CCS centralised buying in the public sector isn't working yet, but worth pursuing
- Summary:
- The Crown Commercial Service was launched in 2014 to secure billions of pounds of savings in spend across the public sector. But things haven't gone entirely to plan, as a critical National Audit Office report reveals.
The Crown Commercial Service (CCS) was supposed to be managing centralised public sector spending of around £13 billion by now. In fact that figure currently stands at only £2.1 billion, according to a highly-critical new report from the National Audit Office (NAO).
Something's not working somewhere.
CCS was set up in 2014 with an objective of saving £3.3 billion in procurement spend by 2018. For the 2015/2016 period, it’s claimed that £521 million of savings can be attributed to CCS. Some £12.8 billion of spending by central government and public sector organisations uses CCS frameworks for the deals.
But the NAO concludes that it’s impossible to tell whether those would have occurred anyway without transferring buying responsibilities to CCS. In addition, these claimed savings were calculated on a different basis and are not directly comparable to the planned net benefits of £3.3 billion over four years.
Most damning of all the criticisms is the one that states that to date CCS hasn’t actually done the job it was supposed to do. The NAO says:
CCS cannot demonstrate to its customers that its deals are always the best available. CCS benchmarks its deals against historical prices, but has limited current market benchmarks to demonstrate that its central arrangements offer best value for money.
Furthermore, CCS does not manage the lifecycle of procurement frameworks well: it has extended 45 of the 58 frameworks due to expire in 2016-17 without market testing or competition. It is also extending frameworks after having already exercised all options for extension, and CCS and departments are sometimes using expired frameworks to let contracts.
Purchases made under extended frameworks are a risk to value for money as the prices paid may not be best value in the market. Contracts issued under expired procurement frameworks contravene public contracting regulations.
How did this happen?
So how did this well-intentioned strategy get into this state? The NAO report states bluntly that the reforms to central buying were simply not well-managed. The Cabinet Office relied on a Cabinet Committee mandate to get departments to transition their services quickly and did not focus enough on how it would manage them once they transitioned. The report says:
Although CCS customers can save money by using CCS deals, we would have expected more savings would have been delivered if CCS had been set on a sounder footing. As a result, central government has not yet achieved value for money from its central buying.
The intention back in 2014 was to transition two government departments to CCS every three months. That objective was canned one month after launch. By 2016, only seven departments had made the move, amounting to £2.5 billion, well below the £13.4 billion envisioned.
And while a CCS survey found that 6 out of 10 customers are satisfied with the CCS service, the NAO says that departments have complained that CCS’s services can be poor quality:
Customers have reported issues including poor communication, unreliable services and the way CCS has managed procurement frameworks. CCS itself reports that service delivery has not always met service agreements.
The NAO goes on to suggest that a significant problem for CCS was lack of consistency of data and no common understanding of what can and can’t be centralised:
[CCS] did not have consistent information on what departments spend and there is no agreement with departments about what should be centralised and what should be bought locally. The Cabinet Office’s estimates of the common goods and services suitable for centralisation have varied from £8 billion to £15 billion. For example, all departments buy information technology, but many of these contracts are strategically important to the department and hard to specify centrally.
With all that in mind, it’s hardly surprising that the NAO report notes that "from the start there was a rapid erosion in departments' confidence in CCS" and that by 2015 the programme was "widely acknowledged to be in difficulty”.
It’s clear that from the start the business case was not fully scoped out. NAO chief Sir Amyas Morse says:
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.
So how do we fix this?
Leaping to the defence of the Cabinet Office, John Manzoni, chief executive of the Civil Service, says:
The Cabinet Office will always set ambitious targets for the work we do right in the heart of government. CCS has made huge strides in recent months, and we expect to see more and more savings as the changes we make take hold across departments. From the centre we will increase skills and bring in the talent needed to make sure every penny of taxpayers' money is used to its absolute maximum.
That's a pretty standard reaction to criticism from 'Sir Humphrey', coupled with a a mile-high statement of direction from the centre, but it doesn't address the problems at hand.
For all its criticism, the NAO admits that the "strategic argument for joint buying remains strong" and that the right structures and management is now being put in place. Since launch in 2014, only four of the original 11 board and senior management team at CCS have stayed in site.
But the second half of this year has seen CCS being on board four senior managers with “significant operational experience”. The NAO observes that in the process of conducting interviews for its report, it detected increased confidence in CCS management and greater goodwill overall.
Perhaps most importantly, even if Manzoni's worldview is that things are on track, there’s an acceptance by the new leadership that CCS got off on the wrong foot and an admission that the original strategy was mishandled:
CCS’s current management does not consider [CCS original] plan to have been achievable as it thinks the plan wrongly estimated the amount of common goods and services appropriate for centralisation, and the buying services which should be undertaken centrally. CCS’s current management also believe the original plan did not adequately define the activities that customers would still need to carry out.
The NAO notes that CCS plans to reduce the number of unique services it offers and transfer some functions and people back to departments.
There’s also an important change happening in terms of how CCS funds itself. By the end of 2017-18, CCS will stop charging departments a fee for buying goods and services on their behalf, and will be mainly funded by a matching increase to an existing levy that suppliers pay when they provide services bought through CCS frameworks.
All of that is progress, but there are still bumps in the road. The NAO cites:
- CCS has not yet agreed the detailed implications of its new standard service offering with departments, although it has set out a high level service offering and is currently implementing this new offering in detailed consultation with departments.
- There’s still no agreed business case that sets out a thorough understanding of what government spending should be centralised in CCS and realistic targets for CCS.
- Customers do not yet have a clear view of the benefits to be achieved or the milestones to be reached.
To tackle these, the NAO recommends:
- CCS should work with departments to build support for central buying.
- The Cabinet Office should reiterate the mandate for CCS in central government and be clear about its expectations for departments that have not yet transferred their buying of common goods and services to CCS.
- The Cabinet Office should work with CCS to clearly set out the relative priority of CCS’s central government and wider public sector markets.
- The Cabinet Office should review the accountability and governance arrangements of CCS and which functions properly belong in the CCS trading fund.
- CCS should focus on the buying of common goods and services and the review should seriously consider the best organisation to host the commercial capability, management of strategic relations and policy teams.
- The Cabinet Office and CCS need to create and communicate a clear benefits realisation plan for improvements to CCS operations and service quality, with a clear baseline and milestones.
My take
Any kind of significant reform in government is going to take time, dedication and a willingness to challenge the status quo. Making bold policy declarations isn’t enough in its own right. One of my favourite phrases here is that of the political will meets the administrative won’t.
That demands strong and coherent leadership from the centre and that’s something that undermined CCS in its early days. As with so much of UK digital government transformation, I suspect that the loss of Francis Maude as Minister for the Cabinet Office was sorely felt in following through on the original ambition for CCS or getting the necessary changes made earlier.
But the course corrections do appear to be taking place and the ambitions for centralised purchasing savings remain worthy of pursuit. As the NAO concludes:
The events of the past two years have shown that, in practice, joint buying needs both a mandate and goodwill from departments. CCS is making changes to its operations which it expects to improve services in the future. CCS needs to demonstrate that this has worked in order for departments to want to use it.
As we always say to vendors - show, don't tell. The same is true for CCS.