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‘Lack of competition’ in public sector ICT market – OFT

There is not enough competition in IT purchasing and supply to the public sector, an Office of Fair Trading (OFT) market study has revealed.

The most notable concerns raised by the Call for Information (CFI) report include the large share of contracts in some areas of the sector held by just a few businesses, high barriers to entry and expansion (especially for smaller scale ICT businesses), and the difficulties and high costs in switching.

OFT also found that the public sector “lacks sufficient in-house commercial and technical expertise” that could help it understand and manage large and complex ICT contracts more effectively.

Additionally, ICT suppliers tend to know more than public sector buyers about the quality and suitability of ICT goods and services. This imbalance of information can be compounded by the practices of suppliers such as complex pricing and a lack of transparency.

Rachel Merelie, OFT project lead, said: “The market supplying ICT products and services to the public sector is worth around £14bn and is ‘not working as well as it should’. In some areas entry barriers are high and there is little switching between suppliers.”

Recommendations of the report include that the public sector continues to seek improvements in the way it procures and manages contracts with suppliers. In particular, it should “work with suppliers to ensure comprehensive, consistent and objective data is collected efficiently about products, prices and supplier performance”. The public sector should also consider how this information can be shared across public sector organisations.

ICT suppliers should also do more to improve the understanding and the flow of clear information to public sector buyers. This would facilitate benchmarking, drive better value for money and improve the assessment of competition across different sectors, said the OFT.

The OFT noted that various initiatives are underway to improve public sector procurement, such as simplifying procurement processes; improving relevant commercial and technical skills; measures to ensure relationships with the largest suppliers receive additional focus; and setting clear expectations about the openness of public sector ICT systems. However, many of these initiatives are at a relatively early stage and their longer term impact on competition is unclear.

Merelie reiterated: “The public sector needs better information and expertise so it is able to judge whether ICT suppliers are delivering good value for money. Companies that supply ICT goods and services should also be more transparent and provide better information to their public sector customers.”

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