Reform Report – Government CANNOT Save £10 Billion Through Digital Procurement

So we featured the report from think-tank Reform the other day, all about UK central government procurement and said that whilst it has some good points, it was spoilt by the most ridiculous potential savings estimate we have ever seen. The problem is that it will be quoted by lazy journalists and analysts in the future - "government could save £10 Billion by implementing digital procurement".

Let's look in some detail at where the £10 Billion comes from.

It starts with the assertion that UK government departments have saved "up to 50%" on software by using the Digital Marketplace. Well, apart from the "up to" (which we all know and love from consumer adverts - "lose up to 140 pounds with our great new diet pills"!) then these savings have not been audited. The Marketplace savings estimates in the report are just that - estimates provided by the buyers with no validation. So we have no idea whether the 50% is accurate.

Then, software is of course one of the few products that has got cheaper over the years as technology develops. We are all paying less for our Microsoft Office or Norton on our home PCs than we were 10 years ago. The same is NOT true for virtually everything else government buys, whether that is outsourced business services, fighter planes, pharmaceuticals, stationery or management consulting. Software is in fact almost unique in becoming structurally cheaper over time.

So Reform takes the 50% savings - the top end of the dodgy software estimate - and applies it to everything that could be "bought digitally".

They then suggest that 50% of everything government buys could be bought digitally; and that is based on the figures from Estonia and South Korea apparently. Now it all depends what we mean by bought digitally anyway. The use of eSourcing in the UK is actually pretty high, so 50% of spend going through some sort of technology is not unrealistic, but just running eSourcing clearly does not deliver 50% savings - how could it?

If Reform means that 50% of spend could go through G-Cloud type platforms, then that is also unrealistic. The amount could grow significantly, we acknowledge that, but given that the MOD accounts for almost half of all central government third party spend, we are not going to buy aircraft carriers, military logistics services or even military uniforms though that route, we would suggest.

The Reform calculation is therefore;

£40 Billion total spend x 50% going through digital x 50% savings on that = £10 Billion.

So the whole thing is ridiculous. The savings estimates are both unverified and spurious as an indicator for other categories because software is not a typical category. Then the figure for potential use of digital marketplaces is also overstated, which all leads to a stupid final number.

Reform is a reputable organisation, but really someone should hang their heads in shame for this very dodgy piece of analysis.

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