Reform Report on Public Procurement – Spoilt by Ridiculous Savings Claim

(The scene – a trench somewhere in the Reform HQ. A candle flickers. A grizzled think-tank middle-manager, his face showing the stress of years of heavy lunches with MPs and donors, addresses two of the recent arrivals at the front line of right-of-centre econo-political analysis).

Ah, there you are lads. Hitchcock, Mosseri-Marlio, how old are you two?

“23, sir”.

“25, sir”.

Ah, you're so young, damn young. Never mind, duty calls. You know a bit about economics, dontcha? PPE degree? What - Durham, not Oxford – never mind, that’ll do. Ever heard of procurement? Are you ready for action, chaps? Are you ready to go over the top?

“Yes, sir”!

You know the enemy? The Crown Commercial Service? Get out there and don’t shoot till you see the whites of their eyes. And remember, you’re doing it for a cause ...”

_________________

So two nice young chaps (Alex Hitchcock and William Mosseri-Marlio) with good degrees and not a shred of commercial real life experience between them (future Cabinet Ministers no doubt) have produced a report about UK central government procurement titled rather weirdly "Cloud 9: the future of public procurement".

They have done it on behalf of Reform, the (slightly and not too partisan) right-of-centre think tank. And you know what? We wanted to hate it, simply because of their lack of procurement credibility, youth and good looks, but we don’t – well, most of it anyway. It contains some good analysis and is well worth a read, but is spoilt by ridiculous savings claims that we suspect were included purely to grab the headlines.

There is an occasional flash of naivety in the paper; the authors see the goals of public procurement very much in value for money terms rather than considering the EU drivers of open, competitive markets and protection against fraud. But hallelujah, it is good to see someone other than Spend Matters looking at issues such as SME spend and the centralisation that has gone on in central government procurement with a critical eye. There is also some interesting material on skills and data which we may well come back to at another date. And they do lay into Crown Commercial Service (CCS) with some vigour.

“In an interview for this paper, a former senior government official argued that CCS does not have the requisite understanding of a department’s needs, nor the accountability required to make lasting decisions. Labelled a “vanity project” by another, CCS has registered a negative ‘net promoter score’ in both the years it has been running, meaning central government departments on average would not recommend CCS’s services to other departments”.

But what is the solution to all the woes of government procurement? Digital! And this is where we start to feel that the lads have been sent over the top by a higher authority. On balance we are fans of the Digital Marketplace (G-Cloud) – but note the words “on balance” But here, the report moves from its critical and analytical tone when looking at CCS into untrammeled adoration of the Government Digital Service (GDS).

The Digital Marketplace (G-Cloud) has “saved departments 20 per cent on legacy contracts” – well maybe. But it should be explained that this savings measurement is very flaky, as users are simply asked to give GDS an estimate of savings. They are hardly likely to say anything other than it has worked for them as they have chosen to use it, are they? Here is another claim. “Digital marketplaces drive value for money by lowering barriers to entry and increasing competition”.

Well, we chuckled at that! For all its positives, G-Cloud has enabled thousands of contracts to be awarded without any competitive process whatsoever, often (in our view) in breach of regulations. Users are simply choosing whichever supplier they feel like choosing from the Marketplace, and often then re-negotiating the rates quoted in the Marketplace anyway. Now the end result may well be fine, in many cases, but more competition is certainly not a driver of the process.

Anyway, the report goes on to say that digital principles should be applied to many more spend areas. Again, we don’t disagree with that, but then we get to the ridiculous element of the report - the savings projections, based on putting more buying through digital channels. Apparently, “Reaching Estonian or even South Korean levels of e-procurement expenditure could generate savings in the order of £10 billion”.

Well, no it couldn’t. We’ll come back to that and demolish that number in part 2 but let’s just say I sent this Tweet out on Monday, which sums up our feelings: “This is truly stupid analysis, spoils what in other places is a very good report”.

PS A full list of anonymised interviewees is given – for example “Former Commercial Director, Department of Work and Pensions”. Gosh, I wonder who that could possibly be?

Voices (4)

  1. Dan2:

    G-Cloud is meant to be for buying cloud hosting and software as a service (that meet the NIST definition of cloud services, not suppliers dressing up traditional approaches as cloud). If you view G-Cloud (Lots 1-3) through that lens, then it is genuinely a well thought out and clever framework. It introduces i) an open market; and ii) the rules of only offering one unit price (that if you drop, you have to apply to all government customers) is something of a game changer. No more of this ‘our prices are confidential’, and limited room to escalate cost upwards for incumbent clients as you need to maintain a keen price to win more business.

    What I think will be interesting is where suppliers have invested in cloud as part of that original wave of excitement and their kit will be due a refresh. Who will exit? Who will see their service dip?

    For those who captured lots of market share – are they getting the returns? Did customers build their apps with the ability to shift environment – or are they heavily locked in?

    The issue on G-Cloud is Lot 4 where spend has increased hugely (is anyone ever going to query whether Cabinet Office claims on reducing spend on consultancy takes into account Lot 4 spend?)

    Anyway, I understand this is meant to be for helping govt organisations onto the cloud services sold in Lots 1 – 3. I’d suggest reading this blog from the ever insightful Alan Mather on the issues there: http://blog.diverdiver.com/2016/01/the-billion-pound-g-cloud.html

    Finally, if suppliers are doing deals on rates (on all Lots), then surely CCS should pick this up through analysing their MI returns and removing them from the framework or forcing a price drop for all other customers? That is the point of the open market/treating the Crown as the customer that underpins it.

    That said – agree with the original post 🙂

    1. Dan2:

      Report section 4.1.5: “GDS should build the Crown Marketplace and CCS should administer it. GDS can then continue as a disruptive force by designing software capable of reframing the way government procures goods and services”

      It’s such a shame the private sector didn’t come up with some kind of tooling that allowed for bidding to be conducted electronically like the digital marketplace.

      Anyhow, sarcasm over – the underlying point that I assume was being made; that things could be better organised and displayed to the market probably stands (than the proliferation of multiple bravo/emptoris etc platforms for each public sector organisation). Not sure the solution of an in-house build is quite the right one to jump to.

  2. bitter and twisted:

    The useful one?

    (Philosophy)

  3. Mark Lainchbury:

    Re PPE.

    “The vast majority of students at Oxford drop one of the three subjects for the second and third years of their course.”

    Guess which one ?

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