Former crown rep chief Bill Crothers, Whitehall’s new procurement boss, is bringing together the government’s buyers and its commercial leads. Matt Ross asks him how he’ll cut spending and rejuvenate procurement reform
Until just a few years ago, Bill Crothers points out, the many arms of the civil service denied themselves the opportunity to compare notes on suppliers or prices. Joining government in 2007 after a long career in consultancy, he took on the thorny task of launching Labour’s ill-fated National Identity Scheme: a role that involved placing contracts with the big IT firms. But when he tried to consult with other departments’ procurement teams or his fellow members of the Chief Information Officers’ Council, he was refused access to the pricing, contract or supplier performance data that might have strengthened his hand in negotiations.
“The policy was that every department was a different client and you didn’t use that advantage,” he recalls. “When I joined I thought it was very odd. I was reaching out and saying: ‘Can I look at the performance in this department?’ And they were saying: ‘No, you don’t do that.’ And then when I consulted with the Office of Government Commerce [and its then head] Nigel Smith, I was told: ‘That’s just not the way we do things’.”
From the outside, that sounds bizarre: why wouldn’t government give all its procurement staff the best possible view of pricing and supplier performance? “I think the view was that it would give us an unfair advantage, because we’d be too big,” Crothers replies.
Five years on, the situation is much better – thanks in part to the coalition’s appointment of departmental commercial chiefs as ‘crown representatives’, charged with overseeing all the government’s contracts with a specific set of suppliers. Crothers, then the Home Office’s group commercial director, was handed a set of big IT firms to manage in 2010; and earlier this year, he moved to the Cabinet Office as executive director of commercial relationships: in essence, chief crown rep.
Even now, he says, “we’ve still got some ways to go in terms of our data gathering systems, capability, culture – our attitudes.” The exchange of information between departments and central management of supplier relationships is not yet “the accepted norm”, he says, and “we’ve got many, many prices across government: more prices than there are departments, and more prices than there are contracts – and that’s just unacceptable.” Yet the situation is getting better, he says: “It’s happening. I could give you many examples of how it’s improved today from five years ago.”
Representing the crown representatives
As crown reps, Crothers and his colleagues worked with Cabinet Office minister Francis Maude to renegotiate existing contracts with the government’s biggest suppliers, whittling away at departments’ vast payments to a handful of key firms working in IT, communications, services, construction, security, design and manufacturing. The savings fell into three categories, he says. There have been price reductions, some achieved by reducing suppliers’ margins and others by hacking back “gold-plating” of services. There has been the streamlining of systems and processes on the civil service side: “We have still got situations where we mark their homework,” says Crothers. “We don’t need lots of people client-side duplicating what the suppliers do.” And there has been a call for “great ideas to transform part of the service.” Unfortunately this last initiative, he says, has produced disappointing results.
When this call went out in 2010, Crothers recalls, “the level of noise in the system was such that those sorts of ideas were drowned out – and by noise I mean practices and procedures that were not anywhere near the best of the private sector. Excess margin, excessive prices, duplication between departments: there was so much noise that we couldn’t get to those good ideas.” But that wasn’t all: the suppliers were so confident that the government would embrace their plans that their ideas “weren’t well thought-through”.
To win support for an idea, says Crothers, suppliers will need to “really work on the proposition. They don’t do that in the way I would expect.” But the firms putting forward transformation plans are still disappointing the procurement chief: having just launched a new round of meetings, he says, “I’m afraid the quality of propositions wasn’t any better than two years ago. It’s just not businesslike.”
In July, Crothers replaced John Collington as chief procurement officer – combining the role with his job overseeing the crown reps. Merging the government’s central commercial and buying operations will, he says, eliminate the awkward gaps between the crown reps – who ringmaster cross-Whitehall interactions with the key suppliers – and the Government Procurement Service’s (GPS’s) Liverpool-based buying professionals handling many of the individual contracts.
This division of labour created “points of overlap, which previously we had to manage,” Crothers says, citing one negotiation with a big software firm in which “we stumbled. One side of the organisation was saying: ‘That’s a good deal,’ and the other side was saying: ‘We need a much better deal.’ [The supplier] was saying: ‘We thought we’d done the deal,’ and we were saying: ‘No, you haven’t.’ And it just looked foolish.”
“John and I got on really well, and so it mostly wasn’t an issue,” Crothers says. “But when you ripple into the organisations, then it is. Dealing with suppliers as one organisation is really important, and in that case we were giving them two different messages.” This wasn’t rare, he adds: “I could give many examples.”
Better aligning the government’s procurement and commercial operations, Crothers argues, will also help bring about cultural change in the GPS. The organisation has “made huge strides for improvement over the last 15 months or so,” he says, but when its lead buyers “say ‘we’, they tend to mean the contracts under their management, rather than HMG. I’d like them to think of ‘we’ as being central government and everything we are doing.”
As well as creating cultural change, Crothers wants to improve the skills of procurement professionals – both within the GPS, and in departmental procurement offices. Too often, he says, civil servants rely on a handful of commercial models and pricing systems – but “there’s actually a range of more sophisticated pricing bases. If you go into construction, defence, they’ve different ways of agreeing a price; and there are factors which make one appropriate in one situation and not in another. So my intention is to put out some guidance on these topics and then train our people in how to contract in a way that’s appropriate.” The government must strengthen its ability to, for example, manage contracts, apply ‘lean’ techniques and establish payment-by-results systems, says Crothers.
To sharpen these skills, he explains, he’ll improve the training for commercial leaders; in part via the emerging Commissioning Academy, which – serving council staff alongside civil servants – will “create a network, as well as putting out some tools and methods and training.” Meanwhile, the Major Projects Academy will include a substantial commercial element – “and that’s aimed at all senior civil servants,” he says, “because all of them have some dealings with large programmes.”
Training budgets have, of course, been badly squeezed recently, but Crothers emphasises that formal training is only one way to improve skills. “People come in and do a day’s training, and it’s gone,” he says. “But if you get them connected to a network and put some knowledge and materials on a website, they’ve got that resource to draw on; it’s reinforcing, and an ongoing support mechanism.” And if all this skills work doesn’t foster behaviour change, Crothers can bring out the big guns – vetoing contracts deemed insufficiently robust, advantageous or imaginative. “We’ve got a controls process where all the big contracts go,” he points out. “If you do a review of a proposed deal and it fails in the control because the pricing technique isn’t right, word soon spreads that people need to get tuned in.”
Less gold-plating, more steely negotiation
As well as getting the pricing right, Crothers argues, commercial professionals must work out exactly how much they need to buy. “We came across examples of individuals having more than one email address; of senior managers having a printer in their office – in their little nest – instead of the ratio being 50, 70, 120 people to a printer,” he says. “If you multiply that by the scale we have, the money adds up.” This kind of “gold-plating” adds nothing to service quality, he points out; government can often “tune it down” without ill effects.
In some cases, he continues, civil servants over-specify contracts to minimise the risk of failure; but their understanding of risk may be weak. “One person’s risk isn’t another person’s risk,” he points out. “If I ask you to do something that you’re really good at and I’m not really good at it, then if I tried to do it it’d be risky, but it’s not risky for you”; so departments may be overpaying contractors in order to take on work that civil servants would struggle to undertake themselves, but which are pretty straightforward for the supplier.
Sometimes, too, civil servants’ attempts to minimise risk generate unnecessary work. Crothers explains that the government is adopting “open book” contracts as standard – meaning that suppliers report on their costs and profits throughout contracts’ lives. This should guarantee that services run smoothly and contractors don’t make excessive margins, he says, but too often “what happens in practice is that we have an open book contract of huge complexity, so every month I get from you megabytes of spreadsheets and then I pore through them and give you back questions.” Too often, the data and questions flowing backwards and forwards don’t even get to the nub of the issue: “People think they’re addressing risk by checking every last thing, but they’re not hitting the goals,” he says. “It requires judgement.”
Open to SMEs, closed to favouritism
Given Crothers’ focus on cutting costs, it’s no surprise that he loudly rejects the idea – embraced by the last government – of using procurement to achieve social, economic and environmental goals. Under Labour many contracts specified, for example, that providers recruit local staff or hit green standards – but Crothers points out that it’s now “government policy that you don’t implement policy by procurement. [Maude] is very, very clear: it’s first and foremost about getting best value, full stop. So whenever talks are raised about achieving other policy goals as well, he’s not interested.”
This is bad news for the causes that drive up prices, such as environmental sustainability and hiring the long-term unemployed; and it also threatens the idea – championed by the PM, among others – of buying more from small firms (SMEs), which can struggle to achieve economies of scale. However, Crothers argues that many SMEs are cheaper than their bigger competitors. “We’re now getting examples where a small business will bid for work, and a large, established systems integrator will bid – and the difference in price is a factor of five or ten,” he says. “We’re driving the SME agenda to get the best value, whether that’s cheaper price or the most innovation or better quality.”
While the Cabinet Office is trying to clear a path for SMEs – creating new routes into government such as Cloudstore and the Contract Finder – it is also rolling more government spending into massive, aggregated contracts operated through a set of procurement ‘centres of excellence’ based in major departments. Indeed, in late 2010 Collington announced plans to require that all purchases within nine spending categories be channelled through central catalogues – and this, says Crothers, is still very much the plan. “The emphasis on that hasn’t gone away one iota,” he says. “The amount we’re now spending in an aggregated fashion is much more than it was a year ago.”
He admits, however, that progress has been slower than intended. “We’ve come up an improvement curve, but got to the point where the amount of new spend that’s being aggregated is relatively small. There was a big impetus 15 months ago, but it tailed off a bit,” he says. “My objective is to give renewed impetus to this. We need an intervention to get a big step change.”
In part, he explains, the problem is institutional inertia: “This is all a change for commercial directors, and you’ve just got to keep at it,” he says. “We need to let them know that it’s not gone away; I want to make sure that the momentum that John established doesn’t get lost.” There’s also the difficulty that some big spending departments are locked into long-term contracts accounting for much of their procurement: when they exit these arrangements and join the aggregation system, “you suddenly get a step up.”
There may be other problems, perhaps explaining why the consulting procurement framework in particular is running very late. Maybe the Cabinet Office quite likes the current near-embargo on consulting spend; maybe the GPS has struggled to fashion the framework. But Crothers isn’t giving much away here: “Best to do a deal when it’s right,” he says. “It’ll get done. And I’m much more interested in cutting demand for consultancy than in making it easier to buy.”
The GPS has been losing staff rapidly – but asked whether a shortage of manpower has slowed aggregation, Crothers denies it: procurement reforms and a fall in government spending have reduced the workload, he says. However, he accepts that “there may be a problem of organisation. There may be a need to balance demand, because one department has got demand and another has surplus people. We [in the procurement profession] need to continue to work on acting as a single virtual unit. The Civil Service Reform Plan talked about corporatisation, and we’re really at the very beginning of that agenda.”
And where might that agenda end up? Crothers isn’t yet nailing his colours to the mast: “An end point might be bringing everyone into a single organisation, but not necessarily,” he replies. However, he cites the example of oil giant Shell, which once overstated its oil reserves and reacted by redirecting all its finance staff to report into the centre, rather than up through its various arms. “That was their response to a crisis, and a response that had previously been resisted,” he says. “We currently have people running into their operating units, rather than up the functional line. We may decide that there’s a sufficient stimulus at the moment – because of austerity – to get the next jump on the curve.” Or, of course, they may decide to follow Shell’s example: “It’s an example of something that I’d like to look at,” he says.
There are certainly advantages to strengthening central control of government procurement, Crothers says: “At the minute there are inefficiencies, because [procurement staff] are managed by each department, so you can’t move capacity to meet demand; you can’t move skills around; they all contract with contractors individually. So we could improve it a lot from where it is today.” And he points to the Home Office’s Newport procurement hub, which currently manages transactions for that department. “We’re in the process of moving it into GPS, into the centre,” he says.
Only too aware of how carefully departments guard their autonomy as buyers in the marketplace, Bill Crothers isn’t moving to snatch any purses; but he certainly is keen to take departments firmly by the arm as he steers them through the tricky process of choosing and using a supplier. From its new home within the GPS, the Newport hub will “provide transactional services for the rest of government for particular categories,” he says. “And we’ll do more of that. That’s my agenda.”