£1.6bn saved by 'smart' government spending

Savings of £1.6bn on government spending have been achieved since the formation of the Office of Government Commerce (OGC), according to a new report by parliamentary watchdog the National Audit Office.

The figure exceeds the target of £1bn and includes savings and efficiencies in IT procurement through central framework agreements and stricter reviews of larger IT projects.

"OGC has had a positive impact in improving departments' procurement capability. The quality of advice and dissemination of good practice is much better. OGC has given a clear lead where opportunities have arisen for departments to exercise their collective buying power to secure better deals," the report said.

Because of the vast sums spent on technology, the NAO said it is preparing a separate report on the procurement of IT. A Parliamentary Accounts Committee report last month claimed departments are on track to save £100m a year by negotiating better licensing deals and using open-source software.

But the level of good practice varies between individual departments and the NAO report said more use needs to be made of joint buying and framework agreements if the more ambitious target of an additional £3bn savings is to be met by 31 March, 2006.

The report examined 86 departments and agencies, looking at nine in-depth. One, the Department for Works and Pensions, saved £245m on its annual £4bn spending bill - with IT supply and modernisation and IT consultancy accounting for £1.1bn of this from 2002 to 2003.

Over at John Prescott's Office of the Deputy Prime Minister (ODP), the story was not so good, with poor accounting systems rendering the department unable to provide any meaningful procurement statistics.

A new SAP accounting system was rolled out by the old Department for Transport, Local Government and the Regions (DTLR). A review found problems with the system due to the DTLR splitting into the ODP and the Department for Transport (DfT), a lack of guidance on procurement activities and insufficient training for staff to input data correctly.

"Problems with its SAP accounting system mean that the Office of the Deputy Prime Minister is unable to identify the amounts spent with different suppliers and who its top suppliers are," the NAO report said.

The system has now been relaunched with new guidance and training for staff. The report also found that the ODP usually turns to the DfT for procurement advice rather than the OGC.

Sir John Bourn, head of the NAO, said in a statement: "The Office of Government Commerce has made a significant contribution in helping to achieve £1.6bn in savings so far, but a great deal more can be done. A higher-level commitment from departments to adopting good practice, as well as addressing specific issues such as better management of suppliers, will result in greater value for money."