08 February 2017

A third of government money is spent on contracted goods and services, and Tom Gash argues that reforms to improve government contracting must get the support they deserve.

In 2012 and 2013, government’s mismanagement of outsourced services was front page news. The botched West Coast Rail franchising process, G4S’s failures to recruit enough security guards for the Olympic Games, and – most famously – problems in Ministry of Justice’s contracts for electronic monitoring of offenders were the most high profile cases.

The sense of a cross-government crisis then increased as a result of a steady drip of less publicised problems – around out of hours GP services, asylum seeker accommodation, and legal aid, for example – and due to systematic investigations by the National Audit Office and the Institute for Government highlighting systemic weaknesses in government’s approach.

The cases spurred government action. But while a new focus on commercial capability helped drive improvements – as shown by an National Audit Office’s review of successes in the Ministry of Justice – not all the actions taken were helpful.

The drive to centralise procurement directly from the Cabinet Office (rather than in departments) was overly-hasty, and antagonised many working in Whitehall’s fiercely independent departments. It created an unproductive dynamic in which both the Cabinet Office and departments often simply complained about each other’s performance rather than helping each other to improve.

A refreshed approach

Today’s report sets out other steps taken since 2016 to improve the commercial capacity of the civil service.

The first big step last year was Gareth Rhys Williams being appointed as the Government Chief Commercial Officer. This ushered in a significant change of tack. The reforms still focus on improving capability but there is less emphasis on centralisation as a route to improvement. Under its new Chief Executive Malcolm Harrison, CCS will concentrate on improving its core offer to departments, not expanding.

More time is being invested in bringing commercial leaders from all departments together to co-design and drive improvements. Departmental commercial directors now meet more frequently than ever before and share departmental successes and debate ideas, building on the approach that has been used with some success by the Government Finance Function.

There has also been an accelerated push on recruitment of senior commercial professionals. Within a year, the Cabinet Office has set up and run several assessment centres, both for new recruits and for existing commercial leaders.

The reforms are focused on the right issues – and have the potential to succeed. For once, progress will actually be measured. Commercial directors have already worked together to define how they will measure whether commercial capability is actually improving – as set out in the Government’s recently published Commercial Operating Standards.

Our report found that commercial staff and senior civil servants agree on the importance of this agenda but there are naturally debates on the detail. Some wonder, for example, whether there is too much emphasis on staff and external recruits. Others don’t think the shift in pay is significant enough to make a difference to recruitment. Overall, however, few deny the need to improve commercial skill, raising skills to those of the best already working hard in government and developing new ways of working.

What next

It’s one thing to improve the calibre of commercial staff and processes but it’s quite another to ensure that their professional advice is heeded. Mistakes are often the result of ministerial haste, inadequate funding for ongoing contract management, and other decisions (for example, about contractual incentives) made by generalists. So attention will in time shift to building the ability of senior civil servants to assess and value commercial advice.

Overall, however, the reforms are highly promising. Now they must be sustained. Attempts to raise capability often take several years to bear fruit so patience and persistence will be required.

Past reforms of this type have too often been allowed to tail off as new short-term priorities have swallowed all senior civil service attention. And they have faded too when the Cabinet Office and individual departments have allowed minor disagreements over the best approaches to raising standards to distract from their strong shared interests in raising commercial capability.

Of course, current plans can and should be refined as leaders learn what is working, but commercial capability is simply too important to the performance of government to fail. Our polling shows that 53% of the public think that when something goes wrong with contracted public services, no one takes responsibility. It is time for the civil service to prove them wrong.

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