Press Notice No. 41 of Session 2003-04, dated 14 October 2004
Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today the drive for procurement efficiency must continue so that the taxpayer gets more in return for the £15 billion a year spent by central government, and he wants to see departments make better progress in developing properly professional procurement.
Mr Leigh was speaking as the Committee published its 41st Report of this Session, which examined progress in improving procurement, including: the impact of the Office of Government Commerce on departments, their agencies and non departmental public bodies; how departments are securing greater value for money from new purchasing arrangements; analysis of the costs of procurement; and what is being done to raise the professional capability of procurement staff in departments.
Central civil government spends some £15 billion annually on goods and services, ranging from equipment, information technology, research, and consultancy advice to postal services, travel and stationery. In April 2000, the Office of Government Commerce (OGC) was established to work with departments to improve their procurement capability. A key measure of the OGC's success is the achievement of its value for money improvement targets. Against a target of £1 billion, departments had reported value for money gains of £1.6 billion over 3 years by 31 March 2003. For the succeeding three-year period to 31 March 2006 the OGC has a more ambitious target to secure a further £3 billion gains. Given this target, together with a drive towards improved efficiency across the public sector, there is a greater need than ever for departments to measure their existing procurement practices against OGC good practice guidance to see where improvements can be made. There will for example be the scope for significantly reduced transaction costs, greater use of e-commerce solutions, increased collaboration between departments and the wider public sector, and greater use of framework agreements.
The Committee found that departments should appoint a Commercial Director with an appropriate professional qualification, who has responsibility and oversight for all commercial dealings with the private sector. He or she should be a member of, or report to, the department's management board, as is the case in five departments including the Department for Work and Pensions. Departments need to increase the numbers of professionally qualified procurement staff. Just 23% of all designated procurement staff have a Chartered Institute of Purchasing and Supply or other procurement qualification, and the rate of progress to develop a fully professional procurement service has been slow.
Departments need to make clear to their executive agencies and non departmental public bodies the importance of adopting good procurement practice. Agencies and non departmental public bodies are less likely to apply OGC guidance and good practice, risking poorer value and missed opportunities for savings. And lessons learned from savings achieved so far should be promulgated to other parts of the public sector, particularly the National Health Service, if the remit of the OGC is extended as proposed.
The OGC should demand early action from departments in response to poor Gateway reviews, in particular where successive reviews suggest projects are going wrong and taxpayers' money is at risk. While accountability for major procurement projects rests with individual Accounting Officers, the OGC should consider engaging the Treasury's authority to control expenditure as a lever against departments who choose to proceed in the face of successive 'red' or 'amber' warnings.
Departments should be able to demonstrate how deviations from OGC-sponsored approaches have secured better value for money. There should be a presumption in favour of using OGC-established procurement routes, particularly for routine and low value items. Where departments make other arrangements they should be able to demonstrate clearly the reasons for doing so, and how better value has been secured. Departments should also get to grips with maverick spending - where staff use unauthorised buying arrangements or suppliers who are not approved - as they risk losing value that could otherwise be achieved through established arrangements.
Greater use should be made of the Government Procurement Card. The card offers simplified purchasing, reduced transaction costs, speedier delivery and reduced stockholding, while a sound audit trail provides information about what was bought, from whom and how much was spent. At present, only 6% of departmental spending is via this route and for non departmental public bodies the figure is only 3%.
Departments should make their procurement processes and policies accessible to small and medium-sized enterprises. These suppliers may be able to offer better value for money through increased competition, local supply lines, and greater flexibility and innovation. In particular, when framework agreements within the S-Cat and GCat catalogues are due for renewal, departments should publicise this effectively, using their links with bodies such as the Department for Trade and Industry's Small Business Service to make sure that as wide a range as possible of suppliers have the opportunity to compete.
If departments are to realise the many potential benefits in developing electronic procurement systems, they need to make a careful appraisal of the costs, benefits and practicalities of developing them. In particular, they should be aware of similar initiatives in other departments, so that wasteful duplication is avoided, and good practice lessons are learned. The Department for Work and Pensions and the Office of the Deputy Prime Minister, for example, are developing separate e-procurement systems to reduce the processing costs of procurement. The gains so far achieved by the Office of the Deputy Prime Minister have, however, yet to meet the expectations of its business plan.
Departments should have the means to satisfy themselves about the financial and operational reliability and resilience of key suppliers, and their associated supply chains. Currently, just 17% of departments, agencies and non departmental public bodies analyse the strength of their suppliers' and their associated supply chains, and only 26% hold information on the proportion of individual suppliers' turnover that their procurement spending represents.
Mr Leigh said today:
"With the OGC's support, departments had achieved £1.6 billion better value from procurement over the 3 years to March 2003. The drive for efficiency must continue so that the taxpayer gets more in return for the £15 billion a year spent on central government procurement, and it is quite right that the OGC's next target is much more ambitious. I want to see departments make better progress in developing properly professional procurement. They must ensure they do not depart from OGC procurement routes without clear justification, and that the agencies and other bodies they sponsor also follow best practice."
Note for Editors
The Office of Government Commerce (OGC) has no authority to direct departments. Rather it works closely with them by issuing guidance, advice and good practice, and developing the government market place so that it is attractive for suppliers. It also delivers services directly to departments, principally through its executive agency, OGCbuying.solutions, which negotiates arrangements for the purchase of goods and services such as utilities and IT hardware and software.
to view Report