Examination of Witnesses (Questions 120-139)
MR PETER
GERSHON CBE AND
MR HUGH
BARRETT
WEDNESDAY 24 OCTOBER 2001
120. And you think that is going to change?
(Mr Barrett) We have a mechanism in place to make
sure that does change.
121. Mr Gershon, could I ask you about the top
of the office comments made at the beginning. What do you think
government could be doing to improve further the strategic assessment
of procurement issues? What more could be done to encourage more
commitment at the top of the office than is currently the case,
in other words to push it up the agenda further?
(Mr Gershon) I do not think there is any single answer
to that. Departments are responding to some of the aspects of
the OGC agenda in different ways. Some departments have made a
decision that they are going to increase the seniority and the
reporting level of the departmental heads of procurement. We can
see that happening now in a number of departments. In some cases
it is clear that strategic procurement issues are being discussed
more than they have ever been in the past at departmental management
board level. For example, I have been giving presentations to
a number of departmental management boards in conjunction with
the departmental head of procurement and that has triggered on-going
discussion about what that department ought to do itself to be
getting a better handle on procurement. Over the last 18 months
we have put an awful lot of new things in place and we have got
to get more experience of how well those are working before I
would be confident in saying whether there were other generic,
government-wide measures that ought to be taken. There is very
positive support from all the permanent secretaries to the OGC
agenda.
Chairman: Thank you, Mr Bacon. Brian Jenkins?
Mr Jenkins
122. Mr Gershon, I have found your answers this
afternoon as illuminating as the Report; I have really enjoyed
it.
(Mr Gershon) You are the only member of the Committee
who has!
123. It has reinforced what I have felt and
known for a long time, namely that the Cabinet Office efficiency
recommendations in 1994 were unobtainable because of a lack of
understanding of the management techniques in place and a lack
of ability to quantify what they were doing, it was a figure picked
at random out of the air. Is that not the case?
(Mr Gershon) No, I do not think it was picked at random.
Talking to some of the people who were involved in that study,
I think they had a good basis for estimating the potential savings.
It was not that the savings were unachievable, it was for the
sorts of reasons that occurred after the 1994 report which are
set out in the NAO Report that the departments gave as to why
there was not full implementation.
124. There was not full implementation because
they did not want to do it. The culture was such that they felt
they could carry on and the taxpayer would dip further into its
pocket. The fact is basic management techniques were non-existent.
I find that amazing. I would not have allowed it on a council
because if my departments were like that I would reduce their
budget by two per cent a year for five years to make sure they
achieved their targets. Why was it not done?
(Mr Gershon) As was identified at the time I did my
review, in my view, looking at this from a private sector perspective,
if the government wanted to get a strategic handle on procurement
there were certain management activities that needed to be put
in place both organisationally, like putting in place some better
processes like the Gateway Review process, trying to get some
measurement techniques in place, and those are now either in place
or in the process of being implemented.
125. So we can look forward to some rapid progress?
(Mr Gershon) It is a matter of record that the OGC's
target in the first three years of existence is to work with departments
to unlock the £1 billion of value-for-money improvements
from what government is purchasing.
126. Excellent!
(Mr Gershon) I believe that that will create a momentum
so that we can look towards a more challenging target in the second
period of the OGC's existence.
127. One of the reasons we bring in contractors
is because we lack the skills in-house. A lot of the answers you
have given in the report show that we lack certain management
skills to allow us to quantify and to act upon some the decisions
taken.
(Mr Gershon) Clearly the answer to that question historically
is yes.
128. You did say that one of the reasons we
lacked these skills is that the public sector could not pay the
same money as the private sector. Is it not true that people work
in the public sector for a range of reasons, one of them being
they would rather work in an environment where as individuals
they are treated far better and allowed more scope to work and
allowed more risk-taking, and the culture in the public sector
is such that it nullifies any young person's enthusiasm or ability
and they fit into a model of take no risk, make sure things go
on nice and steady, and own up to nothing?
(Mr Gershon) The only thing I can say is I cannot
reconcile that with the experience I have now had of dealing with
many civil servants across government. I recognise that that is
a widely held perception. I think people are doing some very difficult
and challenging jobs, they approach them with great commitment
and dedication, and that is what we are trying to do through some
of the mechanisms that help them do those jobs better and get
better value for money for the taxpayer.
129. Outside in the private sector there are
firms who run purchasing contracts where they know exactly, because
there is a procedure laid down, what each contract entails and
its outcome. It is not a difficult process and yet you say that
we are going to have difficulty implementing this in each department.
(Mr Gershon) Having the data in your financial and
management accounting systems that enables you just by pressing
a button to produce analyses of procurement expenditure which
tells you how much money was spent on what and with whom is not
something that is available with the desired level of granularity
in many of today's systems across government.
130. Do you think it is a good idea to have
one in each department or should we centralise this?
(Mr Gershon) Because of the way some of these systems
are tightly integrated into the overall work of the departments,
I would be quite hesitant about having some very big centralised
system. I think what we need to get sharper at, as we begin to
understand the aggregation of government requirements, is for
example ensuring that if we need a particular modification done
to a standard industry off-the-shelf system to meet the needs
of a particular departmental requirement that we look to make
sure the appropriate contract is in place so, for example, that
the modification can be used at no additional expense by other
government departments who use the same software. That is the
sort of area where we should apply ourselves. Clearly in some
departments they have identified a common need. A lot of payroll
is out-sourced, but I do not have enough evidence to say strongly
that I would be recommending that there should be a single financial
and management information system to meet the needs of all government
departments. I think they are too diverse.
131. So we have a situation where department
A purchases a service, department B purchases exactly the same
service—
(Mr Gershon) Usually they are purchasing a system
rather than a service.
132. Within their purchasing procurement they
both purchase professional services at different rates. Why are
we not talking to each other as departments?
(Mr Gershon) As we utilise the head of procurement
network to get better sharing of information along the lines of
the NAO Report, we will be able to better see whether there are
areas where suppliers are trying to divide and conquer.
133. But procurement is passed down in departments.
We get middle management making decisions as to which contractors
they are going to use.
(Mr Gershon) As I have already said, what we are trying
to do as part of the package of improvements to get better in
this area is to get the much stronger involvement of professional
procurement staff to work alongside the users who have the need
for these professional services.
134. So any member of staff can access the database?
(Mr Gershon) Which database?
135. The one we are going to set up.
(Mr Gershon) We have not agreed yet with departments
who will have access to it. The departmental head will clearly
have access to it. Ubiquitous access is something we would need
to consider carefully.
136. Surely the person who is actually doing
the purchasing will need access to it?
(Mr Gershon) What we are trying to get at is that
purchasing these sorts of services should not be done by a single
person. You have to involve both the person who has a business
need for those services and somebody who is professionally qualified
to do procurement and they need to work together, individually
or organisationally, to get a high-quality procurement done which
meets both the user's needs and delivers value for money.
137. So no individual in a department should
be allowed to approach a professional service and say, "I
want you to come and do this work because you are a well-known
and well-loved trader" without going through a procurement
officer?
(Mr Gershon) That is what we are trying to aim at,
yes.
138. Excellent. If we have got key procurement
officers in place in each department and we have not got them
integrated across departments, we have the basis for an information
bank, albeit in their heads?
(Mr Gershon) Departments today do have professional
procurement people but, as was identified both in mine and others'
reports, in some departments the professional procurement people
are not being involved in the high value-added activities. They
have been spending too much time at the routine transactions,
which are much more susceptible these days to catalogue-type arrangements
and use of the government procurement card which ought to be left
more in the hands of the end users, and the skilled procurement
resources available need to be focused more tightly on areas like
the procurement of professional services and some of the complex
PFI-type projects where they can add real value. That is the shift
I am trying to achieve.
139. And that is great. Where is the rationale
that is being used recorded, the reason why they are using a particular
contractor, how they the contractor's performance met up with
expectations and the debriefing at the end? Where is all this
recorded?
(Mr Gershon) That will be recorded in departments
and we then have to find mechanisms in which that information
can be shared.
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