The National Audit Office and the Audit Commission have today called for public bodies to work together much more effectively than they currently do to maximise savings from procurement activities.
The public sector procurement landscape is fragmented, with no overall governance. There are nearly 50 professional buying organisations, as well as individual public bodies running commercial and procurement functions. Many of these organisations operate framework agreements for similar goods and services.
The implications for value for money are clear. Public bodies are incurring unnecessary administration costs by duplicating procurement activity. In addition, the public sector is paying a wide range of prices for the same commodities, even within the existing collaborative arrangements. For example, there was a 116 per cent (£6.84 to £14.79) variation between the lowest and highest prices paid for the same broad specification of paper. The difference was 169 per cent (£65 to £175) for LCD computer monitors.
The public sector is not maximising its significant purchasing power. There are a large number of framework agreements and organisations are not exploiting the potential benefits of volume when using these agreements. There are also few constraints on brand or specification choice.
In 2007, the Office of Government Commerce established a Collaborative Procurement Programme which has led to some real improvements to the way public bodies buy goods and services and is managing over £18 billion of spend under nine categories of goods and services. However, a step change in public sector procurement is now required, which builds on the Office of Government Commerce’s existing work.
“The public sector spends £220 billion a year on goods and services. Given the potential to make significant savings, it is vital that there is much better coordination of procurement activities to ensure value for money is secured across the public sector.”
Amyas Morse, head of the National Audit Office, 21 May 2010
“With all public service costs under pressure, better procurement provides an opportunity to make significant savings that don’t cut into front line services. Most councils already collaborate but, even where there is collaboration, it is not delivering all the possible benefits”
Mr Eugene Sullivan, Chief Executive of the Audit Commission, 21 May 2010
Notes for Editors
Today's review, A review of collaborative procurement across the public sector, is available from the National Audit Office website (www.nao.org.uk) and the Audit Commission website (www.audit-commission.gov.uk).
The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 900 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.
The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone. Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the £200 billion spent by 11,000 public bodies. As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people.
Framework agreement: covers the procurement of a particular type of good or service from pre-approved supplier(s) over a fixed period of time. The agreement usually sets some of the terms and conditions under which the supplier will enter into contracts with customers.