Commercial Strategy

The Department for Transport's Commercial Vision is:

To demonstrate commercial excellence in order to secure the efficient implementation of our desired policy outcomes, and best value for money, innovation and continuous improvement in all commercial matters.

Scope of Commercial Activities

To put the Vision into context it is important to understand that much of the work of the Department is of commercial nature, encompassing a wide range of activities, including:

Policymakers identifying and managing the commercial risks to policy outcomes;
The procurement of goods and services both directly and indirectly. Commercial excellence in this area is achieved through appropriate governance and control structures and procurement processes;
Revenue generation and asset sales;
Economic oversight of regulated transport industries, e.g. airports, Network Rail, see Aviation: and Network Rail - Home.
Contract management. This is achieved by the appointment of a contract manager, or contract management teams, for all commercial contracts.

The Departments work also includes the management of policy, legal and financial responsibilities, many of which will have important commercial implications.

The Departments delivery of its desired policy outcomes is increasingly reliant on third party commercial suppliers. It has a need to establish that its policy aims are assessed and shaped for delivery through that supply market, both where DfT has a direct commercial relationship and where it does not have direct managerial control.

There is a particular focus on projects and programmes that are vital to the delivery of the Departments strategic plan and objectives.
The Department also makes payments and grants to bodies such as Network Rail and Local Authorities, see Funding for Local Transport. Although the Department does not spend this money directly, it has a responsibility to ensure that it is used efficiently and effectively.

Stakeholders

It is important that the following stakeholders have a clear understanding of the Departments commercial vision, together with the principal aims that flow from it:

Departmental policymakers, to ensure the efficient delivery of the desired policy outcomes;
Other Departmental colleagues, both within the central Department and the executive agencies, together with agencies that are trading funds;
Suppliers, and the transport industry generally;
Other Government Departments;
Local authorities;
Non-Departmental Public Bodies (NDPBs), see About the DfT Non Departmental Public Bodies;
The general public.

Principal Commercial Aims
To support the vision, the Departments principal commercial aims will be to promote and demonstrate transparently subject to the need for commercial confidentiality where appropriate and the achievement of:

value for money, see Guidance on value for money for the taxpayer, through the use of innovation and continuous improvement;
fair and effective competition;
timely delivery of projects and services;
compliance with the relevant policy, statutory and regulatory requirements.

Departmental Responsibilitiesand Controls for Delivering the Commercial Vision

The Departments commercial activity impacts significantly on service delivery and budgets and is therefore integral to all parts of the business. Responsibility for delivering commercial success therefore lies with all staff that have a role in the planning, development and delivery of the Department's business plan and objectives. Responsibility for the implementation and control of the Commercial Vision is as follows:

The Board Commercial Sub Committee (BCSC).The DfT Board, through the BCSC, will take the lead to ensure that the Commercial Vision is delivered, and for the continuous enhancement of the Department's commercial capability. As chairperson, the Director General National Networks (DGNN) will also work with, and be supported by fellow Directors General, the Agency Chief Executives, and the other BCSC members in the delivery of the Commercial Vision.

The Investment Boards (IB). IB for each DfT Group and the agencies oversee investment decisions for all commercial projects over 50M (Tier 2) and those classed as Tier 1 (over 200M). IBs ensure projects are subject to appropriate standards of scrutiny and project governance, and consider which of its Tier-1 projects should be subject to a review by the DfT Board .

The Contract Award Committee (CAC). The CAC scrutinises and approves all major project / programme procurement activity where the commercial contracts are signed on behalf of the Secretary of State (SoS).

The Centres of Excellence (CoE). CoEs are available to IBs and Senior Responsible Owners (SRO) to provide independent expert advice and guidance on projects at any time in a project, and particularly before key decisions on affordability, deliverability and VfM.

The Corporate Governance Framework. The Corporate Governance Framework details the system by which the DfT is directed and controlled, In respect of commercial activity this include the selection and appraisal of programmes and projects, VfM, opportunity and risk management, and the regularity and propriety of resource consumption.

The Investment Appraisal Framework (IAF). The IAF provides a single unifying structure for the appraisal, scrutiny and approval of project business cases at all levels across the Department. It ensures that all appraisal processes are fit for purpose, efficient and effective, and meet the standards expected by the Office of Government Commerce (OGC), the National Audit Office (NAO), HM Treasury and other key stakeholders. The IAF covers all capital investments funded by the Department and its agencies with some exceptions, for example investments funded through grants to TfL.

Economic Oversight and Appraisal. The Strategic Transport Analysis Review (STAR), see Department for Transport - Transport Analysis Guidance - WebTAG home page provides scrutiny of value for money or benefit cost ratio (BCR) proposals prior to submission to IBs or ministers. Ministerial submissions also require value for money clearance.
Grants. Grants form a significant part of the Department for Transports (DfT) expenditure. The Principal Accounting Officer (PAO) is responsible for all grants the Department pays out, and must ensure that any grant is for a proper transport-related cause. Guidance on grants for Local Authority schemes can be found at Guidance for Local Authorities seeking Government funding for major transport schemes: Main document

Regulated Transport Industries

Aviation. The Aviation Directorate has policy responsibility for the economic regulation of UK airports and the airline industry in general, whereas delivery is by the independent regulator - the Civil Aviation Authority (CAA). This is to safeguard the interests of the travelling public in terms of ensuring value for money through effective competition and consumer regulation, as well as oversight of schemes such as ATOL bonding.

Network Rail (NR).The Department, through National Networks, has a responsibility to ensure that rail investment represents good value for money The Department determines the outputs it wishes to buy on the network, and sets the level of funding available to buy them with, via the five year Periodic Review process. Responsibility for the actual work of maintaining, renewing and enhancing the network rests with NR, a private sector company limited by guarantee. The Department cannot intervene in NRs operational decision making. However, NR is subject to regulation by the independent Office of Rail Regulation (ORR), see Office of Rail Regulation, which has a legitimate remit to ensure that NR, as a monopoly operator, conducts its business in an efficient manner. The ORR sets efficiency targets for NR, again via the Periodic Review process, and monitors the companys performance against them. This system of independent regulation ensures the value for money of rail investment.

Asset Sales

The Department has a remit under the governments Operational Efficiency Programme (OEP) to ensure that the transport assets identified in the Asset Portfolio, see http://www.hmg.gov.uk/media/52715/oep-assetportfolio.pdf are managed in the most cost-effective way. This includes examining the scope for the sale of certain transport assets to the private sector.