The Department for Culture, Media and Sport and the organisations it sponsors spend some £575 million a year buying goods and services. Today’s report to Parliament by the head of the National Audit Office Sir John Bourn concludes that procurement capabilities and practices amongst the organisations are, on the whole, underdeveloped and that better procurement practice could result in overall annual savings of £14 million by 2008-09 and double this within five years.
The Department for Culture, Media and Sport sponsors a wide range of organisations including national museums and galleries and distributors of lottery funding, and the National Audit Office report covers the 25 largest of these organisations. The NAO found that the organisations are not using their buying power effectively: 60 per cent of organisations’ procurement spend is on generic goods and services, such as facilities management and ICT, but only 4 per cent of their spending is done collaboratively. The NAO identified considerable scope for organisations to work together better to share knowledge and resources and to harness their buying power. In addition, there was a lack of co-ordination of procurement activity within many organisations which presents significant risks to value for money.
The cost of processing procurement transactions is significant. In 2004-05, the 25 organisations processed 350,000 purchase orders, an average of 14,000 orders each at an average cost of £44 per order. The NAO found that more investment in computerised systems and greater use of payment cards by the sector could reduce the administrative cost of processing purchase orders and paying invoices by up to £5 million a year.
The NAO also proposes action to encourage a more strategic approach to procurement within organisations, supported by improved information systems and better trained staff. To help the organisations meet the challenging target the report sets, the Department for Culture, Media and Sport is committed to working with the organisations to implement the report’s recommendations.