House of Commons - Government Procurement - Public Administration Committee

Government Procurement - Public Administration Committee Contents

6 Leadership of procurement reform

101. The Cabinet Office has claimed some significant achievements as a result of the reforms it has implemented to date. It has overseen the re-negotiation of contracts with major suppliers to Government claiming savings worth £800 million in 2010-11, £430 million in 2011-12 and £800 million in 2012-13 and has established Crown Commercial Representatives to manage the ongoing commercial relationship with major suppliers to ensure coordination across departments.[160] It has claimed further efficiencies worth over £400 million in 2011/12 and £1 billion in 2012/13 from centralising contracts for categories of commonly used goods and services—such as ICT, energy and travel.[161] It has also steadily increased the quantity of public procurement expenditure managed centrally by the GPS, which has risen from £8.4 billion in 2011/12 to £11.4 billion in 2012/13.[162]

102. Despite these successes, government departments are yet to comply fully with the obligation to direct spend on common goods and services through the central contracts managed by the GPS. They have not fully implemented Cabinet Office procurement policy. Reflecting on the Government's progress in implementing reforms, Francis Maude recognised that the Cabinet Office had not achieved its current plans for reform, commenting that "I still find examples of very old-fashioned procurements, even in central Government, where, theoretically, our writ runs".[163] He also said that the procurement of "common goods and services, centrally—not necessarily at the centre, but in one place, for the whole of Government— […] has not happened to the extent that it can and should".[164]

103. The Chartered Institute of Purchasing and Supply echoed this concern over the lack of progress:

Whilst the volume of common goods and services spend flowing through frameworks negotiated by central organisations such as the GPS has increased significantly over the past two years, it is estimated they are still only managing a third of the total spend for these categories so procurement authorities continue to 'opt out' resulting in duplication of effort and resources on a large scale.[165]

104. Only one of 17 Departments met targets in 2011-12 set by the Cabinet Office for transferring management of procurement spending to the GPS.[166] In the Government's Civil Service Reform Capabilities Plan, the Government re-iterated its intentions, identifying a target to "transition all spend on common goods and services to the Government Procurement Service by December 2013".[167]

105. We commend the Government's initiatives to reform government procurement and welcome the substantial efficiencies which have been achieved to date. We also support the Government's objectives to make savings in government procurement and to improve public services, not least through better management of suppliers, increased competition and greater aggregation of spending where appropriate. We are concerned however that progress is painfully slow and sporadic.

106. The Cabinet Office operates in conjunction with HM Treasury as the strategic centre of Government and provides support to the Prime Minister and Deputy Prime Minister. It therefore has a cross-government role working with and through other departments. In this cross-government role the Cabinet Office employs what has been described as a "tight-loose" operating model, exercising tighter central control in some areas and allowing departments greater freedom in others.[168]

107. As part of its reform programme, the Cabinet Office has sought to establish tighter control over procurement by central government departments. The Ministerial Public Expenditure Committee (PEX) brings together senior cabinet ministers to consider decisions on the allocation of spending across government departments. In March 2011, the PEX sub-committee for Efficiency and Reform approved a procurement reform strategy proposed by the Cabinet Office to make savings on procurement of common goods and services. To implement its strategy, Departments are mandated to direct their spending on common goods and services through central contracts managed by the Government Procurement Service.[169]

108. Despite this "mandate", individual departments' accounting officers retain ultimately responsibility for managing departmental spending on procurement and securing value for money.[170] HM Treasury guidance notes that "Public sector organisations should collaborate with each other […] in order to secure economies of scale, unless they can demonstrate that better value can be achieved in some other way".[171]But it also recognises that "central government bodies are not tied to central purchasing bodies or agencies".[172]Francis Maude told us: "We have a very dispersed structure. Permanent secretaries are accounting officers. Finance directors, commercial directors and HR directors, at present, have a solid reporting line to their permanent secretaries, and the very sketchiest of reporting lines [to the centre]".[173] For the Cabinet Office to implement its "mandate", it must therefore convince departmental officials that the Government Procurement Service and central contracts can provide improved value for money.[174]

109. It is clear from our evidence that the Cabinet Office has failed to convince senior civil servants responsible for procurement that complying with its centralising mandate will bring greater value for money. Francis Maude told us that in relation to aggregating demand across government departments, "there is a lot of inertia" and he recognised "the need to drive all that further".[175] Mr Maude also stated that there had been some active resistance to the centralising agenda, and that "senior mandarins" were "obstructing what is agreed Government policy".[176]

110. We are not convinced that the Cabinet Office has the authority to assert the Government's policy on the procurement of common goods and services. It is doubtful therefore whether targets for transferring responsibility for procurement of all common goods and services to the Government Procurement Service by December 2013 will be met. It is inexplicable to us that the Ministerial Public Expenditure Committee's Subcommittee on Efficiency and Reform should give a mandate to the Cabinet Office which has proved unenforceable in practice. The Cabinet Office must have the unequivocal support of Number 10 and the Treasury if it is to fulfil and effective leadership role in cross government procurement operations and policy.

111. The present paralysis raises questions about the role of the Cabinet Office and its relationship with other departments, as part of the development of a more unified model for Whitehall which is mooted in the Civil Service Reform Plan. We will address this in our report on the Future of the Civil Service.

112. Bill Crothers said: "The truth is there has been a habit—a culture, an established norm, a practice; call it what you will—across the system where departments have primacy, and departments are used to having the total relationship with a supplier".[177]He gave a pertinent example: in one particular case a department had refused, on the basis of legal advice, to share contract data with colleagues in the Cabinet Office on the grounds of commercial confidentiality.[178]

113. The Government is a single customer and should behave as such. We find it astonishing that a Department should be able to cite legal restrictions as a barrier to collaboration with the Cabinet Office on initiatives that could save taxpayers' money. All government contracts should make clear that suppliers should expect Government to act as a single customer. The Cabinet Office should clarify to us the legal position regarding the sharing within Government of data deemed commercially confidential, and, in conjunction with the Government Legal Service, issue clear guidance to departments on the issue, with the presumption that data should be shared within Government.

114. The Chief Operating Officer noted that some of the cultural barriers to effective leadership from the centre could be overcome by ensuring that all those involved in procurement were incentivised in the same way "to deliver better outputs for less cost" and ensuring that "the lesser performing, less capable people are removed from the system".[179] Having recognised the importance of aligning incentives, the Cabinet Office has sought to amend the relationship between the centre and departmental commercial/procurement directors. In particular, the balance of reporting lines will be shifted so that departmental commercial directors have a stronger "reporting link into the head of the commercial function at the centre of Government".[180]

115. There is general agreement that strong, collective, leadership from both ministers and permanent secretaries across government departments is important if reforms are to be achieved.[181] However, our evidence differed on the extent to which change could be achieved from the top down—and the Government itself is unclear. Jon Hughes, a procurement consultant, argued that change has to happen "from the top down"and that at present there is not that "concerted focus across that small group of key leaders, from politicians down to permanent secretaries and down into the chief procurement officer group".[182]

116. Peter Smith told us however that procurement reform could not be simply imposed on civil servants, arguing that there needed to be persuasive reasons for further centralisation:

There should be more collaboration, identification of common categories and, arguably, more centralisation than there currently is, but it has to happen for the right reasons, and I just do not see that there are mechanisms whereby we can impose it from the top down.[183]

117. There are of course legitimate reasons for objecting to the procurement of certain goods and services through central contracts where aggregating demand might be considered impractical or likely to diminish the wider value for money of the goods or services procured. We received evidence from a number of sources registering practical concerns about the use of central contracts, such as the loss of subject matter expertise or a direct connection between the supplier and the end user of a product.[184] Evidence from suppliers to Government commented that it is highly debatable which goods and services could and should genuinely be treated as "common" for the purposes of aggregating demand across Government.[185] The Market Research Association wrote, for example, that:

Research is not a widgets business, it is an intellectual capital professional service, and its procurement cannot be standardised or centralised without loss of efficacy or value for money […] One of the key issues with centralised procurement is that government departments may be restricted to requesting particular (and 'lower cost') research methodologies, without reference to whether these methodologies will obtain the appropriate insight and evidence to meet the required information, policy and business needs.[186]

118. The Cabinet Office has recognised that there may be differences of opinion over what can be more efficiently and effectively procured through central contract contracts. The Chief Procurement Officer and Deputy Chief Procurement Officer told us how they had sought to work consultatively with departments to increase the quantity of procurement spending on common goods and services channelled through central contracts. For example, the Cabinet Office consults with departments on how to set specifications for central deals. The Deputy Chief Procurement Officer said that there was, however, necessarily a need for compromise from Departments:

Can we always meet 100% of Departments' requirements in a standard contract? No, we probably cannot, because […] one person's strategic need is another person's common good and service, so part of the savings that we will make in some of these categories is through standardisation [...] I think it is horses for courses.[187]

119. We welcome the Cabinet Office's plans to ensure greater alignment of objectives across Government and agree that there are likely to be further efficiencies which can be gained from greater consolidation of procurement spending on common and non-specialised goods and services across central Government and indeed across the wider public sector. However it cannot always be easily determined what goods and services are better procured through a standardised central contract. Aggregation of demand must be clearly justifiable in terms not only of price but also in terms of the impact on the value for money of the goods and services being procured. This underlines why the Government must establish a clear and authoritative mechanism for deciding when procurements are subject to the Cabinet Office mandate; those that can be retained under Departmental control; and how disputes are to be resolved.

160 "Supplier representatives to cut costs for Government", Cabinet Office Press Notice, 13 April 2011; "Francis Maude reveals further savings that beat expectations", Cabinet Office Press Notice, 9 August 2012; Cabinet Office, Efficiency and Reform 2012/13 summary report, May 2013; "Supplier representatives to cut costs for Government", Cabinet Office Press Notice, 13 April 2011. Back

161 "Francis Maude reveals further savings that beat expectations", Cabinet Office Press Notice, 9 August 2012; Cabinet Office, Efficiency and Reform 2012/13 summary report, May 2013 Back

162 Government Procurement Service, Mid-year performance review 2012/13, November 2012 Back

163 Q 536 Back

164 Q 537 Back

165 Ev w20 Back

166 National Audit Office, Improving Government Procurement, HC 996 Session 2012-13, 27 February 2013, Figure 8 Back

³ 167 ⁰ Cabinet Office, Meeting the Challenge of Change: A capabilities plan for the Civil Service, April 2013, p 24 Back

168 National Audit Office, Departmental Overview: A summary of the NAO's work on the Cabinet Office 2011-12, November 2012, p 7 Back

169 National Audit Office, Improving Government Procurement, HC 996 Session 2012-13, 27 February 2013, p 12 Back

170 HM Treasury, Managing Public Money, October 2007, p 19 Back

171 HM Treasury, Managing Public Money, October 2007, p 84 Back