Move to blacklist poor state suppliers

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When the government decided to blacklist underperforming suppliers, one of the first companies to fall foul of the rules expressed incredulity – not at the decision, but that it had taken ministers so long to call its bluff.

Bill Crothers, who took over as the government’s chief procurement officer in July after long experience in the private sector, told the Financial Times that the company’s chief executive confessed: “We are completely high risk. It surprises me you haven’t done it before now.”

As the government confronts a decade of fiscal austerity, a determination to secure better value for money from the Whitehall contracts tendered each year has become a high priority for the Cabinet Office and its minister Francis Maude.

The government’s aim is twofold: firstly, to use its purchasing clout to drive harder bargains; secondly, it will no longer tolerate further bids from businesses that have failed to deliver elsewhere in Whitehall.

Like the chief executive of the blacklisted company, Mr Maude freely admits to astonishment that past administrations have not tried sooner to inject commercial discipline into the spending of public money. When he took office in 2010 following the general election, the government did not even know who its biggest suppliers were and had had to “make a guess” at who they might be.

There had been a sense, he said, “that when government spends money with suppliers, particularly UK-based suppliers, [that] it doesn’t really matter whether we get good value because all the money goes into the economy. But, of course, actually that’s not good for the businesses that get money easily any more than it’s good for the economy.

“A lot of our bigger suppliers are not British-owned. A lot of the profits get repatriated overseas and we have an absolute obligation to ensure that we buy as well as anyone does anywhere.”

The government, he said, “ought to be the most effective customer there is. We have the best credit. We operate at scale. We pay very quickly. We should be a fabulous customer and as a result of that get exceptionally good pricing but we don’t and that’s what we’re changing.”

Within six months of his arrival at the Cabinet Office the government had saved £800m through striking tougher deals. Now, he said, the government was “much more in the mode that a major business would be, of constantly reviewing with our major suppliers how we can streamline contracts”.

One of the fields most ripe for an overhaul is procurement of information technology. “If you have a two or three year [IT] procurement, then almost by definition what you’ve bought is obsolete by the time it’s actually in place,” said Mr Maude. “And if you then lock it in for a long contract period, it’s vintage by the time you get to the end of it.”

In future, he said, the government planned smaller contracts of shorter duration which would open up government work to many more smaller, UK-based suppliers.

As to the blacklisted companies left sitting, in the words of one observer, on the procurement “naughty step”, they will be able to work their way back into the government’s good graces – but the process will be demanding. Mr Maude said the government would expect any outstanding legal action that was “costing money on both sides in lawyers’ fees” to be quickly resolved and performance issues to be addressed. “Then I would expect them to show a period of at least . . . six months where they show that they are rectifying the problems which have led to the status in the first place.”

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