Crown Commercial Service chief Malcolm Harrison on rebooting Whitehall’s procurement savings drive

Written by Richard Johnstone on 28 November 2017 in Interview
Interview

After a shaky start, the Crown Commercial Service is changing the way it works with departments in a bid to improve the government’s buying habits. But chief executive Malcolm Harrison tells Richard Johnstone that its success shouldn’t be measured by savings alone, as he sets out the frustrations – and fun – of cross-government working

Photos by Louise Haywood-Schiefer

Malcolm Harrison knows what you think about the Crown Commercial Service. The chief executive of the Cabinet Office executive agency has read the reports, heard the criticisms and understands that the last five years of the central Whitehall buying agency are not viewed as an unambiguous success for its customers in government departments.

The man in charge of helping government buy common goods and services more smartly insists the vision for CCS, first set out by then Cabinet Office minister Francis Maude as part of his suite of civil service reforms during the coalition government, was the correct one. But he acknowledges flaws in the implementation.

“If you go back to 2013, when CCS was formed, the concept was absolutely right. Everybody agrees that pooling together the different organisations that were involved in central procurement of common goods and services into one body has to be the right thing to do,” he tells CSW in the agency’s CAA House offices in London’s Holborn.

“The challenge in 2013 was that it was the right concept but some of the execution wasn’t right. There are multiple reasons why, but I would say that 2013 through to 2016: right concept but not great execution. Everything we’ve been doing since 2016 is to get the right execution, the right operating model and right implementation in place.”

CCS was created with much fanfare by Maude, who claimed at the time that it would “ensure a step change in our commercial capability, giving government a much tighter grip on all aspects of its commercial performance”.

The intention was for CCS to coordinate the purchase of common goods and services, from office supplies and utilities to consultancy and legal services. Specifically, it would take direct control of some buying decisions and also oversee frameworks of approved suppliers that could then be used across government. These moves would free up departments to focus their commercial efforts on their own bespoke requirements.


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The plan built on the work of the Government Procurement Service, and was intended to achieve savings by ensuring government acts as a true single customer. But Harrison – who joined the CCS as a senior commercial advisor in July 2015 after a private sector career that saw him rise to the role of chief procurement officer for Nestlé – plots its genesis back even further.

“I think the original was The Buying Agency which was probably more than 20 years ago, in the 1990s,” he says. “So, the public sector has been trying to do it for a long time.”

The fact that CCS is at least the third iteration of a central procurement body illustrates the difficulty of reform.

“I think the challenge for the public sector, and where I have probably noticed the difference from the private sector, is the multiplicity of stakeholders that you have to manage and the fact that ultimately this is not one organisation, this is multiple organisations [in government],” says Harrison. “It is a big challenge for a central procurement operation to operate on behalf of multiple entities when you actually don’t have any mandate and you’re never going to have any mandate across multiple organisations.”

Harrison, who became CCS chief executive in 2016 compares the challenge of building an agency to purchase common goods – CCS covers around 80 categories – to creating a similar function across 15 top FTSE 100 companies. 

“They would all say: ‘I have my own shareholders and stakeholders and I’m carrying out what they want me to do. And this plan kind of makes sense, but satisfying my stakeholders is a more important priority’,” he says.

“I think the challenge for the public sector is the multiplicity of stakeholders that you have to manage and the fact that ultimately this is not one organisation, this is multiple organisations”

Harrison says his lesson is that trying to introduce shared procurement across these organisations in the public sector essentially means that “you have to be better than you would be in a private sector environment,” he says.

“You have to make sure that your deals are fit for purpose and you have to be able to demonstrate that you’re delivering value for money, even more so than you would in a corporate environment.”

Frameworks for common goods and services are intended to do just that by allowing government departments to buy products together. It was also envisioned that departments would transfer spend of routine products to CCS management and gradually reduce their use of government frameworks.

However, the initial drive fell some way short of expectations. A National Audit Office report in December last year said that although central buying “should achieve very large savings”, it was not clear exactly what spending should be centralised.

According to the NAO figures, only seven departments had spending directly managed by CCS, 10 fewer than originally forecast. The Cabinet Office wanted to increase CCS’s management of direct buying from around £600m in 2013 to £13.4bn in 2017-18, in order to generate net savings of £3.3bn, but there was no agreement with departments about what should and should not be moved centrally. Savings of £521m were reported in 2015-16, of which only £282m was from central government.

The review also found a lack of confidence in CCS’s ability to deliver the services it had taken over procuring centrally and, within months, CCS started to delay transferring services from departments.

Harrison tells CSW it “became very apparent very quickly” that CCS had taken on too much work, in particular in the management of contracts when spend was transferred to it. “CCS had tried to bite off elements of contract management,” he says. “But it is very, very difficult to manage a contract if you’re not close to the point of use of whatever good or service you’re buying.”

So, last year Harrison was appointed as CCS’s third chief executive and instituted what in effect amounted to a reset of the organisation. CCS would develop new category strategies to inform a new generation of supplier frameworks that departments would actually use. It would step back from the areas of contract management, but it put in place deals to ensure money being spent across government through frameworks could drive savings.

The reaction to the changes from customers was “mixed, to be honest”, Harrison concedes. Among the departments that had taken the lead there was disappointment – “we were promised that CCS was going to do this for us, and now you’re telling us you’re not going to” – but there was also a recognition that a retrenchment could be more effective in the end.

“Some of the departments who were at the forefront of the scheme, who absolutely embraced what they were being asked to do, were probably some of the ones that handed over activities that they would now say they probably shouldn’t have handed over in the first place,” he says. “It was a mix of: ‘I thought I was going to have this done for me and now you’re not, but actually what you are telling me you’re going to do, that makes sense’.”

Then there were laggards who simply hadn’t used CCS. “There were frameworks that people weren’t happy with and therefore didn’t use or there were frameworks that people did use and probably didn’t get the best value from,” he acknowledges.

After an 18-month period where CCS has worked to “get ourselves really focused on what we as an organisation can do best”, Harrison says he is around a quarter of the way through his plan to develop his new category strategies, although he notes, “I am learning that everything takes longer round here than you think it should do”.

Get what you pay for

In one of the more intriguing tenders recently put out by CCS, the agency sought firms to join a spend analysis and recovery analysis framework.

The framework is intended to create a mechanism to ensure that government “doesn’t get charged for something we shouldn’t be charged for”, says Harrison.

This happens when requirements change over the course of a contract, the framework will formalise the process of how renegotiations and cost recovery are undertaken.

After what Harrison calls “a couple of instances where CCS helped departments recover fairly large sums of money” it decided to put the broader scheme in place that could be used for all departments, replicating a system more often seen in the private than the public sector.

“It is not so much about contract management, it is more about people who have got advanced analytical skills and are able to look at what it is you are being charged for and compare this with how your needs have evolved, and ensuring that those two match up,” he says. “It is about analytical skills. Then there may well be some spend recovery work that needs to be done on the back of that [but] you’re only going to do that, and get that agreed with a supplier, if you have very good documentary evidence of how that mismatch has occurred.”

Harrison and co are now working with departments to accurately assess their needs. This will inform the development of these new frameworks, in the hope they will be more widely used.

Previously, CCS has “not been anywhere as good as we needed to be in terms of putting in place these really good commercial category strategies”, he says.

“The number one priority, by a long way, is making sure we have strategies for our categories and then the frameworks that flow from those. You have to get a category strategy right first and that involves a lot of discussion with the users – the departments – based on what their needs really are, and on how the marketplace is evolving and how the supplier base is evolving.

“Once you’ve got those in place, the next stage is making sure our frameworks are really fit for purpose. It is very difficult to get a framework that is fit for purpose without having the category strategy in place, so number two is ensuring that we have the frameworks in place.”

CCS’s existing framework deals for procurement “have got themselves a very bad name”, he acknowledges. “People talk about CCS or Liverpool [its main office] being a framework factory and that is very unfair,” he says. “People talked about frameworks not adding any value. I think that is incorrect. Frameworks are a very efficient way of making sure you put in place agreements that are compliant with UK public sector procurement regulations. Having got those frameworks in place, it means that when it comes to contract it is a much quicker and a much less resource-intensive process to put that agreement in place.”

However, the focus on being easy to use and compliant with procurement rules meant they were not always best value.

“The reality when you are a supplier bidding to be on framework is that there is no commitment to any volume, so you’re not going to give your best price,” says Harrison. “So almost by definition, a framework price will never be a competitive price.

“It is only ever the maximum price, and there is a big risk that you think you’re getting value when actually you’re not,” he says. “Frameworks are designed to be a really efficient way of putting in place arrangements with suppliers which are compliant.”

The key comes in the next step – running a further competition and committing some volume. “That is when you get your best value,” he says.

In order to address the fact that the previous generation of frameworks “are just not as good and as commercial as we’d like them to be”, the third element of the reboot is focused on CCS to “go a bit further than just frameworks” to drive improved value for money.

“How do we, for common goods and services, increasingly be the body that is using our skills and resources to put in place those deals?” he asks. “That’s good for customers, because it then shows us delivering good value for money, but it is also important for us too because it allows CCS to be close to the external market, and overcomes the fair criticism that some of the old frameworks were not commercially competitive.”

These changes will not come quickly, warns Harrison, who shares the example of the Government Legal Department to illustrate the process.

“We have spent the last two years working with the Government Legal Department defining the right approach to using external lawyers to supplement internal government resources when we need them,” he says. “We identified different types of lawyers, we identified where there were areas with a particular need for external legal input.

“A lot of this came from the Government Legal Department themselves – they are much better experts than we ever will be in law. What we brought to it was some category thinking, around how might we structure this, how might we put it into different lots, different panels. That was an 18-month to two-year piece of work to put new arrangements in place.”

The previous legal frameworks highlight the problems of the old approach – they captured less than 20% of the possible spend as they were too general and therefore not used.

“Getting in place a series of panels that can cover the entirety of spend – I’m not naïve – is going to take some time. But at least having the possibility to do that actually means we have put in a much more efficient – equally compliant but much more efficient and commercial – set of panels than we had before.”

Departments are also more involved, rather than CCS focusing on putting arrangements in place itself, and expecting departments to use them.

“I will say to you that that is the bit we probably got wrong before,” he adds.

“Now we’re saying we want departmental input into creating that strategy in the first place. Then, yes, we will put it in place on [departments’] behalf. And then they can use their resources on their own bespoke requirements for other items, the non-common goods and services, which we’re never going to be able to help them with.”

Perhaps understandably given the scale of the task, Harrison is reluctant to commit to possible future savings that this plan will bring, instead focusing on “driving value for money and helping our users spend wisely”.

"It is a big challenge for a central procurement operation to operate on behalf of multiple entities when you actually don’t have any mandate and you’re never going to have any mandate”

“It is interesting, everyone talks about savings, but it is actually quite difficult to make savings if you haven’t bought that thing before,” he says. “If it is a repeat purchase of the same thing then it is quite easy to be able to measure what you paid last time and what you are going to pay this time.

“But if what you are buying is something different, then it is more about how you help your user spend wisely – how do you make sure you’re not spending more than you need to,  how do you make sure you’re getting the service that you need [and] that you specify. That to me is delivering real commercial value and benefits that will deliver savings, but it is not just about savings.”

Harrison admits to a degree of irritation about “getting the enormous machine” that is Whitehall “to change at the place you would like it to” as he goes about this work.

“That has been a bit of frustration, not so much a surprise but a frustration,” he says, but both the ethos of the civil service – “the fact you have got people who are so committed and passionate is great and we have got some really good people in this organisation” – and the promise of success keep him motivated.

“It is a big challenge because of the environment we operate in. Do you know what? That’s half the fun.”

Breaking IT down

One of CCS’s priorities when it was created was to drive reform of the government’s IT spend, with a target to disaggregate large technology deals across Whitehall into smaller deals to open up the market to more firms and improve innovation.

Harrison says that CCS is “going to change the landscape because we can drive more value for money and quite honestly technology has moved on”.

Large deals with single contractors tie departments into long term agreements, whereas breaking down procurement into smaller packages allows government “to link ourselves into, in an agile way, the innovation going on in the IT marketplace, and it is actually quite difficult to do that with big integrated deals,” he says.

In order to drive the changes, the category teams at CCS are working to prepare suppliers for the new disaggregated world, and CCS has claimed the programme is now reaching “an inflection point”, with incumbent deals worth about £4bn set to be broken up and redistributed in the next few years.

“Where CCS comes into it is with not so much the disaggregation of those big deals, but the provision of the new component parts – be it hosting, be it networks, be it software,” he says. “So our IT category teams are very heavily engaged in putting in place the new arrangements, the new frameworks and structures that departments can use when they no longer have those big integrators in place.”

As with so many of CCS’s reforms, Harrison sees many advantages to the process. “Most people [suppliers] would prefer to deal as directly as they can with their customer and their user.”

About the author

Richard Johnstone is CSW's deputy and online editor and tweets as @CSW_DepEd

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