Review urges government to shun resellers
Sir Philip Green's Efficiency Review tells public buyers to go direct and advises urgent audit of major IT services contracts
The clock is ticking: Mutli-year fixed-term IT services contracts could soon be a thing of the past
Long-term multi-million pound IT services contracts are squarely in the firing line as the government is urged to overhaul its procurement processes.
The Efficiency Review, carried out by entrepreneur Sir Philip Green, was published yesterday. It starkly criticises the practice of allowing individual departments to procure separately and points out the massive disparity in cost between what differing bodies pay for effectively the same product.
The Review finds that the government spends an annual total of £61m on notebook and desktop PCs, with no standardised specification across departments. According to the report, the government buys from 13 IT service providers, " often not buying direct from the manufacturer". Laptop prices range from £2,000 to £353, an 82 per cent differential.
"At this level of volume, the government should buy direct from the manufacturer," said the Review.
A £100m per year hardware and software development contract is held up as an example of a "poor quality contract". The deal, which runs for a further six years, has been agreed with one supplier, which backs off the better part of the work to a sub-contractor. Green points out that this means the contract has to make room for two profit margins.
"Work is charged for at a rate of more than £1,000 per person, per day, which is well in excess of market rates," added the review.
It goes on to state the government is without recourse to reduce the annual cost of the contract should the development work no longer be needed.
The review also puts major suppliers with multiple public sector contracts under the spotlight. It uses the example of one IT services player which currently has several contracts with three years or more left to run. Terms and prices vary from deal to deal as the supplier has "been unable to standardise services across all departments".
"The costs are significantly greater than they should be," added the Review.
Green advises the government to conduct a thorough audit of all contracts with at least £100m in remaining value. The current demand for services, the cost of delivery, financing arrangements, subcontract agreements, contractual flexibility and the ability to break the contract should all be examined by "a central, experienced negotiating team", said the Review.
Other areas examined include government spending on printing, with Green claiming departmental buyers over-pay by as much as 80 per cent for printing services. Total central government annual spend on printing is £80m.
Comms spending is also evaluated. The government is advised that it could save up to 40 per cent by buying its own fixed line capacity from one supplier, rather than allowing individual departments to purchase from multiple carriers. An "urgent review" of fixed-line telecoms procurement has been recommended.
In his introduction, Green writes: "This report gives a fair reflection of the inefficiency and waste of Government spending, which is due mainly to very poor data and process."