Press Releases

Speech by Peter Gershon to Public Sector Expo 2000

I am delighted to be here today to talk to you about the OGC which formally came into being at the beginning of this month. Our gestation period has been a long one and I would like to pay tribute to all staff in the OGC for the way in which they have coped during a period of considerable uncertainty.

However, now the waiting is over and we can get down to business. This exhibition and conference mark the beginning of a new chapter in public sector procurement. I am delighted all three agencies - CCTA, PACE land TBA - that are now part of OGC together with other public sector organisations and professional bodies have taken full advantage of this event.

Over the past few months my new colleagues have already begun to build on some of the findings and recommendations arising from my review last year of Civil Procurement in Central Government. As a result I hope we can build momentum quickly on addressing the issues we need to tackle in order for OGC to spearhead the improvements in value for money that are achievable through new approaches to the way we tackle the management of procurement and our relationships with the supply base.

I would now like to share with you my vision of the kind of operation I want OGC to become and to give you an insight into my priorities for this year.

Background

Firstly however and in order to provide a context for my vision and immediate priorities, I would like to briefly revisit the review of Civil Procurement in Central Government which I conducted last year and in particular:

a. The background to the review.
b. Its findings.
c. And the recommendations.

The drivers of the review included:

a. The Government's objectives on efficiency, modernisation and competitiveness.
b. The perceived problems in a number of high profile major projects.
c. Growing evidence of inconsistent practices across Government leading to sub-optimal outcomes.
d. A desire to find ways of achieving improved value for money.
e. A recognition of the growing importance of procurement.

The main findings of the review were that:

• Departments exercised the authorities that had been delegated to them without the benefit of a common framework that would ensure coherence in how public money was spent.
• The number of separate bodies in both Treasury and Cabinet Office and the subsequent fragmentation and lack of co-ordination weakens the leadership needed to advance and improve practices.
• There are no common well-defined processes for the management of major projects.
• There is no common approach to the management of the supplier base.
• There are no common systems for the recording and measurement of purchases, costs of procurement, supplier performance nor the measurement of value for money savings.
• The overall procurement skills level needs to be raised significantly.
• Tendering to Government is unnecessarily burdensome on suppliers and can act as a deterrent to tendering.

It seemed clear to me that in order to solve the issues raised in my report, and overcome the drawbacks in the present approaches which stood in the way of delivering better value for money, we needed to bring greater focus to the role of procurement and the way in which government's commercial relationships were handled.

This I felt could be achieved by consolidating the expertise, know-how and experience already in place in the Treasury departments and the Executive Agencies by forming a single centre of excellence that would, because of its inherited abilities, be capable of supporting government departments across the entire range of procurement activities. The advantages and benefits of such an organisation would be threefold:

a. Common approaches could be applied throughout government.
b. It offered the best opportunity to ensure that the best policies, practices and solutions were adopted by all departments.
c. It would facilitate better supplier management and help maximise purchasing power.

My vision of the future for OGC

My vision is for OGC to become a catalyst for change in the public sector procurement by:

a. Helping government secure the best possible quality and value for money from its suppliers.
b. Identifying the "best in class" approaches and practices and assisting in their implementation.
c. Establishing common measurement techniques.
d. Developing new methods and approaches.
e. Providing management information.

I want to achieve this reputation through the quality of our people, skills, advice and through the strength of our arguments. I anticipate departments and the public sector generally will want to deal with OGC because we offer added value that they cannot secure elsewhere.

It will clearly help that we are a high profile operation with the support of the Treasury but I need to make it clear today that our role is to work with departments to achieve the value for money improvements identified in my report.

Immediate priorities

As I mentioned earlier a great deal of work has been undertaken by my colleagues to ensure OGC hits the street running after its official start and the Chief Executives of the Agencies will tell you more about the plans they are taking forward in 2000. At this stage I would like to tell you what my priorities are for this year.

They are concerned with the structure of OGC, the management of major projects, measurement techniques, electronic trading and the concept of the shopping mall, skill and people development and last but not least the realisation of the £1bn savings forecasted in my report.

• I said in my report that whilst OGC would start with inherited resources and activities, the status quo is not an option. I am launching a review of all the organisations and activities within the OGC to determine the most appropriate structure as quickly as possible so that the organisation of OGC can be firmly aligned with our aims and objectives.
• In my report I recommended the use of a "gateway" process to help improve the way in which we manage large, complex or novel projects. Within the new OGC structure a senior appointment has been made to develop a detailed definition of the gateway process and an implementation plan.
• I regard as crucial the means by which we can uniformly measure the direction and pattern of our procurement spend.
• The Government has set some demanding targets concerning the adoption of e-commerce techniques. The successful use of such techniques will revolutionise procurement but success requires that the issues relating to culture, processes, systems and network connectivity are addressed as well as those relating to technology. There are matters we must get right in order to grasp the huge benefits that are potentially available. We are therefore launching a short externally led review to understand the current status and direction of all e-procurement initiatives across Civil Government, including those in the OGC, to determine if our current approaches are optimum.
• I want us to establish a clear view on how we will tackle the development of the skills of our people. Our ability to become the high impact organisation we need to be rests entirely on how we develop and retain our key resources. At the same time we need to build on the work to date in developing the Government Procurement Service in order to continue to develop the professional knowledge and skills of procurement staff across Government.

Techniques such as the procurement card and e-procurement have an important role to play in freeing up resources to concentrate on high value-added activities.

• I intend to launch a review of all the advice and guidance and information on best practice which has been issued to date by constituent elements of the OGC. The formation of the new organisation provides an excellent opportunity to look again at the coherence, consistency, relevance and practicality of the best practice we promote in the future.
• We need to determine the actions required to ensure that value for money - the optimum combination of whole life costs and quality to meet user requirements - is the basis of every procurement decision involving the taxpayer's money. There needs to be much greater awareness that the Government's Environmental agenda and the Value for Money policy are complementary. My own experience in industry convinces me that full consideration of environmental factors can play an important role in reducing whole life costs.
• We must, of course, not lose momentum on existing initiatives such as Achieving Excellence in Construction where we are now one year into a 3 year strategy to improve Government's performance as a client of the Construction Industry. Later today, Kate Priestley, the Chief Executive of NHS Estates, will be announcing an important construction procurement strategy for the NHS which builds on this initiative. Kate is a key member of the Government Construction Task Force and her announcement today is a very good manifestation of Joined Up Government at work and shows what can be done through inter Departmental co-operation. This is an excellent example of how the OGC will seek to establish effective relationships with procurement authorities across the public sector to seek collective benefits through working together.
• On the subject of inter-departmental co-operation work has now begun in five areas of supply to establish if there are "quick wins" to be gained either through aggregation of requirements or wider communication and use of existing supply agreements which give very good value for money.
• We need to put in hand actions to establish how the £1 billion of value for money improvements identified in my report are going to be realised and measured.

And Finally

I hope I have been able to give you an insight into my thinking as I take up the existing and challenging responsibilities as Chief Executive of the OGC. My objective is that the OGC, by working with Government departments, will become the catalyst for the achievement of excellent value for money in commercial activities through the use of best practice techniques.

Expectations of the OGC are high - on the 21 March the Treasury published the Economic and Fiscal Strategy Report and Financial Statement and Budget Report (the "Red Book") which contained the following statement:

"The Government is also taking action to raise its game in the way it procures goods and services across the board. The creation of the Office of Government Commerce (OGC) is central to this agenda. By drawing together central government procurement agencies into a single organisation and providing a new drive to improve performance, OGC will help deliver a step change in public sector procurement practice."

Thank you for giving me this opportunity to talk to you today. I would now like to pass the baton to the 3 Chief Executives of the OGC agencies to brief you on their plans and key activities.