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    Supporting better value in public procurement

  • Posted on July 20, 2021 by

    The NAO’s good practice guide for managing the commercial lifecycle

    The government’s response to the COVID-19 global pandemic has drawn renewed, and possibly unprecedented, attention to public procurement and commercial practice in government.

    Our aim at the NAO is to provide an independent and evidence-based perspective, on how public authorities can achieve better outcomes and value for money throughout their commercial activities.

    Through our value for money studies programme we have reported on procurement during the pandemic, the supply of PPE, availability of ventilators and preparations for COVID-19 vaccines. We have reported twice on Test and Trace – in an interim report and a progress update as well as the procurement of the free school meals voucher scheme. We have also kept track of the estimated cost of government measures in response to the pandemic, via the COVID-19 cost tracker which currently registers £372 billion.  

    Given that over £200 billion of UK taxpayers’ money is spent every year on the purchase of goods and services (and this excludes capital expenditure), it is right that attention is focused consistently on commercial activity. The diagram below shows the distribution of this expenditure by department in one financial year.

    Annual expenditure on goods and services by government department (£ billion):

    Figures are for 2018-2019

    Enhancing our good practice guidance
    Over the last couple of months we have engaged with government departments, local authorities, professional bodies, commercial experts and our colleagues to consider how to improve the NAO’s existing commercial guidance and we have listened carefully to helpful advice and suggestions. We have also reviewed the revised guidance issued by the government commercial function and discussed the government’s plans for amendments to domestic legislation.

    Our conclusions and recommendations to government that support improved performance in procurement have featured in some 209 reports examining 350 contractual arrangements published throughout the last 20 years. Alongside our good practice guide we have also published a complete list of past reports, noting that many of the findings are applicable to the wider public sector

    Our good practice guide draws on all these valuable sources of insight and practice, and it is intended to support public bodies prepare proactively for future procurements. It will help practitioners understand and effectively manage all elements of the commercial lifecycle, and will support senior leaders with governance responsibilities in asking the right questions about commercial activity in their organisations.

    We have presented it in 10 sections as illustrated in the diagram below.

    • Four strategic sections highlight the elements that support good commercial outcomes: commercial strategy, capability, accountability & governance, transparency & data.
    • Six procedural stages address the end-to-end commercial lifecycle, starting with the identification of a requirement; choice of sourcing approach; market monitoring; process and agreement; contract management; and review, transition and exit.

    Each of the ten sections contains a description, lists our expectations of good practice, supported by our extensive evidence base, and highlights what needs to improve. In addition, the guide contains useful way to find a wide range of relevant guidance issued by the government commercial function and professional practice.

    Good practice guide for managing the commercial lifecycle

    Our good practice guide also contains 20 case studies summarising the NAO’s findings from published reports. In the ‘commercial capability’ section we refer to our report on Managing the HMRC estate and outline how government negotiated improved cost transparency with its supplier. In this and other case studies in the guide we aim to bring our expectation of good practice to life.

    This guidance is essential reading for policy and commercial staff involved at all levels of public procurement and commercial activities, including senior leaders and non-executive board members of public authorities. It complements our continuing programme of reviews to scrutinise public procurement and commercial activity across government.

    In the coming months we will publish a series of blogs focussing on individual stages of the commercial lifecycle, and drawing out our findings and expectations for good practice. We hope to engage with as many of you as possible as we discuss this renewed interest in procurement and collaborate with colleagues across government and other organisations to embed good practice in procurement that will drive good outcomes for taxpayers and the public as a whole.

    The good practice guide for manging the commercial lifecycle is published on the NAO website and can be accessed via this link.  


    About the authors: 

    Matthew Rees FCA, CPFA, FCSI: leads the NAO’s Commercial specialism. He also represents public sector issues as a co-opted member of the ICAEW Council. His commercial experience spans Big-Four audit and valuations, global investment banking and non-executive director and audit and risk committee chair in an energy sector consultancy. Matthew’s public sector experience includes merger and market investigations of a wide range of sectors at the CMA, economic regulation in the telecoms, water and the aerospace and defence sectors and value for money studies in relation to the UK government’s corporate finance activities. 

    Lilian Ndianefo is a qualified accountant with many years of experience working across disciplines at the NAO including public sector companies audits, government departments, and supporting the C&AG’s responsibilities for setting the Local Audit Code and developing Auditor Guidance for local government and NHS bodies. Prior to the NAO, Lilian worked in public practice, with years of experience of managing a large portfolio of corporate multinationals with the Big Four.

    Iain Forrester is a qualified accountant with long experience of working on the NAO’s commercial and contracting related work. This has included cross-government work on grants, shared services, EU Exit, and the government’s response to COVID-19. He also worked on the commercial and contract management insights guide published in 2016. 

     

     

  • When regulation affects everything from education to transport, how do we make regulation effective?

  • Posted on May 25, 2021 by

    Regulation impacts all our lives in many ways. Where we live and work, how we travel and communicate, the food we eat, the gadgets we buy, the banks we use, the water and energy we run our homes with. All of these places, goods and services, and more, are regulated. 

    We don’t generally notice the business of regulation happening in our daily lives. But when regulation fails, it can have serious consequences for our finances or safety, the economy as a whole, or the environment. Some high-profile disasters in recent years are often described as regulatory failures: the explosion at the Buncefield oil terminal in 2005, the financial and banking crisis in 2008, the Deepwater Horizon pollution disaster in 2010, the Grenfell fire in 2017, and the list goes on.  

    As well as minimising the risk of failures like these, good regulation can be used to achieve a range of different aims and opportunities. It can support innovation, make workplaces safer, or help to keep essential services affordable. In a modern, mixed economy, like the UK, regulation is used in most areas of public policy, from education, healthcare and charities to transport, food, communications, utilities and employment.  

    What does good regulation involve? 

    It’s one thing to say what regulation is supposed to achieve, and quite another to make it work in practice. Being in the NAO’s Regulation team, we’re quite often asked: “what does good regulation actually look like?”. This question comes from regulators and policymakers, but it also comes from other people and organisations interested in making regulation work well, such as charities and trade bodies. And it’s not a simple question to answer, as much as we’d like it to be, because regulation can take different forms and exist for different purposes. Regulatory interventions vary, and most regulators and government departments will use a variety of approaches. 

    At one end of the spectrum are essentially unregulated, free markets where primarily the courts are the arbiter of any disputes. At the other end are areas with particular risks, such as the nuclear and pharmaceutical sectors, that have more prescriptive, rules-based systems of regulation. Between these lies a rich landscape of more principles-based approaches, varying from providing guidance and reputational incentives (for example, performance league tables), through various forms of self-regulation and codes of practice, to licensing regimes and the regulation of prices.  

    Despite this variety our work on regulation in the past decade has identified common themes and challenges that come up time and time again, such as the use of data to identify problems, how regulation is funded, or how regulators know whether they’re actually doing a good job or not. Based on this experience, we’ve published a good practice guide setting out broad principles of effective regulation, illustrated by case studies or further guidance for each principle. Our aim is to support policymakers, regulators and other stakeholders to design and implement regulation in a way that is effective at achieving what it is supposed to, whether this is protecting people and businesses, supporting economic growth, adapting to changes from EU Exit and technological developments, or safeguarding the environment and pursuing the priorities and challenges of the government’s net zero agenda.  

    The learning cycle 

    At the heart of our guide is a ‘learning cycle’ for assessing how well regulators and policymakers are applying the principles. Regulation is rarely a single programme of work with a simple beginning, middle and end, but tends to be an ongoing process of designing a regulatory framework, analysing what is needed, intervening, and then learning from experience in order to do things better in the future. If any one of these elements is overlooked there’s a risk that it can undermine the purpose and effectiveness of the regulatory framework.  

    When creating or making changes to a regulatory system, all aspects should be considered upfront – for example, if you don’t plan how you will measure the impact of changes, you probably won’t be collecting the data you’ll need later on. But each of the four stages has its own focus: 

    • The Design stage principles – such as objectives, powers, funding and accountability – are the most crucial to get right from the start. They help translate the policy intent into the design of a regulatory regime, and can be costly or disruptive to change later if they require new legislation.  
    • The Analyse stage is about identifying areas that present risks or opportunities, engaging with stakeholders to understand needs and priorities, and establishing what capacity is needed to respond appropriately. For example, the way data and intelligence are analysed is essential in assessing risks, identifying problems and targeting activities and resources. 
    • The Intervene stage principles are intended to help regulators intervene effectively by understanding what impact their actions might have, prioritising issues, and considering how best to respond in a proportionate, consistent and timely way.  
    • Finally, the Learn stage is about regulators, policymakers and others working collaboratively to measure progress, understand the real-world impact of interventions, and learn from experience to maximise effectiveness in the future.  

    We’ll continue to use our work across government to share principles, lessons and good practice, and we welcome any comments you may have. 

    About the authors: 

    Rich Sullivan-Jones manages our work on regulation, consumers and competition. His recent work has included reports on gambling regulation, problem debt, vulnerable consumers, regulatory performance measurement, and public service markets in higher and further education.  

    Peter Langham

    Peter Langham is a senior member of our regulation, consumer and competition team. He leads our work on public service markets, and has extensive experience of assessing the effectiveness of regulators and the UK competition regime.

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  • Getting contracts right and responding if they go wrong

  • Posted on May 22, 2019 by

    Photo of the game of jengeBillions of pounds of cost increase due to contractual change, delays introducing communication networks for our emergency services, potential strains on Army personnel – our recent reports illustrate the huge importance of getting contracts right, and what organisations need to do if they go wrong. They also reinforce the principles discussed in previous posts in our Contract insights series: the great value of information and the crucial need to act intelligently, get risk allocation right and take sufficient time to plan upfront for all scenarios. more… Getting contracts right and responding if they go wrong

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  • The power of information for contracts

  • Posted on October 1, 2018 by

    Concept image suggesting super importance of informationFrom the collapse of Carillion, to failures within Capita’s £1 billion worth of public contracts, recent NAO reports starkly reiterate the importance of information in managing contracts. As the Comptroller & Auditor General said in his post Risks, resources and government-supplier relationships, government ‘needs to assess the financial health and sustainability of its major contractors and use this information to protect the public interest’. Here we outline the crucial role of information throughout the commercial lifecycle. more… The power of information for contracts

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  • Contract management – challenges and consequences

  • Posted on November 23, 2017 by

    Picture with message stop and thinkEstablishing solid foundations early in the contract and commercial relationship lifecycle is critical for contracts to work. But this process starts long before contracts are signed. Two recent NAO reports provide insights into the importance of getting both the procurement strategy and process right. Experience has shown that not doing so can result in millions of pounds in legal costs – £100 million in one recent case – or an uncompetitive contract leading to additional costs. This latest blog in our commercial and contract management series shares our recent insights across the market management and sourcing domain of our contracts lifecycle. more… Contract management – challenges and consequences

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  • Intelligent contract competition and risk management

  • Posted on April 7, 2017 by

    Climbing competitionWhen it comes to public sector contracts, running proper competitions simply isn’t enough. Government needs to act intelligently to take advantage of competition between potential suppliers, weighing up options and considering who carries the risks, and at what cost. Since launching Commercial and contract management – insights and emerging best practice we’ve reported on two contracts that shed further light on these issues. We explore the new insights from these reports in this blog-post, the latest in our series on key issues for contracts and commercial relationships. more… Intelligent contract competition and risk management

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  • Setting up successful contracts

  • Posted on February 10, 2017 by

    Incentivising contractsCost savings failing to materialise. Customers hit with poor service and financial losses from public services. Contracts disputed and terminated. Contracts can go badly wrong before they even begin if the set up and management aren’t right. Since launching Commercial and contract management: insights and emerging best practice we’ve reported on three contracts that have enjoyed varying degrees of success. As part of our series to share insights into best practice contracting, in this blog-post we explore lessons from these three contracts. more… Setting up successful contracts

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  • Do you feel protected as a consumer?

  • Posted on January 23, 2017 by

    Consumer protectionScams, unfair trading, e-crime, unsafe goods – these harmed consumers to the tune of £14.8 billion in 2014-15. And that’s just the estimate of the problems tackled by consumer protection bodies; you may not even be aware of times you’ve been a victim of unfair trading. With poor consumer awareness and threats to consumers becoming increasingly complex and wide-ranging we, the Regulation, Consumers and Competition team, recently published a report. We describe here the types of consumer detriment, who’s responsible for protecting consumers, and what all this means for consumers. more… Do you feel protected as a consumer?

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  • Making public sector markets work

  • Posted on November 22, 2016 by

    SpectrumWhat do energy suppliers, railways, doctors and rubbish collectors have in common? The answer: they, and many others, deliver essential services that involve, to a greater or lesser extent, a ‘market mechanism’. In a world with a wide range of public service delivery mechanisms, including direct service provision (the military, tax collectors, police, NHS A&E services etc.) our new public service Market Analytic Toolkit is the latest NAO resource designed to help government address a set of new challenges around its use of markets to deliver public services, including oversight, consumer protection, regulation and helping to achieve effective competition and innovative delivery. more… Making public sector markets work

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  • About the NAO blog

    Our experts share their views about issues and common challenges facing government, what public sector leaders should look out for and how organisations have addressed issues. Our posts draw together threads from across our reports, share secrets spilled in events and reveal our experts’ expectations for the future.

    We encourage comments that support the exchange of ideas for improvement, but ask that those posting are respectful of others.

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