Expand performance-related pay to boost Whitehall contract management, report recommends

Plans for reform also include consistent use of cross-disciplinary teams in departments as contracts are signed

Photo: PA

By Richard Johnstone

23 Jan 2020

More commercial officials should be eligible for performance-related pay in an effort to improve management of government contracts, a report has recommended.

An examination of government procurement and commercial functions by the CBI business group set out a series of recommendations intended to improve both he procurement and operation of government contracts.

The CBI has been involved in the development of the Cabinet Office’s Outsourcing Playbook, which made a series of reforms to how government works with external providers following the collapse of Carillion.


The document, published last February, set out a number of policies to help departments make better outsourcing decisions and deliver better public services.

Changes included greater scrutiny of risk in outsourcing and reviews for outsourcing deals that are similar to those for major infrastructure projects.

In today’s More than managing report, Matthew Fell, the CBI’s chief UK policy director said the playbook has been widely welcomed by industry, but there was a need to “accelerate progress and support better collaboration between business and the public sector not just in procurement, but throughout the entire commissioning cycle”.

Among the recommendations today is a move to expand performance related pay for civil servants working in commercial to “increase accountability and incentives”.

Most officials do not have their pay linked to the performance of the contracts they manage, according to the CBI. The exception in the senior commercial staff who form part of the Government Commercial Organisation where a 15% performance bonus is available.

This approach should be expanded, the report said, to tackle the high turnover of officials that contractors say continues to blight their relationship with government, despite efforts by the government commercial function to slow staff churn.

“Currently, commercial staff across the public sector often don’t have clear incentives to ensure that projects are delivered on time and to budget, particularly for lower value or less complex projects which also receive less scrutiny from senior leaders," it said.

“This is not to say that the public sector should seek to match the level of reward on offer within the private sector, only that performance-related pay can play an important role in encouraging commercial staff to deliver.”

Any bonuses should be linked not just to performance on oce project, but across the projects overseen by contract managers in departments. “Performance-related bonuses should also not just be tied to projects being delivered on time and on budget, but to improved delivery of the contract objectives —particularly when the contract is related to frontline public services,” according to the report.

Other recommendations include mandatory use of multi-disciplinary commercial teams, so that staff involved in both the initial procurement and the subsequent contract management are involved in discussions about the deal.

Departments should also put more effort into the development of “an appropriate and proportionate number of key performance indicators” tailored to each project. These should have greater teeth so that, where appropriate, under-performance can be held to account, the CBI added.

Fell highlighted that at any one time, central government departments are managing tens of thousands of contracts, varying from large infrastructure projects to frontline public services.

“Getting commercial practices right to deliver better value for taxpayers is simply critical, he said.

“While government has taken steps to increase its effectiveness in managing public service contracts and projects, supplier feedback as well as National Audit Office analysis shows that more can be done. Firms are ready and able to help improve delivery.”

“A key part of this will be making sure lessons are learned from past project failures and increasing accountability on both sides so that action can be taken where delivery falls below expectations.”

Responding to the report, a Cabinet Office spokesman said: "We recognise the need to improve commercial capability across government, so that citizens always get value for money. We are actively working on this, in particular through the reforms outlined in the Outsourcing Playbook, but welcome the CBI's proposals, which we will examine carefully."

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