Bongeunsa Temple in the Gangnam District of Seoul, South Korea. © 123RF
Bongeunsa Temple in the Gangnam District of Seoul, South Korea. © 123RF

Copying South Korea could save UK government £10bn a year

Even a conservative expansion of e-procurement by the UK government to buy goods and services will save taxpayers at least £470m a year, according to a new report by Reform.

Taking a more radical approach and following the likes of South Korea and Estonia could save up to £10bn a year by 2020, the think tank claims in its report Cloud 9: the future of public procurement.

The report said digital purchasing has delivered savings in the private and public sectors by cutting administration and opening up competition.

G-Cloud, the online portal that government uses to purchase IT services, has cut costs by up to 50%, the report said.

“If e-procurement continues to grow on trend, nearly 6% of purchasing could go through digital channels by the end of the parliament, up from 1% today,” the report said.

This expansion would save the government £470m annually. If the UK followed the examples of Estonia and South Korea, which channel at least 50% of procurement expenditure through digital channels, it could save £10bn.

“In South Korea, the digitisation of procurement has reduced procurement durations 15-fold,” the report said.

“In Estonia, another country bound by EU procurement regulations, e-procurement cut administration costs by 30% to 40% when investment, maintenance, administration, equipment, training, contracting bodies and tenderers are taken into account.”

The potential savings would equal around a quarter of the central government procurement budget of £40bn a year.

However, the report highlighted the “somewhat fraught relationship” between the Crown Commercial Service, the body responsible for cross-government purchasing, and the Government Digital Service – who developed the G-Cloud.

“Suppliers are sceptical about the newly created Crown Commercial Service and its ability to manage relationships both in and outside government,” said the report.

The report said such friction would prevent any acceleration of reform unless steps were taken to improve the relationship.

“More significantly, commercial staff will need to acquire new skills if they are to harness the potential benefits of digitisation,” the report said.

This would include developing technical knowledge through extending secondments and limiting rotation.

These steps should be accompanied by a review of commercial skills and a shift towards a more performance-related model of pay.

Another problem cited in the report was that “government does not have a comprehensive view of purchasing expenditure, inhibiting civil servants’ ability to make strategic commercial decisions”.

Publishing elements of this information could help suppliers better understand the needs of government departments and would also enable government procurement to be viewed more as a strategic, rather than administrative, function.

“The digital procurement agenda, coupled with initiatives on transparency and skills, can help shift focus away from process and towards designing effective contracts and managing suppliers professionally,” the report said.

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