Around £25bn is being wasted in the public sector every year because of outdated methods of outsourcing and procurement, the Institute of Directors has said.
A report by the institute claims that if the different bodies could “work together”, a minimum of £15bn would be saved when procuring for public services, and another £10bn in outsourcing.
An annual spend of £220bn takes up one-third of the total money spent by the government, the equivalent of £3,500 a year from every person in the UK, according to the institute.
The majority of public bodies, including NHS trusts, local authorities, Whitehall departments and government quangos, “do their own thing” and economies of scale have not been implemented, the report claims.
“Despite some areas of excellence and good collaborative initiatives, the majority of public procurement spending is so fragmented that huge potential savings are being missed every year.”
Not enough is done to centralise procurement, despite many public services using the same materials, relating to, for example, human resources, IT and legal services, according to the report.
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“Whilst I agree that the massive purchasing power of the NHS must be harnessed, it would be very useful if those arranging contracts understood what they were buying. Giving large amounts of cash to suppliers without understanding of the end user will save money on procurement but can cause all sorts of difficulties at the ‘coal face’. Remember all the Treatment Centre contracts that did not specify what work must be done – if any? The mobile scanning facilities that were brought in but hospital Consultants would not accept the results as the people using the scanners were unknown and untested?” – Name and address withheld