Auditor backs OGC savings record

18 March 2004
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18 March 2004 | Simon Binns

The Office of Government Commerce (OGC) has beaten its savings target of £1 billion since its inception in 2001, but some departments still lack procurement strategies, according to the National Audit Office.

In its report, the NAO, which surveyed 86 departments, agencies and non-departmental public bodies responsible for more than £15 billion of spend, noted that the OGC helped purchasers to save £1.6 billion through its advisory and consultancy work.

Nine departments account for 85 per cent of these savings, it added.

Among the departments that could hold lessons for similar-sized organisations, said the NAO, were the giant Department for Work and Pensions and the Vehicle and Operator Services Agency, whose remit includes public service vehicles industries, such as buses, and has a £50 million purchasing budget.

The NAO praised the OGC's "key role in raising awareness of procurement issues".

This included the independent Gateway Reviews to scrutinise major IT and construction projects to keep them on budget and to time, which it noted have been "popular with departments".

The OGC's £1.6 billion of savings comprised:

  • £1.1 billion through direct negotiation with suppliers;

  • £200 million from joint departmental and agency procurement;

  • £200 million from improving contract or asset management;

  • £100 million through lowering transaction costs.

    Sir John Bourn, comptroller and auditor-general of the NAO, said in the report that the OGC had made a significant contribution, but there needed to be a "higher-level commitment from departments to adopting good practice, as well as addressing specific issues such as better management of suppliers".

    The report recommends more procurement expertise at management or board level, similar to the private sector. Nearly 80 per cent of departments have a head of procurement, but only 13 per cent of these have board status.

    It also found that three-quarters of purchasers lack a professional qualification.

    Suppliers have said it is often difficult to reach government purchasers and that departments are not receptive to innovation.

    The report also recommends greater use of the Government Procurement Card, used by around 50 departments but only covering 6-18 per cent of spend.

    More departments and agencies should heed OGC advice and will "need to do more", especially if the OGC is to meet the ambitious target of an additional £3 billion in savings by March 2006.

    The report comes at a politically sensitive time for the government. Next month, it plans to release a review of government efficiency carried out by the OGC's architect and first chief executive, Sir Peter Gershon, who is due to step down at the end of March (see News, 4 March).


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