Buy direct to save costs, Sir Philip Green advises government

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Buy direct to save costs, Sir Philip Green advises government

Microscope contributor

The government should bypass resellers to buy PCs and commodity kit directly from manufacturers as it seeks to draw upon powerful economies of scale and a high credit rating to cut public sector expenditure.

This was according to the findings of a review led by retail guru Sir Philip Green on behalf of the Cabinet Office, which focused on the £166bn central government spends each year on procurement including IT, travel etc.

"There is no reason why government should not be as efficient as any good business. Any large organisation would want to use its credit rating and scale to buy efficiently," said Green.

"The conclusion of this review is clear - credit rating and scale in virtually every department has not been used to make government spending efficient," he added.

Fixed line telecoms exemplified the spending habits of government; potential savings of 30-40% could be realised if departmental spend in excess of £2bn each year is collated.

Printing was another area where prices were not competitive as specifications were high and buying processes inconsistent, with 83 individual contracts in place for office suppliers.
 
Green said central government spends £61m a year on PCs, there are 460k desktops and 60k laptops supplied by 13 different service providers with the lowest priced at £353 and the highest at £2,000, marking an 82% differential.

"At this level of volume, the Government should buy direct from a multi-national manufacturer," he suggested, adding that "a process of asserting control over major suppliers has begun".

Vendors' selling PCs direct in the UK has waned in the past five years as the practice's main exponent, Dell, turned to resellers to help fuel future growth, though certain vendors including HP have proved an exception to the rule.

Green said he discovered poorly negotiated service contracts with no in-built flexibility and charges that were in excess of market rates: "There needs to be an audit of all contracts with more than £100m remaining value."

Alongside technology, travel and real estate also came under the spotlight with the team concluding that a lack of reporting standards had prevented government from monitoring costs effectively in any of these areas.

The team did not place a total number on the level of waste or potential savings that could be made.

Minister for the Cabinet Office Francis Maude said the review showed that "for too long there has been no coherent strategy to make government operate more efficiently".

"We know that government is very different to business. But that does not mean that it should not act in a more business-like manner," he added.


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