At least £25bn can be saved for the public purse by restructuring procurement and using more shared services and outsourcing.

The public sector could save £15bn in procurement and another £10bn through outsourcing if it follows radical plans outlined in a report released by the Institute of Directors today.

“The economic situation demands immediate action to reduce public expenditure through implementing the proposals in this paper. There is a lot of talk among politicians about the need to introduce efficiencies into the public sector, but very little detail on how this will be done. The report we publish today provides a vital needed blueprint,” said Miles Templeman, IoD director general.

According to the Institute different departments and bodies are allowed too much autonomy and simply allowed ‘do their own thing’ where procurement is concerned.

“Despite some areas of excellence and good collaborative initiatives, the majority of public procurement spending is so fragmented that huge potential savings are being missed every year. This is because most of the public sector still organises itself on the “corner shop” model, with the majority of purchasing organised in small scale silos,” the report claims.

As a consequence departments are constantly ‘reinventing the wheel’ and having to deal with contract terms and conditions, procedures, processes and interpretations of procurement law; leading to a large duplication of effort.

"This is absolutely true, but the government has tried this previously with OGC although it hasn't been a great success. Having said this, some local initiatives have been successful, so rather than try and do it in one bite, government should try the 'eat an elephant approach' and encourage units to get together that have common issues. They could use Treasuries budgetary controls to give organisations that band together and make savings then get the "saved" money back for more projects," said Martyn Hart, chairman of the National Outsourcing Association.

The IOD recommends that Centralised buying organisations be created to ‘handle all key supplier relationships and all national and major contracts on behalf of the whole public sector’.

National Outsourcing Association members and those working in the public sector can attend a dedicated Public Sector Forum dedicated to transformation through outsourcing and shared services. Interested parties can sign up here.