Autumn Statement 2011 – What it means for procurement

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By Morven MacNeil, GO Content Editor

With Chancellor George Osborne’s Autumn Statement 2011 all ‘done and dusted’, GO looks at its impact on procurement and business, and the reactions it has generated.

Fiscal action

The Chancellor has set plans for public spending in 2015-16 and 2016-17 in line with the spending reductions over the Spending Review 2010 period.

Total Managed Expenditure will fall by 0.9% a year in real terms, the same rate as in the Spending Review 2010 period, with a baseline excluding the one-off investments in infrastructure announced in the Autumn Statement. Public Sector Gross Investment, excluding these one-off investments, will continue to grow with general inflation in the economy in 2015-16 and 2016-17.

Infrastructure announcement

The Government will use the savings from current spending generated over the Spending Review 2010 period to fund £6.3 billion of additional infrastructure spending, of which £1.3 billion was announced earlier in the autumn.

Around £1 billion of new private sector investment in regulated industries will be supported by government guarantee.

The Government is also announcing commitments to £5 billion of capital projects in the next Spending Review period, as part of the National Infrastructure Plan.

The Government has signed a Memorandum of Understanding with two groups of UK pension funds to support additional investment in UK infrastructure.

They will also increase the Regional Growth Fund for England by £1 billion, plus Barnett consequentials for the devolved administrations, and extend it into 2014-15, to provide ongoing support to grow the private sector in areas currently dependent on the public sector.

Procurement and SMEs

The Government has introduced a package of measures which it hopes will provide better value for the UK from public procurement.

Having already published procurement plans for construction, wider infrastructure, information and communication technologies and facilities management, the Government will publish medium-term plans setting out its procurement needs for other sectors by April 2012.

They hope this will give suppliers the confidence to invest for the future and compete on a level playing field, and simplify the procurement process to reduce burdens on industry.

The Government will make better use of pre-procurement dialogue with suppliers to ensure procurement processes are well designed and quickly carried out.

Government will complete all but the very biggest and most complex procurement processes within 120 working days by introducing the Lean sourcing process from January 2012.

Other procurement measures

The Government will fund improvements to the quality of travel for rail users, including £45 million to extend smart ticketing across London and the South East, £80 million to support Southern Rail’s procurement of 130 new carriages, and £290 million to limit the increase in regulated rail and Transport for London fares in January 2012 to the Retail Prices Index (RPI) plus 1%.

Terry Hill (Chair of the Arup Board of Trustees) will lead an industry standards group in the infrastructure sector to examine the simplification of procurement specifications and the removal of unnecessary technical standards, reporting back to the Government on initial progress by spring 2012.

The Government will also ensure that the bundling of contract and sub-contract packages in procurement offers enhanced opportunities for SMEs.

What the experts have to say

Mark Fox, Chief Executive of the Business Services Association, said: “I welcome the Chancellor’s Statement today with its emphasis on stability, debt reduction and infrastructure investment.

“Reducing public sector costs and improving value for money is clearly going to be the priority of government for the foreseeable future and there is much more that could be done in this area. I would encourage the Government to look afresh at and speed up its programme of involving the private and voluntary sectors in the provision of public services. There are huge opportunities for government to improve value, protect the front line and stimulate business growth and job creation.”

John Cridland, CBI Director-General, said: “This Autumn Statement works with the realities of today and provides an imaginative framework for UK businesses as it strives to secure growth and jobs. This is ‘Plan A-plus’ in all but name. We particularly welcome the new emphasis on capital spending, and the measures to leverage private sector investment on infrastructure for roads and energy. Equally important for jobs and growth is the recognition that the UK’s energy-intensive users need help as a result of the unilateral increases in manufacturing energy costs from the carbon floor price and electricity market reform.”

For further information on the Autumn Statement, click here.