.

CSRC – 12 firms have listed in Aug, most of them on Shenzhen. Reviews Shenzhen Overseas Chinese Town Holding’s plan to pay for parent assets with 7.3B yuan worth of new shares. Reviews 7 firms that wish to list on the GEM board. Funds and brokerages have submitted plans for pilot REIT programs. Harvest Fund, Bosera Funds, CITIC, CIC.

CIRC – Drafts rules requiring insurers to seek reg approval for transfer or alteration of a stake in another firm above 5%, as opposed to 10% previously. Also, drops reqs for adequate solvency when an insurer seeks to pursue an IPO or refi. Insurers will have an 8% asset limit on PE operations.

National Audit Office – Investigating recent lending by major comm banks in an effort to trace loans issued as part of the 2008 stimulus. Regulator investigation began after 23% of total H1 new lending was extended in discounted bills financing, a short-term lending practice that allows firms to raise cash by surrendering receivables at a discount; once bills are cashed, banks can no longer monitor capital flow, allowing for divestment opportunities.

IMF – PBoC may pay its $50B IMF notes in yuan, instead of using $s to diversify channels for its forex reserves.

CIC – Stepping up purchases of commodities firms by buying $1.9B of Bumi debt (Indonesia’s biggest coal producer) and $850M for a 15% stake in Noble Group, a HK global commodity supplier. 12% coupon.

Shanghai – August housing loans at record high due to increase luxury prop transactions.

Yunnan – Creates mining trading platform to facilitate trade in minerals, exploration, and exploitation rts.

PBoC – Will sell 6B yuan in sovereign bonds in HK, first sale in an offshore market to help develop the HK bond market. Expects lending by Chinese banks to return to reasonable levels in H2, major tightening unlikely due to stronger-than-expected banking data. Urges IMF to reform governing quotas and add votes for developing countries.

BoC – Swiss subsidiary will issue yuan-denominated Swiss funds as a way for chinese investors to invest globally w/o currency risk.

Eximbank – Central Huijin injects funding into Eximbank and China Export & Credit Ins in order to make them more market-oriented.

Shenzhen DB – Prefers current IR controls rather than floating. Funds with Invesco Great Wall managed fund a PE fund product in Sept with an entry of 1M yuan and max of 200 potential investors.

Bocomm – approved to buy China Life CMG ins, becoming the first bank to tap the ins sector. Will own 51%, the other 49% will be owned by Commonwealth Bank of Aussie. Bocomm now works in the man fund, fin leasing, trust, and ins sectors as well as its core banking, inv banking, and ins services in HK. Gives low-int loans to transport sector for infra porjects.

Industrial Bank – wins approval from PBoC to issue 10B yuan subordinateds.

Bohai Bank – Issues 1.2B yuan 10yr subordinateds at 5.3% for 5yr before being callable. Standard Chartered owns a 19.99% stake.

CDB – PBoC grants permission to increase new lending ceiling for 2009 by 130B yuan to 580B yuan.

CCB – BAC still holding onto its 11% H-share stake. BAC is still not allowed to offer personal banking services though it may serve corp customers.

Hong Yuan Securities – Chairman Tang Shisheng will resign and may take up post of chairman of Founder Securities. Feng Rong, assistant to president of Jianyin Inv (subsidiary of Central Huijin) and former VP at Hong Yuan will replace him.

Galaxy Securities – Central Huijin will appoint new executives. Central Huijin vice gen man Chen Youan will beocme hairman of Galaxy and its parent Galaxy Fin Holdings. Galaxy chairman Li Ming and secretary Li Zhengqiang will return to the CSRC.

Everbright – Board approves 5.8yuan dividend for every 10 shares. 35.3% of distributable profit.

China Merchant Securities – Sets up PE unit to invesst in unlisteds.

Guoyan – Additional A-share issue approved. 10B yuan offering to supp cap and fund expansion.

Minsheng – President of Life Ins subsidiary resigns for personal reasons and may move to Sino Life Ins, which is part owned by Tokio Marine and Nichido Fire Ins.

Pacific Century – Expects AIG’s asset man biz it acquired to be profitable this year. Includes unaffiliated clients, some general accts, and affiliated assets under man. Richard Li owns this private inv firm with ints in infra, prop, satellite comm, and other inv in the region.

First Eastern – HK PE firm. Will set up yuan fund to invest in Northeastern SMEs.

CLSA, Guosheng – JV to begin in 2010 for domestic yuan fund.

Insurance – Life ins premium income up 2.2% YTD.

China Life Ins – Aug premium I down 12%.

PICC – Prepares for 4th restructuring in its 60yr history. Branching out into prop ins, life ins, and investments for IPO. Assets have tripled to 300B yuan and assets under man have 5x’d to 725B yuan under Wu Yan. Could’ve listed on SSE when its affiliate peaked on the HK bourse, but parent would not have been able to support developing its branches in the future. Firm was hamped by lack of open market capital access nor possible cash injections from the govt. Listing would also have diluted its stakes in its HK affiliate and may have had its affiliate taken over hostilely. Injecting other assets into it would have been possible, but its growth had limits and would’ve undervalued its nascent businesses. Hit hard by Sichuan earthquake. Overshadowed by China Life, Ping An, Pac Ins. Was able to boost lif ins by reforming its provincial life ins subsidiaries into PICC Life, while ensuring P&C received a stake in Life. Was able to pick up rural clients. May be hurt by high cap costs and heavy spending to build its sales force. Increased stakes in Asset Man, Life, and Health, while branching out into Credit Trust and Huawen. Huawen holds hundreds of billions of As and licenses for financial business including MFs and trusts. Owns shares of People’s Daily (yes, that one).
China Post – National post service. Launches life ins firm for its subsidiaries. 500M yuan.

Yangtze Power – Buys assets from SOE parent China Three Gorges Project; operates Three Gorges Dam.

Huadian Power, Yinxing Coal – buys 45% stake for 600M yuan, given priority in purchasing coal at market prices for 45% of miner’s output.

Trina – Obtains $300M loans from 5 Chinese banks to fund 500Mw solar photovoltaic project.

Shanghai Electric – Siemens injects 712M yuan into Power Generation Equ subsidiary. Large mechancial and electrical equ manufacturer.

CNPC – CDB extends $30B in credit lines to fund overseas expansion. Parent of PetroChina. May expand into deepwater exploration in 2015.

Petrochina – JV btw China Ocean Shipping and CNPC lost billions in unrealized losses from oil derivatives.

Venezuela – China will invest $16B in heavy-oil JV in Orinoco.

Galaxy Resources – Aussie firm. 4h largest lithium carbonate producer after signing a fin deal with a Chinese PE firm Creat Grp who gets a 19.9% stake worth A$26M and becomes largest stakeholder. A$130M in bank loans will also be arranged to help dev a spodumene extraction project and a lithium carbonate project.

CNCE (China National Chemical Engineering) – CSRC approves app to list 1.23B A-shares in a Shanghai IPO. Proceeds will supp working capital, buy equ, develop IT. Owned by Chemical Engineering Group Corp which is SOE.

CISA – spot and contract iron ore prices converging at $80 per ton.

Hebei Iron & Steel – Applies to CSRC to inject subsidiary assets from  Chende Xinxin Vanadium & Titanium and Handan I&S into another subsidiary Tangshan I&S.

Jien Nickel – Extends offer period for Canadian Royalties (mineral explorer).

Jinchuan – Metal producer. Expands output to 8K tons of cobalt, 130K tons of nickel. Plans overseas expansion.

Baosteel – Lowers steel product prices for Oct by 200-350 yuan per ton from Sept levels. Hot-rolled carbon, hot-rolled low-carbon, cold-rolled prepainted steel, steel plate.

Shougang – Expands steel capacity to 30M tons by 2012, comapred to 12M last year.

Railway Erju – Wins contracts to build 4 expressways worth 1.17B yuan in Sichuan, Fuijian, and Hunan.

China State Construction Engineering – Wins 1.9B yuan construction project in Guiyang. Largest home builder in China.

China Vanke – Largest RE dev by market cap. Sales rose 18.3% yoy in Aug. Shareholders aprove 11.2B yuan share offering. Will not seek to spend heavily on sites in top-tier cities. Will try not to bid up record prices for prime sites (translation: hell yeah we are).

COFCO, Vanke – Jointly win auction for 2.2B yuan for Beijing reisdential site in Fangshan district.

Glorious Property – Will raise $1.5B in an HK IPO on Oct 2, following a share offer with UBS, JPM, and DB underwriting. Shanghai Industrial, SOLI, NanFung Prop, and other QDII under China Southern Fund will be key investors. PE ratio of 19-24.7.

Country Garden – Issues $300M 5yr HY bonds at 11.75%, which will be used to repay $30M in loans from CITIC Ka Wah Bank and fin prop dev projects. 100% oversubscribed.

Shimao Prop – H1 earnings rose 30$, boosted by one-time gain from selling comm prop projects to subsidiary Shanghai Shimao, and strong prop sales.

Legend Holdings – Parent of Lenovo. Plans to inv 10B yuan over the next 5yrs into clean energy, new mats, enviro protection, fin services, high-tech. Will go public after its core ops have floated. Hony Capital may inv in Happigo Home Shopping.

COLI – considers takeover of Everbright assets held by appliance maker Shell Electric MFG.

Dalian Wanda – Files A-share listing app for 2010.

GOOG – President of Google China Lee Kai-Fu resigns to start own business. VP Liu Yun will take over. YEo Boon-Lock (director of Google’s Shanghai engineering office) takes over the engineering and R&D responsibilities. Lee rose from natural language and user interface divisions and has had stays at Silicon Graphics, AAPL and MSFT. Will invest 800M yuan over 4-5yrs w US VC firm WI Harper Grp, Lenovo chairman Liu Chuanzhi, Hon Hai Precision Industry chairman Terry Gou, etc. Enterprise will act as an angel investor, providing seed capital for startups and helping them with management expertise and analysis. May target Internet, wifi, e-commerce, search engines.

Alibaba – YHOO sells 57.5M shares, due to frosty relations. Fears about Alibaba stripping high-quality assets from YHOO China.

Tencent – ISP. Has no plans to list on A-shares currently, though expects to in the future.

SNDA – Gaming subsidiary plans to list on NASDAQ, issue 63M ADRs ($10-$12). Capital will go towards divesting the unit and allow parent to focus on developing online games platform.

Lenovo – Mobile unit launches first OPhone supporting China Mobile’s 3G service.

ChinaCache – Largest content delivery networks provider. Obtains $10M inv from INTC. Upgrade core capabilities and CDN tech.

Gome – Ex-chairman’s asset freeze extended.

Lianhua Supermarket – largest supermarket chain. Shareholders approved Hualian Supermarket purchase for 492M yuan.

Mengniu Dairy – H1 earnings rose 13.6% due to lower costs and an optimized product portfolio.

Wuliangye – Liquor producer. CSRC is investigating securities violation.

Huiyuan Juice – H1 profit dropped badly due to disruptions from failed takeover by KO. Op rev fell 32%. Will benefit in H2 from consolidated distribution network and a broader product line.

Wumart – In talks to buy Jiangsu Times retailer. 4th largest retailer.

Yashili – Carlyle Group and Fosun High Tech inject $100M funds in return for 23% stake.

Sinopharm – Top pharmaceutical distributor. Hopes to raise $1B from HK IPO this month. It is a JV btw Sinopharm Grp and Shanghai Fosun High-tech Grp.

ZTE – Leading telecom equ manu. Wins contract w HK’s mobile operator CSL for a nextgen mobile network tied to Long Term Evolution tech. (4G)

China Unicom – $1B share swap w Spain’s Telefonica as part of a strategic alliance. Telefonica also gets a seat on the board.

China Mobile – Will pursue listing on mainland, will not do Depository Receipts or A-shares. New users rise in Aug by 1.32M, due to handset subsidies. Target of 3M new 3G users may hard to attain.

NEC – cuts 25% of Beijing staff as part restructuring of Chinese subsidiaries.

Bestway – Marine engineering design as well as ship design. IPO planned of 20.5-28.7 yuan on GEM.

Beijing Toread – IPO range of 19-25 yuan per share. 35-45 PE? Outdoor sporting goods producer. Offering proceeds will fund expansion of sales network.

Opinion -Lee Kaifu(Innovation Workshop): Rebuilt GOOG market share from 16-31% after 2006 govt blockages. Liu Yun was once CEO for SK Telecom in China and bought convertibles in 2007 to get a stake in China Unicom. Is trying a 50M yuan incentive plan for SMEs to use search engine marketing.  Wu Xiaoling (National People’s Congress): MinComm should lower threshold for establishing leasing firms and offer equal accesss to Chinese firms. Currently, foreigner and JV leasing comapnies are approved by provincial branches of the ministry. Domestic leasing firms are still in trial phase.  SWS Research: As long as new lending doesn’t fall below 300B yuan a mo for the rest of 2009, then China will continue to grow. Banks in western China have already implemented credi restrictions. 50% of new loans were given to govt-related fin institutions. Platforms must now submit more than guarantee letters from local govts to get loans; hold land collateral? But some project inv went to stock and RE markets. Banks can only inspect funds flowing internally; funds in the borrower hands are hard to track. National Audit Office has increased observation and are tracing securities funding sources. Lending should enter phase of steady growth, restrictions are unlikely to rise drastically. IF funds outstanding for forex increase, pressure on current monetary pressure will increase. Those funds are up 77.8B yuan to 220.5B yoy. Investors are also adding to trusts and other banking products. 180 were launched in Jun, 135 July, 145 Aug. Monthly issue exceed last year’s total issue. Personal IRs will probably rise higher. Andrew Shang (HK Sec and Futs Comm): EU is the largest economy in the world at 30% GDP, though the euro is only in use in 16/27 of countries. Pretty remarkable despite being only 10yrs old and the first notes being issued 7yrs ago. Predecessor EEC was formed n 1957; transition was thus 45 years long and with many intermediate steps along the way. European Monetary System failed in the 80s, fighting speculators. Coordinating monetary and fiscal policies for stabilizing the currency or maintainng parity is hard as some country has to lose out during adjustments. Maastricht Treaty imposes restraints on members from running up more than 3% GDP debt. Vol of currency turnover is at 38% of total, unchanged since 2001. USD accounts for 64% of 6.4T offical reserves worldwide, $4.1T identified reserves. Euro accounts for 26.3%, pound 4.4%, yen 2.5% (ouch). Euro was a tool of political, not economic, integration (wat). Union of many currencies after internally fixed pegs among members and flexible rates individually against USD. Europe has a large, stable internal market and runs a small current acct deficit with the world, international bal sheet deficit of 10% GDP. Still a rivalry btw nationalized banking system. Asia only has trade integration at the moment, and even then…  Jiang Liping (Energy Research Institute, State Grid Corp): Intermittent nature of wind makes it difficult for state grid to use wind power on a large scale. Balance btw gen and C loads necessary, but this is difficult to adjust with coal power. Xia Bin (Fin Research Institute of State Council): China’s high growth and potential will put pressure on the yuan to appreciate, as neighbors wish to hold more of its currency. HK should be pushed to develop its offshore yuan market and widen the use of the currency in Asia (as reserves?). Expand crossborder trade, encourage domestic firms to use the yuan for outward inv and overseas acquisitions. Fan Junli (Caijing): Regulators have instituted changeds that allow securities firms to consolidate. 107 firms will merge. Local govts that control minor brokers will be hurt, though the industry will be strengthened in a step towards allowing foreign competition. Huatai, Guoxin, and GF are being encouraged to integrate and expand their territories, while large brokerages like CITIC and Huijin Family are limited by the 1 Participant, 1 Controller Rule. First consolidation wave in 1990s, followed by the emergence of the powerhouses in 2000-2001. 2001-2004 saw an overhaul of the industry which triggered further consolidation among the weaker firms. In 2008, more M&A among the smaller firms shrank the industry further. Only 70-80 are expected to survive this round. Regulators want to chip away at brokers protected by tight links to local govt fund-raising. Local govts also hold controlling stakes and don’t want to lose them. One Participant, One Controller Rule requires 2 or more securities firms controlled by a single firm or individual to not conduct overlapping brokerage business. During the 2004 overhual, Central Huijin took ints in 9 firms, giving tem the largest market share. It has now been buying some of CCB Invs’ brokers, allowing CCB Invs to reach the standard. Huijin is also transfering its broker stakes to UBS, Guotai, and Qilu, though it still controls Galaxy, Central Inv, Shenyin Wanguo, and CITIC Construction Inv Securities. China only allows foreign firms to offer inv banking except for China Euro Securities which is a JV with foreign backing and has a brokerage permit to operate in the Yangtze Delta and a inv advisory permit from CSRC. Huo Kan, Wang Jing, Yu Hairong (Caijing): NBS announced Aug 11 that industrial growth only increased 0.1pp mom; the markets dived the next day. The govt-led lending increase in inv has helped the economy in H1, despite exports being a drag. Urban FAI growth slowed further than expected. Halt of govt int in July hurt. 200B yuan remains to be allocated by the govt. New projects and planned inv for new projects also fell in Jul as hopefully the economy grows at a slower but steadier pace. Worries however about inflation with a global recovery mean that policymakers may tighten in mid October or in December. Consumption in July was stable and retail sales grew, though they are unlikely to replace govt spending quick enough to prop up economy. Trade declined by only 19.4% in July.  Andrew Sheng (Tsinghua U): Countries with a constant trade surplus should have an appreciating currency. Japan had to keep exporting capital in order to keep the yen down. Japanese were unable to promote their currency as a reserve currency despite offering cheap aid through yen loans due to the high volatility of the $-yen exchange rate; it was difficult to hedge and borrow. Seignorage and the services income that comes from being an international fin center would have supplemented its manufacturing exports. But to be a reserve currency, the yen must be stable, have low transaction costs, and high transparency. Yen was volatile and expensive to transact in. Being a yen exporter meant that a spreads btw Treasuries and Japanese deposits could be wiped out by any significant yen appreciation unless your earnings were in yen. Japanese exporters have preferred to export in yen and import in $s in order to protect their earnings in yen term and saving on import costs when the yen appreciated. Borrowers had to pay forec costs which made the yen more volatile. A yen appreciation causes both borrower and investors to buy yen to protect themselves from appreciation. It also helps if a wide variety of fin and real assets are available for purchase at attractive yields in liquid markets. Japanese asset bubble explosion has prevented that. Huang Yiping (Peking U): Diversify forex holdings away from $, increase outbound direct inv, widen the trading band of the yuan. Euro, yen, yuan or rupee will gain greater prominence as a reserve currency. Zhuang Jian (ADB): Predicts a steady economic recovery and sustainable Chinese growth for the next 2yrs. Wang Ziwu, Wen Xiu (Caijing): Hot money is flowing back into China at a record $170B in H1. Hot money increases China’s forex reserves. SAFE is concerned that it may start inflation. Hot money is derived by subtracting trade surplus, FDI, forex gains/losses from the forex reserves. $122B in hot money may have entered in Q2. Figures don’t exclude service trade, securities inv, and other inv that affects balance of payments numbers. Hot money piggybacks into the country through standard cap channels, service trade deals, and personal forex transactions. Stephen Green believes that $56B in unexplained outflows occured in Q1 and that $30B inflows occured in Q2, possibly up to $90B total in Q2. Expectations for yuan appreciation on the non-deliverable forward market remain dampened. Yua Hairong (Caijing): Exports have been buoyed by increases in shipping traffic, China becoming the world’s largest exporter, other positive indicators. Jiaozhu, Shangdong has posted a 5% increase yoy in exports for Q1, but Q2 saw a slump; Wang Jian (bureau chief at Foreign Enterprises Admin) explains that Q1 reflected unfinished 2008 orders while Q2 reflects new orders for 2009. Zhejiang shows similar slumps among 64% of exporters. Taiwanese Inv Enterprises Assoc of Dongguan has seen its membership shrink as members suspend ops. 2-3M migrants have left Dongguan and not returned. Foreign orders for labor-intensive goods have started to improve, but not so for machinery and electronics. Trade decline has narrowed but container production has halted. Overseas customers have been defaulting, making expansion unlikely. The State Council has tried to help SMEs by increasing export credit ins to offset payment risk associated with foreign trade. Low-tech firms are the hardest hit as bargainin power has been reduced and firms must upgrade tech. Local govts are offering to help by subsidizing costs associated with expanding trade through advertising and marketing. Liu Chuanzhi(Lenovo): Founder. New shareholding structure. China Oceanwide Holdings (Lu Zhiqiang) has paid 2.7B yuan for a 29% stake in Lenovo’s parent Legend, reducing the state’s take from 65-36%. Academy still holds the biggest stake, followed by an employee group. Lieu is still president. New shareholder supports Legend’s long-term vision. Didn’t prefer a SOE owner. Restructuring has given Legend better governance and for Liu’s successor, though succession remains a difficult issue. Management incentives issue still big. Also, the direct inv business. Future dev model might resemble Cheung Kong Holdings. Lu Zhiqiang (Oceanwide): Launched career in 1985 and has invested in RE, financing, energy, chemical engineering. As of 10B yuan. Friends with Liu Chuanzhi. Lenovo was a strategic investment. Appraised and reappraised Lenovo based on net A. Will Liu stay on? Employee stock ownership is still too low, Lenovo’s dev requires more new employees. Worries that incentive mechanism may become a problem. 8-1o yuan per share in the future? Ming Shuliang, Yu Ning (Caijing): 25yrs ago, Liu Chuanzhi accepted 200K yuan from CAS to establish Lenovo. Trying to shift from state ownership to private ownership, qualify for A-share listing. Doesn’t need govt approval for internal decisions. May need to dilute shares to resolve the incentives problem. Lu and LIu are members of the Taishan Association, a club for executives at top Chinese enterprises. President of Taisahn Evertrust Chairman Lin Rongqiang informed Lu that CAS was selling part of its Legend stake; Lu found Liu to discuss the matter. Liu had halped Lu in 2004 to finance land deals. Lu was able to lobby the Dept of the United Front Work CPCCC and All-China Federation of Indus and Comm to convince CAS to consider Lu. Part of a process to transition from the red hat of govt agency approval to private board of directors. Liu introduced a flexible bonus system to motivate employees, and to reduce state shareholdings and increasing employees holdings. MinFIn told him to fuck off, but CAS gave some away anyway. When Lenovo split from Legend subsidiary Digital China, Liu entered the VC market. Zhu Linan was put in charge of Legend investments and began investing in stock and established Hony Capital. Also launched Raycom RE Dev to invest in prop, and an autonomous fund for direct investment. Liu worries about employee turnover as most workers are still relatively new. Needed an investor with understanding with CAS and Legend, back Legend’s future strategic plans. Beijing U professor Zhou Qiren believes that the SASAC policy of “1 majority shareholder” is flawed and costly. CAS demanded reqs of registered cap and profitability. Was the price too low? Based on estimated NAV of state-owned assets and management costs? Legend is trying to increase direct inv ventures while reducing dependence on Lenovo. Core assets need to reach the scope of Lenovo’s total assets. Can Legend list on the H-shares and A-shares?

Education – Policy Banks: Exim Bank, ADB, CDB are used to promote and finance the construction of infra, promote exports, and safeguard food production. Now, they have been commercialized, though the ADB still caters to agriculture. Exim was once 1/10 the size of CDB but has expanded rapidly through providing foreigners with dev aid and preferential loans, distributing govt-backed loans to foreign nations, financing international engineering projects and the export of high-tech products, overseas expansion, and built a market-oriented division alongside its policy-directed functions. By 2008, the market division had completely covered losses from policy-lending and reported profits for the 1st time ever. NPAs are down 2B yuan to 7B. Its primary policy objective is the promotion of foreign trade and diplomacy by capitalizing domestic exporters and exporting credit to profitable foreign projects; yet its customer base is overwhelmingly private biz ints which it competes for against the Big 4. They can provide loans at half the Big 4 IRs. CB has planned to inject 200B yuan into Eximbank to help with restructuring. Regulators are worried about the effects of the trade collapse earlier this year on the bal sheet and its policy goal of supporting export financing. In Q2, its lending surged 130% yoy, raising concerns about CAR and a lack of recapitalization. Info about its cap structure/bal sheet is sketchy; NPL provisions are probably insufficient and reg standards would imply the bank is neg net cap. Eximbank gets its capital by issuing interbank bonds, receiving loans from the CB, and fiscal injections. Li Ruogu, Pres of Eximbank, believes that compliance with the 8% min cap req wil require a 40B yuan injection after loan loss provisions. A 200B injection by the CB would ease pressure from soaring forex reserves. Restructuring would imply a move away from the state policy bank model and establishing capital adequacy and an effective risk control framework.

by paulabowles

For criminologists and sociologists, prison has for many decades provided a fertile environment for research. In recent decades, the focus has been on overcrowding, together with attempts to identify the composition of the prison population. As at 25 September 2009, Her Majesty’s Prisons contain some 84,382 incarcerated men and women.

On the same date the BBC reported that as many as 8,500 of these prisoners are former veterans of the British army, navy and air force. Moreover, this is not the whole picture as Napo, the Probation Office’s union, estimate that a further 12,000 plus ex-service personnel are being dealt with by the criminal justice system. For many of these men and women, their crimes relate to alcohol and drug abuse, as well as domestic violence. Although these crimes may not be unique to ex-service personnel, claims have been made by Napo that ‘[i]t’s the hidden kind of consequences of war.’ In essence, the very nature of their military career—be it post-traumatic stress disorder, or a lack of support upon leaving the services—can make the return to “civvy street” highly problematic.

Despite the government’s insistence that this particular concern is at the ‘forefront of the prime minister’s mind,’ it does raise some very interesting issues. The British media often appears to present issues in very black and white terms. Arguably the terms hero and villain are so diametrically opposed it is difficult to imagine how they will portray these particular individuals.

Doreen Anderson-Facile on Basic Challenges to Prisoner Reentry

Robin L. Riley on Women and War: Militarism, Bodies, and the Practice of Gender

A committee of MPs has said there need to be changes to the benefits system so that carers to be referred quickly to the services they need.

There are an estimated six million unpaid carers in the United Kingdom looking after family or friends who are sick or disabled, the Public Accounts Committee said in its report Supporting Carers to Care.

The Department for Work and Pensions (DWP) provides two main forms of support to carers—paying carers’ benefits and providing employment support—at an estimated cost of up to £2 billion a year.

However, the committee reported that benefits for carers are unnecessarily complex and cause confusion.

About a fifth of carers who receive benefits have difficulties with some aspect of the application process.

These difficulties include understanding the information provided by DWP and also what information they are required to provide.

The system of ‘underlying entitlement’ means some carers have to apply for Carer’s Allowance, even though they are not eligible for it, in order to receive ‘top-up’ payments of Carer’s Premium and Additional Amounts.

Complexity is also caused by the interaction of carer’s benefits with benefits received by the person for whom they care – receipt of carer’s benefit can reduce the cared for person’s benefits.

The committee said DWP’s communications with customers can be lengthy and difficult to understand and Jobcentre Plus’ target regime does not provide sufficient incentive for Personal Advisers to help customers find part-time work.

“Carers’ needs would often be met if the needs of the person being cared for were provided for,” the committee concluded.

“This outcome requires effective co-ordination of services between DWP and other organisations in central and local government, as well as the voluntary and community sector.

“Improving relationships at a local level would make it easier for carers to be referred quickly to the services they need.

At November 2008, 900,000 carers met the entitlement rules and the value of the social care they provided has been estimated by the National Audit Office at £23 billion a year.

Edward Leigh, chairman of the committee, said:

“Millions of people devote a large part of their time, often for many years, to caring for family or friends who are ill or disabled.

“But the value of the service that these unpaid carers provide to society is not reflected in the quality of DWP’s arrangements for providing them with financial and other support.”

In the House of Commons Treasury Committee report Evaluating the Efficiency Programme, Thirteenth Report of Session 2008–09 printed 21 July 2009 there are some recollections to a National Audit Office report of 2007 and its requests when implementing the Gershon programme of efficiency savings. They’re focusing on HMRC but the conclusions are applicable in any application of Peter Gershon’s ‘amazing’ ideas.

In their own words on page 26 of the latest report it is proposed that:

” 75. We welcome the Government’s assurances about maintaining service quality in light of the drive for efficiency savings. However we are concerned that reported measures of service quality are inconsistent with some of the evidence we have received.

We acknowledge that creating new measures may incur costs, but ensuring that service quality is not adversely affected by efficiency savings should be a priority. The fact that departments can select their own measures of service quality may lead to a biased selection of measures that do not give a representative picture of service quality.

Departments should work with the NAO to define adequate service quality measures preferably using data drawn from users.”

Further along on page 28, the committee asks that:

11. To ensure that only true efficiencies are captured and reported, it is important that they are measured appropriately and accurately. We expect Government departments to have implemented the NAO’s recommendations concerning measurement. We expect the Treasury to monitor the progress of departments’ improvement in measuring efficiency. “

I wonder what’s happened the next time they look? How can service quality be measured without analysing feedback from the customers?

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If you are interested and, preferably, in UK local government please complete the survey, it doesn’t take long at all. I’ll keep feeding back through these pages, which are also covered by localgov.co.uk and PSF.

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The election of hereditary peers to the House of Lords will be ended by new legislation proposed by the government.

Justice Secretary Jack Straw, who is also Lord Chancellor, presented the Constitutional Reform and Governance Bill yesterday into the Commons.

It contains proposals for reform of the Lords, judicial appointments, treaties and the civil service and will be debated by MPs when Parliament returns from the summer recess in October.

The Constitutional Reform and Governance Bill removes the hereditary principle from the House of Lords and allow for the disqualification of peers found guilty of serious criminal offences.

The Lords provisions contained in the Bill build on the House of Lords Act 1999 to end the system of by-elections which allowed for 90 hereditary peers to continue to sit in the House of Lords.

They are currently replaced by a poll of hereditary peers from outside the House when a vacancy is created by the death of a hereditary peer.

Ending the by-elections will eradicate the hereditary principle from the second chamber.

There are approximately 750 members of the House of Lords, including 26 bishops and archbishops of the Church of England.

New powers are proposed:

* to allow members of the Lords to resign from Parliament

* to give the House authorities the power to expel or suspend peers found guilty of misconduct

* to disqualify members of the Lords found guilty of a serious criminal offence, or who are subject to a bankruptcy restriction order.

The Bill also places the Civil Service Code of impartiality and professionalism on to a statutory footing.

It takes power away from Government so that any change to the Code must go through Parliament first.

Other measures in the Bill to rebalance the relationship between Parliament, the government and the public include:

* repealing the legislation that limits protests around Parliament

* removing the Prime Minister from involvement in all judicial appointments in England and Wales to strengthen
the independence of the judiciary.

Separately the government will be bringing forward a resolution to ensure that the House of Parliament is able to approve any commitment of armed forces into conflict.

Jack Straw, Lord Chancellor and Secretary of State for Justice, said:

“We are committed to ending the hereditary principle, which has no place in a modern, representative democracy.

“Together with new powers which will give the house authorities more options in terms of disciplining peers on the rare occasions when this is appropriate, this builds on the work we have already done to create a strengthened, more legitimate second chamber.

“We also want to strengthen the relationship between voters and those they elect.

“The Constitutional Reform and Governance Bill will ensure that power lies where it should – with Parliament and the people.

“The Lords reform measures in the Bill come before proposals for comprehensive reform of the second chamber, which will be put forward in a draft bill later this year.

“The government is committed to reforms leading to an 80% or 100% elected second chamber.”

The Bill includes the following reforms:

1. The Civil Service

Place the Civil Service and Civil Service Commissioners on a statutory footing, and enshrine the Civil Service’s core values in statute.

2. Treaties

Enshrine in statute the procedure for pre-ratification scrutiny of treaties by Parliament, and give legal effect to a vote against ratification.

3. Demonstrations around Parliament

Repeal sections 132 to 138 of the Serious Organised Crime and Police Act 2005, removing the requirement to give notice of demonstrations around Parliament, as well as the offence of holding a demonstration without the authorisation of the Metropolitan Police Commissioner.

The Bill will instead enable the police to be given proportionate, alternative powers to maintain access to Parliament.

4. Human Rights – ‘Somerville’

Reconcile the time limit for human rights claims under the Northern Ireland Act 1988 and the Government of Wales Act 2006 with that in the Human Rights Act 1998.

Due to the interface between this Bill and parallel provision for Scotland in an Act of the Scottish Parliament which has yet to receive Royal Assent, the same provision for Scotland will be introduced by amendment at the appropriate time.

5. Judicial Appointments

Remove the Prime Minister from the process of making appointments to the new Supreme Court (this complements non-legislative measures ending his involvement in the appointment of other members of the senior judiciary of England and Wales); and remove the provision enabling the Judicial Appointments Commission to assume responsibility for magistrates’ appointments.

6. National Audit Office

Provide a modern governance arrangement for the National Audit Office, and change the tenure of the Comptroller and Auditor General.

7. Transparency in accounting for NDPBs

Align the spending mechanisms of non-departmental public bodies with the existing budgetary treatment.

Services for people with rheumatoid arthritis – UK National Audit Office report – 15 July 2009

* Publication date: 15 July 2009
* HC: 823 2008-2009
* ISBN: 9780102955071

Extract from the press release:
“Too many people with rheumatoid arthritis are not being diagnosed or treated quickly enough, and some services for people with the disease are not coordinated enough, according to a report published today by the National Audit Office. Delay in treatment is detrimental to patients’ health, their quality of life and, with three quarters of people of working age when diagnosed, the economy. The estimated cost to the economy of sick leave and work-related disability for people with rheumatoid arthritis is £1.8 billion a year.”

The liaison committee has said the way public expenditure figures for Government programmes for future years are controlled.

The committee, made up of the 32 chairs of the House of Commons Select Committees, said the process much more understandable and useful.

Committee Chairman Alan Williams said:

“Effective monitoring of government expenditure—and ultimately the exercise of effective control over it—is one of the core functions of the House of Commons.

“This function is pursued day in and day out by the House, through inquiry and debate on the policies underlying expenditure, on priorities, and on overall government spending, and through examination by the National Audit Office (NAO) and the Committee of Public Accounts (PAC) of past expenditure.”

The committee said it welcomes the Alignment Project White Paper from the Treasury alongside it own proposals for “additional opportunities to boost the House’s effectiveness.”

In the White Paper the Treasury put forward plans for major reform of the way expenditure figures—the Estimates for the current year which require the approval of the House of Commons—are presented to Parliament.

This would align them more closely with the expenditure plans already published for future years.

The Committee said “overall” it supports the detailed proposals for alignment.

They will:

* make the Government’s requests to Parliament for spending authority easier (though not easy) to understand

* mean that the sums that Parliament approves are on the same basis as those actually used within Government for setting the budgets of each Department.

This will enable better scrutiny by individual Members, by the House’s Select Committees and by other interested parties.

However, it will not in itself deliver better scrutiny and control by the House as a whole.

That will require also more effective procedures for consideration of expenditure proposals on the floor of the House.

The Committee’s Report today therefore proposes that:

* the scope of debate on the days set aside for these matters be broadened to allow genuine examination of future spending plans, allowing proper scrutiny before plans are almost irretrievably firmed up in the Estimates

* two additional days’ debates be set aside for formally debating Estimates and spending plans (in accordance with the Government’s own initiative to provide opportunities for debates on these matters).

While the House scrutinises expenditure all the time – through parliamentary questions, statements, general debates and legislation, and Members are already able to precipitate debates, vote on individual Estimates, and force reductions in Estimates – the Committee considers that the House would benefit from an extension of procedures to provide for wider, but nonetheless focused, opportunities to examine future expenditure plans, as well as current Estimates.

Intelligent Monitoring: New guidance to help cut red tape for charitable, voluntary and community organisations – UK National Audit Office – June 2009

“The National Audit Office has published some practical guidance. This will help Government reduce the red tape involved in monitoring the £12 billion it gives to charities and other voluntary and community organisations each year.

Charities that receive public funding have to account to government funders for how they have spent this money. They also need to show the impact they achieve with it.  But the burden and cost of this must be appropriate to the risks and benefits involved.

Cutting unnecessary red tape can free up time and money that would be better spent focusing on the key services that these organisations provide. The term we use for achieving this balance and avoiding poor practice is ‘intelligent monitoring’.

Our guidance: Intelligent Monitoring is part of ‘Financial relationships with third sector organisations – a decision support tool for public bodies in England‘.

It is designed to:

• be a step by step guide that will help Government to apply the ‘Principles of proportionate monitoring and reporting’ produced by the Office of the Third Sector.
• encourage Government to think about monitoring as early as possible in a funding relationship and not simply as an add-on.
• highlight the importance of monitoring for the providers of services as well as funders.
• include practical case studies to illustrate the guidance and how the principles can be applied.

The National Audit Office plans to expand on these practical examples of intelligent monitoring with the help of users of the guidance as best practice emerges.  If you would like to contribute to, or comment on, the guidance please email better_funding@nao.gsi.gov.uk.

Intelligent Monitoring builds on the existing National Audit Office decision support tool ‘Financial Relationships with Third Sector Organisations: a Decision Support Tool‘. This is an online toolkit designed to help Government funders work through the key considerations and issues involved in funding third sector organisations such as charities and voluntary and community organisations.

The guidance has the support of HM Treasury, the Office of the Third Sector  and the Commission for the Compact.”

Cheryl Gillan is Conservative MP for Chesham and Amersham

by Tony Grew

A bill that would require an adult autism strategy and statutory guidance has passed all its Commons stages.

The Autism Bill now moves to the Lords. It is a private member’s bill moved by Tory MP Cheryl Gillan.

“Mr Deputy Speaker, I cannot tell you how delighted I am to move Third Reading,” she told the House on Friday.

“Reaching this stage is a landmark, and our having done so is due not only to me, as the Member who had the privilege of promoting the Bill, but to the House of Commons at its very best.

“This has truly been a cross-party effort involving those on the Conservative, Government and Liberal Democrat Benches, and I am delighted that Members of Parliament have come together to try to introduce a Bill which we hope will make a great difference to so many people’s lives throughout our country.”

The bill requires the Secretary of State for Health to publish an adult autism strategy and to issue associated statutory guidance.

It would also place a duty on local authorities and NHS bodies to act under this guidance.

The government supports the bill.

Health minister Ann Keen told the House:

“I am happy to confirm that, although my Department is in the lead on this matter, it is a cross-Government piece of work.

“We have a steering group for developing the strategy which includes representation from all relevant Departments including the Department for Children, Schools and Families, the Department for Work and Pensions and the Office for Disability Issues, and we are also working closely with Cabinet Office and the Department for Communities and Local Government.

“I can confirm, as the hon. Lady asked me to, that we will ensure that the delivery plan for the strategy is robust and practical.

“We will assess the impact of the proposals and the benefits, weighing up the evidence in a systematic manner.

“I am delighted to be supporting the Bill.

“We can confirm that the Bill is in a form that the Government can wholeheartedly support as it continues its journey through Parliament.

“We have made a difference in this Parliament.

“The hon. Lady (Mrs Gillan) has made a huge contribution, along with her colleagues but, of course, as we all recognise, it is the families and the people with autism who have made real progress.

“I hope that the House will give the Bill its Third Reading today and that the other place will ensure that it becomes an Act.”

Mrs Gillan, who is Shadow Secretary of State for Wales, outlined the scope of the legislation.

“The Bill has the potential to deliver the crucial improvements needed for the approximately 500,000 people with autism in the UK, who have been neglected for so long,” she said.

“Autism was long overdue serious consideration, as outcomes for both children and adults were consistently so much poorer than those for people who do not have autism.

“A recent report by the National Austistic Society (NAS)  found that 40 per cent. of children with autism had been bullied, that 27 per cent. had been excluded from school and that 42 per cent. reported that they had no friends.

“In addition, 70 per cent. had a psychiatric condition accompanying their autism. For adults, the picture is even bleaker.

“The NAS estimates that 63 per cent. of adults with autism do not receive enough support, while 82 per cent. of parents or carers of adults with autism say that their child needs daily support just to live independently.

“Only 15 per cent. of adults with autism are in full-time work and 75 per cent. do not have any friends or find it very hard to make friends, while 40 per cent. of adults with autism still live with their parents.

“We currently fail both children and adults with autism in this country.”

Tory MP Angela Browning said that parents worry about their children’s education and ability to live independently.

“However, as a parent, I think—I hope that I would speak for many parents—that the biggest fear is: “What happens when I die?” That has to be addressed.”

Mrs Gillan said that fear “is probably the most moving part of my encounters with families with children who have autism.

“The terrible fear of someone who has a child with a disability of any sort is about what will happen to that child when they are no longer around to give it the sustenance that it needs.

“That is why I hope that this framework legislation will provide a platform from which Governments can ensure that local authorities and other services are structured in such a way as to give greater reassurance to people in that situation.”

The bill creates a new legal duty to ensure that local areas collate and share data on disabled children and that they will also include children with autism in their plans for children’s services.

The statutory guidance accompanying the regulations will state that autism must be specified as a separate category.

The bill places a duty on the Secretary of State to introduce a strategy for improving outcomes for adults with autism, accompanied by statutory guidance for local authorities and NHS bodies.

“If the Bill becomes law, it will be a catalyst for huge progress in meeting the needs of the country’s adults with autism,” Mrs Gillan said.

MPs spoke in favour of the bill and paid tribute to Mrs Gillan for successfully piloting it.

Anne Milton, Tory health spokesperson, said:

“I was always aware of the danger that this morning’s speeches would sound a little more like an Oscar ceremony than anything else, and I am afraid that I will only add to that.

“None the less, I say to my children and to my colleagues that when one does something well, one should be proud of it.

“It should be used as an opportunity to understand better how one can do things better in future.”

“We have started the journey,” Lib Dem MP Annette Brooke said.

“We have the luggage and the map, but will we reach journey’s end?

“It is such a long journey.

“The NAO found that 74 per cent. of local authorities do not have a commissioning strategy for adults.

“Some 80 per cent. of GPs told the NAO that they needed additional training and guidance.

“This is a huge problem and we must not underestimate how much needs doing. Training is necessary across the board.”

Mrs Gillan said:

“By not providing adequate support to people with autism, we are wasting not only large amounts of taxpayers’ money, but human talent and lives.

“I hope that the Bill will act as a catalyst for change.

“I am very proud to have been able to continue other people’s work and introduce this legislation by working with people across all sides of the political divide and in the best interests of our society and community.”

The bill passed its Third Reading and now moves to the House of Lords.

Reducing healthcare associated infections in hospitals in England – National Audit Office – 12 June 2009

This report examines the extent and impact of healthcare associated infections; the effectiveness, sustainability and cost of the Department of Health’s approach; and the effectiveness of action taken in hospitals to prevent and control infections. It also looks at the barriers to improvement and recommends the steps that the NHS should take to sustain and make further progress.
68p.

National Audit Office – publications

Supporting people with Autism through Adulthood , National Audit Office, May 2009

Executive Summary

Click on the report title to gain direct full-text access

Abstract:

Autism is a lifelong developmental disability, sometimes referred to as Autistic Spectrum Disorder (ASD) or Autistic Spectrum Condition (ASC). Its causes are not fully understood, although there is some evidence that genetic factors are involved. The term ‘spectrum’ is used because, while all people with autism share three main areas of difficulty (Box 1), their condition affects them in different ways. Some can live relatively independently – in some cases without any additional support – while others require a lifetime of specialist care.

The features of autism

 The three main areas of difficulty experienced by all people with autism are:

• Communicating socially, particularly using and understanding facial expressions, tone of voice and abstract language
• Recognising or understanding other peoples’ emotions and feelings and expressing their own making it more difficult to fit in socially
• Understanding and predicting others’ behaviour, making sense of abstract ideas and imagining situations outside their immediate daily routine

 Other related features can include: love of routines and rules, aversion to change and sensory sensitivity (for example a dislike of loud noises)

Around half of people with autism also have a learning disability (sometimes known as ‘low functioning‘ autism) while the rest do not (so-called ‘high functioning’ autism which includes Asperger Syndrome).

The Public Accounts Committee has slammed the BBC for refusing to reveal how much money it pays its radio presenters.

Today the committee published a report on the BBC’s management of radio production efficiency.

It accused the corporation of giving “inaccurate information to this committee on the cost of its top radio presenters relative to commercial competitors.”

It said the expensive contracts with top presenters reduces the cost base from which the BBC can seek efficiency savings.

Edward Leigh MP, chair of the committee, said:

“The National Audit Office has a statutory right to examine the details of expenditure in any government department.

“It has no such right of audit access to the BBC, despite the fact that the Corporation is funded with over £3 billion of public money each year.

“One consequence of this highly unsatisfactory arrangement is that the BBC would not provide the head of the NAO, the Comptroller and Auditor General, with a breakdown of the presenter and staff elements of radio programme costs, unless the C&AG agreed to constrain his discretion to report to Parliament on what he saw.

“Quite rightly, the C&AG, who handles information of the highest sensitivity in his wider work, refused to accept such a constraint.

“Very few will find acceptable any such constraints on the National Audit Office’s ability to investigate how a publicly funded national institution spends our money.

“It is disgraceful that the NAO’s lack of statutory audit access to the BBC puts the Corporation in the position to dictate what the spending watchdog can and cannot see.

“What the NAO has been able to find out is that the costs of similar programmes on different BBC networks vary widely.

“And, for most breakfast and ‘drive time’ shows, the BBC’s costs per hour are much higher than those at commercial stations.

“This is primarily down to the size of contracts with top presenters which, the BBC has confirmed, absorb over three-quarters of staff costs on these shows.

“All of this places a big question mark over whether the BBC is achieving value for money for the licence payer.”

The committee said there are “unexplained differences in the cost of similar BBC programmes.”

“Looking beyond internal cost comparisons, the costs of some BBC radio programmes are also significantly higher than those of comparable programmes broadcast by commercial stations.

“For example, the cost for an hour of Radio 2’s breakfast show, Wake Up to Wogan, is double the cost of the most expensive commercial breakfast show.

“Although commercial stations provided the Comptroller and Auditor General with cost information, the BBC has, as yet, not carried out any benchmarking with commercial stations.”

The committee said the BBC appears to be paying more than twice what commercial radio stations are paying their presenters.

“The BBC has not convinced us that it needs to pay so much more than the commercial sector to some of its presenters, who can owe their fame to their jobs at the BBC.

“There is no obvious core skill for presenters that cannot be found by seeking out new talent.

“We are not persuaded that the market, rather than the BBC itself, on the back of the licence fee, is driving what top BBC radio presenters are paid.”

The committee recommended that the BBC should establish why it is paying more than other stations for some presenters and take advantage of the position of current market conditions and the BBC’s standing in the industry to attract and retain talent at the minimum cost necessary.

“2000 SCHOOLS IN DEFICIT”

“HEAD TEACHER SUSPENDED IN BONUS ROW”

Three recent headlines tell the same story.  The country’s education service lacks effective financial management. The National Audit Office says Ed Balls’ Department could have spent another £250 million on schools last year. That’s the Ed Balls who would be Chancellor of the Exchequer. But the Department he runs now just does not have proper modern accounting systems.

The Audit Commission is equally concerned that 2000 schools regularly run a deficit. They lack the nous to manage their own modest budgets.

And the Chair of Copland Community College Governors has admitted that the school spent several hundreds of thousand pounds on bonuses for senior staff. The local authority has suspended the Head, Deputy Head and Bursar while the whole business is investigated. The Secretary of State is delighted Brent Council has taken decisive and swift action to investigate this grave situation.

These three reports highlight the same problem. No one now doubts that fifty years ago local councils exercised unnecessarily detailed control over spending on their schools and colleges. Many, led by authorities like Cambridgeshire, London and Sheffield, gave up this detailed control, and managed to combine control over the overall budget with  freedom  for schools to maintain their own premises, and decide their own priorities in staffing,  equipment and materials.

In 88 Baker extended local management to every school and transfered responsibility for monitoring and controlling expenditure to governing bodies. At a stroke more than 25,000 schools became small businesses, managed by heads appointed for their educational expertise, and overseen by governors who do not necessarily have the skills or time for financial management.

Local authorities may have run too tight a ship. No-one said their controls were ineffective. The best education departments appointed management accountants a generation before the DCSF heard about accruals. It is high time to restore and strengthen this middle link in our education service.

DIOGENES

By Lauren Crooks

THE Defence Secretary John Hutton yesterday admitted that the MoD had a “responsibility” to help war veterans injured or traumatised while fighting the UK’s war on terror.

He claimed there had been huge improvements in ensuring equipment and kit reached the front line despite a damning National Audit Report slating the time it takes to ensure supplies reach boots on the ground.

But on a visit to a medical centre at Redford Barracks in Edinburgh yesterday, the Minister warned Britain had to gear up for a long-haul in Afghanistan and ensure health care is available for the casualties that will follow.

Describing medical help for the armed forces as the “best in the world” he said the MoD was working to improve after care for the veterans who have returned from Afghanistan suffering from both physical and mental health issues.

He said: “This war could last a long time and we can’t just walk away from them and say it’s a part of military life.

“We are responsible for looking after those who have suffered mental trauma while on duty.

“We are determined to do everything we can to improve welfare of veterans and that commitment will continue.”

He spoke as the National Audit Office claimed the Ministry of Defence is struggling to get equipment and supplies out to frontline troops in Afghanistan – saying just 57 per cent reach them within the allocated time.

But Hutton denied the claims saying: “I don’t think that’s true.

“We have seen a huge improvement in kit and equipment and we are getting it out there in record time.

“We are doing everything we can and anywhere it is possible to make improvements we are making them.”

He was accompanied yesterday by Scottish Public Health minister Shona Robinson and met with patients and staff at the Redford Barracks medical station in Edinburgh.

They were given a tour of the physiotherapy facilities as they launched the Military and Civilian Partnership awards – being held in Scotland this year for the first time.

Mr Hutton heaped praise on the treatment on offer to the troops on the front line and at base while chatting with patients in the medical centre who were receiving treatment for injuries received while on duty in Afghanistan.

Among them was Lance Corporal Leah Lewis, 25, who was hit by a 26-ton Mastiff truck while on patrol.

She said: “People can hardly believe that big truck has gone over me and I am still here to tell the tale. But the medical care as soon as it happened was really very good. The team was straight there and I was flown to Camp Bastion.

“Everyone at each different stage of my recovery has been brilliant. I love my job and all of these people have helped me to reach my full strength again so I’m very grateful.”

Lance Corporal Darren Bonnar, who had to have an operation on his knee after a fall, added: “The medics and physio staff give you encouragement and confidence at a time when you are feeling pretty low and just want to get back out there.”

During the tour the ministers were introduced to officials from the Army, Navy and RAF.

They were shown a typical front-line medical tent, ambulances and their equipment and were taken aboard a rescue helicopter.

Mrs Robinson said the link between the armed forces and NHS in delivering treatment was clear.

She said: “This is true partnership.

“Our forces and veterans receive superb care from our NHS, while increasing numbers of doctors, nurses and other health professionals employed in the NHS are using their skills as military reservists – which is turn benefits the care they offer on return to our hospitals and health centres.

“Each and every one of them deserves our thanks and the awards ceremony gives these often unsung heroes credit they deserve.”

Mr Hutton admitted that although the care was not perfect, he was working closely with the armed forces to ensure improvements were being made.

And he said that the medical care on offer in the UK was of the highest standard, lavishing praise on the medical staff.

He said: “These awards celebrate the achievements of the unsung heroes in the military and NHS delivering outstanding medical care to our Armed Forces.

“I am proud to say that wherever our personnel are they are supported by some of the most skilled and dedicated physical and mental health care professionals in the world.

“I think we have one of the best services in the world. These people are exceptional, we are so lucky.

“The things they do for us makes the hairs on the back of my head stand up.”

The MCHP awards ceremony will take place at Hopetoun House Hotel in West Lothian in October.

A recent report published by the National Audit Office estimates that up to £290 million ($425 million) could be saved each year through better management of Government service-based contracts.

The report concludes that the UK Government spent over £12 billion ($18 billion) on Service-based contracts in 2007-08 primarily in the areas of information and communications technologies and spent around 2% of the total contract cost (£240 million/$350 million) to manage and administer those contracts.

Since the publication of the 2004 Gershon Report into public spending, UK central and local government organisations have been encouraged to provide greater visibility into their contract spend and on the value for money that public funds are used for in government projects.

The National Audit Office goes further by stating that:

The delivery of public services, protection against failure and achievement of value for money are all dependent on effective contract management.

Poor contract management has been cited as the cause of a number of embarrasing and costly public project failures in recent years, like the difficulties experienced by the UK Rural Payments Agency to pay British farmers compensation, to the problems at the UK Passport Office that cost over £12 million in one instance when a new computer system failed.

The National Audit Office says that ‘contract management is especially important where suppliers are engaged to provide services over a long period of time and customers need to ensure that service levels and value for money are maintained over the duration of the contract’.

Key findings of the report:

• Contract Management is not always viewed as being strategically important
• There is rarely a single person with overall responsibility for Contract Management in an organisation (interestingly, we wrote an article about this issue in the commercial world a few weeks ago)
• Government organisations do not allocate appropriate skills and resources to contract management
• Poor management information and enforcement of contractual obligations:  38% of contract managers did not envoke contract penalty clauses when supplier performance fell below specified levels
• Poor risk management of contracts
• Value for money testing can result in significant savings but the extent to which government tests the value for money of ongoing services and contract changes is variable

Whether you are looking at Contract Management in the public sector, as in this case, or whether it is in a commercial context, there is unlikely to be single solution to better contract management.

The key things to get right however are:

1. Define your contract management process
2. Establish clear policies and procedures for creating, approving, archiving and managing contracts
3. Appoint someone to have overall responsibility for contract management in your organisation
4. Consider the use of technolgy solutions (like Contract Lifecycle Management solutions) that help to support and manage the contract process