Three more government departments have undergone Procurement Capability Reviews. Paul Snell explains the findings
Few of us have fond memories of having our test scores read out in front of the rest of the class at school.
But something very similar is happening to buyers in central government. Under the Procurement Capability Review (PCR) process, their departments are reviewed and rated and their scores are revealed publicly.
Announced as part of the government's Transforming Government Procurement overhaul, the PCRs are designed to act as a health check for central government buying, identifying what works well and what needs to be improved.
The first three reviews, covering the Department for Work and Pensions, the Department for Education and Skills (as was) and the Department for Communities and Local Government, were published in December 2007 (Whitehall's mixed review, SM, 3 January). Now it's the turn of the Department for Transport (DfT), Department for Environment, Food and Rural Affairs (Defra) and the Department for International Development (DfID).
Departments are assessed in three areas by the OGC - leadership, skills development, and deployment and systems. These categories are broken down further into nine "key indicators" including stakeholder and supplier confidence, visibility and impact of leadership, and governance and organisation. Each of these areas is given a rank ranging from green, meaning "strong", to red, which signals "serious concerns".
In this second round of reviews no department received a score at the extreme ends of the scale - most categories were given an amber ranking, meaning "development area".
But this should not be a concern, according to OGC chief executive Nigel Smith. "Although there is a good deal of 'amber' scores in the individual reports I am keen that departments and the wider community understand that 'amber' is not a bad score; it indicates fit for purpose with some clear scope for development and improvement," he wrote in the foreword to the reviews.
The DfT was given three amber/green ranks, five amber and one amber/red. Defra achieved one amber/green rank, five amber and three amber/red. DfID had no green ranking in any category, scoring six amber and three amber/red ratings.
With evidence from six completed reviews so far, the OGC has identified a number of "potential issues" that arise consistently.
As in the private sector, the lack of skilled and trained commercial staff is a concern. And although good people can be found within departments, there continues to be a shortfall of resources to meet demand, with reviewers seeing "heavy reliance on interim/consultancy to fill commercial posts".
Linked to this is a lack of contract management skills and resources in departments, and the need to ensure contract managers become part of the procurement community and get the training they need.
There were also problems concerning the ability to obtain accurate management information, even in seemingly basic areas such as how much money is spent and which suppliers it is spent with. This is also the cause of another emerging issue, a lack of consistency when measuring performance, which cannot be achieved without decent data.
How procurement teams can influence spend over their department's agencies, non-departmental public bodies and other related organisations also continues to be a problem. While the OGC recognises there are agreements to preserve the independence of some organisations, it has seen examples of teams extending their influence - even if this is "sometimes due to little more than the force of personality of the head of procurement".
Other less common issues include a lack of commercial strategy, inconsistent supplier relationship management (SRM), absence of category management and the need for more knowledge sharing between departments.
DfID was criticised as having "no articulated procurement vision, mission or strategy", viewing procurement "narrowly" as a primarily administrative and tactical function and "no evidence of a whole-life, total cost of ownership approach". This is not good news for an organisation the OGC considers to be "first and foremost a 'procurement' organisation", buying in the services it needs to deliver aid.
There was also concern that supplier performance is not managed or used to influence future procurement decisions. And although the department's application of EU procurement rules is rigorous, it means it is often too inflexible in its approach.
The department was also unable to provide a map of its spend or records of spend with suppliers. The review team found no evidence of benchmarking of procurement process or performance, and said management reports "lack insight and analysis".
The department has difficulty retaining its staff, who have limited roles and lack leadership preparation, creating a culture of "to 'get on' you need to 'get out'".
Recommendations for the department include creating a procurement policy and strategy to address leadership, improving procurement skills and establishing closer monitoring of supplier performance.
The DfT received the most positive of the current round of reviews, which said the department's £10.9 billion annual spend is "generally well controlled" and "there is considerable good practice and some that is genuinely leading edge".
It added there are "impressive people in procurement" and Jack Paine, procurement director at the DfT - described as "well-regarded, energetic and visible" - has "strong credibility with colleagues".
However, it also said there is a "limited grip on spend" across the department and its multiple agencies, which include the Highways Agency, Maritime and Coastguard Agency and British Transport Police, and information is not collected regularly. And while the department is seen to be an "intelligent client" with suppliers in most spend areas, it lacks an overarching view of key vendors across the organisation.
Although the department has good staff, it does not have a "people" strategy, causing problems in succession planning, a high dependence on key staff and an unstructured approach to professional development. Recommendations to improve this include the implementation of a strategy covering recruitment, pay, career development and succession planning, and a review of senior staff responsibilities to avoid "bottlenecks".
The DfT was also advised to develop an SRM programme for key suppliers across all of its organisations, to help with innovation, risk management and sustainability.
The lack of SRM was also raised in the Defra review. Although suppliers rated buyers as well-trained, competent, ethical and fair, there was "no co-ordinated approach to enable the sharing of supplier performance or benchmarking of services provided".
Defra was also criticised for lacking a strategy to co-ordinate technology across departments, with different agencies running different systems. The department has only run one e-auction - back in 2003 - but plans to hold one more.
Like the DfT, Defra finds it difficult to recruit and retain staff. Head count in the central procurement team has fallen from 79 in 2004 to 48 in March 2008. This has led to a strong reliance on interims, with 30 currently employed in the department, some having been in their role for five years and filling "many of the senior positions".
And while leadership, both from the permanent secretary and director of procurement, was described as "passionate", there is no overall commercial strategy and limited governance over spend. The central procurement team only controls £1.1 billion of the £4 billion annually spent by the department as a whole, which includes organisations as diverse as the Rural Payments Agency, British Waterways and the Carbon Trust. This leads to a lack of collaboration and no consistent approach to category management.
Defra was also told to draw up a strategy for staff, which could include secondment and job rotation in different procurement teams across the organisation.
The next three procurement capability reviews, evaluating procurement at the Department of Health, Home Office and HM Revenue & Customs, will be released in November.
Improvement and beyond - what happens post-review
After each department has agreed its improvement plan with the OGC, an OGC procurement transformation manager (PTM) is appointed to help the department make changes, resolve specific issues and find sources of best practice.
A "milestone" assessment is carried out at both six and 18 months after the initial review, where the department gives its own opinion on progress made and problems encountered. The PTM also gives their view, which is fed back to the OGC's chief executive and directors, who then meet with the department's permanent secretary.
After 12 months a more formal review, known as a "stocktake", takes place. A review team member carries out three days of interviews to review the initial findings of the PCR and find evidence of improvement. Suppliers and stakeholders are also questioned about improvements they have seen. Another stocktake will be carried out 24 months after the initial PCR.