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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

  1. 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.
  2. 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.
  3. 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.
  4. 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).
  5. 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.
  6. 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
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