Strategic Suppliers Contents

4Crown Representatives and Risk Assessments

104.In 2010 the Cabinet Office introduced reforms in a bid to regain control of Government spending and exert downward pressure on procurement costs in central government, local authorities and the wider public sector.108 The largest Government suppliers, the Strategic Suppliers, were assigned a Crown Representative. The Crown Representatives are members of the Commercial Relationships Board (CRB) which reviews the list of Strategic Suppliers and oversees relationship management and performance monitoring in line with the Strategic Supplier Risk Management Policy. The CRB is chaired by the Chief Procurement Officer.109

105.The Crown Representative produces analyses of suppliers’ risks based on performance against contracts and a Suppliers’ financial health, which are reported to the Cabinet Office Commercial Representatives Board. The Board will then assign a risk rating of Black, Red, Amber or Green to each supplier as set out in in the Strategic Supplier Risk Management policy. The risk assessment documents are mainly subjective and draw on publicly-available sources; we have found little confidential information in these internal, protected documents designed to encapsulate the condition of suppliers.110

106.The Cabinet Office defended the RAG rating system as a good measure of performance. They told us that the high risk Black rating was rarely used, and that Carillion had not been placed in that category because if that status had become public it “would precipitate exactly what we were trying to avoid”.111

107.The Government’s RAG rating system is not working, either as a carrot, or as a stick. The RAG rating system is a management tool that provides civil servants with a shorthand assessment of a supplier’s performance. A decline in a company’s RAG status appears to have no material impact, other than to trigger closer scrutiny from the Cabinet Office as set out in the Strategic Supplier Risk Management Policy.

108.We do not accept Cabinet Office’s rationale for failing to give Carillion a High-Risk rating. Given the caution with which Government treats risk assessments we believe it is highly improbable that a High Risk rating would become public. The Cabinet Office’s decision not to do this undermines its own Strategic Supplier Risk Management policy.

109.Recommendation: We recommend that the Cabinet Office review the Strategic Supplier Management Policy and its application. If RAG ratings are to be of use they need to be applied consistently and based on objective assessment. The Cabinet Office should consider whether it is appropriate that a supplier can appeal against a rating.

110.We considered the Minister’s view that the risk assessments were “acutely commercially sensitive”, and that publication could have “very serious consequences for jobs, people working for some of those companies and investors in those companies”.112 The Cabinet Office was also concerned that publishing the documents would deter suppliers from voluntarily providing information to Government.113 We found, as can be seen from the published Carillion risk assessments, that most of the information was already in the public domain either formally or as well-informed supposition in the relevant trade press.

We consider that the Cabinet Office overstated the potential impact of publishing the past risk assessments relating to the Government’s remaining Strategic Suppliers. However, we accept that some material risk of damage exists and particularly to smaller supply chain businesses and their employees, and have therefore decided not to publish the documents in full at this time.

111.The Crown Representatives meet regularly with their company’s senior management and monitor publicly available information. The Strategic Suppliers have welcomed the introduction of the Crown Representative system, although some were concerned about their representative having sufficient time and resources.114 Most Crown Representatives are now recruited from the private sector and spend around two years in the post.115 The Cabinet Office accepted that individuals were unlikely to dedicate themselves full-time to the role.116 We have previously raised concerns about high turnover in senior posts weakening institutional knowledge.117 In the case of Crown Representatives, short tenure and high turnover undermines the main purpose of the role—building and maintaining relationships. By consulting the companies in advance of a RAG change allows to them object and if this is overruled by Government they risk judicial review. This effectively stymies the whole system.

112.Recommendation: The Crown Representative system is at risk of under-resource and high staff turnover. The Cabinet Office should consider how to make the role sufficiently attractive to attract and keep individuals of an appropriate calibre.

113.The circle of civil servants working closely with Strategic Suppliers is small. It is important that in the cut and thrust of commercial discussions, undertaken on behalf of taxpayers, Crown Representatives do not get too close to suppliers. Without effective oversight of these relationships there is a risk that Strategic Suppliers become secretive ‘sub departments’ of Whitehall.

114.Recommendation: The Government should consider appointing an independent commissioner to provide independent assurance that suppliers are being held to the same standards across government.

108 Qq 9–10

109 Cabinet Office, Strategic Supplier Risk Management Policy, November 2012

110 See Committee of Public Accounts, Forty-First Report of Session 2017–19, Government risk assessments relating to Carillion, HC 1045

111 Q 783–5; Documents released to the Committee demonstrate that only one supplier has been rated as High Risk since the introduction of the system, whilst others have been recommended for this rating.

114 Qq 222, 551–2, 593; CGI (SSU0002), para 2; Motorola (SSU0004); Sodexo (SSU0005), p. 1; Accenture (SSU0006); SEC Group (SSU0012), para 3.2

115 See Committee of Public Accounts, Forty-First Report of Session 2017–19, Government risk assessments relating to Carillion, HC 1045

116 Q 715

117 See Committee of Public Accounts, Second Special Report of Session 2017–19, Third Annual Report of the Chair of the Committee of Public Accounts, HC 1399

Published: 24 July 2018