RECOMMENDATION 1
Spend more efficiently
Limit contract values with consultancies and technology suppliers at £100m over three years
Much of the critical infrastructure for digital government operates via outsourcing to super agencies and third-party suppliers. Public service entrepreneur Dominic Campbell termed this “the return of fewer, bigger vendors” – an arm’s length approach to legacy platforms and essential capabilities that echoes the creep of consultancies in other parts of government.
Wholesale changes to procurement are necessary but will take years to embed; the next government could quickly intervene by capping the value of contracts at £100m, limiting the duration to three years and introducing review periods for existing contracts. This will increase control of expenditure and enable rapid redeployment of funds that are locked up in maintaining the status quo.
Current levels of outsourcing can mean civil servants do not have sufficient visibility or understanding of how things work, while budgets that might be spent on decommissioning and modernising are wrapped up in expensive long-term Service Level Agreements with a small number of powerful suppliers. Improving technology procurement within government is not a new problem but it remains a critical one. As one of our respondents noted:
[to be] fit for the future, we have to learn from the mistakes of the Horizon Post Office Scandal. It’s vital to construct these investments around high standards, including expectations on interoperability and replaceability of suppliers. Government must do the hard work to break up contracts into smaller units
Many of the Cabinet Office’s 39 strategic suppliers are technology companies retained for infrastructure contracts in excess of £100m. For instance, a recent Treasury report shows that “public organisations affiliated with the Treasury have held more than £3.4 billion worth of contracts with Fujitsu since 2019”, while the final value of Palantir’s contract to deliver the NHS Federated Data Platform is at least £182m over four years.
Such large contracts were originally agreed initially to make procurement more manageable, but this simplification has also empowered suppliers to shape delivery and restrict policy choices, often at considerable financial and quality cost to the taxpayer. One of our respondents noted “the failure of GOV.UK Verify for identity assurance was not a technology, product of standards failure, but market failure to provide for the most marginalised in society”.
This de facto vendor lock-in is further entrenched by low levels of strategic digital knowhow in government and procurement processes that disempower new entrants, while the closure of the Digital Marketplace in April 2023 has created the perception of “a closed shop”.
Meanwhile, weak regulators and existing accountability processes fail to uphold standards and lead to underperforming services. Taken together this means that “tech markets are shaped by legacy, not a vision for the future”.
Capping contract levels at £100m with a maximum term of three years would reduce risk, rebalance control, and unlock resources for further transformation.