1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Cabinet Office and the Crown Commercial Service on progress with buying common goods and services centrally.
2.The Crown Commercial Service (CCS) is a government agency and trading fund established on 1 April 2014 to replace the Government Procurement Service. It delivers services such as advice on complex procurement, commercial capability development, the creation and management of procurement frameworks and buying services for central government and public sector organisations. In 2015–16 CCS bought around £2.5 billion of goods and services for central government departments and some £12.8 billion was spent by departments and the wider public sector to purchase goods and services using CCS framework contracts.
3.CCS was launched on 1 April 2014 with the aim that two departments would transfer the buying of their common goods and services to CCS every three months. However, in May 2014 a Cabinet Office review concluded that CCS had failed to meet its ambitious transition programme. It found that CCS had consistently promised more to customers than it could provide and that the central implementation team had not communicated well with the individual project teams. As a result, CCS suspended transition for new departments. We asked the Cabinet Office why the launch of CCS went off track so quickly after its set-up in April 2014. It told us that there had been several reviews into CCS’s performance and that it had taken time to set up a new organisation. The first review in May 2014 had focused on CCS’s governance structure and found weaknesses in communication and implementation of the transition programme which had led to a change in the governance structure.
4.The Cabinet Office admitted that it had only noticed that CCS was severely off-track about a year later in 2015 when a second review was commissioned. At that point, CCS managed £2 billion of purchasing on behalf of seven departments, £5.5 billion less than the £7.5 billion originally anticipated. The Cabinet Office acknowledged that the initial review had looked at governance issues rather than focusing on wider performance problems and told us that initially it had not had the right people to lead CCS. The Cabinet Office also accepted that proper risk management tools had not been in place at the start. CCS added that it had been difficult to manage risks as proper management information was not available. There had been 62 different systems within CCS. Many of them were out of date and no longer supported, and most did not talk to each other requiring information to be keyed from one system into another.
5.This Committee has reported on a number of occasions on the difficulties encountered in previous attempts to set up central buying services and shared service centres including, unclear baselines and overambitious targets; the lack of clear plans; inadequate data; weak governance, assurance or control; and lack of customer buy-in. CCS told us it believed the organisation was wrongly designed and the transition programme was badly executed at the start. The Cabinet Office told us that it was disappointed it had not learned the lessons with setting up shared services when it launched CCS, but said it had not directly run shared services up to that point.
6.The Cabinet Office created CCS in April 2014 from the Government Procurement Service, and consolidated in it all commercial roles that were present in the Cabinet Office. Accordingly CCS has five functions. In addition to being responsible for buying common goods and services either directly on behalf of departments or through frameworks, CCS also: develops procurement policies for the UK public sector; advises and supports departments on complex procurements; manages the government’s strategically important suppliers; and develops and strengthens commercial capability across government departments.
7.Initially, all five functions reported to the CCS Chief Executive. However, by the middle of 2015 the Cabinet Office decided that three functions would report to the Cabinet Office government chief commercial officer on a day-to-day basis. These functions cost around £7 million in 2015–16 and are forecast to cost around £9.5 million in 2016–17. The Cabinet Office estimates the expenses for these three functions amount to £25 million for the next three years.
8.Around half the departments that the National Audit Office interviewed were unclear about aspects of CCS’s governance such as which functions reported to the government chief commercial officer. In addition, the NAO found the current governance arrangement reduced clear lines of sight and blurred accountability. The Cabinet Office told us that all commercial activities were swept up into CCS at its launch, but noted that these functions were not in the right place in the long run. While HM Treasury had agreed with the set-up and funding structure, the Cabinet Office expects the arrangements and structure to change over time.
2 , paras 1, 4, 1.10
3 , , paras 9, 1.22
4 , , Figure 8
5 For example, Committee of Public Accounts, Cabinet Office: Improving government procurement and the impact of government’s ICT savings initiatives, Sixth Report of Session 2013–14, HC 137 and Committee of Public Accounts, , Twentieth Report of Session 2016–17, HC 297
6 , , Figure 2
7 , para 1.10
8 , , paras 1.13, 3.13 and Figure 5
9 , , para 3.13 and Figure 18
22 March 2017