A parliamentary enquiry into how the Crown Commercial Service (CCS) achieves value for money was recently undertaken, after which its Chief Executive, Malcolm Harrison, candidly suggested that due to a lack of appropriate focus initial expectations of the CCS had become unachievable.
Paraphrasing his reported response to the enquiry, too much energy had been focused on the bespoke operational functions of their public-sector clients to the detriment of other benefits the CCS might have been able to offer in support of their clients. Such benefits could have included helping them implement a standard approach to measuring ‘return on investment’ and evidenced cost savings in line with Cabinet Office estimations.
Spotlight on the CCS
The Crown Commercial Service (CCS) was founded as the Buying Agency all the way back in 1991. And, through various incarnations and merged entities, it has evolved into the CCS we know today. The Crown Commercial Service was relaunched as such in January 2014 and serves many roles, but chief among them are:
- The creation of national framework agreements with suppliers which allow public sector clients to shortcut their standard lengthy procurement process when searching for suppliers with specific and proven skills, services and products.
- Procurement consultancy and support for any government department that wishes to develop an initiative, whether they eventually choose to use a CCS framework or go out to the wider marketplace themselves.
- Contract management to assist public sector clients to manage the supplier relationships they form in order to achieve better outcomes.
Essentially, the CCS is intended to offer public sector clients a simpler, swifter procurement process for selecting suppliers, guidance on all procurement matters, and support throughout their supplier relationships in developing structures and strategies for getting the most value from them.
The NAO report that sparked a PAC enquiry
In 2016, the National Audit Office (NAO) produced a report on the Crown Commercial Service. It stated: “…central government has not yet achieved value for money from its central buying. Furthermore, the Cabinet Office severely under-estimated the difficulty of implementing joint buying across government.”
It also stated that the “CCS helped save government departments and public sector organisations £521 million in 2015-16”. From the perspective of the NAO, however, the indications from the report were that it perceived this to be a drop in the ocean, as the four-year projection for savings expected of the CCS had been £3.3bn (some 84% higher).
Unfortunately, the projected figure has been described as unachievable by CCS management. Another issue was that the report noted that the savings projected by the Cabinet Office were “calculated on a different basis and are not directly comparable to the planned net benefits”.
In our view, the fact that over £500m was saved can only be positive. The issue of the savings not reaching the original expectations could well have been for the reasons set out by Malcolm Harrison, in which case, stronger focus by the CCS team would clearly be necessary.
However, it could also be that he is taking the fall for poor judgement or a lack of diligence on the part of senior ministers/executives who, at the outset, may have set an impossible savings target in the knowledge it was not they themselves who had to deliver it.
Despite the stated value for money and quality consistency issues highlighted, the NAO noted “recently CCS has shown clear signs of improvement in governance, risk and internal control”. A CCS survey mentioned in the NAO report had found that 60% of its customers were satisfied with the service they had received, implying that 40% were not. Again, there could be many reasons for the lack of satisfaction that are not necessarily connected to the competencies of the CCS.
Amyas Morse, Head of the NAO, summarised his views of the findings of the report, saying: “Without a sound overarching business case or a detailed implementation plan, it is not surprising that the Crown Commercial Service rapidly ran into difficulties and soon had to reset its plans. It is particularly disappointing that the Cabinet Office has not tracked net costs and benefits. Because of this, it is not possible to show that CCS has achieved more than departments would otherwise have achieved by buying common goods and services themselves.”
This issue of uncertainty in not being able to independently evidence whether CCS clients were receiving true value, or whether the organisation itself was generating net savings, is central to the issues highlighted in the NAO report and the reason for the more recent parliamentary enquiry. It seems as though there is (or has been in the past) no clear monitoring/auditing process that stands up to independent scrutiny to assist in the development and assessment of the value being generated.
Unfortunately, it is reported that the NAO believes that the Cabinet Office had rushed through the transfer of responsibility, without enough thought about how it would be managed once centralised, and it indicated that this management element has been slow to be implemented.
The PAC enquiry
Mr Harrison was reportedly questioned extensively at the Public Accounts Committee enquiry as to the role of the CCS in what they perceived was a lack of adequate contract management, as they believe this is what has led to the CCS’s inability to holistically show value for money. But Mr Harrison insists that since the NAO report, the CCS had “standardised the service, to narrow it, to deepen it and to focus it”. John Manzoni, Permanent Secretary to the Cabinet Office, responded to the enquiry by stating that there was now a business plan with milestones in place. It was reported that this was something that was lacking at the outset.
Lessons the Crown Commercial Service can take away; the value of understanding ‘what good looks like’
It is difficult to be certain about why these issues have arisen with the CCS. They are bright people. But in the corridors of central government, nothing is straightforward between politicians, policymakers, and those individuals like Mr Harrison who are charged with having to mobilise and deliver on the policies created, often with very limited, if any, input.
In terms of assessing value for money, there are many factors to consider that are outside a general article such as this. But with any complex service relationships, whether it is outsourcing, large commissioning delivery, significant IT integration projects and other large capital project relationships, it is important for organisations such as the CCS and its clients, to have a more ‘holistic’ model to enable it to build capability in its government clients. This will help to provide an assurance model and process that can assist in the evidence to assure value for money is being achieved.
For this to be implemented, it’s important for the CCS and its clients to appreciate fully ‘what good looks like’ to them. To summarise an article we wrote on just this subject, to achieve this clarity you will need:
1 – Well-articulated business requirements
How well does everyone involved, both internally and externally, understand what they are trying to achieve, KPIs, objectives, and who is expected to do what? In other words, when the project/service is complete, what does the ‘future state’ of the organisation look like? What can it achieve that it was unable to before, in quantified terms. This vision is vital to understanding the value to be expected.
2 – Client-side ‘intelligence’
With the commissioning of any strategic service relationships, it’s important to remember or recognise that this does not mean you can now reassign all related resources to other areas of the business confident that your supplier has everything in hand. It’s vital that you retain the right in-house expertise (Intelligent Client Function [ICF]) to collaborate with the supplier to help innovate the service, monitor progress, understand risks and recognise when intervention may be required in some form. It is usually the responsibility of the ICF team to put into place value for money and return on investment performance measurement and management to support the business requirements/business case for the service/project.
3 – Supplier-side ‘intelligence’
It’s all about managing the relationship to ensure mutual benefit, collaboration not confrontation, and the supplier should be prepared to evidence both their team spirit and their performance against the business case. This will help to support the client’s ICF team to evidence its client’s business outcomes through the service/project being delivered.
4 – Service requirements clarity
Fully and clearly express the needs of what objectives the client organisation will be able to achieve, through the successful implementation of the project. The client also needs to fully express what the consequences are on the organisation of not achieving its expected outcomes if the service/project does not achieve its own goals. In addition, it’s important to identify what professional advice you are reliant on from your supplier, why your supplier was specifically selected and the value you place on their expert advice. This articulation provides a clear understanding of what aspects of the service will provide a measure of the value being achieved.
5 – A focus on supplier ‘expert’ responsibilities
Ensure, in a practical manner, that your suppliers are aware of your understanding of their responsibility to their client – their ‘duty to warn’ which extends not only to an honest appraisal of their ability to service the client’s needs, but also where their and the client’s weaknesses may lie and whether your business and project/service objectives are realistic. This helps to identify any material risks against which value for money or return on investment is likely to be achieved.
6 – Dedication to supplier due diligence
The client should tap into its supplier’s expertise by asking it to perform pre-contractual, or if an existing relationship, a pre-scope change due diligence exercise on the proposed project/service/extension to identify what they can deliver, and what they can’t along with the implications for the client’s business outcomes of what they can’t deliver. Again, this helps to provide greater assurance on what benefits, value for money, and return on investment are likely to be realised.
7 – A fit for purpose contract
Contracts are not simply about guidance and protection. They should be designed to drive the right ‘enabling’ behaviours, evolve with the project and its relationship, and give clarity on how to handle any material situation that might impact on the success of the project. Contracts must be structured to put in place the behavioural foundations to get everyone to achieve both the client’s and supplier’s objectives, not just penalise everyone for getting it wrong. These key foundations, must be clear, agreed and understood by all. A fit for purpose contract is the ‘anchor’ for the earlier components to provide a foundation to assure value for money and business benefits are realised.
8 – The need for holistic buying/operating governance
Having the right governance in place will provide an end-to-end strategy for ensuring an innovative, controlled and guided route to achieving the business outcomes the client and supplier are aiming for. The purpose of which is to offer clarity, collaboration and commercial trust between all parties to achieve a fit for purpose service/project. In turn, if the behaviours of both the supplier and client reflect the good foundations put in place through the operating governance, appropriately structured performance measurement and management will help to evidence the value for money and return on investment over the lifecycle of the relationship.
The NAO and PAC certainly have questions over the early days of the Crown Commercial Service, their perception is of a lack of an appropriate monitoring/auditing process to assure whether value for money is being achieved, assurances that service quality and objectives achieved were in alignment with the investment being made, and of course the value for money the CCS is capable of.
Having the above eight components as foundation stones will make it much easier for the likes of the CCS and its clients to put in place appropriate value for money performance measurement (and performance management). From the comments made, the CCS seems to understand where it is strong and where improvements need to be made in its service. If it mobilises in the right way, there is every opportunity they are able to achieve the cost-saving, value for money and return on investment potential the Cabinet Office once believed possible.
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