Treasury: major reform for OGC

15 February 2007
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15 February 2007

Job cuts, a new chief executive and improved procurement skills - that's the outlook for the OGC in the light of a new report, says Antony Barton

The past month has seen frantic activity at the Office of Government Commerce (OGC), and the repercussions of the department's overhaul and the appointment of a new boss may mean further changes in central government procurement.

The long-awaited Treasury report on the OGC arrived last month, with plans to radically change the department and increase procurement skills across government.

The OGC welcomed the report, Transforming government procurement. Yet one week later the head of the department, John Oughton, announced his resignation (Web news, 30 January).

Oughton explained he would step down at the end of March because it was the right time to appoint a new chief executive. Considering the extent of some of the proposed changes, many may agree.

One major alteration will see the transfer of responsibility for monitoring efficiency from the OGC to the Treasury. The Treasury says the OGC's success in establishing the 2004 Spending Review programme means efficiency savings can now be included in each department's financial management.

A Major Projects Review Group will also be created to ensure the most complex public sector projects are subject to an enhanced Gateway review process. This will be based on the scrutiny of local authority PFI projects and chaired by the Treasury.

Oughton specified the need for tougher Gateway review processes when he spoke to SM last October. He insisted it was necessary "to be absolutely satisfied in a complex procurement with a significant acquisition element that procurement questions are being thoroughly addressed at the start".

He also said there was a need for "renewed emphasis on professionalism of the procurement function" - an area given considerable coverage in the Treasury report.

Neil Bentley, CBI director of public services, says business is keen to provide practical long-term help in improving public sector purchasing: "We can improve the skills of procurers and assist the capability reviews because we can identify, from a private sector perspective, what makes a good procurer, contract management specialist and commissioner of services."

He says the focus on improving skills is not a euphemism for recruiting more purchasers from the private sector and insists the skills in the public sector are increasing. He points to the Department of Health, the Home Office and the Department for Education and Skills as departments with "excellent commercial understanding". Yet he says the improvement process will probably involve experts travelling across from the private sector on a secondment or permanent basis.

Peter Fanning, deputy chief executive of the OGC (and acting chief executive from April), stresses that purchasers in the public and private sector are of comparable skills but good purchasers in both markets are in short supply. "Although there are centres of excellence in the public sector, we recognise suppliers have legitimate complaints about buyers and we're determined to improve."

David Smith, commercial director of the Department for Work and Pensions, agrees, adding that government must tackle its cumbersome procurement processes. "We must make sure processes are consistently expert. Government needs to be easier to do business with and it must demonstrate efficiency without placing undue burdens on the supply market."

In his view the techniques employed by departments with procurement expertise are likely to be used across other departments, so there is a consistency in purchasing.

But the Treasury findings don't please everybody. Vincent Cable, shadow chancellor for the Liberal Democrats, is sceptical the report will change anything. "We've had different agencies and different government departments that have operated as separate fiefdoms and they've simply ignored good practice requirements," he says. "If the OGC had the powers to whip them into shape then perhaps it would change."

Indeed, the report said the government will be "giving the OGC strong powers to drive these improvements", with the ability to "ensure remedial action is taken where necessary".

John Healey, the financial secretary to the Treasury, says the OGC will be able to "demand departmental collaboration when buying common goods and services".

Fanning insists the OGC has strong backing from the Treasury to implement change but adds that it will not be necessary to force departments to follow procurement best practice. "What gets commercial people out of bed is doing a good deal for their department," he says. "We need to demonstrate clearly what the best deal is and we do that by getting people to share information." Nevertheless, Bentley urges the government to implement the report's recommendations swiftly and openly.

Fanning says the OGC is already working towards more collaborative deals, procurement stock takes, the GPS restructure and the Major Projects Review Group. It is, however, unable to comment further on its progress.

But there are more details available on a central and sensitive element of the report. Fanning confirms that for the OGC to be "a smaller, higher calibre organisation", the workforce will be halved to around 200 within the next four years.

The cuts can be made because the OGC will no longer provide civil servants as consultants to government departments as ministries have been encouraged to develop their own procurement skills.

There will be a job-mapping process to see which staff fill the newly defined roles. If there is less than a 90 per cent match between a current position and a future one, the department will consider whether the skills needed for the new role are likely to be available elsewhere in the OGC. If this is not the case, the department will look externally.

Fanning says the OGC has invested in its HR department to support staff as they pursue alternative careers. He adds: "Of course, people are sad, but they're also excited by the challenge that has been offered."

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THE OGC TIMELINE

  • April 2000 - The government's new procurement agency, the Office of Government Commerce (OGC), begins work, headed by Peter Gershon, former COO at BAE Systems.
  • March 2003 - Gershon sets the OGC a target saving of £3 billion in three years, following an announcement that the organisation has saved £1 billion in its first three years.
  • October 2003 - Gershon announces he will step down as head of the OGC in 2004.
  • March 2004 - The National Audit Office (NAO) says the OGC has beaten its savings target of £1 billion, but claims some departments still lack procurement strategies.
  • April 2004 - John Oughton takes over from Gershon as chief executive. He was previously deputy chief executive of the department.
  • July 2004 - Releasing resources to the front line, a review of government efficiency, is published by Gershon. The Spending Review 2004 responds, setting efficiency targets of £21.5 billion by 2008. Procurement estimates it will make £7 billion of efficiency gains.
  • February 2006 - The NAO publishes a highly critical report, Progress in improving government efficiency, which finds there are "inconsistencies in measuring efficiencies".
  • September 2006 - The OGC confirms it is likely to become a smaller operation.
  • 23 January 2007 - The Treasury releases Transforming Government Procurement, the "first major reshaping of the OGC".
  • 30 January 2007 - Oughton announces he will stand down as chief executive at the end of March this year.
  • February 2007 - Procurement estimates that savings of £9.7 billion can be made by 2008.


* A full report on the OGC's progress towards the Gershon review will appear in the next issue of SM on 1 March.

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