UK government failing to break large service providers’ dominance

Large UK service providers are strengthening their grip on the public sector purse, despite efforts by the government to offer contracts to more suppliers.

The UK government’s attempts to spread its business services spending to more suppliers have so far failed, according to research from ISG, with small-and-medium-sized (SME) suppliers in the UK and overseas alternatives being overlooked.

UK-based services firms, such as Serco and Capita, have increased their share of government outsourcing from 40% between 2002 and 2005 to 61% since 2010. IT-enabled business services take up a large chunk of the government’s outsourcing budget.

In January 2014, the government published rules to reduce the dominance of a small number of IT suppliers offering inflexible contracts.

The Cabinet Office published its “red lines” for IT contracts to increase the number and variety of IT suppliers to government.

The rules include limits to the size of contracts in financial terms and the length of agreements, as well as breaking up contracts.

At the time, cabinet office minister Francis Maude said the government is radically rethinking the way it does business as it has been stalked by big IT and big failure for too long.

"We are creating a more competitive and open market for technology that opens up opportunity for big and small firms," she said. "These red lines will ensure the government gets the best technology at the best price, and we will be unashamedly militant about enforcing them to provide value for hard-working taxpayers.”