New NAO Report – A Short Guide to Commercial Relationships

The UK's National Audit Office published a Short Guide to Commercial Relationships just before Christmas, the latest in a series of useful public procurement-related publications that go beyond the NAO’s usual remit to examine specific organisations, projects or activities.

Like the excellent Commercial and contract management: insights and emerging best practice guide which was published around a year ago, which we have been reviewing insight by insight over the past few months on Public Spend Forum, this new guide looks at general procurement and commercial issues across a range of central government organisations and draws on the many reports that NAO has produced relevant to these topics in recent years.

The new report is somewhat snappier, some 30 pages long, compared to 84 for the prior work, but both are essential reading for anyone interested in public sector commercial performance.  As NAO says:

“This Short Guide summarises the key issues the National Audit Office has encountered when auditing government’s commercial relationships, the progress government has made addressing these, and the risks that remain”.

The document is a combination of factual information, brief case studies and some NAO analysis. The data is very interesting and will be quoted by many for years to come we suspect (including Spend Matters and Public Spend Forum) – with statements like this:.

“£251.5 billion - Estimated government spending through external suppliers in 2015-16 based on analysis of Whole of Government Accounts, representing about 33% of total government spend”.

However, even the NAO leaves us with some questions. The initial spend by sector analysis seems to ignore Education, which is odd. And another chart (page 7) then shows total education spend of £89.7 billion, but third-party spend of just £7.4 billion. Such a tiny percentage of external spend surely seems unlikely?

This may just emphasise the difficulty of getting to accurate numbers, but there is much more to this report than just the data. After the initial numbers, it gets into an overview of government’s commercial activities, and comments on the governance structures.

Government bodies retain responsibility for the services that they contract out. The contract is the principal mechanism for accounting officers to ensure that contracted-out services contain appropriate accountability arrangements to meet the standards expected of public services. These arrangements should be set out in the Accounting Officer System Statements now published by each department”.

The NAO is also not afraid to make some quite direct comments.

The contract itself should provide a clear expression of the spending commitments and objectives. But, despite a clear legal and policy expectation that all contracts are made publicly available, we find that many are either not published or are severely redacted”.

That difference between positive statements on transparency and what happens in practice is something we experience regularly as we try to find out what is going on in government procurement!

Anyway, the report then moves onto its core, looking at “commercial themes” in the light of NAO reviews and work. We’ll come back and take a more detailed look at that soon, and there are also interesting comments and data around the current programme of Government Procurement Organisation assessment centres, which we will also look at again. But in the meantime, you can download and read the whole document here.


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