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Government makes construction procurement savings
The government saved £447 million in construction procurement during the last financial year.
This figure was revealed in a speech by Cabinet Office minister Chloe Smith and forms part of the coalition's plan to drive down costs by 15 to 20 per cent.
Such savings were achieved using a benchmarking system, which sets out how much the public sector should be paying for construction services.
Ms Smith also said plans to alter public sector procurement for small to medium-sized enterprises (SMEs) are progressing well.
The government aims to raise the amount it spends with SMEs to 25 per cent by 2015. Ms Smith claimed the last financial year saw a 6.6 per cent increase on the 10 per cent that was spent on this area in 2011-12.
Rachel Osborne, of Odgers Interim, welcomed the news. She stated: "Any initiative that offers a responsive and data-led alternative to salami slicing cost cutting in public services has to be a good thing.
"Combined with a clear route to market for SME suppliers, who over the years have had their fair share of town hall initiatives to negotiate - 'best value' then 'CCT' to name just two - this has to be a model that will have benefits far beyond the construction industry."
However, Odgers' Alex Lenihan warned there is still more to be done.
"While there is much rhetoric about allowing SMEs greater access to public sector business, EU procurement still favours the big boys. Granularity can only really be achieved through leveraging fewer suppliers on standardised data sets."
He added: "SMEs are not always able to directly access such contracts as they don't have the resources to collect such data. Most SMEs are therefore forced to sign up to unfavourable sub-contract arrangements, and while the call for 'prompter payment terms' is welcome, this doesn't address the main issues that SMEs have with such deals.
"Downward pressure on the supply chain has created an environment of inflexible pricing models, threats to IP and box ticking. All of these things get in the way of SMEs being able to provide the innovative services and solutions that they are renowned for."
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