Select Committee on Public Accounts Thirty-Third Report

Conclusions and recommendations

1. operates 180 framework agreements, but more than 90% of customer sales are undertaken using only 25% of these agreements. 40% of framework agreements do not cover their letting and management costs. should identify the product areas where it has particular areas of market expertise and where it can demonstrate best value by offering keener prices and securing higher levels of customer take up than other bodies or procurement organisations in the public sector. It should rationalise its framework agreements accordingly.

2.  The requirement for to raise revenue as a trading fund acts as a disincentive for it to promote activities such as the Government Procurement Card and Memoranda of Understanding which provide wider value to public procurement, but do not yield a direct return to the business. At present, for example, 47% of central government organisations are not using the Microsoft Memorandum of Understanding for purchasing software licenses, and 22% are not using the Government Procurement Card. The Office of Government Commerce and need to agree separate funding arrangements and incentives to encourage to promote these products, based on the principle that the immediate costs involved will be more than covered by the wider savings achieved across the public sector.

3. acknowledges that it has insufficient high level commercial expertise to negotiate consistently good deals with suppliers which its customers want to use. needs to gauge the extent of this shortfall by reference to, for example, high performing procurement operations in the private sector. It should develop an action plan for training and recruitment so that it has the capabilities to convince its customers that the deals it negotiates with suppliers offer the best prices and quality of service.

4. operates in a commercial world, but incentives for key staff do not match this environment. In order to attract high calibre individuals and to drive performance, incentives for senior staff, particularly those in commercial roles, should be linked to business performance as measured, for example, by volume commitments secured, better value deals negotiated and increased market penetration.

5.  63% of central government organisations and 73% in the wider public sector consider that do not consult their organisations enough when letting new framework agreements and managed services. needs to have regular meetings with its key customers, including executive agencies, non-departmental public bodies and wider public sector organisations, particularly before letting new framework agreements. It should also use these consultations to get feedback on the performance of' suppliers.

6.  Despite three development stages, customers still find' website difficult to use. should identify from successful websites in both the public and private sectors how it can improve its website and how it can better identify what their customers want. should also make it easier for potential customers to use other forms of contact, for example, by providing them with names and email addresses of staff most able to deal with their issues.

7.' suppliers are not given enough information to understand their performance and how to improve it. needs to improve its supplier performance monitoring system so that it gathers comprehensive customer feedback on supplier performance and relays this to suppliers to enable them to improve performance and better meet customer requirements. It could, for example, introduce supplier league tables, which are used by the NHS Purchasing and Supply Agency to compare supplier performance across the same framework agreement.

8. has met its value for money performance target in each of the last three years, but has the potential to increase its annual value for money savings by at least £500 million. These savings should be achievable within three years, but the Office of Government Commerce needs to set much more challenging targets, based on the recommendations above, to make sure this happens. should also aim to ensure that the prices for all its major framework agreements fall within the lowest 25% of public sector prices, as a more demanding test of value for money than the 'average prices' benchmark currently used.

9.  Public sector bodies spent £415 million on unnecessary procurement process costs in 2005, and prices across central government organisations for four standard products varied by between 73% and 139%. The Office of Government Commerce and need to provide public sector organisations with accurate and comprehensive information on the costs of letting and managing contracts and clear price benchmarking data so that, under the principle of 'comply or explain', the Office of Government Commerce has reliable grounds to challenge departments where they decide to depart from 'best deals'.

10.  Across Central Government and the NHS there are four main procurement organisations (, the NHS Purchasing and Supply Agency, the Defence Logistics Organisation and the Defence Procurement Agency). The resulting duplication of effort means, for example, that both and the NHS Purchasing and Supply Agency procure electricity. To support its 'single approach to sourcing', the Office of Government Commerce should develop a concordat so that, where a 'lead' organisation, whether a dedicated procurement organisation, government department or other public body, is identified for each commodity or product, these four procurement organisations commit to using and promoting the contracts put in place by that organisation.

11.  Central government organisations have made little use of eProcurement despite, for example, potential price savings using eAuctions in the region of 20-25%, compared with historic prices. The Office of Government Commerce and should publicise and highlight these savings to demonstrate to procurement professionals and, more importantly, budget holders and Finance/Commercial Directors the value that is not being currently captured.

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Prepared 26 June 2007