How government departments can get better value for money from the £600 million they spend each year on professional services from suppliers of specialist expertise advice and assistance is highlighted today in a National Audit Office report. It concludes that value for money improvements of at least 10 per cent (£60 million) are achievable.
Presenting the report to Parliament Sir John Bourn, the head of the NAO, highlighted:
- £45 million in total gains that could be achieved if departments negotiated better deals with suppliers by using information to compare fees and understand suppliers’ costs; and
- a further £12 million that could be saved by departments using competitive tendering and appropriate forms of contract to get better deals and reduce departments’ internal processing costs.
This report focuses on consultancy or advisory services in the areas of human resources, financial, legal and general management consultancy which because they are in demand across departments and because there are many suppliers have the greatest potential to secure improvements in value for money. The report draws on a NAO survey of 152 departments. It sets out examples of good practice in the purchase of professional services from the public and private sectors.
The report recommends that the Office of Government Commerce works with departments to take advantage of their considerable buying power to negotiate better deals with suppliers. Some departments are starting to do this internally but there is less evidence that it is happening between departments. The report highlights ways in which departments get better value for money from professional services.
- Undertaking more robust analysis of their need for professional services to identify requirements for advice on similar issues within and across departments, and opportunities to pool advice to prevent unnecessary expenditure on purchasing duplicate work, and using internal resources where available.
- Use of the most effective form of procurement. Departments make too much use of single and informal tendering (32 per cent of contracts were awarded on the basis of single tender or informal price tendering). Unless the cost of going out to tender is disproportionate to the value of the contract, appointing suppliers through competition is the best way of ensuring value for money.
- Collect and use management information on what they spend on professional services to determine the value for money departments are getting from their spending, compare prices and fees paid, evaluate suppliers performance, assess the amount of business suppliers are receiving from departments collectively (twenty-five suppliers accounted for 37 per cent of all departments expenditure on professional services) and report to the Office of Government Commerce on value for money gains.
- Develop a more effective working relationship with key suppliers to allow both departments and suppliers to get maximum value from the assignment by identifying opportunities to reduce costs and adopt innovative approaches.
- Sharpen their approach to negotiations to ensure they get a good deal from suppliers. Departments should act as intelligent customers by discussing with suppliers all the elements of the contract price including level of service, timescale of the assignment, skill mix of supplier’s team and how costs such as travel and subsistence are to be remunerated.
The report suggests some key questions which departments might ask themselves to assess whether they are promoting value for money in their expenditure on professional services.
"A significant amount of taxpayers’ money is spent on these services each year. We have found excellent examples of innovative practice but much more could be done to improve government purchasing. Implementing the changes we propose would free up at least £60 million a year for spending on public services".Sir John Bourn
- ISBN: 102909024 [Buy a hard copy of this report]
- HC: 400 2000-2001