INITIATIVES
TO IMPROVE
VALUE FOR
MONEY
15. We explored the following main requirements needed
to improve value for money in departments' use of professional
services. Ensuring that purchasing professional services is
justified 16. Departments can obtain professional advice and
assistance either from the 3,000 specialists such as economists,
statisticians and lawyers which they directly employ, or they
can purchase these services externally. In the light of the number
of specialists employed by departments we asked why they needed
to spend over £600 million on purchasing professional services
and whether this expenditure was justified. The Office told us
that the demand for specialist expertise in a number of areas
exceeded the supply of skills available in departments, in terms
of both quantity and quality. It was not possible for departments
to retain sufficient numbers of experts with the relevant expertise.[9]
17. We asked the Office of Government Commerce whether, if departments'
demand for specialist expertise exceeded what they employed directly,
it would not be cheaper to increase in-house professional services.
The Office said that if wage rates and conditions of employment
for some specialisms were closer to the private sector, it would
be possible for departments to employ these skills in-house. There
were always going to be certain specialists, however, who were
not required on a full-time basis.[10]
18. If the work specification is not clearly defined suppliers
will be unsure as to what they are contracted to deliver. We asked
what was being done to encourage departments to specify clearly
what they wanted from external experts. The Office said that more
complex procurements which demanded significant professional expertise
were now subject to independent "gateway" reviews which
also considered whether the use of external experts was justified.[11]
19. We asked whether there was a risk that departments employed
consultants as a possible defence if something subsequently went
wrong. The Office agreed that there was such a risk but said that
departments were having to respond to new challenges such as making
public services available electronically in which the private
sector had more experience and expertise than in-house staff.[12]
Minimising single tendering 20. Unless the cost of going out to
tender is disproportionate to the value of the contract, appointing
suppliers through competition is the best means of ensuring that
departments achieve value for money. We asked why nearly a third
of professional services' contracts were awarded on the basis
of single tender or through informal tendering. The Office said
that it was discussing with departments how controls might be
improved to make it harder for single tender to be used. In particular,
the Office told us that existing delegations of authority made
it too easy for single tender to be adopted and that more senior
levels of approval were needed where it was considered that there
was a compelling case for single tender. The Office considered
that on bigger assignments there was 100 per cent compliance with
European Union competition rules and full competitive tendering.
The Office hoped to have the new controls agreed with departments
by the end of December 2001.[13]
Maintaining probity 21. Given the high proportion of contracts
which were awarded through single tender we asked what controls
existed to prevent collusion between suppliers and civil servants
responsible for purchasing. The Office said it intended to tighten
controls to reduce single tendering. Departments should involve
professionally qualified procurement staff more, and procurement
decisions should be based on clear and transparent objective criteria.
The National Audit Office's survey of departments' expenditure
on professional services found that four suppliers received some
£132 million in payments for professional services. We asked
whether there was an element of oligopoly, with suppliers having
the power to determine prices. The Office told us that the majority
of the business these suppliers received from departments had
been awarded competitively.[14]
Making more use of framework agreements 22. Framework agreements
which include a number of suppliers, all appointed through competition,
on whom departments can call upon to carry out work within pre-agreed
fee rates, have good potential to improve value for money. The
advantages are that departments do not then have to retender every
time they need to seek professional services; competition to be
included in the framework agreements provides an incentive for
firms to offer better prices; and the transaction costs of having
to organise a large number of competitions for relatively small
packages of work are reduced. The Office told us that increasing
the range of framework agreements should make it easier for departments
to procure competitively professional services which were needed
at short notice. At present there was the SCAT framework agreement
for information technology services which included certain categories
of management consultancy. The Office said that while there were
no comparable arrangements for other categories of professional
services such as legal services, human resources and accountancy,
it was looking to put framework agreements in place for them.[15]
23. We asked how departments could identify opportunities for
combining common services which were suitable for framework agreements.
The Office said that it was discussing with departments the scope
to increase the range of framework agreements to obtain better
discounts through aggregating departmental requirements. With
the SCAT agreement for example, departments had secured discounts
of up to 20 per cent in consultancy fees. The Office said that
agreements covering management consultancy should be in place
by March 2001, with better volume discounts for some types of
work including incentives and capped fees to provide greater control.[16]
Having the right commercial skills 24. Achieving better
value for money from professional services requires civil servants
to be sufficiently skilled to assess and define their need for
professional assistance and to manage contracts with suppliers
of these services effectively. We asked whether the Office of
Government Commerce was satisfied that civil servants had the
necessary level of procurement expertise. The Office said that
professional procurement staff could add considerable value, but
in the past professional services had often been purchased without
their involvement. The Office told us that it intended to look
at the extent to which departments proposed to involve professional
procurement staff in purchasing professional services in the future.[17]
25. Asked whether departments could learn from the private sector
to improve how they purchased goods and services, the Office said
that it was easier for the private sector to attract and retain
procurement experts in some areas because companies had greater
flexibility and discretion over pay and benefits. In the private
sector there tended to be a general perception that consultants
should be used as little as possible and, if they were used, approval
at very senior level in a company was usually required. On the
other hand some companies gave local managers more discretion
to employ professional services.[18]
26. We asked whether departments should be doing more to adopt
a strategic approach to procurement issues with more commitment
at a senior level within departments. The Office told us that
departments were responding in different ways, but that Permanent
Secretaries were very supportive of its procurement agenda. In
some departments strategic procurement issues were now being discussed
at departmental board level, and the seniority of the heads of
procurement had been increased. The Office said, however, that
it needed more experience of how its initiatives were working
before it could identify what other Government-wide measures were
needed to improve procurement.[19]
Assessing the quality of professional services 27. We asked
how the quality of external advice and assistance was monitored
and what action was taken. The Office said that its guidance encouraged
departments to take up references from potential suppliers about
other relevant work they might have done and set clear milestones
when the quality of the supplier's service should be reviewed.
Post contract reviews should also take place at the end of an
assignment, to review overall quality and learn lessons. If a
department was dissatisfied with the performance of a supplier
included in a framework agreement the Office would raise this
with the supplier directly. The Office agreed, however, that there
needed to be better information sharing between departments about
the performance of suppliers, and this was something which they
were seeking to improve.[20]
Conclusions 28. Departments employ over 3,000 internal
experts such as economists, statisticians and lawyers. In securing
professional advice and support departments need to consider carefully
how the work can be best divided between external suppliers and
in-house staff.
29. Despite the Efficiency Scrutiny's recommendations
in 1994, departments are still awarding too many professional
services' contracts by single tender. The Office of Government
Commerce is working with departments to introduce controls to
make it harder for single tender to be used. Departments should
ensure that their staff comply with these controls and the Office
should monitor departments' progress in putting more of their
contracts out to competition.
30. The use of framework agreements to purchase
information technology services has enabled departments to secure
discounts of up to 20 per cent in consultants' fees. There is
considerable potential for similar savings to be made in other
types of professional services.
31. Co-ordinating purchases can enable departments
to use their bargaining power to get better deals from suppliers
by negotiating lower fees and volume discounts. Departments therefore
need to share information on the volume and nature of their purchases,
the value of their contracts and their key suppliers. The Office
of Government Commerce is well placed to facilitate this sharing
of information, perhaps through a central data base which procurement
staff in departments can access to identify opportunities to collaborate
in purchasing professional services.
32. Departments need to monitor and assess
the quality of advice and assistance provided by suppliers of
professional services and in particular undertake reviews at the
end of each assignment to evaluate overall quality and lessons
learned. The Office is seeking to improve information sharing
between departments on suppliers' performance. Departments should
use such information and routinely seek references from potential
suppliers before appointing them.
33. Qualified procurement staff can provide
valuable advice and expertise in negotiating and managing contracts
for professional services. But departments have not routinely
involved such staff in procurement decisions. Departments should
ensure that they have sufficient staff with procurement expertise
and actively involve them in purchasing professional services.
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