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The public sector spends £227 billion each year buying a range of goods, services and works, £45 billion of which is spent by Whitehall Departments. The Ministry of Defence alone spends £20 billion a year. By improving the efficiency and effectiveness of procurement, the Government has an opportunity not only to save the taxpayer significant sums of money, but also to drive economic growth.
The Government has initiated steps to improve the efficiency and effectiveness of government procurement: improving its data, aggregating demand across government departments; and renegotiating the relationship with major suppliers. The stream of procurement and contract management failures, however, continues unabated?the G4S and Serco contracts with the Ministry of Justice, under which payments were made regardless of the service delivered, are just the most recent examples. There is clearly much more to be done.
Public procurement in the UK is governed by the Public Contracts Regulations 2006, which in turn implement the EU Directives on public procurement. We are concerned that these Directives reinforce a process-oriented, risk-averse culture in procurement, which in the UK has resulted in delay, increased cost and a failure to focus on outcome. It is intolerable that UK public procurement still takes 50% longer than it does in France or Germany under the auspices of the same Directives. The effort to reduce risk tends to increase risk in the form of delay and increased costs.
Not enough has been done to improve the access of SMEs and social enterprises to government contracts. We welcome the EU reform proposals, which will encourage public bodies to use procurement for wider social and environmental purposes. Similarly, we welcome the Public Services (Social Value) Act 2012, which seeks to maximise the positive impact of public spending for the UK economy. The UK has trailed other EU countries in doing this. Whilst Bombardier in Derby was not successful in securing the contract for Thameslink trains, for example, French and German suppliers have for a long time been more successful in securing contracts for domestic producers, to the benefit of their national economies.
There are clear shortcomings in the ability of the Civil Service to run effective and efficient procurement. The Civil Service shows a consistent lack of understanding about how to gather requirements, evaluate supplier capabilities, develop relationships or specify outcomes. We welcome the initiatives to improve capability and skills, such as the Major Projects Leadership Academy and those set out in the Civil Service Reform Capabilities Plan, but a more fundamental shift is required. Little is known about the skills and experience?or lack thereof?of 17 of the 61 senior procurement civil servants across Whitehall, and consequently there is little coordination of this vital resource. This needs to change, not least because these officials will be thrown into the public spotlight when the Government makes Senior Responsible Owners of major projects directly accountable to select committees.
The proposed Ministry of Defence Government Controlled Contractor Operated (GOCO) model has been designed to get around outdated restrictions and improve Government access to commercial and procurement capability. It will, however, be difficult to implement and brings with it considerable risks. Moreover, it should not be necessary in the first place. No other civil service in a comparable country operates on the basis that the Prime Minister's salary should be a maximum and such a myopic policy makes the UK Civil Service internationally uncompetitive. We are not convinced that the GOCO concept is sound or that a cost-benefit analysis would prove its viability.
The Government has failed to set out a clear strategy for public procurement. The Cabinet Office needs urgently to address this, setting out clear procurement objectives and timescales for their achievement. The evidence base for this needs to be consistent, good quality procurement data from across Whitehall, and progress on gathering this, which has been unacceptably slow to date, needs to be significantly improved.
Whilst we welcome the Government's initiatives to centralise procurement, we note that progress so far has been painfully slow and sporadic. It is clear from our evidence that this is because, despite the centralising mandate given to the Cabinet Office by a Cabinet Committee, inter-departmental cooperation is poor. We find it astonishing that a department should be able to cite legal restrictions as a barrier to collaboration with the Cabinet Office on initiatives that could save the taxpayer money. The Government is a single customer and should behave as such. As a matter of urgency the Cabinet Office should establish clear and authoritative guidance for deciding when procurements are subject to the Cabinet Office mandate; when they can be retained under departmental control; and how disputes are to be resolved.
The present paralysis raises questions about the role of the Cabinet Office and its relationship with other departments, as part of the development of a more unified model for Whitehall which is mooted in the Civil Service Reform Plan. We will address this in our Report on the Future of the Civil Service.
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