14 September 2010 | Paul Snell

Shortly before he stepped down from his role as chief executive at UK government procurement agency the Office of Government Commerce, Nigel Smith told SM about the challenges of the past three years and what’s in store for public sector buyers.

SM: What do you feel has been your biggest achievement during your time at the OGC?

Nigel Smith: I will not take these as personal achievements. And I won’t even accredit them to OGC alone. The major change in the way procurement is seen has been done by working with departments.

I will say with great certainty procurement is very much on the top table of government now. Permanent secretaries talk in an educated way about what procurement is, they know who their suppliers are, and they are talking with their suppliers.

There is a strategy in every department, and one of the catalysts to that was the procurement capability reviews, which I would argue is the most comprehensive review of capability in government ever. I think that was a great initiative, the implementation of which was during my period, but the idea was from before I came.

On data, we do now know what we spend our money on. And in central government, 80 per cent of our spend is fully categorised, which is a great achievement given the amount of money we are talking about, and the range of categories we spend our money on.

There is a basis of a profession. We know how many professionals there are, and we do have a sense of community being created. We are not there yet, but we are at the start of that.

We are doing true aggregation, where aggregation is the right way to go. You can only aggregate where you have got a national market. When I came in most of our energy was being procured, as you and I would procure it as a retail customer. We are now buying energy on a day-to-day basis on the global energy markets. We are now at the cutting edge of private sector practice in that area.

SM: What has presented the biggest challenge to tackle during your tenure?

I think data is always the toughest thing, particularly given the landscape of government is so fragmented.

I suppose the second thing is getting an understanding at the top of the shop of what procurement is. Procurement goes from definition of outcome right through to benefits realisation and that is not in the DNA of most permanent secretaries, so that has been a process. But I would say, even with permanent secretaries that have never understood what commercial matters were, they now talk about it in a knowledgeable way.

Let’s take DFID (the Department for International Development). [They] were talking “procurement” being about £450 million. What they now understand is “procurement” is around £5.2 billion, because the international aid is “procurement” in the vast majority of cases. That has been taken on board with massive enthusiasm. The public are not wholly convinced that international aid should be ring-fenced. From DFID’s point of view they need to ensure every pound they spend is a pound showing value and is spent in the right way. So procurement process and practice is helping to do that.

SM: What do you think public sector buyers will have to do in the next few years to meet the ambitious targets being set for them?

NS: Procurement is not going to be immune from budget cuts, but it will be even more important, so how do you square that circle? The only way you square it is to follow in a much more aggressive way the sorts of things we have been trying to do over the past three years.

Let’s take a museum. Is it strategic to a museum for it to buy its own energy? The answer to that is “no”. The objective of a museum is customer experience, it’s got nothing to do with energy. Should we actually push forward with shared services on the commodities which are not strategic to departments to get more efficient use of capability? The answer is absolutely “yes”. We have to do that. And we have to free up our capability to tackle complex procurements.

The big challenge is to find a way of matching capability to need in an effective way. And that is one of the things government has struggled with. That is a real challenge, and I do think that is understood now. Over the next two to three years there are already signs this is really going to pick up pace, which is good for the professional community. It is really going to widen their eyes and experience.

I think it is understood by necessity at the top levels, because there is not going to be enough money, and if you don’t have enough money but you still have a massive need, how the hell are you going to do it?

“The centre must do things where it occupies a unique position, but only where it occupies a unique position. [That] may come through its ability to aggregate, its ability to manage portfolios, or where it can leverage resources on behalf of wider government. It must not try to duplicate what is best done within departments.

“You need to be successful at that or departments are going to see they are having things done to them, not as support for them.”

SM: Most government collaboration so far has been voluntary, but the government is shifting to a mandatory approach. How will that work in practice, and is the change in strategy an admission the voluntary approach has not been as effective as needed?

I think we have come a massive way with “hearts and minds” approach. In some categories we are already there, like energy.

Is there a place for mandation? Of course there is. Is it the complete answer? Of course it is not. I really think there is an open door and one of the advantages of the current economic crisis and spending challenge is there is a burning platform. And there is an acceptance of that.

There will be things on the boundaries where mandation will be seen to be the solution, and some will be right and some are going to be wrong. There is a danger, because of the benefits we are seeing from mandation at the time of this crisis, that it may be taken too far. We must work with departments and procurement professionals must work together. I have been chief executive, but I would never mandate everything. You mandate what is practical and reasonable.

SM: How will the appointment of John Collington [as head of procurement for the Efficiency and Reform Group] and Sir Philip Green’s review of government spend affect the OGC? And what does it mean in terms of responsibilities?

OGC is now part of the Cabinet Office and part of the Efficiency and Reform Group I would rather talk about the agendas and capability of OGC, than OGC as an organisation.

What will happen about the branding of OGC, I don’t know. That is something for Ian Watmore [ERG chief operating officer] to consider when he is looking at organisation structure. But the people in OGC and these agendas are supporting everything.

John Collington is one of the most experienced procurement professionals in government. He is coming in to add to that agenda of putting shared service and commodity procurement into practice. I see that as very much a positive.

As far as Sir Philip Green, I only know what I have seen in the papers. I suppose you can never have too much advice can you? I would just say that I think when you are coming in to do efficiency reviews of government, perhaps there is a practical and technical element and there is a political element. The only way you will make an assessment is by evidence, so I don’t know how comprehensive it will be, I have no idea.

SM: Do public sector buyers have the necessary skills to tackle the task in hand?

I think the answer to that must be “no”, looking at the size of the challenge. Are they much better? Yes they are.

Can you get the capability to meet the need by having this fragmentation of departments? No. [To have a situation] where you’ve got people who have been through complex business process procurements, but that experience is not then available to the rest of government seems to me a nonsense, and that must change.

There are challenges, because in the private sector the first thing that goes when you have a crisis is your training budgets. So there is a real challenge and I think some departments will do the right things and others may not. In Building the procurement profession in government, which we published a year ago and got permanent secretary sign off, there is a requirement to do 50 hours of professional development. Would you have needed that in the private sector? No. Did you need it? I think really to shock the system, yes.

SM: Given recent reports can the public have confidence that any savings announced are accurate and real?

When came in, almost on my first day, I think a National Audit Office report was published on the Gershon efficiency programme that said a third [of savings] was real, a third might be, but there was no evidence and a third weren’t.

I was about to embark on a very comprehensive collaborative procurement process and therefore the first thing we did here was put in some very rigorous evidence processes with agreed definition of what savings were. The NAO report that followed was very complimentary about the process we have put in place for evidence gathering and sign-offs.

What is the purpose of a saving unless you know it has been made or real? Going forward I think all of those processes are in place to make sure the savings are real. We cannot have a situation where public confidence is lost in this new government, which has set its stall out on transparency. We cannot have that situation again.

SM: If you were to leave a note of advice for your successor, what would it say?

I would be very careful about leaving notes. I’m just pleased I’m not a politician. I don’t do notes.

I know Ian Watmore extremely well and have had a lot of opportunity to give him advice, and it is advice he doesn’t really need. But if it were somebody different, I would say process produces nothing, people produce everything. And production has to be evident. It is about people and evidence and data, which is absolutely key. Mandation and things like that can help. But always ask that important question: “What is the unique position we hold at the centre which cannot be performed at the departmental level?”

SM: And what is next for you, on a personal level?

Three years ago I was going to develop a portfolio career, but I got sucked in to this job, and I have no regrets. Sitting on the board of the Treasury, while the global economy collapses has been absolutely fascinating.

I will stay on the Major Projects Review Group, because it is something I really enjoy, I’m not getting paid by the way. I am also going to head up a charity, something I have always wanted to do and is very dear to my heart. I’m on the board of Saïd Business School, University of Oxford, and I will be looking to go on the board of three or four companies in a non-executive capacity, hopefully as chairman ultimately, I will be addressing that when there isn’t any conflict of interest.