The Cabinet Office draft structural reform plan is curiously unambitious in some areas (for example the £6 billion savings targets set for the Efficiency and Reform Group) and centralist in others. This implies a risk that the Return of the Jedi will indeed be followed by “The Empire Strikes Back”, rather than the other way round. Thus the plan is to abolish or bring back in house those Quangos which are not technical, transparent or impartial. There appears to have been no option of removing their statutory powers and leaving them to sink or swim as self-funding co-operatives, competing to provide services valued by those running front line delivery. Instead some of these look set to fall through expensive cracks, as functions valued by no-one, as well as those which should never have be devolved, are transfered back to departments whose previous failures led to the rise of the quangocracy in the first place.
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Will the 800 staff transferred to the Efficiency and Reform Group evolve into a new central procurement agency: a parkinsonian hive of bureaucracy spending years to wind down 100 or so framework agreements created by over 40 public buying organisations, plus all the customised variations on the model contracts drawn up with the help of the staff of OGC Buying Solutions (and their lawyers and consultants). Given that the latter look set to be in charge of process I share the fears of the cynics. Or is the intention that it form the basis of a new and more powerful CCTA that will take 70%, or more, out of the cost of running Whitehall and also help roll back the centralisation process started by Lloyd George, under a previous coalition government in 1917, while those who knew where this would lead were busy getting killed in France,
Less business has been awarded under most of the frameworks than the collective cost to suppliers of getting on them. The bidding costs, fees and commission changes restrict choice: many cover only three or four suppliers. The headline commissions to those running them may be under 1% but to this hsould be often be added 5% or more in charges levied by those who subcontract, in turn, to small firms. These charges can rise sharply if “added value”, e.g quality control, is involved. According to the recent Audit Commission and NAO study of the collaborative procurement of commodity products the result can double the cost for commodity products.
In consequence a growing number of NHS trusts, for example, are going direct to OJEU as existing contracts have to be renewed, e.g. for local communications networks. Will they be stopped while we wait for the ERG to produce a new framework? Or will the ERG follow Darwinian management principles, move fast to publicise those frameworks which deliver good value for money, even if run by Quangos, recommend they be used on an iterim basis, leave the others to die and then build on the survivors?
In this context the decison of BIS to create a new Quango, or is it an intra-departmental organisation, Broadband UK, might be seen to represent the worst of all worlds. It looks set to repeat the mistakes of the Addits. These added sevral years of delay to the last round of broadband investment, getting in the way of the co-operation already under way around the regional broadband consortia, before more rolled over and died when the start-up fuinding ran out. Meanwhioe the Regional Broadband Consortia (now known as NENs) were bringing the internet to schools at a fraction of previously quoted costs, by making the would-be suppliers compete and “even” co-operate. Today the NENs are bringing 100 mbps links to schools at half the price quoted by the main ISPs and data transit services at a third of the cost (see Datamonitor report). No wonder those seeking government subsidies to underpin expensive proprietary business models wish to see them killed off as “non-statutory quangos”.
How did the NENs acheive this?
1) By not charging fees or commissions to suppliers to participate in their framework agreements: thus getting a wider choice of suppliers, large and small, national and local.
2) By copying best EU open procurement practice – as opposed to paying time based fees to procurement experts who understood neither application nor technology, to negotiate behind closed doors with suppliers whose legal teams were equally ignorant and motived on size (rather than profitability, let alone timeliness) of contract.
Thus the NENs, in co-operation with JANET (another remakably efficient, low cost, high capacility, network success story based on collaborative procurement) were delivering low cost, high reliabality, fibre-based, services to schools while OGC was trying to boil the Ocean and others were planning equally grandiose networks for which the consultants and lawyers (of both buyers and suppliers) would be paid – whether or not the tender was awarded.
Unfortunately the current bonfire of the Quangos appears to be being used by DSCF to try to eliminate the NENs (part of whose funding was via BECTA) rather than allow them to be fully privatised as co-operatives, working in co-operation with the REIPs (another success story) to pool the in-house expertise of education (from universities to schools) and local government to deliver shared network services at a fraction of the costs envisaged by those lobbying BIS and DCMS for central government to intervene on grounds of “market failure”.
Unless, that is, the 25% cut in central funding towards already contracted broadband services to schools for this budget year was “merely” part of the departmental strategy to get rid of their new Minister by strewing enough banana skins in his path. Hopefully it will not succeed because enough players can already see that the NENs are a key start point for bringing together local demand, (fibre to the school, alongside fibre to the doctors’ surgery and community centre etc. etc.) to enable broadband to be brought to the “final third” – with little or no need for government to do more than allow market forces to operate properly – including being, itself, a more intelligent and far-sighted customer than it has been for the past couple of decades.
Given the government objectives of sharing infrastructure, there is also a good case for saying that Broadband UK should be transferred from BIS to Treasury to form part of Infrastructure UK – with a remit to provide information on existing existing network procurement processes and organise events to bring players together – leaving them to agree to co-operate or compete – under a spotlight of publicity.
When the Addits were first proposed I was vice-chairman of the aggregation group of the Broadband Stakeholders Group and suggested that the Addits be scrapped in favour of giving BSG a modest budget to organise local conferences to bring players together. Today INCA is finally doing this, at a fraction of the cost of the Addits or BBUK. It is likely to acheive very much more. Rory Stewart’s conference in Cumbria is a similar model. Other MPs appear to be looking at similar local co-operation, including across party boundaries. Will they get serious support from the supplier community? If so what will the effect be on Whitehall? Will the coalition Whips recommend to Ministers that they tell their officials that back bench feeling is such that they will have to respond and take the new localism very much seriously?
This brings me back to my starting point, whatever the current state of the Cabinet Office plans (and I would most surprised if that have not evolved over the past month) – will the new “Efficiency and Reform Group” seek a transformation of government akin to that which saved IBM: with budgets devolved to operating units who will be allowed to decide whether or not to buy from central “support” units?
Or is it planning a process akin to that which destroyed AT&T and most of the other great private sector bureaucracies of the past? – as consultancy after consultancy re-organised them around centrally co-ordinated and planned “markets” until they rolled over and died.
P.S. This blog has focussed on points that caused concern among long-term observers of government behaviour (like me). I am actually impressed by what I have seen so far. I believe that we are about to see real change for the better. Also some of those who are saying least, and being criticised by political pundits for doing so, are getting into position to deliver most.