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First class delivery?

Monday February 22nd, 2010

By Morven MacNeil, GO Features Editor

As the Office of Government Commerce celebrates its ten-year anniversary, GO looks at its progress to date and some of the major challenges the organisation may face over the coming years.

The Office of Government Commerce (OGC) is ten years old this year, and a decade after its inception, is continuing to make significant savings each year for the taxpayer and delivering even greater value for money from the £220 billion annual UK public sector spend.

Around £1.4 billion of savings were made last year across government through collaborative procurement, representing an increase of more than 100 per cent over the previous year. The OGC has also been instrumental in helping departments meet the Lyon Review target of relocating 20,000 civil service posts out of London and the South East almost one year ahead of target. In the past few months the OGC has completed the first full wave of Procurement Capability Reviews (PCRs), which are intended to create tangible improvements in procurement practice and capability in numerous areas. It has also recently published the first tranche of Wave Two PCRs for the Home Office, Department for Work and Pensions (DWP) and Department for Communities and Local Government (CLG). The reviews reveal the progress made by these departments compared with the procurement capability improvement plans which were established following Wave One reviews.

The OGC has also played a central role in the creation of the first comprehensive plan for the delivery of the Government’s targets on Sustainable Operations on the Government Estate (SOGE), drawn up by departments in collaboration with the OGC’s Centre for Expertise in Sustainable Procurement (CESP). The work of CESP over the past two years has been significant in helping government departments reach a position where they are likely to reach their SOGE targets.

New ‘delivery confidence’ measures were also recently introduced by the OGC to the Gateway Review process, providing greater clarity on the overall health of projects.

OGC Chief Executive Nigel Smith is proud of the achievements of the organisation, but believes that even more could be done. Mr Smith said: “A great deal of progress has been made in the last year in improving commercial and procurement practices across Whitehall and in the wider public sector. Getting maximum value from government spend has never been more important than now, and the OGC is helping the public sector deliver this.

“The momentum we have seen over the past year must be maintained if we are to deliver the savings potentials that have been identified through the Operational Efficiency Programme.”

The breadth and depth of its activities shows how far the OGC has come in the ten years since its creation. The organisation was established in 2000, following the publication of Sir Peter Gershon’s report Review of Civil Procurement in Central Government in 1999. Sir Peter was appointed as Head of the new organisation, which then had a remit to improve the efficiency and effectiveness of the Government’s annual civil procurement budget.

At the opening of the OGC, Sir Peter announced: “Now the waiting is over there is a great opportunity to make a real difference to how government undertakes procurement. I want the OGC to become the catalyst for the achievement of excellent value for money by government through the use of best practice techniques.

“Our future is exciting and challenging. Our greatest strength is, and will be, the people who work in OGC and our ability to develop high levels of coherence and consistency in our methods and approaches to OGC outputs. I want to progressively align our structure and resources to meet these aspirations.”

The OGC took on the staff of the Central Computer and Telecommunications Agency (CCTA), Property Advisers to the Civil Estate (PACE) and The Buying Agency (TBA) together with some procurement staff from HM Treasury, the Cabinet Office and the Department of Health.

When the OGC was officially ‘opened for business’, Sir Peter set out a five-point plan to harness the strengths of the new organisation, including:

  • Helping government secure the best possible quality and value for money for its suppliers;
  • Identifying ‘best in class’ approaches and practices and assisting in their implementation;
  • Establishing common measurement techniques for procurement spend;
  • Using eCommerce techniques to revolutionise procurement having regard to issues of culture, processes, systems and network connectivity and those relating to technology; and
  • Introducing techniques such as the procurement card and eProcurement which have an important role to play in freeing up resources to concentrate on high-value added activities.

After four years as head of the OGC, Sir Peter was succeeded by his deputy John Oughton. Throughout both of their tenures (2000-04 and 2004-07 respectively) the OGC played a key role in improving the way government undertakes procurement. It helped departments and local authorities deliver annual efficiency gains of £13.3 billion by the end of September 2006, more than half way towards meeting the Government’s ambition of over £20 billion of annual efficiency gains by 2007-08. Included in this were £5.5 billion of efficiencies attributable to procurement.

In 2001 the OGC established Gateway Reviews as a means to help departments improve their record in project delivery. To date approximately 3750 Gateway Reviews have been completed in the UK.

By the beginning of 2007, 63 eAuctions to a value of nearly £1 billion and eTenders to a value of £2 billion, with 14,500 suppliers and 1100 buyers, had been managed by the OGC. Furthermore, the OGC’s PRINCE2 (a project management tool) and ITIL (an IT service management tool) continued to help departments and local authorities manage programmes and projects, and follow IT best practice.

Mr Oughton’s work at the OGC culminated in early 2007 with the publication of the Transforming Government Procurement (TGP) agenda, which coincided with possibly the organisation’s most radical change. TGP highlighted the central importance of procurement in delivering high-quality public services and best value for money. A new higher-calibre, more muscular OGC was charged with delivering this transformation, and with driving up standards and procurement capability across central government. The OGC would set procurement standards and monitor performance and capability, as well as developing a cadre of skilled procurement professionals across government. It was further tasked with driving value for money through collaborative procurement, playing a stronger role in the successful delivery of major projects and improving management and use of the government estate.

Transforming Government Policy also laid the ground for the next and current OGC Chief Executive, Nigel Smith, who joined the organisation in the summer of 2007. Mr Smith immediately set about driving the changes OGC was charged with. By the first half of 2008, considerable progress had been made in delivering further savings. A pan-government energy collaborative pilot, sponsored by the MOD, delivered savings of £85.3 million in 2007-08. In the ICT category £190.3 million was saved in 2007-08, and £88.1 million was saved in the professional services category for the same period. In the Office Solutions category £50.4 million was saved in 2007-08, with savings of £21.7 million delivered in the Fleet category. The Government Procurement Card added further savings of £137.1 million in 2007-08.

By the same period the OGC had also published its first three Procurement Capability Review reports for the Departments for Education and Skills (DfES), Communities and Local Government and Work and Pensions.

At the same time 13 departments comprising 95 per cent of the government office estate had appointed board level property champions with the specific role of ensuring robust implementation of High Performing Property (HPP), run by the OGC as the Government’s five-year strategy for transforming the management and use of the estate. Five of the 13 departments identified potential savings at that point totalling £236 million. By the time of the spring 2008 Budget the Government had relocated more than 15,700 posts from London and the South East.

Furthermore, the OGC’s Government Procurement Service (GPS), which was outlined in the TGP report, launched the Government Procurement Graduate Scheme (GPGS) in 2007. A Major Projects Review Group (MPRG) was also up and running by then, providing expertise in the review of the Government’s major projects. Also in the spring of 2008, the CESP was set up as part of the OGC to help Whitehall departments achieve their targets for reducing carbon emissions and waste across the government estate.

Two years later, and in the midst of one of the severest economic downturns in living memory, the importance of the OGC’s work has been thrown into sharp relief. There are several key initiatives in which the OGC is playing an instrumental role, not least the Operational Efficiency Programme (OEP). The OGC is helping to implement a range of OEP recommendations and targets, including extending the scope and uptake of collaborative procurement targets, increasing coverage from £50 billion to £78 billion of common spend. The OEP has also identified that the collaborative procurement programme can save up to £7.7 billion annually for the taxpayer by 2013-14.

Mr Smith is pleased with the progress so far. He said: “Significant value for money savings have already been made as part of public sector engagement with collaborative procurement initiatives, but we need to strengthen the programme of current activity and build on those achievements.”

The OGC is also extending its influence to other areas. For example, it is continuing its work in supporting small and medium-sized enterprises (SMEs). Recently it launched its Small Supplier, Big Opportunity campaign, which will help promote greater access for smaller firms to contract opportunities awarded by the public sector.

Work on the government estate is also continuing apace, with the efficiency and effectiveness of the civil estate having been significantly improved over the past 12 months. The size of the mandated estate (ie the estate managed and used by central departments, their agencies and Arm’s Length Bodies) has been reduced by over 5.58 per cent – down from 12.1 million m2 to 11.4 million m2 – and the cost of running the civil estate is now £500 million per annum less than it was in 2003-04 – a performance that puts the Government well on track to deliver its target of £1-1.5 billion savings per annum by 2013-14.

The OGC will also continue to help departments reach their targets with respect to Sustainable Operations on the Government Estate and in sustainable procurement. Since 2009 the OGC has had responsibility for reporting annually on sustainable operations and procurement performance through the Sustainable Development in Government survey results.

The OGC is also playing an instrumental role in the Policy through Procurement agenda. As such it is aiming to further help improve access to government contracts for SMEs. It is also addressing environmental, social and equality issues through the procurement process. Furthermore, the OGC has worked with departments to provide guidance and a toolkit to help departments fulfil their commitments to the Innovation Nation White Paper and is supporting an initiative to cater for skills and apprenticeships in public procurement. Throughout 2010 the OGC will push forward with the Policy through Procurement agenda.

Work will also continue in driving forward the improvement of central government capability in procurement, project and programme management, and estates management through the development of people skills, processes and tools.

Leading figures from across public and private sector procurement have given their thoughts on the progress of the OGC to date and the challenges it may face over the next ten years.

Andrew Croston, Head of Procurement and Commercial, Department for Environment, Food and Rural Affairs, believes the OGC has delivered its goals and that promoting effective collaboration will be its key challenge ahead. He said: “The terminology used today may be different but the underlying goals for the OGC have not changed over the last ten years. The delivery of procurement support and guidance for government departments has evolved, with many changes and improvements driven by developments in central government procurement policy and the maturing of the purchasing skills in departments and lately local government to aid the business demands on getting more from budgets.

“The concept of ‘value for money’ ten years ago was not really understood outside the closed ranks of people with purchasing skills, and perhaps the greatest change has been a deeper understanding across many ‘normal’ business areas within government of the need to demonstrate that the expenditure of taxpayers’ money is done wisely, competitively and is seen to be well managed. Purchasing is no longer a closed shop, and today the ethos of VFM is embedded in all procurements as evidenced by the business case approach adopted through the Programme and Project approach and the OGC Gateway evaluations that cover all major procurements.

“The key challenge for the OGC in the next few years is to support the collaborative contract approach, consistent with the need to meet overall procurement compliance and ensure the results meet the other goals of the OGC.”

John Tizard, Director, CPSP@LGiU, explained that further improvement of commercial skills may be another challenge for the organisation. He said: “Government has made strides to increase its commercial capacity and competency over the last decade and OGC has played a significant role in this. More needs to be done and OGC has an opportunity to make a difference through leadership of commercial and complex project management across government and the wider public sector.

“As the public sector faces up to major budget pressures it will require effective commercial skills, sophisticated procurement, excellent market management to secure outcomes that support is strategic policy and commissioning decisions. The challenge for OGC is to be able to step up to the mark and bring departments and others with it.”

John McClelland, Chairman, NQC Ltd, believes the financial constraints over the coming years will be a key challenge, but one that the OGC can overcome. He said: “My initial reaction on learning that we were approaching OGC’s tenth anniversary was one of surprise that the organisation had been operating for so long. A fact that serves to prove that addressing and pursuing opportunities at a national level is very much a journey and in the case of public procurement is a very challenging one at that. Also, consistent with other journeys, progress is not always linear and step function change improvements do occur that move us forward through breakthrough activities and other events.

“I think this is very much the case with OGC and I have certainly witnessed its contribution and influence grow rapidly in the last two to three years. Whether in operational procurement, support to the sector such as procurement capability reviews, or in strategic areas such as ‘policy through procurement’ they certainly seem to be adding important value.

“The OGC has also undoubtedly become an integral ‘part of the fabric’ in public procurement in the UK. I think their position within this dynamic and exciting area lends itself to thinking not about future challenges as much as about future opportunities. I know that the economic environment will put additional pressure on the need for savings and efficiencies but at the same time the expectation that procurement can in parallel contribute to policy areas like sustainability, diversity and equality and in general how much of a contribution can be made in non-traditional areas. The OGC is centre stage in this.”

The OGC has made great strides in improving central government procurement processes over the past ten years. There will be many more challenges facing public procurement over the coming years, but the OGC looks to be in a strong position to drive further reform and deliver even greater efficiencies.

For further information, please visit: www.ogc.gov.uk

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