3 The role of OGCbuying.solutions
in transforming government procurement |
18. Central civil government spends an estimated
£20 billion a year procuring goods, services and works. The
wider public sector spends an estimated £100 billion.
Public sector procurement is uncoordinated.
The 'silo effect' remains prevalent with procurement professionals
letting their own contracts rather than considering collaborative
options such as using OGCbuying.solutions' framework agreements
or agreements set up by other departments.
Central government organisations are operating 2,300 framework
agreements, many of which are in areas covered by framework agreements
operated by OGCbuying.solutions.
For example, there are 37 framework agreements covering energy
which are likely to duplicate the range of energy framework agreements
operated by OGCbuying.solutions.
19. This lack of co-ordination is eroding value for
money. Prices for standard products vary greatly across central
government organisations (Figure 3).
|Figure 3: Prices paid by central government organisations for the same product show significant variation
||Price variations (highest price above lowest price)
|Toner cartridge (per cartridge)
||£41 to £89
|Electricity (day rate p/kWh)
||4.8p to 8.3p
|Box of 5 x 500 A4 (80g/m2) 100% recycled while paper (per box)
||£6.95 to £14.95
|Post-it notes 76mm x 76mm yellow recycled pack of 12 (per pack)
||£4.41 to £10.55
Source: National Audit Office
20. In addition to price variations, the lack of
co-ordination is resulting in duplication of effort resulting
in increased procurement process costs. In 2005 public sector
organisations spent an estimated £415 million on unnecessary
process costs by tendering their own contracts rather than using
framework agreements operated by OGCbuying.solutions.
21. Information is a key element to enable public
sector organisations to make rational decisions about when to
let their own contracts and when to use collaborative options.
Central government organisations consider three types of centrally
available data are the most important to improve value for money
across the public sector: information on price benchmarking; information
on framework agreements which are open to public sector organisations;
and information on where the 'best deals' are. The majority of
organisations think there should be more of this information available.
22. The Office of Government Commerce has established
a database providing public sector organisations with information
on established contracts that are open to all public sector organisations
across various product categories including energy, professional
services and travel.
There is, however, no centrally available price benchmarking information.
In addition, organisations need to understand the costs of letting
their own contracts to be able to make an informed decision about
when to let contracts and when to use collaborative options. 87%
of central government organisations have not made an assessment
of the cost of letting and managing contracts.
23. As part of the Treasury's reform of public sector
procurement, the Office of Government Commerce will be given stronger
powers to set out the procurement standards departments need to
meet, monitor departments' performance against them and demand
inter-departmental collaboration where it improves value for money.
Good information on the contracts open to public bodies, price
benchmarking information and information on the cost of letting
and managing contracts will strengthen the Office of Government
Commerce's role when it looks to organisations to 'comply or explain'.
Where government departments choose to depart from the best deals
they will be subject to challenge by the Office of Government
24. There are over 50 procurement organisations across
central government and the wider public sector contributing to
the lack of co-ordination across public sector procurement.
There is significant duplication across these procurement organisations
with many operating framework agreements in the same product areas.
25. Across central government and the NHS there are
four main procurement organisations: OGCbuying.solutions; the
NHS Purchasing and Supply Agency; the Defence Logistics Organisation;
and the Defence Procurement Agency. There is some co-ordination
amongst these organisations.
For example, the Defence Logistics Organisation manages the liquid
fuels portfolio for OGCbuying.solutions' Energy Managed Service
customers. However, other OGCbuying.solutions' products and services
are in competition with similar products and services provided
by other procurement organisations.
For example, OGCbuying.solutions and the NHS Purchasing and Supply
Agency both procure electricity. At present there is no systematic
co-ordination of activity across public sector procurement organisations.
26. eProcurement offers the potential for significant
value for money savings. For example, across the 138 eAuctions
undertaken through the OGCbuying.solutions' framework agreement,
average price savings are reported at 22% compared to historic
prices paid for the same product.
Utilisation of eProcurement tools nevertheless remains low across
the public sector.
For example, 73% of central government organisations have not
used an eAuction. Of the organisations that have not used eAuctions,
31% cited 'the value for money benefits are difficult to identify'
as the reason despite the strong evidence of significant savings
42 C&AG's Report, footnote 22, 25, page 23 Back
Qq 28-29 Back
Qq 138-140, 125-126 Back
C&AG's Report, para 3.4 Back
C&AG's Report, Figure 24, page 29 Back
Q 127 Back
Qq 46, 83-85; C&AG's Report, para 3.9 Back
C&AG's Report, para 3.6 Back
C&AG's Report, para 3.7 Back
Qq 90-91, 127 Back
C&AG's Report, para 2.37 Back
Qq 52-54, 153-154; HM Treasury (2007) Transforming Government
Procurement. London: The Stationery Office. Foreword by the
Financial Secretary to the Treasury, page 1 Back
HM Treasury (2007) Transforming Government Procurement. London:
The Stationery Office. Foreword by the Financial Secretary to
the Treasury, page 1 Back
Q137; C&AG's Report, para 3.3 Back
C&AG's Report, para 3.3 Back
Qq 86-87, 113, 147 Back
C&AG's Report, para 3.5 Back
C&AG's Report, para 3.3 Back
C&AG's Report, para 2.18 Back
Qq 117-120 Back
National Audit Office, central government survey results: http://www.nao.org.uk/publications/nao_reports/06-07/0607103_gov_survey.pdf