The Kelly Report

In 2002 the Chancellor of the Exchequer asked OGC to advise on what further steps could be taken to increase competition and encourage better long-term capacity planning in markets where the Government possesses significant purchasing power. Successful delivery of an ambitious programme of public sector reform, which requires investment in bought-in services, depends on markets being able to respond effectively and innovatively, and at an affordable price.

The OGC team, chaired by Sir Christopher Kelly,  produced a report (Increasing Competition & Long Term Capacity Planning ) in December 2003.

Main Findings:

• If competition and capacity planning are to be significantly improved, the public sector needs to take a much more systematic and strategic approach to the markets in which it operates, and not just to focus on individual procurements. 
• There is a need for a stronger lead from the centre. That means a strengthening of the leadership provided in departments on procurement matters, not just to the parent department itself but also to the agencies, non-departmental public bodies (NDPBs) and other public sector bodies they sponsor. 
• Greater focus on markets and stronger leadership will not be effective in improving competition and capacity planning unless the public sector continues to make progress in increasing its own capability as a client and puts into practice an unfailingly professional approach to business planning, programme/project management and procurement throughout the sector. Improving client capability is a key part of the delivery and reform agenda.

There is a wide understanding of what best practice is, or ought to be. But the public sector is characterised by widely varying states of capability and learning, and best practice is far from universally followed.  If best practice were applied intelligently throughout the public sector, and if suppliers also  applied published good practice principles, competition and capacity planning would be considerably enhanced and the scope for value for money savings would be substantial, possibly running into hundreds of millions of pounds.

Recommendations:

(i) All departments should be required to think innovatively about how best they can provide clear information on their future needs commensurate with industry lead times, engage early with key suppliers throughout the supply chain and take suppliers' needs into account in their business planning.

(ii) Departments should systematically pool market intelligence and share strategic information about future programmes and current projects, with a view to better understanding the totality of the public sector's likely demands on industry and the nature of the market necessary to meet those demands.

(iii) In addition to improving performance on individual procurements, both individual departments and the public sector as a whole should take a much more systematic and strategic approach to the major markets in which they operate.

(iv) All relevant departments should be tasked with giving a stronger lead on procurement issues to the agencies, NDPBs and other wider public sector organisations they sponsor, including on the market creation and management issues at (i) to (iii).
 
(v) All departments should continue to give high priority to the existing drive to improve client capability.

(vi) All departments should continue to give high priority to making procurement timetables more predictable and to reducing delays in the bidding process.

(vii) All departments should give priority to reducing red tape in procurement and improving the attractiveness of the Government marketplace to all suppliers, including taking actions in line with the Government's response to the May 2003 Better Regulation Task Force and Small Business Council report 'Government: Supporter and Customer?'
 
Responsibility for implementation the above recommendations would rest with individual departments. In central civil Government, the OGC would need to continue with its leadership role, to foster the take-up of best practice, to facilitate a coordinated approach to markets where necessary, in order to manage delivery risks and improve government's interactions with industry, and to monitor progress. In the wider public sector, sponsoring departments and central bodies are recommended to play a central role in bringing about change within their respective domains.

(viii) The OGC should explore three or four of the more obvious case studies of market creation - stimulating a competitive supply response to novel service requirements where a healthily competitive supply market does not already exist - with the departments or other public sector bodies involved.

(ix) The OGC should draw up guidelines on the factors that can be taken into account in reaching decisions which reduce the risk of adverse consequences arising from over-dependency, for example where a supplier may be so over-stretched by existing demand as to raise doubts about its financial capacity to deliver, or where a supplier's share of the Government business is such that it may be deterring other potential bidders.

(x) The OGC should research the wider applicability of Achieving Excellence principles on the make-up and management of the supply chain and draw on this and other experience to articulate and embed best practice guidance in supply chain management.