By Matt.Ross

20 Mar 2013

While America’s Californian rappers battle their East Coast rivals, transport chief Philip Rutnam has his own West Coast struggle: the effort to restore his department’s reputation after its rail franchise failure. Matt Ross meets him

In our daily lives, few of us spend much time thinking about how Britain keeps moving. If traffic is light or the train is on time, we focus on our destination; it’s only when we’re delayed that we concentrate, with instant irritation, on the transport systems themselves. But for Philip Rutnam, the Department for Transport’s (DfT’s) permanent secretary, the UK map is a moving one – not a patchwork of static towns and cities, but a network of connections carrying flows of people and goods to every corner of our crowded islands.

As Rutnam poses awkwardly for photos on a tiny DfT roof terrace, one reminder of transport’s complexities looms behind him: the unfinished St George’s Wharf tower is less than a mile south of the department’s Horseferry Road HQ. On 16 January a helicopter hit the tower’s construction crane and crashed to the ground, nearly striking the railway near Vauxhall: a busy rail interchange with a bus terminus, tube station and major roundabout. Half a mile to the West of Horseferry Road lie Victoria’s huge rail and coach stations; Waterloo is a 20-minute walk to the North-East, just across the River Thames – busy with ferries, pleasure boats and barges – and its two bustling embankments.

Without its transport links, London would die: these four train and tube stations alone carry more than 200 million passengers every year. And while we owe many of these huge chunks of infrastructure to the foresight of our Victorian forebears, Rutnam says that today’s DfT is also keenly aware of the need to plan and invest for the decades to come. “There’s never been a time when transport and infrastructure have been more important to the government’s economic agenda,” he says. “Unless we prepare ourselves for the future and invest for it, we’ll find that we’re totally unprepared when demand arrives and we’re facing huge overcrowding.”

High-Speed 2 is a good example of this long-term planning, Rutnam says: the projections show steadily increasing demand for rail travel, “and the best way to provide that capacity is through high-speed rail, not conventional capacity”. HS2 will “stand the country in good stead for decades to come,” he adds. “It’s very much about looking at the strategic needs of the country and referencing those to the demand there’s going to be for travel and transport.”

Is it possible to predict demand over that kind of timescale, or to know in advance the economic impacts of such a huge project? Forecasts are always uncertain, he responds – but typically, they err on the conservative side. “The experience in our country is that actually the benefits have tended to be understated beforehand, if anything, rather than overstated,” he says, pointing to the Jubilee Line extension – a piece of infrastructure, like HS2, whose benefits were fiercely debated before its construction. “Usage has turned out to be greater than predicted, and nobody is questioning the huge impact it’s had on the regeneration of Docklands and other areas of East London; the way it’s changed the centre of gravity of London,” he says. “Infrastructure can be a game-changer.”

When the game is lost
So the DfT is steadily forging ahead with a set of major transport projects, few of which attract much national attention as long as they keep ticking along. But, like a traffic jam or signal failure interrupting your daily commute, a big problem with an element of the DfT’s work can suddenly bring a transport issue into uncomfortably sharp relief – and in organisational terms, they don’t come much bigger than the department’s failure to properly let the West Coast Mainline (WCM) franchise.

The catalogue of errors that culminated in Virgin Trains’ successful challenge to the DfT’s franchising operation has been exhaustively examined in recent months – not least within these pages (see CSW 23 January). Reports by the National Audit Office (NAO), the Public Accounts Committee (PAC), the Commons Transport Select Committee and the DfT’s own lead non-executive director Sam Laidlaw have savaged the department’s handling of the franchise, though the culpability of particular individuals remains unclear: the HR investigation, carried out by retired environment department official Bill Stow, will not be published.

What is clear, though, is that a number of contributory factors lie behind the failure of the franchising operation – meaning that Rutnam, who joined the department six months before the franchising process collapsed, has a lot of work to do. For a start, he’s had to unpick the new organisational structure imposed on franchise management during the major reforms that began in 2010: this arrangement “failed to set out roles, responsibilities and associated accountabilities clearly”, said Laidlaw, and Rutnam acknowledges that “it’s certainly right to say that the structure didn’t help – in particular, the separation between the responsibility for developing policy towards franchising, and the responsibility for delivering that policy by awarding franchises and managing them afterwards”.

The PAC pointed out that during a bungled handover between these two arms of the DfT, there was a three-month hiatus in proper oversight of the project; and Rutnam has now re-created a rail directorate to manage the whole process, led by a director-general. That’s just the start of his challenges, though: the separation of responsibilities “was one of a number of factors” that led to the failure, he says. “Organisational structures can help or hinder, but in themselves they can’t provide all the answers.”

Getting the knowledge
The DfT also suffered from a lack of skills and expertise – due both to the departure of many highly-experienced (but expensive) staff during the job cuts, and the fact that the department didn’t fork out for external auditors or consultants. Rutnam admits that the DfT itself doesn’t have enough financial expertise: “The use of external financial advisers on the West Coast transaction would have been helpful,” he says. “We’ll be using them on franchising in future.”

So does the department’s failure to deploy external advisers on the WCM franchise suggest that the Cabinet Office’s spending controls, which require central sign-off for all significant spending on consultancy, should be loosened? “I’m not pressing for any change in the way in which controls operate,” he replies, pointing out that they allow departments to bring in consultants if the Cabinet Office is persuaded of the need for them. “I haven’t found any difficulty in getting our clear business needs met,” he says, “and this seems to me a clear business need.”

Meanwhile, the DfT will also have to build up its in-house expertise – and Rutnam is keenly aware that “there’s always a challenge for organisations like ours in the public sector to make sure they’re equipped with scarce skills that are highly valued in the private sector”; he mentions commercial skills as one obvious example. He knows that public bodies can’t compete on salaries, but argues that the DfT can offer “exceptionally interesting, rewarding roles which carry heavy responsibilities. We can give people a unique experience, a unique set of insights, and a unique ability to make a difference.”

The civil service’s commitment to training and developing its staff also gives it a leg-up in recruitment markets, he believes: “Offering people the sense that this is a place where they can learn and grow as professionals is a core part of our offer”. In this context, the fact that training budgets are being squeezed across Whitehall must be a worry – but Rutnam, at least, says he’s not cutting his funding for learning and development in 2013-14.

All change, end of the line
So the WCM debacle was due, in part, to a change programme in which the department adopted a problematic new structure, lost experienced employees and squeezed consultancy spending. And these changes were imposed at breakneck speed: the DfT was one of the earliest departments to begin cutting, and ran one of the fastest reform programmes. Does Rutnam accept that the pace of change was part of the problem? “I wasn’t here when the restructuring took place,” he replies, “but my experience is that if you’re going to restructure, you should do so fast.” Clearly reluctant to blame the DfT’s weaknesses on his predecessors Robert Devereux and Lin Homer – now both ensconced at bigger departments – Rutnam says that he’s “not going to try to provide analysis of whether things should have been done differently”.

And what about Claire Moriarty, the director-general who oversaw the change programme and is now running the new rail directorate? Didn’t her reforms lead indirectly to the WCM problems? The reforms “made the context within which the department was operating more challenging, no doubt”, he concedes; but he maintains that these “background factors” were no more than contributory elements to a complex mix of causes. “It’s not as simple as saying: ‘It was the cause’,” Rutnam concludes.

Let’s take a look at some of those other causes, then. The NAO complained that the DfT had put too much faith in the project checks undertaken by the Major Projects Authority, pointing out that “Gateway Reviews are not a substitute for management controls”. For its part, the PAC explained that relatively junior staff had concealed from their managers some of the franchise process’s legal vulnerabilities, and suggested that the pressure to hit deadlines “may have led them to ride the risk they had recognised because completing the task was uppermost in their minds”.

Tighter programme and project management is required, says Rutnam – the department has already strengthened its internal auditing work and the training for senior project managers – and “we’re working to make sure that everybody in the organisation [better] understands the expectations there are around escalating issues, concerns, risks; and trying to make sure that there really is the culture of open and honest communication at all levels that is a key part of a thriving organisation”. So can he be sure that in future, people raising concerns won’t be putting their careers at risk? “This is an organisation which needs to encourage direct feedback from people at all levels,” he replies. “Straightforward communication up and down the organisation is a key part of being the kind of organisation we want to be.”

Buying time
Only DfT employees will know for sure how loudly these messages are reaching staff; but it is easier to see where concrete changes have been made to the procurement process. PAC pronounced itself “astonished” that under the department’s ‘anonymisation’ system, top officials and ministers hadn’t been told the bidders’ identities: this was a major cause of the franchise’s failure, it said, adding that Rutnam “did not challenge the approach when he arrived”. Nonetheless he now appears glad to ditch the system, noting that “I’d always thought after my arrival in the department that the approach it took was unusual – and given the experience that we’d had in franchising it was clear to me that it wasn’t only unusual; it was in some ways unwise.” Rutnam is, he adds, “completely confident that we can make the change in the way in which we do procurements without compromising their integrity”.

Worries about procurements’ integrity have, though, spread across the civil service since the high-profile collapse of the WCM franchise. CSW has heard several examples of procurement processes being restarted, altered and strengthened as officials seek to guard against challenges from rejected bidders – and the obvious danger is that the Cabinet Office’s attempts to make civil service procurements faster, more flexible and less onerous will suffer. Rutnam insists that the DfT “can’t shy away” from its duty to “do things which are difficult and innovative and challenging”, adding that the inevitable dangers should be controlled and minimised by officials being “very methodical, very thoughtful, very thorough about the way we reduce those risks” (see news). Yet it would be odd if civil servants don’t react to the WCM saga by making their procurements bullet-proof; and that is bound to add cost and time into the process.

Officials might be a bit more confident about exactly what they can and can’t do if it was clear precisely which individuals’ mistakes had fatally undermined the WCM franchise; but Bill Stow’s HR report will remain secret. “All I’ll say is that following its conclusion, I initiated some disciplinary proceedings against a number of members of staff,” says Rutnam. It’s not surprising he won’t go further: early on the department was accused of hanging some officials out to dry, and it’s already been the subject of legal action by one suspended civil servant. In fact, the department has had a bruising time ever since fears first surfaced over the WCM last autumn, and the media furore has only recently abated; the franchise’s collapse was used by some elements of the press to add ammunition to a much wider-ranging set of attacks on the civil service’s efficiency, competence, and enthusiasm for implementing ministers’ policies.

“Leadership is about responding to hard times, to challenging circumstances,” comments Rutnam. “It’s about helping people to see through the superficial comment that you can find in some quarters, and to recognise the reality of what civil servants can add to society. As leaders of the civil service, it’s our job to help people to see beyond comment that is uninformed. That can also mean accepting criticism sometimes – but it’s about focusing on the reality, and not getting distracted by the superficial.”

An unlucky aberration
That reality, in Rutnam’s view, is that the DfT is a generally high-performing organisation within which one set of operations went badly wrong. “We do a really good job in this department, and in my experience the West Coast was not the standard by which the department should be judged,” he says. “West Coast was a very unfortunate exception, but it was an exception to the kind of organisation that I see around myself on a daily basis.” Nonetheless, he adds, “we need to learn the lessons of [WCM], to recognise that it’s been a big episode. It really matters that we do our job well, and we have to apply everywhere the consistent standards of professionalism that I see in almost every aspect of the department”.

“Other major programmes and projects have gone really well,” he concludes. “We were pivotal to the transport story on the Olympics, which was an enormous success. Think of Crossrail: one of Europe’s largest construction programmes, and it wouldn’t be happening without the department. It’s on track, on budget, on schedule.” Look at the DfT’s planned devolution of decision-making to the emerging Local Transport Bodies, he says; and note that the department’s shared services centre (which, regular readers will know, has had a troubled history) has just been passed to a private partner as one of the government’s two new shared services hubs. “It’s an example of how we in DfT are leading the way on civil service reform, providing a civil service-wide capability that offers better quality of service at lower cost,” he says proudly.

So the DfT does have a lot on, and almost all of it seems to be making good progress. But in this job, Philip Rutnam will always struggle against the clash between people’s simple desire to reach their destination on time, and the huge complexity of Britain’s overburdened transport infrastructure. He’d like us all to notice when things work well; but if our trains get us to work on time, then we’ll probably be thinking about something else.

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