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PROCUREMENT: BUSINESS THROWS DOUBT ON CHANCELLOR'S EFFICIENCY PLAN

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The Confederation of British Industry today warned that chancellor Gordon Brown will struggle to achieve£21.5bn of...
The Confederation of British Industry today warned that chancellor Gordon Brown will struggle to achieve£21.5bn of efficiency savings without a radical overhaul of public sector procurement.

The employers' organisation fears that the government may be wasting much of the£120bn a year it spends buying good and services because of poor practices.

A snapshot MORI survey of CBI member firms says the government is often a poor client that fails to specify clearly what it wants to buy, pushing up bid costs unnecessarily.

In the poll of 83 companies, two-thirds of respondents said public sector procurement systems and structures require fundamental change. The sample includes some of the UK's biggest businesses involved in public sector procurement, more than half with a turnover of over£100m.

The study will form part of a major CBI report on procurement that will published later this year. The CBI's move is a response to business concern that failure to improve procurement is hampering attempts to build partnerships between firms and the public sector.

MORI questioned a cross-section of companies who sell to the government. The survey found that:

* Almost half of the respondents say bid costs on like-for-like contracts have increased substantially in the last five years. A further one in four say that costs have increased slightly.

* Firms said that the public sector changed three-quarters of all contracts mid-way through the procurement process. Only three in ten companies believe the problem of the government changing specifications has eased at all in the last five years.

* Although almost half of companies say they believe the public sector overall has made progress in the last four years towards the selection of bids on the basis of value for money rather than lowest price, two in five say this has not proved the case. This is despite the government insisting that value for money is the criterion on which all procurements must be made.

* The study identifies some of the potential causes of this, including the government providing 'inadequate specifications' and 'complex procurement models', both cited by three in four companies, and the 'absence of a standardised approach' to making purchases, cited by almost seven in ten firms.

Digby Jones, director general of the CBI, said: 'Business is positive about its relationship with the public sector but poor procurement practices are getting in the way. Too often government dithers about what exactly it wants to buy, or makes an order then changes its mind.

'The impression we're getting is that existing systems aren't delivering and that the costs of procurement are actually going up. Repeatedly changing specifications means the taxpayer ends up paying more than if the government got it right first time.'

The CBI calculates that the civil service job cuts will only deliver£5bn of the£21.5bn efficiency target. Three-quarters of the savings will have to come from the£120bn a year the government spends buying goods and services, the£7bn it spends on regulation, inspection, policymaking and grants to the private sector and the£8bn a year it spends doing the same in the public sector.

Mr Jones said: 'Making efficiencies doesn't just mean reducing headcount. The government must do things differently and introduce better working practices. If it doesn't think more about this when it goes shopping, then it's difficult to see how the chancellor will be able to meet his targets.

'Intelligent public procurement can make such a contribution to productivity gains in the private sector. Measured, predictable purchase plans enable companies to invest in kit and people more effectively - just look at France and Germany.'

26 July, 2004

Notes

MORI on behalf of the CBI conducted a research survey among CBI members on public sector procurement. The survey is more comprehensive in its scope than most others on this subject. It was designed to get beneath the surface and understand some of the more systemic challenges of improving public procurement.

* The respondents in this survey are all CBI members whose companies are involved in public sector procurement to a greater or lesser extent. Of those companies surveyed 66% operate across the UK and 34% are based in a particular region.

* Nearly a fifth (18%) have a turnover of over£1bn, while just over a third have a turnover of£1m to under£100m (36%) and the same proportion between£100m to under£1bn (36%). A tenth have a turnover of less than£1m (10%).

* There is similarly a cross-section of companies in terms of number of employees - Under 100 employees: 25%, 100-999 employees: 20%, 1,000-4,999 employees: 30%, 5,000+ employees: 24%.

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