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12 December 2011 | Angeline Albert

Wider use of payment by results by public buyers is needed to “get procurement right”, say businesses that have compiled a guide for government.

The Confederation of British Industry (CBI), which represents around 240,000 UK businesses, said effective public sector procurement to ensure every taxpayer pound is well spent requires the expansion of both outcome-based commissioning and payment-by-results.

This recommendation is one of seven suggested in the CBI’s Procurement Reform Proposals document, published today. 

The report said outcome-based commissioning would stimulate new ideas from suppliers, forcing them to consider new approaches. Contracts are “often over-specified and input-based in a way that requires extensive oversight of processes and restricts the ability of suppliers to deliver innovative new approaches”.

The CBI praised the Ministry of Justice’s payment-by-results contract with Serco, which requires the supplier to deliver a 5 per cent reduction in reconviction rates among offenders released from HMP Doncaster every year. If this is not achieved, 10 per cent of Serco’s expected annual revenue from the contract will not be paid.

Among the other recommendations made by the business group was that the value-for-money assessment of bids must be improved, with whole-life costing rather than lowest price considered across the public sector as the basis of buying decisions.

The CBI also called for the simplification of EU procurement directives and for better implementation of these rules by buyers to avoid “gold-plating” requirements and help speed up purchasing processes. CBI members also said public buyers’ risk aversity led to the over-use of the competitive dialogue process, when alternative processes could be used.

Companies further urged the government to improve buyers’ skills and transparency, which includes giving advance notice of a purchase to allow for pre-tender dialogue.