Guidance

Commercial spend controls (version 5)

Follow this guidance when you want to get spend approval for commercial activities costing £10 million or more.

Read this guidance to use the commercial spend controls pipeline process within your organisation. If your organisation has not yet transitioned to the pipeline process, you should continue to use the existing Cabinet Office commercial spend controls process.

The commercial spend controls are operated by the Cabinet Office Central Commercial Teams, which are part of the Government Commercial Function (GCF). The Cabinet Office Central Commercial Teams support the Government Chief Commercial Officer to deliver cross-government initiatives.

The commercial spend controls process

To use the commercial spend controls pipeline process, your organisation must:

  • maintain a pipeline that lists spend on all commercial spend worth £10 million or more (excluding VAT)
  • assess all commercial activities using the relevant Commercial Operating Standards
  • agree assessment of every line in the pipeline at each step (see Table 1 below)
  • work with the Cabinet Office commercial and digital and technology teams to review pipeline spend activity
  • provide appropriate approval routes and a process to re-evaluate spend activity if there are changes after it is initially assessed

Table 1: Assurance steps

Assurance steps Step 1: Triage your pipeline Step 2: Get approval from the assurance board Step 3: Get approval from the joint assurance review
What happens at this stage Your organisation will self-assess each spend activity and record all of the items in the pipeline. Your organisation boards and committees (internal governance processes) review the pipeline assessment and make a recommendation to the joint assurance review.

The commercial assurance board also makes recommendations for activities that should be sampled by the Cabinet Office.
The centre of government (including Cabinet Office teams) carries out an independent assessment of the activities and provides final approval.

Source: Adapted from HM Treasury’s ‘Assurance Frameworks’

Set up a commercial pipeline

Your organisation must record all future commercial spend activity costing £10 million or more (excluding VAT) in a document called a pipeline. You should add new activities to the pipeline as soon as possible and list all the items under each activity.

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.

The commercial spend controls do not apply if a business case contains a number of sub-£10 million transactions that add up to £10 million or more. The commercial spend controls only apply if one transaction in the group is over £10 million.

It may take time for you to create a pipeline, and you need to maintain it on an ongoing basis to comply with the spend controls.

Use the Cabinet Office template to help you set up a commercial pipeline.

Each organisation has a Cabinet Office Commercial Business Partner (CBP) who will work with you to develop your pipeline. Email commercialassurance@cabinetoffice.gov.uk to find out which CBP you should work with.

Overlap between pipelines

Commercial and digital and technology pipelines can overlap. For example, when digital and technology spend activity is valued at £10 million or more, this activity must feature on both pipelines during the triaging process. GDS and the Cabinet Office Central Commercial Teams will work with you jointly to get approval.

Examples of commercial transactions

A framework is classed as a transaction within the commercial spend controls when the aggregate spend is £10 million or more.

The commercial spend controls apply, as a minimum, at Outline Business Case (OBC) and Full Business Case (FBC) when your organisation, for example:

  • is procuring goods or services under a new contract for £10 million or more

  • awarded a contract for £159 million 3 years ago and wants to sign a change or variation for £10 million or more

  • awarded a contract for £30 million 2 years ago and wants to extend the contract for one year at a value of £10 million or more

  • is procuring a framework for goods or services with a maximum value of £10 million or more, but the individual call off contracts from the framework are expected to be under £10 million

The commercial spend controls do not apply when your organisation, for example:

  • awarded a contract for goods or services last year at a value of £9 million and you now require a change the value of the contract by £3 million

The commercial spend controls may apply to only one supplier in a programme.

For example, if your organisation includes multiple procurements for goods and or services in a programme where individual contracts could be more than £10 million, the Cabinet Office commercial spend controls apply at OBC.

If your organisation will award Supplier A 2 contracts at a value of £8 million and £3 million, the commercial spend controls do not apply to Supplier A at FBC. At the same time, if your organisation will award Supplier B 2 contracts at £1 million and £11 million, the commercial spend controls apply to Supplier B only for the contract of £11 million at FBC.

Get approval for commercial spend

All commercial spend activity must pass through the 3-step spend controls process for approval. You must:

  • triage your activity
  • get approval from an assurance board and take part in sampling
  • get approval from a joint assurance review

The Cabinet Office supports your organisation during this process.

Step 1: Triage your spend activity

The commercial pipeline must include all activities that will cost £10 million or more. The Cabinet Office Central Commercial Teams recommend you add spend activity to the pipeline 6 quarters in advance.

You must assess an activity at least one quarter before you need a business case approval decision.

You should assess activity when:

  • you add it to the pipeline
  • it reaches an agreed review point
  • it changes significantly after an assessment

A similar process applies to the digital and technology pipeline. For digital and technology contracts over £10 million, you should also involve the relevant CBP when triaging the activity. Email commercialassurance@cabinetoffice.gov.uk to find out which CBP should be involved.

During the triaging process your organisation must assess commercial spend activity as one of the following:

  • assured
  • monitor
  • control
  • pending

Assured

Your organisation and activity owner have assessed that this activity meets all of the relevant Commercial Operating Standards, and would like to validate this assessment with the Cabinet Office.

Monitor

Your organisation has assessed this activity and found it does not currently meet all relevant standards but is not ‘contentious’. An activity is contentious if it is controversial or requires a high-level of scrutiny as defined in the managing public money guidance. Further work is required to make sure that all the relevant standards are met.

The activity owner needs to put a plan in place so activities meet standards within an agreed timeframe. The Cabinet Office CBP needs to approve this plan.

Control

Your organisation has assessed the activity and found at least one of the following issues:

  • the activity is unlikely to ever meet all of the relevant standards
  • the activity is novel or contentious
  • there are historic concerns about projects, related projects or suppliers
  • there is a proposed extension to an existing contract without enough planning or preparation (could be presumed as a direct award)
  • there are no plans for a transparent competitive procurement process

When an activity owner marks an activity as ‘control’ they need to develop a business case and present this to the assurance board. Once the assurance board has provided approval, the Cabinet Office will carry out an in-depth review. Activities marked as ‘control’ are submitted as advice to the Cabinet Office Minister. The minister may ask for some final adjustments before spending is approved.

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 sources.

Activity remains marked as pending until you have enough information to classify it.

Step 2: Get approval from your assurance board and sample spend activity

After assessing commercial activities in your pipeline, you need to obtain approval from your organisation’s assurance board. Your organisation may have a similar board already in place or you may need to set one up. This assurance board may become a subset of the joint assurance review process if there is a good reason for this.

Your organisation can use an existing governance board as an assurance board if it includes:

  • senior organisational leaders with suitable commercial skills and experience
  • senior commercial expert(s) from another government department, if possible

The commercial assurance board reviews the recommendations from triage and:

  • agrees the assessment of lines in the pipeline
  • reviews problematic items
  • agrees any action plans relating to ‘monitor’ status
  • plans future review points of individual areas of spend activity on the pipeline, including pending items
  • agrees the sampling strategy that the Cabinet Office Central Commercial Teams carry out

Use Cabinet Office guidance if you need to set up an assurance board.

Cabinet Office sampling

To help your organisation correctly assess its activities, the Cabinet Office CBP supports triage activity and carries out sample testing of pipeline activity recommended by the assurance board. The Cabinet Office CBP tailors the sampling method to suit your organisation’s pipeline.

The Cabinet Office CBP works with organisations to:

  • group items by similar characteristics,
  • test a proportionate number of activities
  • consider activities according to risk profile

The Cabinet Office CBP reviews and tests selected samples using one of the following:

  • commercial sample assessments
  • critical friend reviews
  • commercial assurance reviews

Commercial sample assessments

This is a short single activity assessment based on a session lasting up to 2 hours with the organisation’s commercial lead. The Cabinet Office CBP asks a standard set of questions and gathers information from the organisation’s existing documents.

The Cabinet Office CBP can undertake a commercial sample assessment together with your organisation’s own assurance validation activity.

Critical friend reviews

This one-day review can assess multiple activities that are similar within a project or programme. Cabinet Office Central Commercial Teams collect information from the organisation’s documents and by conducting interviews.

Commercial assurance reviews

Commercial assurance reviews are multi-day reviews for complex activities and are similar to a Gateway review. Commercial assurance reviews can cover many activities within a large and complex project or programme or in an area of the business, for example, a category. The Cabinet Office Central Commercial Teams collect information from the organisation’s documents and by conducting interviews.

The Cabinet Office expects to use the commercial sample assessments and critical friend reviews in most cases when reviewing samples on the commercial pipeline.

Any recommendations the Cabinet Office Central Commercial Teams raises for improvements to your organisations assessment process are discussed at the joint assurance review. Ultimately, you should follow advice from the Cabinet Office.

Step 3: Get approval from the joint assurance review

Senior leaders from your organisation and the Cabinet Office oversee the joint assurance review (JAR). GDS and the Cabinet Office Central Commercial Teams both participate in joint assurance reviews of your commercial pipeline if you’re planning digital and technology activity costing over £10 million.

The joint assurance review needs to include the following Director-level participants or their deputies (at least SCS1 grade):

  • senior leader from the organisation’s digital and technology function
  • senior leader from the organisation’s commercial function
  • senior leader from the Government Digital Service (GDS)
  • senior leader from the Cabinet Office Central Commercial Team
  • if appropriate, representatives from HM Treasury and Infrastructure and Projects Authority (IPA)

The Accounting Officer may choose an official at the appropriate level of seniority to attend, if required.

The joint assurance review should take place periodically, with quarterly meetings suggested as a starting point. Your organisation can change this timeline.

Joint assurance reviews may take place via correspondence when they become routine if there are no contentious activities to discuss. Senior leaders only meet by exception. For example, they should meet each time significant changes are made to an organisation’s pipeline.

When you can start spending money

You can spend money on commercial activities marked as ‘assured’ after the joint assurance review confirms this assessment in writing.

Commercial activities marked as ‘monitor’ do not meet the relevant Commercial Operating Standards and spending is not approved. These activities can only be approved when a joint assurance review marks them as ‘assured’ or if the Cabinet Office Minister approves them when submitted as a ‘control’ case.

Commercial activities over £10 million marked as ‘control’ will follow version 4 of commercial spend controls process, which involves further scrutiny and is subject to approval by the Cabinet Office Minister. The Cabinet Office Central Commercial Teams will seek a decision from the Cabinet Office Minister using version 4 of the commercial spend controls process.

A joint assurance review confirmation of an assessment at one stage of the procurement cycle continues to apply to future stages unless the spend activity changes significantly. For example, ‘assured’ status at Outline Business Case (OBC) also applies at Full Business Case (FBC). ‘Assured’ status remains so long as an activity continues to meet the relevant Commercial Operating Standards. Organisations should tell the Cabinet Office immediately if anything changes. The Cabinet Office will re-assess the activity through the joint assurance reviews and may change the approvals status (in which case the next relevant commercial stage approval would need to be obtained).

If both commercial and digital and technology controls apply to an activity but only one of the functions (the Cabinet Office Central Commercial Teams and GDS) has provided approval, then that activity is not approved for spend. The function that has not granted approval will treat the activity as ‘control’ and prepare the submission for the next approval point, including the first function’s recommendation. The submission takes the form of either Outline Business Case or Full Business Case as a minimum.

Cabinet Office Minister involvement

The Cabinet Office Minister will see a summary of the pipeline report within 10 working days of every joint assurance review. In most cases, this joint assurance review is carried out quarterly. The pipeline report must list:

  • live activities and their assessments
  • activities retired following a contract award
  • any changes in categorisation (for example, from ‘monitor’ to ‘assured’)
  • the next review date for ‘monitor’ items

The minister may decide a spend activity is contentious in exceptional circumstances and may ask for a reassessment, for example from ‘assured’ to ‘control’. If the organisation has already committed to awarding a contract, then this reassessment will not take place and the status will stay the same.

Contact

Email commercialassurance@cabinetoffice.gov.uk for questions related to the commercial controls.

Published 30 April 2018