‘The more the OGC is decimated, the more celebration there will be’

Within four weeks the Office of Government Commerce (OGC) could be no more. Treasury ministers and senior civil servants are deciding the future of the office, which advises central and local government on procurement and project management.

Between January and June this year, the OGC had to undertake a “zero-based review”. This meant that not only was it forced to fight for every penny of its budget, but it had to explain why it should exist at all.

Although other Whitehall departments and agencies are being put through the same process ahead of next year’s Comprehensive Spending Review, it is the OGC that is most at risk. One of the organisation’s many critics within Whitehall says: “The view within the Treasury is that the OGC is not doing its job. Its basic objective is to make government, and government procurement in particular, more efficient. Ask any department what the OGC does and it will say absolutely sod all.”

A senior private sector procurement specialist goes even further: “The more the OGC is decimated, the more celebration there will be among thinking people. It has been an absolute fucking disaster.”

In its defence, the OGC would argue that since its inception in 2000 it has given departments the guidance they need to cut procurement costs, has brought together senior officials across Whitehall in the Public Sector Construction Clients Forum, and has introduced “gateway reviews”, which monitor large projects. These are estimated by the National Audit Office to have doubled the number of schemes delivered on time.

The OGC has also played a part in delivering important policies, most notably by producing the Kelly Review, which looked at whether the construction industry had the capacity to absorb the government’s investment in public services over the next few years. Finally, it is overseeing the Gershon Review, the Treasury’s much-publicised drive to make annual efficiency savings worth £21.5bn in the machinery of government.

Despite all this, the OGC itself seems to understand that it cannot go on as it has. Although the zero-based review is known to have recommended that the organisation survive, the four-person team behind it has acknowledged that it needs to be slimmed down and restructured. As an OGC spokesperson puts it: “A zero-based review means that the first question asked of an organisation is ‘Do we need it?‘ If the answer is yes, then one asks, ‘how can it be improved as an organisation?‘“

It is rumoured that one option being considered by the OGC is to cut staff numbers from 400 to 250 while retaining most of its responsibilities. This could also involve moving some of its 200 London staff to Leeds and Norwich.

This would have several benefits. First, it would meet proposals put forward in the Lyons Review, which recommended relocating much of the civil service to cheaper accommodation outside the capital. Second, it would help the Treasury meet its commitment to reduce its budget by 5% a year from April 2008 to March 2011. Third, it would make a small contribution to the OGC’s ambition to achieve the £21.5bn savings identified in the Gershon Review.

The OGC’s objective is to make government more efficient. Ask any department what it does and it will say absolutely sod all

Whitehall source

Has it gone far enough?

The ironic thing about that last review is that its author, Sir Peter Gershon, was the OGC‘s chief executive when the targets were leaked to the press in 2003. It could be that his recommendations will result in the downfall of his former employer, since it appears likely that the Treasury will decide that the zero-based review has not gone far enough.

The early signs are that finance ministers will decide, at the very least, to bring the office‘s procurement function back in-house. This would reduce the OGC to a rump organisation, possibly with the task of issuing further guidance on procurement, and working on the development of the gateway reviews. Essentially, the Treasury would have conceded that it was wrong back in 2000 to separate itself from procurement responsibilities.

Procurement would be run by a smaller team within the Treasury‘s corporate and private finance unit, which is led by senior civil servant Jeremy Pocklington. Although one Whitehall source suggests this would be a demonstration that “functional requirements are just not being met” by the OGC, Graham Watts, the chief executive of the Construction Industry Council, thinks that such a move could help improve the industry’s contact with the Treasury.

“The OGC does lots of good work and has been more effective in the past few years. But it wouldn’t be a bad thing if procurement advice went back into the Treasury. In round table discussions that we have with government it’s difficult to get the Treasury directly engaged, because the OGC is already there. Construction is such a massive part of the economy, it’s better if it and construction procurement sit within the Treasury.”

The other option would be to get rid of the organisation altogether, which is certainly the preferred route of its more ardent critics. At the moment, it appears that this might be too extreme for the Treasury.

But, whatever happens, the OGC will not remain the same beast, and is likely to become a more peripheral organisation than it is now. Even a defender of the office admits: “Bits of government don‘t listen to its good ideas as they don‘t think that they need centralised advice.”

As the office’s spokesperson says: “The OGC will be a different organisation, but we don‘t yet know in what way.”