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Maude told to get savings from Whitehall procurement practices

Cabinet Office minister Francis Maude has been urged to improve government procurement practices as well as seeking price reductions from contractors.

Mr Maude last week held a meeting with 30 suppliers including Atkins, Balfour Beatty and Carillion to renegotiate contracts they hold with central government.

Speaking at the Conservative Party conference days after the meeting, Mr Maude said that as the biggest customer for many contractors, the government was “entitled to get handsome discounts”.

But industry experts said the government should address inefficiency in the procurement process rather than just demanding pure cost savings.

Don Ward, chief executive of best practice body Constructing Excellence, said focusing purely on a top line saving could prove counterproductive.

“If the client comes along in a heavy handed manner, it is only going to provoke a similar reaction from the contractor,” he said. “If you are just squeezing on a headline figure, it just comes down to profit and overhead rather than looking at the whole process.”

A spokesman for the Construction Alliance - an amalgamation of several trade bodies including the Civil Engineering Contractors Association and the Federation of Master Builders - suggested a lot more could be done to address inefficiency.

“We will be pushing the message that the savings the government is looking for need to come from efficiencies,” he said. “There is no point turning the tap off and not changing the processes. Rather than just not spending; look at the way you spend.”

Noble Francis, economics director at the Construction Products Association, said he hoped the renegotiation process would improve the industry’s working relationship with the government.

“It could result in a better procurement system, where bidding for a project isn’t completely different depending on the local authority or government department,” he said.

But Mr Francis warned that the government needed to ensure it was speaking to more than just the biggest firms in the industry.

“It should be talking to the broader industry; not just the major firms but the whole supply chain,” he said. “I would hope this is just the start of a series of discussions.”

Accountancy KPMG has warned that renegotiation of government contracts could cost the construction industry £4 billion per year.

The professional services firm’s analysis found the government spends £16bn on construction each year, which would be cut to £12bn if firms match the 25 per cent savings departments have been asked to find across the board.

A spokesman for Atkins admitted the company was bracing itself for broader government cuts.

“The uncertainty of the impact of UK public spending cuts continues and we are prepared for a period of tighter government spending,” he said. “We continue to work with our clients to understand and work through the impact of any cuts it has to make.”