The Office of Fair Trading (OFT) has urged IT suppliers to be more transparent about costs and avoid confusing their public sector customers.
In a study which looked at competition between companies in two areas – off-the-shelf software and outsourced IT – the OFT said ICT was “vital for the efficient and cost-effective delivery of all public sector services”, accounting for a significant proportion of total public sector expenditure, with about £13.8bn spent in 2011/12.
But according to the OFT study, there are barriers preventing companies entering the market or expanding their share of supply, and also deterring buyers from switching between suppliers.
Some of these barriers include: overly complex procurement practices leading to time-consuming and expensive tenders; expensive and time-consuming processes for gaining security clearances; the advantage held by incumbent suppliers can lead to "significant switching costs".
And the OFT said these barriers are compounded by a lack of information provided to public sector decision makers on whether a proposed product or service is the most efficient or best value for money.
It lamented an "imbalance of information" that meant ICT suppliers knew more than the buyers about the quality and suitability of goods and services, due to a lack of in-house commercial and technical expertise within public sector organisations that could help them manage contracts more effectively and efficiently.
Rachel Merelie, OFT project lead, said in a statement: “ICT is central to the efficient and cost-effective delivery of many public services. The market supplying ICT products and services to the public sector is worth about £14bn and is not working as well as it should. In some areas entry barriers are high and there is little switching between suppliers.
She added: “The public sector needs better information and expertise so it is able to judge whether ICT suppliers are delivering good value for money. Companies that supply ICT goods and services should also be more transparent and provide better information to their public sector customers.”
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