Memorandum by the Department of Trade
1. This memorandum provides evidence for
the Treasury Sub-committee on the use made by the Department of
Trade and Industry (DTI) of the Office of Government Commerce
(OGC). The Sub-committee is inquiring into the work of the OGC
and invited DTI to submit written evidence on the use it makes
of the OGC and the services it provides.
2. OGC was launched in April 2000 as an
Office of the Treasury, funded by its own Parliamentary Vote and
responsible to the Chancellor of the Exchequer. It inherited responsibility
for the provision of a broad range of services previously offered
by the Treasury's Procurement Group, the policy arm of the Treasury
Taskforce on PFI, and three Executive Agencies: The Buying Agency
(TBA), Property Advisers to the Civil Estate (PACE), and the Central
Computer and Telecommunications Agency (CCTA).
3. DTI is engaged, with varying degrees
of involvement, across the whole spectrum of OGC activity. OGC
sets the direction for central Government in undertaking commercial
activity. DTI delivers many of its business objectives by contracting
with second and third parties, including most of our services
to industry and to the public. Our policy responsibilities in
trade and industry mean that we recognise the importance of a
consistent approach in delivery, and hence the importance of the
role of the OGC.
4. At the highest level, DTI has a seat
on the OGC Supervisory Board chaired by the Chief Secretary. Departmental
representation is at Permanent Secretary/Accounting Officer level.
DTI is represented by Robin Young. The aim of the Supervisory
Board is to ensure that the strategic direction of the OGC meets
the needs of central Government collectively.
5. DTI also has a seat on the OGC Chief
Executives Advisory Group. This Group deals with commercial /
procurement strategy for government, specific areas for action
and the strategies adopted to take forward those actions. Through
this Group, OGC consults Departments on strategy and the priorities
within it, and Departments influence the way these are agreed
6. OGC are the custodians of procurement
policy in central Government. DTI receives guidance and direction
from OGC on procurement policy issues for promulgation across
DTI, its Agencies and NDPBs. Where appropriate, OGC consults Departments
on procurement policy issues. DTI also consults OGC on its own
policies which have a commercial impact, eg on Small and Medium
Enterprises, ethnic minority businesses and state-aid rules. OGC
acts and negotiates on behalf of Government on EU public procurement
Directives and the incorporation of those Directives by regulation
into UK law. DTI consults OGC on the Directives and their application.
In turn, OGC consults Departments to ensure that, as far as possible,
Departmental needs are met and that the positions OGC adopt in
negotiation reflect the business needs of UK Government. Procurement
policy and EU issues can require input and advice on legal issues
from lawyers. DTI lawyers consult OGC lawyers as appropriate.
7. OGC have the leading role in Government
for the development, sharing and promulgation of best practice
in commercial activity. Existing guidance issues by the former
Central Unit on Purchasing is being reviewed for currency, consistency
and ease of use and again, Departments are being consulted. There
is a greater emphasis now than hitherto on the adaptation of private
sector practice where this can provide added value in a public
sector setting. The best practice issues being addressed are wide
8. As part of strategic supplier management,
Peter Gershon, OGC's Chief Executive, has established top-level
review meetings with the key suppliers to Government. DTI feeds
into this process where the supplier is critical to DTI's business,
eg ICL or Consignia (former Post Office). ICL is part of the Unitas
partnership to whom DTI's IT provision is outsourced. Consignia
is running a one-stop shop pilot for customer services by Government.
DTI is represented on the Consignia User Group, resurrected by
Peter Gershon to improve service delivery by Consignia to Government.
9. A "Gateway" process has been
introduced to address the number of high profile failures in Government
projects, particularly in IT and construction. The process, adapted
from private sector practice and the McCartney review on IT projects,
consists of a series of peer reviews or "Gateways" through
which a project must successfully pass before proceeding to the
next stage. The process so far has been very successful, highlighting
issues such as the adequacy of project resources and project management
skills, and the realism of timescales. These issues are not always
comfortable matters to address, but airing them through the process
should lead to higher success rates across Government projects
as a whole. DTI has found the Gateway process very helpful for
its own projects, eg on the re-tendering of our contracted-out
10. A number of areas of supply, common
across Whitehall, have, in consultation with Departments, been
identified as areas for "quick wins" in achieving better
value for money by aggregating the needs of central Government,
establishing contractual arrangements with selected suppliers
led by the major user Department, and making them available for
use by other Departments. Of the areas covered so far, DTI is
using the Vodafone contract for mobile phones, and uses Expotel
who are contracted for hotel accommodation. DTI also use some
of the supply frameworks established by OGC Buying Solutions (formerly
TBA), the trading arm of OGC.
11. A key area for common supply is management
consultancy. A recent NAO report on Government's use of external
professional services has led to proposals by Peter Gershon to
revise the referral levels to Ministers on the use of external
consultants, focusing particularly on non-competitive supply.
Subject to the outcome of Peter Gershon's consultations, we will
be putting his proposals to Ministers. OGC will establish Government
wide contractual arrangements with common consultancy suppliers
to Government, the first tranche to be identified by end-December.
(Management consultancy had been identified as a "quick win"
area before the NAO report was published.) All of this is consistent
with DTI's own commercial strategy plans. DTI also uses S-CAT
and G-CAT frameworks managed through OGC on behalf of Government
in the IT/IS area.
12. A Procurement Excellence Model has been
developed by OGC, based on the European Foundation Quality Model.
This provides a benchmarking system for Departments to compare
themselves with OGDs across a range of areas of performance on
an "innocence to excellence" scale. The information
accruing is stored and brokered on behalf of OGC by CMPS (Civil
Service College). DTI are users of this system.
13. Value for Money measures have been developed
by OGC to enable measurement of the £1 billion VFM improvements
to be achieved across central Government over a three-year period.
Like OGDs, DTI is actively participating in this exercise.
14. DTI has ministerial and policy responsibility
for e-Commerce and competitiveness, giving a lead to industry
and across Whitehall on e-Business. Part of doing business electronically
is e-Procurement, being led in Government by OGC, so DTI is fully
engaged with those initiatives. OGC have engaged a number of Departments
to pilot test e-Procurement solutions and a separate system for
electronic tendering. DTI is itself an OGC pilot Department for
both e-Procurement and e-Tendering. The e-Procurement pilot in
DTI is assisted by resourcing from OGC, these developments being
of mutual benefit to DTI and OGC. DTI is represented on the OGC
led Cross-Departmental E-procurement Advisory Group.
15. The Department, its Agencies and executive
NDPBs, are relatively minor players in PFI/PPP, with eight signed
projects. The Department is a member of the PFI/PPP Interdepartmental
Group which is chaired by OGC. It consults OGC about specific
issues arising from its projects and matters of general policy
concern. It also provides OGC with input on various policy matters
concerning the development of PFI/PPP and the statistics required
by Parliament on a twice yearly basis.
16. In the recent round of Machinery of
Government changes, DTI has inherited from former-DETR, responsibility
for sponsorship of the construction industry. There will now therefore
be newly forged links between DTI and OGC on best practice in
construction. OGC and its predecessor CUP, led, with DETR, on
major reviews of construction industry practice.
17. OGC manage the Government Procurement
Service (GPS) for procurement practitioners across central Government.
DTI has a seat on the GPS Management Board which addresses issues
such as skills development, training, qualifications, recruitment
and retention, remuneration and career opportunities. Examples
of some of the major issues currently being addressed are project
and contract management skills shortages, the broadening and synthesising
of commercial skills in Government through a Commercial Skills
Strategy, eg mainstream procurement, construction/building and
facilities management, IT/IS procurement, and PFI/PPP and financial
skills. The issues facing DTI on these are replicated across many
Departments, so a collective approach, where that can be achieved,
is highly beneficial. DTI seeks to ensure representation at conferences,
seminars and workshops facilitated by OGC for the benefit of departmental
18. DTI acts as a conduit on the flow of
information from OGC to DTI Agencies and executive NDPBs. Similarly,
information to be fed back to OGC from those bodies is collated
and co-ordinated by DTI. OGC has recently put in place a structure
of customer managers, to provide single points of contact for
Departments to improve the interface between Departments and OGC
and to "troubleshoot" as necessary. From DTI's point
of view, this has proved to be a very positive move given the
breadth of activity which the Department is now engaged in with
5 November 2001