Who is making the bigger cuts: Whitehall or its Outsource Suppliers?

A number of commentators seem to think that future cuts in the Civil Services will lead to an increase in outside business and influence . In other words they think the policy is nominal cuts with spend transferred to contractors and outsource suppliers.

But what if Ministers really were and are serious about removing duplication across Whitehall and public sector, about consolidating on to the best of current delivery operations, about doing less but doing it better and about achieving the 30 – 70% savings that most external reviewers have long believed are realistic – not just the nominal 10% negotiated by those who have left at the end of the first round of cuts.    

You may believe that pigs will fly in formation down Whitehall before that agenda is delivered, but the main IT (including consultancy) suppliers to Central Government have made bigger cuts in their sales and sales support teams than Government has been making in its planning and procurement teams. 

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Many major suppliers appear to have believed that government wasserious. Their cuts this spring have been even more savage. The onlyones spared have been those working on new business from the PSN andG-Cloud or on other incremental change projects. It is not only therecently announced 29 winnerswho stand to gain. There are serious rewards in prospect for those wholook to the PSN as a catalyst for bringing together central and localgovernment communications plans, including ubiquitous fixed and mobilebroadband, to cut the cost of public service delivery at all levels.

Butfew still believe that new business will be aggregated into “big”contracts, “to make it attractive for world class suppliers to bid”. Thelast two decades have shown the expensive folly of the inflexible”delayed big bang” outsourced projects that result from that approach.More-over any “big” project will attract the attention of those lookingfor the “big” savings they have yet to achieve. Instead we will see agathering pace of change as the flow of rapid payback projects,beginning with those that can be implemented on positive cash flow toprime the re-investment pump, accelerates. That requires a fundamentalchange of approach for organisations that have grown top heavy on theback of “big” procurement campaigns.

I hope that the EURIMgroups looking at the inter-operability standards necessary forcost-effective shared infrastructure investment and at some of therelated procurement issues (including security and state aid) willprovide an umbrella for helping major players discover how to profitablysupport the small local suppliers through whom Government wishes toplace at least 25% of its future business. Progress to date has been slow but over the last couple of weeks players have finally begun to move from confrontation to co-operation and are beginning to agree, but not yet launch, valuable material. I suspect this change of heart is linked to a feeling that the business value of delaying the inevitable no longer covers the legal cost. 

If we are serious about making genuine savings at the same time as improving service, increasingflexibility and encouraging small local suppliers, we need suppliers of all sizes to workto common standards so that others can take over in the event offailure. This is a much better and cheaper way of removing risk  than forcing innovators to become economic serfs in the supply chains of multinationals who are”too big to be allowed to fail” – like RBS or HBOS.

It is also morelikely to give rewards to taxpayers and shareholders rather than to lawyersand consultants. The latter fulfil a valuable function but should be ontap, not on top. They cannot substitute for clients who know what theyare doing and what they want. And ministers know what they want. They said so before they were elected.They may not have managed to achieve what they wanted in their first100 days but now that they have begun to dispatch those who they think prevented them fromdoing so ….

Whether or not ministers succeed, the cuts among the major outsource suppliers may well be significantly more than those among civil servants and local government staff, provided the latter are better at handling the challenges of genuine, as opposed to cosmetic, change.