Digital reforms: Government has mountain to climb but does not yet understand size of challenge - PAC report
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Government's ambitions for major digital reform exist alongside
major challenges in the way of modernisation. In its report on
government's relationship with digital technology suppliers, the
Public Accounts Committee (PAC) warns that the centre of government
does not yet recognise the scale of reform required to address
long-standing issues in digital procurement. Past PAC reports have
repeatedly identified failures in the delivery of government's
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Government's ambitions for major digital reform exist alongside major challenges in the way of modernisation. In its report on government's relationship with digital technology suppliers, the Public Accounts Committee (PAC) warns that the centre of government does not yet recognise the scale of reform required to address long-standing issues in digital procurement. Past PAC reports have repeatedly identified failures in the delivery of government's digital transformation projects causing large cost overruns (e.g. HM Prison & Probation Service's handling of the electronic tagging programme). The report notes this is because government struggles to act as an ‘intelligent customer' when procuring services. The PAC's inquiry heard that while government plans to work on upskilling, capability and assurance across the wider civil service to address this problem, this was not a simple set of actions that would result in change overnight. The Government Commercial Function (GCF) leads policy on how contracts are awarded to, and public money spent with, technology suppliers - with whom government spends at least £14bn every year. The report warns that it has only 15 people dedicated to the full-time management of technology suppliers. This is untenable, given the pace of digital technological change needed to adopt AI and the significant shift from legacy systems to modern replacements. The report warns that government does not have sufficient skills to manage the depth and breadth of its digital commercial needs. While new Digital Commercial Centre of Excellence aims to fully harness the capability of digital and commercial functions, the report notes the Centre will have just 24 experts to undertake its roles, compared to 6,000 mainly general commercial people working across government. The PAC looks forward to evaluating government's declared objective plan to upskilling these 6,000 staff in digital areas. Another aim of the Centre of Excellence, and area of focus for the PAC's report, is the leveraging of government's buying power with technology suppliers. Here the PAC finds that government underestimates how difficult it will be to consolidate its considerable c.£14bn annual spend of buying power across government. Historically, government has sought to exercise buying power through competition between technology suppliers. But the digital technology market is increasingly being dominated by a small number of very large suppliers, giving the government limited choice. The report calls for wide-ranging changes to how digital commercial activity is approached, which reflect the changing reality of technology markets, and bring clarity on how the centre of government and departments work together. Sir Geoffrey Clifton-Brown MP, Chair of the Committee, said: “The government is talking a big game in digitally evolving Whitehall, but we are concerned that it is not yet fully cognizant of the pace at which it will need to adapt to keep up with the wider digital and AI revolution. Technological change was encompassed in the nineteenth century by electricity, the twentieth century by the internet, and in the twenty-first century, it will be by AI. “Our Committee has long called for digital professionals to take their rightful place at the top table both in management and on the supervisory boards of Departments themselves, guiding and shaping key conversations on AI, cyber security, and overall policy delivery. How digital services are bought in from the private sector is the very foundation of this work. It is heartening to hear government beginning to aspire to excellence in this area, but it is vital that those at senior levels who understand the scale of what government faces communicate this with urgency to the wider mechanisms across Departments. Without reckoning with the reality on the ground which our report lays out, aspirations will not get government very far. “Government ambitions exist in a context in which the field is littered with failed digital transformation projects which suffered from the same systemic issues – a lack of in-house skills, a lack of effective cross-governmental collaboration, a lack of future-proofed infrastructure. Our report provides a template for government on how to sharpen its approach to the challenges of a digital landscape that poses the twin challenges of the dominance of a few big players, and moment-by-moment change. Without seizing the opportunity to deliver the urgently needed reforms laid out in our report, government's noble digital aspirations are likely to remain unfulfilled, and productivity improvements in the public sector will be delivered sub-optimally.”
PAC report conclusions and recommendations We are concerned that GCF does not yet recognise the scale of reform required to address long-standing issues in government's digital procurement, including how it will work effectively with GDS to bring about necessary changes. Government has a long-standing need to improve its use of technology suppliers for major business change, and its existing ways of working have contributed to poor outcomes in its attempts to modernise and make government more efficient. It has also not adapted to the fundamental shifts in technology markets which are increasingly dominated by very large suppliers. GCF is a cross-government network of around 6,000 people who procure, or support procurement, of general goods and services. But it has only 15 people dedicated to the full-time management of technology suppliers given the pace of digital technological change needed to adopt AI and the significant shift from legacy systems to modern replacements, this number is simply not tenable. The GCF and GDS have important roles to play in improving government's digital procurement, as will the new Digital Commercial Centre of Excellence that the government is setting up. GDS has not had formal responsibility for digital procurement in the past. This needs to change, but GCF and GDS have not yet set out how they will make this happen. With different parts of the Cabinet Office and DSIT responsible for different elements of digital procurement, and the new Centre of Excellence reporting to both Departments, it is also not yet clear who is ultimately responsible for delivering the improvements to digital commercial activity that government needs to make. We are concerned as to whether DSIT will have the authority to instil the change that is needed in most departments. Recommendation 1.
The Cabinet Office and DSIT have many expectations for the Digital Commercial Centre of Excellence to deliver the large-scale improvements needed to current digital commercial activities, as well as its existing aims. Government's current digital commercial approaches and practices require improvement in a range of areas, including creating a clear sourcing strategy setting out what government wants and how it will procure it. Yet government does not have sufficient skills to manage the depth and breadth of its digital commercial needs. There is an insufficient level of digital commercial skills across departments, and some Departments do not make enough use of their digital expertise. The objective of the new Digital Commercial Centre of Excellence is to identify opportunities for further reform and improvements needed to enable tech startups, and small- and medium-sized enterprises to access government contracts. Cabinet Office and DSIT appear to have much more extensive and wide-ranging aims for the work of the Centre of Excellence. These include fully harnessing the capability of the digital and commercial functions; ensuring better data on technology spending; leveraging government's buying power with technology suppliers; helping departments to optimise their use of the cloud; and digitally upskilling commercial staff across government. The Centre of Excellence will have just 24 experts to undertake its roles, compared to 6,000 mainly general commercial people working across government. Recommendation 2. The Cabinet Office and DSIT should, in line with their Treasury Minute response, set out: what the Digital Commercial Centre of Excellence is going to do to address the problems with digital commercial activity as well as its published aims for SMEs and startups; and how it will balance its resources and time between activity facing government and suppliers respectively. Cabinet Office and DSIT's approach to preparing for the opportunities and risks presented by new technologies is not yet being developed alongside addressing more immediate digital procurement challenges. Government faces uncertain but profound technological changes, particularly around artificial intelligence, and rapidly needs to develop the skills to deliver the next generation of programmes for digitally enabled change and the significant task of replacing legacy IT systems with modern equivalents. At the same time, it needs to bring the skills of its people up to an acceptable standard to enable them to successfully deal with historic programmes and challenges from its legacy digital environment. Addressing the existing issues and challenges within government's digital procurement will be critical to being able to successfully deal with emerging technologies in future, but government is not yet widely thinking in these terms. Cabinet Office does not yet have a plan for how it will develop the specialist digital skills or commercial capability required. The government has published a 'digital, data and technology playbook', but this lacks the level of detail needed to offer practical support to officials in departments undertaking procurements. GDS and GCF acknowledge that the playbook needs to be fit for purpose and expanded, to provide clear guidance across the commercial lifecycle and to reflect both the supplier and customer perspective. It intends to update the playbook accordingly. Recommendation 3.
GCF's current plans for training to build digital commercial expertise across the civil service are insufficient to bring about the transformative change needed to improve government's digital commercial activity. GCF acknowledges that government needs to do more to build digital commercial skills across the base and lift the whole level. Specialist skills needed include people with the experience and expertise to deal with the most senior commercial digital experts in suppliers and global 'big tech' companies. GCF's examples of the general training and development programmes it is delivering to civil servants are not sufficiently targeted at delivering the digital commercial skills that government most needs. GCF accepts that more could be done but has not yet set out what that would look like in practice. We are also concerned that some bigger departments are better served with digital skills with the potential to work with their commercial teams than some of the smaller ones. But GCF could not say whether this needed a set of commercial people with digital skills in every department. Recommendation 4.
Government's ability to get the best deals with technology suppliers is being hampered by its lack of knowledge of what it is spending or its future needs. Government estimates that it spends over £14 billion each year on digital commercial activity. But it cannot say for certain as it has no central record of this spending. Government also lacks reliable or comprehensive data on its overall pipeline of future demand for digital services and lacks the ability to evaluate this against suppliers' appetite to provide those services. Cabinet Office considers that following the Procurement Act 2023, a new database will give government better data on spending and pipelines. However, this only supplies a platform for departments to submit data. It does not negate the need for systems and processes to be set up between the Centre and suppliers, and between the Centre and departments, to provide the forecast and pipeline data which is critically needed. Without reliable data, government cannot make informed buying decisions or fully make use of its consolidated buying power. Cabinet Office acknowledges that it needs an improvement plan to ensure it is capturing all available data on digital commercial activity in government. The Cabinet Office Permanent Secretary wrote to us after our evidence session saying that within 8 to 10 weeks the Government Chief Commercial Officer would set out to a plan and approach to upskilling his 6,000 staff in digital areas. We look forward to evaluating this. Recommendation 5. The Cabinet Office and DSIT should, by Autumn 2025, set out how it will ensure that it has the data and the capability (systems, processes, people) it needs to make more informed decisions about where and how government spends with technology suppliers. This should include data on spending and on the pipeline of supply and demand, to help the centre of government build a more strategic approach to working with technology suppliers. Government is underestimating how difficult it will be to consolidate its buying power centrally when procuring digital technology across government, in a way that will give it maximum leverage. Spending over £14 billion annually on digital technology suppliers gives government considerable buying power and the potential to make deals that benefit the taxpayer. Historically, government has sought to exercise buying power through competition between technology suppliers. But the digital technology market is increasingly being dominated by a small number of very large suppliers, giving the government limited choice. GDS has a goal to support government to maximise its commercial leverage by moving beyond memoranda and frameworks to a position where different parts of government can commit to contracting with the same supplier. However, in practice it can be difficult to line up multiple customers with differing requirements. Government will therefore need to adopt wide-ranging changes to how it approaches digital commercial activity, which reflect the changing reality of technology markets. For example, it will need more clarity on how the centre of government and departments work together, and more focus on requirements developed in advance of contract awards. In dealing with cloud providers, it will need to more fully understand its negotiation levers and have the ability to commit money in order to have the best possible leverage. Recommendation 6. The Cabinet Office and DSIT should design a suitable commercial construct moving from the current conceptual level to a more detailed explanation of how things should work, recognising that this is a new cross-government approach with new processes. |