UK Government Procurement Savings – introducing inflator brings a £300M+ boost to the numbers

The Cabinet Office savings figures for 2013/14 were announced a couple of weeks ago, to remarkably little fanfare or media comment compared to previous years. Was that because Francis Maude the Minster involved, didn’t want to make a fuss about the data? Or is the media tired already of the story – Cabinet Office saves money, yeah, we’ve done that to death, let’s move on to Jihadists in Iraq or the World Cup? But on closer examination, there are a few interesting facts to note. Remember all the numbers are based on the 2009/10 baseline – so savings are not against last year’s figures, but against the spend four years ago, the peak of the last Labour government’s spending spree.

  • Last year the savings for Consulting (£1,012M) and contingent labour / Temp Staff (£598M) were given separately. This year, they were combined at £1,615M. there must be a reason for that, and we suspect it is to disguise the fact that spending on consultants is on the way back up. (See here for more on this topic).
  • Getting into the ‘technical note’ on the savings, for the first time, we see that an “inflator” has been applied to the baseline for these two category spend areas. So given Whitehall consulting spend was around £1.8 billion in 2009/10, we might have expected it to have gone up by RPI over the last four years, so around 15% cumulatively or £270 million by 2013/14, taking it to £2.07B. So that boosts the savings claimed by £270 million automatically. Even if spend had still been £1.8 billion, you can claim the “saving”. Not unreasonable in many ways but interesting they’ve chosen to start doing that now (and the same applies to the Temp Staff figures).
  • The Marketing savings appear to be identical to last year (2012/13) at £378 million. That’s not an impossible coincidence but it might raise a few eyebrows.
  • The saving from post contract negotiations – “commercial relationships” - is a massive £1,809 million and comes from Departments rather than Cabinet Office. As such we’d suggest this is almost impossible to verify. It includes not doing stuff (demand management) and areas where there is no baseline so it is very hard to say how tangible it really is. But it does include the best part of £200 million that the Ministry of Justice recovered from G4S and Serco which we know is real.
  • The savings from centralising procurement have grown from £1024 million in 2012/13 to £1490 million in 2013/14. It would be very interesting to know where that growth has come from. There have been few new contracts in 2013/14 other than perhaps Consultancy One (which sits in under the ‘Consulting’ savings heading) and our perception is that total volume through Crown Commercial Service is not growing that strongly – in part because overall spend is flat or declining in Whitehall because of the budget cuts. So unless some mega-amazing deal has been done in Energy perhaps, it is a mystery where this has come from. Anyone like to explain?

So a few points there to introduce the suspicion that maybe the previous rigour of savings measurement has been relaxed a little this year? The introduction of inflators, for instance, obviously was a big boost to the numbers, whilst the identical figures for Marketing and the huge unexplained rise in the ‘centralising’ savings look odd. We’re going to ask a Freedom of Information request about the latter point but based on past experience I have no expectation that Cabinet Office will tell us anything unless we get the Information Commissioner to nail their heads to a coffee table ... sorry, of course they don’t do that. I’m thinking of the Piranha Brothers. Oh well, we live in hope. http://youtu.be/8ZkWL-XvO0U

Voices (3)

  1. Ian R:

    This is more a question that a statement, but wouldn’t education or local government spending also reduce considerably as a result of the increase in academies? Is this a saving accounted for in “demand management” or is it still in the system and measured with the central and local government figures?

  2. Trevor Black:

    None of this cost savings rubbish produced every year has any credibility. Most figures produced by government are politically driven and do not relate to the reality. A more imaginative approach would be to produce figures on cost avoidance but then again I doubt whether we could trust this information as well.

  3. Tom McAra:

    Glad someone is keeping an eye on this. Three small points. First I’ve never been able to work out how savings can be divorced from consumption and inflation. eg if consumption doubles but costs go up 50% presumably thats a good thing for procurement. Secondly everything I’ve been reading about the new saviour of the public sector- commissioning -seems to criticise the continued emphasis (fixation?) on cost savings. Thirdly when a claim for a saving of one billlon is made for one year are we really to believe 20m per week, 3m per day, 380k per hour has been saved? Was it really that bad?

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