The state of government procurement

Today the Public Administration Select Committee has reported on its inquiry into government procurement, and while there is scant mention of charities in particular, many of the problems highlighted do have a direct impact on the voluntary sector.

The public sector spends £227 billion each year buying goods, services and works. As the committee rightly points out, making these procurement processes as efficient and effective as possible is not only essential for savings to the public purse, it is vital for stimulating economic growth.

So what does the report say about the current state of affairs?

Firstly, procurement processes are too inefficient. Because of a ‘process-orientated, risk-averse culture’ the way in which government bodies apply procurement regulations is often too slow and bureaucratic, making us 50 per cent slower than some of our European counterparts. Understandably, the committee considers this ‘intolerable’ as it is often to the detriment of UK suppliers winning contracts.

The committee also highlights how the government has failed to develop a clear strategy for public procurement and underlines a lack of access for SMEs and social enterprises (a category that charities arguably fall within), citing a problem long-highlighted by NCVO, namely many government contracts are just far too big for smaller organisations to bid for.

While acknowledging that government has made some improvements regarding the efficiency and effectiveness of procurement processes, the committee raises serious concerns about contract management failures, such as the recent Serco and G4S debacle. It also criticises the civil service for its ‘lack of understanding about how to gather requirements, evaluate supplier capabilities, evaluate relationships or specify outcomes’. With regards to public services, this shortcoming could be partly addressed by greater involvement of the voluntary sector in needs assessment and policy formation.

On the issue of where and how the Government spends taxpayers’ money on purchasing goods, services and works, the report also considers how government procurement achieves wider social and economic objectives. While welcoming EU reform proposals and the Public Services (Social Value) Act 2012 which encourage public bodies to use procurement for wider social and environmental purposes, the committee sympathises with the Minister for the Cabinet Office, Francis Maude’s concerns about loading ‘procurement with values and requirements other than getting what you want at the best price.’

Voluntary organisations indeed tell us that price is the driving consideration behind many procurement decisions at present. But it is a missed opportunity for government not to consider the quality of services, and the added social and economic benefits that they could achieve with their purchasing power. For example, SEUK’s Shadow State report highlights the issue of zero-hour contracts for social care staff, and how the resultant low wages can have negative ramifications for residents and other benefit departments within a local authority.

Worryingly, Maude also makes clear that the Government has no plans to promote the Social Value Act, saying “[it] is a permissive rather than a mandatory regime, so it is very much for public contracting authorities themselves to see how they want to use this, rather than for us to require it”. While the Minister adds the caveat that where it does not interfere with price, other factors can be considered, his remarks raise serious doubts about the Government’s overall commitment to the social value agenda and indeed securing value for money in public sector procurement. At a time when economic growth and cuts to public spending are top of the agenda, it is somewhat surprising that the Government is not more supportive of legislation that can help stimulate job creation and reduce pressures on other services.

Despite the committee’s somewhat conciliatory tone regarding Maude’s concerns, it does acknowledge widespread concerns that the Government is still not doing enough to use its procurement spending to achieve wider social and economic benefits for the UK, and suggests the use of wider contract performance measures to help achieve this. Given the glaring omission of any such requirements in the Social Value Act this is certainly a welcome recommendation.

In the meantime NCVO will be continuing to work with our partners across the voluntary sector and government to ensure the sector’s ‘added value’ and value for money is accounted for in government procurement, and that measures are taken to monitor and report on the implementation of the Social Value Act.