What the Spending Review may mean for suppliers to Government

In truth, there weren't many big surprises in the Review, although you might consider squeezing another £7 billion out of a range of seemingly obscure welfare measures either impressive or harsh.

But there is still no real clarity on what it means for Government procurement, including OGC / ERG, although the additional £3 billion admin savings in Whitehall doesn't bode well for procurement jobs in central government.  There was no overarching indication of a strategic view on how procurement actions might help the situation, so we will have to wait for individual organisations to start announcing their own more detailed plans.  But I thought we would look instead in this post at what this all means for private sector suppliers to the public sector.  I don't pretend this is all-encompassing, but rather a few immediate thoughts on winners and losers.

Losers

Private landlords letting to housing benefit claimants; whilst the new restrictions will be tough on some claimants, there have been market distortions and super-profits available to some landlords so reform was needed.

Legal Aid lawyers; the Ministry of Justice budget settlement is pretty tough and Legal Aid is a major part of that, so I expect big cuts here. (The effect of the cuts on the whole justice system - prisons, courts, Legal Aid - is in my opinion where the Coalition is most politically vulnerable to future 'events').

Small business generally; however it is positioned, more Philip Green type 'centralised procurement' is unlikely to be good news for SMEs.  Even at more local level, Police or local authorities collaborating more in procurement terms may make sense, but is rarely good for small, local suppliers.

Consultants in general, particularly those with major central or local government business; Health may be a better prospect given both the slightly healthier budget position and the magnitude of structural change there.  Expect announcements of redundancies and consulting firms going under soon (OK, don't all cheer at once....).

Winners

Some major capital project suppliers; Crossrail, major road projects and wind have all come out of this reasonably well.  My shares in Balfour Beatty are probably OK, although the schools capital budget is way down on what ws going to be spent under Building Schools for the Future.

'Social care' providers of goods and services who can take advantage of the growing 'personalisation' agenda in this sort of care provision (giving individuals their own budgets rather than goods and services being provided centrally).  This may be an area where innovative and smaller firms can compete.

Procurement lawyers; with work more scarce, and more centralisation, suppliers are going to be less reticent about challenging procurement decisions.  If you don't win the central contract, you are out in the cold, so why not challenge?  And if procurement teams are stretched, and corners are cut....

Consultants and software providers who can link their work directly to savings and ideally take on some risk in the process; and the procurement area must be a key target for this sort of proposition.  One would expect there should be opportunities in areas such as Spend Analysis, eSouring, electronic auctions; and in cost-reduction delivery services (don't use the consulting word, whatever you do) that might work alngside smart technology.  There should be some mutual advantage to the public sector and solution providers who can take some risk, deliver a service with real outcomes and value, and help make the savings needed.

But we'll see...

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