The National Audit Office (NAO) has released a comprehensive report titled "Government’s approach to technology suppliers: addressing the challenges". The report scrutinises the UK Government's digital procurement strategies and highlights significant challenges and recommendations for improvement.

Key challenges

Key challenges will not be of any surprise, and include:

  • High expenditure: The Government spends at least £14 billion annually on digital procurement, with £9 billion of that being through CCS frameworks in 22/23.
  • Complexities in digital procurement: Integration with existing systems and the rapid evolution of technology markets pose significant challenges, as do the inherent uncertainties that characterise digital programmes (the 'known unknowns').
  • Lack of strategic approach:  Markets such as Cloud Services and AI are dominated by a small number of big players and increasingly use subscription-based models (which give the customer less control and leverage). Not having a unified strategy for managing the relationships with the major technology suppliers causes inefficiencies.
  • Skills gap: The Government currently lacks sufficient digital procurement skills, impacting the effectiveness of digital transformation programs. A particular issue is the lack of understanding of technical feasibility in planning technology purchases.

Recommendations

In order to address some of the persistent issues in the procurement of digital transformation projects, such as delays, cost overruns, and unrealistic expectations, the report suggests several measures:

  1. Strategic alignment: Develop a comprehensive sourcing strategy for digital procurement, including who owns the relationships, better data collection and analysis.
  2. Enhanced skills and capabilities: Invest in digital procurement skills and ensure digital specialists are involved early in the procurement process.
  3. Improved supplier management: Foster a more collaborative relationship with suppliers and adopt flexible contracting mechanisms.
  4. Focus on outcomes: Shift from a cost-minimization approach to one that prioritizes value for money and innovation. This means considering the long-term benefits and overall effectiveness of digital procurement, rather than just the initial expenditure. Make greater use of outcome-based contracts.
  5. Technical feasibility: Conduct technical feasibility studies before awarding contracts to ensure proposed solutions are realistic and achievable.
  6. Flexibility in contracting: Adopt flexible contracting mechanisms that allow for adjustments as the project progresses, accommodating changes in technology and ensuring continuing alignment with the desired outcomes.
  7. Better guidance: Provide more guidance on key negotiation points with major cloud suppliers, such as on navigating the complexity of pricing options, term length and flexibility, or service levels.

The NAO 's report reinforces need for a more strategic and skilled approach. We look forward to working with the Government in acting on some of these insights – including looking at how the new flexibility that is coming under the Procurement Act 2023 can help ensure that digital procurements are more effective, innovative, and aligned with the Government's broader goals.

If you have any questions or would like to discuss any of the recommendations from the report, please contact Alexi Markham or Alison Richards.