2 Changing civil service culture

13. We asked if the culture within Whitehall has started to change, given this Committee previously reported that central government had long neglected contract management because "the glamour was in procurement in the civil service and not actually in running contracts".31 The Ministry of Justice, told us that changes to the organisational culture were underway, although they would take longer to embed than improvements in systems and processes.32 The Cabinet Office also considered that culture was now improving, but there was still a long way to go.33

14. Part of the culture change required involves raising commercial awareness beyond the specific commercial directorates within departments-a priority issue identified by the commercial capability reviews. The Home Office told us that it had focused a lot of its attention on building commercial capability outside the commercial specialist function and in the businesses, such as in the Passport Office and UK Visas and Immigration, stating that it would "require the people at the top of those organisations to be not necessarily commercial specialists but commercially savvy, because they are running public service businesses and they are also running them depending on big third party suppliers."34

15. The Ministry of Justice set out a three tier model for commercial expertise in the civil service, with firstly the commercial specialists, and then "people who know how to run contracts but are not in a commercial function, and there I think we have further to go-people in all sorts of business delivery areas who own contracts and need to have experience of running contracts. Then there is the general commercial awareness that policy people should have, for example. That is, in a sense, the hardest cultural nut for Whitehall to crack."35

16. One way in which senior management can demonstrate the importance of commercial expertise is by holding contract owners, who are usually in operational roles outside of the department's commercial directorate, properly to account for managing commercial contracts. Both the Ministry of Justice and the Home Office told us that they have identified owners for every large contract, and explained how each contract owner reports up their management line.36 The Ministry of Justice explained that "the head of the commercial function is this professional adviser, but a really good contract owner, who could well be at Director General level, would be the person who is absolutely answerable to the Minister for the success of the contract. I would not want you to think that this specialism is confined to the commercial function and the rest of the Department gets on freely without knowing how these contracts work; that would be a recipe for disaster."37 The Ministry of Justice described its system of 'attestation' which is overseen by its new Commercial and Contract Governance Committee comprising the department's senior leadership, including representatives from business areas, finance, HR and Internal Audit. The Committee reviews high-risk, high-value contracts and requires senior contract owners, who are in operational roles, to "confirm that they are meeting their responsibilities, alongside performance, financial and risk management evidence and highlight any areas of concern or non-conformance."38 The Home Office agreed that the authority and accountability for delivery of a successful contract lies with the senior business contract owner, so that "the authority and accountability rests with the person who is responsible for delivering the outcomes."39

17. In our view the private sector places more value on commercial skills than the public sector, with policy roles much valued in the civil service and more likely to lead to promotion than being, for example, "the guy who makes sure Serco has done what it is supposed to have done."40 Through the 'recruitment hub' established by the Cabinet Office, government has been able to set up a fast track commercial programme with a clearer career path and apprenticeship scheme, but most departments are carrying significant vacancies with some departments reporting vacancy and interim rates of 15% or more.41 Key senior-level posts especially, such as at least one departmental commercial director, are still unfilled.42 Retention also continues to be an issue, with the Home Office's previous commercial director being an example of an external appointment that did not work out.43

18. The Cabinet Office told us that external appointments into commercial roles typically receive around £30,000 more than civil servants in equivalent roles, with senior commercial specialists coming in at Director level and being paid at the level of a Director General.44 The Home Office confirmed that some of its staff who came in from the private sector were "to roles that are formally Director level roles but are paid more, at least in headline terms, than some of my Directors General. We essentially detach the salary scales when we look at big programme management or commercial skills."45 In addition, the Cabinet Office told us it is working on proposals to reform the existing pay and grading structures.46

19. We questioned if contract owners were at a sufficiently senior level and whether Commercial Directors should sit on departmental boards, especially given the Cabinet Office told us it is doing work to increase "senior engagement [and the] voice of commercial at the executive table".47 The Cabinet Office told us it was watching the situation to see whether it should recommend that Commercial Directors were at Director General level and sit on Departmental boards but that the current priority was to build skills and experience first as "part of the culture change is that you bring your particular expertise to the table as opposed to having to be a particular grade to be at the table."48

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31 Committee of Public Accounts report, Transforming contract management, Twenty-third Report of Session 2014-15, HC 585, 10 December 2014 para 7; Q 3

32 Ministry of Justice (TCM0001) para 61

33 Q 2

34 Q 58

35 Q 58

36 Qq 81-82

37 Q 79

38 Ministry of Justice (TCM0001) paras 5-8

39 Q 80

40 Qq 58-59

41 Cabinet Office (TCM0003) para 8.2; Q 7