1 Introduction
1. The Cabinet Office has been leading reforms
to the organisation of government procurement since 2010. It is
reaching a critical juncture in its reform programme as it seeks
to sustain initial progress, implement wider Civil Service reform
and overcome objections to further centralised control from individual
departments. At the same time, the European Parliament is considering
how to reform EU Directives on public procurement to allow public
authorities greater flexibility, not least in response to the
economic challenges facing all Member States. In light of these
developments, it is timely to reflect on how much progress has
been made in reforming and improving government procurement; reconsider
what is inhibiting improvements to the commercial and procurement
capability of the Civil Service; and to identify what is limiting
the social and economic benefits from central Government's, and
indeed the wider public sector's, procurement spending.
2. 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.[1]
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. At
one end of the spectrum "common" goods and services,
such as office supplies, computer equipment, energy and travel
are purchased by all or most government departments. The Cabinet
Office has estimated that £7.5 billion is spent each year
by departments on such items.[2]
Departments necessarily also procure particular goods, services
and works as part of projects and programmes to implement specific
policies or meet specific operational requirements.
3. The term "procurement" can be more
or less narrowly defined. This inquiry considered procurement
in its broadest sense, including not only the technical process
of specifying requirements, seeking and evaluating bids and awarding
a contract, but also the wider process of investigating and engaging
with the market, and negotiating and managing contracts. We were
primarily concerned with the procurement undertaken by central
government departments. We recognise however that there are important
parallels to be drawn with the rest of the public sector, not
least the NHS and local government.
4. This report builds on our previous report,
Government and IT — a recipe for rip-offs: time for a
new approach, which examined the barriers to greater openness
and competition in government IT procurement, and identified the
need for measures to support SMEs' access to government IT contracts.[3]
It is notable that the Government has now started to address many
of these issues explicitly in its Government Service Design Manual
advising Departments on how to prepare to change IT suppliers.[4]
5. This report also complements the Committee's
inquiry into Civil Service reform which has been running in parallel
with this inquiry. Both inquiries have examined the considerable
challenges facing the Government in transforming and improving
the Civil Service while reducing costs. This report also builds
on our 2012 report Strategic Thinking in Government which
emphasised the importance of strong strategic leadership at the
centre of Government, and our 2011 report Change in Government
which emphasised the need for increased commissioning and procurement
capability in the Civil Service, not least to support effective
outsourcing of public services.[5]
6. The purpose of this inquiry was to look at
whether the Government was taking the right approach to reforming
the organisation of government procurement, and whether it was
addressing the apparent gaps in procurement and commercial capability.
We held seven evidence sessions, taking oral evidence from representatives
of business, small and medium-sized enterprises (SMEs), and the
third sector; procurement and commercial advisors; commentators;
as well as academics. We also heard evidence from the Minister
for the Cabinet Office, the Rt Hon Francis Maude MP, the Government's
Chief Operating Officer (and head of the Cabinet Office's Efficiency
and Reform Group), Stephen Kelly, and the Government's Chief Procurement
Officer, Bill Crothers. We went on a short visit to Brussels to
understand better the challenges facing public procurement and
plans for reform of the European procurement Directives. A note
of the visit is at the Annex to this report. We are grateful to
George Last, a secondee to us from the National Audit Office,
for his support to this inquiry.
1 HM Treasury, Public spending statistics: April
2013, Table 9, National Audit Office, Improving Government
Procurement, HC 996 Session 2012-13, 27 February 2013, p 11 Back
2
National Audit Office, Improving Government Procurement,
HC 996 Session 2012-13, 27 February 2013, p 7 Back
3
Public Administration Select Committee, Twelfth Report of Session
2010-12, Government and IT-'A Recipe for Rip-Offs': Time for
a New Approach:, HC 1724 Back
4
Government Service Design Manual, at www.gov.uk/service-manual Back
5
Public Administration Select Committee, Twenty Fourth Report of
Session 2010-12, Strategic thinking in Government: without
National Strategy, can viable Government strategy emerge?, HC1625
and Public Administration Select Committee, Thirteenth Report
of Session 2010-12, Change in Government: the agenda for leadership:
HC 714 Back
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