Death by a Thousand cuts

The COI and HEA have traditionally been a rich source of work for agencies. But is the Government committed to keeping advertising concerns in-house rather than in a free market?

The COI and HEA have traditionally been a rich source of work for

agencies. But is the Government committed to keeping advertising

concerns in-house rather than in a free market?



The Central Office of Information, the Government’s advertising

department, celebrated its 50th birthday last month with a visit from

the Prince of Wales. Behind the smiles, however, there was much anxiety

among COI staff. The body, which grew out of the wartime Ministry of

Information, is now fighting the biggest battle of its life.



Its long-term survival is in doubt because of the new culture in

Whitehall stemming from the Government’s determination to inject private

sector disciplines into the civil service. The chilly breeze of market

forces is also being felt by the 23 agencies working on government

campaigns. Their commission has been squeezed in recent years and, to

justify its existence, the COI will maintain the downward pressure.



The changes in Whitehall will also mean more account reviews and

uncertainty for agencies. But they could bring new opportunities, too.

Government departments, under Treasury pressure to cut costs, are hiving

off more publicity work to private companies. Whitehall advertising

chiefs believe that the agencies that will prosper will be those

offering an impressive integrated marketing service.



The new era began on 1 January this year, when government departments

were allowed to run their own campaigns and buy their own advertising

instead of being forced to go through the COI. Although no major

department has broken away yet, some big spenders have sounded out media

companies about forming a Whitehall group that would enjoy the buying

clout the COI has at present. If that happens, the COI’s whole raison

d’etre could disappear.



The big media specialists are watching developments closely but they are

reluctant to strike, fearing that a failed coup could deprive them of

future government business. They hope, however, that a Whitehall

breakaway is only a matter of time and are convinced they could more

than match the COI’s discounts, which it claims saves taxpayers pounds

20 million a year. Media shops insist they are hungrier and leaner than

the COI and are able to employ higher calibre staff.



‘The COI performs a useful function, but there is no reason why it could

not be done by the private sector,’ the boss of one top media company

says. ‘The COI is a very defensive organisation. It spends a lot of time

protecting its own jobs.’



The word in Whitehall is that the departments most likely to break away

from the COI include the Home Office, the Department of Trade and

Industry and the Department of Health. But no-one is jumping ship yet,

and departments with smaller ad budgets are opposing a breakaway.

Anxious to cut costs in the stringent financial climate, they would

rather pay 1.75 per cent commission on their campaigns to the COI than

retain under-employed publicity staff.



Some senior officials warn that replacing the COI with a private-sector

media buyer could increase their advertising costs in the long run.

‘Without the COI, we would not know when we were being ripped off,’ one

says. This is a fear on which COI bosses play in their talks with

departments. They also insist the COI holds down commission - believed

to be around 10 per cent - to well below what agencies earn from other

clients. The COI cuts bureaucracy, such as the need to advertise

contracts in the EC journal, and keeps an eye out for party political

ads, which would break the Whitehall rules.



Despite these plus points for the COI, ministers have struggled to

define its role in the brave new Whitehall world; they have been

reviewing its future for three years. A long-awaited announcement is

due shortly after ministers have studied the latest in a line of

investigations into the COI, this time by the management consultants,

Kinsley Lord.



Michael Heseltine, the Deputy Prime Minister, and Roger Freeman, the

Cabinet minister responsible for the COI, want it to become a

‘procurement agency’ rather than a provider of services. Functions like

running events and exhibitions, making radio programmes and providing a

reference and translation service may be privatised or become the

subject of management buyouts.



The new slimline COI would retain advertising, direct marketing and

promotions, research and publications as its core services. Its

advertising division should emerge relatively unscathed since it already

sub-contracts so much work to agencies.



However, the changes introduced in January have already started to bite.

The Health Education Authority has exploited the new freedom given to

government bodies by deciding to buy advertising for its campaigns on

Aids and drug abuse instead of using the COI.



But the COI knows it cannot be complacent. Peter Buchanan, its director

of advertising, has drawn up a five-point plan of attack aimed at

ensuring that the organisation survives and prospers in the new

environment. He has set a target of winning pounds 10 million worth of

new business in the next year among public bodies such as the HEA, which

operate independently from government departments. This would be enough

to take the COI from tenth to fifth place in the league table of top

advertisers.



Buchanan also wants to expand the COI’s pounds 5 million pool of

recruitment advertising and is talking to five potential new clients. He

intends the COI to win more marketing and media consultancy work and to

exploit new media more fully. Finally, he is determined to offer a more

flexible and tailored-type service.



Buchanan welcomes the new competitive environment and dismisses the idea

that the COI is on its last legs. ‘It is not something that is closing

down; it is opening up. We are far from being defensive,’ he says. ‘The

changes mean that everything we do has to be of the highest standard.

Otherwise, our clients will vote with their feet and not use us. The

pressure is on us to maintain high standards but that does not hold any

fears.’



Like the COI, the HEA has undergone a root-and-branch review. Some

ministers - irritated by its frank approach to sex education and its

support for a tobacco advertising ban - wanted to abolish it. But the

Government compromised by settling for a market-based system forcing the

HEA to compete for contracts with the private sector.



When the new regime began on 1 April, there was no ‘big bang’ upheaval

and the HEA’s contracts are being reviewed gradually. The high-profile

Aids campaign, currently with BMP DDB, was due for review this spring,

but there is no immediate sign of a repitch.



So far, the HEA seems to be prospering in the new environment. It has

already secured pounds 38.5 million of business for the financial year

which started this month, almost matching its pounds 42 million budget

in the past 12 months. The new system allows the HEA to spread its wings

beyond work for the Department of Health. For example, it is advising

the Ministry of Agriculture and promoting good health in Estonia.



Charles Gallichan, the HEA’s head of advertising, sees the new culture

as a logical extension of the internal market in the National Health

Service introduced by the Government. He is bullish about the

authority’s future because of the growing recognition that preventing

ill-health is better - and cheaper - than curing it. ‘The need for us is

proven and growing rather than diminishing,’ he says. ‘I am confident we

will survive.’



Indeed, the HEA has expanded its staff from 198 to 230 in the past year,

partly because it has taken charge of the anti-drugs campaign previously

run directly by the Department of Health. Ogilvy and Mather was a victim

of this change - it stood down when the HEA called a review and the

account was won by Duckworth Finn Grubb Waters.



However, the HEA lost out when the Department of Health split its anti-

smoking campaign into separate drives aimed at adults and teenagers. So

did Abbott Mead Vickers BBDO, which retained the pounds 3 million-a-year

adult campaign but lost the pounds 1 million-a-year teenage one to

Brewer Blackler, a through-the-line consultancy which pitched

successfully against the HEA and COI. Brewer Blackler’s win is a warning

shot to agencies and a clear sign of the new times. ‘The agencies who

get their act together on integrated marketing will be the winners,’

Buchanan says.



The HEA missed the boat again when the Department of Health put out to

tender a pounds 150,000 contract to run and promote the Health Alliance

Awards - a joint venture of public and private companies to improve the

nation’s health. It was won by Medical Imprint, a health communications

agency which is part of Haymarket Publishing.



Although the new culture is now firmly established, some senior civil

servants wonder whether the Tories’ free-market principles have created

a giant paperchase rather than real benefits for taxpayers. ‘There is an

element of change for change’s sake,’ one says. But ministers insist

there are big savings to be found in Whitehall’s running costs.



The Labour Party suspects the push for efficiency is driven by free-

market dogma and a desperate desire to cut taxes before the general

election. However, Labour would not necessarily ease the financial

squeeze if it won power. For example, the COI would probably remain a

semi-independent executive agency run on private sector lines rather

than restored to full Whitehall control. Labour would be unlikely to

allow a media company to get its hands on the COI’s media buying. ‘There

would be no point in creating a private monopoly,’ Peter Mandelson, an

ally of Tony Blair and Labour’s spokesman on the civil service, says.



So the COI might avoid a fatal body blow if there is a change of

government. Whatever happens at the general election, it is clear that

government advertising has ceased to be a gravy train for agencies and

there is no turning the clock back. The new culture in Whitehall means

it will have to work harder for every penny it takes from the public

purse.



Andrew Grice is the political editor of the Sunday Times



------------------------------------------------------------------------

COI AND HEA CAMPAIGNS

------------------------------------------------------------------------

Electricity privatisation ... 1990

British Army ................ 1994

Anti-drink drive ............ 1995

Crime prevention ............ 1993

Road safety ................. 1974

Gas privatisation ........... 1986

Save it ..................... 1979

Aids awareness .............. 1989

Anti-drugs .................. 1985

Anti-smoking ................ 1993

------------------------------------------------------------------------



------------------------------------------------------------------------

GOVERNMENT ACCOUNTS AND WHO HOLDS THEM

------------------------------------------------------------------------

Central Office of Information

Total advertising spend 1995-96                              pounds 62 m

financial year (estimated)

Biggest campaigns                   Agency                      Spend

Soldier recruitment                 Saatchi and Saatchi      pounds 6.5m

(Ministry of Defence)

Tax self-assessment                 Leagas Shafron Davis     pounds 5.9m

(Inland Revenue)

Railtrack flotation                 WCRS                       pounds 5m

(Dept of Transport)

NVQs/Modern apprenticeships         GGT (now under review)   pounds 4.2m

(Dept of Education

and Employment)

Territorial Army recruitment        Saatchi and Saatchi      pounds 3.4m

(Ministry of Defence)

Partners against crime              BMP DDB                  pounds 3.4m

(Home Office)

Kill your speed                     DMB&B (now A MV BBDO)    pounds 2.3m

(Department of Transport)

Wasting energy costs the earth      Grey London              pounds 1.9m

(Dept of the Environment)

Special Constables recruitment      Leagas Shafron Davis     pounds 1.9m

(Home Office)

RAF recruitment                     J. Walter Thompson       pounds 1.8m

(Ministry of Defence)

Drink-drive                         DMB&B                    pounds 1.7m

(Ministry of Transport)

Source: COI

------------------------------------------------------------------------



------------------------------------------------------------------------

Health Education Authority Advertising campaigns 1995-96 financial year

------------------------------------------------------------------------

                                 Agency                        Spend

Drug abuse                       Duckworth Finn Grubb Waters   pounds 3m

Anti-smoking                     Abbott Mead Vickers BBDO      pounds 3m

Aids                             BMP DDB                     pounds 2.5m

Physical activity                Leagas Delaney                pounds 2m

Immunisation                     Saatchi and Saatchi           pounds 1m

Folic acid in pregnancy          Saatchi and Saatchi      pounds 500,000

Source: HEA

------------------------------------------------------------------------



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