1.8 The Government has put in place a number of reforms that have improved procurement performance since 1997.
1.9 It introduced Public Service Agreements in the 1998 Comprehensive Spending Review, setting out its key priorities and how its performance against them should be judged. These encourage departments to focus on delivering their key priorities rather than the means of delivery, and also signal to the marketplace those areas where the Government is a potential future customer if those priorities are to be met.
1.10 The two fiscal rules, against which the Government measures the performance of its fiscal policy, work together to promote capital investment while ensuring sustainable public finances in the long-term. These, when translated into the budgetary system and the creation of separate capital budgets, give departments the incentives to take a long-term view of value for money. Capital budgets can only be used for investment purposes, and not to meet short-term funding pressures as used to happen in the past; while the full costs of a project now impact on the resource (or current) budget. So any department that looks to save money at the investment stage will have to pay the longer-term additional costs of that false economy out of its resource budget.
1.11 Sir Peter Gershon carried out a review of central civil government procurement in 1999, described in more detail in Box 1.2.
Box 1.2: The Gershon review of civil procurement in central government Sir Peter Gershon's key findings were: • previous governments had delegated procurement responsibilities to departments, without any common framework within which they should operate; • this led to a lack of consistency, and wide variation between the best and worst practice. Departments were paying significantly different prices for the same items; • procurement activities at the centre of government were fragmented and uncoordinated; • there was no common process for managing large, complex procurements; • there was no arrangement for managing suppliers across government, which allowed some suppliers to enjoy differential pricing; • there were no common systems across government for recording what was being purchased, at what prices and from whom; rating the performance of suppliers; or targeting and measuring year on year value for money improvements; • the overall skill levels of the Government Procurement Service needed to be raised significantly; and • while there was general agreement that UK government procurement was fair and open, and compared well with other countries, there were concerns about bidding costs. |
1.12 In response to his findings, Sir Peter recommended setting up the Office of Government Commerce (OGC) as a one-stop shop central procurement organisation to catalyse best procurement practice within central civil government. Its remit was subsequently extended to cover the wider public sector in line with its lead role on the Government's efficiency programme.
1.13 The OGC has achieved some notable successes since it was set up in 2000. In particular, it has helped departments and local authorities to make annual efficiency gains of £13.3 billion by the end of September 2006, more than half way towards meeting the Government's ambition of over £20 billion of annual efficiency gains by 2007-08. Included in this are £5.5 billion of efficiencies attributable to procurement.
1.14 The OGC has also established Gateway reviews as a means to help departments improve their record in project delivery. Over 1,500 Gateway reviews have been completed since their introduction in 2001 on more than 700 separate projects and programmes in central government, resulting in over £2.5 billion value for money savings calculated using a methodology audited and approved by the NAO.
1.15 So the Government has improved the public sector's track record in project delivery and achieved over £13 billion of efficiency gains to the benefit of frontline services and other priorities, while undertaking large and sustained increases in public investment. Further OGC achievements are set out in Box 1.3.
Box 1.3: OGC achievements The OGC has made progress in delivering Sir Peter Gershon's original vision through mainstreaming best practice in departments, improving professionalism, promoting the use of e-procurement techniques to deliver process and cost savings, and in making collaborative procurement a reality. Through these improvements the OGC has: • helped realise £800 million worth of value for money gains during 2003 through Achieving Excellence in Construction as reported in the March 2005 NAO report due to an increase in projects coming in on budget (from 27 per cent in 1998 to 65 per cent in 2006), and an increase in projects being delivered on time (from 30 per cent in 1998 to 61 per cent in 2006); • made collaborative procurement a reality by leading with departments on deals such as the Department for Work and Pensions fleet deal mentioned in Box 1.4. More collaborative deals are scheduled to be made available to public sector organisations by the end of the financial year, including a prison service led deal for temporary labour, NHS PaSA contracts for tyres and vehicle leasing, a police-led contract for vehicle windscreens, and an OGCbuying.solutions' framework for the purchase of electricity; • introduced the BT Premier Value scheme offering BT's best permanent voice call rates to the public sector due to the guaranteed volumes that collaboration brings, where users save between 10 and 30 per cent on their telephone bills. Improvements in the mobile telephony framework contract have led to an increase in users from 250,000 to 700,000 since 2003, earning £16 million in savings this year; • run 63 e-auctions to a value of nearly £1billion, and e-tenders to a value of £2 billion with 14,500 suppliers and 1,100 buyers; • managed the programme that has relocated over 10,000 civil servants from London and the South East of England, ahead of the target of 20,000 posts by March 2010, freeing up 136,000 square metres of office space and so reducing the Government's rent bill by £20 million a year. This is being made possible in part by the OGC e-PIMs information collection tool, which currently holds the details of 9,000 public sector land holdings; and • PRINCE2 (a project management tool) and ITIL (an IT service management tool) are helping departments and local authorities manage programmes and projects, and follow IT best practice. These are supporting their efforts to deliver user requirements in a timely manner, and are increasingly being adopted more widely in the public and private sector around the world. |