OFT launches public sector ICT spending probe

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Houses of Parliament

Spending watchdog wants to establish if SMBs are getting their fair share of public sector contracts.

The Office of Fair Trading (OFT) is to launch an investigation into the supply of IT goods and services to the public sector.

The OFT will look at competition between suppliers and look for reasons why procurement processes are not working as well as they should.

The IT sector accounts for a significant proportion of total public sector expenditure, with an estimated £13.8 billion spent in 2011-12.

The probe follows a call for information by the OFT, which raised a number of concerns that it said merited “further analysis”.

The logical explanation for seeing the same suppliers again and again is because these players are the only ones with the infrastructure, skills and financial clout to work with the large public sector departments.

It said the most notable of these concerns were that certain businesses appear to have a large share of contracts in some areas. It also noted there are high barriers to entry and expansion (especially for small ICT businesses) and that public sector organisations face difficulties and high costs when switching suppliers.

The spending watchdog aired further worries over public sector procurement practices, especially around the use of commercial off-the-shelf software and outsourced IT. These two areas, according to the OFT, make up around half of UK public sector ICT expenditure

Nisha Arora, OFT senior director of services, infrastructure and public markets, said: “Information and communications technology is vital for the efficient and cost effective delivery of today’s public services and for many aspects of public service reform.

“When competition works well, it can help drive down costs, encourage innovation and ultimately ensure that the taxpayer gets the best value for money. We want to look further into this market to understand whether it is really serving its customers’ interests,” she said.

Iain Tomkinson, director at ASM Technologies, a firm that works with small IT vendors and large resellers vying for government contracts, said he doubted there would be a quick solution to this.

“The logical explanation for seeing the same names again and again is that these players are the only ones that have the infrastructure, skillsets and financial clout to work with the large public sector departments. It is simply a market reality,” he said.

The bigger problem is the public sector procurement process is “too long-winded, bureaucratic and expensive for the smaller, yet often more innovative firms to compete in on their own,” he added.

“The procurement process and associated financial investment is simply too much of a barrier to entry for [SMBs]. That is why most public sector business still goes to the larger players.”