Government exceeding targets on cutting IT expenditure, says NAO

The National Audit Office (NAO) said that in 2011/12 the Government had spent an estimated £316 million less on IT than "it would otherwise have done". It said that it is likely that £145m-worth of those savings can be sustained for the "foreseeable future".

The NAO had analysed initiatives that have been put in place to control IT spending, including a review and approval process operated by the Cabinet Office for cases where IT expenditure would exceed £5 million and a programme that aims to ensure that the various departments of Government "adopt common technical standards and share ICT assets wherever possible". A further initiative that was analysed was the way the Government Procurement Service has handled the running of procurement frameworks with suppliers.

The NAO said that the savings made could be partly attributed to the "leadership" shown by the Cabinet Office in driving efforts to cut Government IT expenditure, as well as the "cross-government and cross-profession collaboration" that has taken place. It also said that spending controls introduced by the Cabinet Office had been a "powerful lever" in pushing departments towards making IT savings.

The Cabinet Office has the challenge of following through on its cost-saving initiatives in the context of the Government's drive towards reforming public services, with an increasing push being towards digital services, the NAO said. The watchdog said, though, that the Government is on track to meet its next IT spend reduction target.

"On performance to October 2012, government is likely to meet, if not exceed, the targets for ICT savings that it set itself in October 2011," the watchdog said in its report (50-page / 539KB PDF). "In October 2011, the government announced a target of £440 million for 2012-13 from the ICT spend control and shared ICT infrastructure programme. In October 2012, the government announced that, subject to audit, it had already saved £410 million from these initiatives in the first six months of 2012-13 and expected to save a further £200 million by the end of March 2013."

The NAO said it was as yet "unknown" if the Government's drive towards using fewer large supplier and more SMEs had resulted in savings. It also said that there was also a lack of certainty on how successful efforts made to ensure that different Government departments interact with major suppliers as one "customer" had been. The early "qualitative signs" from both initiatives were "positive" though, it added, before it challenged the Cabinet Office over its future measuring of those initiatives.

"Demonstrating quantitative impacts from these initiatives in the future will require the Cabinet Office to have a significantly better common understanding of spend and savings data with suppliers and departments," it said. "It will also take time to demonstrate the impacts of restructured relationships with the ICT industry on the digital transformation of the civil service and the quality of future digital services."

The NAO recommended that the Cabinet Office revisit some savings targets to ensure that they remain "sufficiently stretching" for departments. It also called on the Cabinet Office to take a more "holistic view of the impact of their initiatives on suppliers (large and small), spending less and reforming public services through digital by default" rather than merely recording what financial savings the measures deliver.

The NAO said that the views it had obtained from suppliers about their relationship with Government in 2012 was, in general, "less positive" than it had been in 2011.

"[Suppliers] were frustrated at the slow pace of change and the focus on cost-cutting, rather than on exploring innovative opportunities to redesign digital public services," it said. "Some Crown Commercial Representatives and CIO Delivery Board members identified positive changes in suppliers’ attitudes but others commented on resistance by suppliers to change."

"However, the Cabinet Office’s publication of a strategic supplier risk management policy shows how government is becoming more robust and transparent in its handling of suppliers’ performance across government," it added.

IT contract law specialist Simon Colvin of Pinsent Masons, the law firm behind Out-Law.com, said that he had seen an increasing trend towards renegotiations of IT contracts between customers and suppliers in a move he said can be mutually beneficial.

“In the current volatile economic climate, UK Government continues to face challenges in terms of cutting IT spend," Colvin said. "As the report shows, the medium to long term agenda is likely to be focused on initiatives like shared services, using frameworks to leverage buying power, and we believe, implementing ‘intelligent sourcing’ strategies which consider a range of sourcing approaches such as tower based, best of breed and possibly insourcing approaches." 

"These more structural changes to service delivery can lead to a win/win scenario for customer and supplier, but getting there is rarely straightforward: moving from the current service model to the new service model can require complex renegotiation of existing contractual arrangements. The challenges faced by customers and suppliers in the public sector are by no means unique in this respect: we are also increasingly seeing PLCs looking to renegotiate with their suppliers," Colvin added.