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Whitehall 'could save £10bn a year by improving procurement'

Published 07/03/2016

The report suggests placing a greater emphasis on using an online marketplace to buy from suppliers
The report suggests placing a greater emphasis on using an online marketplace to buy from suppliers

Up to £10 billion a year could be saved by improving the way Whitehall purchases goods and services, according to a think tank.

The Reform report on Government procurement suggests placing a greater emphasis on using an online marketplace to buy from suppliers.

If the growth of e-procurement continued at current levels, nearly 6% would be done online, saving around £470 million a year by 2020.

But if Whitehall followed the example of Estonia, where the government buys half of its goods and services online, or South Korea, where e-procurement makes up 64% of spending, the savings could amount to around £10 billion a year.

Will Mosseri-Marlio, the report's co-author, said: "Transforming central government procurement could save up to £10 billion a year, three-quarters of the annual cost of the police service in England and Wales."

The report said the precise amount spent by central government departments was disputed, but the National Audit Office figure was around £40 billion.

In total, it is estimated the digital marketplace has saved departments 20% on legacy contracts, and 50% when process costs were included.

If Whitehall followed Estonia's example of carrying out 50% of spending online and achieved savings of 50%, that would amount to a £10 billion saving a year.

But the report warned that a "somewhat fraught relationship" between the Crown Commercial Service and Government Digital Service could limit Whitehall's ability to make such savings by preventing the "acceleration" of reforms.

"More significantly, commercial staff will need to acquire new skills if they are to harness the potential benefits of digitisation and drive value for money more generally," the report said.

Co-author Alex Hitchcock said: "Commercial skills in the civil service are a long-standing concern. Unless the Government improves practice, savings from digital procurement are unlikely to materialise."

A Cabinet Office spokesman said: "Taxpayers rightly expect us to find the best value for money, and everyone deserves the best possible public services.

"We've saved billions of pounds for taxpayers through our commercial reforms, and the Crown Commercial Service and Government Digital Service will continue to work closely together to introduce the latest innovations and ensure we get the best value from every deal."

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