APPENDIX 28
Memorandum submitted by KPMG
1. EXECUTIVE
SUMMARY
1.1 Introduction
Our experience in the manufacturing sector extends
across a wide range of manufacturing employers, both large and
small, and across the public sector. A summary of the key issues
arising from our knowledge and experience of the sector relating
to the three inquiries is given below.
1.2 Skills shortages
We consider that the three main issues in relation
to skills shortages are:
— Infrastructure: an overcrowded and
over complex education, training and skills infrastructure which
acts as a barrier to employer involvement in accessing external
training for their workforce.
— Training provision: lack of high
quality, employer focused and flexible training provision.
— Image: the image of manufacturing
and engineering amongst young people needs to be raised, in terms
of profile, attractiveness and the diverse nature of employment
opportunities.
1.3 Marketing UK PlcThe key issues we
consider impacts marketing UK plc are:
— Resource: In the context of UKTI
having a finite resource base, an appropriate level of focus and
targeted effort is critical. Working with the private sector may
to some extent reduce resourcing constants.
— Measurement: We concur that evaluation
is key but it is equally important that there are clear and measurable
targets at the appropriate level of detail.
— Ownership and accountability: UKTI
needs to have the clear responsibility for the attainment of the
investment opportunity and its ultimate placement within the UK
so that conflict can be avoided. In this way the UK can speak
with one voice in the world with prompt and focussed completion
of projects.
1.4 Public procurement
In relation to using public procurement to benefit
manufacturers, we believe that the following three issues are
key to supporting UK manufacturers:
— Awareness: There is a general lack
of awareness of the range of social, economic and environmental
clauses that could be legitimately utilised within public sector
procurement tenders to support UK manufacturers.
— Motivation: a general lack of motivation
to consider the social, economic and environmental clauses and,
most importantly, overcoming aversion to risk.
— Execution: Provision of effective
total costs of ownership models and training of procurers in how
to use these effectively.
2. SKILLS SHORTAGES
Background
As part of our work in preparing both the expression
of interest and the business plan for the proposed National Skills
Academy for Manufacturing, KPMG have undertaken a wide ranging
consultation and research programme, through which a number of
large and small employers in the manufacturing sector have fed
in their views on skills in the UK.
We would like, as a response to your request
for submissions, to report our key findings from this work, and
thereby help to inform your inquiry.
2.1 General findings
Feedback from employers has indicated that the
manufacturing sector's training provision is characterised by
a lack of consistent quality and a range of qualifications which
meet only some aspects of the employers' needs. A significant
number of employers we spoke to felt that there was confusion
over which training providers could offer high-quality programmes
that could meet their needs. Tutors and trainers were felt in
many cases to be out of date with current manufacturing practice
and techniques. In addition the employers felt that current funding
mechanisms were difficult to understand. In many cases employers
had moved away from using publicly funded skills provision and
providers and used their own in-house training only. Many employers
who feel unable to follow this route are therefore not investing
in the vital skills they need to compete. Employers themselves
currently invest some £2 billion in training each year.
SMEs and other small organisations reported
that they find it difficult to engage in training offered by many
of the existing providers, as they were unable to afford to release
employees from their operational role in order to undertake training,
as was required by most training providers and colleges. There
is a need therefore for provision relating to skills needs, which
is flexible in delivery model, mode and length, in order to minimise
time away from work and to ensure that SMEs have equal access
to training for their workforce. This is a particularly crucial
need for aerospace companies, the majority of which are indeed
small, but it is also a sector which is looking to improve its
attractiveness to a more diverse workforce. Women, especially,
can be excluded from training by a lack in flexibility in how
it is delivered.
The employers in the sector are also concerned
at the lack of young people entering scientific and technology
based careers and the move away from these subjects at Advanced
level in schools. The image of manufacturing amongst young people
is a cause for concern and further work is needed to overcome
this barrier to entry to the sector. Provision for the 11-19 age
group must be a second focus area for future development, which
would ensure that employers were key partners in the development
of the new 14-19 diplomas and their delivery models and also draw
together opportunities for practical experience with employers.
It was felt by employers and other stakeholders
that the existing CoVE structure had, since its inception, become
less consistent in quality and that this needed to be addressed.
The LSC reported that they were currently reviewing the CoVE network,
establishing new criteria, and would be reassessing the CoVEs
in the light of this. They felt that this would reduce the number
of accredited CoVEs and increase the consistency and standards
of the quality of training delivery.
2.2 Specific issues
During the course of the interviews, and other
meetings undertaken with stakeholders in the sector, a number
of key issues and themes emerged.
Brokerage
Business Link has traditionally undertaken brokerage
of business-related services, including some advice and signposting
on skills, primarily to the SME sector. Since the introduction
of the Employer Training Pilot, and now Train to Gain, the Government
announced that brokerage will play a key role in the operation
and expansion of this programme. The Skills White Paper: Getting
on in business, getting on at work, outlined the need for brokers,
however it stopped short of setting out how this would work and
which organisations would perform this role.
Funding to pilot brokerage models was given
to a range of organisations. Local and regional LSCs and RDAs
piloted different models in different areas of England. Sector
Skills Councils were given significant amounts of money to pilot
brokerage for their sectors and Trade Associations were similarly
given funding.
It would appear now that substantial funding
is being devoted to a diverse range of models across different
sectors and geographical locations and regions. There is no consistency
across different regions, so employers who work in more than one
region have to deal with different arrangements. Additionally,
in many regions, the reputation and profile of Business Link has
been poor, and using the same organisation to undertake the skills
brokerage underpinning Train to Gain may lead to a lack of engagement
by employers.
This may all lead to further confusion on the
part of employers and potentially to a lack of efficiency in the
use of this funding.
Funding
Currently, there are a number of funding routes
supporting the delivery of qualifications and other training programmes
in the manufacturing sector. Funding is offered primarily through
the LSC and the RDAs.
LSC funding can be accessed via a number of
routes:
Further Education funding
This funding is primarily accessed by Further
Education Colleges. They have a funding allocation which currently
allows them to use the grant they are given to support almost
any fundable course of study. This means that they can choose
to fund both approved qualifications, which have been validated
by the relevant Sector Skills Council, approved by an awarding
body and approved by the Qualifications and Curriculum Authority
for entry onto the National Qualifications Framework, and also
fund programmes which have not been approved, and may not conform
to the National Occupational Standards for the sector. The range
of programmes currently fundable extends from basic literacy and
numeracy programmes to National Vocational Qualifications, Vocational
GCSEs and A Levels, National Certificates and Higher National
Certificates/Diplomas. There are currently over 90,000 courses
on the Learning Aims database for 2005-06 academic year.
Apprenticeship funding is accessible by training
providers, including FE colleges, and by employers directly through
either their local LSC or through the National Employers Service.
Apprenticeship funding differs from FE funding in that each programme
has one set amount allocated to it. A full apprenticeship framework
comprises an NVQ, a technical certificate (which may be, for example,
a City and Guilds or BTEC Edexcel-type qualification) and Key
Skills (usually communication, application of number and IT)
Through Train to Gain, employees can be offered
an NVQ and appropriate literacy and numeracy support. Again there
is a set amount of funding. The funding can be accessed by employers
via a training provider directly, or through a broker.
The main issue surrounding funding is that employers
perceive it to be complex and confusing, and the variation in
levels and routes means that the same qualifications can be funded
at different rates dependent on the route chosen or available.
Quality
At present, Ofsted and ALI are responsible for
the inspection of quality in education in England. All training
and education providers in receipt of public funding are inspected
on a regular basis to assess their quality against a range of
criteria that are common to both agencies. The criteria cover
the whole student experience, curriculum areas taught and the
leadership and management of the provider.
Although this inspection can give an indication
of the quality of teaching and resources observed by the inspectors,
it is possible that the criteria may not match the priorities
of employers. For example, employers spoken to in the course of
our work in the manufacturing skills sector listed tutor and assessor
competence, including up to date knowledge and experience in the
employer's sector and in the skill area which they were teaching/assessing
as being vitally important. This is not explicitly covered in
the criteria for Ofsted/ALI inspection and the global standards
expected by many employers may be beyond the scope of an Ofsted/ALI
inspection team. In addition, some employers viewed college based
resources as out of date.
Duplication of functions
One of the major issues arising during our work
was the number of organisations who felt that the proposed National
Skills Academy for Manufacturing may overlap with their existing
role. This situation also highlighted some existing overlaps between
the stakeholders.
Some key functions and a selection of organisations
who undertake this role are given below:
|
| Role | Organisations interviewed who felt this was within their role
|
|
| Brokerage of skills/training | SSCs, EEF, Local LSC, Regional LSC, National Employers Service, RDAs, Business Link, NEPA
|
| Provision of manufacturing related training
| FE Colleges, Private Training Providers, Automotive Academy, NEPA
|
| Lobbying for manufacturing and skills | SSCs, EEF, SMMT IF, SBAC, Automotive Academy, Trades Unions, other Trade Associations, individual large employers
|
| Employer representation | SSCs, EEF, SMMT IF, SBAC, Automotive Academy, Trades Unions
|
|
In many cases this is not an issue which needs to be addressed.
For example, there may be merit in having a large number of lobbying
bodies, each with a different approach and range of contacts.
However, there is a perception that the landscape in manufacturing
is confused, overcrowded and over-complex and that some streamlining
would enable funding and resources to be focused more effectively
on the needs of the sector. In addition this would once again
reduce confusion on the part of employers as to who to approach
for given services. It is possible that the forthcoming final
report of the Leitch Review of Skills may address some of these
issues.
2.3 Overcoming the issues
For there to be a step change in skills development in the
manufacturing sector and, in turn, to support the sector in improving
productivity and achieving globally competitive standards, a number
of issues may need to be addressed.
Skills Brokerage
It would appear from the stakeholder feedback that there
needs to be a review of the current piloting of brokerage models.
There appears at present to be a risk that a number of models
will be adopted which differ on a regional and sectoral basis.
This could potentially perpetuate confusion in employers and may
not support further engagement of employers in skills training
and development for their workforce. It may be preferable to adopt
one national model, or to at least have consistency in approach.
Funding
The current funding arrangements are complex and there is
a wide variation in funding levels for individual qualifications
funded via different mechanisms.
In addition, the current processes mean that FE colleges
can be funded for offering engineering and manufacturing training
provision that is not viewed as a priority by employers in the
sector. The Sector Skills Councils are producing Sector Qualifications
Strategies to inform the LSC of priority areas for their sector.
This in turn may lead to more focused funding, but only if the
SSCs are given the authority to direct how funds should be used
for their sector.
Quality
The current inspection arrangements are, by design, intended
to assess quality of teaching and learning and its management,
in England. However, in order to be globally competitive, the
manufacturing sector employers and their representative bodies
feel that they need to be judged against global standards. The
manufacturing sector needs to ensure that only the providers and
courses that meet these standards are recommended to employers.
Ultimately, this may lead to funding and qualifications being
aligned solely to those providers meeting these standards.
Duplication of roles
Feedback from the employers suggests that there would be
merit in streamlining the roles of organisations with a stake
in the manufacturing skills sector. This is supported by the evidence
of overlap in function outlined above. A review of the current
skills infrastructure may result in recommendations which can
save significant amounts of funding which can then be directed
towards further, focused skills development.
Conclusions
The manufacturing industries require higher level skills
than those currently possessed by the workforce, in order to compete
on a global basis. The first priority must therefore be upskilling
the current workforce to at least level 3 (advanced or technician,
rather than craft level). Management and Leadership are also felt
by employers to be an area of need. The proposed National Skills
Academy for Manufacturing has as its aims to address these needs
as a priority.
Much of the evidence given in this paper focuses on the complexity
of the current manufacturing skills landscape, and the barriers
that this infrastructure places on employers accessing training
and funding for their workforce. Once again, the proposed National
Skills Academy, working with the Sector Skills Councils for Manufacturing,
namely SEMTA, Cogent, Proskills, Skillfast—UK and Improve,
can help to streamline this situation. This can be achieved through
close collaboration, a coordinated approach to communicating with
employers, and working with the Learning and Skills Council to
ensure that funding for qualifications is focused on the skills
needs of employers.
The brokerage model in place to support the Train to Gain
funding initiative can help to improve the links between employers
and education/training providers, but only if the brokers themselves
are credible with the employers and have a knowledge of both the
manufacturing sector and a detailed understanding of the education
and training provision available and funding associated with this.
This is a difficult role and it is hard to see where these multi-disciplinary
specialists currently exist. It is felt that the use of business
brokers will not fulfil the requirements of a skills broker, and
vice versa. Extensive training may be needed to ensure that this
scheme does bring benefits to the employers and the employees.
3. MARKETING UK PLC
Background
UK manufacturing is facing a multitude of problems and challenges
not least of which is the economic emergence of low cost economies.
Conversely this presents the UK with an opportunity to capitalize
on our unique strengths in assisting businesses to establish themselves
in the UK. Our manufacturing businesses benefit from the quality
of their offerings, our strong history of innovation and our world
class processes. Inward investment into the UK and a strong export
performance by UK manufacturers is vital for the economic wellbeing
of UK plc.
We support the mandate that UKTI have been given to achieve
these objectives. In order for them to have the best chance of
success they must, in our view, be empowered, properly resourced
and have the full backing of all Government agencies.
Our work on behalf of the Manufacturing Advisory Service
("MAS") to produce the "Offshore BeSure" tool
to support UK manufacturers, considering the opportunity and threats
presented by the emerging economies, together with anecdotal evidence
through our global manufacturing client base, leads us to recognise
that there is an increasing need for cohesive support for exporters
and inward investors which is easy to access.
General findings
We support the recently published new five year strategy
for the UKTI which if successfully implemented will go a long
way in assisting the Public Service Agreement target of delivering
an "improvement in the business performance of UKTI's international
trade customers"
However we believe there are three fundamental success factors
in achieving this:
— sufficient resource is made available to deliver
the strategy;
— appropriate, independent robust measurement of
performance is maintained; and
— clear and easy to access delivery channels is
maintained and adequately promoted
Specific issues
Resources
With unlimited resources and strong management, delivering
the strategy successfully should be achievable. In the context
of UKTI having a finite resource base, an appropriate level of
focus and targeted effort is critical. The strategy refers to
focus of resources on three levels: Clients, Sectors and Markets:
Clients—focus on innovative companies, high
R&D intensity companies, high value potential investors, major
exporter, exporters to emerging companies, SMEs exporting for
the first time.
Sectors—focus priority sectors and technologies,
eg financial services, oil and gas, information and communication
technologies and biotechnology.
Markets—continued focus on advanced economies
but increasing focus on emerging markets.
The planned foci on the clients and markets are appropriate
and if achieved will contribute to the UK having a successful,
knowledge intensive, highly skilled manufacturing sector. However
given such a wide remit and finite resources sufficient guidance
and metrics should be developed by the UKTI to be used at an operational
level to implement this focus.
It is disappointing to see that the manufacturing sectors
are not well represented in the examples of priority sectors proposed
by the UKTI.
The private sector has, in many cases, links with those parts
of the world from which the investors of the future are likely
to emerge. We have already seen the start of this, with India
and China amongst the vanguard. KPMG has a large and active practice
in each of India, China and Eastern Europe and we would welcome
the opportunity to assist UKTI in developing their approach and
in the implementation of their strategy. This may be particularly
appropriate with exporting where the existing structure can support
the need for exporters to undertake visits to meet potential customers.
In utilising the strength of the private sector the resourcing
issues can, to some extent be overcome.
Measurement
The strategy refers to continuous evaluation with a rolling
programme of evaluation for the future. We concur that evaluation
is key but equally it is key that there are clear and measurable
targets at the appropriate level of detail.
The strategy refers to a target driven approach with top
level targets cascaded down to teams and individuals. It will
be key that these targets are at the appropriate level for each
layer of the organisation and that they can be reliably measured.
These targets will drive behaviour throughout the organisation
and as such are critical to the success of the strategy.
Delivery Channels
A common symptom of many support organisations is that their
structure is overly complex, difficult to access, of varying quality
and unclear in the prioritisation of their offerings. This is
ever more likely where there are organisations competing. There
are a number of organisations with an acute interest in the location
of inward investment, many of whom are performing well. There
is a danger that there will be disagreement over the preferred
location for a new opportunity and competing proposals, which
will diminish the effectiveness and create confusion.
UKTI needs to have the clear responsibility for the attainment
of the investment opportunity and its ultimate placement within
the UK so that conflict can be avoided. In this way the UK can
speak with one voice in the world with prompt and focussed completion
of projects.
The UKTI strategy recognises the need for coordination of
activities and the need to align performance targets for each
organisation to engender a collective culture but it is unclear
to us how each organisation will be incentivised to act in this
cohesive way. In the absence of this collective approach a fragmented
and ineffective, efficient service will prevail.
Charging
One of the actions noted in the strategy is to double the
revenue UKTI receive from charging for services. In the context
of support for UK manufacturers, this is unlikely to encourage
SMEs to access the support. Any increase in charges for service
must be supportable by a high level of client service
Conclusions
UKTI are tasked with a challenging agenda and their strategy
is well thought out. If executed in line with the strategy, this
should deliver the results required and needed. In our view the
issues of resource and clear responsibility are key to delivery.
We do not expect UKTI to be able to resource up to the level required
or needed and therefore propose that a collaborative approach
be adopted to maximise effectiveness and success. As we have indicated,
one body needs to have responsibility for the inward investment
programme and must be able to make key decisions which in many
cases will not be easy or popular. Of equal importance is cultivating
exports and, equally, resources will be key as will measurement
and accountability.
3.1 Public procurement
Background
KPMG Advisory has a specialist team of over 30 procurement
advisors, working within the UK, which provides in-depth market
and management experience together with access to the breadth
of resources through our global largest advisory network. Over
the course of the past three years, we have delivered a wide range
of procurement-based projects for public sector clients within
the UK. These have included City Councils, Police Authorities,
Housing Authorities and Government Departments. For the Department
of Transport, for example, we are assisting in a high level review
of how they are organised to deliver procurement services.
Scope
The level of direct government support for UK industry is
governed by the implementation of the EU's public procurement
directives. Scope exists within these directives to apply relevant
social, economic and environmental clauses to channel expenditure
into specific regions, but only in those circumstances where the
inclusion of these clauses can be proven to be valid.
The appropriate application of these clauses represents an
opportunity for the UK government to provide continued support
to UK industry. Given this, further consideration is needed, in
our opinion, to determine the size and scope of the potential
problem of non-utilisation of relevant and valid social, economic
and environmental clauses.
In determining the exact level of procurement expenditure
that is affected by the non-application of social, economic and
environmental clauses, it is necessary to understand the following:
— The proportion of UK public sector spend that
is classified as "Part B Services", which have minimal
legislative requirements and already fall outside of the scope
of OJEU requirements;
— The proportion of UK public sector spend that
is classified as "Part A Services", but which fall beneath
the published OJEU thresholds;
— The proportion of the remaining spend that is
within scope but is deemed to be not attractive to non-UK providers;
— The proportion of the remaining spend that then
is potentially affected by the non-application of social and environmental
clauses in circumstances where a valid clause could have been
applied.
An understanding of theses factors will help to determine
the potential effect on UK manufacturers and therefore the most
appropriate nature and scale of response.
An additional area of expenditure that is worthy of consideration
relates to the level of indirect expenditure on manufactured goods
from tier-1 supplier contracts. This expenditure typically falls
within the private sector and is not subject to any control under
the EU directive. Local contract-based initiatives to constrain
and direct this tier-2 spend to UK manufacturers may be worthy
of further consideration.
General Findings
Feedback from public-sector procurement advisors has indicated
that a number of barriers exist to the proper and effective utilisation
of social, economic and environmental clauses by the sector.
We have summarised our findings under what we see as the
key issues in ensuring effective deployment:
— Awareness—the general level of understanding
that public sector procurers have of the UK industrial supply
market existence and applicability of social clauses to support
this market.
— Motivation—the desire and focus placed on
the application of valid social clauses within public sector procurement
processes by procurers and associated sourcing decision makers
to provide additional support to UK industry.
— Execution—the effectiveness of implementation
of valid social clauses within public sector procurement processes
in support of UK industry support strategies.
Awareness
Our experience suggests that there are two issues that need
to be addressed:
The most significant barrier to the effective execution of
effective local UK procurement is often a lack of understanding
of the breadth of the supply market and knowledge of capable UK
suppliers.
Generating awareness is a two way process with responsibility
resting with both UK manufacturers and public sector procurers,
leading to the issue of how this can be tackled:
— How can the awareness of public sector procurers
of suitable UK manufacturers be raised?
There is no easy answer to this; we all need to work towards
a solution.
Social, economic and environmental clauses
A general lack of awareness exists of the range of social,
economic and environmental clauses that exist and that could be
legitimately utilised within public sector procurement tenders
to support UK manufacturers. On this basis, raising the awareness
of the public sector procurement community is a critical first
step in the process, with a particular emphasis on communicating:
— the available clauses, their aims and objectives;
— the range of circumstances where these clauses
might be relevant and legitimately applied;
— how these clauses should be communicated, interpreted
and applied in any given sourcing process, with a particular focus
on whether they act as a constraint to supplier qualification
for a given tender or are applied as a one of a number of weighted
evaluation criteria.
In addition, to ensure their appropriate application, further
information on the following related issues would be valuable:
— the consequences for procurers in the event of
non-application of these clauses when a valid basis of application
existed; and
— in cases where the application of a clause is
not clear, where advice and support can be obtained to gain appropriate
clarification.
Motivation
The primary motivator of procurers in the public sector is
to ensure the implementation and on-going compliance with the
EU's public procurement directives, while ensuring value for money.
This creates a process-based, mechanistic approach to procurement
and has the consequences of stifling creativity, preventing innovation
and breeding a culture of risk aversion, all of which are potential
barriers to the inclusion of "non-standard" social,
economic or environmental requirements that may be of benefit
to UK manufacturers.
The use of social, economic or environmental clauses is seen
often as directly in conflict with EU legislation, through the
use of restrictive tenders or through the awarding of contracts
to suppliers that offer neither the lowest price nor can demonstrate
the best value for money based on the most economically advantageous
tender.
Therefore, to increase the motivation of procurers to implement
these clauses there are three issues that need to be addressed:
— How can the consideration and inclusion of social,
economic and environmental clauses become a routine element within
public sector procurement processes?
— How can the general aversion to risk within the
public sector be overcome, resulting in a lack of motivation to
apply social, economic and environmental clauses?
— How can the social, economic and environmental
impact be factored into the total cost of ownership over the products
life-cycle?
The aversion to risk is of the most concern and in situations
where valid inclusion of a social, economic or environmental clause
is debatable; its non-inclusion is the most likely outcome.
Execution
The application of social, economic or environmental clauses
within a procurement process can be in one of two ways:
— through the restriction of the tender to those
suppliers that are compliant with the social, economic or environmental
requirements; and
— through the positive weighting of social, economic
and environmental criteria in the post-tender submission evaluation.
In those situations where the tender is restricted to suppliers
that can demonstrate compliance with the specified requirement,
a strong legally sound basis needs to underpin this decision.
In a risk-averse environment this can lead to the non-application
of valid clauses and requirements.
If the clause or requirement forms part of the process of
evaluation of supplier submissions the issue becomes one of ensuring
that the evaluation model used accurately represents the most
economically advantageous tender (MEAT). In this situation accurately
modelling the total cost of ownership becomes critical.
Therefore, if valid social, economic or environmental clauses
are to be routinely applied the following issues need to be addressed:
— improved awareness for the type, extent and legitimate
application of the clauses; and
— provision of effective total costs of ownership
models and training of procurers in how to use these effectively;
Ultimately, the benefit to UK industry of UK public sector
procurement will only increase if we see significant changes to
public sector procurement policy and process.
29 September 2006
| 
