GCHQ chose "image over cost" when deciding the location of new offices that wasted public money, MPs have said.
In a damning report on government office accommodation procurement, the Intelligence and Security Committee says GCHQ competed its favoured London location against a “no hoper” option in an effort to secure luxury premises.
The winning site was described by the committee as then-Chancellor George Osborne’s “pet project”.
The MPs say GCHQ’s selection of the Nova South complex in Victoria for the newly established National Cyber Security Centre was over twice the cost of an alternative option in Canary Wharf.
“The cost significantly exceeded the funding allocation, meaning that GCHQ is paying for the shortfall out of its main budget, money which could otherwise have been spent on operational capabilities,” committee members said.
The report says criteria for selecting the location were “faulty”, warnings were ignored , the process used “an absurd weighting mechanism, unjustified score changes [and] a ‘no-hoper’ alternative”.
“Great emphasis was placed on finding high-end accommodation without any case being made for that being necessary.
“The procurement process was unacceptable, with an emphasis on image rather than cost,” committee members Kevan Jones and Stewart Hosie said in the report.
Ministers’ performance, including the then Chancellor George Osborne, was “highly unsatisfactory”.
Selecting Nova South as the future NCSC location described as Mr Osborne’s “pet project”.
In an email on May 18, 2016, the Chancellor’s private office stated in an email to the National Security Advisor (NSA): “Nova South meets more of the criteria for the NCSC, in that it presents a more modern, hi-tech image and is closer to Whitehall and agency partners.”
The NSA, as Principal Accounting Officer for GCHQ initially objected to Nova South, citing value of money concerns, but on May 20, 2016, wrote to GCHQ to give his approval to proceed with Nova South based on assurances he had been given.
The Telegraph contacted Mr Osborne but he declined to comment.
However, responding in a written statement the Prime Minister said the procurement of Nova South was “a unique challenge, undertaken within a demanding timeframe”.
He said the Government acknowledges there are “lessons that can be learned from the procurement process”.
The business case for Nova South shows the annual running cost of £6.4 million is over double the £3.1 million of the Canary Wharf option and well above the £3.5 million annual allocation set in 2015.
Over the 15-year span of the negotiated lease, the difference in cost between Nova South and Canary Wharf amounts to around £50million.
This works out at over £21,000 per staff member per annum, which is more than double the average Government cost for London based staff, the report notes.
The report criticises Ministers for the haste in which the “arbitrary” opening date of October 2016 was selected which led to many cheaper options being discounted. In the event Nova South did not meet this planning date.
The MPs say: “Canary Wharf represented the best option on the criteria used.
“GCHQ and Ministers should not have rejected this conclusion by subsequently attempting to massage the process to ensure that their preferred option was selected.”
GCHQ had to postpone investment in operational capabilities to pay for the increased cost of the offices. The report notes further sacrifices will be required given the 15-year lease of the site.