Public AdministrationWritten evidence submitted by Cabinet Office (PROC 32)

RESPONSES TO QUESTIONS FROM PASC AT THE PRIVATE BRIEFING ON 22 JANUARY 2013

Thank you for allowing me time to brief you on public procurement issues on 22 January 2013.

During our discussion the Committee asked two questions about procurement leadership and effectiveness which are answered in more detail below.

Context

The publication of the Civil Service Reform Plan in 2012 set out a clear need to build commercial capability in the Civil Service as a key priority area. The Government committed to the development of the first ever five year plan on how the Civil Service as a whole would develop the necessary capabilities in this (and other priority areas). Ensuring that skilled professionals can be attracted, trained, retained and deployed effectively, is critical, as is ensuring that Government as a whole gains maximum benefit from the skills and expertise that exist in some areas. In particular, where more services are commissioned from outside there is an obvious need for many more civil servants to have commercial and contracting skills.

Since 2010, the Cabinet Office has recruited a number of senior leaders who have a wealth of private sector and commercial experience. For example, the role of Chief Operating Officer for Government was a new appointment to strengthen the team in improving the way government operates, making efficiency savings and supporting UK growth. As a former CEO of a US NASDAQ company and more recently CEO of a FTSE company, Stephen Kelly brings extensive experience from the private sector. The role of Chief Procurement Officer was expanded in July 2012 to include a range of commercial as well as procurement responsibilities and to strengthen commercial capability at the heart of Whitehall to match best practice in the private sector. Several senior civil servants have been recruited with a broad range of commercial experience to drive the efficiency and reform agenda including Ed Welsh (Executive Director, Commercial Models, Efficiency and Reform Group), Mike Bracken (Executive Director, Government Digital Service), Katharine Davidson (Executive Director, Strategy and Management Information, Efficiency and Reform Group) and Liam Maxwell (Chief Technology Officer, HM Government, Government Digital Service) and myself. In addition, we are nearing the end of an exercise to recruit a number of highly experienced commercial negotiators from the private sector to the role of Crown Representatives. Bringing board level experience from the public or private sector, the Crown Representatives each will lead the strategic relationship with a number of suppliers to secure better value for taxpayers and improve the way services are delivered.

In this context, the Minister for the Cabinet Office (MCO) and Sir Bob Kerslake have recently asked me to lead a programme to improve commercial capability across central government to achieve consistently effective business outcomes, improve value for money for the tax payer and run efficient commercial operations.

Procurement Senior Leaders

The first question was in relation to how much procurement experience we have within the procurement senior leadership team.

We currently have in the region of 60 Senior Civil Servants in procurement leadership roles within central government. In the absence of central HR systems that hold career history information, we have collected data from sources in the public domain and by individual follow up, which provides a broad picture of the nature of private sector procurement experience that currently exists at a senior level.

In summary, more than 50% of the sample (where information has been obtained) have private sector commercial experience, and of those recruited from the private sector, over 85% held previous roles within procurement or supply chain management. Furthermore, half of these individuals were recruited from the private sector within the past five years. The nature of private sector commercial experience is set out in the table below.

Number of SCS	Sector experience		Nature of experience/ typical commercial roles		Typical length of private sector experience
32 have private sector experience	—	Banking Services	—	Senior Purchasing Manager	49% >10 years
	—	Utilities	—	Senior Logistics Director	45% > 5–10 years
	—	Consultancy	—	European/Global Supply Chain Director	6% < 5 years
	—	Retail	—	Company Director
	—	Manufacturing	—	Operational Manager
	—	Insurance Services	—	Senior consultant
	—	Telecomms/ICT
12 have Public Sector experience only	N/A		N/A		N/A
17 (not known)	Information not available

The Efficiency and Reform Group is leading an ambitious programme of Procurement Reform which is designed to consolidate, rationalise and improve commercial capability in all government departments. We are actively considering establishing a centrally managed commercial service which will comprise a team of experts (with deep private sector experience) to be deployed on common but complex procurements and contracts eg ICT.

Finally, in my role as Head of Profession for Procurement, I have commissioned Civil Service Resourcing as part of the Civil Service Reform plan to establish more consistent and reliable recording and reporting of workforce data for those in specialist roles—so that in future we have the mechanism in place to systematically identify, develop and deploy specialist expertise into the places where it is needed most.

Procurement Effectiveness

The second area you asked us to look at was measuring the effectiveness of procurement across a sample of projects.

You asked that we look at “a sample of approximately 100 projects and assess the number of people involved, the time taken, and the money spent and then measure this against how effective the procurement exercise was”. This was to test your view that a successful outcome is largely independent of process (such as number of people, duration, techniques, etc). Further, you stated your view, which we agree with, that “attitude” was likely to be as important a factor as process in delivering good outcomes.

Findings

This sample indicates that outcomes are not significantly impacted by any of the process elements—resource deployed, budget or time taken. From the results of this exercise we conclude that neither increases in duration nor people deployed correlates directly with how effective the procurement exercise was (determined by eg delivery to time, expected budget price, satisfactory contract); indeed, if anything, the opposite may be the case. However, in the case of contract value, higher values showed reduced quality of outcome in terms of delivery to budget. We conclude that successful outcomes are not determined solely by process factors. Our plans for procurement reform need to focus on practitioners’ capability and skills as much as on process.

Given the short timescales to complete this exercise, there are a number of mitigating factors which may impact the findings—self-assessment was sourced from procurement staff rather than business users; no account is taken of the outcome of the contract through delivery of the sourced goods/service; resource deployment in departments may focus on high spend procurements; and the survey was conducted via a series of structured telephone interviews, as opposed to formal written responses.

To fully test the hypothesis it would be necessary to engage with the business customers of the procurements and complete the assessment at the end of the contract delivery period.

Media coverage of bad procurements in government creates the impression that large procurements fail. However, the failure of smaller procurements is less newsworthy and effective procurements attract either no or very limited attention. The vast majority of procurements deliver good outcomes but there are clearly a limited number of high profile failures.

Detailed analysis of these findings is included as Annex 1 and Annex 2 contains the approach and caveats. We were able to gather complete information for 80 procurements in the sample. Generally assessments of outcomes are positive overall—which is as expected as the majority of procurements deliver good outcomes—it is only the (publicised) minority that do not. The analysis shows that generally:

Outcome is assessed more positively for higher value contracts.

Delivery on time is assessed more positively for contracts > £1 million in value.

The lowest overall assessment of delivery to budget is on lowest value contracts, although the extremes are all in contracts with a value in excess of £1 million.

Additionally from the data we can see that:

There is no correlation between the duration of the procurement and the assessed quality of outcome.

The overall procurement resources deployed have no apparent impact on the outcome assessment.

These findings support the direction of the reforms we are implementing in the Efficiency and Reform Group, as we seek to drive better value for taxpayers. We are doing this through embedding good procurement processes enhanced with judgement underpinned by improved commercial capability.

I hope that the above provides you with all of the information you need in relation to the two questions posed.

Annex 2

Approach

The full information set required to address this question is not held centrally. From the central Contracts Finder providing visibility of individual supply opportunities to potential bidders we built a sample of candidate contracts (140). The sample is sub-divided into four categories by contract value with a spread of contracts across each value range.

Value	<£100k	£100k–£1m	£1–20m	>£20m
Number	40	40	40	20

The sample includes contracts across all Central Government departments and is for a mixture of works, services and supplies as shown below:

Contracts Finder holds information on the start and end dates for procurements from which we have assessed the elapsed time for each. The other information required to conduct the assessment is not held centrally, so contact was made with the registered contact for each contract and they provided a self-assessment scaled response (1–4) on the following three criterias:

Quality of procurement outcome.

Delivered to budget.

Delivered to time.

Additionally, to assess the resource applied we asked for procurement resources deployed (split by internal and external provision where appropriate).

Caveats

The information sources used were contracts finder and feedback provided by named contract contacts. We cannot provide assurance that the contracts included in the sample are typical or representative, however, we selected by value and annex 2 shows the proportion for each value category in the sample versus volumes for a one year period. The questions addressed to the nominees for each contract were specifically focussed on the completion of the procurement, not the delivery of the resulting supply or service or the overall end-to-end process. Timeframes assessed are from the start of the procurement as identified by the publication date of the OJEU or the date registered on Contracts Finder. Completion dates are likewise the contract award date for OJEU or the date from Contracts Finder. The sample does not include any abandoned procurements.

March 2013