Trade & Industry Committee

7 November 2007



Timid public procurement practices too often lead to taxpayers’ not getting best value for money, MPs conclude

The Committee’s Report into the Future of UK Manufacturing: Public Procurement is published at 00.01hrs on 8 November 2007.

Overall, the Committee found that UK government policy on public procurement was clear and appropriate, but less satisfactory in practice. Applying this policy to every contract demanded skills and experience not available in every one of the 2,000 public bodies in the UK that procure goods and services. Instead, some officials took refuge in bureaucratic procedures and opted for the least cost, not the best value, bid. This deterred competition and innovation among suppliers, often ruled out environmentally sustainable options, and was particularly harmful to small businesses which do not have the resources to deal with complex, long tendering processes. The Committee called for better trained and higher quality procurement officials throughout the public service, supported by floating teams of experts in particular procurement areas.

During the course of the inquiry (the third of a series looking at the future of UK manufacturing industry) the Committee found that many of those involved in public procurement are too timid. This is either because those buying goods and services are either insufficiently well-acquainted with the sector concerned to know or understand what options are available, or are too afraid of failure to try anything new, even if it might provide better lifetime costs or additional benefits.

The Committee found that in some respects, the Government’s current efficiency drive-involving (amongst other things) centralising purchasing and the use of framework contracts-is making it more difficult for SMEs to compete for public contracts and reducing competition further. The Committee also deplored the fact that public bodies, including HM Treasury, had a poor record on timely payment of bills. The Committee called on HM Treasury to set a better example.

The Committee accepted that the Office of Government Commerce (OGC), the body charged with overseeing procurement policy, had issued a number of comprehensive guides to best practice and had drawn up useful standard forms, for example in relation to prequalification for tendering. However, until a few months ago it did not have the authority to enforce implementation of best practice. The Committee expects it to do so now.

The Committee was concerned that in one area-the use of public procurement to further the Government’s social policy and equality aims-the OGC’s guidance did not go far enough. It recommended that the guidance be reviewed.

Mr Peter Luff said: “The Government is finding it difficult in practice to balance its different aims in public procurement. There is a danger that SMEs will be squeezed out from even tendering for contracts because of the centralization imposed under the Government’s efficiency drive. The bureaucracy around tendering runs the risk of reducing competition for contracts in future. In addition, too often purchasers see ‘cheapest cost’ as being the same as ‘best value for money’, and they fail to use the discretion already given to them to promote innovation or to achieve  environmental or social aims through public procurement. We need  greater professionalism among those engaged in buying goods and services for the public sector. HM Treasury must also be more sensitive to the effects of its policies on competition among companies that supply the public sector.”

For further information please call the Committee Office on 020 7219 5777/5779

Further Information:

The Trade and Industry Committee ceased to exist at the end of the last Session of Parliament; it has been replaced by the Business, Enterprise and Regulatory Reform Committee. Members of this Committee have not yet been nominated.

Chairman: Peter Luff MP (Con) (Mid Worcestershire)
Roger Berry (Lab) (Kingswood) Brian Binley (Con) (Northampton South)
Peter Bone (Con) (Wellingborough) Judy Mallaber (Lab) (Amber Valley)
Michael Clapham (Lab) (Barnsley West and Pen.) Rob Marris (Lab) (Wolverhampton S. West)
Claire Curtis-Thomas (Lab) (Crosby) Anne Moffat (Lab) (East Lothian)
Lindsay Hoyle (Lab) (Chorley) Mike Weir (SNP) (Angus)
Mark Hunter (Lib Dem) (Cheadle) Anthony Wright (Lab) (Great Yarmouth)
Julie Kirkbride (Con) (Bromsgrove)

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