One of government CCO Gareth Rhys Williams’ KPIs is keeping Whitehall procurement out of the Daily Mail, and he’s seeking the brightest commercial minds to help him do it
Nothing in government is simple. That’s the general rule, and it is particularly evident when strengthening the procurement set-up across a whole gamut of governmental departments and out across the wider civil service and local government. But Gareth Rhys Williams, the chief commercial officer leading this transformation, is not phased by his task. Rather, he is well on the way to enabling the Cabinet Office to deliver best value for the taxpayer. Last year, his team saved about £2bn, and they are only about half-way through the process.
The £2bn is a commercial benefit, not savings as such, points out Rhys Williams, as it is always fed back into something else. “So, that’s four teaching hospitals, two frigates, or any number of police cars,” he explains.
“The range of things we are doing is exponentially wider compared with the commercial world I’ve come from,” he adds. (He used to work in the private sector.) “This is such an interesting and exciting place to work because we do the most extraordinary things.” The departments are specialised, and procurement staff work on specialist requirements, buying a huge range of items, from submarines to squirrel contraceptives [for the Department for Environment, Food & Rural Affairs].
“In terms of service we are buying everything from dog grooming – you’d be surprised how many dogs we have: guide dogs, police dogs, army dogs, cancer-sniffing dogs, drug-sniffing dogs – to accommodation for asylum seekers or testing services for disability benefits.”
“Given that we spend across central government the thick end of £50bn, it is always easy to find something that is not right,” he admits, but his vision remains ambitious – to create the best commercial function in the UK.
The government’s awakening to the need for transformation came around 2013, when the Ministry of Justice secretary Chris Grayling revealed that Serco and G4S had been overcharging the government by “tens of millions of pounds” on offender tagging contracts, largely down to poor contract management. It was a scandal that Rhys Williams says is “seared in everyone’s mind”. That came only a year after significant flaws were found in the Department of Transport’s West Coast rail line bidding process, highlighted when Virgin Trains challenged the contract award to First Group, and which cost the government £40m.
A capability review followed and the plan to introduce a commercial team operating as a function serving central government departments, arms-length bodies – like the Met Office, DVLA, the BBC – and local government.
When Rhys Williams arrived, work had already been done on improving deals with vendors, which took place “during the coalition government, with huge costs-down to balance the books”, and a number of new staff members had been brought in. His key task was to build internal capability. And his plan ran across three streams: people, structures, and systems.
As a former chief executive, Rhys Williams has driven transformational change in large, federated organisations, and believes commercial talent is needed to lead complex and novel programmes and projects. He has also been involved in cross-functional work at businesses including packaging firm Bowater (now Rexam) and British Plasterboard, where operating standards and benchmarking were common practice. “Those two things were almost entirely lacking from the commercial work here. Now there’s both,” says Rhys Williams. He also had experience of selling into government – from electronics and data shredding to washroom products via PHS, the facilities management firm he led until 2014.
His task, as well as being complex, is huge. It involves about 4,000 people purchasing across central government departments alone – of which there are about 18, give or take a merger/split or two. There are about 60 arms-length bodies with huge spend running through them. And then there is local government.
The objective was to build a cadre of commercial people who run across departments, supporting the permanent secretary in delivering that department’s objective. It was not so much the procurement skillset that was needed, explains Rhys Williams, but a wider business acumen and experience of different sectors – knowledge that could help when dealing with large vendors and integrating what they were doing across government. “It is about capability, expertise, helping with delivery and cost, and avoiding cock-ups,” he says.
A central solution
The solution was the introduction of the Government Commercial Function (GCF), with the Government Commercial Organisation (GCO) to manage and improve the calibre of senior staff.
The GCF shares resources to maximise the effectiveness of the local buying teams. It comprises department commercial teams, who can draw on the resources of central commercial teams and the purchasing clout of the Crown Commercial Service, which procures common goods and services for central government and the wider public sector.
The GCO is the senior subset of the function, providing a mechanism, acceptable to the Treasury, to administer pay freedoms to attract highly trained, networked people for about 400 roles, to help the commercial agenda of their department.
This was a crucial piece of the plan, as civil service pay for commercial staff had fallen way short of the marketplace over a decade or so, says Rhys Williams. “This was partly because of the public sector pay structure, but also because in the external market everyone is racing to improve the calibre of their commercial people because they can see the value that it generates.” By paying the senior staff through the GCO, the Treasury could keep an eye on the structure. “The deal we have, which is broadly similar to the deal of the existing civil service terms, is higher pay, a higher potential bonus up to 20%, and offset by a lower pension,” he says.
The pay deal for the staff appointed to the GCO – who would lead the commercial teams – was signed off about a year ago. Recruitment onto the new pay system is a rolling feast, as departments themselves must first go through a blueprinting exercise, to check the structure of the commercial process is correct.
There are up to about 230 people now in the GCO, including about 130 new hires, says Rhys Williams. Civil servants who qualify can choose to stay on their existing pension-heavy terms, which can be important for long-standing employees. “Outside the civil service, the pension scheme appears to have been less attractive, so they are coming in on the higher salary and bonus. Offering a menu to make up a total package is a well-trodden path,” says Rhys Williams. “And it has solved the problem of being unable to recruit.”
Blueprinting the departments confirms the commercial staffing needs. “It lays out the commercial challenges, the pipeline of work, and what is the correct or appropriate structure, grade mix, skills mix, number of people,” he explains.
Getting the right commercial structure also involves checking the cost of the function as a portion of how much is spent, and ensuring sufficient resources for senior commercial staff. “We are spending £40bn or £50bn, so when you look at it in those terms, in many departments we did not have the right staff resource,” he suggests. “We have benchmarked with a number of commercial organisations what is the appropriate size for a business doing that sort of volume of work. Getting that approved has been – I think – a seminal moment. If that had happened in living memory, no one can remember it. So that is a really important step forward.”
Once the department has been blueprinted, the senior commercial team can be recruited to GCO. “Every senior civil servant who wants to work in commercial in one of the roles on the blueprint has to go through the Assessment and Development Centre.”
This involves a full day assessment. “We built job specs, professional standards with CIPS and IACCM [the Association for Contract Management], and worked with workplace psychologists to create a battery of case studies that people go through. It is a proper assessment centre in the way the private sector has used for a long time, but it is new within commercial in the civil service. People who pass first time are good,” he says.
Those who pass well progress to ongoing learning and development – less well and they get additional training and a retest. “Folks who get a C are probably not in the right role, and there is a career discussion about whether they want to continue in commercial.”
A flipside advantage is the huge sense of community that has been created, explains Rhys Williams. “Because they must all pass the same tough, high hurdle, everyone is more open to working together on cross-government projects because they know the counterparty on the other side of the table – who they may well not have previously met until the GCF was set up – is competent and switched on,” he says.
“There is nothing more corrosive to team dynamics than finding out half way through that the other guys don’t really know what they are doing. Now that has been borderline eliminated.”
Once the right team is in place, it makes sense to plan for that to continue. “We have never before had an across-Whitehall look at the talent,” says Rhys Williams. “So we look at succession planning across Whitehall. ‘You’ve got a gap coming up in a year or so, and somebody in another department could be a candidate to fill that, so what development do they need?’ That is something that a function should be good at. We have just finished off the first round of that for the senior roles.”
Ensuring the right systems – or methods – are in place is another focus. Before the changes, departmental sign-off from the central assurance team happened far too late. “When someone wants to sign a contract, saying ‘you haven’t done that very well’ is totally unhelpful, it wastes time and annoys everybody.”
So Rhys Williams has introduced a requisite level of assurance plan, making sure there is time to avoid just accepting the default, which they then live to regret: “At one end, no assurance if it is something simple that the department does every time, to a full package of assurance along the stages of its life if it’s new or contentious.”
“We wrote ourselves some commercial operating standards, done by a wide group of people across Whitehall,” he adds. It defines good, better and best processes. Departments started by self-scoring, and now there are masterclasses sharing best practice, he explains. “This is leading to some quite punchy discussions. In any benchmarking exercise in the first couple of rounds there are a few pithy conversations round the back of the bike shed: ‘You’re not that good.’ ‘Gosh, we’re better than we thought.’” Then the system will settle down after a couple of iterations. “The point is that everyone shares ideas and picks up things that are relevant to their department, such that every six months people will have improved, moving from development to better, to best,” says Rhys Williams.
A performance dashboard is being built to monitor the systems, and simplify benchmarking across departments. “This is groundbreaking in a way that might be surprising for private sector organisations. Here there was nothing like this before,” he says.
The changes keep coming, with more firsts for government departments. Every improvement will help the function, and its many novel or contentious projects.
Take the accommodation contract for asylum seekers. “It is difficult to estimate how many asylum seekers are going to turn up any season let alone every week, to know where they are coming from, if they are families or individuals,” says Rhys Williams. “The management of that contract is complicated, so we have been spending time working with the vendors on how to write these contracts in a flexible way that allows them to flex as demand goes up and down in a way that we can’t predict.”
“It’s not,” he stresses, “that we are bad at predicting, it is that it is unpredictable.”
This is an unusual situation – you wouldn’t see that in the private sector, he adds. And it is a perfect example of how important it is to ensure there is a better commercial process in the pipeline than just holding up a scorecard at the end.
Selling the concept of a commercial function in government
In government, where all the energy flows through departments, the commercial function had been a fractionally understood concept, says Rhys Williams. “A year ago, a lot of people would have said a function was in opposition to a department,” he says. The administrative management of a government department is headed up by a permanent secretary, with staffing groups for finance, operations, policy, and specific specialisations for the department. “Usually buried in the finance group is a commercial group who buy,” says Rhys Williams.
Some private secretaries – a role that links the government minister and the department officials – had been concerned they would lose some people and some control through a central commercial function, but they soon saw they were the same people – but better trained. “Most of the effort is done by local people in their department who know what they are talking about,” he says.