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Departmental Procurement

Business, Innovation and Skills written question – answered on 8th November 2011.

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Photo of Owen Smith Owen Smith Labour, Pontypridd

To ask the Secretary of State for Business, Innovation and Skills what methodology (a) his Department and (b) the non-departmental public bodies for which he is responsible used to estimate savings to the public purse made in respect of its procurement and purchasing since May 2010.

Photo of Edward Davey Edward Davey The Parliamentary Under-Secretary of State for Business, Innovation and Skills

The Chief Secretary to the Treasury, Danny Alexander, said in response to my hon. Friend John Pugh, on 15 November 2010, Hansard, columns 615-6W, that the Government have announced a more specific and innovative approach to efficiency and reform across the public sector, including:

a reduction in administration budgets of 34% across the whole of Whitehall and its arm's length bodies saving £5.9 billion a year by 2014-15; radically reducing the number of arm's length bodies across Government; and the Efficiency and Reform Group's tough new efficiency regime which will drive savings in procurement, major projects and estate management; and that, in result, Departments would no longer be required to report against the previous Government's efficiency target.

In August 2011, the Minister for the Cabinet Office and Paymaster General, my right hon. Friend Mr Maude, announced that the Efficiency and Reform Group's new measures had saved £3.75 billion over 2010/11.

This impact was assessed using methodologies in the table. The assessment has been independently verified by Government auditors who found the benefits assertions to be fairly calculated and presented.

These savings are borne out in Department accounts. The table on page 79 of the Annual Report and Accounts 2010-11 (HC1001) reports that non-pay Gross Administration Costs for BIS reduced from £187 million in 2009-10 to £140 million in 2010-11. Figures in this report are prepared in accordance with HM Treasury's Financial Reporting Manual for central Government Departments and associated Treasury resource accounting and budgeting guidance.

Table—Activity and Calculation Method
Area Activity description Evidence Base/Calculation
Consulting Government put in place a moratorium on new consulting spend, and extensions to existing contracts. Savings are calculated by subtracting total departmental reported spend on consultancy for 2010/11 from total departmental reported spend on consultancy for 2009/10.
  Where spend was considered operationally critical (for example, where it might put at risk critical services) an exception process existed for Department Ministers to sign off expenditure over £20,000. To reduce the risk of costs shifting between categories, we also monitored expenditure on other Professional Services categories, including contingent labour.
     
Crown Commercial Government has renegotiated deals with some of the largest suppliers to Government. The method of calculation varies according to the initiative that yields the saving, but was based on cash releasing savings against a baseline of what would have otherwise been spent. This was often price savings against the previous price paid.
    Savings agreed with suppliers are recorded in Memoranda of Understanding as guaranteed-in-year or conditional-in-year savings.
    Realised savings were subsequently tracked back to departmental verification of supplier progress reports.
     
Contingent Labour Government have significantly cut the number of temporary staff. Savings are calculated by subtracting total departmental reported spend on contingent labour for 2010/11 from total departmental reported spend on contingent labour for 2009/10.
     
Communications Government froze all new marketing spend unless it is an operational necessity. Where spend was proposed. Ministerial sign-off was required for £20,000 or above. Calculations compare departmental spend on marketing and advertising through COI for 2010/11 with that for 2009/10.
     
Centralising Procurement Government have started to centralise spend on common goods and services to drive down prices. For each initiative, calculations are performed using individual benefit methodologies that set out how savings will be calculated against an 2009/10 price baseline.
  These savings derive from the 10 categories of expenditure targeted for centralisation, and relate to price savings through increased aggregation. Evidence is management information provided by suppliers.
     
ICT We implemented: Calculations are based on departmental reports of spend that has not proceeded.
  (a) a moratorium on all new ICT spend above £1 million; and Spend that has not gone ahead in 2010/11 is recorded, as a result of stopping or reducing spend.
  (b) a review of all on-going ICT commitments. Further, sustainable savings are targeted through the Government ICT strategy.
  Departments also reported those projects that were closed before undergoing the review.  
     
Major Projects We reviewed the Government's biggest projects to see where 2010/11 costs could practically be reduced within contractual constraints, or wasteful projects stopped altogether. HMT have provided assurance that the relevant amounts were removed from departmental budgets following the Major Projects related negotiations.
  We have halted or curtailed spend on four projects:  
  14-19 Reform—£60 million  
  Identity Cards—£50 million  
  Highways Agency Projects—£54 million  
  Whole Farm—£5 million  
  We have redacted £22 million of potential double counting from these figures, that arises between this work and our supplier renegotiation work stream. £14.9 million arises from the Home Office National Identity Cards and £6.7 million from DEFRA Whole Farm.  
     
Property We put in place national property controls such that signature of new property leases or lease extensions were approved centrally. Calculations are property by property based on the amount Departments have reported saved through the Government's property database by non-renewal of property leases at lease breaks or upon lease expiry.
  It has not always been possible to net off all costs associated with vacating buildings. However, we have also not claimed savings in respect of revenue from property disposals.  

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