1. The accountability arrangements remain a barrier to the growth of more efficient, value for money centralised procurement. The Government Procurement Service manages the central contracts, but departments are ultimately responsible for their own spending decisions. The Cabinet Office requires departments to use the central contracts, but there are currently no consequences for departments which do not comply. If departments are to move their procurement to the centre, they need to have trust and confidence in the centre's ability to get a better deal, to manage it well, and that the centre will be accountable for failure. Without the means for bodies to hold each other to account , the impact of these reforms will always be limited. The Cabinet Office should set out formal accountability arrangements supported by detailed service level agreements for each category of procurement managed by the Government Procurement Service. With these in place there should then be sanctions for departments which do not comply.
2. The procurement and ICT reforms lack the discipline of stretching targets over time and proper data to inform decisions. Despite efforts to improve the availability and accuracy of management information, considerable gaps remain. A lack of detailed and accurate data has led to the Cabinet Office setting inappropriate targets; expected proportions of spending through central contracts have been unrealistic, and the savings asked of departments in ICT procurement have not been sufficiently stretching. Also the departments do not always trust the data from the centre so it is more difficult to demonstrate the value for money of central contracts. The Cabinet Office and the Government Procurement Service should work with departments to improve the quality of procurement data, and use this to agree detailed plans and targets with each department for the next three years.
3. There is a tension between the government's drive to centralise procurement and its commitment to localism. The Cabinet Office has focused its efforts on central government, covering around £45 billion of goods and services in 2011-12. However, this is a small proportion of total procurement spending across the public sector. This is estimated to be around £200 billion when you include the wider public sector, covering bodies such as local authorities, schools, and NHS trusts. The principles of localism inhibit the Cabinet Office's ability to force public bodies outside of central government control to buy goods and services through central contracts. This is especially important on ICT contracts as the localism agenda could inhibit Government ambitions like achieving a paperless NHS. The Cabinet Office and the Government Procurement Service need to ensure greater use of the central contracts in local bodies by providing robust data to demonstrate the benefits, and by improving their communication with the wider public sector.
4. The Government is not using its buying power with suppliers to get the best deal for the taxpayer. This includes ensuring that large government suppliers are paying enough tax on UK profits. While it is long overdue, we welcome the co-ordination of the management of major suppliers across government. However, government is still not fully using its negotiating position as a large customer to challenge those who pay little UK tax on their profits or those who have failed to deliver effectively in previous contracts. The Cabinet Office should consider how suppliers' performance and record of paying their fair share of tax impact on procurement decisions. EU public procurement laws should not be interpreted as a barrier to making common sense decisions on procurement.
5. The government has not yet done enough to provide greater opportunities for SMEs to win government business. The government has a long way to go in its aspiration to achieve 25% of its procurement spending with small businesses by 2015. Current data suggests that, despite clear commitments, only 10% of government spending is currently with SMEs. However, there are also major gaps in SME data, which means that it is not possible to confirm this figure. This limits the Cabinet Office's ability to measure progress. Recent large government procurements have had negative consequences for SMEs, for example in the Work Programme where many are now leaving the market or going out of business. The Cabinet Office should develop a detailed strategy for how it intends to increase government spending with SMEs, including which services could and should be provided by small businesses, and how the data collected on SMEs can be made more robust.
6. Government still lacks the capability and capacity to commission services, and in the past has acted as if simply buying ICT is a solution in itself. Government is moving away from thinking first about what ICT is needed, towards delivering a better service and using ICT to support its delivery. This approach should cut costs. However, we have seen several recent examples where the traditional approach still prevails, such as buying BlackBerrys for police officers without first working out what improvements to services were expected. The Cabinet Office should strengthen its capability and capacity to challenge departmental proposals for ICT procurements, identify failure quicker, and work with departments to accelerate the change in culture from buying ICT to commissioning services.
7. There is much more to do if the government is going to realise lasting and significant savings from its reforms. The Cabinet Office identified priority areas for further improvement, including more cost effective procurement, the expansion of digital services, making the most of potential savings from shared back office services, and better management information. These areas are inter-dependent, and will need a coherent approach to gain the trust of departments and suppliers and make the reforms work. The Cabinet Office should set out in its Treasury Minute response the improvements it expects in these areas, the money it hopes to save, how it will measure progress, and how the initiatives will be integrated.