Conclusions and recommendations
Procurement Process and the European Directives
1. We commend the Cabinet Office for initiatives
to make procurement practices across Government more efficient
but the progress is inconsistent and business argues that processes
are still slow and bureaucratic. It is intolerable that UK public
procurement still takes 50% longer than it does in France or Germany;
the Cabinet Office does not seem to know why this is the case.
It should reassess the impact of its initiatives to streamline
and modernise procurement practices; identify what key factors
in the procurement process must be addressed; and report the results
of this work in response to this recommendation. (Paragraph 11)
2. We recognise that the regulation of public
procurement serves a valid purpose. However, we are concerned
that the EU Directives, and the fear of breaching them, have driven
a process-oriented, risk averse culture within the Civil Service
which has inhibited efficient procurement and lengthened procurement
times. The application of LEAN procurement training does not seem
to have fully addressed this problem. The Cabinet Office should
identify the factors which add to complexity and delays in government
procurement. The Cabinet Office must also ensure that civil servants
apply the minimum required by EU directives. The EU should not
be used as an excuse for over complex process and delays which
do not seem to affect other Member States. (Paragraph 16)
3. We welcome the principle that the European
Commission should act to streamline public procurement, and we
welcome in particular their plans to make procurement more efficient
through the use of e-procurement technology. The Cabinet Office
should publish its implementation plan for e-procurement in the
UK in its response to this recommendation to ensure the public
sector in the UK is able to meet the agreed timescale for completing
the transition to e-procurement. (Paragraph 20)
4. The EU Remedies Directive has made civil servants
risk averse and adhere too rigidly to process. There is however
value in a mechanism for challenging erroneous procurement decisions.
The Cabinet Office must monitor the impact of the Remedies Directive
and issue guidance on how its negative effects can be mitigated.
If this is not effective, the Cabinet Office should insist that
the Commission amend the Remedies Directive to minimise its potential
to inhibit effective public procurement. (Paragraph 22)
Using government procurement to support the UK economy
5. We endorse the efforts that the Government
has made thus far to give industry greater visibility of future
procurement. The Cabinet Office should work with other government
departments, not least the Department of Business, Innovation
and Skills to ensure the data in the procurement pipelines is
as full and up to date as possible and identify what further information
Government can provide to help industry to innovate and prepare
to deliver future government contracts as effectively as possible.
(Paragraph 28)
Supporting small businesses
6. In our 2011 report Government and IT—
a recipe for rip-offs: time for a new approach, we noted that
the way procurement currently operates favours large companies.
We remain sceptical that, since then, sufficient change has been
achieved. However we support reforms to improve SMEs and social
enterprises' access to government contracts and note that the
Government's Chief Operating Officer is confident that small business
will win a much greater share of government business over the
next two years. (Paragraph 36)
7. We are also concerned at the apparent weaknesses
in the Government's data on the level of spending with SMEs. Government
must improve its data on spending with small businesses. The Cabinet
Office should publish regular quarterly updates on progress towards
its "aspiration" of 25% by value of government contracts
being won by SMEs, giving a clear indication of how it has defined
a small and medium-sized business and how reliable the data are.
(Paragraph 37)
Achieving social and economic objectives within the
rules
8. While Bombardier in Derby was not successful
in securing the contract for Thameslink trains, for example, French
and German suppliers have for a long time been more successful
in securing contracts for domestic producers, to the benefit of
their national economies. We welcome the EU reform proposals which
encourage public bodies to use procurement for wider social and
environmental purposes. These reforms alongside the Public Services
(Social Value) Act 2012, allow the public sector to take a much
more considered approach to procurement which seeks to maximise
the positive impact of public spending in ways which are already
used by other EU Member States. We understand however the Minister
for the Cabinet Office's concerns about "loading procurements
with values and requirements other than getting what you want
at the best price." The Cabinet Office should bring forward
proposals as to how it can ensure that proper consideration is
given to the potential to promote the UK economy in all government
procurement exercises, without losing sight of the fundamental
purpose of procurement regulation: to get best value for the taxpayer.
(Paragraph 47)
9. Setting wider contract performance measures—such
as the creation of apprenticeships—is one means of ensuring
procurement spending achieves additional social or economic impact
which could be employed more widely across Government. The Cabinet
Office should provide guidance to government departments on how
to use the scope within the existing EU procurement directives
to maximise value for the UK economy, for example through greater
use of appropriate contract performance measures. (Paragraph 49)
Procurement Capability
10. The Civil Service shows a persistent lack
of understanding about how to gather requirements, evaluate supplier
capabilities, develop relationships or specify outcomes. The effort
to reduce risk tends to increase risk in the form of delay and
increased costs. Policy making remains divorced from the practicalities
of procurement, while few policy makers or senior leaders in the
Civil Service have relevant procurement experience or training.
The Cabinet Office has responsibility for leading procurement
training across Government. It should publish a procurement training
plan demonstrating how it will increase the understanding of procurement
issues among civil servants engaged in policy development. (Paragraph
60)
Improving Commercial Capability
11. A range of valuable initiatives to improve
capability and skills have already been launched, such as the
Major Projects Leadership Academy, which should improve the commercial
and procurement skills within the Civil Service. The Civil Service
Reform Capabilities Plan has also proposed a number of further
initiatives to build commercial and procurement skills and the
Cabinet Office has successfully recruited a small number of experienced
procurement and commercial personnel to senior roles. We commend
the Cabinet Office for its efforts to develop commercial skills.
We are concerned however that a more fundamental culture shift
is required within the Civil Service if those with commercial
skills are to be allowed to operate effectively to feel appreciated
and rewarded accordingly by the Civil Service, so they wish to
remain. (Paragraph 66)
12. Even though there are only 61 senior civil
servants in procurement leadership roles within central Government,
there is little known about them, their skills and experience,
or lack of them, across Whitehall. There is no departmental breakdown
and the fact that the Cabinet Office does not know the experience
of 17 of the 61 senior procurement cadre indicates a serious lack
of coordination of this vital resource. These officials will be
thrown into the public spotlight, now that the Government is to
make Senior Responsible Owners of major projects directly accountable
to select committees. (Paragraph 68)
13. We welcome the Government's proposals to
establish a central database of commercial specialists, starting
with procurement professionals by summer 2013 as a first step,
but not much has been achieved. The Cabinet Office database should
include all key procurement positions and functions in the Civil
Service. The database should be updated each quarter so that progress
in improving commercial capability can be monitored effectively.
Departments should be required to provide this information. This
information should also be provided as part of the response to
this recommendation. This should include a list of Senior Responsible
Owners of procurement projects, who the Government now propose
should be accountable to select committees of Parliament. (Paragraph
70)
14. Consideration should be given to regenerating
the professional Civil Service, so that highly qualified professionals—scientists,
engineers, manufacturers, retailers—can be deployed to deal
with purchasing, and with projects, managed by the Permanent Secretary,
but with a symbiotic relationship to the head of those professions,
of which procurement should be one. (Paragraph 71)
Accessing private sector expertise
15. Civil Service reform should aim to deliver
an organisation that can recruit, train and retain people with
the necessary procurement and commercial skills. Reforms such
as the Ministry of Defence's "GOCO", designed to get
around outdated restrictions on Civil Service salaries and conditions
in order to improve Government access to commercial and procurement
capability should not be necessary. A decision has yet to be taken
on whether to contract out the management of the Ministry of Defence's
procurement and logistics arm to a GOCO. There are risks with
this model, not least the complexity of another relationship which
the Ministry of Defence will have to be able to control. We are
not convinced that this concept is sound or that cost-benefit
analysis will prove its viability. (Paragraph 81)
16. The very fact the Ministry of Defence is
seeking to contract out the procurement function, which is a fundamental
reason for the Ministry of Defence's existence underlines how
counterproductive it is to maintain the existing restrictions
on salaries and conditions for leading professionals in a modern
Civil Service. No other Civil Service in a comparable country
operates on the basis that the Prime Minister's salary should
be a maximum. Such a myopic policy makes the UK Civil Service
internationally uncompetitive. In the meantime, Government should
make an assessment of what salaries must be offered to recruit
and retain the senior and experienced procurement professionals
it needs. (Paragraph 82)
A strategy for reforming government procurement
17. The Government has failed to set out a clear
strategy for public procurement. There remains a lack of clarity
about the Government's longer term policy for the consolidation
of government and wider public sector procurement. The future
role, responsibilities and accountability of the Cabinet Office
and the Government Procurement Service and its relationship with
government departments and the wider public sector also remain
unclear. The issue of accountability will be addressed in much
more depth in our inquiry into the Future of the Civil Service
but failures of procurement or contract management are ultimately
a failure of Government whatever the failures of contractors may
be. The Cabinet Office should issue a clear strategy on the organisation
of procurement across Government and the wider public sector which
sets out its objectives for procurement and how and when they
are to be achieved, in response to this report. (Paragraph 92)
Data and Management Information
18. We recognise that from a very low baseline
the Cabinet Office has made progress in collecting and improving
the quantity and consistency of data available to it on the procurement
spending by individual government departments. Nonetheless it
is appalling that after three years of trying, the Cabinet Office
database remains incomplete, "clunky" and does not use
the latest data. The Cabinet Office should publish a plan and
timeline of no more than a few months for the complete implementation
of a system to collect consistent and comparable data on procurement
spending across government departments and agencies. (Paragraph
99)
19. Once this is complete, the Cabinet Office
should also plan to extend its data collection exercise beyond
central Government to identify what further data it could collect
to improve its understanding of the performance of government
procurement. The Cabinet Office should publish its analysis of
the performance and spending data it collects on procurement activity
by departments and agencies on a quarterly basis and where possible
the wider public sector. It should use this analysis to inform
and justify its proposals for the future organisation of government
procurement. (Paragraph 100)
Leadership of procurement reform
20. 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. (Paragraph 105)
21. 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. (Paragraph 110)
22. 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. (Paragraph 111)
23. 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. (Paragraph 113)
24. 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. (Paragraph 119)
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