Editor's blog Monday 11 October 2010: Green's review of government procurement
After a day of hearing about how "shocking" it all was (Mary Whitehouse would be proud), Sir Philip Green's .
The Shareholder Executive are going to be very busy.
On slide 29, the (un-named) Department of Health gets it in the neck thus:
"There is inefficient management of the estate, even within one department:
•In 2009 a department had 149 regional offices (administration only) in 10 regions, with 27 in London.
•The central property function recommends downsizing to 30 offices.
•The department has recognised the issue and is trying to rectify the situation.
•Effectively 119 of these properties are not needed. We have been unable to confirm the cost"
Now this is wisdom after the fact of the White Paper.
Green finds that
•Basic commodities are bought at significantly different prices across Government departments.
•Multiple contracts have been signed with some major suppliers by different departments at different prices.
•The Government is the largest tenant/owner in the country, yet the use and management of space is wholly inefficient.
•Expensive IT services are contracted for too long with no flexibility.
Why so wasteful? Green's document suggests that:
•Data is very poor and often inaccurate.
•Government acts as a series of independent departments rather than as one organisation.
•There is no motivation to save money or to treat cash “as your own”.
•There is no process for setting and challenging detailed departmental budgets.
•There hasn’t been a mandate for centralised procurement.
•There are inconsistent commercial skills across departments
The report points out that iterated estimates of central government expenditure on travel brought an initial figure of £2 billion down to £551 million. It notes, "There is considerably more spent on travel outside central Government but we were unable to confirm actual spend".
Separately, the review found that a box of paper was p[rocured at a highest price of £73 and a lowest price of £8 - an 89% differential. Laptops ranged from a highest of £2,000 to a lowest of £353: an 82% differential.
For mobile phones, the total annual spend in central Government is £21 million. There are 105,000 devices in use and 98% of central Government spend is with one provider. This provider has 68 contracts with Government departments and arms length bodies, typically negotiated by each department separately and not ending at the same date. This makes the process very inefficient and again fails to leverage scale.
Its recommendations are simple: "Government must leverage its name, its credit rating and its buying power - mandating centralised procurement for common categories to leverage this buying power and achieve best practice; producing accurate spend and consumption data; pricing common items at the same level for all central Government departments (and making contracts available to wider public sector); and managing down demand and specifications. When purchasing on behalf of Government, civil servants must focus on cash, applying the same principles as if the money were their own.
It finds that IT contracts are poorly managed and bad value for money. It calls for an audit of all contracts with more than £100 million remaining value (estimated total £16 billion) by a central, experienced negotiating team. The remit should be to investigate:
•The current demand for services.
•The cost of delivering the service, and the relationship between cost and price (open book).
•The financing arrangements.
•The subcontracting arrangements.
•The contractual flexibility.
•The ability to break the contract.