The civil service commercial chief heading up the government’s efforts to improve its procurement and contracting skills tells Richard Johnstone about his goals, and how Whitehall dealt with the collapse of Carillion
Photos by Louise Haywood-Schiefer
No team at this year’s football World Cup is likely to go into a game without a goalkeeper but, according to government chief commercial officer Gareth Rhys Williams, this is what happens all too often when delivering policy.
Following the collapse of Carillion, the government’s commercial skills are rarely out of the news. Speaking to CSW in the weeks following the company’s closure, Rhys Williams expresses what could be termed a football manager’s frustration with armchair experts critiquing government procurement from the comfort of newspaper pages. There has been little problem with the ongoing delivery of public services Carillion was previously involved with, he notes, which is one marker of progress. But there is more to do – and one key area is those missing goalkeepers.
These, Rhys Williams says, are the officials involved in managing government contracts – who are currently often passed the ball in a high-pressure situation from their governmental team-mates. Too often, he says, a solution to a problem is developed by a policy professional aiming for a particular goal without the involvement of those who form part of the last line of defence to monitor the outcome. Following two years in government, Rhys Williams is “dreaming of a world where a policy colleague comes up with a great idea to solve a policy problem and in that department, we have the right commercial people to decide how we should get that, either inside or outside, and then we have qualified contract managers who are involved right at the get-go and can see that project from its gestation, through the policy phrase into implementation, then run that contract afterwards”.
“My experience of the companies I’ve been in, or the companies I’ve run, has been… you can’t play football without the full team; you can’t play football without the goalie – where’s the guy with the big gloves?”
Plans to accredit government’s contract managers represents the next phase of the reforms Rhys Williams is undertaking as head of the government’s commercial profession – to help Whitehall become “multifunction by default”.
This means, he explains, that government needs to get to the point where policy professionals in departments say: “This meeting cannot progress, where’s the commercial person? Or this meeting can’t progress, where’s the project manager?”
“My experience of the companies I’ve been in, or the companies I’ve run, has been [that people know] you can’t play football without the full team; you can’t play football without the goalie – where’s the guy with the big gloves?” he says.
Government doesn’t think like that right now, he says, but the drive to improve functions across government – which alongside commercial includes the creation of the Government Digital Service and the development of the project management profession under Infrastructure and Project Authority chief Tony Meggs – makes such an approach possible.
“As the strength in the functions grows then it is in the interest of the project team to involve people from the functions, because they will get a better solution for whatever policy idea they’re trying to execute. I’m not critical, this is a learned behaviour – it is easy to say, but we are a while away from it being instinctive,” he says.
All of this builds upon reforms that have seen government rise up the commercial league table since Rhys Williams joined in March 2016. To continue the football analogy, he has put in place new tactics and formations since being appointed as well as building a better squad – or as he puts it, “right people, right structure, right process”.
Rhys Williams has recruited a total of 300 people – around 200 appointments and 100 promotions – to senior commercial roles, so what he calls the “bench strength” has improved. New structures also mean that commercial staff are more readily available to support the whole of government’s policy-making squad – the entire profession of around 4,000 people is represented by the Government Commercial Function, which works to upskill the cohort and help with career development. Most of these staff are based in departments, but there are also around 700 staff at the Crown Commercial Service, which focuses on buying common goods for departments, and then around 100 staff providing support at the centre.
Since arriving in government, Rhys Williams has also led the creation of the Government Commercial Organisation, which directly employs the senior commercial staff in departments: grade 6, and SCS1 and SCS2 grades, and is soon to include grade 7.
The Treasury has also granted the GCO additional pay freedoms. Though hardly in the league of Manchester City, these allow the profession to alter benefits packages so that staff in the GCO can choose to receive more salary in exchange for lower pension contributions.
This has had the knock-on effect of making the civil service more attractive for people from outside government, he says, “as the outside market sees the progress we’re making”.
“The evidence before was that we were really struggling for people to join us from the outside. That is no longer the case – we are frequently now having multiple appointable people on senior panels, which is great,” he says.
“I think that is because of two things – it is partly the pay freedoms but partly also this sense of a commercial function. For people joining from the outside, it could be quite a daunting prospect. But now they know that, yes, they are going into a department but they are also joining a function, that is a comfort blanket. We are able to recruit people from outside, I wouldn’t say easily, but relatively easily now.”
Now that the commercial reform drive has seen government improve its commercial skills – “when I say to my colleagues: how would this compare to the outside industry? They say we’re pulling ahead” – inter-disciplinary work is Rhys Williams’ next priority.
“There is some chatter in the broadsheets that the government is trying to drive long term contracts into loss. Why would we want to do that?”
Such an approach has been slow to develop, he says, because government is used to spending more inside its own walls than outside – although this is changing.
“One interpretation is that the civil service has grown up with an assumption and a history that these things are self-delivered, so why do you need to talk to the commercial people? It is not part of the DNA. If you go to Jaguar Land Rover, for example, and you see how they develop a product, they have cross-function teams from the get-go: the designer, the engineer, the marketer, the accountant, the project planner... they are all working in a team.
“The team flexes through the life of a project, but there is always someone from each discipline in that project team and as a result, the time it takes to design a product has been dramatically shrunk.”
Another thing government procurement shares with football is that it is never short of criticism from all sides, with January’s collapse of Carillion leading to as much comment about government outsourcing as there has been debate about the England World Cup squad.
John Tizard, a former senior executive at Capita and ex-Labour leader of Bedfordshire County Council, was among those to call for major changes.
He called for a pause in new contracts in a review of outsourcing a week after Carillion went into involuntary liquidation. The Out of Contract report, undertaken with former Audit Commission communications director David Walker for the left-leaning Smith Institute think tank, argued for a root-and-branch outsourcing review to find out what has worked – and what has not.
Tizard told CSW that if the government is going to outsource services, there is a need for “real due diligence into the companies it’s contracting with – their operating model and ownership models”.
This will determine how they’re going to run the business and how they’ll make their money, he said.
“We need a lot more information about the size of companies and the scale of outsourcing to become a much more intelligent client.”
He also called for an independent regulator of outsourcing contracts to be able to provide evidence of performance, including “a Domesday Book” of all significant contracts, so the market share of individual companies and their performance is known – across central and local government and other public services – when government departments go out to tender.
Rhys Williams has acknowledged more information is needed, which is why his team is set to launch a pan-government contract viewer and database.
Simultaneously, government has also been criticised from the other side of the fence, accused of driving too hard a bargain with service providers. Rupert Soames, the chief executive of global outsourcing giant Serco, claimed in February that improved commercial skills in government contributed to the sector’s woes – providers including Interserve and Capita issued profit warnings as Carillion fell – as companies accepted tight contract terms.
“Government introduced austerity and sought to reduce expenditure, the supply of new work slowed, just as new competitors entered the market,” said Soames, who is the brother of Conservative MP Nicholas Soames. “At the same time, government started to hire poachers and made them its gamekeepers, and in recent years has improved its commercial and contracting capabilities beyond all recognition,” he added.
“Feeling compelled to deliver the growth they had promised, suppliers competed fiercely for a reducing pool of new business; prices fell, and a newly-savvy government discovered it had anxious suppliers prepared to accept risks and contract terms which in normal conditions they would not have agreed to,” Soames concluded.
Rhys Williams says he is very aware that providers have to make a margin sufficient to ensure that there is a competitive market, and rejects the idea that terms are too harsh.
“We want our vendors to make a fair return,” he says. “There is some chatter in the broadsheets that the government is trying to drive long term contracts into loss. Why would we want to do that? All it will mean is vendors don’t turn up and public services fail. We don’t want that. Or, they skimp and try to save money in a way that means service levels fall on public sector contracts, we don’t want that – we want public sector contracts to be delivered well. Or they don’t bid again when the contracts are renewed and we don’t want that because we want a vibrant competitive market.
“So we want our vendors to make a fair return because that is what gives the best public services so that is worth underlining: it wasn’t public sector outsourcing that was the cause of Carillion’s problems... This was a problem of construction contracts but [it] has been a catalyst to think about what could we do better.”
This “period of introspection” is going on as Civil Service World meets Rhys Williams, and it is clear he is keen to see if there’s anything government could have done differently.
“We need to have discussions with different industry sectors to see what we can learn, but Carillion’s problems, I think it is clear now, related to problems on construction contracts, some of them overseas, not public sector outsourcing contracts,” he says.
“They were delivering public sector outsourcing contacts very well, and the vast majority of them were appropriately profitable.”
There are specific criticisms of government that he rejects: that it shouldn’t have awarded contracts to Carillion after its July 2017 profit warning and that the lack of a civil service Crown Representative engaging with the firm from August to November last year hindered government’s understanding of its problems.
“The previous Crown Rep for Carillion had been doing it for a number of years, then wanted to step back,” he says. “Finding a good Crown Rep, like anything, takes time, and as Carillion’s problems worsened it became apparent we would be better finding a rep with financial restructuring expertise rather than rep from the construction sector, and he joined in November,” he says. “But the point is the Crown Rep is a part-time resource, they work for the director of my markets and suppliers team. She and I were fully engaged on things Carillion from July – we had a large team working on that. So although there was a vacancy in that spot, I think we had capability and focus on this.”
“The evidence before was that we were really struggling for people to join us from the outside. That is no longer the case – we are frequently now having multiple appointable people on senior panels, which is great”
He adds that he is not too concerned about the contract-letting point. Seven contracts let since the warning amounted to two agreed before the warning and announced subsequently, three that were extensions to existing deals and two that were new deals for the construction of the High Speed 2 rail line as part of a joint venture.
Even after the profit warning, the firm passed the Department for Transport’s financial tests with the joint venture partners Kier and Eiffage and these firms were happy for Carillion to still be part of the group, says Rhys Williams. “I remember on the day Carillion went bust, the first of them put out an announcement, I think it was 8.20 in the morning, saying ‘we will take over Carillion’s part of this joint venture’, and the other one did a few hours later.”
A company’s share price cannot be the measure of whether it can do work for government, he says. “Our goal is not to ensure that shareholders make money. Our goal is to make sure we put in place structures and contracts, and we have to make sure that public sector services can keep going. And the evidence is that they did,” he says.
“Could we have done with less press attention when we were trying to deal with a business going into liquidation? That would have been a big help… but I think the way that colleagues actually organised those contracts worked pretty well.”
Describing himself as “congenitally impatient”, Rhys Williams is constantly striving for improvement. He believes that the reforms he has overseen mean there is greater clarity and understanding about the structure of government commercial teams between departments, CCS and his four central teams that provide support on complex transitions, markets and suppliers, continuous improvement, and capability. But he is always striving for better.
“Everything can always be better, but I think on method, on process, we have made dramatic progress,” he says. “We have introduced operating standards, now in their second generation, we introduced a commercial dashboard, now in its third generation, we’ve introduced professional standards, we introduced contract management standards.
“These are big building blocks getting put in place. Am I satisfied? No, but in my calmer moments I can see we are making good progress – and wish we could go faster. I think that is a fairish reflection.”