UK public procurement rules 'hinder digital purchases'

26 July 2015

Most UK public sector leaders say that procurement rules hinder their ability to source digital services, according to a survey.

A study by Deloitte asked 400 leaders across central and local government, the NHS, police and further and higher education, how their organisations were moving toward digital services. It found regulations, lack of flexibility and legacy contracts were identified as the most significant obstacles to digital-friendly procurement.

When asked how procurement needed to change, the two most cited factors were supporting agile development and lifting restrictions on terms and conditions. Some 83 per cent of respondents said procurement needed to change to accommodate digital transformation.

The study, The Ascent of Digital, also showed 74 per cent of organisations mixed in-house and contracted resources to develop digital services, with 10 per cent relying solely on in-house capability. But only 17 per cent said they were satisfied with their vendor community.

Deloitte said there was widespread recognition procurement and commercial strategies needed to change to accommodate digital transformation.

The report said: “The people who responded to our survey want to see improvements in both the commercial flexibility of their organisations and the responses of their vendors. There is a significant body of rent-seeking vendors whose installed base in the public sector is threatened by digital transformation. Public bodies need commercial strategies to free themselves from lock-in and to move to lower cost options for all kinds of services – whether digital or not.”

Deloitte said the research suggested the interventions that would have the most impact are shifting onto open standards for data and interfaces, as well as breaking larger contracts into smaller parts.

The report said the justification for large contracts was being diluted: “The rapidly falling cost of technology means that savings from economies of scale are lower than the savings that would be achieved by tracking falling prices anyway. Large suppliers may offer deep relationships, but don’t always give access to the innovation of exponential change. And the risk of owning technical work in-house is falling as digital skills increase and technologies mature.”

More widely, the survey found the public sector lacks the skills, funding and culture to successfully deliver digital public services. Eighty-six per cent of respondents said digital service delivery was essential, but only 12 per cent said they were actively involving and consulting the public in the design of digital services. Only half of respondents said they had the ability within their organisations to collect views and 89 per cent said their organisation was pursuing digital services to cut costs, but just 32 per cent said that funding for the shift to digital had increased.

Overall, only a third of those surveyed had confidence their organisation was well-placed to respond to digital trends. Joel Bellman, public sector digital partner at Deloitte, said the public expected the same level of digital services from the government that it experienced in other areas.

“The technology is there for the public sector to take advantage, yet they lack the culture, skills, governance and leadership to do so,” he said. “The public sector needs to ramp up its digital skills, just one quarter saying they have the right skills in place is not a good omen.

“Funding is clearly going to be difficult in an age of austerity but digital is a route to long term savings.”

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