A lack of digital and procurement capability within government has led to wasted expenditure and lack of progress on major digital transformation programmes, the National Audit Office (NAO) has warned. 

An NAO report says the government must learn from past mistakes in how it has worked with technology suppliers, which has seen taxpayers’ money wasted and missed opportunities to modernise government.

At the same time, growing reliance on ‘big tech’ for providing cloud services and artificial intelligence capabilities – which are subscription-based and which the government does not ultimately control – calls for a change of approach, the report says.

Generalist model

The UK public sector spends at least £14bn every year on digital programmes and technology, based on independent estimates, a figure cited in the NAO report. However, it warns that public sector commercial teams have typically adopted a generalist model more suited to traditional outsourcing.

The report calls on central government to do more to support departments to make their processes and engagement with suppliers more effective and become more intelligent clients. It also calls on the government to improve cross-departmental data sharing to underpin a more strategic approach to suppliers.

It also says a stronger focus on recruiting and retaining staff with in-demand technology skills is needed.

New digital centre of government

Gareth Davies, head of the NAO, says: “The government needs to rethink how it procures digitally, including how to deal with ‘big tech’ and global cloud providers that are bigger than governments themselves. The creation of the new digital centre of government provides an opportunity to make the systemic changes that are needed.”

The NAO says former flagship major transformation programmes have failed to deliver expected results. Although the centre of government sets the overall direction, culture and conditions, it’s at the individual departmental levels – where contracts to suppliers are awarded and managed – where problems are most likely to manifest themselves. 

The government can save significant sums of time and money by improving how it engages with technology suppliers, the NAO says, but only if it learns from its past procurement approaches to large-scale digital transformation projects, which have experienced decades of poor progress and billions of pounds in cost increases.

Improve understanding and technical expertise

The government struggles with the breadth of issues that affect its ability to engage effectively with suppliers. It needs to invest in capability to improve its understanding of digital markets, its technical expertise and how to partner more effectively with suppliers.

Meanwhile, departments’ programme teams often hasten to award digital contracts because of pressure to deliver, including before fully understanding what is needed from them. The NAO also recommends that government departments do a better job of identifying and developing key requirements before the tender process begins.

Oliver Nelson-Smith, Technology Policy Manager at ICAEW, says: “The NAO report summarises the problem with the government’s use of technology well. Data and people are assets that need long- term strategic investment over individual projects.” 

Focus on the foundational

He continues: “Without these secure foundations, any additional spending will be the equivalent of attempting to build a home on sand – likely to end up over budget and not fit for purpose. We strongly recommend that the government looks to learn from other governments that have successfully digitised and ensures its focus is on the foundational rather than the buzzword.”

The NAO calls on a cross-government sourcing strategy that takes account of how to deal with ‘big tech’ suppliers that are bigger than government. It should also create a digital skills plan to plug recruitment shortfalls and better equip and train decision-makers responsible for digital commercial activities. 

Geoffrey Clifton-Brown MP, Chair of the Public Accounts Committee, says: “The government spends at least £14bn a year procuring digital services, but its woeful handling of major digital programmes has led to delays and costs to the taxpayer. 

“Digital commercial skills are in short supply and the government is not making the most of the limited expertise it has. The government has managed digital suppliers poorly and the centre of government has not provided direction to help departments become intelligent clients. 

“Without a more strategic approach from the centre, and a sourcing strategy that is fit for purpose for the digital age, the government risks wasting more money and squandering the opportunity to modernise the public sector.” 

Alison Ring OBE FCA CPFA, Director, Public Sector and Taxation at ICAEW, says:“The government must invest in big digital programmes in a coordinated way to save money and to enable public services to be delivered more efficiently and effectively. A good start on this investment journey would be to implement the recommendations in the NAO’s latest report.”