Further to last Tuesday's Committee hearing, there were several areas for which I agreed to provide the Committee with further written clarification.

  I have written to you separately regarding areas relating to DTI financials, but I also agreed to provide the Committee with a note addressing questions and providing further clarification on public procurement and small business, details of DTI's support for the construction sector including the latest position on the review of the Construction Act and comparative regional spend per head between Scotland and the West Midlands. I also agreed to provide you with a copy of the Technology Strategy Board's Annual Report and an explanation of the Whitehall Innovation Platforms.

  The answers and further clarification are set out below.

PUBLIC PROCUREMENT AND SMALL BUSINESS

  The Government is committed to engaging small businesses in the public procurement process. Work is ongoing to create a more level playing field for small businesses through various initiatives that are designed to give them greater opportunities to sell to the public sector.

  With Government support, two pilot studies were held in London and the West Midlands to look at ways of easing access to public procurement contracts. The pilots were successful in offering practical help and advice to small businesses and breaking down some of the barriers facing them when they try to do business with Government and local authorities. They also confirmed that providing procurement support for small businesses can help boost the local economy and deliver wider community benefits. I enclose copies of the evaluation reports[1] for both these pilots that give further details of their findings and recommendations.

  Current initiatives to engage small business in the public procurement area are showing encouraging signs that Government assistance is being better targeted. These include:

—  The launch in March 2006 of the www.supply2.gov.uk national opportunities web portal advertising all smaller value public sector contracts. Around 28,000 suppliers and 2,900 buyers have signed up to the portal.

—  A simplified national pre-qualification questionnaire has been introduced to reduce the time spent by business completing such forms.

—  Over 3,000 small businesses have been trained in how to sell to the public sector through the Regional Development Agencies.

—  Over 110 local authorities have signed up to the "Small Business Friendly Concordat" which set out what small firms and others supplying local government can expect when tendering for Local Authority contracts.

—  Over 800 procurers have been trained in how to make procurement opportunities more accessible to small businesses.

—  Guidance on supply chain management, designed to help explain how procurers can ensure the supply chain is managed efficiently. It encourages prime contractors to consider using small businesses and to work with top suppliers on opening their supply chains to small business involvement.

INNOVATION PLATFORMS

  Innovation Platforms provide an opportunity to bring business and Government closer together to generate more innovative solutions to major policy challenges such as in transport, network security, health, and sustainable consumption and production.

  The platforms are designed to deliver simultaneously an improvement in the quality of public services and in the ability of UK businesses to provide innovative solutions for the challenges facing the global marketplace, in particular:

—  UK Government will obtain more innovative public service solutions at reduced risk.

—  UK business will be better positioned for global opportunities either as a result of UK Government procurement, or as a result of risk sharing in development with both the public and private sectors.

  Key features of an Innovation Platform are that it brings together government and business with an interest in the specific platform, it identifies the appropriate research enablers to use, and through aligning funding streams from separate sources, it seeks to link research to market, for example through procurement opportunities.

  Two pilot Innovation Platforms have been established in the areas of "Intelligent Transport Systems" and "Network Security."

Intelligent transport systems

  More "intelligent" transport systems provide the opportunity to manage traffic flow more efficiently through traffic demand management and greater availability of traffic information, thus reducing congestion and pollution. To support the development of transport schemes that feature demand management, the Secretary of State for Transport launched the Transport Innovation fund, where funding of £290 million will be available in 2008, increasing ultimately to £2.5 billion by 2014.

  This Innovation Platform is intended to support the uptake of innovative approaches in the Department for Transport (DFT) programme and to optimise participation by UK business.

  Progress so far:

—  In August the South East England Development Agency (SEEDA) launched, in conjunction with the Platform, a £2.3 million call for collaborative projects to provide businesses or consumers with improved services, including transport logistics and congestion.

—  DFT, DTI and the Engineering and Physical Sciences Research Council (EPSRC) have, as part of the Platform activities, announced joint funding of £9 million for research into future intelligent transport systems.

—  DTI and DFT have agreed an integrated approach involving £10 million of DFT demonstrator funding and £7 million of DTI Collaborative R&D funding for technology insertion. Successful projects funded by the DTI will have preferential access to the DFT demonstrator programme.

Network security

  Network Security is concerned with the resilience of a network's communications infrastructure and with the security of the information being transmitted across a network. This will inevitably include the people using the network, and it is therefore relevant to include the usability of such systems, including human factors, beliefs and interfaces such as identity management and authentication tools.

  Government requirements for Network Security include identity cards, e-borders, the Ministry of Defence's networking of assets; and many other Departments (eg DFT, the Department of Health, Department for Work and Pensions, and the Department for Education and Skills (DFES) are major prospective users of secure networks. Additionally, there are significant global requirements in the banking and financial services sectors, as well as in the retailing, oil and gas sectors, indeed, across any global supply chain where sensitive data is being exchanged.

  This Innovation Platform is intended to promote the exchange of innovative approaches between UK government and industry, to ensure that UK Government is able to make use of the most secure networks and to strengthen the ability of UK companies to compete in a global market.

  Progress so far:

—  DTI and the Economic and Social Research Council (ESRC) have agreed to launch a call on Human Vulnerabilities in Network Security as part of the Technology Programme.

—  A workshop has been held to develop the government and industry engagement and to identify the future priorities for the Platform.

—  DTI and EPSRC have reached agreement to run a co-funded "think-tank" on a topic owned by another Government department.

Future Innovation Platforms

  Discussions are proceeding with other government departments to identify themes that would offer the most profitable interaction, most notably with the Department of Health, the Department for Environment, Food and Rural Affairs and the Department for Communities and Local Government.

  I enclose a copy of the Technology Strategy Board's Annual Report.[2]

THE CONSTRUCTION SECTOR

  DTI's Construction Sector Unit (CSU) covers construction materials and products, suppliers and producers, building services manufacturers and installers, contractors (main, sub and specialist), consultants and the professions, and construction clients. It works under the main headings of enterprise, innovation, regulation and skills. Below are some examples of the unit's work and impact.

Enterprise

—  CSU works with key players in the industry (eg the Strategic Forum for Construction) to deliver the industry's productivity improvement agenda and deliver the considerable potential year on year savings (eg 10% reduction in construction time, 20% reduction in defects, 10% increase in productivity) identified in Sir John Egan's "Rethinking Construction" agenda.

—  It has funded the development of a set of key performance indicators by the industry so that the industry can monitor its performance.

—  CSU was a catalyst in the adoption of the "2012 Construction Commitments" to ensure best practice in the delivery of the Olympics.

—  Trustmark was launched at the start of 2006 to raise standards and empower customers in the domestic repair and improvement market. Nearly 8,000 firms have been recruited to Trustmark, which should be self-standing by March 2007.

Innovation

—  CSU has developed with the Department of Health a project to promote innovation and knowledge transfer across Local Investment Finance Trusts (LIFT) in the health sector. Initial estimates are that it should yield cost savings of 10% pa and added value of 10% pa, yielding £40 million pa benefit over the predicted 20 year LIFT programme life cycle.

—  Over the next year CSU is developing a strategy for sustainable construction.

—  CSU has set up a "Knowledge Transfer Network" and a "National Platform on the Built Environment" to develop a strategic view on construction research.

Regulation

—  CSU has worked with the Health and Safety Executive to ensure the revised CDM (Construction Design and Management) Regulations—which relate to safety performance—are more reflective of business views.

—  CSU has worked with industry to save more than £100 million pa through the Waste and Resources Action Programme (WRAP).

—  CSU owns Constructionline, set up at the construction industry's request, to cut the cost of bureaucracy from the prequalification process.

Skills

—  CSU has worked with DFES, the Sector Skills Development Agency and industry to ensure the skills and recruitment needs of industry are met. The number of employees qualified to NVQ Level 2 or higher has increased from 30% in 2004 to 40% in 2006.

CONSTRUCTION ACT

  Part II of the Housing Grants Construction and Regeneration Act (the Construction Act) is a key component of the construction industry improvement agenda. The review of the Act was announced in the 2004 Budget. Since then:

—  Sir Michael Latham has conducted a review of the Act with key members of the sector. This review was published in September 2004. No strong consensus emerged across the industry on many issues.

—  A consultation document "Improving Payment Practices in the Construction Industry" was launched in March 2005—it elicited over 350 responses, with consensus on some issues though not on others.

—  Consultation analysis was published in January 2006. In addition to a statistical analysis of the responses this set out, in broad terms, the proposals DTI was minded to take forward.

—  A "sounding board" was drawn together in January 2006 to advise DTI on the detail and practical effect of its proposals.

  It is the intention to introduce these proposals using powers contained in the Regulatory and Legislative Reform Bill, which is currently completing its passage through Parliament. The second consultation will be launched around the turn of the year.

COMPARISON SPEND PER HEAD BETWEEN SCOTLAND AND THE WEST MIDLANDS

  The table at Annex A8 of the Departmental Report shows estimated spend per head in Scotland of £176.2 compared with the West Midlands of £78.0. Both of these figures are based on estimated spend for 2005-06. The main difference arises as a result of where the Department deploys its resources with respect to nuclear decommissioning. After making adjustments for this, and using the most up to date information for 2005-06, the level of spend is more comparable, with the adjusted figure for Scotland being £88.9.

ERRORS IN THE 2006 DEPARTMENTAL REPORT

  On the errors in the 2006 Departmental Report, I acknowledge that there were more errors than I would have wanted. There were an unusual number of amendments needed in the period prior to the publication deadline of 12 May—for example to ensure that the 5 May reshuffle was properly reflected in the Report—and this diverted effort from normal checking procedures. We intend to learn the lessons from this and will be changing procedures for next year's Report.

Alistair Darling

8 November 2006

2   "Technology Strategy: Annual Report 2005" not printed. Back