Government could save £10bn a year by improving procurement – Report

Lack of commercial skills in the civil service may stand in the way of the government's visionary plan for digital procurement, according to think-tank.

The Reform report on public procurement issued today suggests an increased use of the digital marketplace could save the British government billions. Projecting the growth of e-procurement at current levels, nearly 6 per cent would be done online, saving around £470 million a year by 2020.

According to the report, the wasted billions is due to the fact that the British government is unaware of how much it spends on private sector suppliers. If Whitehall were to model its procurement strategy to that of Estonia, where the government buys half of its goods and services online, or South Korea, where e-procurement makes up 64 per cent of spending, the savings could amount to around £10 billion a year.

In total, it is estimated the digital marketplace has saved departments 20 per cent on legacy contracts, and 50 per cent when process costs were included.

A Cabinet Office spokesman said: “Taxpayers rightly expect us to find the best value for money, and everyone deserves the best possible public services.

“We’ve saved billions of pounds for taxpayers through our commercial reforms, and the Crown Commercial Service and Government Digital Service will continue to work closely together to introduce the latest innovations and ensure we get the best value from every deal.”

With the launch of the G-Cloud programme, the UK government made its ambition clear: at least 50% of spend on new government IT should flow to SMEs directly and in the supply chain. E-procurement also promises to reduce the barriers to entry for many SMEs who have never worked with the public sector before. Additionally, the government’s digital marketplace is geared towards helping SMEs secure long-term work. 

With 51 per cent of the G-Cloud spend coming from SMEs in the first three months of 206 alone, this presents a huge opportunity for growing businesses to break into the lucrative public sector. To that effect, a number of industry insiders project the value of the services brought through this platform to exceed £3 billion per annum by 2018.

In a recent blog post, the report’s author, researcher William Mosseri-Marlio, the principle issues facing suppliers interviewed for the paper was concern “about the expertise of officials.” There seems to be a general call for up-skilling commercial staff with the specific skills needed for a digitised platform.

“Limiting rotation and boosting secondments into and from the private sector are immediate steps that should be accompanied by a review of civil service commercial skills. Moving towards a performance-related model of pay might also help tackle the culture of risk aversion within procurement teams,” according to Mosseri-Marilo.

The British government’s exact procurement spend is heavily disputed. The National Audit Office calculates central government annual spend at £40 billion each year, with a further £147 billion accounted for by the NHS, local government and devolved administrations. This conflicts with the HM Treasury’s estimate of a £242 billion procurement spend across all the wings of the public sector.

According to the report, the lack of public attention on the government’s procurement strategy is the leading cause for a £55 billion discrepancy. This suggests an urgent need for baseline figures, greater transparency, and increased efficiency in the procurement process–all boxes which a fully digitised platform can allegedly tick.

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.

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