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£2 billion savings for public as Government buys smarter

Central Government has achieved £2 billion worth of value for money (VFM) gains, two thirds of its target, after only one year, Chief Secretary to the Treasury Paul Boateng said today.

The £2 billion savings for 2003-04 have been achieved by implementing best practice and working to make government departments smarter customers.

These savings show how the cross-Government wider efficiency agenda, which will realise over £20 billion in annual efficiencies by 2007-08, can be achieved. The Government will continue to build on this success to ensure that the significant element of efficiency savings to be delivered through procurement are realised.

Paul Boateng said:

"This is good news for the tax payer and for all government departments and their agencies. Government is well on its way to meeting the challenging target of £3 billion and we will continue to build on this as we implement the Gershon efficiency review in full."

"It shows how departments can work smarter with the aim of achieving the Government's wider efficiency agenda, which will deliver over £20 billion of annual efficiency gains by 2007-08."

OGC Chief Executive John Oughton said:

"I am pleased that the OGC has been able to play a part in helping achieve these savings through better procurement."

"This very real progress builds on our £1.6 billion VFM gains announced last year. It shows that, since OGC was set up in 2000, we have been able to spread best practice successfully."

"We will now be building on these successes in our work with the wider public sector as well as continuing to work with central civil government."

The VFM gains have been achieved through a wide variety of better procurement practices, such as greater collaboration across several departments, improved contract negotiation and management, smarter quality of service and reduced process costs. The gains have been calculated using a methodology agreed by the National Audit Office and departments.

Key achievements in 2003-04 include:

Direct negotiation: gains achieved by departments negotiating directly with suppliers - £580m.

Collaboration: gains achieved through greater collaboration between departments - £460m.

Gateway Reviews: the value for money gains from Gateway Reviews in 2003-04 is £730 million. Over 850 reviews have been completed covering in excess of 500 projects and programmes since the process started in February 2001. Gateways are reviews of procurement projects and programmes carried out at key decision points by a team of experienced people, independent of the project team. A total of 119 separate departments, NDPBs and agencies have had a Gateway review of their medium, high-risk or mission critical projects and programmes.

About OGC

The Office of Government Commerce (OGC) is an office of HM Treasury, with its own Chief Executive.

We work across government as a catalyst to achieve best value for money in commercial activities and support government departments in successfully delivering major acquisition programmes and projects.

Our remit has been expanded to encompass support for implementation of the Lyons Review on relocation and OGC is increasingly engaging with the wider public sector. As announced by the Chancellor in the 2004 Budget, OGC's Chief Executive is also responsible for implementing the Government's public sector efficiency programme.

OGC has a Public Service Agreement target agreed as part of the 2002 Spending Review to secure £3 billion of value for money gains in central civil government by 2006 and has an annual spend of £65 million.

Notes to Editors

Value for Money (VFM) is defined as the optimum combination of whole life costs and quality to meet the customer's requirements. It is not just lowest price.

Procurement is defined as being the whole life-cycle process of acquisition of goods, services and works from third parties - beginning when a requirement is a gleam in the eye and ending with the conclusion of a service contract or ultimate disposal of an asset.

The aim of Gateways is to stop budgetary overspends through effective interventions in projects.

Central Civil Government means government departments except MoD, plus their agencies and NDPBs. NHS and other parts of the public sector are not covered.

Nearly £600 million of the value for money gains in procurement for 2003-04 have come from the Home Office, Department for Work and Pensions and the Inland Revenue.