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«Cm 9013 February 2015 Treasury Minutes Government responses on the Eighteenth, the Twenty First to the Twenty Fourth, and the Thirty Third reports ...»

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7.1 The Government agrees with the Committee’s recommendation, but disagrees that senior executives should be accountable to Parliament.

Target Implementation date: End 2015.

7.2 The Government does not believe that the benefits of holding senior executives personally accountable to Parliament outweigh the disadvantages. There is a significant risk that smaller companies (SMEs) would be deterred from signing contracts if they would have to appear before Parliament, and such a requirement would be perceived as a new barrier at a time when the Government is dismantling old ones. Parliament is able to hold departments to account for service delivery through Accounting Officers and Senior Responsible Owners. Departments are, in turn, holding suppliers to account more effectively through better contract management, the Government’s policy to take into account past performance, and management of strategic suppliers.

7.3 Within departments, as part of their work to improve contract management, internal audit divisions will develop proposals to assure controls for strategic providers; for example, by requiring new contractors to commission external reviews to give assurance on the contractor's controls. The Cabinet Office will seek to bring these initiatives together into an integrated system of control, transparency and assurance.

7.4 The Cabinet Office is already working with stakeholders to produce principles for improving the transparency of contracting which will be launched in due course. Building on this work, the Crown Commercial Service will work with Industry stakeholders, including the CBI, to explore the feasibility of introducing a duty of care and what it might entail. Any outcome will need to balance a contractor’s duty of care to the taxpayer with its obligations as a commercial entity operating in the private sector.

Recommendation 8:

The 'corporate renewal' process is a new concept for many. The Cabinet Office and HM Treasury should publish a review of this process and its outcome, and, when disseminating findings, make clear to all departments what it expects them to do differently and what different behaviours departments should expect from the contractors.

8.1 The Government agrees with the Committee’s recommendation.

Target implementation date: Early 2016.

8.2 The Cabinet Office will conduct a lessons learned exercise on the government experience of instigating corporate renewal for G4S and Serco. This will look at whether the process was right (including financial compensation and the use of independent external assessors); whether the eight principles of corporate renewal were the right ones to use; and whether it has established healthy working relationships between the departments and the companies.

Committee of Public Accounts conclusions 9-12:

Public service markets are becoming more difficult for government to manage.

Recommendation 10:

Led by the Cabinet Office, departments must take concerted action to develop competitive markets for public services. Government must use its contractual powers to intervene in market consolidation - so that taxpayers and public service users benefit from the innovation and competition a thriving market can offer.

10.1 The Government agrees with the Committee’s recommendation.

Target implementation date: Spring 2015.

10.2 Markets of Government Services oversees Government’s work to ensure that public service markets are competitive. The Cabinet Office and the Treasury are producing joint guidance on designing competitive markets to assist officials in determining when and how to use markets to deliver complex public services. This will be published in due course and should help the Government and taxpayers to benefit from healthy competition and encourage new SME players and social enterprises in the market.

10.3 The Government realises the importance of increasing competition and consumer choice in order to drive innovation and efficiency, and of identifying new commercial models as an alternative to the binary choice of traditional in-house or outsourced delivery. This includes opening up public service provision where it can to employee-led mutuals, to harness the recognised benefits of employee ownership, and other joint ventures.

10.4 Change of ownership clauses give the Government specific rights in the event that a supplier is acquired by a rival. There are examples where Government has used these clauses very effectively to protect taxpayers and service users. However, it is important to ensure that they are routinely included in all appropriate contracts and Cabinet Office has strengthened the guidance available to departments by including standard clauses in the new model contracts

Recommendation 11:

All Government contracts should include robust sanctions for underperformance or weak control which should be applied rigorously when performance falls short, and performance on previous contracts must always be taken into account when awarding new work.

11.1 The Government agrees with the Committee’s recommendation.

Recommendation implemented.

11.2 The Cabinet Office has published model terms and conditions for major service contracts for departments to adopt, including provisions for managing poor supplier performance, including robust sanctions, and for sharing information between departments.

11.3 As part of the Strategic Supplier Risk Management policy, the Cabinet Office collects performance reports from departments on supplier performance. This includes both current contracts with Strategic Suppliers and those completed in the previous three years that collectively have a contract value of £20 million or more. These will be refreshed by in-scope organisations on a six-monthly basis and where appropriate in light of on-going developments.

11.4 Departments are now regularly asking for performance certificates when buying information technology and business process outsourcing services. These certificates allow past performance to be taken into account in procurement decisions. The Cabinet Office will review existing arrangements to see if these can be further improved within the scope of EU public procurement directives.

11.5 CCS is currently running a pilot project to test whether providing feedback on suppliers to prospective buyers has a positive influence on the efficacy of government spending. Feedback on suppliers will be aggregated and made available to prospective buyers.

Recommendations 12:

The Cabinet Office should look at the barriers to SMEs joining markets and develop a plan to address each barrier. Departments should be required to demonstrate that they have considered disaggregated models for each major contract.

12.1 The Government agrees with the Committee’s recommendation.

Target implementation date: Spring 2015.

12.2 The Government has introduced a wide range of measures to level the playing field for companies bidding for government contracts, with the proportion of Government business won by SMEs increasing substantially.

12.3 The Government is now implementing recommendations by Lord Young, the Prime Minister’s advisor on enterprise, by creating a single market for SMEs in public procurement through the new public contracts regulations. Measures to make public sector business more accessible to SMEs will ensure all new contract opportunities are accessible in one place; remove burdensome Pre-Qualification Questionnaires (PQQs) for low value procurements and standardise PQQs for higher value contracts;

and ensure all suppliers in public sector supply chains are paid promptly.

12.4 The Small Business, Enterprise and Employment Bill contains a further range of public procurement reforms that aim to remove further barriers for small businesses. These include a delegated power which will allow Government to implement future procurement measures by secondary legislation where they help small businesses, for example duties on contracting authorities to run an efficient and timely procurement process, and accept electronic invoices; and a strengthened Mystery Shopper scheme with statutory powers to ensure that all contracting authorities fully co-operate with requests for information.

12.5 All departments have developed action plans and targets to increase their spend with SMEs;

appointed SME Champions at official level; and departments have confirmed the appointment of a Ministerial SME lead to drive this agenda forward.

Committee of Public Accounts conclusions 13-16:

Government's current approach to contracting gives too much advantage to contractors.

Recommendation 14:

The Cabinet Office standard operating procedures should require departments to set and regularly review KPI regimes, to ensure they are incentivising the right behaviours, with clearly specified indicators that are capable of highlighting poor performance at an early stage.

14.1 The Government agrees with the Committee’s recommendation.

Target implementation date: Spring 2015.

14.2 The Government has established the Complex Transactions Team in the Crown Commercial Service, which provides expert support to departments when setting appropriate Key Performance Indicators (KPIs). These commercial experts restack the balance in favour of the taxpayer by providing departments with an equivalent to supplier’s big deals teams during commercial negotiation. The set of transparency principles being produced jointly by Government and the CBI will cover KPI regimes. The model services contract, published in January 2014 by CCS, contains service credit provisions and remedies for performance failures or shortfalls.

Recommendation 15:

The Cabinet Office should mandate the inclusion of open book provisions in all Government service contracts and set clear expectations for how these provisions should be utilised to manage the contract throughout its life.

15.1 The Government recognises the value of Open Book techniques and acknowledges that they can help to secure better value for money, particularly on complex, high value, multi-year service contracts.

However, Government is mindful of the added burden that open book arrangements could pose if they were included in less complex, lower value contracts, and is therefore keen to ensure that they are implemented proportionately.

Target implementation date: Summer 2015.

15.2 The Government recognises the value of open book techniques and acknowledges that they can help to secure better value for money. The transparency provided by Open Book allows both parties to be clear on the supplier’s charges, costs, and planned return. It also provides a basis to be able to review performance, agree the impact of change and to challenge each other with ideas for efficiency improvements. If implemented well, this technique should help to improve mutual understanding and trust between client and supplier

15.3 However, it is important that departments recognise that open book procedures could disproportionately affect SMEs. Government needs to understand how and where the approach can be used effectively. Consequently, the Government believes that open book provisions should be implemented proportionately.

15.4 The Cabinet Office has completed a study into open book accounting, which examined a range of issues in order to identify and evaluate the different models for using Open Book and consider to what types of contract these models should apply to enable departments to secure the maximum benefit from open book accounting.

15.5 Officials are working to finalise policy recommendations following the study, which they expect to take through approval routes in the first quarter of 2015. These recommendations include publishing Open Book guidance containing a tiered framework and self-assessment decision tool to guide departments on how and at what level to apply Open Book; supporting the guidance with training, using existing training offerings and providers; and the Crown Commercial Service using its expert resource to support departments and to facilitate the sharing of experience across departments.

Recommendation 16:

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