Press Release - Improving Procurement: Progress by the Office
of Government Commerce in improving departments capability to
procure cost-effectively
12 March 2004
Sir John Bourn, head of the National Audit Office, reported
today that the Office of Government Commerce (OGC) has had a
positive impact in improving departments procurement of goods and
services but that there are several key areas for improvement. The
NAO report confirms that by 31 March 2003 departments had generated
savings of 1.6 billion which exceeds the OGCs target of 1 billion,
with 85 per cent of improvements coming from nine departments.
Departments will need to do more if OGC is to meet the more
ambitious target of an additional 3 billion in savings by 31 March
2006.
The OGC has played a key role in raising awareness of
procurement issues and providing advice to departments and
agencies. The development of professional procurement skills and a
number of framework agreements for purchasing goods and services
have contributed towards overall savings. Gateway Reviews provide a
well-defined process for managing large, complex and novel
procurements and OGCs introduction of them has been popular with
departments.
Procurement practice is also more developed in the United
Kingdom when compared to four other European countries; for example
through a higher profile for procurement generally as a result of
OGCs activities with departments, the existence of teams in
departments with responsibility for providing procurement advice,
and the range and quality of guidance available to help procurement
staff in departments.
The NAOs examination of procurement across 86 departments,
agencies, and non-departmental public bodies found that adherence
to the best practice promoted by the OGC varies. For example, while
80 per cent of the bodies surveyed had a head of procurement, the
post only had board status in 13 per cent of cases. Less than
one-quarter of designated procurement staff had a professional
qualification from the Chartered Institute of Purchasing and
Supply. Of the twenty top spenders on procurement in 2002-03, only
three had commercial directors whose role explicitly covers all
engagement with the private sector.
The NAO found that departments and agencies need to improve
their capability in seven key areas: raising commercial awareness;
having better and more up-to-date management information,
particularly on current market prices; increasing joint purchasing
between departments; more proactive management of suppliers;
managing the risk of relying on too small a number of suppliers for
key commodities; developing procurement expertise; and better
targeting of value for money improvements.
The NAO has also identified a number of areas which offer
further potential for value for money gains to be achieved by
departments if they act on the good practice and other initiatives
put in place by OGC, and the report illustrates where 300 million
such savings could be achieved. These include the more widespread
use of framework agreements, bringing maverick spending (spending
undertaken outside authorised buying arrangements) under control,
wider use of the Government Procurement Card, and reducing internal
processing costs. Departments also need to look for ways to open up
the marketplace to make it easier for suppliers to compete for
government business, especially smaller suppliers than can be a
source of innovation from which public services can benefit.
Sir John Bourn said:
"Procurement is an area where departments, agencies, and
other public bodies can achieve significant savings and
improvements, thus releasing resources to be invested in front-line
services. The Office of Government Commerce has made a significant
contribution in helping to achieve 1.6 billion in savings so far,
but a great deal more can be done. A higher-level commitment from
departments to adopting good practice, as well as addressing
specific issues such as better management of suppliers, will result
in greater value for money."
Notes for Editors
- In April 2000, the Office of Government Commerce (OGC) was
established to work with departments to improve their procurement
capability and to secure better value for money. This report
assesses the impact which OGC has had and follows up an earlier
report which we published in October 1999. OGC seeks to promote
best value for money by working closely with departments including
issuing guidance, providing advice and promulgating good practice;
by developing the governments marketplace so that it is attractive
for suppliers and their customers, and by delivering services
directly to departments, principally through OGCbuying.solutions,
an executive agency of OGC which negotiates buying arrangements
which departments can use to purchase a range of goods such as
utilities and IT hardware and software.
- Prior to the establishment of OGC, a review of civil
procurement in central government by Peter Gershon, who
subsequently became the Offices first chief executive, recommended
significant reform of procurement arrangements in departments and
agencies.
- The NAO examination was based on a comprehensive survey of 86
departments, agencies and the largest non-departmental public
bodies responsible for just over 15 billion of total procurement
spend; in depth case studies of two departments the Department of
Work and Pensions and the Office of the Deputy Prime Minister and
one agency the Vehicle & Operator Services Agency; an
assessment of the impact of OGCs initiatives to promote good
practice; international comparisons, and consultation with
suppliers, the Chartered Institute of Purchasing and Supply and the
Small Business Service.
- This is one of a series of National Audit Office reports
examining procurement, with two further reports to be published
over the coming year covering procurement of information technology
and construction (consequently this report does not focus on these
areas of procurement).
- Press notices and reports are available from the date of
publication on the NAO website,
which is now at www.nao.org.uk. Hard copies can be
obtained from The Stationery Office
on 0845 702 3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 20/04
All enquiries to Bill Schaper, NAO Press Office:
Tel: 020 7798 7335
Mobile: 07795 120838