Government gets commercial

In summer 2013, news of the Ministry of Justice’s (MoJ) failure to manage electronic monitoring of offenders, a service provided by Serco and G4S, hit the headlines. There were plenty of failures before, but this incident marked a turning point in government’s awareness of the need to improve its commercial skills. The Government quickly embarked on a range of reforms: it commissioned a slew of (as yet unpublished) ‘commercial capability reviews’, accepted our proposal for a new standardised transparency clause (though it is still not fully implemented), and implemented various other Cabinet Office initiatives, such as a centralised log of upcoming government contracts in a still-somewhat-unwieldy platform called Contracts Finder. This cross-government reform agenda has been renewed since the 2015 general election, with Cabinet Secretary Sir Jeremy Heywood and Civil Service Chief Executive John Manzoni stating that ‘improving commercial skills and capability is one of the Civil Service Board’s top three priorities’. But the Cabinet Office isn’t the only department to look at for progress – other departments are also driving improvements in Whitehall. Departmental responses to the crisis Changes made in the Home Office (HO) and MoJ immediately after the Serco and G4S scandals have been assessed by the National Audit Office (NAO). They evidenced promising developments, such as the MoJ’s use of a balanced scorecard approach to assess supplier performance on major contracts and HO’s training offer for commercial staff. DWP’s category management approach Other departmental changes have been less well documented. For example, last financial year, DWP audited cash savings of £157m from renegotiating existing contracts. The DWP Commercial Director, Andrew Forzani, has been working with colleagues to embed a ‘category management’ approach to managing commercial relationships. This is based on the principle that organisations can secure better value for money if they actively manage spending on certain types of goods and services. It is familiar to most businesses but not government, and is hard to get right. DWP spends more than £3 billion on outsourced goods and services, and the department has identified five main categories of spend – technology, employment, health, corporate and facilities management – with senior commercial professionals clearly responsible for supporting operational leaders to secure value for money in each category. For the approach to work, ‘category leads’ in the commercial team need to work closely with policy and operational leaders – and this requires a more collaborative, mature working relationship. For too long, policy and operational staff have consulted those with commercial expertise too late to influence key decisions – creating a vicious cycle of late involvement, inability to help (both due to late consultation and, in some cases, weak capability), and frustration all round. Our report, Making Public Service Markets Work, showed how employment, social care and education services have all suffered badly when policymakers announce bold initiatives without understanding how companies will respond to their plans. DWP’s new approach is also supported by investment in systems and processes that allow it to better track when contracts are coming up for renewal and how well suppliers are delivering across multiple services. Assuming it works well, their software has the potential to be used more widely across government and help address widespread complaints from government’s suppliers. Reforms in Business, Energy and Industrial Strategy Like DWP, the Department of Business, Energy and Industrial Strategy (BEIS) commercial team is implementing a ‘category management’ approach. However, the challenge for Chris Pope, BEIS’s Group Commercial Director, in implementing this approach is considerable. The Department for Business, Innovation and Skills (BEIS’s precursor department) had a diverse network of more than 40 arm’s length bodies, so a ‘category management’ approach requires careful navigation of accountability and relationships across a diverse set of organisations and cultures. BEIS has already made progress, with skills being deployed more flexibly across BEIS organisations, greater sharing of commercial expertise (and even resources), and the creation and an acceptance of the value of common standards and approaches. Reasons for optimism – but work in progress These departmental reforms, which are so hidden from public view, are important. They suggest that there is a strong underlying desire to address some of the contracting fiascos of the recent past, and that there is a group of commercial leaders with ideas and energy to drive improvements. However, for them to bear fruit and continue much more work is needed and the work of departments must dovetail with reforms driven by the recently appointed Government Chief Commercial Officer, Gareth Rhys-Williams. These reforms focus particularly on improving government’s ability to attract and deploy senior commercial talent effectively, and on raising standards across the board. This autumn, the IfG will publish an update on how they are progressing.