Nov 16, 2010
An interesting report appeared in the Daily Telegraph on 15 November (page B4). According to Francis Maude the government has exceeded its £800M target for renegotiating central government contracts. If this really is the case then it is accolades all round. However, before we all start guzzling a nice glass of bubbly in celebration, a number of observations spring to mind.
Firstly, will these prove to be real savings or will these benevolent suppliers just recoup their losses via other, and larger, public contracts, say in local government or the NHS? If the costs are not recouped elsewhere, then I am certain that most of the suppliers will do a ‘Serco’ and simply pass the reductions along the supply chain to their own suppliers – even Mr. Maude appears to have conceded that point, although I doubt it will be quite as crude as the alleged Serco methodology!
Then Mr. Maude mentions the excessive profit margins that many of these suppliers have been making out of central government contracts. Surely, this could not be the case if these contracts had been subject to the many ritualistic processes required under the EU public procurement directives? Again, it does make me wonder how such elaborate processes designed in Brussels to remove cost have actually had the reverse effect. This line of thought then got me wondering – if they got £800M by good old fashioned negotiation why isn’t the rest of the public sector doing it? Why isn’t Francis Maude commending this robust approach to his colleague Eric Pickles at CLG or Andrew Lansley at Health?
If we could replicate this achievement we would soon be chasing debt rather than deficit reduction. Or am I missing something here?