NAO details lessons from government procurement failings

New report calls on departments to engage with suppliers more effectively, and follow guidance more consistently

By Jim Dunton

19 Jul 2023

Public spending watchdog the National Audit Office has highlighted litany of shortcomings with government procurement – including an inability on the part of the Cabinet Office to demonstrate how well competition is working.

Government spent £259bn on the procurement of goods and services in 2021-22, according to the NAO. Of that figure, around £100bn was awarded by major departments, two-thirds of which was subject to competition in some form.

But the NAO said that its review of competition in public procurement had found that the government cannot show how well competition is currently working because the Cabinet Office does not take advantage of the data it collects to understand more and gain further benefits.

Its just-published report, Lessons learned: competition in public procurement, says that while the Cabinet Office uses its data for analysis of overall trends, central commercial teams did not use more detailed information available to them to analyse competition or markets.

The NAO said that of 235 large contracts recorded on the Find a Tender database between January 2021 and January 2023, 20% of those using open competition had received only one bid.

It said the Cabinet Office had not assessed the expected level of single bidders within government’s major markets or analysed trends in numbers of bidders.

Elsewhere, the report said departments are unclear about how to engage with the market before a contract is let.

The NAO said departments need to design realistic requirements for goods or services and use them to inform their sourcing approach if they are to make the most of the opportunities available through competition.

“Our past reports, and our more recent fieldwork with stakeholders, have shown government has often not done this,” the report said. “We have seen cases where poorly‑designed requirements and sourcing have led to few bids, or to buyers appointing suppliers that proved to be unsuitable.

“Departments need to engage the market sufficiently, by consulting potential suppliers and providing information to the market in a way that does not favour particular suppliers.

“Cabinet Office guidance encourages this, but stakeholders told us that departments often take an overly cautious approach to engagement and are not always clear on what they can do.”

The report cited the Ministry of Justice’s difficulty in procuring its new-generation electronic monitoring programme for offenders as an example of how an over-ambitious procurement exercise had reduced the potential supplier pool.

The MoJ parted company with two suppliers for its bespoke, “world-leading” tags before adopting a less-prescriptive approach.

The report also found that departments do not routinely follow central guidance to achieve the benefits of competition.

“As well as issuing guidance to departments, the Cabinet Office applies spending controls to procurements for larger contracts, and sometimes makes recommendations on competition,” the report said. “Despite these arrangements there are many cases of departments choosing non-compliant extension of contracts rather than the competitive procurement process which should be the default.”

The report said that while departments now consistently publish procurement pipelines of forthcoming contracts, for each of the quarters during 2022 only five of 16 departments published a complete set of the required data on these contracts.

The NAO said the government’s impact assessment for the Procurement Bill, which is currently in its final stages before gaining royal assent, suggested savings of £4bn to £7.7bn a year could be achieved through increased competition, driven by more flexibility in the way departments can select suppliers

It concluded: “If government tackles some of the longstanding challenges in using competition effectively it will increase its chances of securing the benefits of its planned new regime.”

A Cabinet Office spokesperson said: “The Procurement Bill will create a more open and transparent system, stimulating competition and ensuring procurement teams have the flexibility to design a tendering process to their needs.

“It will also increase competition by opening up opportunities for new suppliers, particularly SMEs, through the removal of more than 350 complicated and bureaucratic rules as a result of Britain leaving the EU.”

The Cabinet Office added that a free programme of learning and development would be rolled out to help contracting authorities operate the new regime effectively.

It said the government’s Sourcing Playbook contained guidance to help departments decide whether to extend contracts or re-tender.

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