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Open Data Institute: Public sector could save money using SME consultancies

The Open Data Institute (ODI) investigates public sector spending on consultancy services from large and small companies

The Open Data Institute (ODI) has, together with the Spend Network, launched an investigation into public-sector spending on consultancy services and hopes to show that, by making the data public, the government can cut costs.

It believes releasing open data on the price differences between large firms and small to medium-sized enterprises (SMEs) could help shift spend, while at the same time maintaining “the level of services currently provided”.

Most public sector organisations use a range of consultancy services, but the amount of money spent varies – and moving to smaller suppliers could save money, argued the ODI.

It drew comparison to Calc, a service launched by US public sector agency 18F earlier in 2015, which helps the public sector compare consultant day rates based on experience, skills and specialisation, among other factors.

Using data made available by this service and more limited data available from the government’s G-Cloud framework, the ODI found indications that smaller suppliers may provide cheaper consultancy rates than larger ones.

The ODI said that, if the UK public sector had the same ability to compare consultancy rates as the US, it would be easier to spot differences in prices, which would in turn “encourage greater direct spend on more cost-effective smaller suppliers”.

The G-Gloud framework has in many ways paved the way for more small and medium-sized enterprises to secure government contracts, and the current government plans to increase the proportion of spend with SMEs to 33%.

However, the ODI argued that much of this is purchased indirectly by small suppliers, subcontracted through larger ones.

“In these subcontracting arrangements, larger suppliers add a margin to the price charged by smaller suppliers,” the ODI said.

The ODI will calculate the direct impact of moving 25% of spend away from large consultancies to smaller suppliers over five years.

However, it is wary of the possibility of SMEs finding themselves unable to cope with the extra volume of work, and some preferring subcontracts through a larger supplier due to risk factors.

Analysing the data is tricky. As the UK does not currently publish a complete set of contractor day rates, the data on the difference in costs between large companies and SMEs is primarily sourced from the US.

“To mitigate this limitation we are analysing data from the G-cloud service, but this is limited to technology contracting,” the ODI said.

The findings of this investigation, as well as four others, will be published in a report later in 2015.

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