71. The problem of inadequate expertise and experience among individual officials has been compounded by the lack of clear responsibility for ensuring that best practice is followed by the various procuring agencies.[181] Despite the intention to strengthen the role of the OGC in public procurement as evidenced in the January 2007 paper, Transforming government procurement, responsibility for developing various areas of procurement practice is still diffuse. Government officials told us: "The responsibility of the policy lies clearly with the Treasury, … but the implementation of value for money policy lies with the departments who are actually deploying the public funds"; and "Where public procurement issues are related to competitiveness or productivity in business, DTI took an interest"; while the OGC's job is to ensure the spread of best practice; and the Small Business Service has had responsibility for increasing access by small businesses to a fair share of public contracts.[182] Recently, the situation has, if anything, become more complicated. As a result of the machinery of government changes in the summer of 2007, the newly-created DIUS took over the DTI's role in relation to the encouragement of innovation through procurement; while in April 2007 the Small Business Service ceased to be an executive agency and was absorbed back into the DTI as a policy unit (later renamed the Enterprise Directorate). It is not clear whether, and if so to whom, the agency's specific PSA target to "improve small business access to public sector procurement" has been transferred.

72. SMEs face even greater difficulties in securing public contracts than larger businesses and, as we noted earlier, these difficulties may increase as a result of the Government's efficiency agenda — implementation of which is no longer the responsibility of the OGC. SMEs need an obvious champion within government. At present, it is not clear which department has responsibility for protecting their interests in relation to public procurement, or whether the responsible body has the necessary influence over the many central government procurement authorities to bring about a real improvement in practice.

73. Mr Fanning was convinced that Transforming government procurement symbolised and continued a change in the role of the OGC that he had noticed during his three years working for it.[183] He noted that, when he had joined the OGC, the agency did not even know how much departments spent on common goods and services. The figures were now known, expenditure had been broken down into 54 categories, and the OGC was able to begin making proposals about how to improve value for money. The first areas to be tackled were energy, office supplies, travel and the vehicle fleet. Moreover, the OGC proposed to collect that information periodically to discover any changes over time.[184] He attributed the change to a willingness in the OGC to adopt approaches from the private sector and the commitment of all Permanent Secretaries who were keen to have OGC's help in improving their departments' performance. He was blunt about earlier failings: "the idea of working out where you are, working out where you want to be and charting a route from A to B and measuring movement along that route is something that you do in business every day. … we've not done it in [public] procurement hitherto."[185]

74. Another area on which he placed particular emphasis was the decision to undertake Procurement Capability Reviews of all departments.[186] These were conducted by a team of independent experts who examined three main elements: leadership; skills development and deployment; and systems and processes. The team then produced a report of findings together with a list of recommendations for each department. In response, departments were required to formulate an Improvement Plan, whose implementation would be continuously and robustly monitored by the OGC.[187] Mr Fanning said that the first review had been of the Department for Education and Skills which, though it spent £20 billion pa, devolved this expenditure and decisions on procurement to many different bodies. The OGC could not review every contract made by each school, for example, so its focus would be on the "quality of overall procurement activity within the Department".[188] Two other departments (Communities and Local Government and Work and Pensions) have also been reviewed and, as of the end of September 2007, were preparing their Improvement Plans. The reports on all three and their Improvement Plans were scheduled to be published by the end of 2007. The OGC said that the next two reviews were under preparation, with all the main departments being scheduled to undergo reviews by December 2008.[189]

75. A further source of information was provided by the OGC's function as an informal independent complaints authority: aggrieved suppliers could go to the OGC with complaints about purchasing departments, and the OGC now (under Transforming government procurement) had powers to investigate individual complaints if it felt that was warranted.[190] Mr Fanning summarised the situation as follows: "We have not had the tools, the instruments [to ensure that departments followed best practice] before. We are building those instruments and we intend to use them."[191]

76. Transforming government procurement specifies that the OGC will have "tough powers derived from the Treasury" to:

• Set procurement policy and best practice, including performance measures;
• Audit those standards through procurement capability reviews;
• Ensure that the right incentives are in place to attract and retain those with relevant procurement skills in the public sector
• Set standard terms and conditions for procurement wherever possible;
• Require departments to take up centrally-negotiated deals for certain goods and services;
• Require departments to collaborate in procurement in the "most critical markets".[192]

77. As a result of these priorities, HM Treasury placed emphasis on the development of OGCbuying.solutions, the trading arm of OGC and an executive agency which is in charge of establishing government-wide procurement contracts.[193] At the same time, responsibility for the Government's efficiency programme has been transferred from the OGC itself to HM Treasury and "In line with this sharper focus, the OGC will be a much smaller, higher-calibre organisation" concentrating on procurement in central government, "where its levers to effect change are greatest" but continuing to make its services available to the wider public sector where this does not harm its core work on central government.[194]

78. The OGC has been given a clearer role in leading policy on government procurement, auditing departments' performance and improving the calibre of the procurement service. All of these are welcome. However, the main thrust of the Transforming Government Procurement agenda is to increase centralisation and impose uniformity on government departments. As we have seen, that will not necessarily deal with the problems raised by our witnesses, many of which boiled down to the need for intelligent decisions to be made on individual contracts. Moreover, the majority of public agencies — local authorities — procuring goods and services remain peripheral to the OGC's remit and, as the OGC's description of the procurement capability review of the DfES indicated, even the reviews of the main government departments will not really touch on the expenditure devolved to organisations like schools and hospitals. Nor could the leaner and more focussed OGC cope with a wider remit. We therefore fear that Transforming Government Procurement does not represent such a leap forward as its supporters suggest.

79. Mr Fanning of the OGC summed up the challenge: "Procurement is quite a difficult thing to do, and it is quite a difficult thing to do well. The easiest thing is always to be very rigid in the application of the rules and to always go for the lowest price. That is not where the Government wishes to be. It wishes to make full use of the flexibilities within the rules and to make full use of the general statement on value for money which is the whole life-cost that brings into balance the user requirement."[195] Thus we return yet again to the quality of the officials procuring the goods and services. Until there are enough high quality people spread throughout the public sector, in local as well as national government, the problems set out in this Report will persist.

182   Qq 680-683  Back

183   A view echoed by Intellect: Qq 14-176 and 178 in 'Europe moves East' Back

184   Qq 715, 695 and 724 Back

185   Qq 697-698 Back

186   Q 711 Back

187   Appendix 54 Back

188   Q 722 Back

189   Appendix 54 Back

190   Qq 720-721 Back

191   Q 724 Back

192   Para 2.16 Back

193   This agency operates mainly in two areas: framework agreements (umbrella contracts arranged by the agency with a number of suppliers under which public sector bodies can buy goods and services) and managed services (where public sector customers in effect depute specific procurement projects or areas to the agency to purchase on their behalf). The agency charges a small commission or percentage of cost to its clients. Back

194   Transforming government procurement., paras 2.18-2.20 Back

195   Q 708 Back