Better buying could save UK government 25 billion a year

19 March 2010

19 March 2010 | Allie Anderson  

Better buying could save the UK government £25 billion a year, the Institute of Directors estimates.

A review by the organisation said a “radical restructuring of public sector procurement” could save £15 billion a year, while an additional saving of £10 billion could be achieved through increased outsourcing.

It criticised current arrangements for the sector’s £220 billion annual procurement spend as “fragmented” and organised in small buying points. “Huge potential savings are being missed every year,” it added.

It is the latest in a string of reports that have put forward suggestions for improved public sector buying. This report advised that greater collaboration when purchasing identical products or services – including legal services, IT and HR – would prevent duplication and unnecessary spending. Shared services and outsourcing could further reduce costs, as well as boost productivity and efficiency.

It recommended establishing central buying organisations to handle all key supplier relationships and major public sector contracts. Additionally, “procurement hubs” could be set up on a regional scale to cater for specific local requirements.

If implemented immediately, it claimed the changes could be completed in just 12 months and deliver savings within three years.

Colin Cram, the report’s author and public procurement expert, said: “There has been much improvement in procurement under the leadership of the Office of Government Commerce. However, public sector procurement remains a legacy of its past and a prisoner of its structures. A step change is long overdue in the way public sector procurement is organised and managed.”

It follows calls from the UK government’s most senior buyers for swift and meaningful improvement to public procurement.

The Confederation of British Industry and manufacturing group the EEF also called for an overhaul of public purchasing this month.

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