Select Committee on Treasury Minutes of Evidence

Memorandum by the Office of Government Commerce


  1.1  This paper is intended to provide background on the Office of Government Commerce, why it was created, how it is organised and what it has achieved so far. The paper is divided into several sections and a number of annexes that provide further detailed information. More information is available from the OGC website—


  2.1  OGC was created following the completion of a review in 1999 by Peter Gershon, who was then Managing Director of Marconi Electronic Systems and a member of the Board of GEC plc. The Gershon review found a lack of consistency with different departments applying different approaches and practices to the procurement of essentially similar requirements. This lack of consistency meant that there was a wide gap between best and worst practice in Government. The review found widespread recognition that there was a need for a central body to ensure consistency of strategy, promotion of best practice and appropriate aggregation as well as a coherent approach to the management of key suppliers and the delivery of complex projects.

  2.2  The Gershon review examined the whole process of acquisition from third parties by Government, including goods, services and large capital projects. This process spans the whole life cycle from initial inception through to the end of the useful life of the asset or the completion of a contract. The review covered conventional public funding and more innovative types of procurement such as PFI/PPPs.

  2.3  The review identified a number of weaknesses in Government procurement. These covered:

    —  organisation,

    —  process,

    —  people and skills,

    —  measurement and

    —  the contribution of the "centre" of Government.

  2.4  The proposals for dealing with these weaknesses called for the creation of a unified procurement organisation. The aim was to provide a greater sense of direction in procurement and to push best practice in central civil Government. The review proposed that if the changes were effectively implemented they could deliver considerable gains of the order of £1 billion across a three-year period. Departments would need to work closely with OGC and in some cases accept the need to work together on procurement matters, but this would deliver better value for money for Government as a whole. Ministers accepted the review in full.

  2.5  Peter Gershon was appointed as the first Chief Executive Office of the OGC on 1 April 2000. His appointment was as a civil servant with a three-year contract. A copy of the report from the 1999 Gershon review is attached at Annex A.[1]

  2.6  The creation of OGC builds on the work that had been undertaken across Government over many years to improve procurement policy and practice. The Treasury Procurement Group which was established in 1992, brought together under one command, two HM Treasury teams—Procurement Policy and Procurement Practice and Development (previously the Central Unit on Purchasing (CUP)). The Group preserved the Government's procurement policy of value for money, influenced developments in the European Union in respect of the Procurement Directives as well as their implementation in UK law. The Group had medium term roles to obtain improvements in departmental procurement performance, to undertake an on-going central role as the functional lead and champion of Government procurement. The Group was brought into OGC on 1 April 2000 (see paragraph 2.7 below) together with the Private Finance Policy Unit.

  2.7  At its inception in April 2000, OGC brought together three former Cabinet Office agencies, (the Property Advisers to the Civil Estate (PACE), the Buying Agency (TBA) and the Central Computer and Telecommunications Agency (CCTA)), with the former Treasury units concerned with procurement policy, procurement practice and development and a legal team staffed by the Treasury Solicitor's Office. The legal team provide advice within OGC and draft regulations to implement EC rules. They also help departments to answer questions related to procurement law.

  2.8  One of Peter Gershon's first tasks was to develop OGC's Vision and Key Strategies for the future. That work culminated in the Vision and Key Strategies receiving endorsement by OGCs Supervisory Board (see Section 5 below) at their first meting on 6 June. Once OGC had an established rationale for operation in place, it was necessary to move forward to establish the most appropriate organisational model for OGC to deliver against the Key Strategies. During 2000-01 a Business Alignment Review was carried out. The Review also encompassed the quinquennial reviews in respect of (PACE) and (CCTA)[2]. The outcome of that Review was the creation from 1 April 2001 of a unified organisation with six Directorates and a single trading arm (OGC buying solutions). The new structure is shown below:

  2.9  The new structure provides:

    —  a more unified organisation, working to a common purpose

    —  an identifiable customer facing function charged with developing positively OGCs working relationship with departments, championing the customers' cause and helping to stimulate innovation in Government procurement.

    —  an identifiable supplier facing function to deliver on supplier related strategies, including enabling competition and working with departments on strategic supplier management

    —  coherent policy and best practice development

    —  development of procurement skills across Whitehall

    —  value adding consultancy services, including support on gateways and with project and contract management

    —  a trading arm—OGC buying solutions that works with OGC and departments to support delivery of the Key Strategies.

  2.10  The result is a more efficient and effective organisation that, while building on strengths, adds and supports new capabilities to meet Ministers and departments' requirements. Further information about the aims of each Directorate and the trading fund is given at Annex B.[3]


  3.1  OGC was created to lead a wide-ranging programme to modernise procurement in central civil Government, and deliver substantial value for money improvements. Whilst Defence and the Devolved Administrations are not covered by OGCs central civil Government remit, we have a good working relationship with them and a commitment to exchange information and knowledge across a spectrum of OGCs activities. OGC is developing an integrated procurement policy and strategy across government. OGC represents the UK on procurement matters in Europe, in the World Trade Organisation (WTO) and other international fora. The organisation plays an important role in the Government's efficiency and modernisation agendas.

  3.2  UK Government policy is that public procurement should be based on value for money rather than initial purchase price, with value for money being defined as the optimum combination of whole life costs and quality to meet the user's requirement. The Gershon Review was based on the definition of procurement as the whole process of acquisition from third parties (including the logistical aspects) and covers goods, services and construction projects. This process spans the whole life cycle from initial concept and definition of business needs through to the end of the useful life of an asset or end of a services contract. Both conventionally funded and more innovative types (eg PFI/PPP) of funded projects are included. This definition, which is consistent with modern supply chain management practices and that used in the 1995 White Paper (CM2840) Setting New Standards, underpins the Gershon Review recommendations and the OGCs agenda.

  3.3  OGC seeks to offer customers and suppliers integrated, flexible and responsive support for all aspects of procurement and supplier management in central civil Government. By integrating its component parts OGC can help departments achieve value for money improvements in commercial activities across government. All of OGCs work is based on a collaborative approach with central civil Government departments, their agencies and NDPBs. OGC works with central civil Government to achieve the aims, objectives and targets set out in the following section.


  4.1  OGC has a vision, four high-level objectives and ten Key Strategies. This strategic framework sets the broad agenda for building strong customer and commercial relationships and planning and driving forward actions in support of achieving value for money gains from central civil Government.

OGCs Vision

  4.2  The OGCs vision describes the overall role and purpose of OGC as:

    —  To work with central civil Government as a catalyst to achieve best value for money in commercial activities.

High-level objectives

  4.3  OGC has four high level objectives:

    (i)  Provide guidance and expertise to support the successful delivery of procurement-based projects and other forms of commercial activity.

    (ii)  Develop the Government market so it is more efficient and attractive for both suppliers and customers.

    (iii)  Develop a clear and supportive framework for best in class procurement activity to help achieve better value for money.

    (iv)  Deliver efficient and effective services to external and internal customers, gaining widespread recognition for excellence and as a leading contributor to Government modernization.

Key Strategies

  4.4  The OGC Key Strategies support the strategic vision and objectives and span a medium term. The strategies are being embedded in the work of the OGC Directorates and the Trading Fund and are crosscutting strategies supported by work streams across OGC.

    (1)  Realise OGCs vision by establishing and continuously developing OGC as a centre of excellence, with a highly motivated staff of suitably skilled and experienced practitioners.

    (2)  Help civil Government departments secure value for money through use of best practice techniques.

    (3)  Achieve VFM by catalysing the sharing and exchange of knowledge about Government commercial activity.

    (4)  Drive forward improvements in the management of large, complex and/or novel projects involving the acquisition of third party goods, works and/or services.

    (5)  To catalyse and facilitate commercial relationships with suppliers and partners that generate value for money.

    (6)  Ensure that staff in central civil departments have the professionalism and skills to meet the needs of all aspects of Government commerce in the 21st Century.

    (7)  Implement and continue to develop a process for the strategic management of key suppliers so that value for money is gained from these relationships.

    (8)  Achieve effective competition for Government business through simplified access to the Government market place for suppliers.

    (9)  Realise a step change in efficiency by catalysing the use of e-procurement for Government's inter-actions with its supply base.

    (10)  To support the wider public sector in the achievement of value for money.

  4.5  Further information about the Key Strategies is given at Annex C.[4]


  5.1  OGC is an independent Office of the Treasury with its own Chief Executive appointed at Permanent Secretary level. OGC is not an executive agency but has a governance structure that allows it to act independently. OGC reports to the Chief Secretary of the Treasury. To reinforce the nature of OGCs cross-departmental function and purpose, and to give strategic direction, the OGC has a Supervisory Board of which the Chief Secretary is the Chair.

  5.2  The Supervisory Board is made up of departmental Permanent Secretaries, the Chief of Defence Logistics, the OGC Chief Executive, the Head of the National Audit Office (the Comptroller and Auditor General) and two senior external representatives. It is a novel formulation in central Government and provides a very high level strategic steer for the OGC agenda and top-level buy-in. The current membership of the OGC Supervisory Board is shown at Annex D.[5]

  5.3  The OGC Chief Executive also has an advisory group—the Chief Executive's Advisory Group (CEAG) that is made up of a wide representative base of departments, executive agencies and NDPBs undertaking the full range of civil government commercial activities. The current membership of CEAG is shown at Annex E.[6]

  5.4  Whilst Sir Andrew Turnbull, Permanent Secretary to the Treasury, is the Principal Accounting Officer for the Treasury's Estimate, in practice, he delegates all matters related to the day-to-day running and resourcing of the OGC to the OGC Chief Executive. The OGC Chief Executive is an Additional Accounting Officer for the Treasury, responsible for the OGC Request for Resources of the Treasury's Estimate. He is responsible for advising the Treasury Principal Accounting Officer, the Chief Secretary and the OGC Supervisory Board on OGC policy advisory and executive functions. He also advises on OGC structure and objectives, the setting of appropriate financial and non-financial targets, resource levels, accountability, propriety and regularity.

  5.5  In managing the OGC, the Chief Executive is assisted by an Executive Board on which the Executive Directors of each of the OGC Directorates, the Chief Executive of and a Non-Executive Director (Debbie Howard from LEX plc) sit. All significant strategic, operational and management issues are considered by the Executive Board.

  5.6  The OGC Chief Executive is accountable to Parliament for OGCs performance and operations.


  6.1  Each of the Key Strategies support the OGCs top level target which is to deliver £1 billion of value for money improvements from central civil Government commercial activities by the end of 2002-03. This forms one of the targets in the Treasury's Public Service Agreement (PSA)

  6.2  OGC will achieve this in collaboration with departments by implementing the Key Strategies, promulgating best practice approaches, by leading and supporting the Gateway Review process, improving the attractiveness of the Government market, aggregation of requirements, by identifying and promoting e-procurement techniques, by providing strategic and operational consultancy and information services and by sharing knowledge, skills and experience.

  6.3  OGC has already developed, in conjunction with the NAO, guidance on measuring value for money gains and will embed the concepts across the Government procurement community. A copy of the guidance is available from the OGC website. Departments in measuring the VFM gains they have achieved against the £1 billion target during 2000-01 have used this guidance.


The OGC/departmental Joint Action Plan

  7.1  The OGC Supervisory Board approved a proposal to develop a Joint Action Plan to set out the shared aspirations of OGC and departments in driving forward the OGC's Key Strategies. The plan has been agreed by representatives of all the major departments and came into force on 1 April 2001. It will help to cement the partnership approach being taken by OGC to lead and support the central civil Government procurement community. It will be reviewed and monitored each year. A copy of the plan is attached at Annex F[7]

Relationship and joint working with central bodies

The Treasury

  7.2  OGC is developing a close working relationship with the Treasury, particularly with the Expenditure teams who are responsible for working with departments to ensure the best use of government resources overall. A particular area of work for OGC will be to assist the Treasury in considering procurement related issues during their consideration of departmental submissions for funding during the preparatory stages of the next public spending review (Spending Review 2002)

  7.3  In implementing the Achieving Excellence initiative and acting as a focus for Government's responsibilities as a client of the construction industry, OGC works very closely with DTI which now has sponsorship responsibility for the construction industry. The Chief Secretary is a member of the Rethinking Construction Steering Group, which is chaired by a DTI Minister.

Office of the e-Envoy

  7.4  In addition to the specific shared agenda with the whole of the central civil Government procurement community, OGC works closely with the e-Envoy's office in the Cabinet Office. The Office of the e-Envoy is leading the drive to get the UK online. They have the main responsibility for strategic development of IT within government in support of the aims of UK Online and in particular they aim to achieve the governments overarching e-government strategy. They lead and advise on emerging information technologies and their strategic use across government. The OGC supports individual departmental procurement from a commercial viewpoint taking into account the strategic aims of e-government and the work of the Office of the e-Envoy. OGC also offers technological expertise to provide procurement advice about the relative merits of new information technologies and their strategic application across government.

  7.5  In May of 2000, the Cabinet Office published the report—Successful IT: Modernising Government in Action. It sets out measures to improve IT project delivery and includes 30 recommendations that aim to ensure that all Government IT projects are as good as the best.

  7.6  OGC has produced a series of briefings in support of the Successful IT report (including guidance on Senior Responsible Owners or SROs , Managing Risk, Project Mentoring, the Business Case, the Project Profile Model or PPM & the Gateway Review Process (see section 8 below). The Prime Minister announced on 24 April 2001 that the responsibility for driving forward recommendations in the report would be transferred to OGC.

Cabinet Office: Delivery Unit and the Office for Public Service Reform

  7.7  OGC is developing relationships with these two newly created bodies to ensure that the use of good procurement techniques and practices and the development of skills, particularly project management skills, are recognised as essential in the drive to improve the delivery of public services. OGC also has close working relationships with other parts of the Cabinet Office, including the Performance and Innovation Unit.

  7.8  Another significant area of collaboration with central Government has been the establishment of key fora to implement the Achieving Excellence in construction procurement agenda. These include the Government Construction Clients Panel (GCCP), which is chaired by the OGC and its Strategy Group and Central Government Task Force, chaired by OGCs Chief Executive.

  7.9  In implementing the Achieving Excellence initiative and acting as a focus for Government's responsibilities as a client of the construction industry, OGC works very closely with DTI which now has sponsorship responsibility for the construction industry. The Chief Secretary is a member of the Rethinking Construction Steering Group, which is chaired by a DTI Minister.


Best Practice

  8.1  OGC aims to achieve value for money through the adoption of best practice techniques. The first three high-level best practice guides, targeted at Permanent Secretaries and Agency and NDPB Chief Executives have already been published:

    —  Why IT Projects Fail

    —  Managing Partnering Relationships

    —  How Major Service Contracts Can Go Wrong

  Further guides are planned for later this year.

  8.2  In addition to publishing new high-level guides, OGC is reviewing all the existing guidance on procurement related subjects with the aim of providing a more generic and useable set of business and operational guidance—aimed at procurement practitioners.

  8.3  This specific work on best practice guidance is in addition to the advice and guidance that OGC provides to departments by way of consultancy on property, construction, IT and general procurement issues.

Knowledge Sharing

  8.4  A key part of what OGC does is catalysing the sharing and exchange of knowledge. A good example of that is the Watermark project, for which pilots are currently being run with 17 public sector organisations taking part and information from DfES on over 10,000 schools, to provide water consumption data to help develop benchmarks. Funded by the Government's Invest to Save Budget and managed by, it offers potential savings of £60 million by 2002—£30 million in central Government and another £30 million in the wider public sector. It is estimated that 90 per cent of the potential saving projections could be achieved through improving greater understanding and awareness of reducing water consumption, including less wastage, and addressing greening issues including wasted energy such as pumping and wasted hot water. The 10 per cent could be derived from implementing correct metering where rateable charges exist.

  8.5  Another example is OGCs development of the electronic Property Information Mapping System (e-PIMS) which displays the precise location and outline of departments' properties, holdings and occupations on computerised maps and will allow users to access and amend their own core property details on line.

Large Project

Private Finance Initiative

  8.6  OGC has policy responsibility for the Private Finance Initiative in respect of procurements using PFI techniques. The Government has stressed that PFI should be approached pragmatically, and that it is important to pursue what offers the right answer and the best value for money. In this respect, PFI is one of a number of acquisition tools. The OGC Private Finance Unit works closely with departments and the Devolved Administrations to provide advice and guidance on strategic issues relating to the use of PFI.

  8.7  OGC has a close operational relationship with Partnerships UK which provides practical knowledge and assistance in developing policy and operational guidance, in particular relating to standardisation of PFI contracts. The Private Finance Unit chairs and provides the secretariat for the Project Review Group which examines all local authority projects requiring PFI credits.

  8.8  The OGC Gateway programme has been designed to provide structured, independent review of large, complex government procurements at five critical decision points during the life cycle. It has been based on proven private sector practices and piloted on a number of public sector projects during 2000. At the heart of the Gateway process is the principle that the greatest opportunity to influence the outcome is in the early stages of a project. The Government has agreed that this process should be mandatory for all large projects.

  8.9  Seventy reviews of procurements with a total value in excess of £13 billion have been completed successfully and a total of 124 with a total value of over £18 billion will be completed by the end of this year. These reviews have provided guidance both on setting the procurements on a path of delivery and on the common lessons that must be learned for project success. OGC is using these lessons to deliver appropriate guidance to project sponsors/owners and teams.

  8.10  An early lesson was the need at the initiation of a delivery requirement, to check that the pre conditions for success were in place and that programmes of work, ie multiple projects were identified as such from a very early stage. As a result, OGC has been asked by departments to deliver an additional "Gate 0" ahead of the business case "Gate 1" review, to cover this validation for major initiatives. This is now in full implementation phase.

  8.11  The Gateway initiative was developed to support our key strategy of improving the management of large, complex and/or novel projects. This process will deliver significant value for money improvements in major construction, IT and PFI projects.

  8.12  Two further, parallel streams of work in relation to improving the performance of projects are Achieving Excellence in Construction and the Successful Projects in an IT Environment (SPRITE) programme (mentioned in Section 7 of this paper). The first of these is a three year initiative launched in 1999 which aims to provide a step change in the value for money achieved by departments, executive agencies and NDPBs on new construction, maintenance and refurbishment projects. Improvements will be monitored against targets for the implementation of best practice by March 2002. OGC is responsible for leading this high profile programme that recently received positive support from the National Audit Office in their report—"Modernising Construction" which was published in January 2001. The second initiative, the SPRITE programme, follows on from a review of the handling of major IT projects—the McCartney report, which was published in May 2000.

  8.13  SPRITE was transferred to the OGC in April 2001 (see Section 7 of this paper) to take forward the implementation of the recommendations of the "Successful IT: Modernising Government in Action" report. Nineteen early recommendations have all been delivered, providing the infrastructure to enable departments, agencies and NDPBs to embed them and the remaining recommendations into their working practices. The infrastructure includes the issuing of guidance, the introduction of the Senior Responsible Owner (SRO) role and the development of the IT Projects database. OGC will drive this program forward and as part of this commitment, we have already produced a Best Practice guide— "Why IT Projects Fail" (see paragraph 8.1 above) which was developed in consultation with the National Audit Office, the Computer Services and Software Association and academia.

  8.14  Also within SPRITE's remit is the Senior IT Forum. The Forum is chaired by Peter Gershon and has an equal number of senior members from government and the IT industry. The forum was set up in October 2000 following the "Successful IT: Modernising Government in Action" report and the companion industry report "Getting IT Right for Government" published by Computer Software and Services Association. The aim of the Forum has been to identify and address joint systemic issues that occur during the acquisition and implementation of government IT-enabled projects.

  8.15  The Forum has identified key joint issues (joint government and industry) and is in the process of developing proposals to address them that will be published later this year. The work of the Forum is being closely co-ordinated with other relevant areas within OGC and expects to make a significant contribution to the increased efficiency and success of government IT-enabled projects.

Commercial relationships

  8.16  OGC is working to facilitate commercial relationships with suppliers and partners that will generate improvements in value for money. This is helping us to realise a series of collaborative deals, the latest of which is in the area of hotel accommodation. This is expected to deliver £18 million value for money gains over three years. The OGC initiative under which the Department of Social Security (as was) took the lead on behalf of Government in the tendering exercise and award of contract to Expotel, provides a single contract to Government at competitive rates to drive down the cost of hotel rooms and external conferences, minimising paper-based transaction charges and cutting Government re-tendering costs.


  8.17  OGC is seeking to develop, across central civil Government, the commercial skills necessary to meet its needs in the 21st Century. OGC has held discussions with all central civil departments and is drawing up a set of recommendations on reducing the shortage of project and contract management skills in central civil Government. There will be a specific drive to increase project management skills across central civil Government. This is particularly important given the emphasis on improving public service delivery and is a key message from evidence collected so far from Gateway Reviews.

  8.18  During 2000-01, OGC managed an Assisted Training Places Scheme, working in partnership with departments, the Civil Service College and other training providers. We supplied more than 50 per cent of the funding for over 200 students on a total of 500 individual training modules for training in Procurement, Construction Project Sponsorship and Estates and Property management. Funds to support a similar number of applicants and schemes will continue throughout the coming year.


  8.19  OGC is developing the strategic management of key suppliers having agreed criteria with departments, for identifying the relevant companies. Meetings have been held with the companies' top-level of management to seek mutual understanding of their perception of the Government's agenda and OGCs role, and their corporate strategy for doing business in the Government market. For example, on 7 September 2001, OGC announced a Memorandum of Understanding with Consignia, in which the OGC will develop an "intelligent customer" approach to managing the relationship between the Government and Consignia. The MoU proposals concentrate on value creation, rather than cost reduction, recognising that unit price reduction is not the sole method of realising value for money goals and that improved quality of service and greater process efficiency can be achieved through the re-engineering of opportunities to the mutual benefit of both supplier and purchasers.

  8.20  OGC aims to give SMEs every opportunity to compete in the Government marketplace by understanding through research, those barriers, both real and perceived, which are discouraging suppliers, and take action to address them. OGC will shortly be re-issuing its Supplier Financial Appraisal Guidance. This will be amended to ensure that, wherever possible, SMEs are not at a disadvantage when seeking to do business with Government. For example, Departments have been reminded that they are not required to request accounts for the past three years of trading. In the absence of audited statements, other information will be requested that is considered sufficient for assessment purposes.

  8.21  One issue, relevant to supplier participation, on which new guidance has already been issued to departments concerns the treatment of liability in Government contracts. In the past, there was some confusion about the scope to limit contractor liability for loss or damage. This led to an understandably cautious approach, in which there was a tendency for procurers to insist on unlimited contractor liability regardless of the facts of the case. This is likely to have had an adverse impact on competition and value for money, where, for example, suppliers have been unable or unwilling to meet such a requirement or have increased their tender prices in order to cover the costs involved. The new guidance clarifies the position. It highlights the need to consider liability in a flexible way, reflecting value for money considerations. It sets out the different situations in which liability will be an issue (ie personal injury, direct loss and damage, indirect and consequential loss) and provides advice on how limits should be set in each case.

  8.22  OGC is working with the DTIs Small Business Service to identify and tackle the concerns of SMEs. To start to address a perceived lack of clear information about government's requirements, our recent joint publication, "Tendering for Government Contracts", provides information, guidance and departmental contact points to prospective suppliers. Our central contact point resolves further queries on dealing with Government. We are identifying options for addressing the perceived bureaucracy and cost of selling to Government through, for example, encouraging the use of e-commerce activities. A further concern expressed to us is that that government will always prefer the tried-and-tested option and to overcome this, training is being explored. We are also working alongside the British Chamber of Commerce to market government's commercial needs.

  8.23  Our strategic meetings with large, market-leading companies are providing insight into factors that can make the private sector market appear more attractive to some companies. These meetings have identified the following barriers: the public visibility of some major projects and adverse publicity if problems occur; the lengthy and costly procurement process involved in a major services contract; and the consequent inability of suppliers to continue to the later stages of a bid, particularly if they have concerns that the contract is likely to be awarded to the incumbent supplier. These concerns are being explored with suppliers, including through the Senior Forum, in order to identify options for improvement.


  8.24  OGC aims to achieve the optimum use of e-procurement. Considerable work during 2000-01 on a competition for electronic tendering pilots has now reached fruition with the introduction of a web-based pilot Electronic Tendering System to not only replace the traditional paper tendering system but to also deliver additional functionality and increased benefits to all parties involved in the purchasing of goods and services by central civil Government. The pilot will be run for six months, with a number of departments and their suppliers participating. The contract to take this forward has been awarded to The Royal Bank Of Scotland and the project, using software and services supplied by Trustmarque International, gives the UK Government the opportunity to be at the forefront of the development of electronic tendering. It should produce value for money gains in the region of £13 million over the next four years but it will also reduce burdens and costs to suppliers by an estimated £37 million and stimulate interest in the market.

  8.25  A research project into the use and impact of electronic procurement in the public sector is being undertaken by the OGC. The e-Pilots project will test four e-procurement solutions in up to eight live environments within several central civil Government Departments and Agencies. The pilots are scheduled to run until the end of June 2002 and following their completion, a final report will capture lessons learnt. This will be published and widely distributed.

  8.26  There is still work to be done. Whilst estimated savings of £100 million have been realised as a result of central civil Government applying electronic techniques to the processing and payment of procurement goods and services to date, the objective was to purchase 90 per cent of low value goods and services electronically by March 2001. Recent measurements undertaken by OGC indicate that at present just over half of low value transactions are conducted electronically. Work is continuing to realise additional benefits through means such as increased use of the Government Procurement Card and the replacement of antiquated IT systems with more modern ones.

  8.27  More than £45 million worth of value for money improvements is expected to be achieved in the next 18 months as take up of the Government Procurement Card (GPC) increases across central Government, this is in addition to the £25 million saved in its first three years of operation using the GPC for processing low-value transactions and putting in place a new impetus to encourage a switch from paper-based systems to electronic processing. In July of this year, OGC announced plans to widen the scope of the GPC as part of its commitment to e-Commerce, by allowing higher value capital items and service transactions to be paid for by GPC.

  8.28  Current spend on the GPC is over £100 million and is expected to reach a cumulative figure of £300 million by the end of 2002. This represents over 2.4 million transactions per year.

Supporting the Wider Public Sector

  8.29  Support for the wider public sector is provided from across the range of OGCs activities where this does not detract from providing service to the core customer base (central civil Government). Two areas where the wider public sector has already achieved gains as a result of OGC activity are in the use of collaborative deals and sharing best practice information.

  8.30  OGC's first collaborative initiative, announced last August, was in the provision of mobile telecommunications services. With the emphasis on a cross-Government approach, OGC utilised an existing framework contract (GTM) to negotiate a special deal with Vodafone Corporate Ltd. The first 12 months of this arrangement has seen significant growth in take-up: from an initial base of 12,000 connections to over 140,000 connections throughout the public sector. This growth has already resulted in a series of tariff reductions due to benefits of scale, and the deal is on track to generate its target of £38 million value for money gains over a two year period. This deal is available for use by the wider public sector.

  8.31  A good example of sharing information with the wider public sector is the Watermark project—see paragraph 8.4 above.

  8.32  OGC has signed agreements with the Devolved Administrations that commit both sides to share and exchange knowledge and information so that each can benefit from the work of the other. Further work will be done during 2001-02 to reinforce these agreements and to identify practical ways in which they can benefit from OGCs work.

Supporting customers

  8.33  OGC aims to work in collaboration with its customers in central civil Government and seeks to support them by building effective working relationships, to facilitate information sharing and collaborative innovation, to secure departmental engagement in OGC activities and to make OGC expertise more easily accessible. OGC has established face-to-face communication through a team of Customer Relationship Managers who customise OGCs response to meet departmental needs. We have also provided a single service desk for all customer enquiries and an integrated web presence as a single online resource for all OGC information as part of our e-business strategy. These services will continue to be enhanced and developed during 2001-02. We promote networking and knowledge exchange within the government commercial community and with suppliers through a balanced programme of events addressing the key issues facing commercial managers in procurement, IT, property and construction. These include a number of active forums organised for customers by OGC to address specific opportunities and issues. In July of this year, OGC held a conference for customers in Warrington. The conference brought together procurement, construction and IT contacts from across government to discuss and make suggestions on OGCs forward agenda for the medium term.

  8.34  We have developed a set of excellence indicators—Capability, Accessibility, Responsiveness and Effectiveness (CARE) against which customers will be able to give us feedback on our performance. The first CARE survey will be conducted during 2001-02. We will use this feedback to develop OGC as a centre of excellence in all aspects of procurement.


  9.1  OGC has developed a comprehensive work programme that builds on the achievements of 2000-01 to ensure support for the actions in the OGC/departmental Joint Action Plan and the Key Strategies. We set out below the key targets for 2001-02 that have been agreed with the OGC Supervisory Board.


OGC as a Centre of Excellence

1.By March 2002 to achieve a satisfactory rating of 85 per cent or better in a survey of all central civil departments using the CARE criteria.

Best Practice

2.By March 2002, as specified by departments, to identify the most relevant OGC guidance and update it in accordance with new standards for OGC business and operational guidance, and to deliver a programme of Best Practice guidance for top management in Departments.

3.By March 2002, to draw up a revised approach to the use of PFI for IT contracts, which is endorsed by OGC's Supervisory Board.

Knowledge Management

4.By September of 2001, a report covering 12 months of central civil Government expenditure with suppliers will be produced to allow ongoing co-ordinated management action to be taken to improve value for money.

Large/Complex/Novel Projets

5.At quarterly intervals to report generic lessons emerging from the Gateway Reviews to OGC customers in order to stimulate corrective action to departmental projects.

6.To provide departments with a model to assess their state of readiness to deliver Successful IT-enabled projects, by December 2001.

7.To review the progress of OGC and Departments against the Achieving Excellence targets and put in place by December 2001 a strategy, agreed by the Supervisory Board to speed up the delivery of Achieving Excellence.


8.By March 2002, facilitate and co-ordinate 12 projects and complete in conjunction with departments, six new areas for collaboration where the cumulative value for money improvements will exceed £150 million by March 2003.

Government Marketplace

9.By March 2002 to identify common processes and practices which act as barriers to accessing the Government marketplace, and to take action on those which can be addressed within this timescale in order to stimulate greater competition.


10.To advance the implementation of e-procurement pilots and draw interim conclusions by March 2002. (Final conclusion of all pilots will be in June 2002 to allow for cross-financial-year testing).

OGC Internal Integration

  9.2  A Change Management Unit was established in November 2000. The main role of the unit is to oversee the successful alignment of OGC to its new structure and to ensure that a full programme plan covering the major alignment and integration projects is in place and is regularly monitored. The current Change Programme is focused on the organisational business and operational aspects of the integration of OGC. The physical structure was established on 1 April 2001 (see Section 2). The unit is likely to exist for about 18 months or until all the major strands of change associated with the Alignment Review have been achieved. An early achievement for ongoing use is a Routemap for OGC staff. The Routemap provides electronic pointers to information sources, whether they are a set of procedures, a policy, and a plan for change or contact points for further information. This provides all OGC staff with a consistent set of key information covering all of OGCs internal administration.

  9.3  A key priority for 2001-02 is to push forward with integration of our internal systems for Finance, Human Resources and IT. Work will continue throughout the year on developing a new pay and grading structure for OGC, developing an integrated appraisal and reward structure and embedding the OGC corporate values. The OGC values were developed as a result of consultation with staff. The corporate values are:

    —  Customers

    —  Leadership

    —  Professionalism

    —  Teamwork

  9.4  These values, and the associated behaviours attached to them will be embedded into the culture of OGC over the coming months.

  9.5  OGC is embedding the concept of risk management across the OGC directorates and as an integral element of forward business planning. A new Internal Audit function has been established and an independent Audit Committee has been set up comprising only members external to OGC

  9.6  Currently OGC is split across a number of sites. OGC has main offices in London, Norwich and Liverpool and a number of small satellite offices in other parts of the country. OGC is developing an accommodation strategy during 2001-02. The aim will be to achieve both reduced costs and increased efficiencies. To support the physically distributed nature of OGC, new and enhanced IT capabilities will be required. Central to this is the development of an integrated network to link all the main OGC offices and to ensure that internal electronic communication is fully supported. Good progress is being made with this.

  9.7  OGC is committed to achieving the 2004 service-wide target for full implementation of electronic records management. This is being taken into account in driving forward the development of our internal IT support systems and processes.

  9.8  All of the work set out above will help deliver rationalisation across OGCs geographical locations providing increased efficiency, a fully integrated organisation with common coherent systems and a shared culture.

Modernising Government

  9.9  Improving performance and delivering value for money in commercial activities are integral to the Modernising Government Agenda. OGC aims to be professional, adaptable and innovative in achieving the challenging objectives set by our Minister and meeting our customer needs.

  9.10  Some of the ways in which OGC will contribute to the Modernising programme in 2001-02 are by:

    —  encouraging a more customer-focused approach, with an emphasis on excellent service for all our customers;

    —  recognising potential and developing skills to ensure that OGC achieves continuous improvement in management, communication, training and development with excellent support systems and business planning processes;

    —  sharing good practice and knowledge to make the right information easier to find;

    —  acknowledging that while we encourage suppliers to recognise the need for change to the collective benefit of Government and the private sector, in turn, suppliers expect us to practice what we preach;

    —  promoting the benefits of diversity within OGC to ensure opportunities for all.


  10.1  OGC public expenditure forms part of the Treasury's Resource Budget. It is approved by Parliament as a separate Request for Resources within the Treasury's Resource Estimate. Management of expenditure within these limits is delegated by the Treasury to OGC.

  10.2  Within the Treasury Departmental Expenditure Limit, just over £58 million is allocated as the 2001-02 expenditure limit for OGC (excluding OGC This is a net figure representing the expenditure that OGC can control overall, including running costs, programme costs and capital expenditure net of all receipts.

  10.3  Within the OGC expenditure limit, it is assumed that receipts of £49.4 million will be received during 2001-02 representing income from rechargeable services and programme income from the sale of the Government's residual estate. The net running cost total including within the OGC expenditure limit for 2001-02 is £22.6 million.

  10.4  OGC has a commitment, inherited from the Property Advisers to the Civil Estate (PACE), to maintain and dispose of a residue of a portfolio of property declared surplus by government departments. There are currently 53 properties remaining from the original portfolio of 384. The programme element of the OGC expenditure limit covers this commitment.

  10.5  OGC will operate within the agreed expenditure limit for 2001-02. Each OGC Directorate has a budget that reflects the contribution that they will need to make to achieving the OGC Key Strategies and targets for the year.

  10.6 is a trading fund and as such is self-financing. They have a key target to achieve an 8 per cent return on capital employed and are on target to achieve this for 2001-02. A copy of their key targets for 2001-02 is attached at Annex G.[8]

OGC Staffing

  10.7  In total, OGC employs 621 staff, 180 of which are in

  As at September 2001, the following percentage of staff by grade level, were employed in the OGC directorates:

Grade Levels
Percentage of staff by level
Administrative Assistant/Officer and typing staff
Executive Officer and Senior Personal Secretaries
Higher Executive Officer
Senior Executive Officer, Grade 7 and Grade 6
Senior Civil Service (Grade 5 to Permanent Secretary)

  As at September 2001, the following staff, by grade level were employed in

Grade Levels
Percentage of staff by level
Administrative Assistant/Officer and typing staff
Executive Officer and Senior Personal Secretaries
Higher Executive Officer
Senior Executive Officer, Grade 7, Grade 6 and
Senior Civil Service
(less than 1 per cent)

1   Not printed Back

2   The full Review report is in two volumes: "A Report on the Organisation of OGC and the Alignment of its Resources with its Key Strategies" and "A Report on the Performance between 1996 to 2000 of the Office of Government Commerce (OGC) Agencies". The full report is available on the OGC website ( Back

3   Not printed. Back

4   Not Printed. Back

5   Not printed Back

6   Not printed Back

7   Not printed. Back

8   Not printed. Back

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