Millions saved in squeeze on state IT suppliers

It may be some way off the billions envisioned, but a reported £800million in savings is set to be eked out of the government's preferred outsourcing and IT suppliers.



Having started renegotiations in July, the nineteen biggest services suppliers to the public sector will meet officials this week to narrow the scope of their state contracts.



The suppliers, including Capita, Serco, BT and IBM, might be told by Cabinet Office minister Francis Maude, chair of the meeting, to accept a short-term hit on profits.



De-scoping, or shrinking contracts by 'taking costs out,' was first floated to public sector IT suppliers in April, as their way of contributing to reducing state spending by £6.2bn.



The upside, perceived by some suppliers, was that agreeing to join the re-negotiating table with officials would open up new opportunities elsewhere in the public sector.



At the time, the government also signalled it was aware of their bottom line concerns, by inviting suppliers and industry to suggest how to remove the "complexity and cost" of them bidding for work.



Judging by an HM Treasury web-page, responses have been forthcoming - unlike the new opportunities, or promised action to improve contract tendering and procurement.



"There should be a renegotiation of IT contracts across the board", one of the 60,000 replies says. "They are poor with regards to their costings matrix and rates charged."



"Procurement processes should also be made easier so more suppliers can get on to the roster and fairer competition can be put into play.



"The process is incredibly laborious...government is not getting the best IT suppliers coming through. IT is a very fluid industry and suppliers and their abilities change".



Fixing inertia in the system would "bring better ideas into the IT world", the reply adds, and eventually make it more cost effective, in line with the coalition's aims.



For now however, the price focus is expected to be on public sector bodies reducing the specifications of some contracts with its suppliers, to unlock a saving for both parties.