Competition in public procurement – Report Summary

Summary

In 2021–22 government spent £259 billion on the procurement of goods and services, yet the Government has not demonstrated that it has consistently used its purchasing power to support local and national policies and objectives, or to drive healthy and competitive markets, including buying from SMEs. Public authorities have often not been effective in engaging with markets and potential suppliers, not helped by a lack of clear guidance from government. Furthermore, Government is unable to evaluate competitive trends in markets or demonstrate that it is achieving value for money in public procurement. Good procurement practice is essential to provide good quality services to citizens, support greater transparency and probity and provide value for money. Government does not routinely measure how much of public procurement is competitively tendered, but of the total contract value awarded by major departments during 2021–22, around two thirds was subject to competition in some form. Government has estimated that more effective use of competition in public procurement could achieve savings of £4 billion to £7.7 billion per year. These savings could generate value for money benefits by potentially reducing the cost of public sector contracts, through more efficient, streamlined, and flexible procedures including pre and post tender, driving commercial excellence and improving commercial capabilities.

Competition can help support efficiency, innovation, and quality in public services, by allowing buyers to select the bid that can supply the optimal balance of benefits and cost. Given the level of government spending and the increased trend to use framework agreements to get the most competitive benefit, at least administrative cost, it is imperative that government, local authorities, and arm’s length bodies make the right decision, at the right time, and take account of the multiple opportunities to use competition in public procurement to achieve value for money. However, government has not been fully capturing data on procurement, much less using the analytics from the collected data to draw insights on how competition in public procurement is operating within government and give context to purchasing decisions. The shortfalls in data hinder government’s ability to solve procurement issues, capitalise on value for money benefits or evaluate the functioning of competitive, innovative, and open markets.

The Procurement Act offers opportunities for government to make improvements to the procurement process, including improving the collection of public procurement data and making effective use of framework agreements to achieve competitive benefits from the market. We believe frameworks can be successful and work well for the purchase of common goods and services without reducing competition, if carefully managed. However, this can be hard to get right if government underestimates the importance of developing and maintaining commercial expertise across government including local authorities and arm’s length bodies. While we acknowledge that government has made progress to professionalise the commercial function at the centre, we are concerned that it has not sufficiently prioritised the need to develop that expertise across government, to ensure the successful implementation of the Procurement Act.