Central civil government organisations spent approximately £20 billion on goods and services in 2005-06. The Office of Government Commerce has estimated the figure for the wider public sector to be in the region of £100 billion. It is important that central government departments and the wider public sector secure good value for money when procuring these goods and services. The Government's Efficiency Programme is designed to improve public service delivery by achieving £21.5 billion of efficiency gains per year by 2007-08. About one third (nearly £8 billion) of this is expected to come from more efficient procurement of goods and services.
Established in April 2001 as an agency of the Office of Government Commerce, itself an Office of the Treasury, OGCbuying.solutions' primary purpose is to maximise the value for money that public sector bodies can achieve when buying goods and services. It provides a portfolio of products (framework agreements, managed services and memoranda of understanding) which aim to provide public sector organisations with lower prices and reduce procurement process costs through avoiding the need to undertake time-consuming and expensive tendering processes. OGCbuying.solutions' customer base extends across both central government and the wider public sector, including the devolved administrations. Its products cover a wide range of commodities, for example, consultancy services, IT equipment, office equipment and telecommunications services.
In 2005-06, OGCbuying.solutions reported value for money savings of £412 million. Whilst these savings are significant, the National Audit Office has identified the potential for a significant increase in savings of between £520 million to £660 million over the next 3-5 years through improved performance by OGCbuying.solutions and by increased co-ordination across public sector procurement. Three key areas where OGCbuying.solutions can add greater value are through: securing lower prices for its customers; improving the management of its suppliers; and increasing its market penetration. To achieve these benefits will require a 'fit for purpose' organisation based around a core set of products, enhanced staff skills, and incentives to drive performance across all its activities.
Public sector procurement is unco-ordinated. OGCbuying.solutions is only one of over 50 public sector procurement organisations operating across the UK, many of which offer framework agreements for the same goods and services found in OGCbuying.solutions' product range. In addition, central government departments, executive agencies, non-departmental public bodies and wider public sector organisations operate their own framework agreements. This lack of co-ordination results in organisations paying more than they should for goods and services and incurring unnecessary procurement process costs.
In support of the Efficiency Programme, the Treasury announced on 23 January 2007 its plans to transform government procurement which included a more defined role for OGCbuying.solutions.
On the basis of a Report by the Comptroller and Auditor General, we took evidence from OGCbuying.solutions on three main issues: creating a 'fit for purpose' organisation; increasing market share through smarter engagement with customers; and the role of OGCbuying.solutions in transforming government procurement.
Key terms used in this report are listed in the Annex in order of appearance.