The centre of government is learning to be less "shrill" and more "intelligent" in its dealings with departments, civil service chief executive John Manzoni has said, as he set out the thinking behind new guidance aimed at sharpening Whitehall's ability to deal with private sector suppliers.
The Cabinet Office, which Manzoni also leads as permanent secretary, published a wide-ranging set of commercial standards for government earlier this month. The new rules call on departments to draw up a "blueprint" for improving their commercial operations by next month, and are the culmination of more than a years' work, triggered by a public accounts committee report which issued a stark warning about Whitehall's commercial capability.
PAC's 2014 report followed revelations that suppliers G4S and Serco had overcharged the Ministry of Justice for the electronic tagging of offenders, and called on departments to pay "much more attention to contract management" in order to avoid being outgunned by the private sector.
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Among its recommendations, the MPs urged increased transparency through the adoption of open book accounting standards, and said steps should be taken to ensure "strong accountability and appropriate sanctions and rewards for staff managing contracts".
Appearing before PAC for a progress update this week, Manzoni – who has repeatedly stressed Whitehall's need to do more to attract and retain commercial specialists in recent months – said he had been focused on "rebuilding" that skillset across government since the committee's report.
"We are addressing that now and I think we are beginning to see some examples where those things are starting to change," he said.
Manzoni highlighted moves to recruit a batch of new commercial specialists across government, saying the Cabinet Office was now working to build a unified "commercial fraternity".
Twelve new commercial experts have been hired at Pay Band 2, he said, with 13 more to come, while 19 – including ten from outside Whitehall – have been drafted in at the level below that. The Cabinet Office is also about to launch "another recruitment round" for 40 more commercial experts at Pay Band 1, and is "in its final stages of agreement to take a more holistic view of the top 400-600 commercial posts across government", Manzoni said.
"Just because the Cabinet Office happens to ask a bunch of questions doesn't mean that everybody jumps to attention"
A Commercial Capability review was launched by the Cabinet Office and the Treasury in 2014 in response to PAC's report, with ten government departments responsible for the majority of contract spend reviewed by outside experts, and seven left to carry out self-assessments.
Manzoni confirmed that three of those self-assessing departments – responsible for some £5bn of contract spend – had still not reported back on their findings, a result, he said, of the Cabinet Office not having "followed up as hard as we might have".
"Just because the Cabinet Office happens to ask a bunch of questions doesn't mean that everybody jumps to attention," he said. "Because, actually it's up to the departments to do their commercial – they're accountable for their commercial capabilities. So I actually think this is about getting a large organisation's attention."
But he said the new guidance set out by the Cabinet Office this month, and the requirement for departments to set out commercial plans by the spring, meant government was now taking "substantial steps to accelerate" reform.
"The centre of government can easily become shrill," he said. "And unless the centre of government has the right capabilities inside it, and can interact in a mature and sensible way with departments, it's just not effective.
"So it's a question of how we build the capability at the centre in order to inquire of the departments in an intelligent and helpful, and yet challenging way. It may well be disappointing, but I think we're changing that now. We've got substantially more capability in the centre to interact in a way that departments find both challenging and more constructive as opposed to being just shrill."
The 14 commercial standards for government set out earlier this month call on departments to "build and implement commercial capability plans" – dubbed "blueprints" – by March, and say all departments must work towards having "a fully resourced and appropriately skilled, trained and experienced commercial function".
The standards also call for open book accounting, say the the business cases underpinning planned commercial deals should be made "available for review and early engagement", and say government should "plan well in advance of a contract ending and restart the next procurement process in sufficient time to avoid the use of extension options".
During the PAC hearing, Manzoni was pressed by Conservative committee member Stephen Philips to name the three best and worst-performing departments in commercial terms.
While the civil service chief executive stopped shorting of listing three of each, he said he believed the Ministry of Defence had "pretty reasonable commercial capability", while the Department for Work and Pensions had made "big strides".
"Some of the other, bigger departments are in some senses less important [but] the Department of Energy and Climate Change has very good corporate finance capability and that's what it needs for what it's doing," he added.
But contract oversight at the Department of Health remained a "work in progress", Manzoni admitted, while he said HM Revenue & Customs remained too reliant on external help.
"I think in HMRC today we have the capability, it just happens to be a capability that is not predominantly [posssessed] by civil servants," he said. "So there's a couple which are the top of my worry list."