The Effects of the Efficiency and Reform Group on Public Sector Procurement

In a drive to cut the massive budget deficit, the recently formed coalition government has created a joint Treasury-Cabinet Office group called the Efficiency and Reform Group (ERG). The Group’s work is co-chaired by the Minister for the Cabinet Office and the Chief Secretary to the Treasury.

Three senior business leaders that will also sit on the board include:

· Sir Peter Gershon, Chairman of Tate & Lyle, former government efficiency adviser and first chief executive of the OGC;

· Lucy Neville-Rolfe, Executive Director, Tesco PLC; formerly a senior career civil servant; and

· Dr Martin Read, Non-Executive Director of Invensys, Aegis and Lloyd’s of London.

Working on the Selling to the Public Sector project[1], it becomes immediately clear that the decisions from this group will have massive consequences on public procurement and supplier diversity. Since it was created, the ERG has been granted control of the Office of Government Commerce and Buying Solutions, the two major government purchasing organisations.[2] The drive to ‘conduct, centralised procurement for commodity goods and services’ and ‘freeze all new advertising and marketing spend’ are amongst the group’s first priorities.[3]

While several benefits can result from the initiatives of the ERG, including cost cutting measures and increased collaboration between purchasing departments, these initiatives in the field of public sector procurement should be taken with caution. Prime Minister David Cameron stated, during the debates in Birmingham, that Small and Medium Enterprises (SMEs) should be given more opportunities to bid for public sector contracts. However, contrary to this, it seems that the ERG is focusing on major suppliers and combining different public sector purchasing organisations, thus indirectly decreasing the amount of procurement initiatives aimed at SMEs.

In the short term, these policies might lead to public savings due to increased efficiency of public services. However, by overly relying on major suppliers to deliver public sector contracts, the public sector will fail to maximise its potential as an economic driver for SMEs and David Cameron will fail on this campaign promise.

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[1] The Selling to the Public Sector project aims to engage with Corporate Procurement Functions in the public sector and suppliers to develop and create capacity in SME’s in the Leicester City area to access public sector supply chains, whether it is through be-coming an approved supplier or to win a contract.

[2] http://www.publicservice.co.uk/news_story.asp?id=13255

[3] http://www.cabinetoffice.gov.uk/newsroom/news_releases/2010/100524-waste.aspx