Crown Commercial Service Report and Accounts – A Second Look

A couple of weeks back, we featured the UK’s central government collaborative body, Crown Commercial Service, and their annual report and accounts. We said we would return to that document - and here we are.

Let’s start with some positives from the document that we didn’t pick up on first time around.

Customer satisfaction with our new Customer Service Centre (CSC), which we set up to simplify and improve the way we respond to enquiries, has increased from a Net Promoter Score of -33 to +36”.

That’s impressive and supports our observations that relatively new CEO Malcolm Harrison and his new team are trying hard to get the departments (the core customer base) back on board. The “simple and easy to use ‘click and buy’ e-catalogue for Technology Products has been an outstanding success and is a strong sign of its future potential”. That is provided by Mercato, one of the unsung heroes of UK supply chain technology (not unsung by us), although there are questions around how scalable that solution is to the full “Crown Marketplace” tech vision – more on that from us soon.

Another positive in an area we’ve been a little cynical about in the past is that “all 32 “strategic suppliers” to UK government have formally signed up to the Prompt Payment Code (up from 22 in 2015/16)”. As they jolly well should …

Looking at the financial results in more detail, the “retained deficit” (loss) was £8.4 million - CCS in running cost terms was therefore negative for the taxpayer, although the savings claimed through their work do of course dwarf these figures. However, as a trading fund, CCS has to in effect balance its budgets over the medium term rather than look to make profit.  So as long as profit and loss evens out over perhaps a five year cycle, this is not a problem. The issue therefore is whether some of the “other operating costs”, such as work on the Crown Marketplace and Digital, will disappear over the next couple of years. As long as that happens, CCS should be fine. (Incidentally, we would love to know how much McKinseys made out of the “commercial accelerator” programme – we feel an FOI coming on here)!

Of course, CCS could just increase their fees charged to suppliers, as they did last year. We said at the time that this is fine up to a point; but this is not a bottomless well. Ask too much in supplier margin, and their framework prices will start to look uncompetitive as suppliers increase prices to build in the margin they pay to CCS.

One big gap in the report is around what some might consider a pretty key role for CCS; the letting and management of their major contracts. The NAO report on CCS last year identified a worrying number of contracts that had been extended, perhaps “illegally” in some cases, and a general trend that saw CCS struggling to meet their programme of contract letting. There is no mention we could find in the report of this key goal, but hopefully the trend is positive.

The detailed segmental analysis is not explained by any narrative either. Here is our simplified table, which raises some obvious questions about the two massively loss-making “segments”. While the  report does not really answer the questions, we have a couple of hypotheses.

All numbers are £,000 Frameworks

 

Managed services Whitehall systems Commercial central teams TOTAL
Total income 56,222 7,830 2,496 6,807 73,355
Total operating costs 37878 22,626 2,496 16,809 79809
Operating surplus (deficit) 18344 -14796 0 -10,002 -6,454

So hypothesis one - the big apparent loss in “managed services” may well be largely down to some slightly unhelpful cost allocation between the “frameworks” and “managed services” accounting buckets. Some of the work and the cost base associated with what CCS does for and with departments cuts across both, we understand, and allocation is perhaps not perfect. It may well be more sensible we suspect to look at the two together, which would give a more balanced bottom line number. (A suggestion for 2017/18)?

The “commercial central teams” line though is very interesting. The report is not clear on the drivers here this but there is perhaps one clue here; “We also support the Cabinet Office through provision of resources and funding for the Commercial Central Teams deployed under the direction of the Government Chief Commercial Officer” . (That’s Gareth Rhys Williams).

Our understanding is that this is NOT funding salaries for all the senior procurement folk who are moving into the new Government Commercial Organisation from Departments. Rather, it definitely includes the complex transactions team, who report into the Rhys Williams empire and earn the £6.8 million consulting type income identified in the table. But our theory is that another major chunk is the cost of setting up and running the whole commercial capability programme, including the assessment centre work, which we have mentioned previously.

If that is the case, it could be quite a breath-taking amount of money to be spending in this area, including probably a significant element of consulting and contractor spend. As a procurement professional, it’s great to see that investment in commercial skills, but as a taxpayer, it would be quite illuminating to see the business case and be clear as to how Rhys Williams will demonstrate the effectiveness of that multi-million pound investment.

Back to the report, and another gap is any talk of the other collaborative bodies in the public sector landscape. We know good things have happened with CCS and others such as the Yorkshire Purchasing Organisation, but there is no mention we could find here of that. Linked, and even more strategic, is the whole set of issues around which categories should CCS focus on, and which should follow a national approach rather than regional or local. We would have liked to see some sense that those issues are being considered, and that is an important point to remember when we come on to talk about the Crown Marketplace shortly in another article.

Well, that’s all gone on somewhat longer than I expected, but I hope you found it useful if you got this far. And can I have an OBE for being probably the only person in the world (not employed by CCS) who has read the document from start to finish?

Voices (2)

  1. Dan2:

    Does anyone know how the ‘Net Promoter Score’ is measured for CCS?

    The claim of “Customer satisfaction with our new Customer Service Centre (CSC), which we set up to simplify and improve the way we respond to enquiries, has increased from a Net Promoter Score of -33 to +36” is quite a turnaround.

    I appreciate that that cynicism might affect those in a commercial role from time to time; but I have to say, “really?”

    I’ve not noticed a major change in CCS culture, attitude or output. So is this measuring the ‘Customer Service Centre’ old score to new score, or comparing the same thing?

    Also, I may be exceeding my authority – but sure – you have can have an OBE for services to perseverance.

  2. RJ:

    Both that and the Taylor Report! Clearly an insomnia sufferer, Peter!

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