Cynulliad Cenedlaethol Cymru

Yn ôl i Chwilio

Y Pwyllgor Cyfrifon Cyhoeddus

Public Accounts Committee

18/02/2019

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Adam Price AC
Mohammad Asghar (Oscar) AC
Neil Hamilton AC
Nick Ramsay AC Cadeirydd y Pwyllgor
Committee Chair
Rhianon Passmore AC
Vikki Howells AC

Y rhai eraill a oedd yn bresennol

Others in Attendance

Adrian Crompton Archwilydd Cyffredinol Cymru
Auditor General for Wales
Andrew Slade Cyfarwyddwr Cyffredinol, Economi, Sgiliau ac Adnoddau Naturiol, Llywodraeth Cymru
Director General, Economy, Skills and Natural Resources Group, Welsh Government
Jonathan Hopkins Dirprwy Gyfarwyddwr Masnachol a Chaffael, Llywodraeth Cymru
Deputy Director Commercial and Procurement, Welsh Government
Marion Stapleton Dirprwy Gyfarwyddwr, Tîm Strategaeth Gwasanaethau Trawsbynciol, Llywodraeth Cymru
Deputy Director, Cross-cutting Services Strategy Team, Welsh Government
Mark Jeffs Swyddfa Archwilio Cymru
Wales Audit Office
Matthew Mortlock Swyddfa Archwilio Cymru
Wales Audit Office
Mike Usher Swyddfa Archwilio Cymru
Wales Audit Office

Swyddogion Cynulliad Cenedlaethol Cymru a oedd yn bresennol

National Assembly for Wales Officials in Attendance

Claire Griffiths Dirprwy Glerc
Deputy Clerk
Meriel Singleton Ail Glerc
Second Clerk

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Dechreuodd y cyfarfod am 13:50.

The meeting began at 13:50.

1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
1. Introductions, apologies, substitutions and declarations of interest

Can I welcome Members to this afternoon's meeting of the Public Accounts Committee? I also welcome our witnesses. As usual, headsets are available for translation and for amplification. Please put any phones onto silent. In an emergency, follow the ushers. We've received one apology today from Jenny Rathbone. Do Members have any declarations of interest they'd like to make? No.  

2. Papur i'w nodi
2. Paper to note

Okay, item 2, and we have one paper to note today, which is correspondence from Maria Battle, and that relates to the audit of Cardiff and Vale University Local Health Board's contractual relationships with RKC Associates Ltd. As I say, Maria Battle has provided us with further information following our last request. I'm quite happy to note that letter. Are Members agreed? Good.   

3. Caffael Cyhoeddus - Y Camau Nesaf: Sesiwn dystiolaeth gyda Llywodraeth Cymru
3. Public Procurement - Next Steps: Evidence session with the Welsh Government

Okay, item 3, and our substantive item today, which is our witness session with the Welsh Government on public procurement—the next steps. Can I welcome our witnesses to today's meeting? Would you like to give your name and position for the Record of Proceedings? 

I'm Andrew Slade, director general, economy, skills and natural resources, and I'll ask my colleagues to introduce themselves. 

Jonathan Hopkins, deputy director for procurement. 

I'm Marion Stapleton, deputy director. I lead on fair work. 

Great. Thanks for being with us this afternoon. We've got a number of questions for you. I'll kick off with the first few, and before we move on to specifics, it's nearly 18 months now since the Welsh Government announced the review of the National Procurement Service and Value Wales in advance of the publication of the Auditor General for Wales's report, and it's a year since we took evidence. During this lengthy period of reflection, what practical progress would you say has been made to strengthen public procurement in Wales? 

Thank you, Chair. An awful lot has gone on over the recent period, and we'll talk about some of the specifics, I'm sure, as we go through the evidence session. And it's worthwhile saying that the team have made, I think, substantial progress in the teeth of a number of other competing priorities for their time and attention, which not least includes Brexit and whether or not we're preparing for a deal or no deal. Both those outcomes require a good deal of attention, and have involved a lot of work.

I think it's also worth saying just at the outset that from a position in the mid-2000s where public procurement involved Welsh-based companies to the tune of about 35 per cent of the procurement expenditure involved, we're now at over half at 52 per cent. And if you look then again within that at the category that involves community benefits, we're up at around the 82 per cent mark, worth about just over £2 billion to the Welsh economy.

So, I think, in general terms, we have made very substantial progress. A lot has gone on since the then finance Secretary's statement to the Assembly in September and, again, as I say, we'll come on to talk about some of the specifics in following up the review work that Marion led on last year. This includes a new approach to what we're trying to do around our central procurement functions and what happens at a national level in Wales; in terms of what we're trying to do at a regional and local level, and working with partners in terms of what we do with e-procurement and digital; and in terms of a range of pilot programmes that we've been heavily involved with, which include Better Jobs Closer to Home, the Valleys taskforce, the feed-in to some of the work that Marion has just alluded to in respect of fair work, and a lot that's gone on to work with suppliers to ensure that they have better access to contracting arrangements, better understanding, more feedback and a lot of work with small and medium-sized enterprises.

So, a lot has gone on. We'll talk in a few moments, I'm sure, about next steps and the programme of work to follow.    

Just before we go on to the next steps, you've painted quite a good picture there of progress, but I'm sure you're aware that the Future Generations Commissioner for Wales has been—. Well, she's written to this committee saying that she's frustrated at what she says is a 'lack of tangible progress'. Do you recognise any of the criticisms by the future generations commissioner, or do you think that she's incorrect to be negative about that progress? 

No, I think in relation to the work of the future generations commissioner, which is to push forward, there is a lot more work to do. She and I were talking about that only a few weeks ago at one of our regular catch-ups, and we've got a workshop with her team lined up for—is it early April, Jonathan?—to pursue some of the particular points that she's got.

We've done work around pilots in respect of the Well-being of Future Generations (Wales) Act 2015. Mainly, they have fallen with local authorities into the category of work around plastics and disposal of waste and how we can minimise use of plastics in packaging in provision of services. There's a wider suite of things that we can be doing going forward, I think, and one of the things that we'll be looking at with her, and with a number of other stakeholders, in April, is how we might pursue that agenda further.

But I wouldn't wish to paint a picture of everything's sorted and we've done everything. As I say, apart from anything else, the fact that we've spent so much time recently focusing on preparations for leaving the European Union has had an impact on the work of the Welsh Government generally, including the procurement teams. 

13:55

Sure. I appreciate as well that, obviously, with the Brexit process, that's going to be taking some of your time. 

The First Minister's leadership manifesto contains several commitments relating to procurement, but is there anything different that you're having to respond to now under the new regime that wasn't already part of the Welsh Government's policy?

Well, clearly, in relation to public procurement, for which he was previously responsible as finance Minister, much of the direction of travel had already been set out, and you heard that in his statement to the Assembly back in September. But I think there is a real focus in the FM's manifesto around social enterprise, fair work, a much better contract with the private sector—a sort of social contract with the private sector—a much stronger emphasis on how we work together with other public bodies, as a sort of wider public service. And that, of course, suffuses everything that we're trying to do in respect of the foundational economy. We now have a deputy economy Minister, focusing very much on that element of the economic action plan, and I think there's a package of things, including where we go next with social partnership, that all feeds together, and where we, I think, need to provide a more holistic, rounded focus to all of those things, and we're looking at that now in the context of the programmes of work we have within Welsh Government. 

And, finally from me, before I bring in other Members, you mentioned in your paper that you provided further growing the involvement of Welsh. What do you expect this to mean for future procurement policy?

Well, I think there's a lot—I'll bring Jonathan in in a moment—in terms of the work that's going on right now, but we're still doing an awful lot with small and medium-sized enterprises. We're doing a lot to get people to come to us through the Sell2Wales website; numbers there have gone up quite substantially over the last few years. We're trying to get a much broader supplier base than we've had to date. There's quite a lot of evidence to suggest that that is starting to work. In relation to our NPS contracts, and what's left in the national procurement service pot, I think we've got quite a lot of evidence to suggest that partners, whether they're in the public sector buying element of the supply chain, or providers, see greater flexibility in the approach. We're not standing on people's shoulders, or sitting on their shoulders, saying, 'You must use these services.' We're working with partners to say, 'What's the best way for you to procure this service in the future?' If the NPS can help with that, we'll do so, and that has, in my view, at least partly led to the fact that the NPS spend has stayed up at about the £300 million mark, when you might reasonably have expected it to start to reduce. I don't know if you want to anything to that, Jonathan.

Just to say that, really, we've taken a—. In terms of the previous landscape review, that showed the landscape staying fairly constant for a little bit of time. So, what we've decided to do is take a more detailed look at the £6 billion, the spend, just to understand a bit more about where that specifically goes, where there are things that we buy that aren't necessarily supplied by suppliers in Wales, and to look to see what sort of things we can actually do in that regard. So, for example, in the Better Jobs work that Andrew mentioned previously, my colleague Simon identified the fact that protective clothing—. There were lots of distributors who provided that in Wales, but there weren't any manufacturers. So, he's undertaken some commercial interventions to actually look to see if we can actually set up a manufacturing hub in Wales, and proceedings are under way for that. 

So, in terms of the overall holistic approach, I think, in recognising some of the future generations commissioner's criticisms, or views, we've just decided to take a complete step back, articulate a little bit more maybe about where we want to go in terms of a vision and, at the moment, that vision is looking as though we want to very closely align procurement support to the priorities and policy objectives of the various organisations across Wales. So, we're working quite closely with colleagues in the Welsh Local Government Association, the NHS, and so forth, to articulate that, and then to maybe make these interventions, with a particular vision in mind.

14:00

And this is a pretty substantial culture change, in addition to the practical and hard-edged elements of doing procurement in a different way. But, basically, we are moving to a position where we are looking at a wider range of benefits being derived from public procurement, to characterise it and move away from concerns solely around cost savings. Although, that's a slightly unfair presentation, but a move away from that focus to something that looks not only at how we can use money most effectively and get value for money, but the wider benefits that that spend will bring in terms of community wealth building.

And if I may just add to that, the point I neglected to mention about Better Jobs was that it's a commercial intervention but it's actually being driven by an employment and skills agenda. So, the purpose is actually to create jobs, but we're using procurement to do that. So, we're looking to align the things that procurement can offer to these broader outcomes.

Thank you, Chair. We took evidence from a range of stakeholders back in November 2018, and while they were generally supportive of the direction of travel of Welsh Government, there was an overriding commonality of feeling that there'd been little communication about the detail of Welsh Government's plans or the way in which other public bodies would be engaged. And some of those stakeholders are the ones that you referred to there, Jonathan, like the WLGA and the NHS, which you said you're working with. So, my question is: what have you been doing before November 2018, and since then, to communicate with these key stakeholders and involve them in the next steps?

Shall I kick off with that, and then bring Jonathan in? I think it would be fair to say that, in November, we wouldn't have had a huge amount of contact. I think we would have been talking—Jonathan could pick this up—to WLGA and NHS colleagues more generally. But I think it's also true to say that, in the initial phases after the finance Minister's statement, we were making sure that staff were supported through the beginning of quite a significant change process and making sure that we were communicating clearly, internally, within Welsh Government what was needed as a result of the review. But, since then, a lot of work has gone on—some fairly substantial meetings with the local authorities, with the WLGA, with the NHS, and a range of other partners, and quite a big programme now of engagement going forward, as we work up the next phases of the review. We're also using other communication mechanisms—our newsletter and other bulletins—to get information out to colleagues.

I think, on the whole—well, actually, I think almost entirely—in my dealings with stakeholders, they are pleased with the direction of travel. We had the Council for Economic Development discuss some of the changes here,. They were very complimentary about the things that we were doing and proposing to do, and supportive of the direction of travel from an employer's perspective. I think we've had quite a lot of positive feedback from the public sector. Differences of view on some aspects—you'll never get complete uniformity of opinion, but I think, on the whole, the direction of travel has been well received.

I was going back through some of the evidence in respect of the WLGA and others, and I think the WLGA in their evidence to you in November included some of their contributions from earlier on in the review process, which were some of the things that we were seeking to address. But their most recent paper said very clearly that they were supportive of what we were trying to do.

Jonathan, can you add to that?

Yes. I think what I'd say is we have our regular means of communication and newsletters, which go out once a month, and they generally provide information on practical things that are going on. What we felt, though, in our reflection when the statement actually came out, and in conversations with the Future Generations Commissioner for Wales, was that, rather than simply tell people what we were actually doing, we wanted to actually engage with people and work with them to actually get them to help us to actually shape the solution. So, we've been quite minded to follow the Well-being of Future Generations (Wales) Act's five ways of working.

So, we looked at the spend levels and found that the WLGA, collectively, was the highest spender—£3.5 billion of the £6 billion. So, we basically engaged with them, and have been working with them since to really build on what came out of the review in terms of what they were looking for, to get an understanding of the problems, the issues that they actually have, in order to look at this long term to prevent things actually going wrong in terms of things that they generally expect. But also, in terms of the solutions that we're actually looking to provide, we were wary of previously being seen or of the perception of us coming up with something and then throwing it over the fence to the wider sector. So, in this regard, we've taken a more, 'Let's come and see, let's sit in a room with you, let's work up an understanding of what the problems are and what you want, and then let's come up with these shared, jointly owned solutions'.

So, as Andrew mentioned, we've had a couple of meetings with the WLGA now, we've met with the NHS, and then we have a broader programme of engagement, basically based on the regional fora that exist, over the next four or five months.

14:05

And the statistic that you gave there about the level of procurement spend of our local authorities shows just how vast their needs are, but also the potential as well. And I'm interested in some of the things you said earlier as a panel in terms of using procurement to create jobs, through Better Jobs Closer to Home, and also I believe that there's going to be a renewed focus on procurement through the Valleys taskforce agenda now. So, could you tell us a little bit more about how you're going to balance all those interests against the overall context of public procurement expenditure and the wider field as well, and why those choices have been taken?

Are you happy to pick those up?

The general point I'd make, as you pointed out, Ms Howells, is that Jonathan's figure speaks for itself—about 60 per cent of the money that goes through public procurement is spent by local authorities, so they are a very important player. I think if we are going to move into community wealth building, with its requirement to have anchor institutions and a range of other parties involved in changing the way that the economy works, and the way that the economy is owned in terms of a place, then local authorities are obviously key, but so, too, are other partners. The national health service would be part of that. We've got a wide number and range of public bodies out there, and this is a bit back to the point I was making about the First Minister's focus on a sort of public service for Wales, and how we go about maximising the opportunities within the public service to deliver our spend in a different way and generate these place-based outcomes.

I think one of the lessons we learned during the review and in our deliberations since is that some of the previous solutions and tools that were available were sort of designed to be one-size-fits-all, whereas, when you look across the sectors, it isn't one-size-fits-all, and different sectors have had different priorities previously. So, some of the tools we've had, for example the community benefit tool, the NHS didn't consider that to be as helpful as maybe it could have been, because that wasn't specifically their role. So, we've been quite conscious in coming up with our strategy going forward to have this strategy whereby it oversees the £6 billion spend that actually the public sector has at its disposal, and then undertaking a prioritisation exercise for all these various agendas that you actually mentioned. Because, what we've found is that many of them are actually interlinked anyway. So, for example, by delivering and taking forward some of the things in the Better Jobs pilots, we've also cut across or cross-referenced some of the stuff in the Valleys taskforce aspect of it.

And I think that what we're ultimately trying to do is have more of an understanding of the supply chain from the point at which somebody decides they need to buy something all the way through to buying it, but then also beyond that in terms of understanding who we're actually going to buy things from, how those suppliers treat their workforce, where those suppliers are actually based, what are the things that they actually need to buy in to produce these things, that sort of thing. I think what we realised is that we maybe lacked that level of understanding, but, in establishing that amount of detail, you can then see how we can actually deliver the broader outcomes of the organisations that we're working with through that more detailed understanding. Does that—? 

14:10

Yes, great. In fact, that leads me perfectly on to my final question in this session, which is that we took some evidence about the importance of listening to suppliers' perspectives as well within procurement, so I was wondering how you've been engaging with the business community and the existing NPS suppliers about all these changes, and what opportunities will they have to feed into things as you progress. 

Yes. In terms of the existing NPS suppliers, our communications have basically been around, 'We've had the written statement, we're working through the practical implications of that, and we will continue to engage with you through the usual contract management methodologies.' In terms of engaging with other suppliers—a broader range of suppliers—we haven't done that yet in terms of the actual review itself, but we have been actually engaging with supply communities as part of the work that we're actually undertaking anyway, and one of our specific focuses has been on the social enterprise community. Generally, when we say suppliers, it's the private sector suppliers, and they are organisations that have generally won a lot of public sector business.

But, in terms of our engagement with the social enterprise community, what they've told us is that we've tended to maybe assume that what they're doing at the moment is what they can do going forward, and so, when they do get opportunities to bid for work, which they've suggested they maybe hadn't, there's an assumption that they get those opportunities in an area they're already working on. But what they've said to us is, 'Well, if you talk to us before you even realise that you need to buy something and just say, "This is what we're trying to achieve, have you got any ideas?"' they can actually come up with solutions that maybe can help us, but also then it increases the scope of the opportunities that they may wish to get involved in.

So, for example, pilot 3 of the Better Jobs exercise involves an existing social enterprise that may be looking to move into a new area for itself. It previously remanufactured furniture; they're now looking to move into the remanufacturing of paint for us, and that's come through that dialogue. We've extended that dialogue through some of these initial engagements to the Wales Co-operative Centre so that we can actually capture the broader landscape out there. So, it's sort of by—. We're doing the work on the review, but we're also, by doing practical things, actually able to get this information out that we can actually feed into how we structure the strategy going forward. 

Thank you. I'm really pleased that you're engaging with social enterprises in that way as well. In fact, the evidence that you gave accorded very much with the evidence in my cross-party group on co-operatives and mutuals, where we were looking at procurement just last week. 

I do. In regard to the net portfolio, then, of procurement through the NHS you've referenced in terms of the fact that—not their core business obviously, or their raison d'etre—. Bearing in mind the whole policy direction within Welsh Government around fair work, social procurement, community benefit, how then are you mainstreaming it—if you can possibly do this briefly—in terms of that NHS shared services platform?

Do you mean how we—

Social procurement, the whole ethos around the economic contract, how are we doing that in a big player like the NHS? Because that is going to be fundamental to those local suppliers, the social enterprises that Vikki Howells has mentioned.

There are two elements to it, as I see it. The first is—. Well, three elements, actually, thinking it through. The first is getting the buy-in and the understanding of these organisations that we're trying to work in a different way now. We're trying work collaboratively. We're looking at this from an all-Wales perspective. And we do actually want to understand what your specific objectives and priorities are. So, that's the first thing.

The second thing then is almost breaking down the way in which these organisations undertake their procurement and providing the tools and interventions whereby they can actually apply these tools to certain stages of their processes to enable them to build in specific things that you referenced just now. So, for example, if you're doing a procurement exercise for something, if you're aware that these are the things that you need to incorporate into the exercise, there are key stages during that exercise at which you can actually do that. So, knowing what those stages are and actually being able to provide the organisations you're working with with the knowledge and the information to be able to do those at the right times—that's key to making it work. 

The third thing, though, is that—going back to the point I made earlier, it's recognising that different sectors will have different priorities and will have different parts to play in terms of how they contribute to society in Wales, I suppose, and suggesting that one sector implement something or prioritise something that maybe isn't necessarily their biggest priority is something that you have to recognise as maybe that's not the right thing to do. So, rather than, previously, where we may have said, 'Right, when you're doing it—this tender exercise—you need to do this', it's a case of, 'When you're doing this exercise, these are the priorities that we actually need to consider here, and let's look at which sector is best placed to deliver which specific priorities.' And, if we're looking at it globally, as Wales, in a procurement community, we'll be delivering all these various initiatives, but there will be clarity as to who, specifically, is delivering what, and how it all contributes to a whole.

Does that—?

14:15

If I may, there's a link here also to how we organise ourselves across Welsh Government—so, making sure that the policy drivers are joined up to reinforce the work that Jonathan and the team are doing. So, we have a new-ish—the last 16 months or so—cross-government delivery group for the economic action plan, which picks up a lot of what we're talking about today. And Marion and I have been talking about what we might need in future, in relation to fair work and picking up wider social procurement issues, in terms of the organisation of Welsh Government as a whole. So, what we're trying to get other partners to do we need to be leading the way on internally within Welsh Government.

We've had a plethora of reviews of procurement in the last 18 months or so, starting with the auditor general and the PAC, internal reviews of Government. The internal review wasn't intended to produce a report with implementation proposals, but you did then have a gateway review. The report—. I presume there was a report to Welsh Government, but that not's been published. We've received criticism from some of our stakeholders, not least the Welsh Local Government Association, and two specific concerns of WLGA were these:

'There were concerns that the review was unable to escape the pressures to assure the established roles for Welsh Government officials.'

So, in other words, the structure of the existing procurement service would remain pretty much the same. And, secondly:

'little confidence in the Welsh Government review process...widely expected that the Gateway Review will call a halt to the review'

that spawned it. So, I wonder if you can give us your reflections on those criticisms. Did the Welsh Government get the scope of your review wrong from the start? And has the review, as it turns out, told you anything that you didn't know anyway from the auditor general's reports?

There's a lot for me to go at there, so I'll get going and then I might ask Marion to pick up the threads. So, we originally said—and I've gone back to the terms and reference, because I think that it's helpful—

'The purpose of the review is to refocus the role of the National Procurement Service for Wales (NPS) and Value Wales within the Welsh Government.

It will develop organisational proposals for using the publics sector’s £6bn annual procurement spend'.

And that was the original task set. What the gateway review brought out, which I think we had probably instinctively come to the view on internally but it was helpful to have some external validation of that, was that refocusing the role of NPS and Value Wales was not going to be enough. So, we had heard, as you rightly pointed out, from the auditor general's reports, stakeholders' positions—we had quite a lot of feedback from stakeholders. But, actually, the procurement landscape has changed quite a bit—is changing. Policy around what we're trying to do with public money is also developing, and I think we got to a point, through the gateway review, which at the end of the day is merely an insurance mechanism to support the senior responsible owner in this case—'How is my review or my project doing? Is it going to deliver the things that it's meant to do to the timescales set out?' And it won't surprise you to learn that the gateway review gave us a red flag on that, partly in light of, as I say, what we've picked up, but also because the review, very frankly, drew from a whole range of people, including internal stakeholders, how they felt things were going.

So, to answer the point about, 'Is this not just about changing the deck chairs in the Welsh Government?', I think the answer to that is 'no'. The gateway review reinforced our own view that we were going to need to go wider with next steps with the review. All of that then dovetails with what Marion is leading for us around wider use of public money, so not just procurement, but also what we do with our work with the workforce, what we do around broader grant spend—a whole suite of things that we do with public money. And I think the gateway review process was helpful for us in saying, 'It will not be enough merely to refocus—you need to do more', and that has led to a set of outcomes, which includes refocusing the national contracting service back down to the core of things that we think would best be done at a national level, having much more regional and local involvement in spend in a number of key areas, and then moving towards this wider approach to how we use public money to generate local value and value in supply chains. And, as Marion puts it very ably—I'll paraphrase her and then she can explain it in rather better terms—we've got to be realistic. We haven't got vast numbers of big companies in Wales that would traditionally be considered tier 1 contractors for big programmes and projects, and, as Marion says, a lot of this mission is about growing our tier 2 and tier 3 supplier base in Wales to support stuff that's going on in public procurement in Wales and also opportunities elsewhere in the UK and beyond.

14:20

I fully accept that the scale of companies operating in Wales limits your scope in this respect, but—. I mean, what practical challenges has the review process thrown up that has informed your decisions about how it might be changed? The outcome that you're now taking forward—how have these challenges presented? What challenges have these presented for the Welsh Government as an employer?

Do you mean the gateway review or the review process generally?

Well, I think it's made us look again at how we're structured and how we're organised. There's a question about how the national service that's left at the end of this process should be set up, where it's based, precisely what it does, and so on. It has caused us to look again at how we treat procurement and contracting work across Welsh Government as a whole. Perhaps Marion would like to pick up on some of the wider review points.

I think—. The point about 'Did we get it wrong?', when we embarked on the review, we actually shared the terms of reference with all of the key stakeholders, and I think it was generally felt, yes, we need to look at the type of service that we want from that procurement service. Part way through the review, it became very clear that just simply refocusing the NPS was not the way to go, because when the National Procurement Service was established, stakeholders' priorities were different, and I think that, in the Brexit context generally, people were thinking, 'Actually, we want more from this; we want to be able to concentrate on the priorities that we have on a regional and a local basis.'

In terms of the wider review, I think that it was quite evident that people were generally saying that they wanted to be able to support their local businesses to be able to compete for contracts. And, in terms of how possible, plausible, that is in terms of the large infrastructure projects that public sectors are involved in and leading on, we discussed that, perhaps, potentially, we would look, as we move forward to this bigger, wider review of public funding, at how we support tier 2 and tier 3 businesses to be able to compete on this stage.

14:25

Obviously, I don't want to turn this into a Brexit debate, but, obviously, there will be new rules of some kind—assuming we ever do actually leave the EU—that will possibly give you greater flexibility in the way that the procurement service works. Are you factoring all that into the mix now, or are you just waiting to see what happens? 

Well, okay. On Brexit, there are a number of points. I think that the premise of this work originally, even though Brexit was in the background, was that there are flexibilities within the procurement system that we could be making more of anyway, irrespective of what happens on the point of leaving the European Union. I'm happy to explore those a bit further because they play a lot into the work that Jonathan's talking about and where Marion has been looking to steer the future debate around the outcome of the review. But, in hard terms, if you work on the basis of a 'deal' scenario for Brexit, we will carry on with the same set of rules and arrangements, pretty much, until a transition period ends and then, as you say, there'll be something for the future. We're bound in all this by our international commitments, not least through WTO requirements. We're members at a UK level, through our membership of the European Union, of the Government procurement agreement, which works with a number of WTO members to allow access to each other's contracting public procurement arrangements. That market is worth about £1.3 trillion a year. So, it's not something to be sneezed at.

If we end up in a 'no deal' situation, then we do have some headaches. We're still working away at a UK level, as you'll be aware, on free trade deals. Some of those will be piggybacking the arrangements that the EU currently has. Some of those have been agreed. Switzerland is the most obvious and important one to us, both at a UK level and, indeed, for Wales. Chile's another one and, I think, Israel and there are a couple of others. But there's quite a large number that are still to come through the system, and I know colleagues in UK Government are working hard on all that, but there's a level of risk around that, and we would not be members of the GPA arrangements on leaving. So, we would need to get that put in place pretty swiftly. And I think it's fair to say that the UK Government's approach, which, for the sake of managing this forthcoming period most successfully, I think, most devolved administrations would buy into, is to keep things pretty much as they are for now, even in a 'no deal' situation. So, you've got people familiar with the rules and you do what you can with domestic instruments to make the framework as similar as possible to the one that applies now with a view to changing it over time. 

Well, I'm very interested in that but I don't think this is the right time for me to follow that up in the context of this question session. Just to go back to what I was questioning on earlier on: how have you been communicating with staff who might be affected by the changes that will take place as a result of your review?

Well, immediately after the statement was made by the then finance Minister in September, we had a gathering of staff. The SRO—senior responsible owner—Dean Medcraft, for the review, took colleagues through that process. There's been a lot of engagement since, and I'll bring Jonathan in because he manages and leads that team, so he can talk about that. Helping staff through what is potentially a pretty significant change process has been close to our minds at a time of uncertainty anyway—back to Brexit again—and we have a team development day this week, Thursday, where we'll be picking up a number of these thoughts. The team have done remarkably well through this time of change to pursue both the points in the review—Jonathan can come on to that—but also in the way that they've engaged with taking forward procurement generally. I've been hugely impressed with what they're doing and the spirit with which they've gone at the review recommendations. Do you wish to say a bit more about the work and the category team's work and so on?

Yes, okay. It was important that the team who were directly affected by this were part of the solution. So, a couple of days after the written statement came out, we set up a process of regular engagement and communication with them. So, every week, I have a phone call with everybody, wherever they are in Wales, they can actually join in on that, and we set up a structure whereby we've got a couple of groups working on all this amongst the team, made up entirely of volunteers across the team. So, we've got a group of people working on the vision of where we want to get to and we've got a number of people working on the strands within that, so, the national frameworks, the policy-related tools that people want, and so forth. We've also got an insight group whereby the team volunteer to be part of this particular group, and if I say something on one of my weekly calls, or if I send something out in terms of my e-mails, if somebody doesn't like something or somebody's got an idea, they're actually able to feed those directly through to myself. So, we've got a developing strategy and solution that the team have (a) had the opportunity to be part of, but (b) have actually been driving a lot of that. So I think it's helped during an uncertain time for them that they've actually had that opportunity to be part of it. The next steps now, as I mentioned earlier, when we start to go out and talk to the wider community, the team will be doing that as well, so it won't just be me going out there, it'll be the people who specialise in the various areas, who know the customers out there, who will actually be taking all this forward.

14:30

Life is full of uncertainties anyway, but I agree that there's a massive perception generally that we're living in more uncertain times, perhaps, than most. Has that had any impact upon the recruitment and retention of staff in this area?

Yes, we haven't actually recruited anybody during this time, since the statement came out, but we have had a number of people actually leave and move on to other roles.

It is, but I think some of them have given the uncertainty as a reason for it. We specifically haven't replaced them, because we are looking at how the new structures will be going forward. At some point soon, if anybody else leaves, we'll have to look at that just to be able to maintain the continuity of the service to the customers.

My last question, then, is: because we haven't seen the results of your own internal reviews, we are, to use a familiar biblical phrase, looking through a glass darkly, so can you assure us that whatever pops out of the review finally is going to be an optimal solution, or at least you think it's going to be, rather than just protecting the interests of those who are in position at the minute and the established ways of doing things?

That's probably one for me to answer rather than you, Jonathan. From memory, the gateway review made about nine recommendations. Three or four that are most germane to what we're talking about today were reflected in the then Cabinet Secretary's statement back in September. The others were really more about the organisation and administration of the remainder of the review process. As I say, the review gave us a red flag on the project, so we needed to take attention. In other words, it's not going to deliver the stated objective, and we had a lot of internal discussion at the time about what that meant and how best to address that point. The basis on which gateway reviews are undertaken is one of confidentiality to the participants, and because they're a relatively small number of people it would be quite easy to identify who said what from the review. So, this is not one that we would propose to publish. But there isn't too much darkness to see through the glass, darkly or otherwise, in that regard, I can assure you.

The other thing I would say is, manifestly this isn't about protecting Welsh Government officials' position, because we're talking about a pretty fundamental change in how we go about things. There is no shortage of procurement-related jobs or jobs that require the sort of expertise that the teams have got across Welsh Government, particularly at the current time. Jonathan's lost a few from the team into wider Brexit work, to help us get ready for, as I say, either 'deal' or 'no deal', in addition to some who have left altogether. This is not about protecting a function or particular people in the set-up. We will explore different ways of managing the function as part of this follow-up to the review.

I was going to steer away from Brexit, but it is increasingly becoming part of core business in terms of the comments that you have made, and there is concern in terms of both domestic legislation at Westminster and here in terms of capacity around expertise in these matters, with increasingly what you're telling us, and what others are constantly saying, is that we're taking Paul away from Peter and we're struggling to find Peter to bring into that gap. So, my question really is, then: in terms of that need for extra capacity, where are we looking to for that extra capacity? 

14:35

Welsh Government as a whole is in the process of recruiting, on a short-term basis, some additional staff, not vast numbers—I think we'll be up to about 200 by the end of this financial year, so in the next couple of months, next six to eight weeks. And then there'll be employment checks for some of those, so we won't necessarily have all of those in by the end of March.

It's worth bearing in mind that a number of Whitehall departments have ramped up quite considerably, and I've talked about this before. I think DEFRA have about 2,700 staff working on all this stuff now. BEIS—the Department for Business, Energy and Industrial Strategy—have brought in an additional 700 staff to supplement the 500 internally who were working on all this. So, this gives you some sort of sense of the scale. 

So, my question, really—to be brief, because I need to move on—do we have what we need? 

So, I think for the core work that we're trying to do on procurement, whether that's in relation to legislation that has already been put through the system, or in terms of gearing ourselves up particularly for a 'no deal', we've got most of the building blocks in place. I don't wish to be complacent about that. We need, I think, to continue to do work with our major suppliers, and Julie Harrison who leads that work's done a lot in a very short space of time to get messages out to the wider public sector and to suppliers. But she and I were talking about it recently; there's more that we can and should be doing. There is a wider capacity and capability issue facing Welsh Government as a whole through all of this process. 

And then, separately, we're looking to get public services, and Welsh Government more generally, up to speed on commercial awareness. Your own report on Pinewood— 

I will come to that. So, in that regard, to just finish this little topic off, which is obviously of very great importance: how much have the wider external factors around Brexit, the need to reprioritise, the need to put people into different positions, how much has that affected this process and this gateway external review and the wider review, in terms of that eye on the ball? Because you can't sit there and say that it can't have impacted it.

I can't and wouldn't say that, and nor would I really be in a position to quantify and say we'd have made this much additional percentage of progress if we hadn't had Brexit. The team have worked very hard in the aftermath of the review, and indeed through the review process, to address the points that we've already touched on, and there's a lot of work going on at the moment. But people who would otherwise have been involved in this type of activity have been pulled off to work on Brexit. 

Yes, and not just on Brexit and procurement, but on Brexit more generally in terms of its impact on Welsh Government, and management time as well. I would guess about 80 per cent of my time at the moment is on Brexit-related stuff. 

Okay. Well, firstly, I welcome the co-constructive approach that you mentioned right at the start of this session and, obviously, we are in a very different place to where we were 10 years ago in terms of social or more social procurement, and things have moved on extensively in that regard. So, in regard to the new national policy development and the delivery function within this wider review, and the gateway review, which will operate separately from the smaller national contracting function, we hear that the Welsh Local Government Association's evidence suggests that local government heads of procurement were looking for one joint team, comprising a policy team and a contracting arm, and that their views had been listened to, which is very encouraging. So, for this particular question, can you clarify how those new central functions will be structured and managed, and how much buy-in there is for the proposed arrangements? And that would be also from local government. 

Our expectation, as we've already discussed, is that the National Procurement Service-type function will be smaller and limited to a smaller proportion of contracts, which are most definitely best managed at a national level on behalf of everybody. And that's done, basically, on the analysis of spend and working with partners. We might come on to this but from memory, Jonathan, it's energy, transport services, some specialist functions, things of that sort, where it's not really terribly sensible, or it's less advantageous for people to be doing that at a local and a regional level. On the practical elements, Jonathan, can you say a bit more?   

It's interesting. In terms of the way the review outcome and the bit that you mentioned is stated, it's focusing purely on Welsh Government—the new policy unit and the national contracting unit. But the approach that we're trying to take, talking to all the other sectors out there, is ultimately understanding that we're all part of a particular objective for Wales, and getting to understand who's best to contribute to certain things. So, from my perspective, whether a strategic unit or the national contracting unit are together or separate is a similar question to how we work with the Welsh Local Government Association, or how we work with the—

14:40

If they were to be separate, how would they work in an integrated fashion, or has that not been scoped yet?

We haven't scoped out the exact practicalities, but there are several ways of actually doing that. I think the first thing is to clarify specifically what the role of the national contracting unit is. Is it to put the contracts in place, or is it a bit more than that? And I think it will be likely that it will be more than that. We need to put the contracts in place in accordance with the outcomes that the wider sectors want, but also the policies and strategies that the central unit actually comes up with, because the policies that that unit will come up with will be for the whole of Wales, and then the national contracting unit will be expected to implement those for use by the whole of Wales. 

So, in regard to if that were to be the way forward in terms of smaller national contracting functions, and more of a shift to reflect the regional and local priorities, running throughout the whole of this, in terms of operability, if there is such a word, has been this concern around conflicts of interest. So, how would you tackle that big issue at the onset of the birth of our new service?

Okay. I think the simplest way to do that would be to just tackle the conflicts, or the perceived conflicts head on, to get clarity as to what those specific conflicts are. 

Because this has been the real issue in terms of local government-level procurement.

Ultimately, what we're talking about here is reducing the size of NPS to oversee a smaller number of national contracts and frameworks. Ultimately, it sort of doesn't matter who actually puts those contracts and frameworks in place if we're looking at an all-Wales perspective. The important issue is to understand, well, if it is to be their role, it's putting the parameters around that to make sure that there aren't any conflicts of interest. 

Okay. So, with concerns raised about the overall procurement capacity and capability in particular, is there any particular reason or a practical reason why the NHS Wales partnership—and I've sort of mentioned this before—couldn't take on a wider role to manage any future national contracts, bearing in mind its breadth and width and—?

'No' I think is the short answer. I don't want to put words into Jonathan's mouth, so I will let him respond, because he's intimately involved in thinking about how this best goes forward. But the point that we've been at pains to make through this process is to be clear about what we're trying to achieve, the objectives, and then to work out what best delivers that. The implication of Mr Hamilton's question from earlier on was that, in some senses, the review process could have been seen as, 'How do Welsh Government sort themselves out around these things?' The outcome of the review is not about that; the outcome of the review says we need to do this in a very different way across Wales, and we need to do that in a collaborative way.

The well-being of future generations Act requires us to embed the five ways of working, which does include being more collaborative and integrating the approach, and involving all of the users and participants in that process, among other things, and taking a whole-life, long-term preventative perspective on those things. If, as a result of putting everything through that assessment and looking at spend, the best outcome is that that function could sit with the NHS partnership side, then, okay, that's a potential outcome, and there are others. I think we've got to be realistic, though, and if I may let Jonathan come in, about the pace of change. I think, while we're going through a significant change, and with Brexit and everything else, and I think customers' desire, or users' desire, not to see us throw everything up in the air right now, the expectation is that NPS, as a Welsh Government function, will continue like that for the time being, but we will be looking to design new arrangements. Is that fair?

Yes. Theoretically, there isn't a reason. I think—

14:45

Yes. I think one of the previous challenges was that when NPS was undertaking national and regional, it was the fact that the NHS and local government had different regions, or they operated in different areas. So, it was quite difficult in practical terms. But theoretically, yes.

Okay. In terms of supplier engagement, how important is it to have a clear national contract and presence for the Welsh public sector? I'm sure that's—[Inaudible.].

It is very important. There are two things. One is that the supply community, whether they're big or small, understand how things operate, and who to contact, if they want to engage with the wider sector.

Okay. So I'm presuming that, obviously, underneath that definitive, 'we all agree' answer, that is a massive cultural change as well, as well as the operational issue underpinning how that then moves forward— 

—and I'm sure we'll come to that at a different time and date. In terms of the WLGA's evidence, it reflected a concern that the Welsh Government was looking to control regional procurement in the revised arrangement, and a view that this regional component would be best led, as we've stated previously, by local government. So, how do you see the plans for regional collaboration—we have touched on this—and local procurement actually working in practice, or is that a long-term vision?

In simple terms, we're sitting in the room with the WLGA and talking this through. And we've agreed that we're going to work it out together.

This is not about us controlling what happens at the regional level.

So, really, we're talking about a co-constructive approach, and a social partnership model.

Okay, thank you. And lastly, how confident are you, then, that the organisations across the different sectors will be able to come together successfully—we have touched upon this on a regional basis, but this has been a highly contentious issue for some time—to support collaborative arrangements, in the context of ongoing differences in local priorities and capabilities and tensions?

I think it goes back to the earlier question around how confident we are that this is going to be the optimal solution. And I think, ultimately, because we are looking to have a solution that we all put together, so we've got joint ownership in the new strategy, in the solution, that's ultimately the way that we can actually be confident that we have this—well, be confident that we have a system in place that everybody has a certain degree of ownership of, and everybody has a responsibility.

Okay, so that's the approach—and I'll cut through, because I know that we've got a packed session. I accept that totally, but in terms of the tensions that we have, around austerity, ongoing austerity, and the huge issues around Brexit, in terms of the unknown and what we know is going to be more costly, for all public sector agencies, what sort of timeline have you attached to this now, in terms of our new way forward? Because it's never more important that we—[Inaudible.]

This is a series of stages, isn't it?

And we're not about imposing, you know, 'It shall be done by this time', if that then means that we don't get the buy-in or the engagement that we require to make this a truly collaborative and co-designed process. But we have, nevertheless, with colleagues, set out a timetable.

Yes. The plan is to have the clarity on the service to be provided by Welsh Government by the end of March, to inform the new structures to take things forward, and then to have a draft strategy, which we will have designed with our various partner organisations, by early summer, to actually take out to a wider consultation. There are things that are in train at the moment, like the Better Jobs stuff and so forth—those will continue in parallel.

Jest eisiau mynd nôl at y cwestiwn blaenorol—y cwestiwn y dechreuoch chi ag e, Gadeirydd—ynglŷn â thystiolaeth y Llywodraeth. Mae'n dweud yn Saesneg: 

I just want to go back to a previous question—which you started with, Chair—on the Government's evidence. It states in English: 

'further growing the involvement of Welsh'.

A dyna beth oedd eich cwestiwn chi. Ond dwi'n cymryd nad yr iaith Gymraeg rŷch chi'n cyfeirio ati yn y submission Saesneg. Mae yna air ar goll, oes?

And that's what your question was. But I take it that it's not the Welsh language you're referring to in the evidence—in the English submission. There is a word missing, is there?

14:50

I think that's correct. There is a word missing. It's about Welsh supplier engagement—or two words, to be accurate. Apologies for that.

Mae'n iawn. Jest yn gyffredinol, fyddech chi’n dweud, ar sail yr adolygiad dŷch chi wedi ei wneud a’r pethau dŷch chi wedi eu dweud heddiw, yn y bôn, mi oedd y gwasanaeth caffael cenedlaethol yn syniad da a gafodd ei weithredu’n wael?

That's okay. Just in general, would you say, on the basis of the review that you've undertaken and what you've said today, essentially, the NPS was a good idea that was implemented badly?

I think it was a good idea. I think the world has moved on. So, it's a moving target to hit. I think we got a number of things wrong about our assessments about how quickly we would get take-up of frameworks, how much money they would deliver, we hadn't got to a point where NPS was self-funding, and I made a number of these points when we met last year. But the notion that you might want to do a number of these things at the national level I think still holds true and is certainly one of the findings of the review process. And we will learn lessons from the experience to date, as well as from elsewhere, in driving things forward from hereon in. So, you know, there are elements of things that we could have done better, there were elements around circumstances changing, and I think there were expectations set at the outset that haven't quite been fulfilled as originally envisaged.

Sut ŷch chi’n mynd i osgoi’r math yna o ffenomenon yn digwydd eto ymhen pum mlynedd? Hynny yw, ein bod ni’n cael sesiwn arall yn debyg i hyn a’ch bod chi’n dweud rhywbeth tebyg. Hynny yw, roedd y syniad, yn ei hanfod, beth bynnag yw’r trefniadau newydd, yn dda. Mae’r byd wedi newid a wnaethon ni ddim ffactora i mewn nifer o bethau, a dyna pam wnaethon ni fethu.

How are you going to avoid that kind of phenomenon happening again in five years' time? Namely, that we have another session, similar to this, and that you say something similar. That is, the idea, essentially, whatever the new arrangements, was good. The world has changed and we didn't factor in a number of things, and that's why we failed.

Well, it’s worth pointing—you know, I should say it’s not a question of pointing out; it’s remembering, isn’t it? Because we've had these discussions before, and this was about a voluntary arrangement into which a whole range of people were meant to engage. And we were able to go at the pace, to some extent, that partners wanted to go at. This wasn’t Welsh Government just providing a service and just people in a kind of ritualistic sense brought into it; they had to see the value from it. I think we’ve acknowledged in previous sessions that relationships weren’t quite as good along the way as they might have been. We’ve done quite a bit of work around improving those.

I think the fact that NPS has gone, certainly in the last 12 months, for a more 'We’ll help you realise why it would be beneficial to opt in, rather than you’ve got to tell us what you wish to opt out' approach—if I could characterise it like that—has borne dividends, back to the point I was making about the amount of money that’s gone through the framework programme over this last 12 months. You could reasonably have expected it in the light of the review to have gone down. In fact, it’s gone up slightly, and we expect it’ll go up a bit further by the end of this financial year.

So, I don’t think the fundamentals were wrong, but whatever we design for the future—it’s back to Jonathan’s point—we’ve got to be very clear what we’re trying to get in terms of objectives and the outcome of the process. That’s then got to drive the model, and partners have got to buy into it. We don’t wish to impose it on people; it’s got to be something that works for people, that they will buy into in every sense of that term.

Er, wrth gwrs, eich bod chi'n dal yn mynd drwy'r broses o weithio mas, yn ôl beth ŷch chi wedi ei rannu â ni heddiw, yn union sut mae’r gyfundrefn newydd yn mynd i weithio, bydd yna rai elfennau yn trosglwyddo drosodd i’r gyfundrefn newydd, yr uned ganolog lai yma, ond bydd yna rai pethau fydd ddim, achos byddwch chi ddim yn delifro nhw yn y ffordd yna. Wrth asesu, wrth roi cyngor ar y penderfyniad yna a wnaethpwyd yn y diwedd, sef i ddileu’r gwasanaeth caffael cenedlaethol, un o’r pethau y buasech chi wedi edrych arno fe ydy’r sunk costs, onid e? Hynny yw, yr holl waith a oedd wedi cael ei wneud wrth ei greu e yn y lle cyntaf, ei gynnal e ac yn y blaen. Ydych chi’n gallu rhannu’r ffigur yna â ni a oedd wedi ei gynnwys yn y cyngor? Hynny yw, y buddsoddiad sydd wedi bod sydd yn mynd i gael ei golli, mewn ffordd, onid e, oherwydd eich bod chi yn cael gwared arno fe?

Even though you're going through the process of trying to work out, from what you shared with us today, exactly how the new regime is going to work, there will be some elements transferring over to the new system, this smaller central unit, but there will be some things that won't, because you won't be delivering them in that way. In assessing, in providing advice on the decision that was ultimately made, which was to get rid of the NPS, one of the things that you would have looked at would have been the sunk costs, wouldn't it? You know, all the work that had been done in creating it in the first place, to maintain it and so forth. Can you share that figure with us—the figure that was included in the advice? That is, the investment that has been and which is going to be lost, in a way, because you're getting rid of it.

There are a number of potential answers to that question. We haven't got a sort of shiny NPS headquarters building and things of that sort. It's a relatively small function overall. I don't know, perhaps we shouldn't ask colleagues how they view their current accommodation arrangements. The short answer to your question, which is a very good one, is that I don't have a figure for you here today, and that, with the Chair's permission, might be something I'd go and have a look at. There are lots of components to that: there are capital costs associated with IT and buildings and facilities and so on, there'll be staff costs and so on. But I don't think that the learning that we've got is lost, and indeed many of the people who've been involved in developing the NPS are actively involved in the process of taking it forward into its next iteration. 

14:55

A jest i aralleirio'r cwestiwn mewn ffordd, ond gan edrych ymlaen, oes gyda chi ffigur ar gyfer y gost o greu'r strwythur newydd?  

And just to reword the question in a way, but, looking forward, do you have a figure for the cost of creating the new structure, then? 

No, because it hasn't been designed yet. If it's a matter of Welsh Government expenditure as distinct from others coming in and supporting the process financially, it'll have to managed within the budget that we have available, the current envelope. There isn't new money for that. But I don't think we're expecting there to be vast costs associated with this. There's work going on in relation to the staffing dimension, and there's work going on in relation to how we can support collaboration across the various different partners, but there aren't major costs otherwise associated with this change. 

Beth bynnag yw'r gost, rŷch chi newydd grybwyll a dweud y gwir, bydd e'n cael ei ariannu drwy'r un ffynonellau a oedd yn ariannu'r gwasanaeth cyfredol—y Gwasanaeth Caffael Cenedlaethol, ie? Bydd e'n cael ei ariannu trwy'r un ffynonellau. A fyddech chi'n ceisio dibynnu ar incwm drwy ad-daliad—y rebate, felly? Fydd hwnna'n elfen o'r ariannu rŷch chi'n disgwyl ar gyfer y gwasanaeth ar ei newydd wedd? 

Whatever the cost, you've just mentioned, really, it will be funded through the same sources that were funding the current service—the NPS. It will be funded through the same channels. Would you be seeking to rely on income through the rebate? Will that be an element of the funding that you expect for the service in its new guise? 

I don't know whether it's true of all buying organisations. Jonathan will probably know better than i do, but most operate on some sort of levy-based system, whether that's the Scottish model or the one operated by the Eastern Shires Purchasing Organisation or Yorkshire's or any of the others, including the Crown Commercial Service. So, that will be in the mix for the future, but we're in the process of talking through financial models for the new arrangements as part of these discussions. 

Rŷch chi, wrth gwrs, yn pwysleisio bydd y swyddogaeth ganolog newydd yma yn llai. Pa mor fach ŷm ni'n sôn amdano? Hynny yw, faint yn llai bydd e o'i gymharu â'r gwasanaeth presennol, o ran y tîm?    

Of course, you're emphasising that the new central function will be smaller. How small are we talking about? How much smaller will it be, comparing it with the current system, in terms of the team? 

At the moment, we have about 60 contract frameworks running through NPS. 

And we reckon it will be about half that. Do you want to say a bit more? 

As I mentioned, we've been working with the WLGA and the NHS to understand what they need and to identify the most appropriate national contracts or frameworks and, at the moment, we're looking at between 25 and 33 of those, instead of the 64 that we've currently got at the moment. We just need to engage with some of the other users of those frameworks to confirm that but, yes, we are looking at about half. 

Wrth feddwl wedyn am yr hyn rŷch chi'n argymell o ran y berthynas a defnyddio Gwasanaeth Masnachol y Goron neu sefydliadau prynu cyhoeddus eraill, hynny yw, bod hwn yn opsiwn amgen—alternative—o gymharu â defnyddio'r swyddogaeth genedlaethol ganolog, sut ŷch chi yn mynd i benderfynu beth sydd yn addas ar gyfer prynu cenedlaethol Cymreig drwy eich strwythur chi—y strwythur newydd—o gymharu gyda defnyddio'r rhwydweithiau eraill yma sy'n bodoli neu brynu ar lefel lleol neu ranbarthol ar sail gydweithredol? 

Thinking then about what you recommend in terms of the relationship and using the Crown Commercial Service or other public buying organisations, namely that this is an alternative option in comparison with using the national central function, how are you going to decide what is suitable for national purchasing in Wales through your structure—the new structure—in comparison with using these other networks that exist, or purchasing on a local or regional level on a collaborative basis?

Well, this is largely done on an analysis of spend, and then conversations with our stakeholders. But do you want to say a bit more about that process? 

Yes. I think we're working on criteria to make those decisions based on the spend and, for example, just some of the things that we've actually got at the moment are: is there a Welsh supply base? What's the commonality of the goods or the service across the various sectors—the NHS and the WLGA? What are the opportunities to support the future generations Act and other specific Welsh priorities? We have met with, say, Crown Commercial over in England to have initial discussions. Our previous relationships with them—. We've focused on whether we're able to actually get the benefits specifically under the future generations Act in Wales through using some of their frameworks, and recent discussions with them have been positive, in that they doni't have the future generations Act, but they've got the Public Services (Social Value) Act 2012, so there is scope to work with them, going forward. I think our focus is understanding what we are trying to achieve, what's best for us in Wales and then to identify the optimal way of achieving that, and that might be through our own arrangements or it may be through CCS. But I suppose the aim is to have a means of identifying the quickest route to delivering the best benefits for Wales quite quickly.

15:00

Just going back to where I started, really, and I wonder whether—. We were talking about Natural Resources Wales recently, of course, and that was a new organisation that was created at the same time, I think, pretty much, as NPS. A very different context, of course, but you can see where I'm going with this. Is there a danger that we are getting a reputation for creating new organisations where—. There was wide consensus at the time of the creation of NPS that this was a great opportunity to innovate. Implementation is poor, there are issues about—I suppose it's almost a systems-level problem when you have many moving parts, particularly in this case; some of those moving parts, of course, you don't control directly. So, I'm not sure how much you can say about this, but is there a reflection that creating new bodies with new purposes—? I mean doing one or the other is difficult enough, but doing both at the same time—tasking a new body to transform procurement, which was really the task—that's a tough ask, and we haven't, so far, proven very, very good at this kind of thing, have we?

There are certainly lessons to be learned from both organisations. As you say, their genesis was quite different, and the underlying policy philosophy, although trying to do this in a more joined-up way, in each case, for Wales was at the heart of it, and in other respects, they're quite different disciplines.

I suppose it's worth bearing in mind that there have been a number of other bodies created along the way as well and, no doubt, you wish to review those at some point too. We've got two examples there, but there are a number of others. You're right—

The purpose of this afternoon's session is not to put to world to rights with every single organisation ever created in Wales. I think you'll probably need to diverge slightly.

I do think, because—there is an important point here, because I remember the press releases at the time. The Minister, of course, is now back in Government, but she's not here to respond to that, so it would be unfair to drive that further. But is there a higher level of reflection, not just about the substantive content, but what it tells us at a deeper level about the difficulty of systems change or really transformational change? Because it had high hopes as you said, and it hasn't really delivered them. So, is at least that question also being asked in this particular case, or don't you think it arises here?

Any institutional change is likely to be complex, and, as you say, have lots of moving parts. I think that's a very fair analysis. And it will be challenging. Some of the NRW issues that you referred back to are quite specific about a particular area of the business, but others, in terms of organisational design—they have wider resonance. If PAC wants to consider some of the cross-organisational points brought out from these recent experiences—because you've taken a lot of evidence over the course of the last couple of years, as a committee—I think that would be helpful and we would value that. We try and learn from everything that we do. Where we have all the levers, it's obviously easier, self-evidently, to direct the outcome. Where we're working with partners or others, that is more tricky; we have less control. And the other thing to say is that the relationships, then, between Welsh Government and those arm's-length bodies or those other institutions also need to be looked at. That's also part of the governance arrangements that obtained—

15:05

The committee may well decide to look towards the end of this Assembly at more of a cross-cutting inquiry, looking at lessons that could be learnt from the organisations that Adam mentioned and, obviously, yourself. So, great minds think alike. Had you finished, Adam? 

Just going back to the first couple of questions that Adam Price asked, you mentioned that you didn't think that the new way of doing things would have major costs, but there would surely be some sort of costs involved in the approach you're taking, so what sort of scale would those costs be? 

There may be some costs, but Jonathan and I were talking about it; I don't think they're very significant. If we were going to embark on wholesale new IT systems and to try and do that at a national level, then that would have a cost, which we haven't got factored into the budget, but right now, in the context of this change, that's not what we're talking about.

Because you did say that although there had been big issues with NPS, there are certain things that you would still seek to do on a national-type level.

Yes, and just in this last year, with NPS's financial position, we've done a range of things, haven't we? We've cut back on things that were adding less value, we've gone after suppliers to make sure that things that were going to be done are followed up on. So, we're capturing all of that spend and the value there. We've made some of the processes more efficient again, and all of that has added to our learning about how you do this in a more efficient and effective way.

Thank you very much, and thank you for coming here, telling us all these things regarding procurement, which is actually a backbone of the economy and prosperity of a country—a very important portfolio, I've been learning. You mentioned these national, regional and local issue areas, but never mentioned international. We're only 70 miles from Ireland. In certain areas, especially agriculture and marine and a couple of areas that are very close, it may be be very economical. I know you mentioned earlier that Brexit might affect you and that your one hand is tied for the different areas, so after Brexit, is there a favoured nation status you could gain and get some benefit for the nation?

There's a lot that we are doing with partners, and at UK Government level, lots of conversations are going on with other countries, as you would hope and expect. I think we do quite a bit of work on procurement across the islands of Great Britain and Ireland, and I think I'm right in saying that the Procurex brand, which is one of the conferences that bring together procurement professionals—there's an Ireland component of that, which I think brings thinking together from Northern Ireland and the Republic to address that particular point. But how we will fetch up on the final Brexit negotiations endgame—I think it would be foolish for me to speculate on that.

Now, a couple of questions regarding the procurement strategy and policy, as you were just saying. The review revealed the need for an in-depth examination of how we use public funding to build economic growth. What more can you tell us about plans for that in-depth examination, both what it means in practice and timescale, and for the work to inform a new procurement strategy and policy for Wales?

I think there are probably two elements to that, which we might just spend a minute or two unpacking, and I'll bring Marion in on some of this. One is what we do in response to the then Cabinet Secretary for Finance's statement in September on driving forward the review of NPS and Value Wales, and that's definitely bound up in the work that Jonathan was describing: that we're going to try and come up with a shared new procurement strategy, in draft at least, for wider consultation by the early summer. There's then, as you pointed out, this wider look at how we use public funding, on which Marion's been spending quite a bit of time and thought. Do you want to talk a bit more about what we're doing with the Centre for Local Economic Strategies?

15:10

Yes. The in-depth examination goes wider than the work that we've been doing around procurement. We're seeking to explore with the key decision makers across the public sector how we work collaboratively to be able to look at using public funding, and I think that we'll probably draw upon work that's already taken place around Better Jobs Closer to Home, the code of ethical employment in the supply chain, and then building on the new plans that the Government has around plans for the foundational economy, around the recommendations of the Fair Work Commission and the plans around how do we deliver all of this through social partnership. Now, key to that will be buy-in from the public sector, and all of this needs to be put into the context of what happens around Brexit. The timelines in terms of when we take that forward—we're working on it and working across Welsh Government to bring all of the parts together that will deliver it and will help us to work collaboratively to deliver this, but I think it's highly dependent on what happens over the course of the next few weeks and what the Fair Work Commission say in terms of how we take this forward.

Thank you. The future generations commissioner has referred in her evidence to the approach in Preston, which has seen local spending increase by £200 million over six years. How is the Welsh Government taking work forward to learn from this example here?

Do you want to pick that up? There are a number of places as well—Preston is a prime example. Now, they've gone from about 5 per cent of local spend six years ago with local suppliers to about 18 per cent over that six-year period. There's a bit of a comparison there in terms of our experience here in Wales, where I mentioned earlier that we'd gone from the mid 1990s—I can't remember exactly the date—where we were at about 35 per cent Welsh-based suppliers to 52 per cent now. So, we've been on a similar journey. There's a lot that we can learn from Preston, but other places as well.

Yes. We looked at what was happening in Europe. Andrew's already mentioned Manchester. Key to all of this will be the advice that we hope to be able to take from CLES, which is the Centre for Local Economic Strategies. They did some work with Preston. I think they're renowned experts in this field—

I think the future generations commissioner put us in touch with them.

Yes. Also, taking this forward, we will want to draw upon the advice the fair work commissioner—sorry, the future generations commissioner—has given us, and we'll ask her to be a key part in all of this in terms of how we deliver the well-being goals.

There has been concern about the absence of any coverage of e-procurement as part of the review and calls for a collaborative digital procurement strategy. There are also concerns that certain central support systems were reaching the end of current contractual arrangements. What e-procurement services were provided through these contractual arrangements, and what has been done to address any gaps if these contracts have now ended?

We talked a bit about e-procurement last March, didn't we, and concerns expressed by some stakeholders about the contracts coming to an end. Welsh Government's been funding e-procurement work for about 12 years now—something of that sort. We've had the odd extension along the way, but I think at the moment the plan is to bring most of our support contracts to an end next March, March 2020. However, we are working with partners to make sure that systems upon which they are reliant can continue. There's a slightly separate discussion about who funds those, because, at the moment, I don't have budget for that, but that will be something I think that's swept up in the wider review work.

There are a number of packages of IT systems that are in the mix there. Some, I think, are valued more than others by partners. Some would not represent now best in class for 2019 in terms of things that are available, and digital access has improved and our expectation about what digital access can provide has increased over the course of the last few months, and I'm not sure all of these packages would necessarily—or systems—would necessarily meet those criteria. So, I think we would want to be very cautious about signing up to repeated extensions that we were funding of these older systems. But I think we're working with—is it Gartner—the IT specialists, on what might be needed for the future as part of our strategy. Is that a fair—?

15:15

Just before you go on, Oscar, I think we've missed out some of—. Rhianon Passmore had a couple of questions on the previous section, so I'll just bring Rhianon in.

If that's okay. Briefly, then, in that regard. But, before I do, in regard to the Centre for Local Economic Strategies, if it's predicated on our work with them, the whole—making a cohesive whole of the many different elements within Better Jobs Closer to Home, the economic action plan—I won't go through a massive list, but there are many, many different initiatives within this bundle that will have a very similar outcome, if implemented correctly. So, how much of that in-depth study in terms of the usefulness and effectivity of public spend is going to be predicated on your work with the Centre for Local Economic Strategies? Because, surely, we have enough there already, enough meat on the bones, to be able to say, 'Well, we know where we're going: we want more social procurement, we want social partnership, we want to grow our own jobs.' Do you really, really need to not join up those dots a little bit more quickly?

Well, I was going to say, we don't need to wait for CLES to help us with that, but they are acknowledged experts and they are bringing quite a lot to the party in terms of their understanding about how you grow things.

Yes. It's probably more important, in some senses, going back to that institutional stuff we were talking about a few minutes ago, about making sure that we're joined up across the whole of Government. And I think there is an onus on us within Government to do this in a different, in a more integrated way, just as there is on partners out on the ground.

Okay. I'm just conscious that this is absolutely essential to our policy direction, and it's about bringing that together in one bundle. So, in terms of timescales, again, what are we waiting for on that? In terms of that wider, in-depth understanding of—?

No, go on, Marion. It's partly back to Marion's point about how much can we be clear about the lie of—. So, there are certain things that we can, and should, be doing, as you say, because the evidence tells us that and because there are opportunities already. And then I think some of it is a bit about where we end up after Brexit—deal, 'no deal'; they're quite different outcomes on us, and the imperatives may, certainly in terms of focus or extent, well change a bit.

Okay. Sorry to labour the point. So, in terms of the work with the Centre for Local Economic Strategies, what are we waiting for from them? What is it we're working on them with and for?

Well, currently, they're supporting Jonathan in terms of looking at the pilots.

Yes. The work that I will be leading on is drawing upon the expertise in terms of how do you use public land, public assets, it's looking at how do you engage with businesses in terms of making them more inclusive, it's the sort of lessons that they're expert—

Workforce issues. They have the expertise we're going to be drawing on in terms of the advice, but, in terms of making this happen and crossing the t's and joining the dots, we'll be heavily reliant upon working with the public sector, the wider public sector, across Wales.

In terms of stuff we're doing, they're helping us with a small part of what we're actually doing.

Okay. Okay. So, your description of the First Minister's manifesto suggests that there are flexibilities in procurement rules—we've touched upon these—that are not currently being taken advantage of. So, could you just extrapolate a little on where you feel that—?

There are examples across Wales of some of these things being used, but probably not in a consistent or a joined-up enough way. So, one of the things is: do you do whole-life costing for the service or the goods that you're providing? That can change the nature of the assessment of value for money. Do we take account of companies having breached, for example, employment laws or environmental laws as part of their contractual arrangements? Sometimes we do, sometimes we don't. If the company can come back and demonstrate that they have taken really significant action in response to a previous breach—either because they didn't understand the situation properly and they've now addressed that—that's fair, but we are allowed to take that into account in our contract awarding.

It does in places, but not in a wholly consistent way or a systemic way. There's something about working with supported companies, certain types of social enterprise, companies that employ people with disabilities, where, again, we do some of that across Wales, but probably not enough in a meaningful and joined-up way. And then how we choose to describe the socio-environmental factors that underpin the value of a contract is also something that—although the legislation gives you the bones of that, it doesn't flesh it out, and within reason it is open to us to interpret those in a more rounded way, consistent with our well-being obligations. 

In doing all of these things you have to be mindful of the legal position and making sure that you're not in breach of some of those wider WTO requirements that, among other things, include the requirement to be open and transparent about what we're doing, and to put things out to competitive tender. 

15:20

Okay. Finally, what constraints do current procurement rules present for the ambition to use procurement to drive up community wealth building, so, as we said earlier, in terms of preferentially—bad word to use—contracting to local suppliers in terms of social benefit?

Well, you have to be very—. It's back to this point about fair and open and transparent competition. You've got to be very careful not to get to a position where you're not meeting those requirements. I was talking to someone the other day who said, and I completely understand why, that it was a travesty that we weren't giving Welsh contracts to Welsh companies in all circumstances, and I just invited the individual to say if he'd ever tendered for anything in England, and he said, 'Oh, I do a lot of work in England', so I said, 'Would you like the English authorities to take a similar approach in respect of your business?' and he wasn't very keen on that as an outcome. So, there are some obvious reasons why we need to be careful about that.

And Ms Passmore's question about constraints—are we aware of other things that hold us back?

Local businesses will say that it's too complex—the whole approach to being able to tender—

Complexity, I think, is definitely—. Yes.

—for Welsh Government work is just something that they feel is not on their agenda. There are some very easy, simple, hand-holding things that can be done to make it more simplistic, and also in terms of, if those contracts are large or if they're tiny, you know, how we break those up, and I think there are many things that we can do. But you don't feel that there are any constraints. 

Well, the legislation doesn't allow you to favour local suppliers, but I think that public bodies may be being a bit risk averse in terms of pushing the boundaries of what you can and can't do. I think there are significant opportunities for us to provide more opportunities going forward in a systemic way—

I think a lot can be done without legislative change, but it would be something that we would look at in the context of Brexit. Back to Mr Hamilton's point—if there are ways of making things simpler and more straightforward, and that includes our legislative base for that work, then we should be looking at those things. 

If you look—[Interruption.]—at, say, the Preston example—sorry.

They have achieved things within the existing legislation, maybe by pushing a bit. They've used the Public Services (Social Value) Act 2012 in England to actually pursue what they wanted to do, but, theoretically, you could do that anyway. You just have to have the risk appetite. 

Okay. We're into the last 10 minutes or so, so, if Members can be succinct in their answers, that would be helpful. Vikki Howells. 

Thank you, Chair. Isn't it true that we could have the most amazing ideas here in the Cardiff Bay bubble about how we tap procurement potential, and we could have the best business breakfasts talking about it, we could have the greatest ideas being put forward by Welsh Government, but unless we address the absolute dearth of talent and capacity and capability within the procurement profession in the public sector, we're unlikely to be able to realise our very noble goals?

I think there are a number of things at stake here. The First Minister made it very clear in his manifesto, and has done since, that we need to raise the game in terms of procurement capability across the public service more generally. So, I think there is something about our procurement professionals, and here the issue for colleagues on the procurement side is addressing this wider agenda about how you use public spending to achieve a multiple set of outcomes. That's partly a cultural shift, but also this stuff's quite difficult to do. So, it's more tricky than saying, 'These are the steps you need to follow in order to ensure you drive out the saving at the bottom of the process'. So, we need to support and underpin that work, we need to support and underpin what we are doing on digital generally. We need to support and underpin work on due diligence and financial assessments of data before colleagues enter into contractual agreements. But I think there's a wider thing for the public service as a whole, so it's not just about focusing on the procurement professionals, but it's about getting the wider public service better geared up to the agenda we've been talking about for the last hour or so, and the systems in place to support that, and also making public service colleagues more commercially savvy, better able to use financial information for these sorts of things, better at contract management, and better able to understand what drives public value.   

15:25

So, very briefly, then, does that mean that you're not concerned that we haven't got enough procurement specialists in the public sector—you think that the numbers there are just fine? 

No, I wouldn't say that. We had some correspondence, I think last year, about ratios of procurement professionals to amounts of public spending. It depends whose ratio you use as to whether Wales is in a decent position on that or not. We need more procurement professionals. Again, the First Minister said that. We need more people who are capable of doing this sort of work more generally, and I think that that is important not just for us as a Welsh Government in terms of our operations, but for the wider public service. But we also need the people that they are engaging with within the public sector to be more switched on to these things, too.    

Okay, so very, very, briefly, any chance of a successor programme to Home Grown Talent? 

We're talking about that at the moment, and it has to be balanced against cost and various other things that are priorities for us, too. But we are conscious that it's some years since that programme came to an end. 

Thanks, Vikki. Oscar, did you have one brief question? I think the digital questions have been asked. 

Thank you very much, Chair. The last one, probably. What are the key Brexit-related risks and opportunities that you have identified for public procurement, and how is the Welsh Government responding to them alongside work to implement the outcome from the review?

I think, in respect of Brexit, there are two sets of issues, some of which takes me back to what I was discussing with Mr Hamilton. So, one is around the new landscape outside the European Union, whether that's with a deal or without a deal, and the latter is a much more challenging set of prospects, because it requires agreements to be brokered with a number of others, including the European Union down the track, because it would be some time, I think, in a 'no deal' scenario before we were operating effectively transboundary at that level. I've described some of the work that's under way here in Wales and also with UK Government. 

The other area, then, is contingency planning for people who are, for want of a better term, in mid flight at the point at which we leave. Again, if it's with a deal, it's relatively straightforward. If it's no deal, then we'll need to get out there and reassure people about the rules as far as possible. We'll try to make it, both at UK level and in the work we're doing here, as similar to the current system as possible and to have the legislative underpinnings for that while we work our way through this process.  

We've done a lot of risk assessment work on live contracts, live procurement exercises and so on, and most of them are not affected or are unlikely to be affected in a serious what. What we don't know, just for completeness, is the impact of the general data protection regulation on data. So, with data held on servers outside of the UK, the rules that will apply in the event of a 'no deal' Brexit are not terribly clear, and we're doing an awful lot of work at the moment to understand our risks in that area. 

And the rest, then, is about working with suppliers and people in the public service to make sure that they understand what's going on, what support is available to them and what we think will happen. And the team are doing an awful lot of work around that at the moment. 

You made the point, quite fairly, about dovetailing both with Jonathan's work on the procurement side's strategy going forward, and Marion's wider work, and they are both intimately bound up in where we end up on Brexit.

Okay. Neil Hamilton, I think some of your questions have been asked. Is there anything else you wanted to ask? 

You just mentioned the GDPR. This was a massive headache when it first came in, or at least it was perceived to be. As a result of Brexit, do we have wider international obligations that cover this area, or will this give us some flexibility maybe to scale down the impact of GDPR upon businesses and Government? 

I think some of the GDPR stipulations are EU driven, and a lot of is internationally driven, and I couldn't tell you here today what the proportion of that was. Our concern is that businesses, institutions, our own services—although I think, on our internal review, we appear to be okay—shouldn't end up stranded in a 'no deal' Brexit with data housed in places outside of the United Kingdom, and in the rest of the EU.   

15:30

Thank you. In regard to a few things that I'm just going to briefly throw at you, Carillion, Interserve, Seaborne, G4S, probation, in terms of public sector contracts, and in terms of safeguarding, futureproofing our public sector money moving forward, what plans are there in terms of our ability to be able to do so?

I'll let Jonathan talk a little bit about where we are briefly on Carillion and Interserve. We weren't hugely exposed in Wales in respect of Carillion services. We are still looking at how exposed, for want of a better term, Welsh public services are in respect of Interserve. We have good and increasingly good, I think—getting better—business intelligence services. We're using a range of tools at UK level, and we're working pretty closely with the UK Government, including CCS, the Crown Commercial Services, and their activity, in sort of horizon scanning in respect of businesses. I think we do need to do more, as I said earlier in response to Ms Howells, about business intelligence and due diligence as part of increasing our skill set across the public service. We are using third-party systems to help us get a better handle on particular company issues and challenges. We have to be a little bit careful how we use that information, because if you start talking about concerns about a particular company, those concerns, as expressed, can themselves become a factor in other people's assessment of how well those companies are doing. So, you have to be a lit bit careful about not creating self-fulfilling prophecies. 

However, in that regard—and I know we haven't got much time—how well-placed are we, early on in these downward slides, to be able to intervene? We all need to continually get better, but bearing in mind that we are in a state of much flux in many of these different areas, how well placed are we in terms of our own due diligence, and are we anticipating upping that level in terms of our potential exposure as we move forward?

Our capability is improving. We take risk-based systems on every contract, a risk-based approach on every contract. We're working closely with the UK Government on Interserve. 

Yes, and we are actually increasing our capability of actually making these assessments. 

We've got several ways. We hold spend data, but we also work with some of the organisations who specialise in undertaking financial reviews of companies. So, we've started to pull together systems. Like in England, for example—there are systems operating in the public sector to flag up early warning at a very stage. So, we're developing our own systems to be able to replicate that over here in Wales, through using third-party organisations to help us to do that. 

Great. Can I thank our witnesses for being with us today? That's been really helfpul. We will send you a transcript of today's proceedings for you to check before that's finalised, Thanks for being with us—bit of a marathon session, but lots of questions for you. 

4. Cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o’r cyfarfod
4. Motion under Standing Order 17.42 to resolve to exclude the public from the meeting

Cynnig:

bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â Rheol Sefydlog 17.42(vi).

Motion:

that the committee resolves to exclude the public from the remainder of the meeting in accordance with Standing Order 17.42(vi).

Cynigiwyd y cynnig.

Motion moved.

Okay. I propose that we take—. And I need to propose the usual motion, of course—17.42 to meet in private for items 5, 6 and 7 of today's business. 

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 15:33.

Motion agreed.

The public part of the meeting ended at 15:33.

Archwilio Cynulliad Cenedlaethol Cymru