The target of £21.5bn of efficiency savings in three years could be a bonanza for the private sector as the government seeks to merge back-office functions, ease transactions with business and citizens and get better value for procurement.
But there will be losers as well as winners, particularly in procurement, and doubts remain that the programme will deliver what is promised. Charles Hughes, vice-president of global government practice at A.T. Kearney, consultants, said. "It is such a huge transformation . . . they will have to call in the private sector. There are certainly people who see this as a massive opportunity," he said. "The way for the government to get good value for money, however, is to look for risk-reward arrangements where payment depends upon performance."
The government needed to start "by getting the basics right" before going for further large investments in IT to improve the host of back- office functions the public sector carries out.
William Heath, chairman of Kable, the IT consultancy, said the government had to find better value from the £8bn it had invested in e-government. "To date there's a perception that a lot of websites have been put on the front of back-office functions that have not changed much," he said. "But there isn't really time between now and 2008 for new investment in IT to deliver."
Efforts to secure better value from the £120bn spent on procurement will mean mixed fortunes for goods suppliers. Some of that will come from aggregating purchasing. "But the government needs to be careful," said Ken James, chief executive of the Chartered Institute of Purchasing and Supply. "It may make sense to cut 50 suppliers down to three or four but not down to one. That would damage the market going forward."
Aggregated procurement also risks driving out small and medium sized enterprises, said Michael O'Higgins of PA Consulting. "The Office of Government Commerce is working to avoid it but the danger is there."
Some, including Kevin Simmons, head of financial management consultancy at Atos Origin, ask where the upfront investment will come from. "Anyone who has done big shared services centres in the private sector knows it requires investment and that the payback comes from three years onwards. To achieve some of this local authorities, departments and trusts will need to throw away some of the systems they have invested in . .. and that will take a large amount of money."
Colin Talbot, professor of public policy at Nottingham University, said there was a fundamental contradiction between efficiency and more aggregated procurement on the one hand and the choice and decentralisation agenda on the other.
"You can look back through the Rayner scrutinies [Sir Derek Rayner who carried out an efficiency drive for Margaret Thatcher in the late 1970s], the financial management initiative, market testing, next steps agencies and so on," he said. "They were all promising smaller savings and not one delivered more than about half of what was promised." The certain winner was management consultancy. "When numbers are cut all that happens is that money is taken out of programme expenditure to bring in consultants to do jobs that were being done by the civil servants."
