To deliver public services through third parties, civil servants need to acquire better commercial skills. Mark Smulian attended a Civil Service World round table discussing how, and where, they should be developed
The government has launched a fresh drive to boost the commercial skills of civil servants. It is, Cabinet Office permanent secretary Richard Heaton has told CSW, one of the “two clear priorities” of the Civil Service Reform Plan. And as the role of civil servants changes from delivering services to commissioning them, understanding and effectively working with contractors is only going to become more important.
The growing use of private and voluntary sector contractors means that civil servants must understand how these organisations operate, and know how best to set out their own service delivery aims, write contracts, and negotiate for best value. Many government contracts go to larger, private-sector businesses – and it was to discuss Whitehall’s relationship with this kind of contractor that Civil Service World, in partnership with property and infrastructure firm Capita Symonds, ran a round table on commercial skills.
Back to basics
If civil servants are to ask private companies to deliver public services, they first need to have an understanding of how businesses operate. Rachel Gwyon, deputy director of the housing sustainability and innovative finance division at the Scottish Government, wondered whether – like the British and the Americans – “the public and private sectors are speaking different versions of English.” She would, she said, “encourage both to learn each other’s language.”
Some departments have tried to improve their understanding of the private sector by hiring former businessmen, but one such recruit – David Brandenburger, now head of commercial projects at the Department for the Environment, Food and Rural Affairs – warned that it’s “very hard to disseminate concepts of private sector accountability and responsibility across civil service organisations”. Nonetheless, he argued, it’s important to try – and on both sides: unless private firms employ ex-civil servants, they suffer similar ignorance and “do not know why government behaves as it does”.
From the private sector side Richard McCarthy, executive director for central government at Capita Symonds and a former director-general in the Department for Communities and Local Government, explained that the relationship works best when civil servants understand what the market can provide, and companies have clarity on the desired outcomes.
Officials must ask themselves what service they want and how the commercial model will operate “before they start the procurement and find themselves in a challenging place,” he said. “Before doing the commercial approach, let’s understand the language and the operating models.” McCarthy also identifies knowledge gaps on both sides, and warns that “assumptions are made which can be dangerous”.
To reduce such problems, it’s essential to hold open, minuted talks with would-be contractors before tendering, McCarthy said: this “enables you to create a commercial model that gets the best from potential bidders. Of course, it must be completely transparent and in the public domain”.
Gwyon felt some difficulties are more about culture than skills, citing the service’s aversion to talking about money. “We can’t afford to be naïve and have got to understand the profit motive,” she said. “We don’t think enough about the private sector getting reward because public sector values wouldn’t allow that.”
Greater clarity
As well as understanding its private partners, the public sector must have a better understanding of its own needs; and Nick Hopcraft, head of commercial strategy at the Highways Agency, agreed that civil servants must have a clearly-defined aim and delivery model before going to market. With 95 per cent of its expenditure passing through private contractors, the agency has learned that “you don’t decide how you do something until you have a commercial model which works,” he said. “You cannot ask a supplier to do something you’ve not defined, or you will not get the right answer.”
Achieving that clarity is complicated by the fact that public contracting is ultimately part of a political environment. Therefore, one essential requirement “is a very clear understanding of ministerial aspirations and objectives”, according to Tracy Gale, deputy director of personal tax (products and processes) at HM Revenue & Customs. “We have to develop skill sets that enable us to communicate very clearly what the options and flexibilities are, and sometimes we are not having a sufficiently informed conversation.”
Further, Phil Higginson, Civil Service Learning’s (CSL’s) professions, services and engagement team leader, said civil servants should “go to market with a compelling description of what is required: something that, historically, we’ve not been good at”.
CSL’s active market engagement has paid dividends, he claimed, resulting in a model that has broken down large contracts and meant that “we can get more SMEs into the supply chain, where previously – because the requirements were so big – perfectly good suppliers were excluded who could have done 50 per cent of the offer. You had monopolies occurring”.
Deploying skills
To deliver innovative models such as Civil Service Learning’s commissioning system, civil servants need to have commercial skills and understand financial modelling. However, Declan Burke, an executive director at the Department for Business, Innovation and Skills, noted that while the private sector employs specialists to undertake commercial roles, “in the civil service you have generalists – and it’s quite important to make sure that somewhere you have some relevant experience”. He added: “If you don’t, you need to bring it in, because if you are sitting across from someone who has a lot more experience than you, you potentially lose out”.
Colin Welch, assistant director of the Commercial and Property Directorate at the UK Border Agency, commented that “government has brought in commercial people from outside, but unfortunately the senior civil servants are yet to trust them and would still rather bring in a consultant to run procurement for them”. This approach is not only wasteful, he said, but has – because consultants only come in for a short while to handle a specific job – led to the separation of procurement and contract management. Meanwhile, the two capabilities are generally combined in private businesses, making for a stronger operation.
Another problem with improving the civil service’s commercial functions is the practice of rotating staff through a range of roles, meaning that expertise is routinely drained out of key departments. Katherine Watson, a talent project manager in Civil Service HR Operations, noted that “people do rotate quite quickly in post so you get a rotation of staff during a contract negotiation, which I find a concern at times”. She added: “There are conflicting messages. HR people say: ‘You need development, you need to move,’ but people can need to stay to make sure their contract succeeds.”
The civil service may also not have properly mapped its current capabilities, Hopcraft said. Its atomised structure also creates a problem of “very compartmentalised skills”, he argued, adding that “there probably are all the skills you need somewhere in the civil service, but if you go to another department and say: ‘Can I have that person?’, the answer would be no. We need to use all those skills”.
To solve this, the civil service should copy other big organisations and build its structures “around skills rather than departmental alignments,” suggested Legal Services Commission contracts manager Peter Mason.
New approaches
As well as better understanding the private sector, and better deploying commercial skills, the civil service needs to undertake a culture change on many fronts, the participants said. For example, Welch pointed out that the government expects companies to make no more than a five per cent return on any contract. “If you are a shareholder, are you going to make five per cent?”, he asked, or are you going to seek a better investment?
Meanwhile Lynne Henderson, head of the education department’s Category Leadership Team, criticised an ingrained risk-aversion in the civil service. “I wonder to what degree this stymies our ability to achieve?” she said. “This culture of audit trails is just there all the time. Let’s cut through these swathes of bureaucracy and make one decision, once.”
Andrew Hyslop, the Office of Fair Trading’s head of sourcing and supplier relations, also urged less caution over contract rules. Sometimes, he suggested, civil servants put together a fresh tender process rather than extending a perfectly good existing contract – even when “most of the time nobody would [challenge an extension] because there are good business reasons for both sides to continue.”
Departments also need to better coordinate their procurement work, said Watson: different departments often let contracts for the same things at different prices. “I’m sure everyone has gone out to tender for a contract and found somebody has done it before them.”
Speaking off the record, one participant said savings could be found by designing contracts in such a way that other public bodies could join them further down the line. While departments with existing professional or geographical relationships might collaborate in this way, he said, no structure exists across the civil service to identify or facilitate such opportunities: designing contracts that are open to new public sector buyers would create “a great incentive for the commercial sector, because a private concern will look to the medium- and long-term – and if the door is open on scalability, that will help you drive a better deal.”
The challenge is a big one. Departments must better pool their skills, open up their contracts, relax their requirements, and understand the private sector. The next step will come when the Cabinet Office publishes the Civil Service Capabilities Plan, scheduled for early this year, and sets out the exact skills and approaches civil servants must adopt. Until then, though, this round table shows that there is plenty for civil servants to be getting on with.
The participants – and their conclusions
