Central government procurement policy defended

4 May 2011

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4 May 2011 | Lindsay Clark

The government has defended its centralised procurement policy following criticism that it has not created the ‘new dawn’ that was expected.

Since last year, the government said it would be able to save 25 per cent on £13 billion spent on common goods and services over four years, in part by committing volume to contracts to supply all Whitehall departments.

Government chief procurement officer John Collington said in August that government buying required a new approach. “We have to ensure that procurement changes. If you evaluate what’s happened to the public sector in comparison to the private sector, there’s been the absence of mandation. Where it makes sense to mandate – centralisation of commodity spend for example – then that will be set and departments will be expected to support that model.”

However, observers have pointed out that the first tender notice to be published under the new arrangement, for office supplies, commits only £40 million of the estimated contract volume of between £240 and £400 million. David Thomas, commercial director of HM Revenue & Customs, the department leading on the tender, said, however, that volumes will increase over time.

“Guaranteed volumes are included and the initial baseline reflects the ‘on boarding’ process, which will see volumes increase over time as individual departments are able to join the arrangement. ‘On boarding’ is a practical consideration and reflects the fact that some large departments have to legally exit existing contractual arrangements before they can join the contractual vehicle in question,” he said.

One senior public sector procurement manager, who asked not to be named, said: “We had all been led to expect a central-government-only contract with fully committed business. But what we have now is a smallish amount of committed business, and a limited list of other named public sector participating bodies, mostly in local government, from whom business is, presumably, not committed.”

Although the office supplies tender required a framework deal, a mechanism that the government said it would move away from, Thomas said the new arrangement would be “fundamentally different” from frameworks of the past.

“This is an advert for a single, central-government, contractual vehicle, which will buy on behalf of all departments with committed volumes to maximise leverage. It is the change to a single contractual vehicle and committed volumes that is critical to meeting the Efficiency and Reform Group strategy,” said Thomas, who is also one of a number of crown representatives who act as a direct contact for some the government’s largest suppliers. 

The office supplies tender notice says that the new central government procurement model “brings together a new governance structure, empowered by the minister for the cabinet office, to make key decisions on procurement for central government… The aim is that this arrangement, once awarded, will be used by all central government departments, their executive agencies and non-departmental public bodies.”

Previously, the government was not able to ensure departments used the framework agreements it created.

“The difference is that there is some commitment and, by and large, frameworks don’t provide any commitment,” said Paul Neill, managing partner with The Bidding Consultancy. “You would have to welcome that, but given how large the expected volume is, it is still, in reality, not much more than a framework. I wouldn’t have thought they would get any better prices by committing £40 million – such a low proportion of the expected volume. In reality, the kinds of companies that will be bidding for contracts of that size will pitch their price expecting to get more than £40 million anyway.”

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