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Central government could save up to £10 billion per annum through a reformed e-procurement platform, placing a greater emphasis on administrative efficiencies and market competition, according to a new report.
With the use of e-procurement models championed by the likes of South Korea and Estonia, The Reform, a public-service think-tank, claims that savings of 25% could be made to the present $40 billion procurement bill. Even if e-procurement growth continued on trend, UK government would be set to save in the region of £550 million annually.
Whilst there is a large level of scrutiny placed on the government spending, significant steps have been made since 2010. The government now procures more than 25% of its services from small and medium-sized businesses, and since 2015, has relied upon G-Cloud for the procurement of cloud services.
G-Cloud as a platform has lowered barriers to entry, allowing more firms to compete for government business, and saving in the region of 20-50% when compared to legacy contracts. Building on this success, the implementation of the Crown Marketplace platform will enable government to move e-procurement models to new departments beyond IT services.
While it is still early days within the UK, other countries have demonstrated the wide benefits of e-procurement. Estonia currently attributes roughly 50% of its expenditure through e-procurement platforms, saving an estimated 30-40% on the cost of administrating procurement.
The Reform has recommended a consolidated platform for all government procurement activities:
“The Crown Marketplace should be a single portal for the e-procurement of goods and services. This should be accompanied by an integrated payment function,” said the report. “The framework to purchase commodities must be recompleted regularly to ensure maximum competition.”
While the immediate benefits demonstrate a reduction in expenditure, the move away from the current process will allow government employees to create value-for-money propositions, as opposed to drowning in administrative tasks.
Though the report and supporting statistics demonstrates a positive outlook for government spend, the potential of e-procurement can only be achieved if trends accelerate. The report highlights “If e-procurement continues to expand at the rate of G-Cloud growth in 2015, total government e-procurement spend could reach £3 billion by 2020”
Current e-procurement adoption levels would see UK central government save in the region of £1.8 billion and £4.5 billion depending on the level of pro-rata savings, though emulating the example of South Korea or Estonia would see the UK save in excess of £10 billion.
The UK Ministry of Justice (MoJ) has saved nothing from its cloud strategy as the department still buys 2.3 million licenses, reports The Register. According to the report, a government insider said Oracle is “extreme in its defence of existing licensing” and “stopping any flexibility.”
A freedom of information (FOI) request forced the MoJ to reveal that it buys 53 separate Oracle products including 961,000 internet expense licences, 250,000 licenses for each of three human resources systems and 100,000 payroll licences.
With 3,000 staff at the MoJ’s headquarters, that would average around 767 licenses for each employee. If all staff employed by the MoJ’s partner agencies were considered, then 33 Oracle licences have been bought for each of a total of 70,000 staff.
The MoJ transferred its people, services and IT to the Cabinet Office-run shared services centre in November last year. The FOI response revealed there had been no licensing cost savings yet to be associated with the move, since the licences are held in perpetuity and do not expire. The Technology Oracle Support and Maintenance Shared Services Oracle Support contracts will expire in April 2016, which could save £100m over the lifetime of the shared services centre contract.
The MoJ has refused to disclose the total it is spending on Oracle software, claiming this is a matter of commercial confidentiality.
The MoJ needs to review its use of Oracle, said analyst Clive Longbottom, senior researcher at Quocrica. “If the ministry being held to ransom by Oracle, through the systems integrators and consultants that the government insists on using, then it’s time to insist on a replacement database,” said Longbottom.
The analyst argued that Microsoft or IBM would be ‘more than willing’ to help the MoJ to move them over to their systems. A more nuanced data storage platform using a non-relational database alongside Hadoop could save them a lot on Oracle licences. “Oracle fights to the death to look after its licence revenues,” said Longbottom. “It is still in a legal battle with Rimini Street over how the third party support vendor manages Oracle licensing.”
IBM and the UK government are pouring £313m into big data and cognitive computing R&D
The UK government has signed a deal with IBM that will see the two parties fund a series of initiatives aimed at expanding cognitive computing and big data research.
The £313m partnership will see the UK government commit £113m to expand the Hartree Centre at Daresbury, a publicly funded facility geared towards reducing the cost and improving the efficiency and user-friendliness of high performance computing and big data for research and development purposes.
IBM said it will further support the project with technology and onsite expertise worth up to £200m, including access to the company’s cognitive computing platform Watson. The company will also place 24 IBM researchers at the Centre, who will help the researchers commercialise any promising innovations developed there.
The organisations will also explore how to leverage OpenPower-based systems for high performance computing.
“We live in an information economy – from the smart devices we use every day to the super-computers that helped find the Higgs Boson, the power of advanced computing means we now have access to vast amounts of data,” said UK Minister for Universities and Science Jo Johnson.
“This partnership with IBM, which builds on our £113 million investment to expand the Hartree Centre, will help businesses make the best use of big data to develop better products and services that will boost productivity, drive growth and create jobs.”
David Stokes, chief executive for IBM in the UK and Ireland said: “We’re at the dawn of a new era of cognitive computing, during which advanced data-centric computing models and open innovation approaches will allow technology to greatly augment decision-making capabilities for business and government.”
“The expansion of our collaboration with STFC builds upon Hartree’s successful engagement with industry and its record in commercialising technological developments, and provides a world-class environment using Watson and OpenPower technologies to extend the boundaries of Big Data and cognitive computing,” he added.
The UK government is ahead of the curve in cloud, but work still needs doing
Thanks to G-Cloud, the once stagnant public sector IT marketplace that was dominated by a small number of large incumbent providers, is thriving. More and more SMEs are listing their assured cloud services on the framework, which is driving further competition and forcing down costs for public sector organisations, ultimately benefitting each and every UK tax payer. But the programme still needs work.
G-Cloud initially aimed to achieve annual savings of more than £120m and to account for at least half of all new central Government spend by this year. The Government Digital Service has already estimated that G-Cloud is yielding efficiencies of at least 50 per cent, comfortably exceeding the initial target set when the Government’s Cloud Strategy was published in 2011.
According to the latest figures, the total reported G-Cloud sales to date have now exceeded £591m, with 49 per cent of total sales by value and 58 per cent by volume, having been awarded to SMEs. 76 per cent of total sales by value were through central Government; 24 per cent through the wider public sector, so while significant progress has been made, more work is clearly needed to educate local Government organisations on the benefits of G-Cloud and assured cloud services.
To provide an example of the significant savings achieved by a public sector organisation following a move to the cloud, the DVLA’s ‘View driving record’ platform, hosted on GOV.UK, secured online access to driving records for up to 40 million drivers for the insurance industry, which it is hoped will help to reduce premiums. Due to innovative approaches including cloud hosting, the DVLA managed to save 66 per cent against the original cost estimate.
Contracts held within the wider public sector with an estimated total value of over £6bn are coming to an end. Therefore continued focus must be placed on disaggregating large contracts to ensure that all digital and ICT requirements that can be based on the cloud are based on the cloud, and sourced from the transparent and vendor-diverse Government Digital Marketplace.
Suppliers, especially SMEs and new players who don’t have extensive networks within the sector, also need much better visibility of downstream opportunities. Currently, G-Cloud is less transparent than conventional procurements in this respect, where pre-tender market engagements and prior information notices are now commonplace and expected.
However, where spend controls cannot be applied, outreach and education must accelerate, and G-Cloud terms and conditions must also meet the needs of the wider public sector. The G-Cloud two year contract term is often cited as a reason for not procuring services through the framework, as is the perceived inability for buyers to incorporate local, but mandatory terms and conditions.
The Public Contracts Regulations 2015 introduced a number of changes to EU procurement regulations, and implemented the Lord Young reforms, which aim to make public procurements more accessible and less onerous for SMEs. These regulations provide new opportunities for further contractual innovation, including (but not limited to) dynamic purchasing systems, clarification of what a material contract change means in practice, and giving buyers the ability to take supplier performance into account when awarding a contract.
The G-Cloud Framework terms and conditions must evolve to meet the needs of the market as a whole, introducing more flexibility to accommodate complex legacy and future requirements, and optimising the opportunities afforded by the new public contract regulations. The introduction of the Experian score as the sole means of determining a supplier’s financial health in the G-Cloud 6 Framework is very SME unfriendly, and does not align to the Crown Commercial Service’s own policy on evaluation of financial stability. The current drafting needs to be revisited for G-Cloud 7.
As all parts of the public sector are expected to be subject to ongoing fiscal pressure, and because digitising public services will continue to be a focus for the new Conservative Government, the wider public sector uptake of G-Cloud services must continue to be a priority. Looking to the future of G-Cloud, the Government will need to put more focus on educating buyers on G-Cloud procurement, the very real opportunities that G-Cloud can bring, underlined by the many success stories to date, and ensuring the framework terms and conditions are sufficiently flexible to support the needs of the entire buying community. G-Cloud demonstrates the possibilities when Government is prepared to be radical and innovative and in order to build on the significant progress that has been made, we hope that G-Cloud will be made a priority over the next five years.
Written by Nicky Stewart, commercial director at Skyscape Cloud Services