NAO on Crown Commercial Service – What Went Wrong With Procurement Centralisation Initiative?

We have been threatening to come back to the UK National Audit Office report on Crown Commercial Service since just before Christmas, so here we are finally. Today, let’s look at some of the core historical findings, then we’ll feature the “going forward” thoughts later.

Perhaps the core point made is simply that the “government’s reforms to central buying have not been well managed”.  That is obvious to most observers, and even Bill Crothers (the previous government Chief Commercial Officer) pretty much admitted that when we interviewed him a year ago.

The NAO do think that “the strategic argument for joint buying remains strong. For central government to achieve value for money from its common goods and services, it needs to finish the centralisation it began in 2014”.

We would agree with that, although the report does not go into the justification for centralisation in much depth.  But the caveat from NAO is also important, saying there is a “lack of clarity on what should be centralised”.  Departments and the centre have not always agreed on what is “common” and this has led to differences in projections – “estimates of the common goods and services suitable for centralisation have varied from £8 billion to £15 billion”. The difficulty comes from categories such as IT, where some spend is common and some is highly specific to the particular department.

So, the move to centralise procurement in CCS back in 2014 was rushed, mandated and badly planned – “Cabinet Office relied on a Cabinet Committee mandate to get departments to transition their services quickly and did not focus enough on how it would manage them once they were transitioned”.

Even though we were aware of their feelings, it is fascinating to see in a formal report just how thoroughly the new management has “trashed” the plans and thinking of the previous regime!

However, CCS’s current management does not consider this plan to have been achievable as it thinks the plan wrongly estimated the amount of common goods and services appropriate for centralisation, and the buying services which should be undertaken centrally…  CCS’s current management also believe the original plan did not adequately define the activities that customers would still need to carry out. In 2015 CCS suspended the transition of services and changed its targets for transferring buying services to it”.

Many of the planned workforce transfers from departments to CCS have therefore not happened, hence headcount savings have largely not been realised. The original plan estimated that the changes would realise net benefits of £3.3 billion over the four years to 2017-18, but NAO says that “savings are hard to measure”, and there have been complaints about service, although “matters seem to be improving” under Malcolm Harrison, the new CEO.

One key point identified by NAO is that there has been little standardisation of services. On reading this, we thought, “we’ve seen this before” – oh yes, the shared service centre fiasco! Another programme where Cabinet Office postulated savings from centralisation, without realising apparently that simply bringing disparate work together in one place generates little benefit. Standardising then sharing resource and process cost can drive savings  – but just carrying on with many different approaches plus having all the hassle of transferring work is likely to end up with a situation that is worse than doing nothing.

A final worrying point made by the report is that frameworks have been extended, probably illegally in some cases. “CCS does not manage the lifecycle of procurement frameworks well: it has extended 45 of the 58 frameworks due to expire in 2016-17 without market testing or competition ... Purchases made under extended frameworks are a risk to value for money ... Contracts issued under expired procurement frameworks contravene public contracting regulations …”

That is something Harrison and the new team must get to grips with quickly: actually getting that production line of new contracts rolling again. Of course, contracts and frameworks need to be let in an effective manner, but you can’t take too long with pre-procurement market engagement and so on while you are in effect driving users into breaking the regulations!

And around “38% of the framework deals in its database (177 of 465) have no information on either start dates or end dates or both”. That seems astonishing – such a basic bit of admin that even the smallest procurement function would expect to get right. Again, blame will be pointed at the door of previous management for this.

All in all, things can only get better and according to the report, there are signs that is the case. We’ll be back with the more forward-looking analysis shortly.

First Voice

  1. Trevor Black:

    Who would want to take this on? Anyone with outstanding leadership and commercial skills should not underestimate the power of the “Sir Humphries”. The lack of strategy and political support has resulted in a revolving door situation for the Chief Procurement Officers who have jumped ship before the ship has left the port and the regular changes in name only reflect the reality of a serious identity crisis. It will be interesting to see where the skilled negotiators will come from the help the Government through Brexit – no doubt Sir Humphry is taking care of that!

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