Government IT procurement an 'obscene' waste of money

Scathing report slams the government's policy of sticking with larger IT suppliers and urges more SME involvement

Successive governments have "wasted an obscene amount of public money" on IT procurement, and given some suppliers a dangerous monopoly, a damning parliamentary report has claimed.

In what can only be positive news for SME IT suppliers, the report, Government and IT – A Recipe for Rip-Offs: Time for a New Approach, revealed that 80 per cent of central government IT work is undertaken by just 18 suppliers, with many contracts described as "too complex" to manage with "too much power and money [committed] to a single supplier".

Produced by a public administration committee made up of MPs, the report said that the public sector seems to make "less effective use" of IT than the private sector despite a £16bn IT spend in 2009.

It also recommended that the government commission an "independent, external investigation to determine whether there is substance to claims of anti-competitive behaviour and collusion among suppliers". The report also said it should consider reducing the size of contracts to enable smaller suppliers to get their foot in the door.

According to figures cited in the report, the Cabinet Office alone spent an average of £3,664 per desktop for each full-time employee, and the average spend per government desktop ran at £2,300. This is up to ten times the price paid in the private sector.

The main problem, said the report, is a lack of benchmarking in public sector procurement.

It read: "The poor benchmarking of central government’s IT expenditure is unacceptable. Without this information it will not be possible for the government to advance effectively its cost reduction agenda [...] The government should investigate the claims of overcharging and seek to identify reliable and comparable cost benchmarks."

The findings contrast harshly with prime minister David Cameron's wish to involve more SME suppliers in the contract bidding process, as mentioned at the Conservative Party Spring Conference back in March.

SME suppliers interviewed by the committee said that they were dropped after award of contract, although they had been involved in some bidding processes with larger SIs, and allowed to "demonstrate innovation". They added that government departments would often refuse to deal directly with them. According to the report, this is unacceptable.

"We take seriously the concerns expressed by many SMEs that by speaking openly to the government about innovative ideas they risk losing future business, particularly if they are already in a sub-contracting relationship with an SI," it said. "The government should reiterate its willingness to speak to SMEs directly and commit to meeting SMEs in private where this is requested."

It added a number of recommendations. "We recommend that the government investigate the practices which seem unintentionally to disadvantage SMEs. When contracts and pre-qualifying questions are drawn up, thought must be given to what impact they could have on the eligibility and ability of SMEs to apply for work, and whether separate provision should be made for SMEs," said the report.

"We believe it would be preferable if the default procurement and contractual approach were designed for SMEs, with more detailed and bespoke negotiation being required only for more complex and large-scale procurements."

The report ended with a strong message for the government, urging it to reform its IT procurement policy.

"Without the ability to engage with IT suppliers as an intelligent customer – able to secure the most efficient deal and benchmark its costs – and to understand the role technology can play in the delivery of public services, government is doomed to repeat the mistakes of the past," it concluded.