30 July 2004
Whitehall's ability to deliver £21.5bn-worth of savings targeted in Sir Peter Gershon's efficiency review came under renewed doubt this week following a damning report on public sector procurement.
An interim study of companies dealing with public bodies, conducted by Mori on behalf of the CBI, highlights the wasteful use of taxpayers' cash across many departments and paints a picture of a Whitehall still oblivious to effective purchasing practices.
CBI director general Digby Jones called for a radical overhaul of procurement to ensure the government achieves the savings identified by Gershon, who reported that 'significant progress remains to be made'.
Jones said 'poor procurement practices' were getting in the way of efficiency. 'Too often, the government dithers about what it wants to buy, or makes an order and then changes its mind.'
The government purchases around £120bn-worth of goods and services annually, and experts have estimated that around £7.2bn of Gershon's savings must come from procurement.
Mori's survey, however, indicates that familiar problems continue to blight the sector. Half of the respondents said contract bid costs have increased 'substantially' over the past five years.
James Worron, CBI senior procurement policy adviser, told Public Finance that bid costs exceed 5% of the contract value in more than half of all deals, 'which runs into billions of pounds before services are even delivered'.
More worrying for taxpayers, however, is that public sector bodies changed 75% of their contracts midway through the procurement process, increasing costs significantly.
One IT company was asked to produce a database for government employment records and formulated its business plan on that basis – only to be told one week before the start date to retain a back-up, paper-based system.
'That wiped out the company's ability to deliver the project efficiently, and costs escalated needlessly,' Worron said.
He also identified 'agonising' government contract negotiations that delay projects. One major defence contract has been under discussion for six years and has still not proceeded to the bid phase.
Worron said: 'Businesses want to deliver these contracts – it secures long-term benefits for the public and private sector and we believe the savings identified by Gershon can be made.
'But the government must act quickly. Specialists must control the procurement process and the government needs to be sure about what it wants from contracts.'
A spokesman for the Office of Government Commerce said: 'Many of the suggested improvements… are under way.'
Tribunal ruling could cost Prison Service £100m
Prison Service managers could be forced to stump up £100m in backdated pay following a landmark tribunal ruling.
An employment tribunal in Croydon on July 26 upheld 1,957 equal pay claims lodged by members of Whitehall's largest union.
The Public and Commercial Services union successfully argued that the Prison Service's predominantly female staff in administration, support and managerial roles were treated less favourably than prison officers and governors, despite evaluation exercises that rated their jobs equally.
The union spent five years fighting the case, which had led to differences in basic pay of around £5,000 a year for equivalent roles.
PCS general secretary Mark Serwotka said the Prison Service's defence of the pay regime had been 'shocking'.
Home Office sources said they were considering an appeal, but the department is also conscious that this would escalate the row at a time when the government is attempting to address long-running public sector pay disparities, especially between male and female staff.
It is understood that the department did not factor the estimated £100m cost of backdating claims into its budget for 2004/05.
Officially, the department refused to be drawn on the issue. A spokeswoman said: 'We are currently reviewing the outcomes and judgments before deciding on any action that we may wish to take.'
But Serwotka warned: 'There is no honourable basis on which the Prison Service can appeal.'
DCA to move into Queen Anne's Gate
The Department for Constitutional Affairs this week confirmed it has signed a £150m deal to take over the Home Office's soon-to-be-vacated headquarters in central London.
The DCA will move into the site at Queen Anne's Gate once it has been refurbished by the private owner, Land Securities. The government has already signed an extended lease to ensure the move and the refurbishment go ahead.
The deal was agreed in May, but the value of the project was not revealed. Whitehall chiefs wanted to move another department into the site as part of the government's efficiency drive, which extends to public buildings and land.
Under the public-private partnership, the department and private lessor will share the risk.
Adam Skinner, estate director at the DCA, said: 'This enables us to revitalise a major government asset and convert it into modern accommodation of good quality for the longer term.'
The Home Office will move into a new building in Marsham Street, also in central London, next year.
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