Public Accounts and Public Administration Committee

Croeso. Welcome to our witnesses. Thank you very much for being with us today. For the record, I'd be grateful if you could state your names and roles.

Thank you, Chair. Bore da. Good morning. Tim Moss, chief operating officer and director general, Welsh Government.

Ed Sherriff, deputy director of energy in Welsh Government.

I'm Andrew Jeffreys, director of the Welsh Treasury.

Bore da. I'm Leon Wong, Welsh Government's nominated director for the Local Partnerships board.

Thank you. Thank you very much for joining us. Thank you. I believe that there have been traffic problems with at least one of you, so thank you for making it. Would you like to make an initial briefing, or would you like us to go straight into questions?

I think we're very happy for you to go straight into questions, and help the committee in any way we can. Thank you, Chair.

Okay. I shall begin, then. A quite straightforward question: what guidance does the Welsh Government have for its use of external consultants, and what does that guidance state about when it can go to the market, rather than deliver services in-house?

Thank you, Chair. We don't have specific guidance relating to consultants and consultancy. We tend to have a more sort of principle approach, which relies on the principles that are in 'Managing Welsh Public Money', our scheme of delegations, accounting officer, principal accounting officer, additional accounting officer duties, in terms of assessing when we would use any particular professional services or consultancy across a wide range of things within Welsh Government. So, it's more of a principles-based approach, rather than specific guidance around that. There are particular things linked to the use of contractors and things like that, which might be in the realms of—. Tying into employment and things like that, there are specific things there that tie into the tax rules, but nothing, no specific guidance, around consultancy.

So, when considering appointing a consultant, or advising a Minister on appointment of consultants, what would determine the line of recommendation you might follow?

That would be down to individual directors, accounting officers, within Welsh Government to look at the assessment of the work that is required and what is the best way of meeting those requirements, whether that's through procurement out to the marketplace, whether it's through using Local Partnerships or any other route, and also assessing the resource capacity that will exist within individual teams. And it ties into the nature of the work and what particular skills are required. So, it's down to individual pieces of work and assessment around that.

Obviously, that could, theoretically, produce quite a differential approach, so, what, if any, central oversight or monitoring arrangements exist for the Welsh Government's use of external consultants?

Again, I go back to what I was saying, that central oversight is really around the principles of 'Managing Welsh Public Money', the role of accounting officers and individual directors through the scheme of delegation that we have within Welsh Government, rather than specific controls relating to consultants. I think I should also add that there's a huge range of services that could be provided under the banner of consultancy, so I think that's why it's more sensible to have a principle approach and that things should be assessed on an individual case basis.

So, just to clarify, then, there's no systemic monitoring of the commissioning that's been undertaken to ensure compliance with general guidance and effective use of resource?

The oversight would be through the normal accounting procurement rules, 'Managing Welsh Public Money' and accounting officer tests that would need to be applied across the different parts of Welsh Government, rather than any particular centralised control mechanism looking at that. As I said, I go back to—. When you look at what could be under a banner of professional services or consultancy, it can cover a very, very wide range of activities, and so trying to define that across the organisation would be quite difficult and time consuming, and much better to use a more principle approach through, as I said, the tests and governance that would exist within groups and directorates.

So, would this be captured routinely in an internal audit process?

Internal audit could look at this, if they were looking at a particular issue as to how we're delivering services or achieving particular outcomes and the best use of resources to do that. That could be one angle that internal audit could look at, as part of that work.

So, it's optional rather than mandatory.

Yes.

Okay. How much did the Welsh Government spend on consultants in 2022-23 and 2023-24, and how do those figures compare with figures in previous years?

Again, given that there is no overall central control oversight of consultancy, it depends on how you define what sits within the 'consultancy' category, and, as I said, there can be a huge range of services, from specialist advice, things in the technical IT space, to more general consultancy. It depends on how some of this is coded within the finance systems. So, we do have some codes that would cover elements of consultancy, but it wouldn't give a picture for everything that could be covered within a banner of professional services or consultancy.

So, we have a main consultancy code, and there are figures for that, but I would caveat that that wouldn't cover everything that might be under the banner of professional services, because some of that will be very highly technical within the IT space, and so it would be coded under that, and, if you take some of the organisations that operate in this space, they offer an extremely wide range of services, and the coding would be down to the services that are provided rather than some generic banner of consultancy. So, to give a figure for the committee is very difficult, and it would be hugely caveated by—you know, it depends on how you want to define what sits within those individual things. We do have a main consultancy code, and there are figures around it, but, as I said, I wouldn't want the committee to think that is representative of everything that would be going on within Welsh Government.

For comparative purposes, because, obviously, we were looking at year-on-year comparisons, would you be able to provide us with the figure you do have, notwithstanding the caveats you have provided?

Yes. The main consultancy code has a spend, I think, of around about £7 million over the last five years, averaging at about £1.4 million a year. That has increased slightly over the last couple of years, but it depends on specific pieces of work. But, as I said, that's what's coded under the main consultancy cost centre within the finance systems. As I said, there could well be other things where it would be tied to specific activities, maybe in the IT space or elsewhere, or wider professional services that would happen within the organisation.

So, you say it's gone up slightly in recent years, can you pinpoint particular projects or causes, or has there been a general upward trend on comparative work?

I don't have the specifics around what any increase has been over the last year, but I do know there are particular pieces of work. So, for example, I'm currently involved with what would be classed as a consultancy firm, doing some work with us, advising us on the future of our corporate systems, providing very technical and expert advice around that; that's a specific project of work that we're doing to develop a business case. And so that would be what could be classed under consultancy spend, but that's a defined project at the moment, where they're providing the technical expertise that we wouldn't have within Welsh Government.

Could I—?

Please, Andrew.

Thank you. I don't wish to make this sound even more complex than it already sounds, but most of our spend on Local Partnerships, for example, isn't coded as consultancy in the finance system. The committee will have had some figures for spend on Local Partnerships over the last few years in the evidence paper that was provided for this session, and you'll have noticed that that's £5 million in the last year. So, our spend on Local Partnerships is more than the spend under that code of consultancy in our finance system. And, of course, people would see a lot of what Local Partnerships are doing in terms of work that they're providing for the Welsh Government as consultancy, but people will code the expenditure in different ways. So, in a crude analysis using the finance system, nominal codes won't necessarily get you the full picture of what you might be interested in in terms of how much the Welsh Government spends overall on consultancy. I think that would be a more complex piece of work to try and really pin down exactly how much we're spending on consultancy in all its varied and different characteristics. And as Tim says, it ranges from things like information and communications technology advice on one extreme to property advice on the other extreme. I understand that we also code Health and Safety Executive advice that is provided on building safety as consultancy in some cases as well, so it's a slightly complicated picture, really.

How complex is it to provide some form of comparability figure that this committee can consider?

As I said, we can provide figures around how things are coded, like for the main consultancy spend and what's within that, but, as I said, we'd want the committee to be clear that there is other spend that you might consider might be under the professional services banner that wouldn't be within that. And as Andrew has just said, the work with Local Partnerships is probably more coded to the specific projects and programmes that that support has been given to, linked to the key areas that Local Partnerships operate within. So, as I said, there are some figures available, but I'd want the committee to be clear what that would include and would not.

Thank you. If I bring Mike Hedges—. Sorry, Natasha. Natasha Asghar.

Good morning, gentlemen. Just a quick question. Thank you so much for the questions that you've answered so far, but I just have a quick sub-question about expenditure. I know we're going to go into detail later on. From my understanding, the Welsh Government's total expenditure went up from £2.9 million for 2018-19 to £5.2 million in 2023-24, and over six years there's been a £22.3 million spend so far. So, I accept what you're saying and I understand how everything works, but I just wanted to know where you find that the majority of the extra spend is going. Is that mainly on the consultancy side? The labour side? Because you said that there's an increase of spend happening per year, which I completely understand. I can take COVID into account. I'm sure the committee can as well. Things are going up in price. But what's the justification for the financial increment every year?

If I can just clarify the figures. The £2.9 million going to the £5.2 million—were they the figures you—?

For the project spend.

That's the project spend with Local Partnerships. So, that would be specific to the individual projects that we've got. An increase at the moment that we're seeing for last year and into this year will be the work that's going on with Ynni Cymru and the set-up of that. There's some increase in the work in the resource efficiency and circular economy space. So, again, that's increasing as that work is ramping up, whereas you'll see other work and projects that are coming to an end, and so that changes. So, it's very project specific, linked to individual things. I know Ed can give more detail around those specific projects that we've got, but that's the reason for that spend and there are particular reasons why that's gone up and other projects were coming down.

That's fine. And just a sub-question to that. When a project is undertaken, obviously it will last one year, five years, 10 years, however long the project duration is going to be. How far in advance do you work? Do you work with a project amount from start to finish of a project? Or do you, as some projects—? We've met with organisations here who've come in and given us evidence that they do it on a two-year, three-year basis, and then review it.

Shall I answer that in the context of the work we did on the renewable energy developer, which transcended into Trydan Gwyrdd Cymru? The first couple of years of that work was really identifying the business case and scoping out the activity—so, was there a case for the public sector to be leading commercial-scale, utility-scale renewable projects, utilising the woodland estate. That initial stage was around building the business case, drawing in the commercial and financial expertise from Local Partnerships, and then also the expertise on actually delivering renewable energy projects. That was the first phase of that work, so that was the first year or two of the development.

It only moved into the next phase once the business case was clear that there was a strong case for us taking that intervention. Then, the support that we had from Local Partnerships changed from working on a business case to actually setting up a company. So, the business case support moved away, and we were able to utilise the Local Partnerships support for setting up the company. That was a different range of skills, a different set of expertise that we had. That explains the funding that we had in the third year of the programme. Now we've established the company—the company is set up, it's registered, we've got the team in place—the support from Local Partnerships is much reduced in this last year to some very specific support, again around commercial advice.

So, I think the nature of the support that we get varies depending on what stage we are on the project and the programme. It's very much reviewed around the normal phase gates of a project. The first range of support was around the business case development. Once that was done, we moved into the next phase, which was around setting up a company, and, now, the final phase is the exit support from Local Partnerships to make sure that the company can function as the arm's-length company that we've got set up.

In this particular example, how long was it from start to finish?

The support there—it's in the paper—was four years in total. We had Local Partnerships support for four years throughout that process.

And who oversaw the project during that time?

I was the senior responsible officer for that programme. We had a programme board as well, which drew in expertise from within the Welsh Government and external organisations. We then, as Tim was alluding to, put advice through Ministers through the normal channels, through our normal assessment of value for money and wider considerations in terms of ministerial advice. That happened at each of the phase gates, and that programme, as well, was gateway reviewed as part of that process. There was quite a lot of governance and oversight for that process.

And my final question now: how often did you have the value-for-money assessments on this particular project?

That was at the key phase-gate positions. At the beginning, in terms of should we undertake this work, in terms of doing the development of the business case, to shall we look into setting up a company, there was a value-for-money assessment undertaken there. At the business case stage, that was all about value for money and making sure that what we were doing would deliver a return to Welsh citizens. That was another phase gate for that, where value-for-money considerations were undertaken. And now, when we've got the company running, value for money is going to be taken forward on that project-by-project basis for what the company is going to be undertaking.

Fine. Thank you so much.

Mike Hedges.

Diolch, Cadeirydd. What initiated the Welsh Government's membership of Local Partnerships in 2018?

The change in use of Local Partnerships in 2018 was linked to us being able to allow the work for the Welsh Government to be part of what is known as the owner group in that. The set-up of Local Partnerships is that a minimum of 80 per cent of its work must be for its owners. At the initial stage, that was His Majesty's Treasury and the Welsh Local Government Association. So, the reason for the Welsh Government taking up a 5 per cent stake in there was to be part of the ownership of it, and allowing more of the work that we've got to be part of it, rather than the non-owner work, which has a maximum of 20 per cent. So, it gave more flexibility for us to use Local Partnerships for effective delivery.

It might be worth adding that prior to us becoming part owners of Local Partnerships, we could only access their services through a normal procurement process. And by virtue of becoming part owners of LP, we could benefit from the Teckal exemption, where you're buying services from a company that you effectively own. You don't have to procure them in the normal way; you can just call the services off through a more light-touch process, much quicker. That was quite an important motivating factor in doing that as well.

Thank you. Did you ask to join, or did they ask you to join?

I think it was a bit of both. LP had an interest in us joining, because the Welsh Government was becoming a more important customer of theirs over time. As Tim said, the rules around Teckal companies require 80 per cent of the work to be done for the people who own the company for you to be able to benefit from that exemption from procurement regulations. It was getting to the point where the Welsh Government and entities related to the Welsh Government were taking up so much of its resources it was at risk of breaching that limit. So, they definitely talked to us from that angle, but we'd also been thinking about the benefits of an easier way of acquiring LP's services. It was a kind of coincidence of interests, I suppose, in that sense.

Thank you. Why did the Welsh Government irrevocably waive any distributions from its 5 per cent holding in Local Partnerships?

When we acquired the stake, we acquired it at nil cost. It meant we don't get the benefits of any distribution services but we don't have the liabilities either. So, it was a way for us to enter into the ownership piece, but without any sort of ongoing liability for the organisation. But the consequence of that is that if there are any surpluses and processes where that's distributed, we don't get any benefit from that. That was a decision that was taken at the time.

Basically, we didn't go into it as an investment in the sense that we were buying a stake and we would expect a financial return for that stake. As Tim says, in addition to not getting a return, we're not exposed to any kind of financial risk. The benefit we were looking for was not financial return; it was ease of access to the services.

Thank you very much. I have a couple of questions for Mr Wong, as the Welsh Government's representative on the Local Partnerships board. In its written evidence, the Welsh Government notes actions of the Local Partnerships board require the approval of a majority of board members in attendance. What decisions does the board make and how do you, as the Welsh Government representative, influence them? Do you have a right of veto at any stage?

I've been a board member since October last year. Certainly, in my time as a board member, in Local Partnerships board proceedings, although it is by majority voting, in practice the members, and also the independent members on the board, have been able to reach collective decision by consensus. So, certainly, even though I'm one person on the board, I feel the Welsh Government's interests have been represented. The board itself has a role in being the overall supervisor of the business, setting business direction, for example, approving the business plan, and it's assisted by a couple of committees as well.

Thank you for that. I've served on several boards of varying types, from the school governors right the way through to a local health board, and the one thing I do remember is that there were very few formal votes, and when you end up having formal votes, you've got a problem inside the organisation. Would you concur with that?

I agree, yes.

And the final question from me. The Local Partnerships report and financial statements for 2022-23 suggest the Welsh Government accounted for over half its income from services recharged. How do the rest of the members feel about it, and is it viable?

The board itself, with the chief executive, has been discussing the need to diversify the business. Certainly, we have been expanding into non-Welsh work in that regard. But just to add to the benefits of being co-owner, because of the size of the business we've been giving Local Partnerships, we've been enjoying a 10 to 20 per cent discount on the standard day rate. So, in that regard, it's not necessarily the case that half of the profit comes from the Welsh Government.

Thank you very much.

Thank you. Can I just ask a few supplementaries before we bring in Adam Price? In the context of the 5 per cent holding, how, if at all, does the LLP monitor the Welsh Government call on its services to ensure that it reflects that 5 per cent holding? Is there any cap? Can you utilise 50 per cent of their resources, if you wish, or are you limited to the amount of use you can make of them?

As far as I know, we're not limited in the amount of use, but just to give you some context, Local Partnerships have about 85 members of staff—so, full-time equivalents—and around 37 of them are involved with Welsh Government work. Some of them would be working on it alongside work with other clients. Some members of staff would be working on, focusing on Welsh work, whether for Welsh Government or other clients.

Okay, so there would be no concern or monitoring from their end if you made what they might regard as excessive demands on their resource at the expense of one of the other larger shareholders.

So, to ensure and tackle compliance, the board does review the overall business, just to make sure the non-owner work stays within the 20 per cent cap. So, there's that overall monitoring.

Okay, thank you. Again, referring to the choice taken to opt out of taking a share of the distribution because of the risk of liability, has there been any cost-benefit analysis undertaken in the context of distributions and liabilities since then, or is there any analysis being undertaken? And can that position be changed, if it were deemed to be in the Welsh Government's interest, noting that any surpluses—because, of course, they're not profits; it's not a for-profit body—must be reinvested in public services?

It's something we looked at initially, when we were providing advice to Ministers on whether to take the stake in Local Partnerships—whether we should buy a stake with all the risks and opportunities that came with that, or whether we should just acquire the stake at nil cost, which was, I think, what the Treasury's preference, from memory, was at the time. So, we considered it at the time and, as I said earlier, because we were really focused primarily on improving the efficiency of the acquisition of services, rather than any kind of financial return, we focused on the option of doing it for nil cost without benefits or liabilities. We haven't looked at it since then. In light of experience, it might be something that Ministers want to think about again. Whether Treasury or the Local Government Association, who are the other main shareholders, would be willing to consider that is another matter, but it's something that we might want to consider, I think.

And hypothetically, if you did consider it and you were able to change that status in the future, hypothetically, would your liability be limited?

I'd have to have a look at that.

I think you'd have to look at the nature of the set-up of the company, in its memorandum, et cetera, as to the nature of how liabilities are looked at. So, that would be part of any due diligence that we would have to undertake, if we were going to go down that route. But I think, to pick up on what Andrew said earlier, the main focus at the time was to ensure the operational use of Local Partnerships and getting the benefit of it, rather than any sort of investment perspective, and hence the small stake that then gave us the ability to be part of the ownership and to use Local Partnerships in the best way for Welsh Government.

I presuming that normal limited liability rules would apply and that, like most public sector borrowing, there'd also be insurance provision in place in the event of a—

Yes, there is insurance.

—big liability.

Okay, thank you. Did the Welsh Government publish a decision report or announce this decision to acquire an interest in Local Partnerships?

I'm not aware of that at the time. I don't think—

We'd have to look that up—

We'd have to look that up.

—and come back to you on that.

And come back to you.

I'd be grateful if you could because, obviously, we're now aware that that decision was taken in 2018 and it's only recently that this committee has become aware of that, because of the diligence of one of our members, who may refer to this later. So, yes, I would be grateful if you could come back to us on that.

And before I bring in Adam Price, a final question: we note that a Welsh Government decision report in February about amendments to the members' agreement and governance framework, and your written evidence, note there were, and I quote,

'recently updated and agreed by owners in April 2024.'

Can you expand on what changes have been made and what prompted these?

Okay. I don't—. Leon, anything around the ownership?

The revised members' agreement.

Yes.

What were the key changes in that from the previous version?

Yes, I think it was a general tidy-up exercise. So, the board, for example, was very keen to make sure that the diversity point, the importance of having a diverse board where good decisions are being made through it, was reflected in the documentation itself. There has been no fundamental change that has a detrimental effect on Welsh Government, if that assists the committee.

So, it was essentially focused on ensuring diversity.

Not just that; I was just quoting that as one of the examples. It was a general tidy-up exercise reflecting the fact that Local Partnerships was formed back in 2009, it has been a number of years, and it’s just good practice for governance documentation to be reviewed periodically.

Okay, thank you. So, if I can bring in Adam Price, please.

Diolch, Gadeirydd. Dwi jest eisiau aros gyda'r cwestiwn yma roedd y Cadeirydd newydd ei godi gyda chi ynglŷn â'r penderfyniad i beidio derbyn—wel, i beidio bod â hawl i dderbyn unrhyw ddychweliad ariannol. Yn y ffigurau rŷn ni fel pwyllgor wedi'u gweld o ran y gwargedion a'r difidendau sydd wedi’u talu, mae yna gynnydd sylweddol i'w weld yn y flwyddyn ariannol ddiwethaf y mae gennym ni ffigurau ar ei chyfer, sef 2022-23. Roedd y difidendau a dalwyd a'r symiau oedd yn ddyledus i aelodau yn £2.6 miliwn yn y flwyddyn honno, sydd yn ffigwr eithaf sylweddol o'i gymharu â throsiant y cwmni. Dyw Llywodraeth Cymru ddim yn cael unrhyw gyfran o'r arian hwnnw, yn ôl ein dealltwriaeth ni, felly. Ydych chi wedi gwneud asesiad o faint o ganran o hwnna sydd yn deillio o'r contractau mae Llywodraeth Cymru wedi'u rhoi i'r cwmni, gan dderbyn y dystiolaeth y clywsom ni gynnau, onid efe, fod dros hanner refeniw’r project yn dod oddi wrth Lywodraeth Cymru? Mae'n rhaid bod canran go sylweddol o'r elw felly yn dod o brosiectau Llywodraeth Cymru. Ydych chi'n derbyn hynny?

I think we haven’t made an assessment of that, and I think that would be down to the internal workings of the partnerships in terms of the nature of the work, the range of activities that they do, and obviously the costs associated with individual pieces of work. So, what proportion of any surpluses that are made that come from Welsh Government work is not something that we have any information on or have made any assessment of. As I said, I'm aware that they do quite a range of work, yes, for Welsh Government, but also local authorities, UK Government as well, and it would depend on the specific nature of the work. We also know that the nature of it is some of those profits are reinvested within the public sector and some of the services they provide and some of the tools are available then to the public sector. But there’s been no specific assessment made of that and we wouldn’t have the information, because that’s part of the internal working of the partnership.

Ocê. Rwy’n derbyn eich bod chi ddim yn gallu rhoi ffigwr penodol arno fe, ond a fyddai fe'n rhesymol i ddod i’r casgliad, gan fod, yn y flwyddyn dan sylw, dros hanner incwm y cwmni o wasanaethau yn dod gan Lywodraeth Cymru, hyd yn oed gyda'r disgownt roedd Leon Wong wedi cyfeirio ato fe yn gynharach, fod canran sylweddol o'r ffigwr elw hwnnw—wel, y ffigwr difidénd hwnnw—yn deilio o gontractau Llywodraeth Cymru?

You can draw any conclusions from—. The link between turnover and profit and specific pieces of work, as I said, we wouldn't be in a position to be able to draw those conclusions. You could argue, if it's 50 per cent of the turnover, does that contribute 50 per cent of the surplus? That's one possible thing, but without knowing the detailed assessment of costs and the specific nature of the work that's gone on, it would be a very high-level assumption around that. That is one conclusion that could be drawn, but that's not something that we would have information about. It would be down to the internal workings and cost base of that. I believe that Local Partnerships also gets a grant from the Local Government Association. How that feeds into the turnover and the profits as well, all those sorts of details would be the internal workings of the partnership. Andrew—

Gaf i ofyn cwestiwn arall, mewn ffordd? Oes yna unrhyw elw—? Hynny yw, Leon, dŷch chi'n gyfarwyddwr y cwmni hefyd. Oes yna elw ar y projectau mae'r cwmni yn eu gwneud i Lywodraeth Cymru neu ydyn nhw yn darparu'r gwasanaeth ar sail cost yn unig i Lywodraeth Cymru?

So, as I said on the standard day rate, Welsh Government does enjoy a 10 per cent to 20 per cent discount to it. But just to refer back to your point on a profit, or rather the surpluses, it's worth bearing in mind that half of those actually are retaining a business for the benefit of the wider public sector. So, for example, as we stated in the evidence paper for the committee, the greenhouse gas accounting tool, that could be downloaded, it could be found on Local Partnerships' website and it's for use by local authorities to monitor their carbon emissions. Where there are surpluses, 50 per cent of those, yes, they would go to the designated members, HM Treasury and the Local Government Association, but it's all going back to the public sector.

Ond y sector cyhoeddus, hynny yw, Llywodraeth y Deyrnas Gyfunol, ie? A hefyd, iawn, mae'r 22 awdurdod lleol yng Nghymru yn rhan o'r LGA, ond mae hwnna yn cael ei wasgaru ar draws Lloegr a Chymru wedi hynny, ie?

The benefits of LP's general work are enjoyed by everybody, I suppose, rather than anyone in particular. They're publicly available benefits. Can I just add that we do keep an eye on Local Partnerships' financial performance, for want of a better description, because we are very conscious that the Welsh Government is the biggest single customer for LP and is very important to their business? One of the conversations we frequently have with them is about the level of fees that we're charged and keeping those as low as possible, in order to make it as good value money for the Welsh public sector as we can, whilst, of course, being mindful that they need to be a viable business. They need to be able to attract staff of the requisite calibre to do the jobs that we want them to do for us, but we don't want them making excessive profits at our expense and at the Welsh taxpayer's expense.

Os dŷch chi ddim yn gallu darparu ateb, mae hynny'n ffein, ond jest i ni fod yn glir, yn ôl eich dealltwriaeth chi, oes yna elfen o hyd o elw yn y prisiau maen nhw'n eu rhoi ar gyfer projectau Llywodraeth Cymru, neu ydyn nhw jest yn gweithredu ar sail cost yn unig?

It's not as explicit as that, I don't think, not in my understanding, anyway. But I think our assumption is that there is an element of surplus built into the prices that we—. I don't think we're uniquely being charged cost recovery only and other clients are being charged an additional element for profit to be made. I think it's more complex than that.

Can I just intervene at that point and just clarify in terms of that in-built surplus, because it's not profit, as such, because it's a non-profit body? Does that reflect any mandatory requirement to achieve risk ratios or certain reserve ratios or otherwise to manage the liabilities, for example, that we referred to earlier?

I don't know if Leon has got any more information on that.

Yes. If I may, the board has consistently been looking into a 5 per cent to 10 per cent surplus, and sometimes that its achieved. Other times, for example, in 2021-22, for which the accounts are published at Companies House, it hasn't come to it, because of the challenges that came with the pandemic.

Thank you.

Diolch. Oes yna swyddfa gyda Local Partnerships yng Nghymru?

Local Partnerships have access to some hot desks for Welsh-related projects, but we don't, as a business, own the premises.

Reit. A faint o bobl sydd, ar hyn o bryd, yn gweithio allan o'r swyddfa dros dro hynny, os caf i ei roi e fel yna?

Because of the flexible nature of our project work, my understanding is that there are only so many hot desks. A lot of work these days, obviously, can be done remotely, through laptops.

Iawn, ocê. Faint o bobl sy'n gweithio i Local Partnerships, sydd yn gweithio yng Nghymru ar hyn o bryd?

Just to add to what I provided to the committee earlier, of the 85 FTEs, 37 Local Partnerships colleagues are deployed on Welsh Government-related work. Twenty of them are working closer, most of the time, on Welsh work, and 17 of them work on Welsh Government projects on a part-time basis, along with other clients' requirements.

A faint ohonyn nhw sydd wedi'u lleoli yng Nghymru?

I would have to come back to you on that, if that's of interest to the committee.

Oes yna rai—? Hynny yw, ydych chi'n ymwybodol bod yna rai wedi'u lleoli yng Nghymru?

I don't know whether Ed can—

Yes. So, maybe if I could come in on the resources we have for Ynni Cymru, there are a number of LP staff that are based in Wales, working solely on the delivery of the Ynni Cymru agenda. So, I'm aware of five that live and work in Wales to deliver on Ynni Cymru and they work across the whole breadth of Wales delivering on the community energy projects that Ynni Cymru has been set up to deliver on. And they use the flexible offices that we have, including the M-SParc facility, and also remotely as well.

A'r tu hwnt i'r pump yna, oes yna rai eraill dŷch chi'n ymwybodol ohonyn nhw sydd wedi'u lleoli yng Nghymru, i bob pwrpas?

So, again, from experience of working on the renewable energy developer programme, the LP programme director was based in Wales. He lived in Wales and operated in Wales and that's one of the reasons why we utilised their expertise, because of their knowledge of the Welsh context for delivering those projects. So, I'm aware of others that are also located and based in Wales. That individual is now working, actually, in Trydan Gwyrdd Cymru, rather than in Local Partnerships, but he was based in Wales throughout the duration of that work.

Jest o ran deall y gyriant y tu ôl i'r defnydd o Local Partnerships, ydy e oherwydd bod yna broblem gapasiti gyda'r gwasanaeth sifil, yn ganolog, hynny yw nad oes modd diwallu'r anghenion yma o fewn y gwasanaeth sifil? Ac ydy'r issue capasiti yna'n bennaf yn ymwneud â'r ffaith, fel dŷn ni wedi clywed o wahanol ffynonellau, fod yna cap wedi bod ar niferoedd gweision sifil? Neu ydy e oherwydd nad oes gyda chi, o fewn y gwasanaeth sifil craidd, yr arbenigedd sydd ei angen o fewn gwahanol amrediad y projectau y mae Local Partnerships wedi cael contractau gennych chi i'w cyflawni?

I think that the general use of Local Partnerships is to provide some really specialist skills that we wouldn't have within the Welsh Government, whether that be in the climate space, commercials, specific specialist skills around some project and programme management, finance skills—some of those things—to supplement the teams that we'd have within the Welsh Government. So, it's very much in that specialist skills space, where we can call on experts to be able to help and support the specific pieces of work. I think, when you look at some of the projects that they've been involved in, they are quite highly technical and complex in nature, and they're there to help supplement the resources that we would have within the Welsh Government. Rather than a general replacing of Welsh Government staff, this is about employing specialists to support and provide that expertise that we wouldn't normally have within the organisation, or the expertise that we wouldn't need on a full-time basis within the organisation. I don't know, Ed, whether you want to give some examples.

If I may just elaborate, again, going back to the renewable energy developer programme, we needed a team there to support the development of an independent business case and the commercial and financial expertise, which are reasonably broad skills, but, again, we needed to draw that in because we didn't have the capacity or capability to do that on an independent basis, obviously. But then, on the specialist skills, where we needed somebody with experience of developing utility-scale renewable energy projects, that certainly wasn't anything that we had within the organisation, and not something that we would expect the Welsh Government to have to be able to draw on internally. So, that was a case of needing those specialist delivery skills, and we were fortunate that the Local Partnerships had that experience and somebody working through the Welsh Government energy service that had 15 or 16 years of commercial development experience. So, we were able to draw on that experience through Local Partnerships to be the programme director for the work and bring in those specialist developer skills.

A similar kind of arrangement is working through Ynni Cymru, which is about delivering community renewable energy projects. Again, the skills within Local Partnerships that we don't have within Welsh Government—it's a skills issue, rather than a capacity issue. So, again, there are individuals that work through Local Partnerships—again, through the Welsh Government energy service—that have been working with community energy projects across Wales to help them scale up their ambitions. Being able to draw on that expertise to work on Ynni Cymru was vital, in terms of the delivery of where we've got to so far.

Ydych chi'n derbyn bod yna trade-off, onid oes, wrth osod y projectau yma ar sail ymgynghorol allanol neu i Local Partnerships? Hynny yw, oherwydd nad oes gyda chi'r arbenigedd yn fewnol, dŷch chi'n colli'r cyfle, wedyn, i ddatblygu'r sgiliau a'r arbenigedd yna yn fewnol ar gyfer sefyllfaoedd tebyg i'r dyfodol; hynny yw, maen nhw'n aros, wrth gwrs, gyda Local Partnerships yn yr achos yma, gyda'r timoedd sydd yn darparu, a dŷch chi ddim, wedyn, yn datblygu'r sgiliau a'r arbenigedd yn fewnol ar gyfer y dyfodol. Sut ydych chi'n asesu'r manteision ac anfanteision o'u contractio nhw i Local Partnerships, a dal i fod, felly, yn y sefyllfa lle nad oes gyda chi'r arbenigedd yn fewnol?

I think there's always a balance in terms of bringing in specialist skills and expertise to help alongside Welsh Government teams to deliver on the projects and programmes. A key part of any project or programme will also be elements of knowledge transfer, especially towards the end of programmes of work, to ensure that the teams that carry on with them do have the necessary skills and experience to do that. But that's always going to be a trade-off in terms of specialist skills and experience, where, you know, employees of Local Partnerships may be operating on a number of different projects and programmes across the public sector, and building broad-based experience, and it's getting that balance right. So, I think there's always a judgment call, but a key part of the programme is that knowledge-transfer piece, going forward, so it's an important part of a project. But, as I said, it's always a trade-off there and a judgment call.

Just to add, from my experience, I think the way that we've worked with Local Partnerships—they've very much been part of the project team. They don't sit there as an external consultancy, where they produce an output and it comes to us and all that knowledge is retained there. They very much work as part of a programme team. So, again, for the renewable energy developer team, we had an internal team that worked daily with the Local Partnerships team on establishing the work that was needed to set up a commercial renewable energy developer function. So, there was an awful lot of knowledge transfer that happened there. And also, through the marine energy programme, which is an area where our requirement on drawing on Local Partnerships resources is reducing, the final piece of work that we're doing on ports, which is built on the financial work that they were brought in to do—they're producing an assessment of the position of key stakeholders around Wales, which is then going to be used to inform our internal delivery of the ongoing work, which is of a less specialist nature now that they've done the financial specialist work that they've done. So, there's day-to-day knowledge transfer because they just work as part of the project and programme team, and then we also build in specific end-of-project knowledge and information transfer just to mop up any other elements that would be relevant.

I don't know, are you familiar with the Carltona principle or the Carltona doctrine in relation to the civil service and officials? I don't know if you've come across that.

Not specifically.

It references a famous legal case, Carltona Ltd, I think, v. Commissioners of Works. It essentially established the idea that the actions of officials are synonymous with the actions of Ministers. So, effectively, officials act as agents on behalf of Government. One of the implications of that governs things like arm's-length bodies and also external consultancy contracts, where you're outsourcing outside the civil service. Arm's-length bodies have remit letters, and where there are outsourced contracts, there is transparency. So, we know if the Government delivers something through another company. One of the issues here is that we haven't really had that same level of transparency. We didn't even know much about the existence of Local Partnerships. So, how do you ensure that we as a legislature and the public know about the delivery of these very wide-ranging areas of new policy and new delivery, and that we're aware that they are being outsourced to this body, which is largely based in London, isn't it?

I think, just following on from what Ed was saying, this isn't a case where we're suddenly outsourcing large chunks of work to Local Partnerships. This is where we're using the specialist skills that exist within Local Partnerships to support the work that we're doing as Welsh Government. So, it's not whole pieces of work that are being subcontracted out. This is about supplementing the teams that we have within Welsh Government to ensure that we've got all the specialist skills and capability to be able to deliver the outcomes for Ministers as part of that work. I think there's also an element where, if you look at the total spend with Local Partnerships across, what is it, eight or nine areas, it ranges from £3 million to £5 million a year, against when you look at the spend that Welsh Government will have across a huge range of areas, the proportionality is very, very small. So, in terms of visibility of how we've used Local Partnerships, it's quite a small element of how we would resource the organisation as a whole.

So, I accept that there are key questions around the use of Local Partnerships, but, in proportionate terms, it's very small and is used to supplement the skills, as Ed was just saying, specific skills especially around some of the things in the climate space, the commercial space, to support Welsh Government teams in delivering the outcomes that we need for Ministers, rather than subcontracting whole pieces of work.

On the transparency point as well, I'll just draw committee's attention to the framework agreement under which Local Partnerships provide services to the Welsh Government, which we shared in the evidence paper for this session. So, that spells out in detail the terms on which the Welsh Government receives services from LP and some of the rules around that.

Just in terms of—

Sorry, Adam, I'll just bring in Rhianon Passmore for a moment—she has a supplementary—and then I'll bring you back in.

Thank you very much—[Inaudible.] Fair enough, it's a very small amount of money that could be incurred, but you said yourselves—it's said in the document—in terms of the, as Adam has said—[Inaudible.]—considerable reward—[Inaudible.]

Sorry, you're breaking up a bit, Rhianon. Could you try sitting nearer to the microphone?

Is that better? So, to be precise, the £2.3 million of expenditure incurred from the involvement with these projects—. Can you hear me, Chair?

Sorry, Mark, we think there's a bad connection.

There is a bad connection, yes, I'm afraid.

Can I just say about the transparency point that I agree with Adam? I'd like to know how many directly awarded contracts have come forward in terms of the exemption from Teckal, if you can hear me.

Did you catch that or—?

It was something about exemption from Teckal, but I wasn't sure. I mean, for each piece of work, there is a statement of works, there is an agreement around what will be delivered.

I think Rhianon's question was: how many contracts have you received so far with that particular exemption? Is that correct, Rhianon? Yes, I've got the thumbs up there, so I think that's what she's asking.

I don't know if we have a number for the contracts, but it will be all the work since we changed the ownership back in 2018 that would come under the Teckal exemption, and we're able to do it. So, how many specific pieces of work? There will—. Referring to some projects that we've got here, there were multiple stages and multiple items of work within it, so I wouldn't have a number for that.

Is it possible for you to share a complete list, beyond the evidence that we've had so far, of all the individual contracts that you've had? And also for you to explain what transparency there is around that—so, if, through the normal procurement procedures, there would be announcements of contracts, consultancy contracts et cetera. So, is there anything that you provide in terms of decision reports, or anything that is put into the public domain, when you enter into new contracts with Local Partnerships, so that the public, members of this committee, or the Senedd as a whole, can see a new area of work that has been outsourced—well, is this outsourcing; I don't know—to Local Partnerships on your behalf?

I would say, again, going back to what we said, that I wouldn't class this as outsourcing. This is about getting some services to help support the work that we're doing, and making access to particular skills. I think, yes, we can certainly look at some of that, but there is a level of detail here in terms of a huge range of individual pieces of work, as opposed to contracts. The nature of why we were part of Local Partnerships is to be able to have that access to those specialist skills and capability to support the work, and there's a whole range of arrangements, as Ed was saying, where we might have individuals who are embedded within teams, as opposed to Local Partnerships doing a piece of assurance work as part of a gateway review, providing services through the Welsh Government energy service, where they're providing services to us and access across local authorities. So, there's a massive range of things that are covered within the work that Local Partnerships do, as opposed to specific pieces of work and individual work orders.

Again, I go back to the point I was saying, that, in terms of size and scale, compared to maybe other contracts we would have as an organisation, these are, in proportionate terms, of a smaller scale when you think of the overall expenditure within Welsh Government. We can certainly look at maybe some more detail around some of the projects and programmes we've got and come back to the committee with some further detail, but I think there's a question as to how much detail is given, because you're into the detailed nature of how individual programmes and projects are working, and I think it's just a question of how that will apply to maybe other areas of work that we would do as organisation.

Are there any other examples of organisations like Local Partnerships, anything else like this, which we're not currently aware of? Is there another entity that provides significant pieces of work on behalf of the Welsh Government that we should be aware of that we're not aware of? Or is this a unique example?

I'm not aware of anything else like that, but I don't know, Andrew, if you've got—if there are other things that would come into this sort of space.

In terms of providing this kind of service, I don't think so. Obviously, there are lots of government-owned trading businesses across the public sector that provide services to government, but I don't think there's anything exactly like this beyond Local Partnerships.

Ydy Local Partnerships yn dod o dan dyletswyddau—? Pan fyddan nhw'n gwneud eu gwaith, ydyn nhw'n dod o dan dyletswyddau'r Llywodraeth o ran safonau'r Gymraeg, er enghraifft? Oes yna unrhyw ddisgwyliad iddyn nhw weithredu, yng Nghymru o leiaf, yn unol â dyletswyddau'r Llywodraeth o ran hynny?

There are standards that are expected of that. There are some elements built into the framework agreement that we shared around how they should operate, both standards of conduct in terms of the way they operate, but also there are some specifics around the Welsh language that we would want them to operate under, and support the work that we do.

So, just to elaborate on that, for the staff around Ynni Cymru, the new members that joined the team, as part of the advert there was a Welsh language assessment, and that was included as part of that. So, given the nature of the work that was required, that was a part of the requirements for the posts, and they delivered on those as part of the recruitment process.

Allech chi rannu'r rheoliadau neu'r disgwyliadau hynny, nid yn unig ynglŷn â'r Gymraeg, ond unrhyw beth arall, hynny yw, o ran eich disgwyliadau chi o ran gweithredu'r cwmni yng Nghymru? Dwi'n meddwl mai dyna ddiwedd fy nghwestiynau i. Diolch.

Chair, I think a number of those were shared, because they're part of that 52-page framework agreement document. It covers a whole range of areas of the operation of Local Partnerships in their business with Welsh Government, so that's certainly within that, and that will be the basis for any of the work that they do, as opposed to the specific work orders that will cover the deliverables that are required. So, if there's further information that's not covered in the framework document, we can certainly look at that, but that would be the main document that covers all those things and also makes reference to things like the Welsh language from that point of view.

Just following on, we understand that, in 2022-23, Local Partnerships employed, on average, 75 people. Can you further clarify how, when considering whether to bring them in to work with a team in Welsh Government, you ensure that, within that very limited pool of people, and therefore of expertise, that they have the relevant expertise? Or is it—I may be wrong here, but is it—that they themselves would subcontract if they themselves didn't have in-house expertise in a given area?

My understanding of Local Partnerships is, yes, they do have around 70 full-time employees, but they also call on associates, as and when is required, for maybe other specialist skills that may not be within that cadre of permanent employees, or if there were capacity issues. So, they can flex their resourcing to meet the needs of the individual pieces of work from that perspective.

So, again, just to provide an example, through the work on Ynni Cymru, Local Partnerships were able to bring in an associate that was a UK leading academic around what's called smart local energy systems, which is around the work that Ynni Cymru is leading on. So, they were able to draw in that expertise to work on that project, because that was a very niche area of specialism that we required for the project.

And a final supplementary—again, it's very much building on Adam Price’s questions—what evaluation, if any, do you undertake to ensure that they're delivering value for money for you?

I think that there was an initial evaluation when we took the 5 per cent interest in terms of the benchmarking of costs and things like that, and that's something that is kept under review to ensure that the rates that we're having are representing value for money. As I said, there are also the tests that anyone would apply. We don't have to use Local Partnerships. Anyone who's got a piece of work will assess what is the right way to deliver that, whether it's through an open market procurement or whether it's through the use of Local Partnerships, and it will depend on the nature of the work. So, that's part of those fundamental tests that anyone involved in this work would need to take at the outset. Andrew, is there anything?

Well, I agree with that. It's not—. People should not be using Local Partnerships without doing an assessment of what the options are for providing the advice that they require. It shouldn't be assumed that Local Partnerships are, and it isn't assumed that Local Partnerships are, the right option; it needs to be done on the basis of an assessment of what the other options are, and what the costs of different options are.

So, again, just to provide an example, I'm using Local Partnerships for two key programmes around the Trydan Gwyrdd Cymru work and Ynni Cymru, but I've got two other contracts out in the last couple of years that required specialist skills in the energy space where we didn't use Local Partnerships. We made an assessment as part of the options to deliver the programme, where the lead option, the preferred option, was to go out to market to draw in those skills and expertise. So, it really is a case of looking at the individual requirements for the work and the project and the programme, doing an options analysis as part of the advice that would then release the funding, and a value-for-money consideration is a key part of that. So, sometimes, it will be Local Partnerships, other times it will be going down the external contract route.

Okay. We'll have to be succinct—we've only got 20 minutes left. Rhianon Passmore, you have a hand up.

Right. Can you hear me now, because I think that I've resolved the issue?

Yes.

I think it's been hugely interesting. I'm very concerned that I've not heard of this organisation before, that it has not come forward in any guise of being able to seek information or to ask questions of. And as I said earlier, in terms of it being very broad and far-reaching in some key thematic areas of work and programming for Welsh Government, it's obviously very important. In terms of that you mentioned a small amount of money incurred in terms of direct working, I think it's more the incurred price of the work that its programmes—. For instance, the development of MIM and all of the projects flowing, there's a figure of £22.3 million in this document as costs incurred for Welsh Government.

So, my question really, I'm just trying to seek clarity, but I think I've got it, is a very important tool around this, from what has been said and what I've read, is that it exempts you from normal procurement legislation and rules, the Teckal advantage, as far as we can understand. So, I'm just checking that that is correct. Is this any way detrimental to local procurement, because it's subjective decision making? Adam Price has already mentioned in terms of it potentially could be London-centric. And my question, really, is: are Welsh companies getting a fair share of the opportunities if things are being directly contracted through the process that this Local Partnerships company is, in a sense, selling to us as Welsh Government? Who would like to take that?

Certainly, I'll make a start on that. I think our use of Local Partnerships, as I said, it's been in the region of between £3 million and £5 million a year. Welsh Government procures directly £750 million of services and products a year, so it's in that proportion that we should consider it. You could say, okay, there's been maybe a lack of knowledge around Local Partnerships, but then we'll have a huge range of other suppliers within that £750 million per annum as well, and there's the visibility around that. That's where the principles of ensuring we meet the accounting officer tests, 'Managing Welsh Public Money', the scheme of delegations, come into procurement of any particular services.

As Ed has said, these are highly specialist areas, where we're using specific skills to supplement teams. There are clear examples of a big local element of supply to that. Yes, the partnership is based, has its headquarters, in London, but it operates across the UK and across local government, and a large amount of that work is done in Wales and for Wales.

'So how do we scrutinise their work?' is my question to you, and Adam has already asked it, but I still don't have an answer. How can we as a committee scrutinise the money that is being spent, bearing in mind it's not just the immediate spend, it's the Welsh Government incurred spend as a result of some of the projects and ideas and concepts that have been developed from a Local Partnerships programme development, which is what I'm more trying to get at? But, how do we as a committee scrutinise Local Partnerships?

So, I think maybe a relevant example to mention here is the work that Audit Wales did, some years ago now, actually—I think the report was published in 2018—on the residual waste infrastructure programme, which was a long-running programme the Welsh Government undertook, working with local authorities, to put in place facilities to dispose of residual waste and non-recycled waste.

Yes, but with respect, to interrupt you, Andrew, that was 2018. So, it's that ability to be able to—

It's the type of review. So, as part of that review, we looked at the whole range of activities that went into that project, or programme, part of which was the work that Local Partnerships did as part of that programme. I think that's a good way in to looking at some of the questions I think you've got about the role of Local Partnerships—to look at the programme that they're supporting. So, it's one way of looking at this, which is as Local Partnerships as a company servicing the Welsh Government in general, and then there's the specific work they're doing in specific projects and programme areas. So, I think there are different ways that the committee could look at this, which might draw out different kinds of conclusion.

Okay. Thank you for that response. But, obviously, we're not going to get every single programme come to us as a committee, and I think it's more the concept of an ability to be able to fundamentally look at the business of Local Partnerships, because it seems to have a very big impact on what is happening and what is being developed. So, I'll rest my case there, Chair. And finally from me, I'll repeat what I said: it would be really interesting to find out how many directly awarded contracts have been awarded by the exemption process within our membership of Local Partnerships. I believe the other questions have been asked in regard to the civil service and the cascading of information to our civil servants. If we're going to this organisation for a skills gap, then we really need those specialist skills within Welsh Government, but, granted, there will be opportunities, there will be times when we don't have those expertise, so I fully understand that. Over to you, Chair.

Thank you. And, of course, now this is on committee's radar for the future, no doubt we will be considering this in future work programmes as matters develop. I'll bring in Natasha Asghar, please.

Thank you so much, Chair. Just one sub-question, actually, that I wanted to bring in when Adam Price was asking his questions. Obviously, you mentioned civil servants, and I know Rhianon Passmore touched upon it with regard to expertise—I appreciate that. But surely, if you're aware—. We have many civil servants who are based here in Cardiff, as well as north Wales. Surely from a career-advancement process, surely from a progressive method of thinking, wouldn't it be worth while to provide them with either secondment opportunities, training opportunities, development opportunities, to actually develop those skills in those areas that you're working on, such as energy, such as culture, such as whatever, so that, when it comes to future projects, you have in-house expertise per se, rather than—and I know, Ed, you said this—end-of-project knowledge? That's really good to have, end-of-project knowledge—I'll have knowledge of being a Member after five years of this term—but, ultimately, it's the hands-on experience that I will get in this job that will get me ready for the next term when I come in. So, I'm just asking, is that something that you're looking at, to train in-house civil servants, because we have many, in different areas—whether it be transport, energy, environment, economy, whatever it may be? Why not get them ready, geared up, so that they can take on some of these responsibilities, going forward?

So, I think, just in my area, quite specific, in terms of the way that it's worked on the renewable energy developer, we've worked really closely with the specialist expert there, to understand how to develop projects, the kinds of considerations that we would need to go to, the timescales, the complexities, the financial requirements. So, I would say, over the last couple of years, I've developed a fairly basic but an understanding of how to develop renewable energy projects, which is going to be crucial for me in terms of my sponsorship role of Trydan Gwyrdd Cymru. So, I will understand the terms on which these projects are being taken forward. So, that happens very organically through the work that we do, because they are part of that project team.

If I expand that in terms of the work that Ynni Cymru are doing, again, this is very specialist work around things called smart local energy systems, and how local energy systems work. As part of their programme of activity, they've been holding seminars with civil servants and the wider public sector to share the experience about how local energy markets work, because that's going to be fundamental to the delivery of the Ynni Cymru activities. So, that work is happening organically through them working as a project team, but then it's also built into specific projects, and Ynni Cymru is that example where we've got a webinar, sharing-of-knowledge programme built into that. So, there's been one so far that's been held, which has been around that sharing of that expertise to build up the knowledge and understanding of the activities that are going to be undertaken.

I respect that and I understand that, but I'm just saying why not actually build the next, almost, generation of civil servants in-house, who have that expertise at hand so that you don't have to go, potentially, down these routes?

I think there'll always be a need to bring in—

You have the need for specialists—I'm not disputing that for a second—and there are certain areas where you are going to need them. But I'm saying if you have so many civil servants at hand who have specialist areas, who advise Ministers on a day-to-day basis with their workloads, why not actually—and I hate to use this word, and I don't mean this in an inappropriate sense—but groom them to be ready to be able to deal with those? I accept certain areas of speciality they may not be able to go into, but the rest of it they'll be able to at least handle in-house?

There's always that judgment call as to what are the right skills to have within an organisation, as opposed to having access to specialist skills that get the advantage of being able to work across multiple projects and multiple scenarios, and that's something that would need to be under review. I mean, again, I would come back to—. We're talking here, as Leon said, around 30 people who have been working on Welsh Government projects, compared to the 6,000 civil servants that we have. A number of those 35 would have very, very high, specialist skills that you would never have within the organisation and, actually, would be counter-productive, because you want them to be operating on multiple projects to bring that learning into it, rather than on just individual things that the Welsh Government is doing. So, there's always that judgment call. It's something that we need to do as part of workforce planning, which I know is another area that the committee has looked at in the past, to understand where we need to have the right skills internally, as opposed to supplementing that with Local Partnerships. Again, that was the raison d'être for Local Partnerships in the first place, to have a public sector organisation that enables access to those specialist skills in the marketplace, especially in some highly complex areas like climate and commercial and finance, to do that. So, I accept that there's that judgment call and challenge, and we need to be thinking around that.

And I think, again, just to say, when I was last here, on the accounts side, we talked around project and programme management as an area where we recognise we need to develop our skills, and there's work around that, and that would be one area where I think there's more for us to do.

Okay. So, what do you feel are the main benefits and, perhaps, risks of using Local Partnerships for us?

I think the benefits are it provides cost-effective access to highly specialist skills that we wouldn't have within the organisation. There's an agility around it in terms of being able to call on those quickly, and the flexibility. I was aware of another example the other day where they've come in and they're helping a team for a couple of days a week for a period of a couple of months, just to support that and provide those specialist skills for that piece of work, which you couldn't directly employ someone to do, but, again, it's there, it's providing that agility, that flexibility, those key skills to support the work we're doing.

I think there's also the benefit that they all work for the public sector—they understand the public sector. There's a significant number of people working on Welsh-related projects—they understand the political context and devolution. It's really advantageous in terms of what they can do, as opposed to, maybe, a private sector firm who wouldn't have that. And also, I think, the basis of the organisation is they're there to support the work that we're doing; it's not a commercial arrangement, where they're always constantly looking to upsell and build more business. It's about providing that service to us to support the work of teams. The risks would be around—. It's a very effective mechanism to do that; there's always a risk that you can be over-reliant on it. On the challenge that you've said, around are we getting the right split between using expertise as opposed to growing our own, there is that risk around how you balance the right level of knowledge transfer.

So, they're all some of the risks there, but there are some really significant benefits, and, I think, when you look at some of the programmes of work, the one that Andrew has referred to and the report back in 2018, you know—. I was talking to the deputy director yesterday in terms of the recent announcement about Wales being No. 2 in the world around recycling and, well, Local Partnerships have been key to some of that work. And so, there are some real successes that we've seen in Wales, and that's come to the way that these pieces of work have been resourced, especially in the climate space, and getting that balance right between buying in the expertise as opposed to having the in-house expertise, with the likes of Ed and the team. It's always a judgment call, but I think there are some real successes here that we've seen, so it's positive.

So, who's accountable—? Sorry, go on. Sorry, were you saying something, Ed?

No.

My apologies. Okay. So, who's responsible for the risks? When it all goes wrong—and you mentioned some great stories there and some great examples—if it goes wrong, who's to blame, who's getting sacked?

I wouldn't say, 'Who's getting sacked?', as that's quite an emotive term to use on that, but there are accountabilities for any pieces of work, and that will sit through, as I said, ultimately, the accounting officer responsibilities for the work that goes on across the Welsh Government, and the scheme of delegations in the way that we operate. So, that's where the accountability sits and how we would then look at who’s responsible for the things that are happening. Obviously, Ed is leading some key pieces of work and has responsibilities there, but that will then feed through the scheme of delegations and accounting officer responsibilities within the organisation. As I said, for me, this is very much part of the way that we do things within the organisation and it fits with the normal ways of working. There need to be the right checks and balances in place, which tie into the principles-based approach, as I said at the start, and the scheme of controls through 'Managing Welsh Public Money' and the delegations that we have.

Okay. I'm sure you're familiar with the civil service code of conduct, including impartiality. So, I just wanted to ask you: how do you ensure that such standards are met by staff and contractors who are part of LP, particularly where services you procure relate to formulation of policies?

I think, just on that final bit, the formulation of policy sits absolutely with us as civil servants. We're not using Local Partnerships to develop policy for the Welsh Government and for Ministers, but they are part of teams to help deliver some of the things that we have from that.

I made reference previously to the framework agreement. There’s a series of things within that in terms of the nature of the agreement and the way that Local Partnerships will work with the Welsh Government, but also that sits within individual work orders around the conducts. And also, again, the organisation is owned by the public sector—the Welsh Government, Treasury, and the Local Government Association—so, the principles of those organisations apply to Local Partnerships. So, again, I think it's another reason why it's a useful vehicle to use, because the standards and set-up and principles sit very much within the public sector.

Okay. My final question now. So, Local Partnerships describe themselves as a 'hands-on organisation', noting it often sits alongside project teams rather than providing advice from afar. So, how does this actually work in reality? Does the Welsh Government grant access to its internal systems? And how does it manage the sharing of information and working documents with staff and contractors in Local Partnerships itself?

There are a range of arrangements that will exist, depending on the nature of the work. So, there are individuals in Local Partnerships who will have access to Welsh Government systems. They will go through the standard set of controls that will apply to everybody who has access to that. There will be other pieces of work where they sit one step removed. We use systems like something called Objective Connect to share documents securely in those situations. And there will be other things where they may sit slightly further apart and there will be different arrangements. So, it will depend on the nature of the work, but the rules and the ways of working we'd apply to them to ensure that information is shared securely.

I appreciate the different levels in what you've just said, but who decides on those different levels? Who decides that Mike Hedges will have access to certain documents for one project, I'll have access to another, Adam Price will have another, and we're all different contractors here now as part of different projects that you may have going?

That will be down to the individual pieces of work and the ownership around that and the nature of how the individual is working. So, somebody who is embedded within a team needs to be able to work with that team and have the access, and then the controls that are required, the security checks et cetera, would need to be in place that are suitable for that particular working arrangement. So, it would be down to the individual arrangements linked to the specific pieces of work, and to ensure that that can be delivered in the right sort of way, but that we have the appropriate controls in place, as we would for anybody else.

But it will be determined, ultimately, by someone from your departments.

In line with the standard controls we have for security and access to our systems and things like that.

Thank you so much. Thank you so much, Chair.

Thank you. In your response you've already referred, to an extent, to the development of civil service skills and experience through knowledge and skill transfer in this process. But, Rhianon Passmore, do you have any further questions regarding that?

I think, in regard to the follow-up to the resize and reshape work streams of the Welsh Government, we've touched upon what is the expectation around the transference of skills so that they are actually in-house. But, I think my caution around this is that a lot of these are in relation to awarding contracts and contract management. So, I suppose, to what extent then is the Welsh Government's decision linked to pressures? We've talked about pressures around COVID and Brexit on head count and having that fit-for-purpose and agile civil service. Is there any comment around that, or are you saying that it is purely because there is expertise in this group that we don't have in the Welsh Government, or is the whole issue around Teckal a main driver here, because they're very different things, aren't they?

Yes. I think our use of Local Partnerships is very much around providing access to those specialist skills that we wouldn't normally have within Welsh Government, and to be able to do that on a flexible, agile basis in line with the sort of benefits I was alluding to earlier. The Teckal issue is just the technical route in terms of how we can get these services and can call them off in the right sort of way, given their partial ownership of the partnerships. So, I think that's just down to the route to access those services. As Ed said, everyone who's responsible for a piece of work will assess what is the right way to get services, whether it's through Local Partnerships, whether it's through a direct procurement, or what we would need to do in terms of the skills and capabilities that exist within the organisation.

So, can I just ask, for clarification on that particular point, there is that position and role, then, that somebody will be sat at the desk to say, 'Right, this is going to go out for direct procurement, and this is going to go through normal procedures in terms of tendering'? Somebody's going to sit there and make that decision within Welsh Government. That's a very powerful role, isn't it?

Yes, but just from my experience as a subject policy deliverer, that's just what we do every day in terms of our work in taking forward bits of work. So, when we established the case that set up the renewable energy developer programme, we put advice. We developed the case, assessing all of the options, and put up advice up to Ministers to say, 'We need this level of commitment and resource to take forward this programme. We've looked at the options, we've looked at the risks, we've looked at the benefits, we think there's a strong case for doing it. Here's the evidence as part of the advice that will go up to Ministers.' The use of LP as part of that is just because of that specific case. There'll be other bits of programme and work and activity that I'm leading that will go through exactly the same process, that won't have any involvement of LP as part of that. So, it's just part of normal business as usual as part of the development of advice and setting up programmes and releasing of resources.

I would say, picking up on what Ed said, it is an important role that anyone will play in terms of the responsibilities, but this is very much—. It is how we run—. It is core business, it is business as usual. Again, I come back to the point that we're procuring approximately £5 million-worth of services through Local Partnerships. We procure £750 million of products and services across the organisation. So, proportionality—what goes through direct procurement routes as opposed to what's going through our ownership of the partnership and through the Teckal element is just a very small proportion of that. Likewise, in terms of the skills we're bringing in, it's the use of up to 35 people against a background of 6,000—

Yes, it might be a very small proportion—. Sorry, I was on mute. It might be a very small proportion, but it's the importance of some of these initiatives, which is what I'm getting at. These are some fundamental thematics of the way forward for Welsh Government in terms of energy and in terms of climate change. So, sometimes it's not the number, it's the importance of these projects moving forward. And I think my major overriding question to you is: how are we as a committee—and I still haven't had a proper answer, I don't think—able to scrutinise these decisions moving forward? I think that's it for me, Chair, thank you.

Would you consider, building on Rhianon Passmore's point—? Would you see, maybe, some benefit in providing a note in future Welsh Government financial accounts, because of all the specifics in relation to this vehicle, summarising the use of Local Partnerships across a range of different projects, because it's very—? I don't think there is a budget line where we'd be able to find it, is there? So, is that, maybe, one way in which some greater degree of transparency could be provided?

I'm not an accounting expert, but I think it was how you had that in a consistency piece around the way we procure a range of services across Welsh Government. This is one route, and, as I said, in proportionate terms, quite small. So, if you apply that level of disclosure in the accounts for that, what about other things that may be of equivalent nature? Obviously, we sit within the financial accounting rules and the financial reporting manual rules in terms of disclosure. There's not a specific requirement around this. We're very happy to provide information, as we're doing today, around Local Partnerships, but there are other organisations that sit within Welsh Government and this group, and how they fit within accounts I think we just need to understand deeper.

Just on that, the reason I was asking the slightly nebulous question, 'Is there anything else like this?'—. Local Partnerships occupies a very unique space, because you struggled to define it earlier. It is outsourcing when it's actually partly owned by the Welsh Government, so it's kind of half in and half outsourcing, isn't it? And it's also a company that has multi-year programmes across a wide range of areas. So, it would seem to me that it occupies a fairly unique space, and it is influential in ways that other individual external consultancy contracts wouldn't be, because this is an organisation that works with you on an ongoing basis across a wide range of areas. There's nothing else like this, is there, of an entity that you partly own that has the Teckal exemption. Is there? Of that £750 million, there would be no other entity that would fit that description.

We'd have to come back in terms of that. I know, for example, the Centre for Digital Public Services is owned by Welsh Government. It sits slightly outside. I think that's maybe one where the Teckal exemption can also apply, in terms of some of that work. So, I think we'd have to look at where is a Teckal exemption applicable, because of the ownership requirements that we have. So, as I said, there are other things that we could look at there. That's a different set-up entirely to Local Partnerships in terms of the way that it's operated. But as I said, it is one route to accessing services. But I think also the point I'm saying is this is not an organisation that is delivering whole pieces of work on behalf of Welsh Government. This is a route for us to access specialist skills and experience to supplement the work that goes on. On all these areas, we are delivering those pieces of work. So, yes, they're important areas of work, which is why we're accessing the right sorts of skills to enable us to deliver those things, but the responsibility sits firmly with us as Welsh Government, with the likes of Ed and others, in leading these pieces of work, and it's making sure that we're accessing the right skills in the right way. That's always a judgment call, going back to the point that was made earlier on what are the right skills to have within the organisation as part of workforce planning, as opposed to accessing those specialist skills and experience to enable us to deliver and deliver successfully—rather than outsourcing whole packets of work, these are the skills that sit alongside the teams to supplement them, to ensure that we can deliver in the right way. So, I think it's a really important distinction. As opposed to where you may have another supplier where you ask them to deliver a particular service or a whole package of work, here we're asking them to support us and do things alongside the work that we do as an organisation and ensure we can deliver effectively.

Thank you. And I'll have a final, final question. Notwithstanding critical mass considerations, when the resize and reshape work streams of Welsh Government 2025 have been completed, do you expect to have any more of the skills in-house to deliver projects currently delivered by Local Partnerships or other external contractors?

I think the one area, and I referred to it earlier and we picked it up in a previous session, was our assessment around the needs of project and programme management as core skills. That's an area where Local Partnerships do support us, although more often than not it's in very specialist project and programme management, but that's an area where we recognise that our current capability is not where it needs to be, and we want to develop that further, so that will be a key part of it. I think, again, linking in some of the examples that Ed has said, in the specific areas that he's responsible for, it's that skills transfer, it's how you're building up the capability within the teams for these pieces of work, or with organisations that then set up how those skills and experiences exist within those partner organisations going forward. So, I think the one area where I think we do want to focus is project and programme management, but again there's a whole range between the more generic nature of those skills right the way up to very, very highly specialist ones, and that's something that we would want to assess as part of our workforce planning and the work of reshaping that we're looking to do.

Okay. I think that brings our questions to an end. Thanks for staying an extra nearly 10 minutes. As you would expect, a transcript of today's meeting will be published in draft form and shared with you to check for accuracy before the final version is published. So, thank you very much for your time. Thank you very much for being with us and for answering our questions, which I hope Members have found useful. We no doubt look forward to seeing you at some future date regarding this or another matter. Thank you very much indeed.

Thank you very much.

Okay. Well, I propose, in accordance with Standing Order 17.42(ix), that the committee resolves to meet in private for the remainder of today's meeting. Are Members content? Thank you. Therefore, I would be grateful if we could move into private session.