The future of government procurement: building on (digital) success

17 November 2015

With the spending review looming, Minister for the Cabinet Office, Matthew Hancock, last week outlined how the Government might build on its efficiency savings in procurement policy. This is a key area for focus, totalling some £242 billion of spending each year. Hancock explained that he plans to do so by introducing a ‘Crown Marketplace’, which builds on the savings and innovations the Coalition’s ‘Digital Marketplace’ offered.

This Digital Marketplace aimed to simplify and speed up procurement for basic IT products. The most prominent feature of this has been the G-Cloud framework. This was launched in 2012 and allows the public sector to procure cloud-based services (such as web hosting, site analytics and document collaboration tools) from an Amazon-like marketplace, obviating the need for lengthy procurement processes. Suppliers can upload goods and service advertisements every six months, when a new iteration of G-Cloud goes live.

G-Cloud has increased competition by reducing barriers to the biding process. The simple registration process, which forgoes complex questionnaires required by larger procurements, makes it simple for suppliers to compete. With over 19,000 goods and services available, the Government can choose the product or service that provides the best value for money. The framework has also stoked Small and Medium-Sized Enterprise (SME) involvement, which, the Government argues, provides greater innovation. Of the £753 million of sales, half has gone to SMEs. This well exceeds the Government’s aim for 33 per cent of total procurement spend to go to SMEs.

G-Cloud Quarterly Spend

This results in significant savings for government. The Crown Commercial Service estimates that G-Cloud saves 20 per cent against legacy single-vendor agreements. Former Crown Representative for SMEs, Stephen Allott, and Professor Andrew Cox argue this figure is more like 50 per cent across government and point to DWP reducing its web-hosting costs by 90 per cent in 2015 via G-Cloud.

The marketplace might have the potential to revolutionise procurement practice, but it is still small. G-Cloud accounts for 0.2 per cent of total government procurement spend. The Government is therefore right to build on the successes of the Digital Marketplace. This might go beyond procuring cloud products and involve commodities and simple services. The Government should not, however, lose focus on continuing to grow the Digital Marketplace itself. G-Cloud accounts for only 6 per cent of government ICT spend and so there are clearly more savings to be found here.

The continued growth of the Digital Marketplace alongside an extension of its benefits into other areas has the potential to revolutionise government procurement. Increased competition, including more new market entrants will allow the Government to continuously exploit the best innovation at the lowest prices—thereby ensuring the best value for money for the taxpayer.

Alexander Hitchcock, Researcher, Reform

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