Government IT suppliers are in danger of a competition probe after the UK’s trading watchdog turned its spotlight on the £10.4 billion public sector computing market today.
The Office of Fair Trading is calling for information on the market amid a raft of concerns including the dominance of larger suppliers, higher barriers to entry for smaller firms and the difficulty of switching between suppliers.
The OFT will also focus on whether some firms seek to limit the compatibility of their own systems with rivals’ and if the public sector’s heavy dependence on suppliers affects its ability to gain value for money.
The biggest players in the market are Hewlett Packard, Capita, CapGemini, Fujitsu and BT’s global services arm. But in 2011 the Cabinet Office pledged to “put an end to the oligopoly of large suppliers that monopolise its ICT provision” as well as “break down the barriers that impede SMEs from bidding for contracts”.
A recent inquiry into the sector from the Public Accounts Committee heard evidence from smaller firms who claimed a “cartel” was operating although this was denied by the bigger firms. Its report said it was “ridiculous that some departments spend an average of £3500 on a desktop PC”.
OFT chief executive Clive Maxwell said: “Given the vital role that this technology plays in the delivery of public services and the cost to the taxpayer, the OFT believes it is important to explore whether there are any restrictions on competition.
“We want to hear both from industry suppliers and public sector users about how competition in this market works, any problems that they have experienced, and how it could be made to work better.”
PAC chairwoman Margaret Hodge welcomed the OFT’s move. She said: “This is an area where there has to be better value for money for the taxpayer. Too many projects cost too much and too many go wrong.”
The watchdog is keen to examine whether the practice of bundling contracts together by different local authorities acts as a hurdle to smaller firms unable to deliver aggregated deals.
It is also worried that framework agreements could restrict the number of competitors able to win contracts or deter suppliers from joining because of the costs involved.
The OFT’s options include beginning competition enforcement proceedings, launching a market study, or seeking voluntary action from the industry.