Government is 'shockingly inefficient', concludes Green

In his efficiency review report on behalf of the government, published on 11 October 2010, the entrepreneur says that expensive IT services are contracted for too long with no flexibility. The document cites an unnamed IT contract with six years remaining as an example of the government's poor procurement. Green says that the deal for the provision of hardware and software development is "a poor quality contract with no provision in the contract to reduce the annual amount payable should the development work not be required". "This contract includes services that are no longer required. There should have been an optional element written into the contract," he adds. He recommends an audit of all contracts with more than £100m of remaining value by a central, experienced negotiating team, adding that this team should also investigate areas including: - The current demand for services; - The cost of delivering the service, and the relationship between cost and price, on an 'open book' basis; - The financing arrangements; - The subcontracting arrangements; - The contractual flexibility; and - The ability to break the contract. Green says that inefficiencies within Whitehall are prevalent because "there is no process for setting and challenging detailed departmental budgets" and "government acts as a series of independent departments rather than as one organisation". He singles out fixed line telecoms "as the best example where the government fails to leverage its scale". He says that departments purchase telecoms separately from various suppliers and uses a figure from Kable's UK public sector ICT overview report, which estimates that total government spending is in excess of £2bn per annum, to back up his claims. "It could be 30-40% cheaper for the government to buy its own capacity," Green adds. An urgent review of fixed line telecoms cost has been requested as a result of the findings. Whitehall's procurement of laptops is also criticised. "If you were to buy a laptop for yourself, would you pay £2,000 when the same item can be bought on the internet for £800?" he asks. Green says the cheapest procurement of a laptop by a department was £353, while the highest price was £2,000. The report suggests that this 82% differentiation proves that there is no standard specification across departments. The report also discloses that one mobile phone provider has 68 contracts with government departments and arm's length bodies, which are negotiated by each individual department and do not expire on the same date. "This makes the process very inefficient and again fails to leverage scale," it adds. The report repeatedly states that the government does not "leverage its buying power, nor does it follow best practices" and reveals that central government spends £104m a year on printing, which could, according to Green, be reduced if government sought more competitive prices. He believes the problem could be partially solved if the quality of data issued by departments was improved and a central mandate was put in place to ensure "accurate and timely data". The report makes a number of recommendations about the government's budgeting method calling for a team of three to four individuals with financial and commercial expertise to review departmental spending "with an emphasis on efficiency and accountability". "Budgets should be prepared 'bottom up' where appropriate," the report concludes. Of the findings in his report, Green says: "I am deliberately not going to place a total number on the waste and/or the saving. I think from this report it is clear that the prize for the taxpayer is too big and significant not to chase." In August, prime minister David Cameron asked Green to undertake an efficiency review of government spending, focusing on commodity procurement, property and major contracts. "The scale of the waste uncovered by Sir Philip and his team is staggering. His review shows that for too long there has been no coherent strategy to make government operate more efficiently," says Cabinet Office minister Francis Maude. "Every pound that we can take out of the cost of government is a pound we can protect on the front line. Our over-riding aim is to protect the quality of front line services and to protect the jobs of dedicated public sector workers."