Crown Commercial Service Business Plan for 2016/17 – Costs Grow Dramatically

The Crown Commercial Service (CCS) issued its first Business Plan last week, and it raises a whole range of issues about the UK central government's collaborative procurement arm.  It is good news that the organisation has published this document, in the worthy spirit of openness and transparency, but it is only six pages plus a cover, and in some ways, the lack of detail raises more issues than it answers. We'll have an overview today, then come back to some specifics later this week.  The CCS plan describes five strategic objectives as follows:

1. Savings delivery: To deliver savings for central government departments and the wider public sector

2. Service delivery: To undertake services which can be delivered in an efficient manner and meet the needs of customers; to increase spend through central deals

3. Policy delivery: To deliver the government’s objectives on procurement policy

4. Business transformation and capability: To continue to improve commercial capability and organisational efficiency; to improve staff engagement

5. Governance and financial management: To strengthen operational controls and deliver the financial plan.

The priorities that sit within those objectives include the obvious areas one might have expected: a focus on improving service to central government customers, contributing to the achievement of policy goals, such as supporting SMEs (smaller firms), and living within the financial plan. Implementing the operational review - Malcolm Harrison was leading that before he stepped up to be CEO of the whole organisation - is another. However, some are more interesting, and here are those we will come back to later this week.

Changing our Funding Model

We will begin to phase-out the current system of charging government departments a managed service fee, instead using supplier levy income to fund our operating costs. We will start introducing marginally increased percentage levies.

 Growing and Supporting Customers across the Wider Public Sector

We also aim to grow our wider public sector business by 20%, targeting both existing and new commercial products at local authorities, the NHS and other areas of the public sector, in order to generate commercial benefits including savings of between £200m and £250m.

We will also look at adding additional value from entering new spend categories including waste management, supply teachers and social care delivery.

Delivering Digital Transformation

Key to driving more savings is our ongoing digital transformation. We will invest significantly in technology in the year ahead to replace/refresh many existing systems to deliver services more efficiently and free up capacity.

Crown Marketplace

At the centre of this transformation is the establishment of Crown Marketplace – a new digital platform for our customers to access our great deals. The Crown Marketplace will provide a one-stop shop for our customers, directing buyers to the best deals and solution for their needs.

The next twelve months will see a number of milestones for the project, including signoff of the business case and the securing of resources, before implementation begins for the pilot phase. This will include a small number of categories and customers.

Some of the targets around these objectives are solid - the marketplace for instance will have a "Business case signed off" and a "Contingent Labour pilot in place" by March 2017.  But others fail the SMART test (specific, measurable, achievable, realistic, time-bound). For instance, in terms of growing wider public sector spend, "Up to 20% growth in line with financial plan" is meaningless, as any goal with the words "up to" tends to be.

Finally, for today, a look at the headline P&L type numbers, which may raise eyebrows. We had the idea from various comments (such as those from Matt Denham here) that CCS might be retrenching somewhat in its activities. But the plan shows the cost of the organisation rising from £66.0M to £79.3M this year. Income rises to cover those increased costs, which relates to the comment around higher supplier fees, although there will be a shortfall in the year of some £3.2 million (so the organisation will be loss making basically). However, the spend influenced by CCS actually declines very marginally from £12.8 to £12.7 billion.

The increase of 20% in costs is astonishing at first sight. Perhaps we should be pleased that so much more is being invested in public procurement, or perhaps it reflects a transfer of resources from the departments to CCS? But it is hard to think of many public sector bodies that are growing in that way at  the moment. So when National Audit Office takes a look at the organisation, as it will shortly, CCS will have to defend itself against the charge that it is becoming less "efficient" , whilst funding those increased costs through charging the market more. And let's be realistic, those supplier charges come back to the budget holders eventually.

We've also asked for an interview with CCS and that would obviously be one of our central questions. We will be back with more analysis later this week.

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