Crown Commercial Services – What’s the Right Structure?

Today sees the Public Procurement Summit taking place in London – we will be there and will report on events tomorrow. Some of the focus will no doubt be around the role of Crown Commercial Services (CCS), so we thought we would come back to that today.

In our last article about CCS, we looked at the organisation's overall strategy and highlighted the conflict between serving the strategic goals of their Minister and the Cabinet Office (their own management hierarchy) on the one hand and working to meet the goals and support the objectives of their "clients" (the numerous departments, agencies and other public bodies) that they are working with and for. We suggested that the only long-term sustainable future for the organisation is to focus on those "customers" which means moving away from being focused quite so much on claiming "efficiency savings".

If CCS were to adopt such an approach, what would that mean for the structure and the way CCS is organised? That takes us into both some familiar waters for students of procurement structures (CLAN, SCAN etc) and some issues that are particular for CCS. For instance, many of their contracts are used by public organisations outside that central government dimension. Talking to a senior manager in another part of the public sector, they said this; "I know we moan about CCS at times, but we'd have real problems if we couldn't use their contracts for quite a lot of spend areas".

That means the questions of scope are even wider than it may seem at first sight. But if we focus more on the central government dimension, the question of structure also takes us into analysing the issues around categories. That's because a centralised structure sits best with centralised category approaches.

So let's take perhaps the least contentious spend category in terms of centralisation - energy. It is hard to argue that every department should buy their own electricity, or that the requirements are truly very different between different organisations. So it would seem logical to have a central electricity buying team servicing the whole of central government - and perhaps offering a service, or usable frameworks / contracts to other parts of government too.

But as we get into more complex and varied categories, we run into a few big issues. We find different departments and other bodies that have very different requirements. Facilities Management (FM) for the Passport Office in Durham bears little resemblance to FM for a nuclear submarine base. The Management Consultancy requirements for the Highways Agency are very different frpm those of the Foreign Office. To be fair, CCS does recognise this to some extent, hence its aim to move away from frameworks to committed spend contracts in some categories. But that has simply thrown up other issues.

Indeed, it has raised the question – what are the real benefits of bringing those organisations together from a procurement perspective in those complex categories? It probably isn't aggregation, leverage, buying power or whatever you want to call it, because the needs are so different. (Our view is that economies of scale are much exaggerated anyway in many categories, but unfortunately the press, public and even many politicians are seduced by simplistic “bigger buying is better buying” arguments).

But whether we want to "centralise" procurement or not for many categories, it is clear that resource must go into truly understanding the needs of different organisations, otherwise the central organisation will surely fail.

However, there may be a way through this conundrum. For whilst we are not big supporters of the economy of scale argument, we have much more sympathy for other arguments in favour of a degree of centralisation at least. For example, there is a lot of specialist knowledge needed to be an excellent buyer of consulting services. Not every public organisation can possibly possess those skills internally. So there is a potential role for a central procurement function - even if it is not focused in the main on pure aggregation.

We will come back and explore that more in the next part of this series.

 

Voices (4)

  1. life:

    “For example, there is a lot of specialist knowledge needed to be an excellent buyer of consulting services.” – I would agree and suggest this isn’t knowledge you’d find in a centralised procurement hub either.

    What strong procurement can do is help to drive down rates, organise process structures and ensure compliance. Depending on the purchaser, this off sets all the disbenefits (to all involved) of having a procurement team sitting in the middle often frustrating communication during a critical phase of the overarching consulting process. Some consultants would argue it also undermines the establishment of trust (as defined in this business/consulting context), a critical component of consulting that would only be seen as part of the smoke and mirrors of the consulting dark arts by those exclusively involved in buying and selling it, rather than those engaged in it directly.

    I agree that it is very unlikely, unless by dint of accident, that the procurement team would have as much knowledge and understanding of the issues at hand than that of the purchaser, and in fact you could argue that the “trying to be an expert at everything” approach is one of the main arguments against a central procurement function.

    1. Dan:

      Really? I’d argue that you’re more likely to find the necessary specialist knowledge in a centralised procurement hub than in the user departments who will only engage with consultants on an ad-hoc basis.

      1. life:

        You would think that this could happen, but “centralised” seems to result in “commoditised” as the breadth in scope increases without the depth (my experience is mainly public sector, and just a few very large private sector companies). I think there are limits to what procurement can achieve in very specialist areas like consulting anyway – demand and cost control can be effective for example, but quality is much more difficult.

  2. Simon Young:

    Good to see you today. As you said the article does go in the direction I was suggesting. We could develop that further in the context of DoH or indeed any other non-mandated organisation. For example, government might prefer to use cloud store rather than buy a copy of Amazon or eBay – mind you perhaps the chancellor could get a deal in lieu of taxes. So the CPA would act as a technical approved only and suppliers then maintain their own pricing, storage and distribution. No need for the CPA to run any logistics whatsoever and suppliers are subject to competitive pressure. We could call it a dynamic purchasing system!
    On the subject of SR2015, I would like to see budget holders being targeted to achieve savings. Why? Because they will actively WANT to engage with procurement to help solve their problem rather than have to be persuaded against their will to change.

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