Part 1: The UK Government Procurement Transformation
Collaboration Changes Everything
For decades, governments around the world have been trying to buy better. Success has been patchy and modest. By contrast, in less than 10 years, the UK Government’s procurement arm – known today as the Commercial Function – reinvented itself to become what is arguably the best government procurement function in the world. There is a lot to be learned from the experience, and this is the first instalment in a four-part series that considers the essential ingredients of that transformation. We begin by covering some recent history, as the experiences in the UK included many of the same challenges other jurisdictions face today.
Collaboration doesn’t just happen
The challenge of getting multiple entities within the same corporate group to collaborate on procurement matters is not unique to the private sector. It is true that procurement consortiums in the UK public sector started to emerge significantly in the early 1990s, across the health sector, education, and local councils. However, it took a while longer for the national government to get its act together, notably with the creation of the Office of Government Commerce (OGC) within Her Majesty’s Treasury in 2000. The OGC and its successors attempted to drive value by establishing panels and framework contracts that were open for use by multiple public bodies – but especially by the Central Government departments.
Despite operating for a decade, until it was replaced in the 2010s, the OGC’s reputation was mixed. Advocates would argue, with merit, that it was the first time the UK Government had effectively implemented a capability to contract ‘for Government’ with suppliers – through the creation of multi-client framework agreements – latterly by its operating arm, the Government Procurement Service (GPS).
These agreements can be summarised crudely as preferred supplier lists with ceiling rates and a core of generic agreed terms. A drawback was that they generally held no commitment for the buyer to do business with the bidders. And, importantly, they were felt by many senior procurement officials as lacking teeth: that they were too crude an instrument to be of genuine value.
Take-up was therefore limited. Whereas the intention had always been for these frameworks to be the preferred contracting vehicles for Central Government departments when procuring common goods and services. In practice, most departments elected not to use them for the majority of their needs.
Indeed, many departments felt they were better qualified and equipped to do the deals, finding the frameworks were rarely enough to meet their specific needs – even in cases where further competition was conducted beneath the contractual blanket of the OGC’s framework.
The Game Changes
Developments came to a head in 2010 when the OGC was moved into the Efficiency Reform Group of the Cabinet Office, before being closed altogether in 2011. Meanwhile, the GPS continued to operate, and it was recognised by the newly appointed Government Chief Commercial Officer, Bill Crothers, that to be effective, the organisation needed to be more than what he described as a “framework factory.” He advocated a more holistic, end-to-end capability that could more effectively counteract what was considered to be divide and conquer tactics being used across government by many major suppliers.
A program was initiated to do just this – with yours truly heading the procurement Design and Build workstream – and in 2013 the Crown Commercial Service (CCS) was born. Since that time, CCS has moved from strength to strength. Not only has it captured a far more significant proportion of the Government’s third-party spend, but today its reach extends into the wider public sector.
The principal impact has been to provide the buying entities with access to a wide variety of contracting vehicles across the full range of common categories. Interestingly, an unintended favourable consequence was also to promote far more significant cross-government collaboration on all matters of procurement. This, together with the establishment of a stronger corporate entity within the Central Government, helped pave the way for the more sophisticated developments that were yet to come.
“We’re on course to reach £30bn of spend through our agreements within the next two years…with £2bn commercial benefits for customers”
Simon Tse, CEO, Crown Commercial Service