Spending review: Procurement needs reform as public sector cuts bite

The government should focus on more than just blindly cutting IT spending...
Written by Mark Kobayashi-Hillary, Contributor on

The government should focus on more than just blindly cutting IT spending...

IT will not escape unscathed as the Chancellor's axe sweeps through the public sector. But if the government were really smart, it would address the process of buying IT services, rather than just focus on cost-cutting, says Mark Kobayashi-Hillary.

The national economy is in crisis. What is the IT industry going to do about it? Quite a lot it seems.

Though Britain's economy is no longer technically in recession, there remains an enormous economic deficit that the coalition government has to deal with at some point. In the past year, the government spent £155bn more than it earned, and so the burden of trimming that fat has trickled down to the companies supplying services to government.

Last July, the Cabinet Office called in the top 19 technology suppliers and asked them for help - essentially asking them to cut their rates and reduce the scope of services that are not essential. More recently, a second wave of more than 30 additional companies has been called in to make a similar pledge of support.

Imminent Comprehensive Spending Review
All this manoeuvring is really just a warm-up for the Comprehensive Spending Review (CSR), which will be announced on 20 October. The CSR is like a three-year plan, setting limits on what each government department can spend during that period.

The Comprehensive Spending Review will have a major effect on government spending

The Comprehensive Spending Review will have a major effect on government spending
(Photo credit: Shutterstock)

It's important this time because very harsh departmental cuts of between 25 and 40 per cent have been indicated, but until the Chancellor formally announces the review, we won't know where the axe is going to fall hardest, or if the cuts will be as draconian as feared.

Under normal circumstances, most IT suppliers would feel protected by contract law from any major change, such as a 40 per cent cut in budget halfway through a programme.

But this is the government, the largest consumer of IT services in the country. If Cabinet Office minister Francis Maude 'asks' you to reduce your rates, then what's the choice? Push back and complain only to find you never work for the public sector again?

So normal contract law is not going to protect anyone. There is an acceptance that if departmental budgets change dramatically, then the IT suppliers will need to take it on the chin.

Limited procurement culture
But the real issue for the government is that its procurement culture does not encourage innovative improvements or change, just whatever service is considered to be the safest pair of hands.

Government CIO John Suffolk has talked for a long time about transparency being essential and more recently about his plans for a government app store and G-Cloud.

All great ideas and ones mostly welcomed by private sector IT suppliers - though with some doubts about when they might enter reality - but if procurement from the government does not change, then why would the suppliers?

This is what the director of a major government supplier told me off the record: "The OGC [Office of Government Commerce] is not an intelligent client function. You can't expect the buying behaviour in government to change just because someone says it should change. You have to fundamentally address the professionalism of that group of people - how they go about their daily work and what they do."

Private sector expertise
I asked why government procurement is not improving, even though there are many private sector experts being hired into the public sector.

He said: "There are some very good people all over the place, but how many people who have made it big in business and then gone into government have ever made it a success? Not many. Why is that? Because even with all their knowledge and experience there is something bigger and wider stopping them from working - it's a really systemic problem."

We will soon all learn what cuts are to be made and how they will affect the existing batch of IT suppliers. If the government wants to be really smart, it might just reconsider improving the process of purchasing IT services, rather than treating a cost reduction as the final solution.

Mark Kobayashi-Hillary is the author of Who Moved my Job? and Global Services. He lectures at London South Bank University.

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