OFT calls for action to improve competition in public sector ICT market

Out-Law News | 28 Mar 2014 | 11:27 am | 2 min. read

A UK regulator has recommended that both public sector IT buyers and their suppliers take action to help improve competition in the market.

The Office of Fair Trading (OFT) has called on public sector buyers of information and communications technology (ICT) and the supplier community to discuss new ways for reporting information about bids, products and services they sell, as well as price and supplier performance details.

The regulator called on suppliers to provide buyers with clear and transparent information "in an efficient way" to help them make more informed purchasing decisions. It has also encouraged buyers and suppliers to work together to ensure information that suppliers provide can be shared within the public sector without rivals being able to gain access to commercially sensitive information.

In addition, the OFT said buyers and suppliers should explore how the information gathered "can be used to facilitate benchmarking". It said benchmarking could help deliver "better value for money" and allow competition to be assessed "over time and across sectors".

The OFT outlined the recommendations (138-page / 755KB PDF) in a report that marks the conclusion of its market study into the supply of ICT to the public sector.

The report highlighted a number of "barriers" that are said to prevent smaller suppliers from gaining entry or a stronger foothold in the market, including complex procurement practices and the cost and time it takes to gain security clearances for supplying ICT to the public sector. In some cases, existing long-time suppliers appear able to benefit from their position to win or retain business from public sector ICT buyers, the regulator added.

"Suppliers that have been in the market for a long time benefit from incumbency advantages such as in-depth knowledge of their customers' requirements and business processes, and are in a better position to take advantage of economies of scale," the OFT said in its report. "These advantages make it more difficult for entrants to contest their share of supply, enabling incumbents to sustain their high shares over time."

The barriers act to dissuade public sector bodies procuring ICT products and services to switch suppliers, it added. The OFT called on suppliers to provide buyers with more information about the products and services they sell to help the buyers make more informed purchasing decisions.

Rachel Merelie, OFT project lead, said: "Information communications technology is central to the efficient and cost effective delivery of many public services. The market supplying ICT products and services to the public sector is worth around £14 billion and is not working as well as it should. In some areas entry barriers are high and there is little switching between suppliers."

"The public sector needs better information and expertise so it is able to judge whether ICT suppliers are delivering good value for money. Companies that supply ICT goods and services should also be more transparent and provide better information to their public sector customers," she said.

As well as changes to suppliers' information reporting practices, the OFT made a number of on how to improve competition in the market for public sector ICT.

Among other recommendations, the OFT suggested buyers should cooperate more and share experiences of good practice in procurement and seek to ensure they regularly "test the market and re-tender contracts" to ensure they are accessing ICT at a competitive price and service level.

Buyers should also explore whether they can procure products and services built on standards "to allow them to aggregate purchases, to facilitate switching and to reduce costs", it added.

The regulator also called on the public sector to review "technical standards and security accreditation processes" to ensure that suppliers are not excluded unnecessarily from winning ICT contracts.

Suppliers were also urged to review their internal compliance programmes to check whether they adequately protect against practices which could be deemed anti-competitive.

The OFT called on the Competition and Markets Authority (CMA), set to take over regulatory duties for competition from the OFT next month, to "give careful consideration to prioritising an investigation into any evidence of anti-competitive behaviour".