House of Commons - Business and Enterprise

Select Committee on Business and Enterprise Ninth Report

2 The role of the client

35. Sir Michael Latham told us that, in the end: "clients […] drive best practice".[53] Client leadership is one of the six pillars of the new Construction Commitments. In this chapter we look at the different types of client served by the industry, the features of a good client, and the support to increase clients' effectiveness. As the role of government as client is one of the cross-cutting themes of this Report, we go on to look specifically at the work of the Office of Government Commerce (OGC) in developing and implementing best practice in construction procurement across the public sector.

Frequent and infrequent clients

36. There is a common assumption that the public sector cannot manage large-scale procurement because it is not subject to the same market pressures as the private sector. However, the evidence we received showed clearly that it is a false dichotomy to differentiate between the public and private sectors on their performance as construction clients. Rather, the key distinction is whether a client is frequent or infrequent; in other words, whether a client is experienced or inexperienced.[54]

37. Frequent clients are responsible for the greater part of the value of construction work—about 60% by value. However, at any one time about 95% of the industry's customers are one-off or occasional clients.[55] By their nature they have little or no experience of working with the construction industry. As such, they are less likely to understand how the sector operates and the importance of their role in ensuring success. This greatly increases the risk of a project going off course—both the Scottish Parliament and Wembley Stadium, which suffered massive delays and cost overruns, were commissioned by infrequent clients. The nature of occasional customers varies enormously with, for example, the Olympic Delivery Authority at one end of the spectrum, down to the procurement of a new school by a local authority at the other end. (Home-buyers may also be categorised as infrequent clients, but they are rarely tied to the purchase of a project before it has been built.)

38. Organisations with a rolling programme of construction activity have an incentive to invest in their capability as client.[56] They will tend to establish arrangements that allow them to work with similar teams over time.[57] One of the principal ways for frequent construction clients to establish longer-term relationships with their suppliers is through 'framework agreements'. Here, contractors (initially selected by competition) are on a 'framework' for a set time, during which they are assigned a number of construction projects in succession. This way, clients are able to save on the procurement costs of tendering for projects separately. They can also benefit from suppliers being able to learn from projects early on in the framework arrangement, and deliver later projects faster and to a higher standard.[58] The contractor has the security of long-term work, which also means they are able to invest in their own capacity to deliver with greater confidence, for instance, through the provision of training for their workforce. Hence, both the client and the supplier can benefit in terms of cost, delivery time and the quality of the end-product. However, framework arrangements are not a panacea. They need to be actively managed by the client to impose the commercial pressure, which would usually come from participating firms having to tender for every project. It is important that companies face the threat of being taken out of a framework if they perform poorly.

39. The use of framework agreements began in the private sector, where they have demonstrated some impressive results. In some cases clients have reduced their bidding costs by up to a third.[59] Tesco more than halved the delivery time of its projects from 40 weeks to 18.[60] In turn, many parts of the public sector, such as Defence Estates and the Highways Agency, have begun to adopt a similar approach. Constructing Excellence told us that many local authorities also now have frameworks in place. Birmingham City Council, for instance, has saved £8 million per annum in tendering costs.[61]

40. The public sector is catching up with the private sector in the use of framework agreements, though there remains scope for improvement. Freestanding regional frameworks are an innovative form of frameworks, developed by the public sector. They are run by third parties, such as the regional development agencies, rather than being managed by clients who instead pay for access. These have the potential to be used by those parts of the public sector which are not frequent clients, and take-up should be improved. Moreover, to get the full benefits of framework arrangements, contracts need to be monitored and used properly. Constructing Excellence told us there could be "huge improvement in the way in which framework contracts are managed downstream".[62] While clients are benefiting from reduced tendering costs, they are not performance managing the frameworks rigorously enough to accrue their wider benefits.[63] This problem persists despite the availability of best practice guidance and support from a range of sources, including Constructing Excellence through its Local Government Task Force.

41. Success in construction projects is driven by the knowledge and skills of the client. Whether a construction client is frequent or infrequent is more important than whether they function in the private or public sector. Frequent clients are more likely to have invested in their capacity to fulfil their role, thus delivering benefits both for themselves and their contractors. Infrequent or inexperienced clients are less likely to have an understanding of the construction sector and the importance of their client role. This poses greater risks for the delivery of their projects.

42. Increasingly, framework agreements are being used to develop longer-term relationships between customers and their suppliers. They can improve project delivery in terms of time, cost and quality. However, many public sector clients are not yet managing their frameworks rigorously enough to achieve all their potential benefits. One of the functions of the Chief Construction Officer, in conjunction with the Department for Communities and Local Government and others, should be to ensure wider use and more effective management of frameworks, where they are appropriate, both at central and local government level.

Features of a good client

43. Frequent clients will not always achieve the best results, while infrequent clients are not inevitably doomed to failure. Arsenal Football Club was a one-off client for the Emirates Stadium, which was delivered on time and within budget to high acclaim.[64] The distinction between experienced and inexperienced clients determines the risks associated with project delivery, but the defining characteristics of what makes a 'good' client are the same regardless of their experience.

44. The industry highlighted several factors that define a 'good' client. First, the customer had to be clear and consistent about its needs from the outset. The success of the Emirates Stadium was attributed in large part to the client having had a clear understanding of what they wanted.[65] In their memorandum, Constructing Excellence noted "most big projects which have suffered in recent times have failed in the early briefing phase".[66] There are two aspects to this. First, as pointed out by the Commission for Architecture and the Built Environment (CABE), is the fact that the client's objective for its building project determines strongly its initial design. For instance, a prison with the primary purpose of rehabilitation would be designed in a very different way to one whose main objective was containment and security.[67] Those objectives need to be clear. Secondly, a lack of clarity in the briefing early on can also lead to changes in project scope later, which in turn can impact heavily on overall costs and delivery time. It is worth noting, however, that the onus here does not rest on the client alone. The industry itself should help the client ask the right questions in the first place during the briefing process.[68]

45. Clients also need to understand that the successful delivery of a project is not necessarily guaranteed by awarding the contract to the lowest bidder. Here, an appreciation of what offers best value to the client in the long term is likely to result in a project that meets fully the customer's needs both in terms of the end-product and its operation over its lifetime.[69] This concept of 'whole life value' is one we look at in more depth in Chapter 4.

46. The importance of client leadership does not end once the initial briefing is complete and a main contractor in place. A good client continues to be actively involved in the project as it proceeds, working closely with the whole project team. This does not mean the client should repeatedly tweak the scope of the work. Instead they should pay close attention to the risks associated with the project, and allocate ownership of these to the parties that are best-placed to manage them.[70] This avoids the mutual recriminations and delay that often ensue later on if a problem occurs. Ongoing client engagement is also important for ensuring high standards of health and safety, and the promotion of training—issues, which we explore in Chapter 5.

The Construction Clients' Charter

47. Recent attempts to reform the industry have included work to define the characteristics of a good client, and to disseminate this information. A part of this has been the development of the Construction Clients' Charter. Signatories to the Charter are expected to exhibit a number of best practice behaviours, defined under the broad themes of leadership and a focus on the client; working in integrated teams; whole life quality; and having a respect for people. The Accelerating Change initiative set a target for 20% of client activity by value to embrace the principles of the Charter by 2004, and 50% to do so by 2007. The industry's overarching Strategic Forum told us it had been difficult to collect data on the value of construction activity to assess performance against the target.[71] However, so far only about 300 parties have signed up to the Charter, and the vast majority of those are housing associations, which were mandated to do so by the Housing Corporation.[72] Only one central government client is a signatory and just four local authorities. The sponsors of the Charter are the Construction Clients' Group (CCG)—a membership forum affiliated to Constructing Excellence. It told us the level of take-up had been "hugely disappointing", and that this reflected a perception that the process was too bureaucratic and that there were high barriers to usage.[73]

48. Following a review of its effectiveness, the CCG intends to revise the Charter to make it more relevant. It will reflect the six key themes of the Construction Commitments, namely procurement and integration; client leadership; design quality; commitment to people; sustainability; and health and safety. The CCG hopes these new Clients' Commitments will be more relevant and accessible to all clients, frequent or occasional.[74] In support of this, the new industry targets include one for 35% of client activity, by value, to embrace the principles of the Clients' Commitments by 2010, and for 60% to do so by 2012.

49. The features of a 'good' client are the same whether they are frequent or occasional customers to the industry. They include setting clear and consistent objectives, appreciating the importance of value rather than cost alone, and active involvement throughout the project to manage risk. Following its extremely poor take-up, we welcome the industry's intention to revise the Construction Clients' Charter to reflect the new Construction Commitments. This should provide a comprehensive outline of what being a 'good' client entails. Once in place, we believe the Government should lead take-up of the new Clients' Commitments and contribute to the Strategic Forum's new target for client leadership by requiring all major public sector procurers of construction works in central Government to become signatories within the next two years. We expect local authorities to make a similar commitment, and look to the Local Government Association to encourage this, recognising the benefits this would bring to those authorities and their council taxpayers.

Helping occasional clients

50. The CCG told us "it is critical that clients spend time in training themselves to develop their capability to manage the construction process".[75] Frequent procurers are more likely to already have an awareness of this need, although even oft-cited examples of client best practice such as the Highways Agency have shown there is still significant room for improvement in their performance.[76] Nevertheless, one-off clients need to benefit from the learning of more experienced organisations. This is one of the primary functions of the CCG, although it does not have the resources for significant hands-on engagement with occasional clients. CABE have also undertaken work in this area, with its Creating excellent buildings guidance for clients.

51. However, best practice information and guidance for occasional construction clients cannot be put to effective use unless clients have access to the programme and risk management skills that construction procurement requires. As the Institution of Civil Engineers put it: "without these skills government will struggle to set realistic budgets and timeframes, and to manage projects effectively".[77] While large spending departments need, and can afford, a permanent pool of procurement staff, smaller departments and many local authorities do not have access to such resources.[78]

52. There are ways in which this problem can be addressed. One example is the model used by Partnerships for Schools, the body responsible for co-ordinating delivery of the Government's secondary school renewal programme, Building Schools for the Future. It provides a centralised source of expertise that local government clients can draw on. It also acts as a means of capturing lessons learnt and improving processes through, for example, standardised contracts and products and more efficient design.[79] Despite this and other initiatives, such as NHS ProCure21, there remains a legitimate sense of frustration within the construction industry that the opportunities for such joined-up approaches are still not being fully realised and that procurement skills are spread too thinly across the public sector.[80]

53. The 2002 Accelerating Change report recommended that inexperienced clients should have some form of independent client advice to help them navigate the early stages of the procurement process in particular, and all aspects of that process if necessary. It considered that such mentoring would need to be free from vested interest as well as being in accordance with the principles of the Egan agenda. The report, however, was not clear as to who would fund this initiative or whether it was meant for both private and public sector clients. The Specialist Engineering Contractors' Group noted that the proposal has not been widely implemented.[81] Surprisingly, construction client skills do not currently form part of the strategy for the sector skills council, ConstructionSkills.[82] Rather, the Office of Government Commerce has overarching responsibility for developing public sector procurement skills. We look at this organisation in more detail in the next section.

54. Occasional clients in the public sector who lack sufficient procurement and construction management skills should be able to draw on skills from elsewhere. The centralised expertise provided by Partnership for Schools shows this can be done. The Chief Construction Officer, in conjunction with the Office of Government Commerce, should establish where such skills gaps exist across the public sector. Where deficiencies are found, a process should be put in place to address the issue, involving the sector skills council, ConstructionSkills, where appropriate.

The Office of Government Commerce

55. The OGC is an office of HM Treasury. It was created in 1999, following a review of civil procurement in central government by Sir Peter Gershon. It is responsible for improving standards and capability in procurement, which ranges from the buying of commodities and services, to the delivery of major capital projects.[83] The Office has been active in developing best practice in the public sector procurement of construction work throughout its existence. In this section we look at its main initiatives and achievements of recent years.

THE OGC GATEWAY PROCESS

56. In 2001 the OGC launched its Gateway Process for government procurement. The Process defines various review points—known as 'Gates'—during the lifecycle of a project:

Development of a business case (Gate 1);

Setting up of a procurement strategy (Gate 2);

Investment decision (Gate 3);

Award and implementation of a contract (Gate 4); and

Benefits evaluation (Gate 5).

57. Where the Process applies to a programme of activity rather than a single project, there is also an additional Gate 0, which involves a strategic assessment of the whole programme. At each of the Gates, a project is subject to an independent review by experienced practitioners to assess whether the project is ready to proceed to the next stage. At the end of each review, projects receive a 'red', 'amber' or 'green' status. Here, 'red' signifies the need for remedial action to be undertaken immediately if a project is to succeed—it does not mean that the project should be stopped. An 'amber' status means that certain recommendations should be acted on by the time of the next review, while 'green' signifies that the project is on target to succeed. Two successive 'red' reviews trigger a letter from the OGC's Chief Executive to the permanent secretary of the department responsible.

58. The Gateway Process is mandatory for all medium or high risk procurement of goods, services and construction by government departments and their agencies. Perhaps surprisingly, the OGC does not, however, enforce its use. Instead it is for senior responsible owners of projects to request reviews at the various gate stages. In 2005, the National Audit Office reported some concerns about the take-up of Gateway Reviews, particularly below departmental level where some agencies and non-departmental public bodies were sometimes completely unaware of its existence. It also cited departments' perceptions that in some cases review teams did not possess the requisite skills and experience to add value.[84] At the time, the OGC stated its intention to address these concerns. The Office told us the Gateway Process is "well respected" and that departments had now used it on 368 occasions in 182 programmes.[85] Nevertheless, three years after the NAO's report, Constructing Excellence told us they were concerned not only by the small number of Gateway Reviews conducted for construction projects, but also by the way the process had not become embedded in public sector practice.

59. The Office of Government Commerce's Gateway Process offers a means for public sector clients to assess and monitor their procurement performance for construction projects and programmes. We are disappointed by the low take-up of the Process. All public sector construction commissioners should be aware of it. The effectiveness of the scheme should be evaluated urgently, and action taken if the review teams lack necessary expertise. Furthermore, and while the responsibility for initiating reviews must rest with responsible senior officers who will be able to assess when projects are ready, we hope the practicability of giving the OGC power to enforce its use will be explored.

ACHIEVING EXCELLENCE IN CONSTRUCTION

60. In 1998 HM Treasury commissioned the University of Bath to examine government's performance as client to the construction sector. The report found failings in six key areas:

poor management, evident in a lack of client leadership;

a risk averse culture, stifling innovation;

a lack of integration in the supply chain;

poor project flow, caused by financial and decision-making delays;

an approach to procurement that was not orientated to value-for-money; and

misinterpretations of the need for public accountability, such as a fear of longer-term relationships or partnering with suppliers.[86]

61. A year later HM Treasury estimated that more than 50% of contracts went over their pre-tender budget and 66% exceeded their time estimates. As a result of both these sets of findings, and seeing both the potential for significant performance improvement and accompanying cost savings, the Department launched the Achieving Excellence in Construction initiative. Conceived originally as a three-year programme, Achieving Excellence set targets for improvement across departments in the areas of management, performance measurement, the standardisation of processes, and integrated working—reflecting the agenda set by the first Egan report, Rethinking Construction.

62. On the back of encouraging progress during the first three years, and following the publication of the second Egan report Accelerating Change in 2002, the OGC launched a new set of Achieving Excellence targets in 2003:

By March 2005, 70% by volume, of construction projects reaching the benefits evaluation stage (Gate 5 of OGC's Gateway Review process) in the period 1 April 2003 to 31 March 2005 to be delivered:
- On time;
- Within budget;
- To exceed customer and stakeholder expectations; and
- With zero defects.
By March 2005, for each key sector to reduce the average time period from the start of procurement (Gate 2) to award of contract (Gate 3) by 25% for construction projects taking over a year between Gate 2 and Gate 3, and 15% for all other construction projects.

63.  Responsibility for delivery of the strategic targets rested with departments themselves, and applied to any construction project over £1 million in value. To support their endeavours, the OGC published a set of Procurement Guides. These have been added to over time and now comprise three core and eight supporting guides covering all aspects of the construction procurement process, including whole-life costing, health and safety, design quality, and sustainability. The OGC also put in place some systems to monitor and report progress, which it continues to do. The most recent results for the first strategic target are summarised in Table 3 below. This shows that departments fell short of the Achieving Excellence targets in three out of four categories. In its 2005 report the National Audit Office concluded that the Government had made significant progress since 1999 when only 25% of projects were delivered within budget and 34% on time.[87] It stated that the implementation of the Achieving Excellence best practice principles played an important part in this improved performance.Table 3: Performance under the first strategic target of Achieving Excellence in Construction

—  By March 2005, 70% of construction projects reaching Gate 5 in the previous 2 years to be delivered: —  Achieving Excellence targets —  Project Performance

—   —   —  April 2003 to March 2005 (the target period) —  April 2005 to Sept 2005 —  Oct 2005 to March 2006 —  April 2006 to Sept 2006 —  Oct 2006 to March 2007

—  On time —  70% —  65% —  56% —  45% —  74% —  54%

—  Within budget —  70% —  61% —  37% —  60% —  70% —  57%

—  To exceed expectations —  70% —  70% —  56% —  77% —  83% —  75%

—  With zero defects —  70% —  60% —  43% —  57% —  68% —  56%

Source: Office of Government Commerce, Information Note 2/2007

64. However, two concerns arise from the OGC's reporting of performance against the strategic targets. The first is that the Office did not collect data to measure progress against the second strategic target to reduce the period of time between Gate 2 and Gate 3. Second, is the lack of any continued improvement in performance since 2005 for the areas defined within the first target. Figures in Table 3 show a wide variation between half-year periods. While such comparisons must be treated with caution because of differences in sample size, it seems clear for the performance measures of time, cost and defects, that at best there has been no further improvement in the two years since the end of the strategic targets. More likely it seems that departments' performance has actually deteriorated.

65. In its Information Note, the OGC states that it is investigating the underlying reasons for the downward trends in performance through one-to-one meetings with participating departments. It is worth emphasising here that the OGC does not have powers to enforce or police usage of the Achieving Excellence best practice principles. Instead, its staff focus primarily on monitoring progress and disseminating best practice. Indeed, even if the Office did have these powers, the four people the organisation has dedicated to construction policy would not be sufficient to enforce comprehensive take-up. As the Construction Clients' Group put it, "they have the guidance for public sector clients to follow, however, they do not typically have the resource to turn that into action".[88]

66. The Office of Government Commerce has used Achieving Excellence in Construction as its primary means of driving best practice in construction procurement across the public sector for almost a decade. The initiative played a key role in raising performance during its early days. However, the most recent strategic targets for the initiative expired more than three years ago. Departments' performance since 2005 suggests there has been no further progress on the delivery of public sector projects on time, within budget and with zero defects. This is not surprising given the OGC has no powers to enforce use of its best practice guidance and there are only four people in post to support the scheme. In short, Achieving Excellence is now more accurately realising mediocrity.

67. In the wake of the launch of the new industry-wide Construction Commitments, we recommend the Government reinvigorates the Achieving Excellence initiative by establishing new targets for public sector construction project performance. The OGC should also put in place performance measurement systems that collect data against all of these targets—not just some.

THE COMMON MINIMUM STANDARDS

68. In a bid to improve consistency in construction procurement across the public sector, in early 2006 the OGC launched its Common Minimum Standards. These set basic mandatory requirements for the procurement of construction works at all levels of government. The Standards themselves represented a consolidation of existing best practice rather than additional requirements. The first and 'General Standard' requires that all construction projects are carried out in accordance with the best practice principles set out in the Achieving Excellence initiative. Deviations from this best practice are only permissible if there are demonstrable whole-life value benefits to be achieved.[89] The OGC, in conjunction with the Local Government Task Force, has since also developed a specific version of the Standards to reflect local authority language and practice. These were published in May 2006.

69. At the time of their launch the Standards were generally seen to be "comprehensive, practical and achievable, as well as cost effective" by all those departments that had taken part in their consultation.[90] Yet, in its evidence to us the industry was critical of the extent to which parts of the public sector were actually enforcing their use. For example, the Specialist Engineering Contractors' Group said "if you take local authority work […] there is no indication that those minimum standards are applying or will be".[91] The Construction Clients' Group agreed.[92] Part of the reason for this is simply a lack of awareness of the Standards in the first place. Working with the Local Government Task Force, the OGC sought to tackle this issue by holding a number of 'road shows' around the country during 2007 aimed at familiarising local authorities with the Standards.

70. As with the Achieving Excellence guidance, which underpins the Common Minimum Standards, the OGC does not have the power to police use of the Standards by public sector clients, nor does it collect comprehensive data to monitor compliance. Again, this largely reflects the resources the Office has at its disposal. The SEC Group called for government funding of all construction projects to be contingent on compliance with the Standards.[93] More generally, Constructing Excellence told us it felt the Standards needed now to become "more outcome-orientated rather than prescriptive inputs".[94] In light of the recent launch of the Construction Commitments and the expectation of a new set of Clients' Commitments, it may be time to re-visit and update the Standards to make them more consistent with the principles now expected by the industry.

71. The Office of Government Commerce has set Common Minimum Standards for construction procurement, based on the Achieving Excellence in Construction guidance, which are mandatory across the public sector. Yet anecdotal evidence suggests their implementation, particularly at local authority level, has been patchy, due in large part to a lack of awareness. We believe the Government should now update the Standards to reflect the principles set out in the new Construction Commitments. The OGC should also work to promote greater awareness of the Standards; to measure their use across the public sector; and to enforce compliance by central government departments and their agencies. Local authorities, with the support of the Local Government Association, should also comply with the Standards in the interests of the communities they serve.

THE PUBLIC SECTOR CONSTRUCTION CLIENTS' FORUM

72. In December 2005, the Government established the Public Sector Construction Clients' Forum (PSCCF), hosted by the OGC. It consists of senior officials from various departments and government agencies, together with industry representatives, including the Strategic Forum and Constructing Excellence, and meets four times a year. The PSCCF's purpose is to strengthen the leadership and co-ordination of public sector construction activity. It was set up in response to a recommendation by the National Audit Office report, Improving Public Services through better construction, which highlighted the fact that there is no 'single voice' representing government clients.[95] The work of the Forum is supported by a number of limited-life working groups that are developing proposals on specific themes, including: public sector demand and industry capacity to deliver; fair payment; and improved embedding of best practice. The outputs of some of these working groups are discussed in more detail elsewhere in this Report. We welcome the establishment of the Public Sector Construction Clients' Forum and its work to support the co-ordination of construction activity and initiatives across government. We urge all involved in its work to regard it as a permanent feature of the public sector's engagement with the construction sector.

TRANSFORMING GOVERNMENT PROCUREMENT

73. In January 2007 the Government set out its vision for the future of the OGC with its Transforming government procurement (TPG) initiative.[96] There are various aspects to TPG, but at its heart is a move away from an emphasis on producing best practice guidance towards putting that guidance to use within departments.[97] To achieve this the OGC is becoming a "smaller, more focused, high calibre organisation".[98] It will have stronger powers to monitor departments' performance and demand collaboration when buying common goods and services. In support of this new approach, the OGC has made changes to the Government Procurement Service (GPS), which brings together procurement specialists working across central government. The Chief Executive of the OGC will head a "reinvigorated" GPS that will more closely resemble the established Government Economic Service and Government Statistical Service, which have their own graduate entry routes.[99] The GPS will also be more flexible, concentrating resources where they can have the most impact, and will draw in private sector experience through secondment opportunities.

74. Two other important aspects of Transforming government procurement are the introduction of Procurement Capability Reviews (PCRs) and the setting up of a Major Projects Review Group. PCRs are meant to assess how far departments' procurement meets the standards set by the OGC, and make recommendations for improving performance where necessary. They involve the deployment of a small team of experts, engaging intensively with departments over a short period, looking at all aspects of their procurement, including construction. The Office aims to complete 18 reviews of government departments by the end of 2008. It has already published the first tranche of these, highlighting some serious concerns, particularly for the Department for Communities and Local Government.

75. The Major Projects Review Group (MPRG), which is chaired by HM Treasury, is a panel of commercial experts from across government whose role is to "provide advice on the deliverability, value for money and affordability of the largest and most complex procurement projects".[100] The points at which the MPRG scrutinises projects align closely with Gates 1, 2 and 3 of the OGC's Gateway Process. The aim of the Group is to provide additional value over and above that added by the Gateway Reviews. Although its processes are still developing, HM Treasury reports that departments have welcomed the additional scrutiny provided by the MPRG. The Group is not focused solely on construction projects, although these inevitably form a significant part of its workload. To date it has been involved in a range of projects, including Crossrail, the Nuclear Decommissioning Authority's competition for Sellafield, and the Pandemic Influenza Preparedness Programme.[101]

76. While we support the change of emphasis brought by Transforming government procurement towards wider implementation of the OGC's best practice guidance, we have some doubts about its ability to achieve this end. First and foremost is our concern that the Office has had its staffing reduced from around 400-500 in 2005 to approximately 250 now. Despite this, the OGC told us "it is very much the size and scale it needs to be to do the task it is being set".[102] We find this hard to believe. Even if the new strategy entails being more focused and higher calibre, the overall ability of the Office to do its job can only have been diminished by such a reduction in its resources—not to mention the impact that changes will have had on the morale of those staff that are left. The state puts considerable resources into scrutiny, the spreading of best practice, and external review. For example, the Audit Commission has a staff of over 2,000 and the National Audit Office some 850. The public sector spends some £125 billion a year purchasing goods and services. It would be logical to increase the resources which go into preventing procurement problems from arising at the outset and so reduce those that go into monitoring and dealing with failure.

77. Our second fear, voiced throughout this section of our Report, is the ability of the OGC to police the use of its best practice tools and to ensure departments respond to recommendations made through its Procurement Capability Reviews. It is not clear from the Transforming government procurement initiative whether the Office will have the powers it needs to address this issue. This is a significant challenge for the OGC if it is improve procurement across the public sector.

78. We welcome the Transforming government procurement initiative and in particular the OGC's new focus on implementing best practice across the public sector. We are, however, seriously concerned that the Office has been provided with neither the resources nor the powers it needs to achieve this task. We recommend that the OGC's staffing levels are reviewed. We also recommend that the Government reviews the means by which the Office can better perform the role of 'enforcer' of good practice across the public sector. Several potential institutional levers exist already for it to achieve this, but more may be needed. It should involve taking advantage of its position as an office of HM Treasury. It should also include greater engagement at permanent secretary or ministerial level with other government departments.

53 Q 165 (ConstructionSkills) Back

54 Qq 52 (Construction Confederation) and 236 (Constructing Excellence) Back

55 Qq 441 and 443 (Construction Clients' Group) and Ev 338, para 1.18 (Specialist Engineering Contractors' Group) Back

56 Q 440 (Construction Clients' Group) Back

57 Q 236 (Constructing Excellence) Back

58 Q 225 (Constructing Excellence) Back

59 Ev 210, para 20 (Construction Confederation, Construction Industry Council and Construction Products Association) Back

60 Q 445 (Construction Clients' Group) Back

61 Q 444 (Construction Clients' Group) Back

62 Q 238 (Constructing Excellence) Back

63 Qq 237 (Constructing Excellence) and 450 (Construction Clients' Group) Back

64 Q 465 (Construction Clients' Group) and Ev 223, para 16 (Constructing Excellence) Back