1.The creation of the Crown Commercial Service was poorly executed and failed to learn the lessons from previous aborted attempts to centralise services. One month after the creation of the Crown Commercial Service (CCS), the Cabinet Office undertook a review to investigate problems that arose with moving expenditure from departments to CCS (the transition programme). It found that CCS had consistently promised more to customers than it could provide and weaknesses with communication and implementation of the transition programme, many of which were caused by poor governance and control. The Cabinet Office told us that its risk management arrangements had not been implemented well enough to provide early warnings when these problems arose. However, in June 2015, when the lack of progress became clearer, the Cabinet Office took steps to resolve the underlying causes by appointing an expert to review operations. The Cabinet Office admitted that it should have seen the issues with CCS’s performance earlier and that it had acted three to six months too slowly.
Recommendation: The Cabinet Office should identify the factors that have caused its previous programmes to centralise services to fail and use this information in designing future programmes to centralise services. It should ensure that all such programmes have robust risk management and systems in place to track progress and take action when projects are at risk of failure.
2.Progress in centralising the procurement of common goods and services has been unsatisfactory. The original business case in 2014 for creating CCS estimated that it would manage around £13 billion of spending on common goods and services on behalf of 17 departments by April 2016. However, in practice CCS is only managing £2.5 billion on behalf of 7 departments. Similarly, spending using CCS’s framework agreements did not grow as expected, with only £6 billion spent by the wider public sector in 2015–16 against the original target of £7.5 billion. CCS told us that the original targets had been overly ambitious but believes that it can generate savings of 10% on average on all spend on common goods and services.
Recommendation: All departments must understand the importance of achieving savings from centrally purchasing common goods and services, and transfer appropriate spending to CCS as soon as practicable. The Cabinet Office and CCS should report back to us by October 2017 setting out the plans it has agreed with each department to centralise their spending on common goods and services fully by 2020.
3.CCS’s performance has been poor. CCS did not have detailed plans from the start setting out how it would collaborate with departments, and failed to gain their confidence. CCS also failed consistently to deliver a good service and did not achieve the original net savings set out in the original business case. CCS and the Cabinet Office noted that one reason for this weak performance was the lack of robust management information to assess service delivery and to accurately plan and utilise resources. CCS has recently started to invest in new systems to improve its data quality, which it believes will resolve some of the issues.
Recommendation: CCS should ensure it has the management information required to measure and track its own performance against objective and stretching performance measures so that it can identify and take appropriate action to address any performance failings. It should also publish key performance indicators that allow customers to track improvements in its performance.
4.CCS’s management of procurement frameworks remains unsatisfactory. CCS has been unable to demonstrate its frameworks are the best in the market and there are signs that it does not manage the frameworks well. CCS does not benchmark the prices it achieves on its contracts, so it cannot tell whether the end users achieve the best prices. It also does not measure the impact its services have on end users. In terms of management of the frameworks, CCS has failed to renew or replace frameworks before their final expiry dates and all extension options have been used. In January 2017, CCS listed one framework that had expired and three more will expire in 2017, including those covering consultancy services and temporary staff. The use of expired frameworks contravenes public procurement law and exposes the government and any organisation using these expired frameworks to risks of legal challenge. CCS told us it consults with departments, suppliers and takes legal advice when it extends frameworks beyond their final expiry date.
Recommendation: CCS should ensure that it has plans in force to replace each framework contract before it expires so that there will be no further need to use expired frameworks.
5.CCS’s current governance structure is confusing, blurs accountability and reduces clarity of the purpose of CCS. Three of CCS’s five functions, namely the commercial capability programme, the management of government’s strategic suppliers and the advisory service on complex transactions, report to the Government Chief Commercial Officer instead of CCS’s Chief Executive. This arrangement reduces clear line of sight, blurs accountability and reduces clarity of purpose of CCS. The Cabinet Office believes that this structure was pragmatic at the time CCS was created but accepts that it is not ideal and it intends to change the arrangement in due course.
Recommendation: The Cabinet Office should review CCS’s governance, ensuring that accountability arrangements are clear and provide a direct line of sight between activities, financial reporting and accountability, by the end of 2017.
22 March 2017