Supplier management by government is wasting £200bn

Government projects worth a total of £200 billion are being put at risk by Whitehall’s lack of commercial expertise, according to a damning report.

The value for money on 43 government projects, many of which are either IT focused or have a large technological component, is being put in a dangerous position because of “significant weaknesses” in the ability and background of government employees when it comes to dealing with suppliers.

This is the verdict of a new report by the National Audit Office, which blamed the government for failing to assess skills shortages systematically. The NAO said it was “critical” that government hired permanent staff who had the commercial skills and experience to interact with suppliers, rather than relying on contractors to assist with tackling the problem.

The biggest skills gaps were in contract management, commissioning and managing advisers, risk identification and management, and business acumen.

Fourteen out of 16 departmental commercial directors told the NAO that the Office of Government Commerce had done little to address skills gaps within their department. But the NAO said “ultimate responsibility” for commercial skills “remains with departments”.

While the OGC had introduced a number of initiatives aimed at improving commercial skills, it was not working closely enough with departments, the NAO said. It needed to work with departments to establish standard approaches for dealing with the commercial sector.

While the report did not single out individual projects, the 43 schemes referred to include the £12.7 billion NHS National Programme for IT, including summary care records, the data ‘spine’, and electronic prescriptions.

The ContactPoint databaseof children and the Building Schools for the Future scheme are also among the projects, alongside the Ministry of Defence’s £7 billion Defence Information Infrastructure programme and HM Revenue & Customs’ Pay As You Earn tax system.

On the list too are the Ministry of Justice’s C-Nomis National Offender Management System and its Libra court case management software, as well as the biometric passport and identity cards programmes, and the police Impact programme.

Being on the list does not necessarily indicate a project is definitely at risk, but does mean that its progress is closely monitored by the government.

A review by the Office of Government Commerce, which works on government procurement, found that 44 per cent of senior responsible owners on major projects did not have any substantial commercial experience.

Edward Leigh, chairman of the Committee of Public Accounts, which holds parliamentary hearings based on NAO reports, said that “time and again our committee has seen evidence of the public sector losing out when it deals with the private sector”.

“Given the current tough economic situation and the increasing involvement of the private sector in delivering public services, government must get the right people with commercial know-how in the right places quickly,” he added.

A spokesperson at the OGC said: “We welcome the NAO’s report, which confirms the findings of our Procurement Capability Review programme, and the value of assurance processes we have in place such as the Major Projects Review Group and Major Project Portfolio reporting.”

The OGC will work closely with government departments “to plug shortfalls identified in capability and skills”, he said.