Government spends £284bn – almost one-third of its total
expenditure – with external suppliers, finds a new report by the
Institute for Government. Given its scale, government procurement
could not easily be abandoned even if politicians wanted.
Published today, Government procurement: the scale and
nature of contracting in the UK says that four
departments - the Ministry of Justice (MoJ), the Department for
Transport (DfT), the Department for International Trade (DIT) and
the Department for Environment, Food and Rural Affairs (Defra)
spent more than half of their entire budgets with external
suppliers last year.
The money is spent on a vast spectrum of things, from goods such
as stationery and medicine to the construction of schools and
roads, and from back office functions such as IT and HR to
frontline services such as probation and social care.
The report finds that the largest suppliers are winning more and
more government business. Last year, roughly a fifth of all
central government procurement spending was spent with ‘strategic
suppliers’ - companies that receive over £100m in revenue a year
from government – up from around an eighth in 2013. This is risky
for government, given that its top three suppliers have all
experienced financial difficulties in recent years.
Despite the scale of spending on procurement and outsourcing –
and increasing financial problems in parts of the sector - the
data available on procurement and outsourcing is poor. Every day,
public bodies procure hundreds of millions of pounds’ worth of
goods, works and services. With a clearer picture of how much is
spent, on what and with which suppliers, government could make
better-informed spending decisions and make significant savings.
Emma Norris, IfG Director of Research, said:
“Government is spending hundreds of billions of pounds every year
with external suppliers – but there are signs that some players
involved in outsourcing are struggling, most recently Interserve.
Government does not have the data it needs on its own outsourcing
and procurement. It needs to look hard at the experience of the
past 30 years of outsourcing, develop a much stronger sense of
what has worked well and what has not, and urgently review the
health of its procurement markets.”
