The new government should take a new approach to procurement

Government spent £388bn buying various goods, works and services from the private sector and charities in 2022/23. These are huge amounts of money: more than double the NHS budget and 250 times more than the savings from the recently announced changes to the winter fuel payment.

But there are deep flaws in accountability for how this money is spent. Government itself has surprisingly limited data on what it is buying, and from whom. Suppliers that do a bad job rarely face serious consequences, with red tape muddying the waters of accountability when things go wrong. 

The new government has an opportunity to improve accountability for public procurement. The new Procurement Act 2023 – passed under the last government and now inherited by Labour – will bring in a new procurement regime and number of welcome reforms. It was due to come into force in October, but has been delayed until February. ⁴ House of Commons, Written ministerial statement - Procurement Act 2023 Update, 12 September 2024, https://questions-statements.parliament.uk/written-statements/detail/2024-09-12/hcws90  This is the right decision, as it will give the new government an opportunity to set a strategic direction for the reforms, and get the Act’s implementation right.

Management consultancy contracts worth £5.4bn end in this parliament

With its first budget looming and a difficult fiscal inheritance to contend with, the government is looking for where it can get better value for money from spending. Procurement is in its sights: in July the chancellor said she intended to save £550m in 2024/25 by stopping all non-essential consultancy spending, with further savings of £680m in 2025/26. On Wednesday, it was reported that new consultancy contracts will be subject to more stringent controls from ministers and senior officials.  

Reducing spending on consultants will mean either cutting back on the services they provide or bringing those services in-house when contracts end – rather than retendering or renewing them. Our report published yesterday, Improving accountability in government procurement, produced in partnership with Tussell and AutogenAI, shows the new government has an opportunity to do this. There are £5.4bn of management consultancy contracts due to end in the next parliament, with 1,800 of these, worth £2.3bn, due to end in 2025 alone.

But if the government wants to make wider savings on procurement, and hold public organisations and suppliers for delivering good value for money, it needs to look beyond a single sector, and especially at what happens when things go wrong.

There must be consequences for poor performance

Across government, performance monitoring is ineffective, with metrics often lacking clarity and being poorly aligned with objectives. The people monitoring performance are frequently not trained procurement professionals; the new government should correct this and set an expectation that staff managing contracts should be commercial specialists.

When suppliers do perform poorly the current legislation does, in theory, allow for them to be excluded from supplying the public sector. However, in practice, this almost never happens, meaning these suppliers continue to receive taxpayer money – as has happened with Fujitsu, which has had contracts renewed even after the details of the Post Office Horizon scandal emerged.  

While the new Procurement Act widens the grounds for excluding a supplier, there is a strong risk it remains under-used, particularly for the suppliers the government is most dependent on. The Cabinet Office should lead reviews into suppliers the public sector is most exposed to, or where there is a lack of competition that would make exclusion difficult, and set out how exclusion would work in these contexts.

Poor quality data can lead to worse value for money

Data on what government spends and with whom is patchy, and dispersed. To provide the in-depth analysis in this report, Tussell gathered data from dozens of separate online platforms. For the government, this makes holding public sector organisations to account for getting value for money more complicated. For suppliers, it means they have less good sight of opportunities to work with the public sector, which reduces competition and innovation. 

The Procurement Act should help make more data available. But if current transparency standards aren’t being met, there is reason to question whether any additional requirements would be as well. So government needs to ensure that there is the right capability and sufficient capacity across the public sector to publish accurate information on time. 

There also needs to be a meaningful way to hold public bodies to account for failing to meet transparency requirements. The Treasury should update its guidance on Managing Public Money to make accounting officers responsible for maintaining high quality procurement data. And parliament, particularly the PAC, should then hold senior officials’ feet to the fire in oral evidence sessions. 

The new government should align procurement with its missions

Public organisations face a patchwork of procurement policy and controls. These have normally been introduced with good intentions, but cumulatively create burdensome complexity for the public sector and suppliers to navigate. This complexity hits smaller organisations, such as charities, small businesses and local authorities hardest, since they are less likely to have the expertise, staff or capacity to navigate them.

The government should review procurement policies and controls to ensure they collectively enable clarity of accountability, rather than adding unnecessary complexity.

On top of all these policies sits the National Procurement Policy Statement (NPPS), which sets strategic direction for public procurement and gains statutory status under the Procurement Act. With the implementation of the Act being delayed until February, Labour should seize this opportunity to re-write the NPPS to reflect its missions, and help direct billions of pounds of procurement spend towards delivering them.

The PPE and Horizon scandals laid bare the need for procurement reform. The government should now begin to make these changes.