1. Central government spent a total of around £45 billion on buying goods and services in 2011-12. These range from items common across departments, such as energy, office supplies and travel, through to specialist areas such as defence equipment and welfare to work services. Since 2010, the government has introduced a range of procurement reforms intended to achieve savings, to take advantage of government's buying power to stimulate growth and innovation, and to improve the government's approach to commissioning ICT services.[2]
2. The initiatives include centralising the procurement of common goods and services, on which central government spent an estimated £7.5 billion in 2011-12. The central contracts are managed by a new body, the Government Procurement Service (GPS). There are also reforms specific to ICT, on which central government spent an estimated £6.9 billion in 2011-12, buying a range of items and services, from desktops to large, bespoke ICT systems. The initiatives in the ICT sector include a process whereby ICT spending over £5 million must be approved by the Cabinet Office, and a shared infrastructure programme across government.[3]
3. The government's reforms have brought about improvements, including more expenditure being channelled through central contracts and savings which have been generated through the ICT initiatives. However, progress has, on occasion, been hampered by ineffective governance, including weaknesses in planning and target-setting.[4]
4. In its ambition to centralise the procurement of common goods and services, the Cabinet Office accepted that it had not worked with departments to agree appropriate targets, instead adopting an approach that "might have appeared a bit heavy-handed". It told us that this approach has caused some damage to its relationship with departments, but that it was necessary in order to achieve some savings quickly.[5] The 2012-13 targets for two of the ICT initiatives, spending controls and shared infrastructure, were met in the first six months of that year, suggesting that they were not sufficiently stretching. The Cabinet Office said that it was important for it to work closely with departments to develop shared plans, including challenging targets which are recognised by all parties.[6]
5. Planning and target-setting should be informed by reliable management information. Considerable efforts have been made by the Cabinet Office, working together with departments, to improve the quality of procurement data. The GPS told us that its tool for collecting and analysing spending data now has coverage of around 90% of central government, providing an improved picture of prices paid for standard items across government.[7] However, it is clear that there are still considerable gaps in data which need to be addressed- to ensure that government is getting the best deal and because a lack of confidence in data can also have a negative impact on GPS's relationships with departments. The Ministry of Defence expressed doubt about some of the GPS's reported savings, reporting issues with the visibility of the data and the relevance of the data to the Department.[8]
6. Departments are obliged to use GPS's centrally managed contracts but this is not enforced in practice, and departments are finding excuses not to participate. The Cabinet Office explained that it tried to build a coalition of interests and work with departments, because departments hold the budgets and are therefore ultimately responsible for their own spending decisions.[9] The Ministry of Defence told us that it did not disagree with being obliged to use central contracts, but that there needs to be mutual accountability and responsibility attached to it.[10]
7. There is a tension between GPS delivering a service and the particular needs of individual departments as service users.[11] Departments need to be more confident that central contracts represent value for money and that they are able to hold GPS to account for its performance.[12] The Ministry of Defence told us that departments have a customer service arrangement with GPS, which sets out in principle the style and nature of service that they can expect. However, most categories of spending do not have a detailed Service Level Agreement (SLA)-a document which sets out roles and responsibilities, the specific benefits, and requirements around the exchange of data. Where an SLA has already been put in place, such as the travel category, it has increased departments' confidence in the service.[13]
8. The majority of public sector spending is not from central government. Total government procurement, including the wider public sector, was around £200 billion in 2011-12, of which only £45 billion was in central government. There is therefore considerable potential for savings which lies beyond the initial focus of the government's reforms. However, there is a tension between localism and the government's drive to centralise procurement.[14] Local authorities, for example, are not subject to Cabinet Office measures such as being obliged to use central contracts for common goods and services.[15] The Cabinet Office acknowledged that, not only does it need to make the case more strongly for central contracts within central government, but that it also needs to engage more pro-actively with the wider public sector.
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2 C&AG's Report, Improving government procurement, para 1,2; C&AG's Report, The impact of government's ICT savings initiatives, para 1-5
3 C&AG's Report, Improving government procurement, para 8; C&AG's Report, The impact of government's ICT savings initiatives, para 3-4
6 Q70; C&AG's Report, The impact of government's ICT savings initiatives, para 2.18-2.20
12 Qq 18, 96; C&AG's Report, Improving government procurement, para 1.15, 2.21
15 C&AG's Report, Improving government procurement, para 2.28-2.29