National Audit Office Press Releases
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Commercial skills for complex government projects

The National Audit Office has warned that the value for money of 43 major government projects worth around £200 billion is at risk because of significant weaknesses in the Government’s commercial skills and expertise. But there is an even greater risk to many other complex projects where skills shortages are not being assessed systematically.

The private sector has an increasing role in delivering public services. It is, therefore, critical that Government has staff with the commercial skills and experience to interact with the private sector. However, departments continue to experience a shortage of staff with the commercial skills and experience needed to design and deliver complex projects successfully. A 2009 review by the Office of Government Commerce (OGC) found that 44 per cent of Senior Responsible Owners of major projects did not have any substantial commercial experience.

The biggest skills gaps for Government are in contract management, commissioning and managing advisers, risk identification and management, and business acumen.

The Government has attempted to fill its skills gap with temporary staff and consultants. Thirteen departments have provided information showing that over a third of their staff spending in Commercial Directorates is on temporary staff. Some departments also rely heavily on the support of specialist advisers. While both can make a valuable contribution, over-reliance can lead to higher project costs and loss of knowledge when temporary staff and advisers move on.

The Government is not using its scarce commercial staff resource to best effect. Departments lack information on the expertise, skills and availability of staff and there is no formal mechanism to allocate staff and expertise across government departments.

Pressure to reduce public spending can conflict with the need to invest in staff with the commercial skills to deliver complex projects. The culture of staff frequently moving positions within a department often leads to commercial experience and expertise being lost by projects and by individuals.

Fourteen of 16 departmental commercial directors believe OGC has done little to address skills gaps within their department, although ultimate responsibility for commercial skills remains with departments. The OGC has introduced a number of initiatives aimed at improving commercial skills, such as Building the procurement profession in government. But OGC and departments are not working together effectively and are having limited impact. As a result, the value for money of the £1.5 million a year that OGC has been spending on initiatives is at risk. OGC needs to work with departments to establish standard approaches to dealing with the commercial sector.

Mr Amyas Morse, head of the National Audit Office, said today:

"Commercial skills are essential to success in complex projects and a great deal of money rests on this; but there is still not a coherent system for providing skills across government or for using the existing skills as efficiently as possible."

Notes for Editors

The NAO report defines a project as complex when, at the outset, there is no obvious route to delivering the project outcome or the project has aspects that have not previously been encountered. A project may also be defined as complex if there is a high level of change during the project’s lifetime in the outcome required. As at September 2009, HM Treasury’s Major Projects Portfolio contained 43 of the most complex projects and programmes in Government, with a value of approximately £200 billion.

OGC’s skills strategy ‘Building the procurement profession in government’ has been largely endorsed by departmental permanent secretaries. It includes a commitment to reducing the number of interim staff holding posts in core procurement teams to no more than 10%.

Press notices and reports are available from the date of publication on the NAO website, which is at http://www.nao.org.uk/. Hard copies can be obtained from The Stationery Office on 0845 702 3474.

The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 900 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

Press Notice 56/09
All enquiries to Phil Groves, NAO Press Office:
Tel: 020 7798 5339
Mobile: 07770 678477

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