We need to get value for money in spending

AT ANY one time, UK Government departments are managing tens of thousands of contracts, varying from large infrastructure projects to frontline public services.

Getting commercial practices right to deliver better value for taxpayers is simply critical.

Procurement, done well, can improve public services and infrastructure, boost innovation and drive prosperity.

It ensures the services we all rely on – from refuse collection to major infrastructure like HS2 – are high-quality and future-proofed.

But current practices are creating a race to the bottom, and bureaucracy is preventing effective partnerships between the public and private sector.

At a time when collaboration between sectors is under increasing scrutiny, it is more important than ever that government and business develop better partnerships and boost public confidence in their value.

For many years, we’ve consistently said that a disproportionate focus on short-term cost reduction is undermining government’s ability to deliver value for money through contracting.

In 2018, almost two-thirds of CBI members operating in this space said that public sector contracts were primarily awarded based on lowest initial bid cost, with just 2% stating it was service quality and 3% social outcomes.

In turn, the CBI found this was reducing competition for government contracts, creating unsustainable service delivery models, and stifling innovation.

With government spending £284bn a year on buying goods and services from external suppliers, this is a wasted opportunity.

Procurement might not be the most exciting of stories, but it is creating waves and recently we saw defence procurement splashed all over The Times.

The new UK Government seems keen to deliver change in this area and this is something the CBI welcomes.

But suppliers to government operate in challenging conditions, with almost 40% of businesses rating public procurement as poor or very poor.

The UK Government’s current approach to procurement risks creating a culture of short-termism and an unsustainable marketplace – ultimately putting quality public services and infrastructure in jeopardy.

While the UK Government has taken steps to increase its effectiveness in managing public service contracts and projects, supplier feedback as well as National Audit Office analysis shows that more can be done.

Firms are ready and able to help improve delivery.

A key part of this will be making sure lessons are learned from past project failures and increasing accountability on both sides so that action can be taken where delivery falls below expectations.

Implementing the recommendations set out in our report, Partnering for Prosperity – from reducing churn among senior managers of public contracts to sharing best practice between central and local government commissioners – will help instil a culture of continuous improvement that will have a positive effect on public finances, and ultimately, people’s lives.

Looking ahead, UK Government contracting must focus on collaborative partnerships with industry that deliver for the long term and are centred around genuine value for money – not the cheapest price.

Business cares deeply about the vital role it can play in delivering public services and infrastructure – and it already makes a significant contribution.

However, these partnerships need to evolve if they are to be fit for the challenges of the future. In particular, the UK Government must work with its suppliers to focus more on long-term value rather than just short-term costs.