Select Committee on Treasury Third Report


We note the OGC's unusual status as an "independent Office" of the Treasury and the novel arrangement whereby it has a Supervisory Board containing Permanent Secretaries from the major spending Departments. This structure is designed to ensure that OGC's activities, aimed at modernising procurement and securing value for money improvements, command support from Departments. We intend to return to this subject in the future to examine whether the desired effects have been achieved (paragraph 8).

The OGC's work designed to modernise and promote best procurement practice is based on a collaborative approach with Departments. Success therefore depends on Departments utilising the OGC's guidance and expertise. We expect the OGC to monitor and report on the extent to which this is happening in practice (paragraph 13).

The OGC's remit is limited to central civil Government and it does not therefore cover very significant areas of public spending such as Defence and the NHS. We have reviewed the evidence we have received of the close working relationship that the OGC has with the relevant bodies in these fields. We welcome this and consider that such relationships are essential to ensure best procurement practice is followed in all areas of public expenditure. We look to the National Audit Office, the Audit Commission and the proposed Commission for Healthcare, Audit and Inspection to review and report on whether best practice is followed in these areas (paragraph 14).

It looks as if the OGC is on course to achieve its top level target of delivering £1 billion of value for money improvements by the end of 2002-03, as Departments have reported improvements of some £433 million for the first of the three years concerned (2000-01). However, some caution should be attached to the initial figures, given the need for the accounting arrangements to settle in (paragraph 19).

We note that so far Departments have been given no indication by the OGC of the level of value for money improvements they might be able to achieve. We recommend that, once the system has bedded in, individual annual targets for the major spending Departments should be introduced, and that the OGC's top level target be re-examined in the light of performance up to 2002-03 (paragraph 20).

We note that the OGC Gateway review programme has been welcomed by Departments and appears to be having a positive impact. The benefits of Gateway reviews of procurement projects will not be available for some three or four years when evidence of the number of projects delivered to time and cost becomes available. We wish to be informed of this when the information is available and expect to return to this matter then (paragraph 26).

We are disappointed that our predecessors' recommendation for the creation of a central system to collect information on each PFI project to enable comparisons to be made does not appear to have been implemented. While we accept that Departments should be responsible for monitoring their own PFI projects, we consider that the growth in the number and value of PFI projects reinforces the recommendation made by our predecessors. We therefore recommend that a central system to collect information on project performance and provide a facility, where practicable, to benchmark performance against comparable PFI and other projects be maintained (paragraph 30).

We note that the target of purchasing 90 per cent of low value goods and services electronically by March 2001 was missed by a large margin. The evidence given to us suggests that, at least for the Departments that gave evidence, the 90 per cent target was probably unrealistic in the first place. The OGC's e-procurement pilot projects have also slipped. Clearly there was a degree of over-optimism about the pace at which Departments can accommodate change and the market can deliver new technology solutions. We consider that OGC's future plans and targets in these areas should be based on a more realistic assessment of what is achievable, both by Departments and the market (paragraph 37).

We have noted that substantial parts of MOD and NHS procurement have been excluded from the remit of the OGC. The reasons for this have not been fully explained to us except to say that these procurement processes are different. We believe that in future both MOD and NHS procurement processes should be brought within the OGC's remit unless explicit reasons are given for particular dimensions of procurement being treated independently by the relevant Government Departments (paragraph 38).

Since its establishment in April 2000 the OGC under its Chief Executive, Mr Peter Gershon, has made substantial and commendable progress in modernising the Government's civil procurement processes. Clearly there is still substantial scope for improving the value gained from money spent by all Government Departments as indicated in the sections of this report dealing with particular dimensions of the procurement process. However, after two years sufficient progress can be seen to give confidence that savings are being made or can reasonably be expected (paragraph 39).

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Prepared 23 May 2002