The Office of Fair Trading (OFT) has today launched a market study into the supply of information and communications technology (ICT) goods and services to the public sector.
This study will focus on the degree of competition between the companies which supply these goods and services, in a sector that is vital for the efficient and cost effective delivery of all public services. It also accounts for a significant proportion of total public sector expenditure, with an estimated £13.8 billion spent in 2011-12.
The market study follows an OFT call for information (CFI) which raised a number of issues that the OFT believes merit further analysis. Most notably, concerns were raised that certain businesses appear to have a large share of contracts in some areas of the sector, that there are high barriers to entry and expansion (especially for smaller scale ICT businesses) and that public sector organisations face difficulties and high costs in switching suppliers.
During the CFI, issues were also raised regarding public sector procurement practices. The market study will examine the extent to which these practices interact with the market structure and suppliers' behaviour. Existing reports and ongoing initiatives to improve public sector procurement will inform the study. The OFT aims to avoid duplicating other recent or ongoing work concerning public sector procurement.
In looking at the supply of ICT to the public sector, the OFT will examine two parts of the ICT sector in particular, which appear to demonstrate issues raised in response to the CFI and which between them make up around half of UK public sector ICT expenditure:
– Commercial off-the-shelf software: all types of software commercially available to different organisations, which have not been individually tailored to those organisations' needs. Examples which we may look at include management information and revenues and benefits systems that may be used by a range of public sector organisations, such as schools and local authorities.
– Outsourced IT: the contracting of private sector suppliers to build and/or manage public sector IT infrastructure and applications (software designed for non-technical users). Examples which we may look at include the building, running and maintenance of IT systems and applications for public sector organisations.
Nisha Arora , OFT Senior Director of Services, Infrastructure and Public Markets, said:
'Information and communications technology is vital for the efficient and cost effective delivery of today's public services and for many aspects of public service reform.
'When competition works well, it can help drive down costs, encourage innovation and ultimately ensure that the taxpayer gets the best value for money. We want to look further into this market to understand whether it is really serving its customers' interests.'