Recognising the challenge of IT procurements

The National Audit Office released a report on 16 January on the challenges faced by Government when procuring technology suppliers.

This is not just a challenge we see with Central Government, but is a challenge faced by authorities across the public sector who are seeking to implement real digital change.

The procurement of technology and digital services can be a complex area for authorities. It requires a great deal of preparation to scope the services required and prepare the procurement process.

Due to the ever-evolving nature of technology, it is often not appropriate to simply consider “what did we do last time?”

Technology has moved on, meaning new scopes are needed, as well as new contractual and commercial mechanisms to reflect the changing expectations of the technology market.

The report addresses the fact that many technology services are subscription-based. Gone are the days of IT services primarily being bespoke IT solutions hosted on the premises of the customers. Instead, suppliers increasingly provide one-size-fits-all SaaS solutions.

Whilst this can drive down costs for customers, we find that it does not neatly fit the way in which public authorities are required to procure services and does not align with the standard contract terms that authorities expect to implement.

Frameworks such as G-Cloud have tried to address this but the scope of services that can be procured via G-Cloud can be too narrow to address the range of technology solutions that a public authority requires.

In order to implement real technological change in their organisations, authorities need to understand the potential technological solutions in the market and how these can create cost effective change.

However, to do that, authorities need technological expertise and if that is not available in-house, then it needs to be procured first (and procured bearing in mind conflict of interest considerations that could arise in the future).

The NAO report acknowledges that such expertise is not always readily available in-house within Central Government, finding that there is a lack of specialist digital commercial personnel.

The NAO also points out how digital procurements, unlike other contracts (e.g. construction), require a considerable amount of design work to be done before the contract is entered into. Technical specifications, as well as implementation plans and KPIs, need to be prepared ahead of the launch of the procurement. This work requires appropriate resource as well as sufficient time to prepare.

The NAO’s report discusses the challenges faced post-procurement during contract management. The report finds that in Central Government there is limited resource to manage technology suppliers post-contract award.

Significant effort is often involved in procuring a technology solution, including the development of complex commercial mechanisms, implementation plan milestones and key performance indicators.

To see the benefits of the solution procured, it is important that the contracts can be managed effectively.

Contract management will also become increasingly important under the new Procurement Act 2023, as more focus is put on contract management than under the Public Contracts Regulations 2015.

A theme of the recommendations is that the NAO recommends a need to negotiate with technology suppliers.

Public authorities will need to structure their procurement to enable them to have the flexibility to do this. Many authorities procure technology services using existing frameworks, which has the advantage of pre-agreed contract terms and a potentially shorter procurement timetable.

However, a further competition under a framework can limit an authority’s ability to negotiate. To follow the recommendations of the report, it may require authorities to prepare and run procurements outside of frameworks.

The competitive flexible procedure under the new Procurement Act 2023 may provide authorities with a way to help address some of the challenges authorities face. Nevertheless, as technology advances and there is evermore pressure to digitalise services, the pressure on technology procurements will continue to increase.

Charlotte Smith is a Partner at Sharpe Pritchard LLP.

This video is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email enquiries@sharpepritchard.co.uk.