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National Audit Office Press Notice

Ministry of Defence: Improving the Efficiency of the Procurement of Routine Items

Report by the Comptroller and Auditor General
HC 31 1997/98
20 June 1997
ISBN: 0102618984
Price: £8.95

Sir John Bourn, head of the National Audit Office, told Parliament today that the Ministry of Defence (the Department) could make improvements to their current arrangements for procuring routine items* which would, in time, lead to savings through lower prices, contribute to the Department’s initiatives to reduce storage and distribution costs and reduce the administrative effort expended by a quarter. The quality of service provided would be maintained or improved.

The Department place some 1.5 million orders worth #600 million a year (5 percent of their total procurement expenditure) to supply the diverse range of routine items required by defence establishments. The National Audit Office found that:

• the Department have well-established arrangements for supplying routine items to establishments. But, they have little information on the relative cost-effectiveness of the arrangements, in terms of either the competitiveness of the prices achieved or t e administrative effort expended, and are poorly placed to monitor performance or identify opportunities for improvement;
• the Department aggregate two thirds by value of their requirements for routine items under centrally negotiated arrangements. Price benchmarking undertaken by the National Audit Office showed that, for such items, the Department achieve prices which com are very favourably with those negotiated by other organisations;
• there is scope for the Department to save money by increasing the extent of aggregated purchasing to match the levels achieved by best practice organisations. The Department’s on-going initiatives to reduce logistics overheads can be further assisted by maximising the use of arrangements which supply items directly from contractors to the end user;
• where purchases are made locally, the Department’s current administrative arrangements are less efficient than those adopted by best practice organisations. There is scope for the Department to better target delegated local contracting authority, eliminate duplication of effort and to introduce appropriate information technology to provide better management information and help to standardise local practices;
• corporate Purchasing Cards offer the prospect of further reductions in processing costs and better management information. The Department should give a higher priority to reviewing their introduction;
• and the extent of communication between users and procurers, and between central contracts staff and defence establishments, is variable. There is scope for the Department to raise the weaker areas to the standards of the best by marketing centrally negotiated contracts more effectively, introducing feedback mechanisms for users and amending their guidance.

Notes for Editors

*defined as those items required by defence establishments to support their routine needs - for example, non-operational computer hardware and software, stationery, furniture and motor transport spares. The definition excludes the procurement of military specific equipment, military equipment spares, military clothing and capital works.

The Comptroller and Auditor General, Sir John Bourn, is head of the National Audit Office, employing some 750 staff. He and the National Audit Office are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; 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 32/97
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