Analysis: The contradiction at the heart of Green's review

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Analysis: The contradiction at the heart of Green's review

Simon Quicke

Sir Philip Green is a character with the same bluntness of his fellow entrepreneur Sir Alan Sugar when it comes to talking about business.

So it was perhaps of little surprise that his review of government spending on ICT, travel and office costs would include words like "staggering waste" and give interviews where he expressed incredulity in the way the government bought things.

As head of the Arcadia Group, which includes BHS and Topshop, Green runs a retail empire that is all about maximising profits. One of the ways he suggested the government could try and do the same, in terms of increasing savings, is buy using its muscle and buying direct.

Buying centrally is one of his key recommendations in his report as well as leaning on the government's triple A credit rating to drive a hard bargain.

"Multiple contracts have been signed with some major suppliers by different departments at different prices," stated the report.

"Expensive IT services are contracted for too long with no flexibility," it added.

The report then went on to analyse waste on different areas before coming to the IT spend, making an argument that buying direct is the only sensible option (see below).

But there is a conflict at the heart of the suggestion that government should buy direct because it has implications on the channel and the private sector.

Firstly, the Prime Minister David Cameron used the pre-election debates to talk about the need to get smaller suppliers selling to the government. That of course goes out of the window if the government is buying direct.

The second thing to consider is the most of the companies the government could be buying direct from are not British. Our continental cousins, the French in particular, try and buy from home grown companies. That means even if the deals have to be done directly the money, jobs and taxes are being recycled in the national economy.

Most of the computer suppliers have offices here but are foreign companies and as the HP job cuts announced on Monday, to the tune of 1,300, they are quite happy to outsource work abroad and cut staff numbers here.

The Green report will provide some food for thought but the contradictions between trying to increase business from smaller suppliers and buying direct from multinationals is not one that has been solved by the retailer.

The direct argument

In the report put together but Sir Philip Green there is one key page that sets out his argument for buying direct:

"Central Government spends £61m per annum on laptops and desktops.

•There are 460k desktops and 60k laptops in central Government, supplied by 13 different IT services providers, often not buying direct from manufacturers.

•There is no standard specification across departments.

•We found the following variations in price for laptops: Highest price: £2,000 Lowest price: £353 Differential: 82%.

•At this level of volume, the Government should buy direct from a multinational manufacturer."


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