The claim
“The scale of the waste uncovered by Sir Philip and his team is staggering. His review shows that for too long there has been no coherent strategy to make government operate more efficiently.”
Cabinet Office Minister Francis Maude
The background
Sir Philip Green, the owner of Topshop and Bhs, was appointed by David Cameron in in August to look at the Government’s procurement of goods and services and the management of its property portfolio. His report was published today.
Of a total government spend of £670bn, procurement makes up £166bn – but Sir Philip doesn’t attempt to quantify the waste he says he’s found.
With the Cameron administration planning big public spending cuts, he concluded that the Government was failing to make best use of its buying power, with separate departments paying different prices for the same items.
The analysis
Haven’t we been here before?
In the early days of the last Labour administration, the senior business executive Sir Peter Gershon was appointed to analyse government procurement.
His report was published in 1999 and came to the following conclusions: previous governments had delegated procurement responsibilities to departments, without any common framework; departments were paying significantly different prices for the same goods; procurement was fragmented and uncoordinated.
The upshot was the creation of the Office of Government Commerce (OGC) – a one-stop shop central procurement organisation – headed by Sir Peter.
In 2004, he was asked to carry out an efficiency review across the public sector, which was credited with achieving more than £20bn of savings by 2007.
The Treasury carried out its own study of how things were shaping up and in 2007 released a document called Transforming Government Procurement.
This said: “The OGC has achieved some notable successes since it was set up in 2000. In particular, it has helped departments and local authorities to make annual efficiency gains of £13.3 billion by the end of September 2006, more than half way towards meeting the Government’s ambition of over £20 billion of annual efficiency gains by 2007-08. Included in this are £5.5 billion of efficiencies attributable to procurement.”
In May 2010, two weeks after the general election, the public spending watchdogs, the National Audit Office and the Audit Commission, released a joint report, which said that the OGC had led to improvements. “However, a step change in public sector procurement is now required, which builds on the Office of Government Commerce’s existing work.”
The commissions said procurement was “fragmented, with no overall goverance”. Public sector bodies were “paying a wide range of prices for the same commodities”, with huge variations in the costs of items like paper and computers.
The conclusion was familiar: “The public sector is not maximising its significant purchasing power. There are a large number of framework agreements and organisations are not exploiting the potential benefits of volume when using these agreements.”
Tim Williams, managing director of public sector procurement specialists, Millstream Associates, told Channel 4 News: “Until someone very senior in government says ‘this is going to happen and I’m going to monitor it to make sure it does’, people will go so far and pay lip service and there will be initial savings, but the momentum will go out of it.
“There needs to be someone at Cabinet level, with the support of the Prime Minister, to say, ‘this is the change we want to happen; we want you all to do this’.”
The verdict
Yes, we have been here before – on several occasions. But there’s one vital difference this time.
When Tony Blair’s government appointed Sir Peter Gershon to look at public sector procurement, big spending cuts weren’t imminent. Now they are.
Years after Sir Peter recommended the establishment of the Office of Government Commerce, we’re told by Sir Philip Green that there’s still not enough joined-up thinking about public sector procurement.
The Gershon reforms aren’t working as well as they might, and it’s clear that the government intends to use Sir Philip’s report as ammunition when it announces the conclusion of its comprehensive spending review this month.
But Francis Maude’s use of the word “staggering” to describe the waste detailed in the report is difficult to verify because Sir Philip doesn’t quantify this.
