Central government spent a total of around £45 billion on buying goods and services in 2011-12, including an estimated £6.9 billion on ICT. Since 2010, the government has introduced a range of procurement reforms designed to save money. These include centralising the procurement of goods and services bought by all departments, such as energy and travel, on which central government spent an estimated £7.5 billion in 2011-12. Specifically on ICT, the government has introduced a process by which all ICT spending over £5million must be approved by the Cabinet Office, and a programme to develop ICT infrastructure which can be shared across government organisations.
We welcome these reforms, and recognise the recent progress made by the Cabinet Office, the Government Procurement Service and departments. The changes are beginning to have an impact: the proportion of spending that goes through central contracts has increased steadily; the ICT initiatives have resulted in some savings; and there are signs that departments are starting to think more intelligently about why and how they use ICT.
There are still weaknesses which will need to be addressed if the government wants to improve value for money in the long term. The accountability arrangements for centralised procurement remain a barrier; the centre manages the contracts yet departments remain liable for their own spending decisions so they are reluctant to cede authority to the centre. Management information on spending and savings is incomplete, so departments do not always trust the figures on savings claimed. These gaps in accountability and data make it harder than it should be to make the case for procurement across central government and in the wider public sector to be centralised. The Cabinet Office and the Government Procurement Service will need to work with departments to address these problems, and build shared plans, including much more stretching targets for centralised expenditure and ICT savings.
The commitment to localism seems to be at odds with buying through central contracts, and government's desire to give more government business to small firms does not appear to have changed the way large procurements are managed and designed. The Cabinet Office needs to set out how it will resolve these issues, and clarify how it intends to deliver sustainable reform in its priority areas of procurement, digital services, shared services and management information over the next few years. The current economic position presents a unique opportunity to change the way government does business. It is therefore vital to build on early successes and move towards sustainable change with urgency.
The Government is not using its buying power to ensure that its suppliers, particularly in the ICT industry, pay their fair share of tax on the profits they secure from business activity in the UK. The development of more coherently managed procurement protocols provides an excellent opportunity for Government to exert appropriate pressure on its suppliers whose income on public contracts comes from taxes paid.
On the basis of two reports by the Comptroller and Auditor General,[1] we took evidence from the Cabinet Office, the Ministry of Defence and the Ministry of Justice on progress with government's procurement and ICT reforms.
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1 C&AG's Report, Improving government procurement, Session 2012-13, HC 966 C&AG's Report, The impact of government's ICT savings initiatives, Session 2012-13, HC 887