UK government policy on public procurement is clear: to achieve value for money — taking account of whole-life cost and other requirements such as relevant economic, social or environmental objectives — through a fair and open competitive tendering process. However, applying this policy to every contract demands detailed guidance from an authoritative source and skilled and experienced personnel in all 2000 public bodies in the UK that procure goods and services.

We were told that too often public officials, faced with difficult decisions and afraid of criticism if the procurement went wrong, took refuge behind bureaucracy, failed to choose innovative or environmentally sustainable goods and services, and opted for the least cost not the best value bid. As well as costing more in the long term, this deterred competition and innovation among suppliers and was particularly harmful to small businesses which do not have the resources to sustain complex, prolonged tendering processes.

These failings are caused not by a flaw in public policy but by problems in its implementation. The Office of Government Commerce (OGC), the body charged with overseeing procurement policy, has issued a number of comprehensive guides to best practice and has drawn up useful standard forms, for example in relation to prequalification for tendering. However, until a few months ago it did not have the authority to enforce implementation of best practice. We expect it to do so now.

We are concerned that in one area — the use of public procurement to further the Government's social policy and equality aims — the OGC's guidance did not go far enough. We recommend that the guidance be reviewed.

In some respects, the Government's current efficiency drive — involving (amongst other things) centralising purchasing and the use of framework contracts — is making it more difficult for SMEs to compete for public contracts and reducing competition further. We were also told that public bodies had a poor record on timely payment of bills, which we deplore.

Despite the OGC's new focus and powers, it has a small staff and will find it difficult to police even the central government departments, let alone provide advice and guidance to other public sector bodies. Therefore, we emphasise the need for better trained and higher quality procurement officials throughout the public service, supported by floating teams of experts in particular procurement areas.