NAO on Cabinet Office Efficiency Savings – a mixed review for the procurement elements

We mentioned the National Audit Office (NAO) reports last week on rail procurement and on their assessment of the savings figures declared by the Efficiency and Reform Group (ERG) within the Cabinet Office.

NAO goes into a lot of audit type detail in their examination of the numbers, as you might hope and expect. I gives Cabinet Office a fairly good but mixed review really in terms of whether we can trust their published data; 9 of the 14 savings areas defined by ERG are rated as “Reasonable”, five as “Moderate”. They also highlight that not all of last year’s NAO recommendations have been implemented, and make furtehr recommendations for improvement of the process in the future.

Some of the savings declared this year do seem somewhat flaky. In terms of major project savings, for instance, we’re very much into government departments declaring “savings” in terms of projects that they chose not to do. So “cost avoidance” if we’re being charitable, or “made up numbers” if we’re not. And on projects that were executed, leading to declared savings, “there was also no standardised way for departments to evidence the reductions in ongoing expenditure after implementing projects”.

Construction savings also appear dubious in part at least, and under “commercial relationships”, which covers the post contract award savings from better contract management and the like, NAO says “(ERG) no longer tries to confirm savings from suppliers where the evidence comes from the department” and points out that “ERG includes savings based on compensation for over-billing for electronic monitoring contracts. This is government getting back money that it should not have paid initially, rather than getting the same service for less money”.

Most of the procurement savings, aside from that area, get a relatively clean bill of health. However , NAO picked up as we did on the introduction of inflation factors which make the savings look a lot higher (so the baseline spend in 2009/10 is inflated to give a theoretical “what we might have spent” figure against which to measure savings).

NAO also points out that the ‘centralising procurement ‘ figures now include savings from the wider public sector for the first time. So spend with Crown Commercial Services from local authorities or hospitals (for example now) has some sort of national “savings” figure assigned to it. That explains something that puzzled us when the figures were announced – how that heading had seen an increase from £1020m to £1490m, when really there hasn’t been much new central contract activity in 2013/14 (other than the dreadful “Contingent Labour One” contract which departments are desperately trying to avoid using).

NAO says that “More than £500 million of the centralising procurement savings line this year comes from bodies in the wider public sector”. So if we took that out of the £1490m, savings under this heading would actually have been lower than last year, which fits with what we might have expected. And the problem with including local authorities is that we just don’t know. They may have saved money – or perhaps they switched to a CCS contract for convenience reasons and are spending more than they used to. So really, there is a strong argument that this should not be included in a savings number that is presented by Ministers as being factual and “audited”.

So the figures are by no means all discredited, but this all smacks of, if not desperation, then at least a less rigorous approach then previously seen. That seems to be in order to show continued progress in terms of the numbers. It’s a shame in a way, because we do give Cabinet Office much credit for their efforts over the last four years in driving some real savings, and we doubt whether a Labour government would have been as focused. But this year’s figures are in danger of tipping over from the “largely believable” heading into the “slightly fishy” category, in some areas at least.

And here’s the opposition Labour Party’s comment on all this. (Tumbleweed blows across the website...)

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