Select committee inquiry
The Crown Commercial Service inquiry
Closed
What the inquiry looked at
“According to a recent National Audit Office report , it is not possible to show that the Crown Commercial Service has achieved more than departments would otherwise have achieved by buying common goods and services themselves. Government can save money by using Crown Commercial Service deals, but 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, according to the report from the National Audit Office (NAO). The Crown Commercial Service (CCS), a government agency and trading fund, is directly responsible for buying around £2.5 billion of goods and services for central government and public sector organisations. CCS buying frameworks were used by central government and public sector organisations in £12.8 billion of public spending. CCS helped save government departments and public sector organisations £521 million in 2015–16. However, these savings were calculated on a different basis and are not directly comparable to the planned net benefits of £3.3 billion over four years. The NAO could not tell whether these savings would have been achieved anyway if the departmental buying functions had not been transferred to CCS. A CCS survey shows that 6 out of 10 customers are satisfied with the CCS service. Some departments have, however, complained that CCS's services can be poor quality and CCS itself reports that service delivery has not always been in line with service agreements.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of 48th Report - The Crown Commercial Service ↗
Government can make substantial savings from buying common goods and services centrally, but the results of the government’s latest attempt to do so have been disappointing. Since its set-up in April 2014, the Crown Commercial Service (CCS)
has failed to consistently deliver quality services to departments, and progress with centralising procurement has been slow. It experienced severe difficulties with the programme to transfer procurement from departments to CCS which was halted twice.
As a result, CCS is only managing £2.5 billion of spend on common goods and services on behalf of seven departments instead of the £13 billion on behalf of all 17 departments as was predicted in 2014. CCS still has to develop a full business case and demonstrate how it will add value to departments. This is the latest failure we have looked at of the Cabinet Office attempting to centralise services. It needs to learn the lessons and ensure departments buy in to what it is trying to do.
What the government said
No government response is linked to this report.
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 14 December 2016 to its close on 4 January 2018.
- Oral evidence 18 Jan 2017
- Report 24 Mar 2017
What it recommended 1 recommendation · 18 conclusions
1The creation of the Crown Commercial Service was poorly executed and failed to learn the...
Concluded (the committee's words)
The creation of the Crown Commercial Service was poorly executed and failed to learn the lessons from previous aborted attempts to centralise services. One month after the creation of the Crown Commercial Service (CCS), the Cabinet Office undertook a review to investigate problems that arose with moving expenditure from departments to CCS (the transition programme). It found that CCS had consistently promised more to customers than it could provide and weaknesses with communication and implementation of the transition programme, many of which were caused by poor governance and control. The Cabinet Office told us that its risk management arrangements had not been implemented well enough to provide early warnings when these problems arose. However, in June 2015, when the lack of progress became clearer, the Cabinet Office took steps to resolve the underlying causes by appointing an expert to review operations. The Cabinet Office admitted that it should have seen the issues with CCS’s performance earlier and that it had acted three to six months too slowly. Recommendation: The Cabinet Office should identify the factors that have caused its previous programmes to centralise services to fail and use this information in designing future programmes to centralise services. It should ensure that all such programmes have robust risk management and systems in place to track progress and take action when projects are at risk of failure.
2Progress in centralising the procurement of common goods and services has been unsatisfactory.
Concluded (the committee's words)
Progress in centralising the procurement of common goods and services has been unsatisfactory. The original business case in 2014 for creating CCS estimated that it would manage around £13 billion of spending on common goods and services on behalf of 17 departments by April 2016. However, in practice CCS is only managing £2.5 billion on behalf of 7 departments. Similarly, spending using CCS’s framework agreements did not grow as expected, with only £6 billion spent by the wider public sector in 2015–16 against the original target of £7.5 billion. CCS told us that the original targets had been overly ambitious but believes that it can generate savings of 10% on average on all spend on common goods and services. Recommendation: All departments must understand the importance of achieving savings from centrally purchasing common goods and services, and transfer appropriate spending to CCS as soon as practicable. The Cabinet Office and CCS should report back to us by October 2017 setting out the plans it has agreed with each department to centralise their spending on common goods and services fully by 2020.
3CCS’s performance has been poor.
Concluded (the committee's words)
CCS’s performance has been poor. CCS did not have detailed plans from the start setting out how it would collaborate with departments, and failed to gain their confidence. CCS also failed consistently to deliver a good service and did not achieve the original net savings set out in the original business case. CCS and the Cabinet Office noted that one reason for this weak performance was the lack of robust management information to assess service delivery and to accurately plan and utilise resources. CCS has recently started to invest in new systems to improve its data quality, which it believes will resolve some of the issues. 6 The Crown Commercial Service Recommendation: CCS should ensure it has the management information required to measure and track its own performance against objective and stretching performance measures so that it can identify and take appropriate action to address any performance failings. It should also publish key performance indicators that allow customers to track improvements in its performance.
4CCS’s management of procurement frameworks remains unsatisfactory.
Concluded (the committee's words)
CCS’s management of procurement frameworks remains unsatisfactory. CCS has been unable to demonstrate its frameworks are the best in the market and there are signs that it does not manage the frameworks well. CCS does not benchmark the prices it achieves on its contracts, so it cannot tell whether the end users achieve the best prices. It also does not measure the impact its services have on end users. In terms of management of the frameworks, CCS has failed to renew or replace frameworks before their final expiry dates and all extension options have been used. In January 2017, CCS listed one framework that had expired and three more will expire in 2017, including those covering consultancy services and temporary staff. The use of expired frameworks contravenes public procurement law and exposes the government and any organisation using these expired frameworks to risks of legal challenge. CCS told us it consults with departments, suppliers and takes legal advice when it extends frameworks beyond their final expiry date. Recommendation: CCS should ensure that it has plans in force to replace each framework contract before it expires so that there will be no further need to use expired frameworks.
5CCS’s current governance structure is confusing, blurs accountability and reduces clarity of the purpose of...
Recommended (the committee's words)
CCS’s current governance structure is confusing, blurs accountability and reduces clarity of the purpose of CCS. Three of CCS’s five functions, namely the commercial capability programme, the management of government’s strategic suppliers and the advisory service on complex transactions, report to the Government Chief Commercial Officer instead of CCS’s Chief Executive. This arrangement reduces clear line of sight, blurs accountability and reduces clarity of purpose of CCS. The Cabinet Office believes that this structure was pragmatic at the time CCS was created but accepts that it is not ideal and it intends to change the arrangement in due course. Recommendation: The Cabinet Office should review CCS’s governance, ensuring that accountability arrangements are clear and provide a direct line of sight between activities, financial reporting and accountability, by the end of 2017. The Crown Commercial Service 7 1 Creation of the Crown Commercial Service
6The Cabinet Office created CCS in April 2014 from the Government Procurement Service, and consolidated...
Concluded (the committee's words)
The Cabinet Office created CCS in April 2014 from the Government Procurement Service, and consolidated in it all commercial roles that were present in the Cabinet Office. Accordingly CCS has five functions. In addition to being responsible for buying common goods and services either directly on behalf of departments or through frameworks, CCS also: develops procurement policies for the UK public sector; advises and supports departments on complex procurements; manages the government’s strategically important suppliers; and develops and strengthens commercial capability across government departments.7
7Initially, all five functions reported to the CCS Chief Executive.
Concluded (the committee's words)
Initially, all five functions reported to the CCS Chief Executive. However, by the middle of 2015 the Cabinet Office decided that three functions would report to the Cabinet Office government chief commercial officer on a day-to-day basis. These functions cost around £7 million in 2015–16 and are forecast to cost around £9.5 million in 2016–17. The Cabinet Office estimates the expenses for these three functions amount to £25 million for the next three years.8
8Around half the departments that the National Audit Office interviewed were unclear about aspects of...
Concluded (the committee's words)
Around half the departments that the National Audit Office interviewed were unclear about aspects of CCS’s governance such as which functions reported to the government chief commercial officer. In addition, the NAO found the current governance arrangement reduced clear lines of sight and blurred accountability. The Cabinet Office told us that all commercial activities were swept up into CCS at its launch, but noted that these functions were not in the right place in the long run. While HM Treasury had agreed with the set- up and funding structure, the Cabinet Office expects the arrangements and structure to change over time.9 5 For example, Committee of Public Accounts, Cabinet Office: Improving government procurement and the impact of government’s ICT savings initiatives, Sixth Report of Session 2013–14, HC 137 and Committee of Public Accounts, Shared service centres, Twentieth Report of Session 2016–17, HC 297 6 Qq 2, 4, 7, 8, 18, 19, C&AG report, Figure 2 7 C&AG report, para 1.10 8 Q98, C&AG report, paras 1.13, 3.13 and Figure 5 9 Q1 97, 100, C&AG report, para 3.13 and Figure 18 The Crown Commercial Service 9 2 Current Performance Centralising procurement of common goods and services
9The original business case was based on the Crown Commercial Service (CCS) centrally managing £13.4...
Concluded (the committee's words)
The original business case was based on the Crown Commercial Service (CCS) centrally managing £13.4 billion of purchasing on behalf of all 17 departments over four years, generating £3.3 billion of net savings. But in practice tensions built up quickly with departments and the transition programme stopped twice; in May 2014 and again in 2015. By October 2016, CCS managed only £2.5 billion of spend on common goods and services on behalf of 7 departments. Furthermore spend from the wider public sector in 2015–16 through framework contracts was £6 billion against the original target of £7.5 billion.10
10CCS told us that departments supported the concept of central buying but were not confident...
Concluded (the committee's words)
CCS told us that departments supported the concept of central buying but were not confident in the services they were signing up for. CCS had been badly designed from the start and the transition process had also been executed poorly. For example, some activities, such as the intelligent client function, which should have remained with departments, had been transferred to CCS. CCS also considered that the categories of common goods and services to be transferred to CCS had not been specified correctly. For example, jet fuel was labelled as a common good while in reality this is a highly specific product.11
11The Cabinet Office told us that CCS had had different arrangements with each department and...
Concluded (the committee's words)
The Cabinet Office told us that CCS had had different arrangements with each department and had focused heavily on increasing the volume of transactions transferred from departments instead of assessing what activities should be carried out by CCS. It also believed the Civil Service did not have the experience to transfer procurement from departments to CCS at the pace that was set out. Following an operational review in 2016, CCS has now redefined its operating model, but still needs to set out how it will work with departments.12
12The Cabinet Office believed that central buying could generate savings and value by getting more...
Concluded (the committee's words)
The Cabinet Office believed that central buying could generate savings and value by getting more volume through the centre. CCS supported this and told us that on average it could generate 10% savings on common goods and services. The Cabinet Office told us that in 2015–16 CCS helped departments to save £521 million against a 2014–15 baseline and in 2014–15, it helped save £1.9 billion against a 2009–10 baseline.13 Performance has been poor
13In addition to the difficulties setting up CCS, it has also displayed weaknesses in other...
Concluded (the committee's words)
In addition to the difficulties setting up CCS, it has also displayed weaknesses in other areas, such as: customer focus and effective communication, leading to departments doubting CCS’s capability to deliver quality services; providing reports to departments on CCS’s service performance; and control over processes. CCS’s internal audit team found weaknesses in stakeholder engagement, market and business intelligence, and supplier and contract management. CCS told us that a lot of issues were due to the problems with the operating model that was established at the start.14 10 Qq 2, 26, 57, C&AG report, paras 1.23, 1.24, Figure 7 and Figure 10 11 Qq 12, 13, 14, 15, 16, 17, 19, 24, 58, 59 12 Qq 22, 23, 24, 25, 56 13 Qq 1,7, 8, 20, 142, 143, 148 14 Qq 4, 8, 9, 12, 13, 18, 19, C&AG report, paras 1.7, 1.28, 2.17, 2.18, Figure 9 and Figure 15 10 The Crown Commercial Service
14The National Audit found: that CCS did not have a current business case for the...
Concluded (the committee's words)
The National Audit found: that CCS did not have a current business case for the proposed changes or quantified the benefits that CCS would achieve from them; that it had not set clear expectations on time frames for improvements to its operations and services; that it did not have a full baseline of CCS activity; that its governance was insufficiently clear and that CCS had not prepared a clear strategy to build commitment from its customers. CCS confirmed that at the time of the review, the NAO assessment had been correct and that a full business case for how it will work with departments was not yet in place.15
15CCS told us there had been improvements in their performance.
Concluded (the committee's words)
CCS told us there had been improvements in their performance. For example, CCS said that, even though customer satisfaction was still negative, it was trending in the right direction. It also said that staff engagement had improved from 49% to 54 %, which it believed showed increased confidence in the leadership team. The Cabinet Office and CCS now believe that CCS is set up for success. However, it still needs to develop a business case that demonstrates how it will work with departments and how much volume it will carry out. It agreed in February 2016 to invest in new systems which will improve data quality and management information.16 Management of procurement frameworks
16CCS produces and manages buying frameworks for common goods and services.
Concluded (the committee's words)
CCS produces and manages buying frameworks for common goods and services. In 2015–16, CCS had about 110 frameworks allowing public sector organisations to buy goods and services such as office supplies, training, legal services and vehicles. Framework agreements define what will be purchased (such as maximum price and quality of services) and are valid for a certain number of years. In 2015–16 departments bought £6.8 billion of goods and services through CCS frameworks.17
17Departments can use frameworks to buy common goods and services either directly, or by conducting...
Concluded (the committee's words)
Departments can use frameworks to buy common goods and services either directly, or by conducting a short competition among the framework suppliers. As a result, procurement frameworks can be quicker and more efficient for buyer and seller, and can provide better value for money. However, CCS could not show that its framework deals were always the best available. Aside from lacking complete and consistent information on its frameworks, CCS did not consistently benchmark its frameworks against other deals in the market. CCS told us it had remedied the database issue since the summer and that it had improved its management of frameworks. However, when we asked CCS about benchmarking prices, it told us that it did not collect information on the prices on contracts and that how it really knew whether it was competititve was through “those call-offs and those contracts which are done underneath the frameworks”.18 CCS told us that the end users were involved in setting the requirements for the frameworks, and that this ensured that their needs were taken into account. The Cabinet Office added that the accountability for whether a contract was value for money lay with the end user, and that CCS’s role was to help end users to buy goods and services that fulfilled their needs.19 15 Qq 62, 95, C&AG report, para 3.17 and Figure 18 16 Q 8, 9, 52, 55, 60, 62, 63, 108, 111, 112, C&AG report, para 2.9, 2.10 17 C&AG’s Report, paras 1.3 and 2.2 18 Q 120 19 Qq 68, 69, 72, 118, 120, 122, C&AG’s report, para 2.14 The Crown Commercial Service 11
18CCS has failed to renew or replace all framework agreements before their final expiry dates...
Concluded (the committee's words)
CCS has failed to renew or replace all framework agreements before their final expiry dates and before all extension options were used. For example, in 2015–16, CCS had extended framework agreements beyond their expiry dates in areas such as traffic management technology, printing and the supply and fit of tyres. CCS told us that, at the moment, CCS had one expired framework and that there would be three more frameworks that would be extended beyond their final expiry date. This would include the frameworks for consultancy services and temporary staff. Increasingly CCS has been extending its framework agreements. CCS’s internal audit team found that CCS had been unable to provide assurance that it kept framework extensions to a minimum. CCS told us that frameworks were designed to be extended, and that CCS did continual market testing.20
19The Cabinet Office told us it was content that government had done everything to buy...
Concluded (the committee's words)
The Cabinet Office told us it was content that government had done everything to buy common goods and services legally. However, extending frameworks beyond their final expiry date and issuing contracts under them contravene public procurement rules. CCS told us that extending frameworks should not happen, but that it occurred as CCS was not using its resources effectively. CCS said that by September 2017, all frameworks would be replaced. When it extended frameworks beyond their final expiry date, CCS told us it always engaged with clients and suppliers and took legal advice. It felt it was important that it still had a framework in place so that its customers could continue to buy the goods and services needed.21 20 Qq 88, 89, 90, 120, 124, C&AG report, para 2.14 21 Qq 88, 91, 168, 169, 170, C&AG report, para 2.14 and Public Contracting Regulation 2015 12 The Crown Commercial Service
Evidence
Oral evidence sessions 1
- 18 Jan 2017No witnesses recordedparliament.uk ↗