Cabinet Office must "raise its game" in challenging departments over commercial performance – public accounts committee
PAC says "encouraging signs of change" on the commercial front – but urges Cabinet Office to do more to chase up departments who are failing to make progress
The Cabinet Office must "raise its game" if it wants to ensure government contracts are properly managed by departments, according to the latest report by MPs on the Public Accounts Committee (PAC).
PAC last looked into Whitehall's contract management capability in 2014, in the wake of a scandal which saw the Ministry of Justice overcharged for the electronic tagging of offenders by two private sector suppliers.
Back then, the committee concluded that problems with poor commercial governance, record keeping and capacity were "widespread, long standing and rooted in the culture of the civil service".
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That prompted a renewed effort from the Cabinet Office and Treasury to bolster the civil service's commercial capability, including a review of the 10 largest spending departments in central government.
PAC's latest report says that while there are "encouraging signs of change", the "current pace of progress with reform is disappointing".
"The reviews set out recommendations to each of the departments, including on staffing models, accountability and commercial skills, with departments reporting progress monthly to the Cabinet Office," the MPs note.
"To date, just 37 of the total 96 recommendations have been completed, and the Cabinet Office rated government’s progress as a whole to be 'two to three out of five'.
"We continue to see regular problems with the government’s ability to manage contracts effectively; recent examples include military flying training, health and disability assessments, and the GP extraction service. Departments must increase the pace of progress significantly, or issues with commercial capability will continue to undermine value for money."
Speaking to PAC during its inquiry, civil service chief executive John Manzoni, who is also the permanent secretary at the Cabinet Office, revealed that departments had been asked to work on new "commercial capability plans" by March.
That follows the publication of 14 commercial standards for government set out at the start of the year, which call on departments to work towards having "a fully resourced and appropriately skilled, trained and experienced commercial function"; make use of open book accounting; and plan "well in advance of a contract ending" to avoid using extensions.
He also confirmed that the centre of government was recruiting a batch of new commercial specialists to try and address long-standing weaknesses, and the Cabinet Office recently drafted in a civil service outsider – former PHS Group boss Gareth Rhys Williams – to lead the government’s 4,000-strong commercial profession.
But PAC says the Cabinet Office is still not "effectively challenging departments on slow progress" and has "struggled to exert its authority" in overhauling commercial capability across Whitehall.
"For instance, early in 2015 it asked the seven lower spending departments, covering about £5 billion of commercial contracts, to self-assess their commercial capability but four have not completed them yet," the MPs note.
"The Cabinet Office acknowledged that it had limited resources, and took its attention off following up the reviews to focus on the challenge of recruiting commercial staff instead. It is apparent that some departments have simply not taken the need to improve their commercial capability seriously enough."
PAC therefore calls on the Cabinet Office to report back on progress made by departments against their new plans by the end of the year, and says it should set out clearly how it will intervene with departments that do not make progress, "including reflecting this in performance appraisals of departmental permanent secretaries and commercial directors".
The committee also warns of a wider civil service culture which it says still "does not sufficiently value commercial expertise", and it says commercial roles in departments are still "not attractive enough to potential candidates".
PAC notes: "Government has now hired several staff, including through a fast track commercial programme and apprenticeship scheme, but key senior-level posts such as at least one departmental commercial director are still unfilled, and retention continues to be an issue.
"Part of the wider problem is pay, and the Cabinet Office is developing a new pay and grading structure to address this, but it is unlikely to be able to rival salaries in the private sector. The government must therefore challenge existing practices and tackle other elements of job satisfaction and the rewards available."
"Government must step up"
Launching her committee's report, PAC chair Meg Hillier said moves to improve civil service commercial clout were not happening "consistently or quickly enough" – and raised the possible impacts of poor contract management on the public.
"We are particularly concerned that in cases where service users are being failed they have an effective means of raising the alarm and can have confidence remedial action will follow," she said.
"Government must step up its commitment to holding to account all contractors who receive public funds. Contracting out a service does not mean government can dodge responsibility for poor service delivery. We urge it to respond swiftly and positively to the recommendations set out in this report."
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