Labour will aim to reduce dominance of big suppliers in government IT

The Labour Party will aim to reduce the dominance of large IT suppliers in government should it win next year’s general election

The Labour Party will aim to reduce the dominance of large IT suppliers in government should it win next year’s general election – continuing a policy to encourage more small businesses started under the Coalition.

Shadow Cabinet Office minister Chi Onwurah, who is leading Labour’s review of digital government, is due to give a speech today in which she will highlight the dominance of big companies in the public sector market – across all areas, not just IT.

Computer Weekly asked her via Twitter if that implies Labour will work to reduce the dominance of big IT and outsourcing suppliers in government. She replied: “Of course, we want a mixed economy and real competition. I've always said that.”

Under the Coalition, the Cabinet Office adopted a target of putting 25% of all government contracts to SMEs – for IT contracts, that figure was increased to 50%.

The G-Cloud purchasing framework was designed to open the market to smaller suppliers, and has seen 57% of the £192m spent up to May 2014 awarded to SMEs.

But recent research by the Institute for Government showed large IT suppliers continue to dominate IT spending as a result of ongoing, long-term outsourcing deals – six IT firms received £4.2bn of taxpayers’ money in 2013.

The Government Digital Service (GDS) has banned those big contracts from being renewed, and instead mandates a “tower” model, whereby the requirements are broken down into multiple contracts with specialist suppliers, instead of one large prime contractor deal – a move that opens up the market to greater competition. GDS will not allow new IT contracts with a value above £100m unless in exceptional circumstances.

But some SMEs have been concerned that, should Labour win the election, it might present an opportunity for the big suppliers to retrench their former positions. Some of those large suppliers are known to have lobbied Labour in the hope of continuing their historic government business.

Earlier this year, Onwurah told Computer Weekly it was an "exaggeration" to say big IT suppliers are "the bogeymen of IT". She said that large suppliers "shouldn't be locked out, but neither should they be locked in".

The National Audit Office has been critical of the performance of big outsourcing firms across government. In a report in November 2013 it said: ““There have been several high-profile allegations of poor performance, irregularities and misreporting. 

"These raise concerns about whether all contractors know what is going on in their business and are behaving appropriately; and how well the government manages contracts. The government believes that contractors generally have often not provided sufficient value.”

The Office of Fair Trading (OFT) investigated the market for government IT outsourcing and, in a report in March this year, also raised concerns over the dominance of a small number of incumbent suppliers.

“There are barriers preventing companies from entering the market or expanding their share of supply, and also deterring buyers from switching between suppliers,” said the OFT report.

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