Executive Briefings

Better Government Procurement Could Save $1Tr Globally, Report Says

Smarter procurement could save around 15 percent of government spending globally and improve outcomes, a report has said.

Productivity improvements overall could save an estimated $3.5tr a year by 2021 on a global public sector spend of $35tr according to consultancy McKinsey. Better procurement could contribute up to $1bn of these savings.

To achieve these procurement savings, governments need to cultivate commercial skills to ensure projects and contracts are better managed for value, it said.

Written by the McKinsey Center for Government, the report on government productivity looked at more than 200 case studies from countries at different stages of development and interviewed a number of ministers and civil servants. These savings are needed because while public spending per capita is growing, expectations are also increasing and the global public sector deficit is close to $4tr a year.

Government spending accounted for 34 percent of GDP in 2015, the report said, with major contracts including IT defence and infrastructure projects often worth up to 20 percent of a country’s GDP.

For major infrastructure projects, it estimated these changes could save up to 40 percent of costs. The U.S. government saved around $100m on its IT spend in party by eliminating unnecessary software licenses and enforcing existing rules on electronic devices, it said. Denmark also saved around $80m on a cross-government procurement programme focusing on computer hardware and other office equipment.

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Productivity improvements overall could save an estimated $3.5tr a year by 2021 on a global public sector spend of $35tr according to consultancy McKinsey. Better procurement could contribute up to $1bn of these savings.

To achieve these procurement savings, governments need to cultivate commercial skills to ensure projects and contracts are better managed for value, it said.

Written by the McKinsey Center for Government, the report on government productivity looked at more than 200 case studies from countries at different stages of development and interviewed a number of ministers and civil servants. These savings are needed because while public spending per capita is growing, expectations are also increasing and the global public sector deficit is close to $4tr a year.

Government spending accounted for 34 percent of GDP in 2015, the report said, with major contracts including IT defence and infrastructure projects often worth up to 20 percent of a country’s GDP.

For major infrastructure projects, it estimated these changes could save up to 40 percent of costs. The U.S. government saved around $100m on its IT spend in party by eliminating unnecessary software licenses and enforcing existing rules on electronic devices, it said. Denmark also saved around $80m on a cross-government procurement programme focusing on computer hardware and other office equipment.

Read Full Article