Strategic Suppliers Contents

3Cabinet Office’s role

Skills and oversight

93.Although significant problems remain, Departmental commercial capability has improved in recent years and the hiring of senior leaders from industry is having a positive impact on how Departments are engaging with suppliers.93 The NAO’s Commercial and contract management: insights and emerging best practice, published in November 2016 found a number of initiatives at government, departmental and contract level.94 The NAO concluded that the impact of the changes at the Government and organisational level was only beginning to be seen on individual contracts and projects.95

94.John Collington, the former Chief Procurement Officer, told us that when he arrived commercial skills across departments were “inconsistent”, but that “significant progress has been made in upskilling the commercial and procurement functions across the civil service over the past seven years”.96 This has included external recruitment, capability assessments of existing staff, continuous development, and the introduction of the commercial fast stream.97

95.The Chief Executive of the Civil Service, John Manzoni, told us that such changes were “beginning to work” allowing for “more sophisticated conversations” between Cabinet Office and Strategic Suppliers.98 The NAO has found the Government is improving its commercial skills but found that there was tension between Cabinet office and departments leading to uncertainty for suppliers and departments about accountability and operating models.99 The Cabinet Office deploys some Crown Commercial Service staff into Departments to reinforce linkages between Departments and the Centre, but also to “manage the pay and structures”.100 Government needs to step up its skill development within departments so that contracts are specified better from the outset.

96.While improvements in commercial capability are welcome we remain concerned that expertise and guidance residing in the Cabinet Office is not being effectively promulgated, or followed by commercial functions in departments and the wider public sector. Departments are still not learning from each other’s mistakes and sharing their own across government to avoid them happening again. Jonathan Lewis of Capita told us that whilst Cabinet Office guidelines were being put in place “they are not being universally adopted across Government Departments”.101 Rupert Soames, Group Chief Executive at Serco, told us:

“The Cabinet Office has issued specific guidance to Departments saying, “Thou shalt not do this. Thou shalt go and give accurate data. Thou shalt not go and impose onerous conditions”. The Departments go and gleefully ignore it.”102

Mr Rhys Williams admitted that “there are no hard levers from the Cabinet Office into departments.”103 The adoption of best practice by departments is, therefore, essentially voluntary.

97.The projects that come in front of this Committee often involve Departments trying a new approach or solution. For example, our recent inquiry into Offender-monitoring tags found that the Ministry of Justice’s decision to adopt a novel approach to a simple re-procurement resulted in delays, difficulties for supply chain, and £7.7 million in losses.104 Believing the procurement of tags uncontroversial, the Ministry of Justice did not seek appropriate advance external challenge.

98.Similarly, better challenge could have improved the procurement for running of Community Rehabilitation Companies. The contracting-out of community rehabilitation to private companies has proved a lose-lose, with 14 of 21 Community Rehabilitation Companies still predicting losses, and work volumes far below what was predicted.105 At the time of the NAO’s Report the taxpayer had had to pay out an additional £342 million to keep the companies operating.106

99.We do not wish to discourage innovation, but where Departments consider deviating from standard procurement contracts they need to engage with the Cabinet Office and provide appropriate evidence before adopting an alternative procurement or contract model.

100.We acknowledge the work of the Public Administration and Constitutional Affairs (PACAC) Committee and their report on public sector outsourcing and contracting.107 We concur with their recommendation that the Cabinet Office establish a contracting centre of excellence that can collect best practice and learning and disseminate it across the wider public sector including the NHS and local government.

101.The Government needs to develop more robust challenge and scrutiny of contracts before they are let. We recognise there is progress here, but there are still too many contracts which do not collapse but still deliver poor services to the user.

102.The Cabinet Office lacks sufficient leverage with other Departments. Departments continue to act in separate silos, failing to share information or adopt the appropriate multidisciplinary teams that combine frontline knowledge, commercial skills and project management.

103.Recommendation: Cabinet Office should ensure Departments adhere to Cabinet Office guidance and are required to respond to Cabinet Office challenge for large procurements. Where Departments want to deviate from Cabinet Office guidance, they should write to Cabinet Office ahead of opening a tender, setting out their justifications for that deviation.

93 National Audit Office, Memorandum to Parliament: Managing government suppliers, Session 2013–14, HC 811, 12 November 2013; National Audit Office, Commercial and contract management: insights and emerging best practice, 14 November 2018

96 Q 20

97 Q 23; Q 826

98 Q 679

99 National Audit Office, Memorandum to Parliament: Managing government suppliers, Session 2013–14, HC 811, 12 November 2013

100 Q 683

101 Q 647

102 Q 356

103 Q 681

104 Committee of Public Accounts, Fifteenth Report of session 2017–19, Offender-monitoring tags, HC 458

105 Committee of Public Accounts, Twenty-seventh Report of Session 2017–19, Government Contracts for Community Rehabilitation Companies, HC 897

106 Report by the Comptroller and Auditor General, Investigation into changes to Community Rehabilitation Company contracts, Session 2017–19, HC 676

107 Public Administration and Constitutional Affairs Committee, Seventh Report of Session 2017–19, After Carillion: Public sector outsourcing and contracting, HC 748, para 36

Published: 24 July 2018