£25bn inefficiencies in public sector procurement

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According to the IOD the public sector could save up to £25bn by overhauling its procurement and outsourcing.

It says procurement is currently far too siloed leading to mass wastage and duplication of work. While £25bn is obviously a top-end figure, it’s great to see someone with the IOD’s profile doing the numbers on this.

We’ve been pushing the message on public sector sourcing for some time now and more recently, gathering together expert guidance on the issue through our public sector steering committee. The IOD adding its voice to the roster marks the latest in a long line of organisations that believe there is real money to be saved through public sector outsourcing.

As always though, dissenting voices abound on this subject; from the Unions to those who simply think private sector involvement in public service delivery simply doesn’t work. They certainly have ammunition and will readily roll out the figures spent on ill-conceived and badly managed IT projects.

But this is why the IOD’s report is a breath of fresh air to the debate. The public sector already outsources a lot of work and advocating much more in the same way would be a mistake. It is mismanagement and lack of knowledge-sharing where things come unstuck and savings are not realised. Learning from mistakes is not currently fed into a body of knowledge on which to base future decisions; errors are instead made again and again. Centralisation, or grouping at least, would be a clear step in the right direction as would further tools for sharing success and failure.

While the government has tried this before through OGC it hasn’t really been a great success. For this reason it’s important the government doesn’t try to do it in one ‘bite’. Rather they should try the ‘eat an elephant‘ approach and encourage units to get together that have common issues. They could also use the Treasury’s budgetary controls to ensure that organisations that band together and make savings then get the “saved” money back for further positive projects.

Another good effect of this approach is that it would give suppliers larger potential contracts creating a monetary balance against the bids they lose. They would also be able to afford the development contracts. On the other hand, small businesses may lose out though because they wouldn’t have the breath to take on these bids. But there again there is no indication that small businesses do well from government contracts because of their often Byzantine complexity and lengthy time-scales.

As the election draws near, possible savings of £25bn are clearly going likely to catch the eye of all political parties. That mountain of debt isn’t going anywhere fast, so we continue to expect much more interest in outsourcing post-election. We can only hope that the new government, whoever wins, takes note of bodies like the IOD and the NOA and takes a more logical and coherent approach going forwards.

For those that are interested in sharing their experiences we’ve organised a Public Sector Forum on the 27th of April where practitioners can do just that. The event is free for members and those working in the public sector and interested parties can sign up here.

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