 Rhaid hwnnw i gael eu gennych erfawr deuctr allun, ac yn grewch iawn na'r ffordd ffwrdd y Tynedd Prif Weinidog. Rwyf ei ddifmesg yn y� mem foodie gael y gael. Rwyf ei ddweud i gael y Ffoodie Gael. Cymru, dweud am ddweud o'r ddechrau cantyn ag y cyfrôl. Rwyf ei ddweud i gael eich gael y ddaf i gael i mwy oifid i gael i gael. Fyngoqueis dros eu cyfrosol y cyfrosol y Gymraeg, codi ac yn gweithio eich rwyllt progress update. I would like to welcome our witnesses today from Audit Scotland, Fraser McKinley, director of performance audit and best value, Graham Greenehill, senior manager, Morag Campsy, audit manager and Ashley Magity, senior auditor from Audit Scotland. I ask Fraser McKinley to make a short opening statement. Thank you, convener. Good morning, members. Everyone knows that access to fast and reliable broadband is now essential for everyday life. It's transforming the way public services are delivered and how people interact with those services. The report that I'm bringing to the committee today is the third in a series of reports by the Auditor General, assessing the progress made by the Scottish Government and Highlands and Islands Enterprise in extending broadband coverage across Scotland. You'll see that the report is in two parts. The first looks at what has been achieved to date, and the second covers what remains to be done and the challenges ahead. The Scottish Government met its target of providing access to fibre broadband to 95 per cent of premises in Scotland by the end of 2017. That was achieved through two contracts with BT at a cost of £259 million by 31 March 2018 and through commercial provision. Without public investment, only around two thirds of premises in Scotland would have access to the fibre network. We found that, due to higher than expected take-up and lower than expected costs, over 60,000 more premises than planned will get access to fibre broadband. Ninety per cent of premises connected through the contracts with BT are now estimated to be able to receive speeds of more than 24 megabits per second. Of course, members will be aware that the actual speed that people experience depends on a number of factors, including the chosen broadband package and the technology used. Our analysis shows that the average experience speeds have increased across Scotland since we last reported, but continue to be lowest in rural areas. The report also highlights the difficulties faced in extending coverage with community broadband Scotland, for example, not delivering the anticipated benefits for rural community broadband projects. Members will be aware that the Scottish Government has committed to deliver superfast broadband, which now means to be faster than 30 megabits per second to the whole of Scotland by the end of 2021, known as the R100 programme. Its initial investment will be £600 million and represents a key part of its vision for a world-class digital infrastructure. Our report highlights that around 376,000 premises cannot currently access superfast broadband and, inevitably, many of those are in difficult to reach areas. Further investment may be required to reach all premises, and it will be difficult for the Scottish Government to deliver its ambitions by the end of 2021. There is no doubt that delivering a world-class digital infrastructure is complex, involving many public and private sector bodies. We recommend in the report that it is important for the Scottish Government to develop and publish an overall strategy for delivering its vision, including realistic timetables with targets for delivery. With that, convener, as always, the team and I are very happy to answer your questions. Thank you very much indeed. I am going to ask Colin Beattie to open questioning for the committee. Overall, the report seems to be saying so far so good, some risks in the future, to see how that develops. The one thing that sticks out, like a sore thumb here, is community broadband Scotland, which seems to have had a fairly disappointing result. It is highlighted here in paragraph 21, for example, that its main role was to provide financial support and advice to communities, which does not seem a particularly taxing remit to have, although, later on, you mentioned about in-house expertise in procurement and technology in paragraph 25. Can you drill down on what the real problem was here? Is it that it simply did not have the financial expertise that is being asked to do things within the remit that is outside its experience and skills? I will kick off on that, Mr Beattie, and then ask the team to come in with a bit of detail. As you say, community broadband Scotland did not deliver as people had hoped it would. I think that everyone underestimated the complexity and scale of the challenge in Exhibit 4, in the report on page 15, over the page. We tried to set out what some of those difficulties were. We recognise that some of those are outwith the control of community broadband Scotland, but in particular issues around skills, the skills that they had available within community broadband Scotland, to understand the complexity of some of this stuff, and the way in which they communicated with communities. We heard quite strongly from some communities that they just did not feel that CBS communicated as well as they might have done. team, do you want to say a bit more about the issues? Yes, we spoke to three communities about this. The main things that they pulled out were the communication that they had from CBS was not always as good as it could be, and that they were trying to deal with very complex issues that they did not always feel that they got the support that they needed. In particular, while Quiddur felt that their procurement exercises were hampered a wee bit by the CBS requirements, the kind of requirements that they had on who could bid for contracts. Communication was poor. Do you mean that they failed to communicate the options, the different options that were available to the community, how to access funding, how to access expertise? My understanding was that CBS was more a clearing point to provide that information and bring parties together in order to establish a system. I think that a lot of it was, there was quite a bit of uncertainty around where the two contracts with BT would go, where R100 would go, and CBS weren't always able to communicate to communities whether they would be covered by the individual projects that were coming up, so communities felt that they were maybe in the dark and unable to make plans themselves because they weren't getting the communication that they needed. I know that there was confusion from like a BT, because they wouldn't say what they designated a particular area for, grey areas and all sorts of things. Did that contribute to CBS's failure to deliver? Is that the main problem that they simply could not identify the areas in which they could support communities? It was definitely one of the areas, as we point out in Exhibit 4, where there were a number of factors that came into play. The uncertainty was one of them. We are talking about skills levels here. The main thing here was finance, really. Financial advice procurement. Are we saying that the people who were recruited into CBS, and I would ask who recruited them, did not have those expertise? That is certainly one of the issues, Mr Beattie. We recognise that, if you look at paragraph 22, one of the interesting things is where the money went. It had £7.5 million initially, and it spent £6.4 million. You could argue that only 2.3 million of that was spent directly on projects. As you say, you could argue that that is because the role of CBS was to provide advice. As I said at the start, everyone underestimated the complexity and technical nature of some of the advice that was required. In the event, some of the people in that were working in CBS did not have it in sufficient quantities or in the right way. That is why they drew on consultancy services to be fair, so they recognised some of that and brought other people in. However, the combination of factors that we have tried to set out in Exhibit 4 meant that, overall, the idea of community broadband Scotland just did not get the traction that people had expected. That is why we say that it is really important that both the Government and Highlands and Islands Enterprise learn the lessons of that experience as we go ahead into the R100 programme. CBS is now pretty much wound down except for the care and maintenance of the projects that they have actually managed to get under way. Would that be correct? Kind of. In paragraph 26, we set out what has happened there. As you say, it is much reduced, so as you say, CBS in its old form does not exist and they now sit within the digital communities team in Highlands and Islands Enterprise. That is one of the things that is obviously still in its relatively early stages. That is one of the things that we want to continue to monitor as we let the contract for R100 into the new year and as we go ahead with it. In a sense, the things that CBS was set up to try to help with will become even more important once we get into the really difficult and hard-to-reach parts of the country. As you will see in other parts of the report, we talk about what we think the six or what Government thinks the £600 million additional investment will deliver. We think that there is the chance that there might need more investment beyond that, the so-called aligned interventions. At that point, the expertise that is available for local communities will be really important. Are there any lessons to learn from the way that CBS was handled? Is there perhaps an element of inevitability in a complex project such as this that you would come across difficulties, as we have seen here? Both of those things are lessons to learn about ensuring that you have the right skills in place and that you are properly resourced. Ensuring that there is clarity of purpose for me, the communication with communities that I talked about would be critical. That will become even more important looking ahead. That was partly about CBS, but as you said, that was also about being clearer about the roll-out of broadband and more broadly about who was going to get what and when. It was a report that the Auditor General made in previous, and I saw a recommendation that the Auditor General made in previous reports. We think that that is really important to continue with that. There were also some things out with the control, such as state aid rules and procurement complexities, although you could argue that we now know more about that, so we should be better prepared for it next time. Iain Gray Colin Beattie characterised the first session of the report on the existing programme as being pretty positive. The 95 per cent target was achieved, but many of us will have heard from our constituents a level of dissatisfaction when they see that the targets are supposed to have been met by the field, they are not getting the benefit of it. Not to be too personal, but I am a case in point. I am connected to a fibre-enabled cabinet, but I am two kilometres away from it, so there are two kilometres of copper, so I cannot get remotely, no matter what package I bought, remotely the kind of speeds, but I would be counted as a success in terms of the programme. Just to check, that is the kind of ambiguity in communication that you refer to in paragraphs 19 and 20. Is that right? I think that lots of people would recognise that, and that is where the definitions and the team can help with this. The definitions are quite important. The 95 per cent is access to fibre, as you have just described. We are also talking about the report in other places, about 90 per cent having access to what you might describe as super-fast broadband, with 24 megabits and above. Obviously, as we say in the report, as your experience describes, there are lots of variables, not least how far you are away from a cabinet. 75 per cent in rural areas means that only 75 per cent of properties cannot actually achieve that 24 megabits. Exhibit 1 gives an indication of what kind of fibre coverage was provided to each local authority area. The 75 per cent is talking about fibre rather than speeds. As you will see here, from Exhibit 1 on page 9, the vast majority of council areas get more than 75 per cent fibre coverage through a combination of contracts and private sector intervention. We are still talking about fibre coverage when what matters to individuals is the speed that they can get in their property. As the report says, the Scottish Government has redefined what it means by super-fast, and it is now saying that 30 megabits per second is the generally accepted definition of super-fast. If you work out, paragraph 7 on page 8 gives an indication of how many properties we are talking about. It works out that there are around 2.7 million premises, and, as Fraser said earlier, there is an Exhibit 7 on page 21 indicates that there are 376,000 properties that the Government considers cannot achieve 30 megabits per second at the moment. If you work that out, that comes out at roughly 85 per cent of premises at the moment, capable of achieving 30 megabits per second. How does that compare with the rest of Europe? While the European Court of Orders produced a report earlier in 2018, it does not have separate figures for Scotland, but it gives a UK figure of 85 per cent. That is great, Mr Greene, but does not the report fall into the same trap as the Government programme? 300,000 properties cannot achieve 80 megabits. Does that mean that it cannot achieve it at all, or does it mean that it cannot achieve it at its cabinet? It means that the cabinet cannot achieve it at all, as I understand it. In Exhibit 7, some of the properties can achieve speeds of 24 megabits per second, so there are some within that that can reach. I live in a house that is connected to a fibre-enabled cabinet. That cabinet is capable of achieving 24 megabits. According to the Government programme, I am capable of achieving that superfast speed, except that I am not, because there are two kilometres of copper between that cable in my house. You could or R100 could improve that cabinet so that it is capable of providing speeds of 30. I am then able to achieve 30, but I am not. I am still on four megabits. I do share your pain on that, Mr Greene, because I have been there. This is where, to be fair, it is quite difficult, because the distance from the cabinet is one factor. There are lots of other factors that affect broadband speeds in your home that will never cover things such as the state of wiring in your house, for example. We have tried to capture that report in Exhibit 5 and 6. We have used the best data that we think there is, which is the Think Broadband website, which has its own issues in terms of data, because the people who are more likely to use that website to test it are the people who are experiencing poorer broadband speeds, but that is where the difference is. What we are trying to report on is what the contracts were said to deliver, which was access to fibre. We have also tried to separate out in other bits of the report what that means for the speeds that people actually receive. For what is worth, I absolutely agree that one of the challenges in all this, and I think that this is a massive issue for the R100 programme, is an expectations gap. As this conversation demonstrates, it is very technical. As you say, the thing that matters to people is what speeds the actual experience in their homes. My question to Audit Scotland so is, if you are auditing performance here, would it not be clearer for you to audit performance in terms of what speed is being provided at the property? Obviously, it depends on what package I then buy, whether I actually have those speeds or not, but as things stand, if it is simply impossible at my property to achieve, no matter how good the wiring in my house or how expensive a package I buy, it is impossible to achieve 24 or in the future 30. Would it not be helpful if Audit Scotland audited performance on the basis of the speed that was actually available rather than a hypothetical speed? We have tried to do both. It is reasonable for us to report on how they have delivered against the contract, which is what the first bit of the report does on that initial key message. The second half of part 1, if you like those, some of those that we have described are the best that we can do to try and get exactly to the point that you have made. My final question is, when the Government in our 100s say that the objective is 100 per cent availability of 30 megs and above, that is not actually true in terms of the speeds that 100 per cent of properties can't access. There is always a gap between what is said to be available via the infrastructure and what people will receive in their own home. In 2021, there will not be access to those speeds in every house and business and property in Scotland? No. Well, two things I guess on that. One is that we don't know yet because they are just letting the contract. We are investing a significant amount of money, £600 million, and we don't know exactly how that is going to be delivered for the small number of houses. I think that we will be in a much better position to answer that question. That is why we have recommended that, by the summer of next year, we expect to see a very clear plan. That is what I am asking. The target is not that every single property house, business, will have access to those speeds. I guess that is where you slightly get into semantics. I think that what it is not saying is that everybody will have those speeds. It is not a target that says that every house in the land will have 30 megabits per second, because there are lots of variables, again, to be fair to Government, which are genuinely out with their control. That is my point about the risk of an expectations gap between the consumer, the end-user, like me and everyone else, and what the infrastructure is going to provide. I understand why you cannot audit the performance on the thing that matters to people, which is if I buy a superfast broadband package in my house, do I get superfast speeds? Would it not be a lot simpler if that was how you audited this performance? I think that it would be an awful lot more complicated, in fact, because it is quite hard for us, as auditors, to know exactly how much the speed people are getting in their homes. No, they are not getting what they are getting, but what is actually possible. Obviously, the package that you buy has an influence on that. Alongside a lot of other variables. Sorry, which other variables? Distance to the Cabinet. Wiring how many people are using internet at any given time, we list a whole range of different variables in the report that will affect the speeds that you get. I think that that is why there is such a level of dissatisfaction where the programme has succeeded, but people feel that they have been let down. That is an illustration of it. Can I ask a supplementary question? He speaks on behalf of frustrated consumers everywhere, I think. Supplementary on this? Well, I have been sitting here, I have had similar experiences with constituents of mine, particularly in more rural areas, but having been the infrastructure secretary who issued the initial contract to BT, I have got some experience in this matter. I do not see why BT, the supplier, cannot tell you how many people from each cabinet would have the potential to get superfast broadband and what speeds they would get, because they know that it is their copper, for example, from the end of the fibre to the house. So you have got the Cabinet, you have got the fibre, you have got, in Ian's case, a very good example, you have then got the copper and then you have got the wiring in the house. The question is not how many houses have got it or use it, because that is a decision for each house. At the end of the day. But BT could tell you, out of the people who are serviced by that cabinet, how many of them have fibres straight to the house and how many of them do not have fibres straight to the house, and that would at least give you an indication by proxy of the people who are genuinely going to get the superfast and people who will have much more difficulty getting the superfast. And I mean, certainly the impression everybody has, and it may be a presentational point, but the impression everybody has, well, just ask if this is correct, the impression everybody has is that the target is 30 megabytes or the target is 24 or whatever percentage, you know, it's not qualified in the way you suggested Fraser, but BT should be able to give you that information. I don't see why you can't ask for it. So I'll ask you to come in on the specifics of that, Mr Neil. So to take your specific point, BT would be able to tell us how many premises have fibre going into the house, because actually that's pretty unusual. That's the fastest available fibre to the premises, and actually they would be able to tell you that, but that's a different thing then to what Mr Gray is talking about, which is then for the ones that don't have that, which are connected by copper, what speeds would they actually achieve? But I'll ask Ashley to come in on the detail of it. So in Exhibit 2 we set out the modelled speeds that BT are saying people that have been connected through the contracts will receive, so through the contracts they were committed to deliver 77% of everybody connected to that fibre network receiving 24 megabits, but actually it's turned out that 90% of everybody connected to the fibre are able to receive speeds of 24 megabits. So that is the assessment of how many people should be able to get 24 megabits or more taking into account the factors that we've talked about. Well, maybe the thing to do is to recommend to the Scottish Government that they should do some pilot testing or surveying to find out how accurate those figures are, because I don't think we should just take BT's figures and accept them as God-given. So what we've tried to do in this report is reflect on in Exhibit 5 and 6 the think broadband data, which does exactly that. It's live tested speeds from people, so there are caveats with that, but that's the best data that we have available that actually tells us what speeds people are actually experiencing, and that's where you can see a gap. Ashley Manchester, you wanted to refer to Exhibit 5 and 6 to underline your point. Yes, so that's to underline the gap between what BT are modelling in Exhibit 2 and what people are experiencing when they're testing their speeds through the think broadband website. So this is about as accurate as we can get of what speeds people in Scotland are actually experiencing with the caveat that you're more likely to test your speeds if you're unhappy with it, so there may be that. Thank you. Do members have any further questions on this point? Willie Coff, on this point, Willie? Well, on a number of points, but I'd like to... On this point just now, and then I'm going to take Liam Kerr, and then I'll come back to you. I'll come in on this point, Jenny. Thanks very much. There's no doubt that the remaining 5 per cent or so is going to be the most difficult to achieve. There's no doubt about that, but the commitment has been there. As Fraser McKinlay said, the contracts will be negotiated and agreed in early spring 19. In terms of Ian's question about his cabinet, there will be people attached to his cabinet who do get the speed required, but Ian being further away can't, and that's the challenge. Of course, that's the challenge, and I would certainly expect to see how the Scottish Government and its contractual partners plan to solve that, because that's the biggest challenge, I think, that they face. In terms of that, I don't want to sound as though the project is covered in gloom. This is a fantastic investment, and had it not been for the investment that we're seeing, it would be years and years before we get anywhere near this kind of standard. So the European Union standard of 30 megabits a second is a good one, I think, to embrace, convener, and I think we really need to... I really want to confirm some of the things that have been said here. The procurement for the remaining 5 per cent is going to be taking place now. Contracts are awarded in spring 19, and perhaps it's not quite just at this point, Ian, but when do you think we will see details of how the hardest to reach customers in Scotland will be reached? As you say, Mr Coffey, the tender is out just now. We're expecting that to be let in early 2019, and that's why we recommend it. We do think that the Government and Hylins and Hills Enterprise should be in a good position to have a clear plan by the summer of next year about exactly what the £600 million that they're investing at the moment is going to deliver, and potentially what's left over and what still needs to be done. I mentioned earlier Exhibit 7 on page 21, where we tried to set out, as best we know at the moment, what the plan is to reach those 376,000 premises that currently don't have superfast broadband. I'd actually just like to explore that point. I think it's well made by Willie Coffey. Looking forward, we've got this R100 programme, which is a stated ambition that, by 2021, every home and business in Scotland will have access to superfast broadband. I understand Ian Gray's frustration here, because Fraser McKinley said, to be fair to the Scottish Government, I'm not actually sure we can be fair to the Scottish Government. That is a cast iron commitment. Every home will have this. I think that the point that Ian Gray is making is that that's not true, isn't it? Again, you come back to the question of what do we mean by there's a difference between having access to and what people actually experience in their own home, Mr Kerr. Now, I know that, for most... Back to that. Because the commitment, I have the expectation because of the commitment made, as I think that Ian Gray is pointing out, that that is what I'm going to get, but that's not the reality. Isn't that what you're concluding? What we're concluding is that it's going to be difficult to achieve. I don't think that we're at a point now to conclude one way or the other, for sure, because the £600 million that's being invested in the R100 programme is out to tender at the moment and we need to wait and see what that's going to deliver. Based on the current plans that we've set out in Exhibit 7, we absolutely think that that's going to be difficult to achieve. What does difficult to achieve mean in speak of the people watching this? Is it going to happen? Will there be superfast broadband in every home and business by 2021? I can't say yes or no to that, Mr Kerr. I'm afraid that as much as I would love to be able to. They've set out a significant additional investment of £600 million. We wait to see what that's going to deliver, the extent to which that is going to deliver 100 per cent. They've already said that there is this aligned interventions programme to come, which might include a voucher scheme and various other things, so we need to wait and see what that's going to deliver. Morag, do you want to add to that? In paragraph 49, the reasons why we think it would be difficult, obviously with the contracts being awarded early 2019, is the most difficult to reach premises that are left, so that only leaves less than three years to put the infrastructure in place with it. Alongside that, you have the aligned interventions programme, which is under development just now, so work is under way. A lot of that will depend on what comes out of the procurement, the R100 procurement, before they can decide what's needed in terms of aligned interventions. There's still quite a lot of work to do and a lot of work in progress, and it is quite a short timescales and the most difficult to reach. What is the specification that any successful tenderer will have to deliver by 2021? As we set out in paragraphs 39 and 40, they split it up into a number of lots, and they've also set out some mandated areas, and there's also some waiting in that. As we've set out, it's to deliver the 30 megabits per second. What we can't see just now is that there's obviously fibre-to-premises in the fibre-to-cabinet. It doesn't set out in the tender a percentage that it would like in terms of how many is going to the premise and how many is the cabinet. In paragraph 41, with the mandated areas and the waiting that they've set out in the tender, the hope is that that will encourage the bidders to try, as far as they can, to provide a full fibre solution. As we say in the report, and further down that page in 45, it looks unlikely to us that the £600 million is going to deliver the R100 programme, which is why we say that additional investment may well be required. Forgive me, because I really want to explore that £600 million. I'm slightly concerned by Morag Camps's response, not because it's your response, but because you use the words that there is a hope that this will happen and that it will encourage the tenderers. What I'm hearing is rather different from, we will deliver this by 2021, but I appreciate that you're just reporting back what that is. On the £600 million, it's allocated. The Scottish Government has said that £600 million of public money will make this happen. Audit Scotland is in a position to say that that isn't going to be enough, even on the very basic spec that the Scottish Government is hoping for. £600 million is unlikely to be enough. Why are you able to say that? Why is Audit Scotland able to say that? The Scottish Government, who is responsible for administering this public money, apparently has not done a similar level of analysis. Is that not concerning? I don't think that they've said that the £600 million will deliver the R100 programme, is the first thing. They've said that this is an initial investment, which, as we've tried to set out in Exhibit 7, will get them a good way along the road. You'll see, for example—this is where we are challenging the Government in terms of the plan that I've talked about next year, once the procurement process is under way—even before you get to the 100 per cent, excluding the 30,000 urban premises and the 34,000 premises that already can get 24 megabits per second. It's not clear yet what the plan is to plug that gap. It's also not clear how many of the 147,000 premises that are in school will actually get the 30 megabits per second. In a sense, they've committed the £600 million that they're waiting to see based on the contract that Morag talked about in paragraphs 40 and 41. They're waiting to see what that's going to deliver. Then, we think that there's a good chance that they will need to think about how they reach the further bits. It's absolutely clear, to most people, that a target of 100 per cent of anything is always a difficult ask. Equally, we're not in a position at the moment, given that the contract hasn't been let yet, to say that it either will or it definitely won't happen. We need to wait and see. It's not a target, it's a commitment. My concern is that £600 million is put in. What you're telling me is that, some time in the next two or three years, somebody's going to come back and say, I need a significant further investment to deliver that commitment. Either the Government say, fine, here's some other cash that we'll pull from somewhere, or presumably they say, there is no further cash. The commitment's not going to be delivered and Ian Gray is sitting here in 2021 saying, my house still doesn't work. Isn't that the case? That is possible. Once we know what the initial £600 million is going to deliver, they will need to decide what they then do, which is why we're absolutely clear that we need a pretty concrete plan in the summer of next year once we know what that's going to deliver. It's really clear what they have to do. The only solution for me—not to focus too much on me—is to replace that two kilometres of copper with fibre. Nothing else is going to make that difference, so unless the contract is going to do that, then— That's where, at the end of the report, we do set out other ways that it can be delivered, so there are different ways it's on— No, but I won't qualify for that. It could be delivered by microwave or wireless, that's right, but I won't qualify for that because I'm already connected to a fibre-enabled cabinet. I won't get the voucher. I think that I would say that any voucher scheme that hasn't been agreed yet would be the first point, and that, again, is where we need to see what the plan is next year once we know what the £600 million is going to deliver. There is also, convener, an important—as we get to the end of this process, and we make this point in the report, I think. There are some really important questions about value for money in this. This is another £600 million investment to get towards 100 per cent. As you get to the really remote and hard-to-reach places, some of these costs could be really quite significant, particularly if you're talking about putting fibre right into the premises. Some of the numbers per premises are up in the thousands, if not tens of thousands, pounds per premises, so there is a question at some point about a balance between what people can get and how much it's going to cost. Liam Kerr. Final thing for me, Colin Beattie rightly looked at the people that were in place for the CBS project earlier on. It would appear that perhaps the skills that the right people were not in place for that project. Are the right people in place to deliver the R100 project, and if so, who are they? How confident can we be that we won't be sitting here in three years' time looking at the leadership, the skills that were in place and having this exact conversation that we've just had about CBS in terms of our 100? It's a key question for us, Mr Kerr, and we recommend exactly that in the sense that the lessons are learned and that there's a degree of consistency in the team and the right skills are in place. Team, do you want to pick up on the specifics of that? Yeah, so in terms of the R100 team, there are people in that team that have been involved with the DSSB and also the CBS team have been working with the R100 team as well, so trying to learn lessons from that. There are obviously some parts of the team, like I mentioned, the aligned interventions team that's just been put in place over the summer, so they'll be able to build up that experience there. One of, as Fraser said, we do make a recommendation about making sure, in particular, about contract management that they have the right skills and finance management in place for that as well, so that's something that the Scottish Government had been building up that team over the course of the last six to nine months, so that would be something that we would be keeping an eye on. Willie Coffey Back in, paragraph 35 in the Audit Scotland report there just clarifies that it is a commitment. Your colleagues are right to question this, but the commitment is that every home, including Ian Gray's, will have access to superfast broadband by the end of 2021. Now, superfast can possibly be what you get, Ian. Is it 2 megas or not? The commitment's there, but the proof is in what happens during the early phase of 2019 and how that will roll out. There's a number of ways I'm trying to deliver it to premises like Eti, homes like Ian's, and that's to be worked out, but the commitment's quite clear that superfast will be delivered to every home by the end of 2021. I'm also looking forward to seeing how that will be possible in some of these most remote and rural areas, but the commitment is definitely there. Do you have a question for the panel, Mr Coffey? I was going to get in it back to the community broadband issue briefly. It was simply to ask on the community broadband story there, Fraser. Did they not have access to the whole digital Scotland, skills and expertise? It's as though they operated completely alone in an isolation. Is that perhaps when Colin Beattie was talking about its skills levels there and you've mentioned it in your own report? Is that an issue there? Why did they not have access to the same skills base that they have provided that advice rather than going down the legal route and spending a lot of money on that? What happens on a continuity basis when technology inevitably moves on? Will the community broadband projects be embraced as part of any new developing technology that might emerge? They did have access to those skills, Mr Coffey, and they did work with colleagues. The skills issue was one part of the CBS story, but there were many others to be fair. I think that what's important and what they're trying to do now is embed those skills more centrally, I suppose. Your point about technology moving on is an important one. I think that part of the discussion that we've just been having is that, in two years' time, technology is moving very quickly, so it might be that new technologies and new approaches come on stream that make some of this stuff more doable than it is at the moment. Certainly, the approach that the Government in hire is taking to R100 and whoever they end up partnering with will be taking account of that fast-changing technology environment, for sure. Bill Bowman Thank you, convener. Perhaps you have some experience of that as well, but in your broadband exposure, you give them a lot of exposure. It's good to see Dundee at one end and at the other end of the two charts, but I know from constituents in Dundee who will tell me that they would love a tenth of this speed, never mind what is presented here. I don't know if you call it hotspots or cold spots, but what credence do you give to those figures? Do you put them out here? Do you just accept them? No, we do recognise that it's far from perfect. There is a bit of health warning in the report, and certainly the note to Exhibit 5, for example, tries to explain some of the issues with the think-broadband data. In a sense, Mr Bowman, I would agree that this is the best data that we have available for the speeds that people actually experience. Interestingly, if anything, we think that those speeds are likely to be pessimistic rather than optimistic, because, as I said earlier, people are more likely to test via the think-broadband website if they are dissatisfied with their broadband speeds. Do you assume that these are download speeds? Those are download speeds, but the think-broadband also tests for uplift if we just haven't presented them. I suspect that some people have just given up on testing on those places that don't get the speeds. I would have hoped that there was perhaps a little bit more of a warning on the front of this. To the off-com figures, the off-com data happens less frequently, so it was from 2017, so it was a bit out of date, but it was telling the same story. The order of councils was very similar, so it was backing up out of date from think-broadband. I was a broadband company and I'd be very pleased that you're publishing how wonderful everything is. Do members have any further questions for our witnesses this morning on this report? I think that we've probably got a few follow-up questions for the Government, perhaps, but can I thank, in the meantime, Audit Scotland for their evidence this morning? I'm going to suspend committee for two minutes to allow a change over of witnesses. Item 3 is the 2017-18 audit of the Scottish Public Pensions Agency. I'd like to welcome our witnesses today, Carline Gardner, Auditor General for Scotland, Stephen Boyle, Assistant Director and Tom Reid, Senior Audit Manager from Audit Scotland. I'm going to invite the Auditor General to make a brief opening statement on which I believe you will cover the legal status of this report. Thank you, convener. The purpose of this report is to make Parliament aware of problems with a major new IT system for the Scottish Public Pensions Agency and the financial implications of the delays. The agency's main role is to administer and pay pensions for members, deferred members and pensioners of the NHS teachers, police and firefighters pension schemes in Scotland. In October 2015, the agency awarded a £5.6 million contract to capital employee solutions to deliver a bespoke, unified pensions administration and payment system. The new system, PS Pensions, was to be operational by March 2017. In February 2018, the agency's chief executive decided to close the project. The agency has spent £6.3 million on the project and has written off £1.6 million in capitalised assets that will no longer be used. The closure of the project means that the agency hasn't been able to progress its strategic business and workforce plans as originally intended. Its forecast significant budget gaps and estimates that it requires additional revenue budget of £9.8 million between 2019-20 and 2022-23. It also needs a total capital allocation of £18.4 million to deliver the replacement project. The agency has extended contracts with its existing suppliers to ensure that payment of pensions is not affected by the closure of the project. The SPPA is currently in discussions with capital to establish if either party bears responsibility and potential financial liability due to the unsuccessful project implementation. I have therefore not commented on arrangements for implementation of the PS Pensions project. I intend to prepare a further report in 2019 once the legal process has concluded, which will cover those issues. As always, convener, we are happy to answer the committee's questions about the current position and about the likely financial implications, but we are unable at this stage to answer questions about the causes of the problem and we will come back to that as I say in a future report next year. I am going to ask Alex Neil to open questioning on that report. I have two questions, Auditor General. The first one is who picks up the tab, because clearly irrespective of the outcome of the negotiations or any legal action, there already has been and there is likely to be further cost to the pensions agency, both administrative cost and cost in terms of their capital budget as well. I am not sure that I am not aware of the relationship between the Scottish Government and the Pensions Agency. Who provides the core running costs funding and the capital costs for the Pensions Agency? Is it provided by the Scottish Government or is it self-administered? Do they get a fee from the pensions providers or whatever? You are right. Whatever the outcome of the discussions between SPPA and capital, there will be financial implications, both revenue and capital. I will ask Stephen to talk you through whether the current discussions are about who will meet those costs. Thank you, Auditor General. Good morning. SPPA is an executive agency of the Government, so it is funded by the Scottish Government to meet both its revenue and capital requirements in the current year. As it captures in its forward financial planning, its requirements and expectations for both revenue and capital into the future. What we have not set out in the report, Mr Neil, is to follow the implications of this, whether there are any financial penalties for either party. If there were any recoveries from one side or the other, those would also need to be captured in the forward financial plans, particularly of the SPA, and it may potentially offset any future capital requirements that it has. But whatever cost there is, it would come from the Scottish Government's budget. Yes, that is correct. This is a cost to the taxpayer of this fiasco. The SPPA is an executive agency of the Scottish Government, and it is funded directly by the Scottish Government. We do not want to get into who is to be looking for fault yet, because that is hopefully going to be resolved with the negotiations and or legal action. However, at some stage, I will come back to the committee once you produce your 2019 report to Auditor General. However, it raises the wider issue that we have been given reassurances by the permanent secretary and others in the past year that IT projects were now under much tougher management, better management, better control and all the rest of it. We have, again, irrespective of who did what and who is to blame, irrespective of the outcome of the negotiations, but here we have another IT project that has gone badly wrong. Does that mean that, despite the promises made, we are still in a position where the Government does not seem to be able to get big IT projects right? I cannot answer that question at this stage. There are discussions under way between SPPA and Capital Employee Solutions about what has happened with the project itself. I do not want to compromise those discussions, but I will report back next year once that is complete. However, was this project started? Did it predate the commitments that were made about getting those and predate the introduction of new, better, allegedly better management control of IT projects by Government and its agencies, given to this committee? The contract was awarded in 2015 and, obviously, planning would have started well before that. In general, I would like to look a little bit in the governance of this. As an executive agency of the Government, presumably, it would be subject to the Scottish Public Finance Manual. Therefore, this project would have fallen under a major investment, since it is more than £5 million inclusive of fees and VAT. Would that be correct? Stephen, do you know what the position was at the point that the contract was awarded? I do not have that in my head. Mr Beattie, I think that I would need to come back to answer your question. The cost is more than £5 million. That is correct, yes. Given the document that I am looking at, that would fall under a major investment. On 31 May, Colin Cook from the Digital Directorate wrote to the convener assuring that, since January 2017, there was a more interventionist approach being taken by the Scottish Government in detail. Carefully, all the steps that were being taken, all the different processes that were going to make sure that there would be no issue in the future, that there would be engagement with the corporate assurance providers, internal audit, capability development, project assurance team, etc. Is there any indication that that has taken place in this project? Again, I am afraid that I have to say that I do not want to comment on the management of the project at this stage, because I do not want to compromise the discussions that are under way between SPPA and capital employment solutions. I know that that is frustrating for the committee, but the purpose of the report at the moment is to make you aware of the issue and of the potential financial implications rather than focusing on where the responsibility for the problems lies. I appreciate that you have difficulty in commenting on some of those things. Perhaps I can just mention one other thing about the communication of 31 May. It also listed all the IT contracts, including the Scottish Public Pensions Agency. You would have to have a considerable degree of perspicacity to work out where it says closure and at the same time the project delivery date is February 2018. You might imply that that was the project delivered. You have to work out where it says business justification and so on, underneath the preparation of variations of existing contract. I think that the Auditor General is being quite clear on what she can and can't answer here. It seems to me that you are going down the line of fault. The Auditor General is being clear that we will come back to that next year. If it is on the figures, I will allow you to proceed, but if not, I am going to move on. I think that, clearly, there is a fair bit of restriction of what we can discuss at this point. I think that that is fair. It is unfortunate, but I think that the Auditor General has been clear and it is for good reason. She will come back to us next year. Bill Bowman. If I could ask maybe three questions and two of them I will try to keep general so that we don't get drawn into the limitations that you have set. Alex Neil referred to some of the so-called fiascos, and you probably know the projects that have not worked well. They are all under the public sector umbrella. If staff members are involved in those, does this involvement travel with them if they move jobs so that, if you are in another agency and you are setting up a project, you would know that somebody has been associated with a project? That was one question. The second one is that, given the huge market for public sector and large organisation systems, why do we have bespoke solutions being required? Are there no off-the-shelf solutions that would be good enough? Finally, you mentioned the numbers of the original contract 5.6. 6.3 has been spent with a 1.6 million write-off. Could you just explain where the 1.6 comes in as the write-off and not actually mover? If I could go through these things. I will do my best. I will ask Stephen and Tom to answer the third of them for you in terms of the accounting treatment. The skills question, in general, is the point that Mr Beattie was making, that the Government has recognised that there have been a number of very significant IT systems that have not delivered as planned or in some cases at all, and that it is difficult for public bodies to build up the skills and the expertise that they need to be intelligent purchasers of IT systems or to develop themselves where they decide to take that route. They have been investing in a central information officers team who can provide that support and challenge to projects. That is one of the things that we will be looking at when we report back next year, once the legal discussions have concluded. That is made more difficult by the fact that IT skills are in short supply and tend to attract a premium in terms of salary. We will be looking at how well that has worked in practice for this project, as well as, in general, through a piece of work that we are planning on digital transformation in central government. Anybody could move from one problem project to a new job and do the same thing? The aim is to do exactly the opposite, to date people who have moved from a successful project. There are successful projects that do not tend to come to this committee, but they do exist, and to use those skills and expertise on other projects. We do not think that there is a flagging system or some way of knowing that somebody has been associated with it. I do not think that there is necessarily a flagging system, but I think that government takes very seriously the need to improve its performance in these areas and is making sure that people do not move on if they have been responsible for a problem system. They do not move on to another one. The aim is to do exactly the opposite, to build capacity and expertise around it. I cannot comment on what has happened here, but that is certainly the intention. In terms of bespoke systems, sometimes there are bespoke systems, sometimes there are not, and that is one of the things that we expect to see in the planning and the business plan option appraisal for any particular system. Again, I cannot comment on this one at this stage. I think that often there has been a reluctance to look at whether you can get 90 per cent of what you want from a commercially available system rather than running the risks and the likely extra costs of a bespoke one, but that is one of the things that, again, the central information office is trying to develop expertise around. Are you looking at that particular aspect? For this one? No, I mean generally. In general, yes. I think that looking at the make or buy question is central to what they are trying to do and will be part of what we are doing in the plan piece of work on digital and central government next year. Third question. I will ask Stephen Orton to pick up the 6.3, 1.6. The 6.3 million pounds, as we say in paragraph 9, covers a range of all the costs associated with the project, so that includes the costs, the money that is paid to capital, as well as staff costs and hardware and other elements of it. In terms of the 1.6 million pounds, over the development of the contract, the elements were capitalised, so the hardware was capitalised, and also the elements of the development of the software were capitalised and recorded in the annual accounts. The 1.6 million pounds represents what was written off from in the agency's annual accounts. Is that an addition to the 6.3 million? It's part of the 6.3 million. We just highlight it separately, because, as I said, that's an amount that's actually been written off within the agency's accounts. So you can spend whatever 6.3 minus 1.6 is, and it brings no value to the business. It's not capitalised, and that surprises me slightly. No, the 1.6 million pound has been capitalised. Are there elements? It's also to do with the timing of the closure of the project, so that there were costs incurred within the years, which wouldn't have reached a point where they were capitalised. So if the project had been going ahead, that would have been capitalised? The elements would have been capitalised. Okay, I know that there are accounting rules, but if you're spending that amount of money and it doesn't seem to be going to be an asset, I would have to wonder what the project is actually all about. I think that it's something that perhaps can expand on more fully in the report that we plan to bring back to the committee next year. Convener, I think that it's probably wise to not investigate this any further and put the Auditor General in a difficult position. I want there to be a number of questions that I would like to ask about software procurement and methodology, but I think that it can wait. Till next year's report, that's very good of you, Mr Coffey. Thank you. Liam Kerr, do you feel the same, or have you got a question? I think that Willie Coffey is right. There's an awful lot that will be interesting to explore. I do have one question, which I'll try and phrase it. It might be interesting looking forward, which is simply that the original contract was £5.6 million. We've just talked with Tom Reid about the spend of £6.3 million, but the total capital allocation required the SPPA estimates going forward for, I think, five years is going to be £18.4 million, which is a considerable difference from the original quote, the original estimate. So, do you have any information as to why the cost of delivering the replacement system, the £18.4 million system, is going to be that much higher? Okay, so that's the complete capital budget for the agency over that period of time, so it doesn't just reflect the costs of the project itself. It covers the extension with the incumbent supplier, which represents approximately the agency's budgeting £6 million for that element of it. It represents the costs of a new procurement implementation. The agreement that the agency has entered into with the incumbent supplier takes them to 2024. They will need to look at a longer-term solution going forward, so there's an element of the budget that covers that longer-term solution. The final element is miscellaneous capital, which covers areas such as existing ICT and the building itself existing capital works on the agency's HQ. I see, so a significant element of the 18, just to reflect back and just check I've got this, the significant element of the 18 is what Alex Neil was exploring, the run-on of where we are at the moment just to make sure everything stays in place and nothing goes wrong in the meantime. Are you able to isolate then how much of that £18 million is the cost of a new package, such that we can say, okay, it's comparable to the 5.6 that was originally projected or not? So, I suppose that there's two elements to the approach that the agency has taken, or there's three elements in effect. They've extended the contracts with the existing suppliers to ensure that they can continue to pay pensions. They've entered into an contract extension with one of the incumbent suppliers, and as part of that agreement, they're looking to develop the system so that they can start to develop a unified system, bespoke system. That takes them, as I said, to 2024. They're aware that, beyond that, they're going to have to look at a more longer-term solution. That gives them time to do that. They're currently budgeting £7.4 million for a new procurement and implementation of a further system. As I said, that's just what they've budgeted at the moment. It's a longer term, so those costs aren't as certain as they will come to be. I understand that. Again, just to be clear, about £7.4 million is the comparable figure to the 5.6 that was budgeted back in 2012, something like that. Thank you. Thank you very much. Do members have any further questions for the Auditor General and her team? We look forward to coming back to this, Auditor General, with some other questions once you report again in 2019. I thank you and your team for your evidence this morning, and I'll close the public session of this meeting. Thank you.