Treasury transforms government procurement

1 February 2007
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01 February 2007 | Antony Barton

The long awaited Treasury report on the OGC finally arrived last week, with plans to overhaul the department and increase procurement skills across government.

Seven months after a five-month review, prompted by planned cuts in this year's Treasury funding (News, 21 September), the OGC welcomed the Transforming government procurement report. Yet one week later the head of the department, John Oughton, announced his resignation (Web news, 30 January).

Oughton explained that he would be stepping 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 probably agree with the decision.

One major alteration outlined in the report is the transfer of responsibility for monitoring efficiency from the OGC to the Treasury from later this year. The Treasury says the OGC's success in establishing the 2004 Spending Review efficiency programme means efficiency savings can now be included in each department's financial management. The report also describes the creation of a Major Projects Review Group 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.

Research by the CBI assisted this renewed emphasis on professionalism. 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 departmental 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" but says the improvement process will likely involve experts travelling across from the private sector on a secondment or permanent basis to support a boost in public sector skills.

Peter Fanning, deputy chief executive of the OGC, 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 are not resting on our laurels and we don't think everything is right," he says. "We recognise suppliers have legitimate complaints about buyers and we're absolutely determined to improve."

The Department for Work and Pensions (DWP) used its large spend and good relationships with suppliers to work with the OGC last year to form the second biggest cross-government procurement contract ever (News, 14 December). David Smith, commercial director of the DWP, agrees with Fanning and adds that government must tackle its bureaucracy and cumbersome procurement processes.

"I think it's a legitimate worry, particularly for SMEs, where the resources to keep pitching for government business are finite," he says. "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."

He adds that the techniques employed by departments with procurement expertise are likely to be used across other departments, so there is a consistency in purchasing. "It's about using the best of what is available rather than inventing new approaches," he says.

But 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."

The wording of the report suggests the OGC will have this authority. It says the government will be "giving the OGC strong powers to drive these improvements", with the ability to "ensure remedial action is taken where necessary".

It mentions increased monitoring powers and the ability to "require" that departments take up centrally-negotiated deals and collaborate in their work with key suppliers. John Healey, the financial secretary to the Treasury, told a conference at the launch of the report that the OGC would be able to "demand departmental collaboration when buying common goods and services".

Yet neither the report nor the OGC clarifies whether the OGC will have the power to force departments into any action other than to comply or agree non-compliance.

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 people out of bed, if you are a commercial person, is doing a good deal for your department," he says. "You just need to demonstrate clearly what the best deal is and you do that by getting people to share information. That is what we're doing."

Nevertheless Bentley urges the government to implement the report's recommendations swiftly and openly.

In response, Fanning says the OGC is already working towards more collaborative deals, procurement stock takes, the GPS restructure and the Major Project Review Group. The OGC 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 confirmed 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 on a regular basis as they are being pushed 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 position, 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 to external recruitment.

Fanning says the OGC has invested in its human resources department to support employees as they pursue alternative careers. He adds: "The OGC is a people business. We care about our staff but we have to reduce the headcount and we will do it in a way that is consistent with best practice and the rules and values that are set down by the Cabinet Office."

He adds that morale in the OGC is mixed: "People are undoubtedly sad about the reality of the headcount but they're also terribly excited by the challenge that has been offered to us."

SMfeb2007

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