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The OFT has today launched a market study into the supply of information and communications technology (ICT) goods and services to the public sector.

This study will focus on the degree of competition between the companies which supply these goods and services, in a sector that is vital for the efficient and cost effective delivery of all public services. It also accounts for a significant proportion of total public sector expenditure, with an estimated £13.8 billion spent in 2011-12.

The market study follows an OFT call for information (CFI) which raised a number of issues that the OFT believes merit further analysis. Most notably, concerns were raised that certain businesses appear to have a large share of contracts in some areas of the sector, that there are high barriers to entry and expansion (especially for smaller scale ICT businesses) and that public sector organisations face difficulties and high costs in switching suppliers.

During the CFI, issues were also raised regarding public sector procurement practices. The market study will examine the extent to which these practices interact with the market structure and suppliers' behaviour.  Existing reports and ongoing initiatives to improve public sector procurement will inform the study. The OFT aims to avoid duplicating other recent or ongoing work concerning public sector procurement.

In looking at the supply of ICT to the public sector, the OFT will examine two parts of the ICT sector in particular, which appear to demonstrate issues raised in response to the CFI and which between them make up around half of UK public sector ICT expenditure:

• Commercial off-the-shelf software: all types of software commercially available to different organisations, which have not been individually tailored to those organisations' needs. Examples which we may look at include management information and revenues and benefits systems that may be used by a range of public sector organisations, such as schools and local authorities.
• Outsourced IT: the contracting of private sector suppliers to build and/or manage public sector IT infrastructure and applications (software designed for non-technical users). Examples which we may look at include the building, running and maintenance of IT systems and applications for public sector organisations.

Nisha Arora , OFT Senior Director of Services, Infrastructure and Public Markets, said:

'Information and communications technology is vital for the efficient and cost effective delivery of today's public services and for many aspects of public service reform.

'When competition works well, it can help drive down costs, encourage innovation and ultimately ensure that the taxpayer gets the best value for money. We want to look further into this market to understand whether it is really serving its customers' interests.'

NOTES

1. Data from market intelligence provider Kable - see www.kable.co.uk/index.html. This figure excludes direct employment costs associated with in-house ICT staff employed by public sector organisations.
2. Reports and initiatives on public sector procurement have been published by a number of bodies, including the Cabinet Office, the National Audit Office, the Public Administration Select Committee, the Committee for Public Accounts, Institute for Government and the OFT. The OFT's previous work on commissioning includes Choice and Competition in Public Service Markets - a guide for policy makers and Assessing the impact of public sector procurement on competition.
3. The OFT launched a call for information into the supply of ICT to the public sector on 3 July 2013.
4. OFT market studies are carried out under section 5 of the Enterprise Act 2002 (EA02) which allows the OFT to obtain information and conduct research. Effectively, they allow a market-wide consideration of both competition and consumer issues. They take an overview of regulatory and other economic drivers in the market and consumer and business behaviour. Possible outcomes of market studies include: a market investigation reference, enforcement action by the OFT, recommendations for changes in laws and regulations, recommendations to regulators, self-regulatory bodies and others to consider changes to their rules, or a clean bill of health. See a list of the OFT's other market studies and related work.
5. The OFT aims to complete the market study and publish findings in March 2014. For more information about the market study, see the project page.
6. Any parties who suspect that a cartel is operating can notify the OFT's Cartels Hotline by telephoning 0800 085 1664 or emailing cartelshotline@oft.gsi.gov.uk. See further information. Any parties who suspect some other form of anti-competitive behaviour can notify the OFT by emailing enquiries@oft.gsi.gov.uk or telephoning 0845 7 22 44 99.
7. In April 2014, the Competition and Markets Authority (the CMA) will become the UK's lead competition body.  The CMA will bring together the existing competition and consumer protection functions of the Office of Fair Trading and the Competition Commission, as amended by the Enterprise and Regulatory Reform Act 2013.  The CMA, which is a non-Ministerial government department, was established on 1 October 2013 but will not be taking on responsibility for cases or other work until 1 April. Click on the CMA's homepage for more information