Just yesterday we reported on the next wave of IT job cuts announced by RBS, now we must report on the £800 million which the government must cut from its outsourced services and IT suppliers.
Negotiations began back in July but this week, representatives from the public sector’s nineteen biggest suppliers will meet to hammer out the details of their new contracts. These companies include IBM, Serco, BT and Capita. Francis Maude, cabinet office minister, will chair the meeting. He could possibly inform these companies that they must take a hit on profits in the short term.
The public sector has aimed to reduce the costs of many of their contracts by shrinking the services or ‘taking costs out’. They are aiming to retain the necessary services these companies provide while ceasing payment on non-necessary extras. Suppliers who have considered themselves in a privileged position just by retaining these contracts have accepted this move. They believe it means they are best placed for future public service contracts elsewhere. Besides, the government has also looked to the suppliers for ideas on how to cut costs during the tendering process.
Individuals and businesses had the opportunity to bid via an HM Treasury web page. One of the 60,000 replies received so far reads: “There should be a renegotiation of IT contracts across the board. They are poor with regards to their costings matrix and rates charged. Procurement processes should also be made easier so more suppliers can get on to the roster and fairer competition can be put into play. The process is incredibly laborious…government is not getting the best IT suppliers coming through. IT is a very fluid industry and suppliers and their abilities change”.
One thing is for sure; the effect of the public sector budget cuts is likely to have far reaching repercussions over the foreseeable future.