This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its February 2013 report entitled Improving government procurement, the UK National Audit Office reviewed the government’s central purchasing practices and found duplication, weaknesses in central administration, and a lack of strategic planning, internal accountability or reliable data regarding awards made to small- and medium-sized businesses.
Regarding duplication, the report noted that while the Collaborative Procurement Program established in 2007 had “led to some improvements in the purchase of goods and services”, a review of those efforts found that “there were a large number of central framework contracts with overlap in what they provided, there was little standardisation of specifications, and organisations were not aggregating volumes to get the best prices.” Furthermore, the report found that “there was no mandate requiring departments to sign up to central contracts” and that this lack of mandate undermined consolidation efforts.
For centralized administration, the report stated that “Departments have raised concerns about the inconsistency of contract management across the categories of common goods, and the quality of customer service”, and found that “roles and responsibilities for day-to-day contract management are unclear.” The report also observed that “there are cases where the central contracts do not meet departments’ operational needs, in part due to a lack of consultation when developing the specifications.” As the report stated, these weaknesses in implementation meant that departments were unable to allocate staff resources to focus on more strategic procurements. With respect to staffing these operational needs, the report found that “neither the Cabinet Office nor departments have a detailed operating model of what mix of skills are needed following the reforms.”
In relation to strategic planning, the report found that the government was “not maximising the potential for savings through centralised procurement”, and that the Cabinet Office did not analyze departmental procurement expenditures to “understand issues such as when existing contracts would be coming to an end, specific operational risks, or the actual proportion of expenditure which could be addressed by the central contracts.” The report also observed that the government “did not consult with departments to ensure that the targets were realistic”, or co-ordinate “a plan to transition spending to the central contracts.” The report concluded that these gaps could be partially attributed to the lack of quality data provided by departments to the Cabinet Office.
As to internal accountability, the report found that there were “inadequate mechanisms by which departments and the centre of government can hold each other to account”, and that “current mechanisms do not address the inherent tension between the mandate for government departments to use central contracts, and departmental accountability for expenditure and operational risk.” It also found that the central government’s “mandate is not enforced, and there are no sanctions in place if departments do not comply.” Notably, the Cabinet Office did not “hold departments to account for transferring expenditure to the central contracts, and for reducing their own procurement resources.” At the same time, the report noted that departments were largely unable to hold the Government Procurement Service to account for performance”, and that “governance structures have grown organically, resulting in duplication between groups and boards”, with a resulting lack of clarity regarding the purpose and objectives of the centralization efforts.
Finally, the government’s goal to support small business, which was to direct 25 percent of procurement spending to small- and medium-sized enterprises (SMEs) by 2015, was noted in the report to have only increased “from 6.8 per cent in 2010-11 to 10 per cent in 2011”. It was further noted “poor quality data on SMEs means that these figures are difficult to verify.”
As this report illustrates, achieving efficiencies and cost savings through the centralization of government purchasing may be easier to achieve in theory than in practice. Making those goals a reality calls for concerted efforts and co-ordination by central government bodies and departments.
