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Billions to be saved from centralising government procurement, says Maude

Out-Law News | 03 Aug 2021 | 1:29 pm | 3 min. read

The UK government can better harness its buying power to save billions of pounds for the taxpayer, a former Cabinet Office minister has estimated.

In a new report, Lord Maude recommended that the government procure commoditised goods and services, such as stationery, IT equipment, energy and vehicles, centrally rather than on a department-by-department basis to realise the savings.

Under the proposed new model, which Lord Maude said the government should transition to over a three-year period, government departments would be required to submit an estimate of their future needs commoditised goods and services to “a central buying entity” within the government. It is envisaged that savings would be derived from aggregating demand and negotiating a single price for the supply of those goods and services. Lord Maude said “a very high bar should have to be met before any exceptionalism is permitted”.

Simon Colvin of Pinsent Masons, the law firm behind Out-Law, said: “There is much to gain in moving to a centralised approach for procurement for a buyer like central government. Not only are there benefits for government in joining up and simplifying processes that sit within each department but also potentially significant commercial gains from leveraging a cross-department buying power and economies of scale with suppliers. As Lord Maude has said, for this to be most effective, departments will need to be mandated to do so on a proven exceptions basis only. We have seen this model used successfully in other government procurement approaches, such as in legal services.”

“Success of this model will be dependent on the skills of those charged with the centralised procurement, both from a commercial perspective and from a knowledge of what the government demand will look like. The challenge here will be how to effectively amass from across the departments relevant data on use and future projections and to be able to provide that transparently to suppliers,” he said.

Lord Maude’s recommendation of a new centralised procurement model was one of a number he outlined at the end of a review he conducted into cross-cutting functions and the operation of spend controls in the UK government. His review was commissioned by Cabinet Office ministers in 2020.

At the heart of Lord Maude’s recommendations was his view that core functions of government, such as financial management, procurement, IT and digital, major projects, property, HR and internal audit, perform more efficiently under a “functional model” of governance. This, he explained, is where responsibility for delivering those functions is overseen centrally rather than on a piecemeal basis across the various departments and agencies those functions serve.

Lord Maude emphasised the importance of “strong and capable central leadership of the specialist horizontal functions” and of genuine expertise within those functions, and made a series of recommendations aimed at ensuring each of the functions pursue the delivery of six mandates:  developing capability; continuous improvement; setting and enforcing standards; providing expert advice; setting and enforcing cross government strategies; and developing and delivering services.

The report contained recommendations bespoke to each function. In relation to digital services specifically, Lord Maude said that a functional model would allow the government to harness technical capability to ensure that the products being delivered are of good quality and to address the problem of “legacy systems and technical debt”. He said it would also ensure that the government does not miss opportunities in leveraging the data it holds. “Leveraging government-wide data doesn’t happen spontaneously, it requires leadership and capability at the centre with a strong mandate,” Lord Maude said in his report.

On data, Lord Maude called on the government to “re-boot its open data programme” and provide “a single canonical data set” for each category of information it holds, and to make it available for use by external providers and developers “in a carefully controlled way”.

Other recommendations contained in the report included a strengthened mandate for the Infrastructure and Projects Authority to enable it to oversee the successful deliver of major projects, as well as a renewed drive to move to a shared services model for back-office functions.

“There should be no more than five back office centres for the whole of government, and ideally fewer,” Lord Maude said. “This programme must be managed from the centre, whether the work is outsourced or continues to be delivered in-house. This consolidation is an essential lever to enable much greater standardisation of HR and other practices across government, which will greatly increase interoperability and reduce costs.”