Overall Asset Base

Land and Buildings

9.             In July 2002, the Department occupied 161 properties in total, ranging from large headquarters offices accommodating around 1,500 staff to one-person offices where local services are delivered. Very little of this property is actually owned by the Department and its Agencies, with over 90% being held on modern leaseholds. There is no significant unused space on the Departmental estate.

10.             The operation of the estate is divided between a number of property centres, including a headquarters (HQ) property centre responsible for the main (HQ) estate in the Victoria area and other HQ properties across the country. There are 27 HQ properties, 8 of which are in central London.

11.             Significantly more property is owned or managed through the Department’s NDPBs, such as the Research Councils.

Successful Business

Launch Investment

12.             Launch Investment is a risk-sharing Government investment in the design and development of specific civil aerospace projects in the UK.  The investment is repayable to the Government at a real rate of return, usually via levy on sales of the product developed.  Launch Investment is available only to the aerospace sector and stems from the provisions of the Civil Aviation Act 1982. Significant projects supported in the past include the Airbus A320 and A330/340 programmes and the Rolls-Royce V2500 and Trent programmes.

13.             Launch Investment has helped to maintain the UK’s competence in aerospace research and development by supporting Airbus and Rolls-Royce manufacturing centres of excellence in the UK.

Regional Selective Assistance and Enterprise Grants

14. Regional Selective Assistance (RSA) is the main programme of capital grant expenditure under this objective. The scheme is discretionary and is available to domestic and international investors to help with the investment costs of projects with capital expenditure above £500,000. RSA pursues three complementary goals: to create and safeguard jobs; to attract and retain internationally mobile investment; and to contribute to improving the competitiveness of disadvantaged areas.

15.The Department launched the Enterprise Grant (EG) Scheme in 2000 for projects of less than £500,000 in the Assisted Areas and other areas of England with special needs. This scheme has replaced RSA at this level of support.  Grants can be applied for more than once, subject to a total limit of £75,000.

SBS Capital Expenditure

16.The Small Business Service (SBS) has invested capital in various funds aimed at stimulating business growth and start-ups:

• Business Incubation Fund: aimed at encouraging local partnerships to provide incubator facilities for new small businesses in England;

• UK High Technology Fund: aimed at stimulating institutional private sector investment in early stage / high technology businesses throughout the UK; £20m of Government funding has succeeded in levering in £106m private sector investment since its inception;

• Regional Capital Venture Fund: aimed at stimulating private sector investments below £0.5m in Small and Medium Enterprises (SMEs) in England to demonstrate that such investment can be commercially viable; and

• Early Growth Funding: aimed at increasing the availability of small amounts of risk capital for innovative and knowledge-intensive businesses, as well as growing businesses needing fresh investment to pursue new opportunities.

17.The UK High Technology Fund, the Regional Venture Capital Fund and Early Growth Funding form part of the Enterprise Fund and are aimed at addressing the so-called ‘equity gap’, (the shortage of venture capital funding in the UK below £1 million, which makes it difficult for smaller, emerging businesses to get the funding they need to grow. (The Enterprise Fund also covers non-capital elements, the most significant of which is the Small Firms Loan Guarantee Scheme.)

18.The Enterprise Fund retained its previous capital expenditure allocation of £17m per annum in the 2002 Spending Review settlement. As a ring-fenced programme, under-spending in previous years will continue to be carried forward during the period 2003-04 – 2005-06. Additional capital funding for the SBS programmes is obtained from the Capital Modernisation Fund (CMF). 

Agencies and NDPBs

19.The National Weights and Measures Laboratory (NWML) owns £870,000 worth of assets, comprising furniture, fixtures and fittings, IT equipment, office machinery and vehicles.

20.The Radiocommunications Agency (RA) owns £37,841,000 worth of tangible fixed assets.

World-class Science and Innovation

21.The Department spends over half of its capital expenditure on this objective, for which the major part comprises funding to allow the Research Councils to invest in capital to support the UK’s science base. The funding provides important investment in laboratories and equipment. The main planned expenditure in support of this objective is as follows.

22.UK scientists need access to world-class facilities and laboratories if they are to continue to carry out world-class research. In many areas of science this means access to facilities which no one country can afford to build or operate alone. Access to many such facilities is provided through the UK’s membership of international organisations, including the European Organisation for Nuclear Research (CERN), the European Space Agency (ESA) and the European Molecular Biology Laboratory. In 2002, the UK also joined the European Southern Observatory (ESO).

Large Facilities and Research Council Institutes, Centres and Surveys

23.But there are circumstances when it is in the UK’s strategic interest to build or to host major facilities in the UK, either on a national or international basis, with the UK taking the lead and other countries contributing. In SR2000, the Science Budget was allocated £50 million in each of 2002-03 and 2003-04 for investment in large facilities and Research Council institutes, centres and surveys (see below). The SR2002 settlement consolidated that baseline for a further two years, allowing it to become the basis for a longer-term plan for investment in large facilities. The plan is derived from the large facilities strategic roadmap (http://www.ost.gov.uk/research/funding/lfroadmap/index.htm), which has been developed with the Research Councils as a framework for planning and implementing the investment programme. A review of this process will be carried out in 2003.

24.All large capital investments included in the roadmap which have secured funding will be managed as discrete projects and be subject to independent review at key stages in their lifecycle. This is designed to be compatible with the Office of Government Commerce’s (OGC’s) guidelines for major capital projects embodied in their Gateway process. In order to secure funding a project proposal must progress successfully through the first two key stage reviews: the science case and the business justification. The Research Councils UK (RCUK) Strategy Group will make funding recommendations at the time when projects reach the appropriate point in this process. That recommendation will be based not only on the outcome of Gateway reviews but also on strategic priorities for the available budget.

25. The strategic areas currently covered in the roadmap are: synchrotron radiation (and supporting facilities), neutron beams, radioactive particle beams, particle physics, astronomy, oceanographic research vessels and computing infrastructure.  The medium term projects currently in the roadmap, some of which secured funding in SR2000, include:

• the Diamond synchrotron (separate funding stream – see below);
  

• a second target station on the ISIS neutron spallation source at the Council for the Central Laboratory of the Research Councils Rutherford Appleton Laboratory;
  

• the Centre for Accelerator Science, Imaging and Medicine (CASIM) Fourth Generation Light Source (4GLS) project at Daresbury Laboratory;
  

• Diamond research hotels;
  

• SCUBA 2 telescope instrumentation;
  

• an oceanographic research vessel to replace the RRS Charles Darwin;
  

• a replacement building for Laboratory of Molecular Biology; and
  

• a Muon Ionisation Cooling Device.

26.        Diamond is the name for the new synchrotron radiation facility under construction at the Rutherford Appleton Laboratory, which will provide the very high brightness X-ray radiation that physical and bio-scientists need to stay at the forefront of their research fields. Established as a joint venture between the UK Government and the Wellcome Trust in spring 2002, the company Diamond Light Source Ltd is now taking the project into the construction phase.

27.        A number of the Councils have institutes, centres and surveys which carry out research and provide services (such as curation) to others also carrying out research. As a rule the institutes, centres and surveys undertake research or other activities which have characteristics (such as scale and duration) making them unattractive to universities to carry out. There is a need for infrastructure investment to ensure that these institutes remain internationally competitive, with the appropriate equipment in suitably furbished buildings. In 2001-02, the Office of Science and Technology (OST) sought independent advice on the recurrent level of investment that the Councils should be making to put their institutes, centres and surveys onto a sustainable, long-term footing, and the extent to which Councils were in practice making such investments. Estimated investment gaps of differing sizes were identified among the Councils. The allocation of capital funding for Research Council institutes, centres and surveys will be made in two tranches. The first tranche, totaling £35 million over two years, will comprise two components as follows:

• £27 million to make good 50% of each Council’s recurrent investment gap as identified in the consultant’s report; and

• £8 million to be allocated pro-rata to the size of Councils’ asset bases on the basis that once the immediate problems are addressed Councils with larger asset bases are likely to have greater investment requirements.

Joint Infrastructure Fund and Science Research Investment Fund

28.        The main existing elements of capital grant expenditure on the science base comprise:

• a continuing stream of funding, building on the Joint Infrastructure Fund and the Science Research Investment Fund, to tackle the capital investment backlog in the Higher Education system

• research grants which provide building and equipment to universities to enable successful grant applicants to carry out various research proposals

New capital investment to address underfunding of the science base is set out in Section 3.

Research Councils

29.        Research Councils undertake some research themselves and must operate on a level playing field when considering whether to conduct the research themselves versus commissioning research from Higher Education Institutes (HEIs). Where the internal option is the most effective, their facilities need to be kept up to date by means of capital investment (and resource-funded maintenance) to provide ‘the well-found laboratory’: effective research needs effective facilities, usually in the form of physical assets.

30.        DTI has an agreement with the Treasury that the Research Councils can be encouraged to re-structure their institutes to make better use of resources by retaining receipts from the sale of capital assets on the basis that those receipts are used to fund other capital investment or one-off re-structuring costs.

31.        The asset base of the Research Councils as at 31 March 2002 is illustrated in the following table:  

* MRC figures subject to final audit confirmation

Fair Markets

32.        Agencies and NDPBs within the accounting boundary contributing to this objective have the following assets:

33.        NDPBs beyond the accounting boundary contributing to this objective have the following assets:

34.        Other smaller bodies such as Energy Watch and the Simpler Trade Procedures Board (SITPRO) have a small amount of capital assets also contributing towards this objective.

Liabilities and Statutory Requirements

UKAEA

35.        At the start of 2003-04, the UKAEA expects to have tangible fixed assets worth £130m (land and buildings and plant and equipment at five sites across the UK, accumulated over the last 50 years) and investments worth £3m. All assets contribute to UKAEA’s site restoration and fusion research objectives.

36.        UKAEA’s primary task is the decommissioning and management of radioactive waste arising from the Government’s past nuclear research. It is responsible for discharging these liabilities safely and securely.

Revenue Generation from Existing Assets

37.        It is important to recognise that DTI has relatively little in the way of capital assets. Nonetheless, of those assets that the Department does possess, budget holders are required to investigate the potential for generating revenue, in line with the Government’s policy to secure the maximum value for money from its assets. This includes the scope for selling information held on the Department’s data systems.  This needs to be balanced against the Department’s commitment to making information freely available to business wherever possible.

Resource Budgeting Consequences

38.        The move to resource budgeting ensures that the annual cost of retaining an asset is reflected within a Department’s resource budget, rather than just the cost of purchase. The budget therefore includes an amount for the opportunity cost of holding that capital and not investing elsewhere (the cost of capital charge) and a charge for the amount of capital consumed in that particular year (depreciation). The resource budget consequences of the existing asset base are illustrated in the following table:

Private Finance Initiative and Public Private Partnerships

39.The Private Finance Initiative (PFI) has been utilised in the Department since its inception in 1992; decisions to use PFI or Public Private Partnerships (PPPs) are taken on a value for money basis. During the SR2002 period the Department will be using PFI or PPP in various areas. There are two existing schemes at the Research Councils and more may result from SR2002 funding. These projects are listed in Section 3.

Asset Disposal Strategy

Planned disposal receipts
40.The Department regularly reviews the utilisation of capital assets with a view to realising the value of any asset that is no longer required. The existence of audited registers of capital assets - both within DTI and in the Research Councils - aids this process by ensuring the visibility of all significant assets.

41.Aside from land and buildings, responsibility for the identification of surplus or obsolete assets such as IT equipment within DTI rests with delegated budget-holders. Budget holders are reminded during the Department’s business planning process that they should consider the scope for disposing of assets.

42.In practice the level of such disposals is very low, reflecting the nature of the tangible assets held (mainly furniture and office equipment), which generally have minimal or zero residual value at the end of their useful lives once the costs of disposal are taken into account. Planned disposal receipts are summarised in the following table:

Asset Disposal Plans: Core Department

43.        Plans are being formulated to rationalise the HQ estate by reducing the number of HQ properties in central London.  This is all part of the Department’s drive to minimise the cost of accommodation against a background of rising rates and rent. Within this framework, old inefficient furniture in retained properties is routinely replaced with smaller, more ergonomic furniture to help improve the space density within these buildings.

Asset Disposal Plans: Agencies and NDPBs

44.        Over the SR2002 period, NWML plans to dispose of assets worth £230,000 and UKAEA plans to dispose of land with an anticipated receipt of £9m.

Disposal Strategy of Research Councils

45.Research Councils follow a continuous process of examining their assets to ensure that any that are no longer required are sold off. The Councils examine the structure of their Institutes, some of which are multi-site, to evaluate whether there can be rationalisation. Based on a formal agreement, forward programmes for the Councils are developed on the basis that any redundant assets are sold and contribute to future capital funds.

SECTION 3: NEW INVESTMENT  

46.             Planned new investment is focused around the Department’s objectives, summarised below.

Accommodation

47.             Wherever practicable and cost-effective, the Department is extracting itself from expensive leases and moving staff to lower cost buildings.   The Department plans to invest capital to cover the costs of fitting out existing and proposed new buildings.  This will cover the costs, for example of smaller desks and of moving staff to open plan to increase people densities.

Successful Business

Launch Investment

48.             The Department is committed to investing £530 million for the development of Airbus UK’s super-jumbo, the A380 aircraft, and £250 million for the development of Rolls-Royce’s Trent 600/900 aero-engines. Arial;color:windowtext;">Both companies are progressing with the development of these programmes and have started to draw down on the investment The Department does not currently anticipate new requests for Launch Investment in the near future and therefore the expenditure for 2005-06 is negative. This reflects the fact that launch investment is not a grant and is repayable to the Government at a real rate of return, usually via levies on sales of the product developed.  The first flight of the A380 powered by Trent 900 aero-engines is scheduled to take place in January 2005 and will enter airline service in early 2006. 

49.             Despite the current downturn of the aerospace market, due to 11 September 2001, the Department expects to receive around £400 million in levies from its Launch Investment portfolio over the SR2002 period.

Small Business Service

50.             Future planned total investment (SR2002 allocation, previous under spending and CMF) is as follows:

1 Business Incubation Fund is funded from the Capital Modernisation Fund.

Advanced Metrology Laboratory (AML)

51.             The Department is considering investing in a new facility (the AML) to deliver scientific work in very tightly controlled environments, consistent with the needs of industry. The AML will be used to perform work commissioned by National Measurement System Directorate’s science programmes. Proposed investment approximates £3m/£6m/£9m over the SR2002 period.

Agencies 

52.             Both NWML and RA plan new investment during the SR2002 period. NWML will be engaging in routine replacement only. RA’s new investment will be for:

• Technology – improved IS/IT in response to customer requirements and market developments; and

• Plant and Vehicles - to purchase leading edge technical equipment, to replace/upgrade the field force’s technical equipment and to replace fleet and specialist vehicles.

This is summarised in the following table:

NDPBs

53.             The Design Council will be investing £100,000 over the SR2002 period on IT and furniture, fixtures and fittings.

World-class Science and Innovation

54.             New investment in the science base is viewed as a high priority. The Science Budget is rising by an average 7% a year in real terms as a result of the two previous Spending Reviews. The DTI has proposed overall investment needs to remain at around this present rate in order to ensure that the Science Base receives the funding it needs to grow and compete internationally. Capital investment is integral to this. A further £212m for 2003-04 to 2005-06 over and above the annual baseline of £99.5m has been allocated to this RCUK capital investment as a result of SR2002. Signification capital proposals, including CASIM will benefit from this increase.

55.        In addition, for the Diamond Synchrotron, an extra capital provision of £31m has been allocated for 2003-04 to cover costs in excess of those previously identified. This will largely account for the costs that would have been met by France, but also reflects updated cost estimates and likely VAT liability.

56.        The Cross-Cutting Review of Science and Research found convincing evidence that the UK university research base was on an unsustainable trajectory which, if unchecked, would lead to a continued and decisive decline in the capacity and capability of universities to sustain world-class science and engineering research. The review sets out the many reasons which contributed to this, including:

• chronic overtrading in research leading to reliance on internal cross-subsidies from uncertain income sources and a neglect of physical infrastructure;

• a lack of clarity at the heart of the Dual Support system about the purposes for which Funding Council support for research was intended;

• a gradual but sustained shift in the balance between the two sides of the Dual Support system; and

• a substantial increase over the previous decade in the volume of research being performed which was funded at less than full economic cost.

57.        Investing in Innovation sets out the Government’s agenda for tackling this situation. A copy of this can be found on HM Treasury website at the following address:http://www.hm-treasury.gov.uk/spending_review/spend_sr02/spend_sr02_science.cfm. This includes two specific actions which come under the umbrella of the Science Budget: investment in university science research infrastructure and an increase from 2005-06 in the amount that Research Councils contribute to the overall costs of university research.

58.        A modern and well maintained capital infrastructure in universities is important to the health of scientific research in the UK because:

• the quality and age of the facilities and equipment increasingly determine the quality of the science that an institution can do. Failure to invest will progressively put the UK at a competitive disadvantage given the increasing importance of infrastructure to modern science; and

• universities with older laboratories and outdated equipment will find it increasingly difficult to attract and retain the best research talent in what is now a global market for science research.

59.        Building on investment totaling £1.75 billion in the 1998 and 2000 spending reviews (jointly funded by the Government and the Wellcome Trust), the Government has created a dedicated capital funding stream worth £500 million per year from 2004-05 to tackle the effects of under-investment in research infrastructure. Of this, £300 million will be provided by the Science Budget on a UK-wide basis and £200 million will be provided by the Department for Education and Skills (DfES) on an England-only basis. Additional funding may be made available by the devolved administrations.

Fair Markets

60.        One of the Department’s priorities for the SR2002 period is developing the sustainable energy market. As part of this, DTI is proposing to invest in capital grants for near commercial technology to support renewables and cleaner energy.  This will be vital if the Government is to achieve its target of securing 10% of electricity from renewables by 2010.

61. Other investments under the Fair Markets objectives include new investment by Agencies and NDPBs, mostly comprising routine purchasing replacement of furniture and fittings, office machinery and IT equipment and some new investment. The Employment Tribunals Service plans to invest its allocation (£1.9m/£1.6m/£1.6m) primarily on making newly acquired leasehold premises, including new premises in central London, fit for purpose. Their initial requirement exceeded the settlement and plans are being reviewed at present. ACAS received a settlement of £1.4m/£0.7m/£0.7m across the Spending Review period, which will be used primarily for IT equipment and accommodation. 

 
Liabilities and Statutory Requirements

62.        UKAEA plans to invest £57m in buildings and equipment over the SR2002 period in support of its decommissioning programmes. The largest parts of this expenditure will be at its Dounreay and Harwell sites.

Resource Budget Consequences

The following table sets out the resource budget consequences of the capital charges associated with the new planned asset base over the Spending Review period:

PFI/PPP Projects and Investment

IT – ELGAR

63.        In late 1998 the Department awarded a contract to the UNITAS consortium (Fujitsu in conjunction with CMG) for a privately funded public private partnership under which the consortium would supply the Department with IT resources and services. UNITAS took ownership of the assets, comprising the central Department’s main IT infrastructure, and assumed the responsibility for the related service provision. The contract runs until 2014.

64.        The UNITAS consortium will be responsible for the majority of future IT investments for the core Department. These will be privately funded and UNITAS will own related assets. The contract provides for periodic technological refresh across the infrastructure and applications supported by UNITAS. Investments needed to enable the core Department’s contributions to the Government’s goal of all key services being on line are also likely to be funded privately under the ELGAR contract.

65.        This PFI project is off-balance sheet.

Radio Spectrum International

66.        A PPP was established between the Department’s Radiocommunications Agency and CMG plc in June 1998, under a joint venture called Radio Spectrum International, which has an initial term of seven years. Of the 1000 ordinary shares of £1 issued, 30% were issued to the Radiocommunications Agency and 70% to CMG, with the latter providing all the working capital. The joint venture is enabling the agency to obtain its IS/IT services on a PFI basis and at the same time exploit RA’s knowledge and systems commercially.

National Physical Laboratory at Teddington

67.        The Department is engaged in a PFI with Laser (a company jointly owned by Laing Investments and Serco Investments) to redevelop the Teddington site of the National Physical Laboratory. The project will construct a new 16-module laboratory and support services at a capital cost of around £82m (at 1997 prices). As each phase is completed the new facilities are occupied. The PFI contract was signed in 1998 and was awarded for a period of 25 years, after which the facilities revert to DTI. During 2003-04, the sum being added to the capitalised value of the PFI asset amounts to £17.3M. This represents the final addition to the asset value under the construction phase of the project.

The following table shows off-balance sheet PFI projects for 2003-04 to 2005-06:  

Planned PFI projects Output Baseline Forecast (£'000) (£'000) 2003-04 2004-05 2005-06 Electronic Government through Administrative Re-engineering (ELGAR) (Consortium led by Fujitsu Services with CMG) Provision of IT Services, support and infrastructure. Latest projects will deliver electronic filing and record keeping. Resource budget 38,000 37,000 37,000 Private capital [1] 5,000 1,000 1,000 Coal Authority (Cap Gemini Ernst Young) Provision of geophysical mining information. (reports provided to property purchasers) Resource budget 1,700 1,700 1,800 Private capital [1] 0 0 0 Radio Agency Strategic IT Partnership (Joint venture company - RSI ltd) Provision of core agency IT Services and support Resource budget 21,040 21,670 22,320 Private capital [1] 0 0 0 Natural Environment Research Council (Ernest Shackleton) Contract for a supply vessel to undertake survey activities in the Antarctic Resource budget 3,210 3,210 3,210 Private capital [1] 0 0 0 Natural Environment Research Council (PML Boats) Contract for the supply of small boats to support the marine sciences programme activities Resource budget 320 330 330 Private capital [1] 0 0 0 Engineering & Physical Sciences Research Council (CSAR - High Performing Computing Service at the University of Manchester) Provision of computer services for academic research Resource budget 9,000 10,900 10,900 Private capital [1] 1,000 1,000 1,000

[1]Estimated private sector capital investment in each year.

 

SECTION 4: PROCEDURES AND SYSTEMS

Management of Capital Expenditure

68.             DTI manages its capital expenditure through the processes and systems set out in this section.

The Business Planning Process

69.             The Department is currently working through a new integrated business planning process for 2003-06, responding to the need identified in the DTI Reviews for a more strategic and business-focused approach to the allocation of resources. The aim is to improve the linkage between budgets and strategic priorities, objectives and targets and to provide a better basis for business performance management.

70.             So far, the Department’s SR2002 settlement has been divided into a set of high level budgets for capital and resource expenditure allocated across a number of operational objectives on the basis of the Department’s ability to influence them and their potential contribution towards the Department’s overall strategic aims and objectives. Each of the operational objectives is owned by a member of the Department’s Executive Board, and these objective owners are working to identify the actions which will be needed to deliver these objectives, and measures and targets which can be used to track and manage performance in doing so.  These will be presented in objective delivery plans, which – after a process of challenge and review – will be brought together in a Departmental business plan which will be used to manage the Department’s work over the coming year.

71.             Budgets will be delegated to the Directors General heading each Group to fund the actions which that Group has undertaken to perform as part of the Departmental plan. The primary responsibility for identifying departures from plans, and proposing any necessary corrective action, will rest with Objective owners, although Directors General will also be responsible for managing their Groups’ performance in delivering the actions set out in the plan within the appropriate budgets.

Appraisal

72.             The Department requires Management Units to conduct full investment appraisals when they plan to undertake substantial capital spending on accommodation or IT. This process includes systematically defining the objectives of the investment, the options for achieving those objectives (including utilising private sector finance) and a full cost-benefit analysis. Projects are not approved unless the benefits can be clearly demonstrated.

Evaluation

73.             DTI takes proper evaluation of all its expenditure, including capital, seriously and ensures that the results of previous evaluations are fed into the annual business planning process.

74.      The Department operates a system of post-project reviews for IT expenditure, based upon the size of the project or expenditure. Detailed post implementation reviews are undertaken for all IT projects over £1m.

PFI and PPP

75.             DTI considers PPPs as a method of securing value for money and considers each case on a basis of effective, value for money service delivery. Where capital and expertise can be provided by the private sector, this is considered at a strategic level and a choice on the best source of funding is taken based on Government criteria.

Project and Contract Management

76.             The Department has detailed procurement procedures for establishing a contract strategy, bid evaluation, negotiation, offer of contract and contract monitoring and control, all aimed at the primary objective of achieving value for money. Proposals for larger capital projects are also required to demonstrate adequate management and project management procedures before going ahead, and are typically required to have a separate project management group. The Gateway peer-review process for procurement projects has been rolled-out across DTI, its Agencies and executive NDPBs.

Procurement

77.        Procurement in DTI is aimed primarily at obtaining maximum value for money, with an emphasis on competition, the competitiveness of suppliers, and propriety. It is also consistent with wider Departmental policies, e.g. the promotion of e-commerce, opportunities for SMEs, and sustainable development. Currently, the delegated structure of procurement across the central Department is closely aligned with financial delegations, with procurement being undertaken close to users and clients.

78.        A review of the procurement structure is currently underway, exploring options for extending the use of framework arrangements, implementing e-procurement in DTI and seeking more consolidation of procurement activity, whilst retaining an intelligent customer focus. Procurement networks have been strengthened in the central Department, and established for DTI Agencies and executive NDPBs. These networks facilitate the sharing and dissemination of best practice, and underpin an increasingly professional and collaborative approach. The networks will also provide the necessary links in forming corporate DTI positions vis-à-vis the OGC and collaboration with other Government Departments.

Science Expenditure

79.        The Science Budget (capital and resource combined) is ring-fenced and managed separately from DTI’s other budgets.

80.        The policy framework for all government-funded expenditure by the Research Councils is determined by the Government, which sets broad priorities among several classes of activity. A key new mechanism for supporting this agenda is RCUK. Launched in May 2002, RCUK is a strategic partnership between the seven UK Research Councils through which they are working together to improve the impact of their activities and investments. Within that framework day to day decisions on the scientific merits of different strategies and projects, including capital expenditure, are, in accordance with the longstanding Haldane principles, taken by the Research Councils without detailed Government involvement.

81.        Ministers, advised by RCUK:

• determine the allocations;

• where appropriate, and in consultation with the Council, set broad priorities;

• ensure that Councils have appropriate arrangements for achieving their objectives; and

• ensure that Councils operate cost-effectively and within the rules of Government Accounting.

Delegation

82.        The Department’s capital expenditure on science involves these budgets, resulting in cash grants in aid to bodies outside DTI – principally the Research Councils - rather than the delegation of capital budgets within DTI. Procedures for ensuring that value for money is achieved in the way this money is spent are therefore different.

83.        The existing Joint Infrastructure Fund (JIF) and the Science Research Investment Fund (SRIF) have been successful in increasing investment in research infrastructure. However, SRIF finishes at the end of 2003–04 and so does not provide the certainty that universities require to enable them to plan their medium and longer-term investments sensibly. Under SRIF, universities are required to find 25 % of the costs of projects from other sources, with an exemption for joint university projects which are genuinely collaborative. The thinking behind this requirement was that it would force universities to seek other funds and focus on their real priorities. In practice, while these aims have been achieved, many universities have found it difficult to raise such large sums.

84.        The Government has therefore concluded that the level should in future be set at 10 % and that the waiver for collaborative projects should stand.

85.        The now dedicated capital funding line (“SRIF2”) will be distributed, as SRIF has been, on the basis of a formula driven by research excellence and volume. Universities will draw down their allocations on condition that they can demonstrate a sound research infrastructure investment strategy. Within that strategy, it will be for each university to determine for itself the investment mix which best matches its medium and long-term needs, taking account of the strategic priorities of the Research Councils and other funders of the science and engineering base. It is expected that the allocation of this funding will be announced in January 2003.

86.        A small element of the new dedicated capital stream will be retained centrally to provide a measure of support for strategic rationalization and restructuring of the university science base on a responsive basis. Funds will be made available only where it can be demonstrated that rationalising and restructuring will produce a critical mass of international research excellence that could not be achieved by the institutions using their individual capital funding allocations. This funding will support only the research element of any rationalisation and restructuring; any teaching or other benefits will need to be funded from other relevant sources.

Appraisal

87.        Consistent arrangements are in place for capital expenditure in each of the Research Councils, which are required under their Management Statements and Financial Memoranda to conduct full investment appraisals.

Evaluation

88.    The Research Councils have well tried and extensive systems of ex-ante evaluation and review, notably their peer review process. In addition, quinquennial reviews of the Councils and their institutions, the latest ones having recently been completed, allow periodic re-examination of their structure, overall costs and effectiveness.

Audit

89.        The Management Statements and Financial Memoranda combined with set objectives for each of the Chief Executives and specific measures for the Research Councils together require that the Chief Executive is responsible for:

• ensuring that proper project management systems are in place and regularly reviewed to reflect best practice

• ensuring that the development and installation of all business critical systems are subject to proper project management disciplines and that sound contingency plans are in place.

90.         Audit Committees are responsible for paying particular attention to risks and contingency plans on all business critical projects and report to the Council where procedures for plans or progress are such to prejudice Councils’ operations.

91.        OST maintains an overview plan of Research Council capital investment.

Progress in Delivering Capital Programmes

92.        As has been mentioned, DTI does not have a significant amount of capital expenditure, meaning that the number of capital investments and assets mentioned in the previous DIS was inevitably limited in number. DTI does not manage a large capital infrastructure. Of the capital projects that were described in the previous DIS, there have on the whole been no significant problems or delays with their implementation. Noteworthy developments or setbacks are however detailed briefly below.

RSA and Enterprise Grants

93.        Responsibility for the Enterprise Grants scheme has transferred to the Small Business Service. In addition, responsibility for delivering RSA grants of less than £2m has been transferred from the Government Offices to the Regional Development Agencies, which have come under the DTI banner since the 2001 General Election. Both these changes took effect at the beginning of April 2002.

Diamond synchrotron

94.As described in paragraph 25 above, Diamond Light Source Ltd is now taking the Diamond Synchrotron project into the construction phase.

Teddington

95.The PFI project to provide new serviced laboratory accommodation for the National Physical Laboratory is progressing more slowly than planned. Final completion is now likely to be delayed by 2 years from the date originally envisaged. The relationship between the PFI contractor and the Design and Build Contractor has been restructured but the relationship with the Department is unchanged. There are no additional costs to the Department as a result of this restructuring.

Action for Improvement

96.As described above, the Department has been engaged in a major review of its arrangements for internally allocating resources – including capital expenditure – which is resulting in new integrated arrangements for business planning and performance management focused on operational objectives reflecting the Department’s post-SR2002 aim of Prosperity for All. These will be supported by the work on which the Department is engaged with the Treasury to improve the quality of its evidence base.

DTI
January 2003

---

 

Home - Search - Guide - Contact Us

disclaimer - copyright - complaints procedure