UK government spends £4.2bn a year with six IT suppliers

Government paid £4.2 billion a year, equivalent to £80 million a week, to just six IT suppliers last year, according to figures released today by Spend Network and the Institute for Government (IfG).

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Government paid £4.2 billion a year, equivalent to £80 million a week, to just six IT suppliers last year, according to figures released today by Spend Network and the Institute for Government (IfG).

HP is the largest single supplier to central and local government in any category, with revenues of over £1.7 billion from government last year.

The vast majority- 86 percent- of HP’s revenue came from the Department for Work and Pensions (DWP), where the company provides much of the department’s IT estate. However its mega-contract with the DWP is due to expire this autumn, and as with most Whitehall departments, the DWP is seeking to move to smaller, shorter contracts with a more diverse range of suppliers.

Similarly, Capgemini relied on HM Revenue & Customs for 82 percent of its £1 billion government earnings in 2013, thanks to its IT contract ‘Aspire’, which is due to expire in 2017.

Fujitsu recieved £415 million from government last year, while Atos was paid £401 million, IBM earned £365 million and CSC received £306 million.

However, total spend with the largest six IT firms fell by 9 percent between 2012 and 2013. IBM suffered the biggest losses, with a drop in revenue of 20 percent, while HP’s income fell by 14 percent. Only Capgemini and CSC managed to increase their revenues, by 1 percent and 3 percent respectively.

The £80 million government spent with six IT suppliers in a single week in 2013 compares to £87 million spent with 270 firms through the G-Cloud programme over the entire year.

The report’s authors found that local government contracts more with SMEs than central government, and there was not enough data to verify government claims that Whitehall spending with SMEs has increased.

The data took two years to collect and more than 16,000 hours to analyse 38 million government transactions. However the authors warned that it is incomplete because some datasets are not available and central government transactions under £25,000 are rarely made public.

In particular the DWP is understood to challenged the figures on its expenditure with HP, with verified figures due to be released once that process has concluded.

The IfG and Spend Network made a number of recommendations on how government could improve the quality and quantity of its data on spending with private firms.

For example, they said that government should lower the threshold for publication of data for transactions to £500 (as is already the case in local government) rather than £25,000.

The authors also call for government to set up a reporting regime for PFI contracts and joint ventures so the public can identify commercial beneficiaries.

Finally they argue that government should set standards requiring far more data to be published on contractual terms, levels of performance and sub-contracting arrangements.

Spend Network’s managing director Ian Makgill, who jointly led the research, said: "This is the first time that anyone has been able to get a detailed insight into what is being spent by both central and local government. We believe this data can be used by government and business to reduce waste, create efficiencies and deliver better public services. However, our research also found that the source data government provides could be improved.”

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