Today, the National Audit Office has released a report which examines whether the Government has mechanisms in place to understand and encourage competition in public procurement and how government departments can make their use of competition more effective. The NAO highlights competition as an underlying principle of public procurement widely acknowledged to be a key enabler of value for money but notes that achieving the benefits of competition requires attention throughout the commercial lifecycle.

The report concludes that government cannot show how well competition is working, and that the structures to encourage and support the use of competition are not all working as intended. Departments are unclear on how to engage with the market before they let a contract, and do not consistently follow central guidance. They routinely extend contracts rather than retendering them. The report also notes that Cabinet Office provides guidance but does not take advantage of the data it collects to understand more about competition and gain further benefits.

The Procurement Bill is in the final stages of the legislative process. The report acknowledges that this new regime will create more flexibility for departments in how they select suppliers. In preparation for this, it advocates the need for government to do more at the centre to understand where competition is working well and to support departments to address problems where it is not. 

The report sets out the following key findings:

• The concept of competition is well embedded in central government and departments. 
• Departments need to understand how to establish the right conditions for effective competition, varying approaches as needed across sectors and procurements.
• Departments have opportunities throughout the lifecycle of the contract to improve the effectiveness of competition.
• Departments need to consider how their actions during individual procurements can affect the long-term participation of suppliers and consequently the competitiveness of the market.
• The Government is making increased use of framework agreements to help departments get the most competitive benefit at least administrative cost, but frameworks can reduce competition when not used effectively.
• Departments are not always following central guidance to achieve the benefits of competition.
• The poor quality of much of government’s published data on contracts reduces transparency and makes it harder to identify and promote best practice.
• The Cabinet Office has not used available contract information to understand how competition is working across government.
• Transparency and the use of data will become even more important under planned increases to the flexibility of procurement choices.

To address the above, the report identifies the following actions which should be taken by the Cabinet Office and its central commercial teams:

• Building on work it has begun to update its contract database systems and standards, clearly define the information departments are required to publish, including how it should be structured.
• Through its procurement reform processes, act to improve the quality of information departments submit on contracts, as well as continuing to improve compliance with transparency requirements.
• Set out how it currently uses the information and explore how it can use the range of data collected on individual contracts to analyse competitive trends in markets and use this to support its work.
• Work with departments to understand the barriers to early market engagement and take steps to address them.
• Expand its guidance on frameworks, alongside working to ensure that where frameworks are used it is for compatible requirements and uses competitive pressure.
• Consider how to make improvements in the supporting elements of the commercial lifecycle to support improvements in the effectiveness of competition.

There is a lot of work to be done here which is rather timely as we prepare for the new public procurement legal regime next year. Competition is not a procurement objective itself but a means to achieving value for money and other procurement objectives set out in the Procurement Bill. It is unfortunate that many of the issues highlighted by the NAO report such as those relating to poor market engagement and the use of frameworks are not new and have been the subject of policy guidance before. With regard to frameworks in particular, there appears to be a lot of confusion about what these commercial purchasing tools should be used for and how they can be used effectively. The report reveals that 72% of central government contracts with a value of £10 million or more were awarded by way of a call-off from a framework or dynamic purchasing system in 2021-22 compared to 43% in 2018-19, a significant increase. Frameworks can provide very challenging environments for effective competition where there is an unmanageable number of appointed suppliers or an over-use (or misuse) of direct award call-off procedures. This is an area that will not improve under the Procurement Bill unless very clear and robust guidance is published and followed.