OFT launches competition probe into market for supplying ICT to public sector

The Office of Fair Trading has announced plans to investigate the degree of competition in the multi-billion pound market for supplying ICT goods and services to the public sector.

The announcement of the market study came after a call for information issued by the OFT in July 2013 raised a number of concerns about the operation of the market, including that:

• certain businesses appeared to have a large share of contracts in some areas of the sector;
• there were high barriers to entry and expansion (especially for smaller scale ICT businesses); and
• public sector organisations faced difficulties and high costs in switching suppliers.

The call for information also raised concerns about public sector procurement practices and the OFT said its market study would examine the extent to which these interacted with the market structure and suppliers' behaviour.

The OFT said the sector was “vital for the efficient and cost effective delivery of all public services”.

Two parts of the ICT sector – accounting for around half of the £13.8bn expenditure in 2011/12 – will be examined in particular:

1. Commercial off-the-shelf software: “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”;
2. Outsourced IT: “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.”

OFT market studies are carried out under s. 5 of the Enterprise Act 2002. Possible outcomes of such 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.

The OFT said it aimed to complete the market study and publish findings in March 2014.