Commercial spend controls (version 7)
Follow this guidance when you want to get spend approval for commercial activities costing £20 million or more excluding VAT.
Read this guidance to comply with the Commercial Spend Controls process within your organisation.
The Commercial Spend Controls process is operated by the Cabinet Office Central Commercial Teams which are part of the Government Commercial Function.
Scope of the Commercial Spend Controls
Cabinet Office Commercial Spend Controls apply to all commercial activity with a value of £20m or more, excluding VAT. Some organisations have a higher spend threshold for commercial controls. To confirm the threshold for your organisation contact the Commercial Controls & Assurance Team at commercialassurance@cabinetoffice.gov.uk
The Cabinet Office Commercial Spend Controls apply, as a minimum, at Outline Business Case (typically prior to formally engaging the market) and at Full Business Case (usually contract award recommendation stage, prior to any notification to bidders).
Commercial Spend Controls apply to:
- New or replacement contracts or call offs from frameworks and DPS with a value (including concession contracts) >£20m
- Contract changes or extensions with a value >£20m
- Framework agreements and DPS with a ceiling value >£20m
- Contracts with a grant element with a value >£20m including both fees and grant funding channelled through the contract where the grants are administered by and through the procured supplier.
The Cabinet Office Commercial Spend Controls are delivered by the Commercial Controls & Assurance Team. Note that where a particularly significant concern is identified through pipeline review (see below) for cases in the £10m to £20m range, these may require further review by the Commercial Controls & Assurance Team.
Prior Information Notices
Organisations are encouraged to engage the market when developing their commercial strategy. The Commercial Spend Controls process is not intended to interfere with this activity. Any market engagement, however, must not be conducted in such a way that any spend control determination is rendered moot.
Commercial Spend Controls operate on the following principles:
- You do not need to seek approval from the Cabinet Office to issue a Prior Information Notice where this involves sounding out supply markets regarding your organisation’s requirements, how the services will be delivered, or to gather intelligence on delivery models, terms and conditions, performance standards etc. in developing the strategy that will inform your Outline Business Case, for example.
- You do need to seek approval from Cabinet Office prior to issuing a PIN when your organisation intends to warm up the market to an imminent procurement, before an Outline Business Case has been reviewed by the Cabinet Office.
Organisations are encouraged to share Prior Information Notices with their relevant Commercial Business Partner or Commercial Assurance Lead in the Commercial Controls & Assurance Team who will provide guidance on whether the commitment to the market is too prescriptive and does not allow subsequent options analysis. As a rule of thumb, organisations should avoid market engagement that would be reputationally damaging if the organisation did not proceed with the strategy presented.
Assurance against standards
The Commercial Spend Controls function assures cases against the Commercial Functional Standard and other functional policies and best practice including Sourcing Playbook, Construction Playbook and Procurement Policy Notes.
The Commercial Spend Controls assurance methodology distils analysis into six ‘tests’:
- Commercial policies - test the extent to which the case takes account of relevant Government commercial policies including those relating to SMEs, Social Value, Prompt Payment and Modern Slavery.
- Commercial options and maximising competition - tests the robustness of options analysis and chosen route to market, considering how competition has been maximised.
- Markets & Suppliers - tests the extent of market engagement and supplier/market health, including how supply market risks and issues have been factored into the procurement.
- Risk allocation, pricing and value for money - tests how value for money will be realised, that risk is allocated to the party best able to manage it and that the approach to pricing is appropriate.
- Contract, management and delivery - tests if the contract will be fit for purpose, appropriate performance mechanisms will be included and there is a robust approach to contract management, including transition and exit.
- Process and planning - tests the extent and effectiveness of commercial planning, assurance and compliance with process.
The Commercial Spend Controls Process
Each organisation has a Cabinet Office Commercial Business Partner who can support and advise you on the Commercial Spend Controls process. Email commercialassurance@cabinetoffice.gov.uk to find out who your Commercial Business Partner is.
Pipeline Assurance
Your organisation must record all future commercial spend activity costing £10 million or more (excluding VAT) on a commercial pipeline managed through the Commercial Assurance Management System. You should add new commercial activities in scope, which is due to be procured within the next 18-24 months to the pipeline as soon as possible.
You should also include any material changes to services which result in contract variations of £10 million or more in your pipeline. This includes new activities, extensions and contractual changes.
You can access guidance to developing a commercial pipeline, including details of the minimum viable product.
Once your organisation submits a comprehensive commercial pipeline to the Commercial Controls & Assurance Team, you will be able to start the pipeline assurance process, which enables lower risk and value cases to go through light touch assurance. This will follow three steps:
Step 1: Submit a commercial pipeline and risk assessment
You must submit a compliant commercial pipeline to the relevant Commercial Business Partner via the online system Commercial Assurance Management System and complete a set of risk assessment questions for each line item. This will aid the Commercial Controls & Assurance Team to determine a high, medium or low risk rating.
- Low risk, non-contentious activities that are below the organisation’s spending thresholds (such as Delegated Authority Limit for a Department).
- Medium risk activities where there are limited supply markets or financial concerns for suppliers; where there are legal risks; or where a low risk activity is above the organisation’s spend threshold.
- High risk, complex activities such as a first generation outsource or transformation of scope; where previous procurements have failed or there are market concerns; where there are reputational concerns; or where there are a number of areas of lower risk that aggregate to cause concern.
Step 2: Triage and validate pipeline assurance outcome
Items on the pipeline with a medium risk rating will be subject to a further triage process coordinated by the Commercial Business Partner. You will be required to provide details to a set of questions aligned to the six tests.
Based on the outcome from the risk assessment and further review where applicable, each item on the pipeline will be assigned one of three assurance statuses:
- Assure - the pipeline item is judged sufficiently low risk to justify approval as part of the Pipeline Assurance Review.
- Control - the proposed commercial activity is high value, novel, repercussive or contentious, either in its requirement or commercial methodology, or has a history of failed procurement and justifies a detailed review by the Commercial Controls & Assurance Team and requires further Control submission and approval either by the Commercial Controls & Assurance Team Director or Deputy Director or the Cabinet Office Minister of State and the Chief Operating Officer for the Civil Service.
- Pending - your organisation has not fully defined the activity. You need more information to assess the activity, or you are still in the process of securing funding.
Items on the pipeline between the £10m and £20m threshold (excluding VAT) may, by exception, require further review. This will be determined as part of the Pipeline Assurance Review Report.
Step 3: Pipeline Assurance Approval
Once all items on the pipeline have been reviewed by the Commercial Business Partner or Commercial Assurance Lead, a Pipeline Assurance Review Report will be prepared and submitted for approval to the Commercial Controls & Assurance Team Director or Deputy Director and then the outcome communicated to the relevant organisation.
Organisations can proceed (e.g. with procurement, contract change, extension or contract awards) for all items with an ‘Assured’ status, following notification of pipeline assurance outcome in writing from the Commercial Controls & Assurance Team.
A pipeline assurance assessment at one stage of the commercial cycle continues to apply to future stages unless the spend activity changes significantly. For example, ‘Assured’ status at Outline Business Case also applies at Full Business Case. ‘Assured’ status remains unless there is a material change impacting on the risk level and/or adherence to commercial standards and best practice. Departments must notify the Cabinet Office of any such changes. As such, if there is a material change in the circumstances of an ‘Assured’ item, which impacts the risk profile of the activity, for example the procurement has to be abandoned, the scope and value significantly change, only one bid was received or there is a legal challenge, then consult your Commercial Business Partner, who will determine if the assured status needs to be amended to ‘Control.’
Submitting a Controls Approval Request
Commercial activities marked as ‘Control’ following a pipeline assurance process or activities within scope of controls that are not included on a valid pipeline submitted to Cabinet Office must be submitted as a controls approval request.
You can submit a commercial controls approval request using the online system Commercial Assurance Management System.
On receipt of a controls approval request, a case lead will be assigned from within the Commercial Controls & Assurance Team. The case lead will carry out a review of the submission and engage with the nominated point of contact to seek further clarification or challenge specific areas of the case as applicable.
The case lead will complete an assessment of the case and submit advice either for approval at Official level or, for contentious items, to the Commercial Spend Controls Panel, which meets fortnightly and is attended by the Cabinet Office Minister of State, the Chief Operating Officer for the Civil Service and the Government Chief Commercial Officer and senior representatives from HMT and other relevant controls.
The case lead will notify the organisation point of contact in writing of the Commercial Spend Controls decision which will be either:
- Approved;
- Approved with specified conditions; or
- Rejected with proposed actions
Retrospective Cases
Retrospective cases will be rejected unless exceptional circumstances apply.
Retrospective cases include but are not limited to the following categories:
- where the procurement has already commenced (e.g. issue of an SQ or ITT or issue of a PIN which commits the Authority to running the procurement in a particular way);
- where the results of the evaluation have been communicated to bidders (through e.g. a preferred bidder letter or similar);
- where contracts have already been executed or commitments to enter into a contract or an extension have been made;
- where spend has been incurred or committed,
in all the above cases prior to Cabinet Office Commercial Spend Controls approval of the relevant business case applicable at the relevant point of the procurement lifecycle i.e. Outline Business Case for point A and Full Business Case for B, C and D.
Managing Conditions of Approval
Control cases are often approved with conditions designed to strengthen the commercial case, address non-compliance with standards and policy, or mitigate identified risks.
Any applicable conditions will be communicated in writing in the approval notification from the Commercial Controls & Assurance Team, including due dates. These conditions will be uploaded into the Commercial Assurance Management System and, if you have a login, you can provide responses to conditions directly in the system. If you do not have access to the Commercial Assurance Management System, you can provide responses to your organisation’s assurance team or if such a team is not in place, to the Commercial Controls & Assurance Team who will update the Commercial Assurance Management System on your behalf.
You should proactively respond to conditions by the set deadlines and notify the Commercial Controls & Assurance Team if you will not be able to meet the condition due date. A monthly report on conditions compliance by all organisations subject to Commercial Spend Controls is submitted to the Cabinet Office Minister of State and the Chief Operating Officer for the Civil Service.
Early Engagement
Early engagement is the process by which an organisation’s commercial team explains the context and issues associated with a commercial case to the relevant Commercial Business Partner or Commercial Assurance Lead in advance of final departmental approval and before the formal Commercial Spend Controls process commences. It is an opportunity to familiarise the Commercial Controls & Assurance Team with the circumstances of your spend control case and provide your organisation with early feedback on the Commercial Controls & Assurance Team review. Commercial teams are encouraged to always engage early on contentious and high value programmes.
The point at which early engagement starts will depend greatly upon the nature of the programme and a balance must be found between engaging early enough to allow any feedback to be actioned whilst still at a point when departmental plans are sufficiently mature. Organisations with a mature commercial pipeline who regularly engage with the Commercial Controls & Assurance Team will be able to manage early engagement with the Commercial Controls & Assurance Team through identification of cases triaged as ‘Control’ cases.
If a case is particularly contentious, then early engagement allows the Commercial Controls & Assurance Team to provide feedback and if a case is subject to schedule challenges, early engagement can be used to deliver a swift determination.
Early engagement is not a mandatory part of the Commercial Spend Controls process for either party and is conducted under the following principles:
- Early engagement is not a substitute for inadequate planning. If organisations seek early engagement to reduce the determination time then this will be agreed at the discretion of the relevant Commercial Business Partner. Requests based upon unforeseen emergencies or risk to life, health and safety will take priority.
- Although guidance and feedback can be provided during early engagement, this does not guarantee a determination outcome. Approvers reserve the right to make a final determination.
Programme Assurance
Most large programmes consist of multiple commercial workstreams, with more than one contract over £20m awarded to different suppliers. In these circumstances, an overarching business case and commercial strategy can be reviewed in conjunction with your organisation’s commercial pipeline. Where commercial activity is conducted under a specific programme, this should be identifiable on the full commercial pipeline and can be broken out and reviewed specifically in conjunction with the programme business case.
The relevant Commercial Business Partner can review the programme commercial strategy and determine the best assurance treatment for each contract activity. Whichever route is determined to be most appropriate, it is important that organisations managing large complex programmes are able to provide the following information in order to facilitate a smoother controls process for the relevant individual commercial activities:
- A commercial pipeline specifically for the programme (which should be a subset of information contained and identifiable on your organisation’s overall commercial pipeline)
- A programme business case and commercial strategy.
- A procurement plan for each contract activity that describes how it fulfils the overarching strategy.
Efficient and meaningful engagement with the Commercial Controls & Assurance Team at a programme level allows both teams to minimise the risk of knowledge loss with staff turnover and allows approvers to consider specific requests with a sound understanding of programme context.
Interface with other controls and assurance
The Commercial Spend Controls is one of a number of functional controls operating out of the Cabinet Office. Reflecting their different nature, these controls have different thresholds and intervention points. There are, however, areas of commonality and the Commercial Controls & Assurance Team actively operates to combine advice relating to these functional controls where practicable and appropriate. Organisations can help this process by alerting the relevant Commercial Business Partner when they are aware that other controls apply to a commercial case.
The Commercial Spend Controls process is formally linked to the digital spend control assurance process. Commercial cases that are also subject to Digital assurance are jointly submitted for ministerial approval.
It is important to note that engagement with one functional control does not obviate the need to engage with other relevant controls. The Cabinet Office functional assurance teams will work together to achieve efficiencies but it is the requesting organisation’s responsibility to engage with and provide the necessary information to all relevant control teams.
Contact
Email commercialassurance@cabinetoffice.gov.uk for questions related to the commercial controls.
Last updated 1 February 2023 + show all updates
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Updated the guidance due to changes on the Cabinet Office Commercial Spend Controls threshold, re-branding of the team and general clarifications.
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The guidance has been updated to reflect changes in the Commercial Spend Controls. All Sections have been amended and rewritten
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First published.