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National Audit Office gives mixed review of Cabinet Office progress in managing Government's strategic suppliers

14/11/2013
Since 2010 the Cabinet Office has worked towards improving how the Government manages its relationships with its strategic suppliers. As part of this commercial relationship strategy drive, the Since 2010 the Cabinet Office has worked towards improving how the Government manages its relationships with its strategic suppliers. As part of this commercial relationship strategy drive, the Cabinet Office's main goals have been to gain control over spending in departments, to share intelligence on suppliers across departments and to make savings.

 New initiatives with 40 strategic suppliers (chosen by the Cabinet Office based on the extent and profile of expenditure across central Government) have been introduced as part of this drive. These initiatives include:

  • renegotiation of key contracts with suppliers, identifying immediate savings and agreeing memoranda of understanding;

  • establishing a new role with responsibility for leading the Government's relationships with the strategic suppliers;

  • implementing a new spending control which requires Cabinet Office approval for new contracts, extensions and major changes above a value of £5million; and

  • developing a system of strategic supplier performance management which involves collating performance information from departments, agreeing overall supplier performance ratings and introducing new policies such as formally designating poor performance as 'high risk'.


 In a Memorandum to Parliament ("Managing Government Suppliers"), the National Audit Office (NAO) welcomed the Cabinet Office's progress since 2010. The NAO specifically noted that the Cabinet Office's actions have enabled the Government to get greater value from contracting and have sent signals to suppliers that it is willing to be tough on underperformance. The NAO recognised that it is right that the Cabinet Office should use the Government's strong negotiating position to get more value from its relationships with strategic suppliers and supported the fact that suppliers' underperformance would have real consequences for their future business with Government and their market position.

Whilst recognising the initial benefits achieved by the Cabinet Office, the NAO acknowledged that there are a number of challenges the Cabinet Office must overcome to develop a more mature approach.  The NAO warned the Cabinet Office not to let internal difficulties such as department relationships, resourcing capabilities and accurate supplier information hinder further progress and also not to miss out on longer term value through innovation and investment by focusing purely on reducing costs.

What's clear is that this drive is set to continue. Although currently limited to those 40 strategic suppliers of central Government departments, it is likely that, once a more mature approach has been developed over the next few years, this drive will be pushed out to other areas of public sector spending including local government bodies, the NHS and other public sector devolved and independent bodies.

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