|
This chapter is primarily for senior managers, managers responsible for efficiency
programmes and line managers.
 | Government is committed to value for money in public services. |
| Better value for money and efficiency both mean better quality services for the customer
at optimal cost to the taxpayer. |
| Efficiency reviews should be regular, comprehensive and led, and supported, by senior
managers. |
| Full use should be made of Public Private Partnerships, using the technique, for example
competition or benchmarking, which will produce best value for money in the particular
circumstances. |
| The scope for cross-Departmental working, including through service level agreements,
should be fully explored. |
|
GOVERNMENT POLICY
1.1 The Government's 12 Guiding Principles state
that the Government is committed to developing modernised, high quality, efficient,
responsive, customer-focused, environmentally friendly central Government services. To
achieve these aims, the Government will work with the private sector in Public Private
Partnerships. The Government's approach is pragmatic. Departments should use whichever
means will deliver best value for money. Value for money means better quality services for
customers at optimal cost to taxpayer.
1.2 The choice of the means to deliver best value
for money, should be based on a robust assessment of the options in each set of
circumstances. Departments should not make a choice they cannot justify publicly if
challenged, particularly in relation to the Government's wider policies and objectives.
Departments should regularly and systematically review what services they provide and how
they are delivered to ensure better quality services at optimal cost. Over a five year
period all of a Department's services and activities should have been reviewed at least
once, but that should not be the end of the matter: the search for improvement should be
continuous. No services or activities should be excluded from reviews. No approach to
improvement should be ruled out or ruled in, without a thorough examination of the
options. For Departments, the benefits of efficiency are:
| if Departments can produce service X at the same or better quality but lower cost then,
subject to Ministerial priorities, Departments can either increase the level or quality of
service provided or Departments can put more resources into services Y and Z within any
given total budget. |
REVIEWING SERVICES AND ACTIVITIES
"Make or buy"
1.3 Reviews of services and activities to achieve
better quality at optimal cost should start with the purpose or objectives of the service
or activity in question. Reviews should be robust, without any in-built preference for any
particular way forward. The options (set out in paragraph 1.6) should be considered on
their merits in the circumstances. In practice, the key choice for Departments is between
making or improving for themselves, or buying, which should be decided by fully appraising
the options. In this guidance, the distinction is:
| make |
set up within a Department or restructure internally an
existing service |
| buy |
contract out after a competition (market testing, in effect,
defers this decision until the competition and careful consideration would be needed
whether, in the circumstances, that was the best way to engage staff and the private
sector in meeting the Department's requirements – see paragraph
1.6) |
|
Decisions should be clear and transparent, to minimise uncertainty for
staff and so that they can be clear about how to make their contribution; and so that the
private sector can target its efforts to best meet the Department's needs.
Best practice
1.4 In reviewing their services and activities,
Departments should:
| communicate with, and consult staff, customers/users, the private sector and
other potential external providers; |
| act within the Government's overall objectives, for example, on fair employment,
and on the environment, including sustainable development; |
| take a strategic approach – avoid short-termism, understand the impact of
the steps being taken and look at whole life costs, for example in relation to
environmental issues; |
| bring about managed change – not haphazard savings, for example, by leaving
vacancies unfilled; |
| adopt an integrated approach, so that all knock-on effects of proposals are
recognised and addressed; |
| review related services and activities together, in order to maximise the scope
for improvements and minimise the costs of achieving them; |
| focus on essentials; |
| explore the scope for cross-Departmental working, and working with other parts of
the public sector, in line with the responsibilities of the Accounting Officers concerned; |
| and speak to the private sector, to customers and to staff about the service needed and
about potential improvements; |
| set demanding improvement targets, because people and organisations rise to
challenges; |
| think and act commercially, both internally and externally, when looking for
improvement, and when negotiating and operating contracts or Service Level Agreements, but
do not forget the requirements of propriety and regularity in spending public money; |
| decide whether to make or buy, by appraising the options (see paragraph 1.6); |
| remember to follow the relevant regulatory requirements, especially (when they
apply) the EC Procurement Rules (3) and
TUPE; (4) |
| seek and encourage innovation which will lead to step change improvements in
quality, performance and cost; and reflect this in the specification of requirements (Chapter 5); |
| sequence competitions with other efficiency programmes, in order to avoid
saturating the market (thus sound research and networking with other Departments will be
important), or to avoid over-stretching the resources available; |
| remember that people are both the public and private sectors' key assets: they
need to be supported in achieving change and supported when affected by change. |
Effects on other Departments and the Exchequer as a whole
1.5 In reviewing services and activities and in
scoping (Chapter 4), Departments should have regard to any implications for other
Departments and the Exchequer as a whole (5).
Alternatively, a Department may become aware of implications for itself of another
Department's actions. These might be, for example, staff surpluses arising in one
Department as a result of the efficiency exercise or any competition by another
Department. Therefore, to ensure that these wider issues are addressed when they arise,
the Accounting Officers of the Departments concerned (or senior managers with delegated
authority) should be informed and they should seek to resolve the matter. That is, they
should agree how to handle the risks in ways that ensure better quality services at
optimal cost to the Exchequer as a whole. This must not be used as a veto to
frustrate the search for value for money now and in the future.
KEY STEPS
1.6 The key steps are:
a. Decide whether the service or activity is required at all?
And, if so decide the nature of what is required (6)
and why it is required:
| not "what are the processes involved", because the processes should be
fashioned to deliver the end service, and not all current processes may be
required in the
future; |
| the service should relate to customers' requirements – customers may be internal or
external; |
| Departments should be clear about what the relevant policy is intended to achieve –
the outcomes – and what the service or activity is intended to produce –
its outputs; |
| the service should help achieve the strategic objectives of the Department and the
Government as a whole; |
b. Set performance standards:
| the performance standards for an existing service should be reviewed; |
| if the service is new, performance standards should be set, in outline at least, from an
early stage; |
| performance standards should be challenging and relate to the strategic objectives of
the Department; |
| performance standards will need to be reconsidered throughout the efficiency review, but
they should always be challenging. |
c. Appraise the options for achieving better quality services
at optimal cost – that is, plan an efficiency programme. In summary the options are:
Abolish |
Restructure internally |
Strategically contract out |
Market test |
Privatise |
|
(These options are set out in full, below)
| each set of circumstances is different and no option should be ruled in or ruled out
before being appraised; |
| there is no hierarchy of options – the issue is simply, which in the particular
circumstances will achieve better quality at optimal cost? |
| when the option is chosen, there will then be further choices – for example, if
competition is the option chosen at this stage, choices will then have to be made between
different potential contractors (see Chapter 7 below); |
| the appraisal should be based on research and scoping and should cover costs, quality,
the scope for innovation, the Government's wider objectives – for example, on
environmental impact and fair employment – and other relevant matters; |
| • the Treasury guidance Appraisal and Evaluation in Central Government, the
"Green Book", 1997 should be followed. In particular the costs should
include:
 | existing costs, if the service already exists; |
| projected costs – if the service is new, there will need to be a base case
identified to compare projected costs with the costs of doing nothing; |
| expected savings; |
| the process costs of carrying out the option; |
|
| costs should be discounted in accordance with the Treasury rules (7); |
| the quality appraisal should be based on the performance standards and should be
scored and prioritised, using a sensitivity analysis; |
| the factors in paragraph 1.4 and other relevant factors, such as the effect on staff
morale should be treated in the same way; |
| better quality at optimal costs involves trade-offs (taking account of other Government
objectives, such as sustainable development), which will have to be reviewed continuously. |
| Options in detail 1.
Abolish activities that no longer need to be done at all:
| Is the service or activity necessary to fulfil the strategic objectives of the
Department? |
| Is there sufficient demand from customers? |
| Would providing the service be a justifiable use of taxpayers' money? |
| What would be the costs and other effects of not providing the service? |
2. Restructure internally – that is reorganise the in-house operation to
deliver an effective and efficient service, within its existing framework, or by merger
with another part of the Department, or by merger with another Department. A number of
efficiency techniques can be used but the aim must be to ensure that the service delivered
is as good as, or better than, that which could be obtained elsewhere. The service or
activity should be benchmarked (8)internally and
against external organisations to compare standards and costs and to diagnose where
improvements could be made. The views of customers/users should be canvassed.
| How quickly and over what timescale will restructuring deliver the required
improvements? |
| The staff involved in delivery of the service should be involved throughout to ensure
commitment and minimise the effect of uncertainty during restructuring. |
| How much disruption would there be to the Departments' other activities? |
| There should be clear accountability and delegation. Clear targets and standards of
service should be set each year. In some cases the outcomes might be the establishment of
a Next Steps executive Agency or merger with another function. |
| The service should be properly monitored and controlled under a Service Level Agreement
(SLA) (9) (or if the service is restructured as an
Agency, through a framework document and corporate plan). |
| If the improvements do not materialise, strategic contracting out should be considered. |
3. Strategically contract out: that is, a competition, without an in-house team
competing, between external bidders (usually the private sector, but there could be bids
from the voluntary sector, or other parts of the public sector) for work previously done
in-house. If, in the circumstances, TUPE applied (see Chapter 3,
below), staff currently carrying out the work would transfer to the external employer.
| Is the function assigned by statute to a Minister, officer holder or local authority? If
so, the power in Part II of the Deregulation and Contracting Act 1994 would need to be
used. |
| Is the market capable of providing the service? If the market is not particularly
mature, does it show signs of developing and expanding to meet the challenge of market
testing and contracting out? |
| Is expertise required which the private sector is better able to offer and develop
because of specialisation and differences in size (and which might also offer transferring
staff the chance to specialise). |
| Who would bid? Is there a risk of strategic dependence if the potential market is
limited? |
| Where there are workload fluctuations and the potential for rapid technological change,
can the private sector offer economies of scale and greater flexibility? |
| What would be the effect on staff? How much uncertainty would there be? What would be
the opportunities for staff? |
| Would the private sector be better at managing the risks associated with delivering the
service and can these risks be transferred? |
| The results of the option appraisal that justified the choice of strategic contracting
out, including the comparative cost of the public sector meeting the specified
requirement, should be used as benchmarks and reviewed if necessary. |
| Is capital investment needed? If so, the Private Finance Initiative
(PFI) should |
| be considered. |
4. Market test: that is, hold a competition with an in-house team competing
against external bidders. If an external bidder was successful, the work would be
contracted out, and, if, in the circumstances, TUPE applied (see Chapter 3, below) the
staff in the in-house team would transfer to the external provider. If the in-house team
were to win, they should be awarded a Service Level Agreement (SLA) (9) – which should be essentially the same as a private
sector contract to ensure fairness during the bidding process.
| Is the service or function new, without an existing in-house operation? Has the
Department the resources to set up a function in order to compete? What would be the
implications for other parts of the Department of earmarking resources in this way? |
| Are the skills and management capability necessary to mount an in-house bid available in
the Department? |
| Is there scope for an in-house team to compete in partnership with an external
organisation? |
| How strong is the likelihood that the in-house team would offer better value for money
than the private sector? Would they be able to make a viable bid? Or, would their
participation in the competition be, in reality, an attempt to maintain morale? If so,
have other means – such as rigorous internal restructuring – been adequately
considered? |
| What would be the effect on staff of uncertainty during the market testing process?
Would they be less likely to co-operate with a private sector contractor if the in-house
team were to be unsuccessful in the competition? |
| Would it be fair on staff to make them compete with organisations that later they might
have to work for, if an external bid were successful? |
5. Privatise: the service may need to be provided, but need not be the
responsibility of the public sector. If, in the circumstances, TUPE applied (see Chapter 3), staff currently carrying out the work would transfer to
the external employer.
| Is the service, or something similar, being provided in the private sector? |
| If the Government was not responsible for the service, would significant needs go unmet? |
| Would the private sector muster the skills and resources necessary, if the market were
left to respond to the particular service needs in question? |
| Could the Government ensure that needs were met with better quality at optimal cost
through regulation? |
Privatisation would put the responsibility for funding on the private sector and
provide a tax revenue from the new private sector provider, therefore reducing central
Government's demand for resources. It should provide the private sector with new
investment and growth opportunities. |
d. Select the option
| Departments should bear in mind the need to avoid compromising value for money in the
future. |
| As good practice:
| departments should choose the option which will best develop the human capital.
In each set of circumstances, is the Department or the private sector better able to
develop and motivate the existing and future staff to deliver better quality services at
optimal cost? If the service or activity is a marginal, a minor, or a support undertaking
within a Department, would staff wishing to specialise have better career options in the
Department or in a specialising private sector organisation? |
| departments should consider whether, looking to the long term, innovation and
continuous improvement are more assured with the Department or within the private
sector? What are the track records and prospects of likely bidders – and of the
Department? |
| if all other things are equal, the option with the lowest process costs should be
favoured; |
| if market testing and strategic contracting out will yield similar savings at
similar cost and all other things are equal, or if the transaction costs are likely to
exceed the anticipated savings, then it may be better (in either case) to look for
rigorous internal restructuring, using benchmarking (10)
as a diagnostic tool, and use contracting out in all other cases, or if restructuring
fails to achieve the planned improvements; |
| departments should be decisive, in order to avoid prolonged and corrosive
uncertainty – for staff and for potential external partners. |
|
| In reaching a decision, Departments should consult staff and their recognised trade
unions or, if none, other recognised independent staff representatives, the private
sector, (particularly, companies providing similar services elsewhere), and, if
appropriate, customers/users. It might be helpful to benchmark any existing in-house team
and, with their agreement, any existing external contractor to diagnose the scope for
improvement. |
| Departments should be prepared to defend their appraisal and choice of option – the
decision, when made, should be clear-cut, unambiguous, and transparent. |
e. If competition is chosen, detailed scoping and evaluation should follow (see Chapter 4 (11)).
f. Carry out the chosen option – the remaining chapters are guidance on
competition (12). Competition involves procurement
and generally the EC Procurement Rules are likely to apply (see Chapters
5-7). Whatever option is chosen, the efficiency programme will need effective
management to ensure that objectives are met, progress is monitored and strategies are
reviewed in the light of experience (see Chapter 2). This will be
a complex and demanding process. Senior management must lead and support their people in
achieving change.
g. Monitor and manage the result (see Chapter 8 below)
as an "intelligent customer" through a contract (with an external provider) or
an SLA (with an in-house provider, or another public sector provider).
h. Repeat – starting with the question: what is the service required?; not,
what are the activities or processes involved? This should happen in good time before the
end of the contract or Service Level Agreement, or earlier, if the expected improvements
are not achieved (see Chapter 9).
Deregulation and Contracting Out Act 1994
1.7 The Deregulation and Contracting Out Act 1994
allows Ministers to make an order specifying that functions assigned by statute to a
Minister, office holder, or local authority can be contracted out. Orders are subject to
affirmative resolutions in both Houses of Parliament. The Minister will remain responsible
for the contractor's actions, in the same way as for the actions of a civil servant. This
order making power cannot be used in respect of the functions of courts or tribunals which
exercise the judicial functions of the state.
KEY
MESSAGES
| Value for money means, in this guidance, better quality services for customers at
optimal cost to the taxpayer. |
| It is the service required that should be specified, rather than processes. Requirements
should be specified as outputs and outcomes. |
| The options should be appraised robustly. The options include abolition, internal
restructuring, strategic contracting out, market testing and
privatisation. |
| Whichever option is chosen, the efficiency programme should be managed effectively to
ensure that objectives are met, progress is monitored and strategies are reviewed in the
light of experience. |
| Managing change is complex and demanding and senior managers must lead and support their
people in achieving change. |
|
SOURCES OF FURTHER INFORMATION
| 12 Guiding Principles in Using Market Testing and Contracting Out,
Hansard, 4
November 1997, Col 94. |
| Efficiency Plans – Guidance for Development and Use, Cabinet Office,
November 1995, ISBN 07115 0305 2 and amendments, November 1996 – describes the
various efficiency techniques. |
| Appraisal and Evaluation in Central Government, the "Green Book",
HM Treasury, 1997. |
| , useful ideas on assessing and comparing performances, HM Treasury, 1997. |
| Deregulation and Contracting Out Act, 1994 – An Explanatory Guide, Cabinet
Office (originally issued by the Department of Trade and Industry), 1994. |
| Procurement Policy Guidance and Procurement Practice Guidance (CUP Guidance, as was),
HM Treasury (various dates). |
| Guidance on Agency Reviews, Cabinet Office, 1995. |
| Towards Best Practice: An evaluation of the Public Sector Excellence Programme
1996
– 98, Cabinet Office, 1998. |
| Partnerships for Prosperity: The Private Finance Initiative, HM Treasury, 1997. |
| Selling Government Services into Wider Markets – policy and guidance notes,
HM Treasury, 1998. |
| CUP Guidance Note: No 40. |
| CUP Guidance Note: No 44. |
| The Duties of an Accounting Officer, HM Treasury, 1994. |
| For information concerning Crown copyright and publishing arrangements for official
information see HMSO Guidance Notes and related publishing advisory information. Contact
the Copyright Unit, HMSO on 01603 723001 (fax: 01603 723000). |
![[Contents]](contents.gif)
2. HOW TO SUCCEED
This chapter is primarily for those responsible for ensuring
better services at optimal costs and those responsible for carrying out the option chosen
(see Chapter 1).
| Managing change: achieving better quality services at optimal cost. |
| Setting quality targets. |
| Keeping process costs down. |
| Avoiding conflicts of interest. |
| Resourcing and supporting those carrying out efficiency programmes. |
|
MANAGING CHANGE
2.1 Departments will need to be organised
internally and collectively to carry out the chosen option, so that they can achieve their
objectives to improve services and to manage the changes that will inevitably occur. They
should aim to generate self-sustaining change to enable organisations to respond flexibly
to future changes in circumstances and requirements. Managing change is a complex and
demanding process. There are no simple recipes. However, systematically considering the
following aspects will be beneficial:
| Background – including the way in which organisations function, their
culture and the systems in which they operate. This will help in identifying factors that
are likely to facilitate or hinder change over the medium to long term. |
| Strategy – planning for change should be set in the context of the
Department's overall strategic objectives. The interaction between policies and efficiency
plans should be worked through to ensure that they are complementary. |
| People strategy – people are the key assets and must be supported and led to
achieve change and improvement. Staff should be motivated and empowered. Senior managers
should discuss with staff the effects of change on them and should support staff in
dealing with any consequences of change. |
| Communication – strategies should be clearly communicated throughout
organisations so that, in particular, all those involved with carrying policies through
have a clear idea of the goals being sought and a vision of the end result. Successive
management levels must have complementary objectives and clearly assigned roles and
responsibilities. |
| Planning – all the supporting elements needed for implementation should be
identified to ensure that there are sufficient and appropriate resources available. There
should also be provision for managing their utilisation. Time scales must be realistic and
related to overall objectives and agreed with those involved in implementation. There
should also be provision for tracking success and promoting best practice to avoid
"re-inventing the wheel". |
| Implementation – should involve monitoring progress and the effects of
change, including supporting the resolution of problems and difficulties and taking
remedial action, if needed. Implementation should allow for flexibility in the light of
particular circumstances. |
| Monitoring and benchmarking the efficiency programme as it is going on – to
help ensure that the objectives are being met and that they are achieving the best
possible results in the circumstances. |
| Training – providing appropriate guidance, support and training to encourage
a pragmatic approach rather than a mechanistic one. |
| Developing Public/Private Partnerships through a competition leading to a
contract – involves using procurement techniques and generally EC Procurement Rules
will apply. |
| Integration and flexibility – considering the inter-relationships between
individuals and across the organisation in the efficiency process, their impact on each
other and their relative importance in achieving overall objectives. In some situations,
information gleaned downstream may prompt decisions made earlier on to be reviewed or even
revoked. |
SUCCESS IN ACHIEVING OBJECTIVES
2.2 The following questions need to be addressed
continuously:
| Is quality being improved? Are the views of customers/end users taken fully into
account? |
| Is cost being optimised and, in particular, are process costs being
minimised? |
| Are relationships with service providers sound? |
| Are there distortions in the competition? |
| Are conflicts of interest being eliminated? |
| Is the Department organised to succeed? |
IMPROVING QUALITY
Clarifying objectives
2.3 What constitutes "Quality" depends on
the particular service required. Service customers, providers and commissioners may each
have differing expectations of quality. These should each be understood. Government policy
is better quality for customers at optimal cost. It is also important to
distinguish between the contexts in which the word quality is applied. For instance, in:
| Performance – Service First – the new charter programme sets out nine
principles of public service delivery which providers should observe. Every public service
should: set and publish standards of service; be open and provide full information;
consult and involve all stakeholders; encourage access and promote choice; treat all
people fairly; put things right when they go wrong; use resources effectively; innovate
and continuously improve; and work with other providers. The Better Regulation Task Force
has proposed five principles for good quality regulatory activities: targeting,
transparency, accountability, proportionality and consistency. |
| Procurement – fitness for purpose, to meet the customer's/user's
requirements at optimal whole life cost. |
| Management systems used in providing the services – total quality management
systems refer to the way in which whole organisations are managed to achieve the overall
aim of developing a self-improving organisation responsive to customers' needs. A cultural
change is required for the whole organisation to become quality oriented. All employees
have a role in improving the quality of services irrespective of whether they have direct
contact with customers. |
| Accreditation systems – such as International Standard EN 29000 may ensure
that internal procedures exist for quality management systems and that they are properly
controlled and documented. The Charter Mark is the Government's award scheme for
recognising excellence in the delivery of services to the public. Accreditation can give
customers confidence that suppliers will deliver what is required, but they will not
necessarily guarantee excellence and will not be appropriate or realistic in all
circumstances. |
| Managing and developing people – organisations with Investors in People
accreditation have reached an objectively assessed standard in managing and continuously
developing their staff, to achieve their corporate objectives. |
Raising the profile of quality
2.4 In order to raise the profile of quality and
ensure that quality does improve, Departments should:
| Clarify what service is required – strategically as well as in the short term. |
| Survey customers'/users' expectations especially in relation to the new charter
principles of public service delivery and act upon them. |
| Assess their current level of quality compared with customers'/users' expectations and
with the Department's strategic objectives and then set goals for improvement. |
| Ensure that these goals are integral to the specification for the service and, so, also
integral to any contract/SLA that is agreed. |
| Adopt a systematic approach for measuring quality. |
| Encourage innovations that will bring about step change improvements in quality. |
| Periodically review quality so that services continue to meet the needs of customers and
end users. |
Assigning roles
2.5 There should be effective and interactive
communication between those involved:
| Customers and end users – The views of customers and end users should be
sought on service standards both as part of the improvement process and as a routine part
of monitoring service delivery. The more thoroughly user needs are re-appraised at the
outset of the improvement process, the more likely it is that value for money will be
increased. |
| Client Departments, through the "intelligent customer" function –
The "intelligent customer" function is carried out by the client's, (that is the
Department's) contract manager (see Chapter 8). This is the focal point for understanding
customer requirements as well as managing providers of services, keeping abreast of
changes in requirements and delivery arrangements. Departments need to carry out (or buy
in) this function in order to make sound decisions about purchasing services.
"Intelligent customers" should therefore also maintain an understanding of
current market capabilities for meeting requirements. |
| Service providers – Service providers should be encouraged to improve the
quality of services and continuously to seek ways of enhancing quality through innovation.
Their detailed responsibilities will be defined in the contract/SLA and much can be
achieved through a positive working relationship, effective monitoring arrangements and
incentivisation, all regulated through the contract/SLA. |
MINIMISING PROCESS COSTS
2.6 Process costs are a charge on efficiency
savings. Process costs arise in all efficiency programmes. If process costs are high,
services will not be provided at optimal cost. Process costs cannot be avoided altogether
and tend to be disproportionately high where the value of the service or activity being
reviewed is low. Process costs are a double charge on Departments; their own costs will
erode savings; successful bidders' costs will be reflected in the contract price;
unsuccessful bidders' excess costs may harm their competitiveness, and as they will have
to be recovered, may be passed on in other contracts, so that the Exchequer as a whole
will be penalised. Therefore, Departments should (while maintaining scope for small to
medium sized enterprises (SMEs) to bid) avoid small competitions and minimise process
costs by:
| submitting to competition whole groups of services, activities or organisations, rather
than smaller sub-groups; and |
| bundling together small activities, which would normally be separate, so that process
costs are shared (while maintaining the option of receiving bids for packages of
services). |
2.7 Departments should also examine those factors
that contribute to high costs in each case and avoid or minimise them by encouraging best
practice in procurement and contract management. In the past, the following factors have
given rise to unnecessarily high process costs:
Preparing for and running competitive tendering (13)
| Bureaucracy of the process – reduce by simplifying decision making and avoiding
delay in establishing teams with authority and clear lines of accountability. |
| Over-detailed specifications – state simply what has to be achieved and the quality
and performance standards and avoid, so far as possible, specifying processes. Avoid
"gold plating". |
| Unnecessarily long tender lists. |
| The small size of many tests. |
| Invitations to tender often require too much detailed information or extraneous
information, either of which may indicate that information requirements were not thought
out with sufficient thoroughness beforehand, or they seek information in a format which is
difficult to provide. |
Preparing in-house bids
| The need to provide substantial sums for training and consultancy support to in-house
teams. |
| The low awareness of cost management and the limitations of central Government
accounting systems. |
Transition to new contracts
| Lack of information on service arrangements. |
| If access to staff and premises is not given to new suppliers early enough, costs may
increase and savings may be delayed. |
| Any effects on staff motivation of an unsuccessful bid by an in-house team, which
subsequently transfers to a successful external bidder. |
Managing the contractual relationship (14)
| Excessively detailed monitoring information – so far as possible, the information
required should arise naturally from the provider's operations and should be limited to
that required for monitoring and accountability. |
| Inefficient monitoring techniques – monitoring should be timely, using information
the provider has agreed to provide, but informed by the experience of end users. |
| Inflexible contracts resulting in too much time being spent on discussing contract
variations. |
Establishing sound relationships with service providers
2.8 The relationships established by the
contract/SLA can range from arm's length to close co-operation often called
"partnering", depending on the extent to which there is a shared understanding
of each others' strategies and mutual goals (see Chapter 4). In
keeping with the Government's procurement strategy (15),
Departments must:
| Preserve the highest standards of integrity, objectivity, fairness, efficiency, courtesy
and professionalism in their dealings with suppliers and potential suppliers. |
| Ensure that benchmarking (leading to restructuring) and competitive processes are
conducted in a fair and transparent manner and be able to provide evidence that this has
been the case. For instance, in competitions purchasers should encourage bids from SMEs,
as well as large enterprises. |
Departments should, therefore:
| Consult providers, both internal and external, at an early stage in scoping reviews of
services and activities and in drawing up specifications – to learn how services
might change, to stimulate interest and encourage innovation in service provision, taking
care to ensure that competition is not distorted. |
| For competitions, consider appointing independent observers from trade associations and
trade unions to assure them that the competition has been undertaken fairly and
impartially. |
| Provide feedback (16) to, and invite feedback from
tenderers (see Chapter 7). |
Avoiding distortions in the competition
2.9 One of the principal obstacles to competition
is asymmetry of information between bidders. Departments will need to:
| Be open with information, treating all bodies on equal terms. |
| Provide effective safeguards against collusion, corruption, and potential conflicts of
interest to maintain confidence of Parliament and the citizen. |
| For retendering, ensure through contracts that information is shared between existing
and potential providers, especially on TUPE transfers (see Chapter 3). |
Openness and freedom of information
2.10 Departments are bound by the Code of
Practice on Access to Official Information. The Code of Practice is subject to
interpretation by the Parliamentary Ombudsman. Pending the passage of a Freedom of
Information Act, Government policy is that the Code, and its associated Guidance, should
be interpreted as liberally as possible. The associated Guidance on Interpretation of the
Code of Practice is advisory, not mandatory, and does not bind the Ombudsman. Subject to
exceptions in the Code, Departments must:
| Publish full information about how public services are run, how much they cost, who is
in charge, and what complaints and redress procedures are available; |
| Publish full and, where possible, comparable information about what services are being
provided, what targets are set, what standards of service are expected and the results
achieved; |
| Not use commercial confidentiality as a cloak to deny the public's right to know. But
Departments need not publish or disclose information in circumstances which would (on
the basis of firm evidence) harm the legitimate commercial interests of the
Department, a supplier, or a third party; |
| Act on a strong presumption, following a ruling by the Ombudsman, that contract –
that is, accepted tender – prices may have to be disclosed. Departments may wish,
therefore, to consider inserting a disclosure clause in contracts reserving the right to
disclose details of contractual processes and prices in accordance with the Code of
Practice; |
| Be ready to justify their decisions to unsuccessful tenderers. |
Safeguards against collusion, etc
2.11 Tender documentation and contracts should
include clauses warning against collusion, corruption and conflicts of interest. (17)
Eliminating conflicts of interest (18)
2.12 Departments must have control arrangements to
eliminate any possibility of conflicts of interest arising during the competitive process
and in any subsequent monitoring. These should encompass potential conflicts of interest
arising from:
| Companies running related or associated services. Where one company runs other
services for the same Department in circumstances where conflicts of interest could
arise, responsibilities should be separated. In some such cases, Departments may
exclude a contractor from the short list on the grounds that he or she is already running
a related service. For example, it would be undesirable for the same firm to be running
management systems and internal audit services. Where such exclusions are likely to apply,
these should be given in the first advertisement. |
| Staff involved in running competitions. In keeping with the Business Appointment
Rules the following apply:
| Those responsible for specifying the service and for dealing with bids must declare any
offers of employment from potential or actual bidders even if they do not intend to take
them up. |
| Those involved in the procurement exercise and those putting together an in-house bid
must declare any connection with external bidders, including share holdings, directorships
or offers of employment, especially if these are conditional on the bidder being
successful. |
| Staff offered jobs with successful bidders must advise senior management so they can
satisfy themselves that there is no associated impropriety. |
| There must be a proper separation between those running competitions and any in-house
team bidders. |
| Where an undeclared conflict of interest becomes apparent after bids have been
evaluated, Departments should consider whether it could have materially affected the
outcome of the process and take appropriate action. That might include disciplinary action
against the member(s) of staff concerned. |
| External consultants should be asked to disclose any potential conflicts of
interest. |
| |
|
ORGANISATION
Project teams
2.13 Departments should ensure that project teams
have the right level of knowledge and experience.
| They should have an appropriate combination of skills and experience and should include
members who have a detailed knowledge of the area in question, but do not have any vested
interest in retaining the status quo. |
| Guidance on the task in hand should be provided. |
| A multi-disciplinary team would usually be needed. Often the team will include
procurement, business planning, financial, legal and personnel expertise; or, if not,
specialist advice on these matters should be made available to the team. Where Departments
lack these resources, or lack them in sufficient quantity, external consultants can
provide appropriate specialist support and also other benefits such as breadth of
experience as well as impartiality. |
External consultants
2.14 The procurement rules must be followed in
engaging any external consultants firm (19) (20). Using external consultants will add to the cost of
implementation and they will need time to learn about the Department and the project. So,
Departments must satisfy themselves that greater value for money would be achieved by
using external consultants, than by not using them. If external consultants are then
engaged, the benefits of their support should be optimised, for example through:
| Integrating them into project teams rather than using them for small, isolated packages
of work. |
| Engaging them early on in projects rather than part-way through so that they can
contribute to developing strategy. |
| Employing them selectively to fill gaps in key skills or experience and not to support
essentially administrative tasks. |
| Transferring their skills to staff so as to reduce the need for using consultants the
next time around. |
| Requiring assessments of performance and the costs and benefits of consultancy support
at the end of projects. |
Developing appropriate skills
Skills needed
2.15 Staff will need a broad range of the skills
set out in Departments' core competences. In particular:
| Leadership and Management – to improve policy making, management and service
delivery in general and to enhance awareness of value for money principles. |
| Strategic thinking, and planning, and project and resource management – so
that the project can be managed strategically and carried out within the time and
resources available. |
| People management – both to be able to work within (and, if appropriate,
lead) a team and address the wider human resource implications, so that value for money in
one activity is not achieved at the expense of demotivation elsewhere in the Department. |
| Expertise – most will need a working knowledge of Government procurement
policy and practice and the EC Procurement Rules. They need to be skilled – and
robust – in negotiating, monitoring and managing contracts. They will need
"hard" skills such as contract law and "soft" skills such as the
ability to influence providers, whether they be public or private sector or a combination
of both. |
| Ability to deliver results through the introduction and operation of appropriate
contract management. |
Training
2.16 Training should seek to develop a mature and
flexible approach to the procurement of services rather than a mechanistic one in which
guidance is applied rigidly as if following a "book of rules". This is most
likely to be achieved through training which is interactive and encourages the
consideration of practical aspects of implementation as well as the theoretical. Training
should be: appropriate to the needs of staff; cost-effective; and subject to objective
validation.
KEY
MESSAGES
| Quality improvements should be planned, taking account of customers' expectations, with
specific targets. |
| Departments should minimise the process costs and satisfy themselves that the likely
benefits in any exercise would justify the cost involved. |
| Departments should be open, in particular to avoid or correct distortions in
competitions that might arise through asymmetry of information between bidders. |
| Conflicts of interest arising during the competitive process and in any subsequent
monitoring arrangements, should be eliminated. |
| Project teams will require a broad range of skills, likely to be in core competences,
but should be given training as necessary. |
|
SOURCES
OF FURTHER INFORMATION
| Competing for Quality Policy Review, HMSO 1996, IBSN 0-11-430142-5. |
| Service First – The New Charter Programme, Cabinet Office, 1998. |
| CUP Guidance Note: No 40. |
| CUP Guidance Note: No 46 Quality Assurance. |
| CUP Guidance Note: No 53 Procurement Training. |
| CUP Guidance Note: No 55. |
| CUP Guidance Note: No 56. |
| CUP Guidance Note: No 59. |
| CUP Guidance Note: No 61. |
| Code of Practice on Access to Government information, 2nd Edition, 1997, Guidance
on Interpretation of Code of Practice on Access to Government Information, 2nd
Edition, 1997. |
| "Dear Procurement Officer" Letter DPO(98)2, of 13 January 1998. |
| Consultants: How to Use Them, in the Pay & Trading Guidance Notes,
Cabinet Office, 1996. |
| Use of External Management Consultants, Efficiency Unit Scrutiny, Cabinet Office,
1995 |
| Setting New Standards, Cm 2840. |
|
Footnotes
(3) See Chapter 4, below
(4) The Transfer of Undertakings (Protection of Employment) Regulations, 1981, as amended
- see Chapter 3, below
(5) The Duties of an Accounting Officer, HM Treasury 1994
(6) See also Chapter 5, below
(7) Appraisal and Evaluation in Central Government, the "Green Book", HM
Treasury (1997)
(8) See Towards Best Practice: An evaluation of the first two years of the Public
Sector Excellence Programme 1996-98, Cabinet Office, 1998
(9) See CUP Guidance Note 44
(10) See Towards Best Practice..., Cabinet Office, 1998
(11) And also, CUP Guidance Note 40
(12) There will be separate guidance on benchmarking and restructuring. See also Towards
Best Practice..., Cabinet Office, 1998
(13) See CUP Guidance Notes 40 and 59A - D
(14) See Chapter 8 and CUP Guidance Note 61
(15) See, for example, Setting New Standards, Cm 2840
(16) See CUP Guidance Note 56
(17) CUP Guidance Note 59D provides model documentation with standard clauses on collusion
and conflicts of interest
(18) CUP Guidance Note 55
(19) See Consultants: How to Use Them in the Pay & Trading Guidance Notes, Cabinet
Office, 1996
(20) See alsdo Use of External Management Consultants, Efficiency Unit Scrutiny, 1995
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