Last May, John Manzoni and I wrote here about the need to develop a stronger commercial function for government. Ten months on, much progress has been made and the Civil Service Board has agreed the next stage in the transformation programme.
This is very important because of the sheer scale of the commercial activities that central government – and therefore the Civil Service – is responsible for. We are a major customer for goods and services – each year we spend £44 billion on external contracts. To ensure value for money for the taxpayer, and the best outcomes for users of the services this money buys, the Civil Service needs the best commercial skills to plan, procure and manage contracts.
When we do this well, the results can be spectacular. The Department for Work and Pensions (DWP), for example, is now consulting on changes to their estate, having secured heads of terms for a commercial deal on rents which, with savings on facilities management, is expected to save on average £180 million a year for the next decade. This was a complex and highly technical piece of commercial work, covering some 900 buildings across the country. The department has been able to draw on very experienced commercial experts to shape, negotiate and secure a good deal.
In the Department of Health the Complex Transactions team has worked on negotiating an extension to the current NHS Supply Chain contract with significantly improved terms that deliver value to the NHS customers through savings in product costs. This work realised savings in 2015-16 of £76.7m.
So, how do we make commercial excellence the new normal? The best outcomes can be achieved when we think about and plan for the commercial requirements of a policy from the outset. This involves policy advisors and commercial professionals working closely together to understand whether achieving policy goals requires outsourced services, significant new technology or property procurement, or the involvement of external parties in other ways. It also means taking a broad view of commercial needs within departments and across government, and considering whether existing markets can meet our needs. Once we have procured the products or services, we need to continue to get the best from them.
Although there are plenty of examples of excellent work, Whitehall still doesn’t have either the capacity or consistent capability to deliver excellence at the scale we need.
This is why we brought in Gareth Rhys Williams, previously CEO of PHS Group, as Government Chief Commercial Officer. Gareth’s main task is to strengthen the capability of the 4,000 civil servants working in the Commercial Function across central government, and to create a new, world-class, Government Commercial Organisation (GCO), which will directly employ the most senior 400 staff within the function.
Good progress has been made since May. In February, DWP staff moved into the GCO, with remaining departments transferring over the next six months. The GCO’s purpose is not to centralise commercial talent, but to create a larger pool of talent within departments, focusing on departmental objectives and sharing best practice for everyone’s benefit. For the first time, we are building a complete picture of commercial capability across government and defining the long-term shape of commercial functions within departments.
Last month, the Civil Service Board agreed a series of proposals for the next stage in developing commercial capability across government and its agencies.
There is significant commercial activity in Arm’s Length Bodies (ALBs) that we must support. Departments will work with the Commercial Function and their ALBs to identify those who can benefit from the new professional standards and from putting their staff through the assessment and development centre. In parallel, we are increasing investment in learning and development for these staff, and the use of managed moves to support their careers. Where ALBs and departments request it, we can support the recruitment of accredited staff for ALBs.
Good commercial outcomes result from the work of a wide range of staff who manage contracts, many of whom are not currently commercial specialists. We plan to put in place professional standards, learning and development support, and formal accreditation for these staff – initially, for those managing the contracts of highest value or greatest risk.
At present, it is the more senior commercial staff (grades 6 to SCS2) who will sit within the GCO. Later this year, the GCO will start working with departments to identify Grade 7s in commercial roles who should be part of the new organisation. And as we expand the GCO, we will also increase the investment in learning and development.
We are confident that these measures will help us achieve a transformation in our commercial activities. Others seem to agree. A recent report by the Institute for Government said we were taking the right actions.
It is important that we monitor progress. That is why we will be introducing a consistent commercial dashboard to be used by all departments; also acting as a tool for highlighting best practice.
An excellent government commercial function will support better policy-making and better delivery. In other words, it will be good for all of us and the mark of ‘A Brilliant Civil Service’.
You can track developments by visiting the Government Commercial Function pages on GOV.UK.
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