MPs identify 'tension' in procurement savings priorities

27 April 2012

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27 April 2012 | Paul Snell

MPs believe there is tension between the priorities of public sector buyers that could affect value for money.

A report by the Public Accounts Committee published today said the government needs to be clearer about where it wants buyers to use economies of scale and where it wants the to buy locally.

The report, Cost reduction in central government, published today said good progress had been made in terms of cost reduction, but confusion over priorities could lead to savings being missed.

“There is still a gap which could impact on value for money. For example, high-value medical equipment and PFI schemes will continue to be procured locally although our reports demonstrate that better value for money could be secured by a more central approach,” it said.

It called for the Efficiency and Reform Group (ERG) to be given the power to intervene in the wider public sector, such as health, if progress on a centralised approach is too slow.

The Committee also warned that although the savings programme had started well - reducing departmental budgets by 2.3 per cent in real terms - the real challenge is yet to come with 19 per cent to be made by 2015.

The report was also highly critical that the government does not provide enough information on costs, little understanding on how future reductions will be achieved and monitoring the impact of cuts.

“Departments need to do better at planning their finances logically, understanding the relationship between costs and outcomes better and not going for the easy option which could most damage frontline services,” said Labour MP and PAC chairman Margaret Hodge in a statement. “What is needed is an overarching strategic framework which, among other things, identifies in particular the impact of a cut in one department on expenditure in another, and the long-term impact on value for money and expenditure of short-term decisions to live within budgets.”

It recommended the Treasury and the Efficiency and Reform Group (ERG) establish a strategy that explains specific milestones, how policy and legislation will affect the cost reduction plans and what will be done if departments do not achieve their targets.

* The government has responded to the Transport Committee’s recommendation to publish the reasons for awarding a contract for trains on the Thameslink line to Siemens rather than Bombardier. It said it would give further consideration to publishing details, but maintained much of the information could be commercially sensitive.

“If the Government decides to contract with Siemens for the Thameslink trains we would like more information to be published about why their bid was preferred to Bombardier's,” said chairman and Labour Co-operative MP Louise Ellman. “This is essential to restore public confidence in the Department for Transport's procurement process and we urge the Secretary of State to act."

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