Background to the report

The effective use of technology suppliers is essential to the success of government’s ambitions to improve and digitally transform its services and operations. But repeated delays and cost overruns in digital delivery undermine government’s ability to achieve its policy objectives.

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Expenditure on digital procurement is significant: at least £14 billion is spent annually. Digital spend in government ranges from the design and implementation of new policy initiatives such as Universal Credit, to maintaining and replacing critical services like the Police National Computer, and the purchase and renewal of commodity items, for example, laptops.

With such an extensive digital estate to develop and maintain, every major operational system, from borders to tax to welfare, depends on the successful performance of its suppliers.

Scope of the report

This report examines government’s overall approach to digital and technology suppliers. It sets out lessons for the centre of government and departments to learn from government’s approach to digital procurement.

We focus on major procurement of technology to support business change, including the digital transformation of government and planning for technology of the future. We refer to these major policy and business change procurements as ‘digital programmes’ and ‘digital procurement’ throughout this report. We exclude the more straightforward technology services and commodity items purchased for operational needs. The report examines:

  • the scale of the challenge of undertaking digital procurement in a way that supports the modernisation of the public sector to make it more efficient and effective, and government’s response to that challenge
  • how the centre of government can adopt a more strategic approach to how it works with digital and technology suppliers
  • how departments can better understand and manage the complexities of digital procurement, including making full use of their digital expertise

The report does not look at individual contracts and relationships between government departments and technology suppliers. We have not audited the procurement processes of individual departments as part of this report, but have drawn on past National Audit Office (NAO) reports that have looked at a range of digital procurements.

Conclusions

Government has a long-standing need to improve its use of technology suppliers, and its slow progress in doing this has contributed to poor outcomes in its attempts to modernise government. Our past reports have highlighted where the commercial approaches taken have contributed to delays and increased costs of major digital programmes.

The external market environment is also changing. Traditional models of outsourcing or creating government-owned assets are giving way to subscription-based models such as the use of cloud services, and government has been slow to adapt how it engages with and manages suppliers. It needs to define a comprehensive sourcing strategy for the digital age which takes into account how to deal with ‘big tech’ and global cloud providers that are bigger than governments themselves, while aligning with policies on research and innovation.

Departments find it challenging to acquire the right blend of digital and commercial skills, but do not make as much use as they could of existing digital expertise. Commercial teams have insufficient digital expertise and typically adopt a generalist model, with limited use of a more strategic approach and specialist capabilities.

There is a critical role for the centre of government to provide strategic direction on managing relations with suppliers. The centre can also do more to help departments with guidance to make their processes and their engagement with suppliers more effective and help them become more intelligent clients.

Our recommendations are aimed at supporting government to take these steps to achieve better outcomes and prevent further waste of money and delays to improvements in public services. The creation of the new digital centre of government provides an opportunity to make the systemic changes that are needed.

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Publication details

Press release

View press release (16 Jan 2025)

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