Government urged to rethink digital procurement as ambitions stall
The government’s ongoing ambitions for digital transformation risk grinding to a halt unless it overhauls the way it funds and invests in technology, according to a new report from techUK.
The body’s recent ‘Financing the Future’ study posited that Whitehall’s procurement system remains too rigid and too focused on short-term products rather than long-term digital outcomes.
Instead, the report urged reforms to funding rules, increasingly flexible partnerships with suppliers, and a shift towards ‘test and learn’ pilots to reduce risk.
This intervention lands at a politically sensitive moment. Ministers have promised a “modern digital government” in their ‘blueprint for Reform’, while the £100m ‘public sector reform’ programme is already experimenting with small-scale innovation squads in local areas.
However, with legacy systems still draining budgets— and the shadow of scandals such as the Post Office’s Horizon IT case—questions remain over whether Whitehall is willing or able to change entrenched practices.
An outdated funding system
The report argued that a funding mismatch lies at the heart of this issue. Departments are often steered towards using one-off capital budgets (CDEL) for IT projects, rather than drawing on resource budgets (RDEL) for ongoing services.
This skews incentives, as contracts are often built on purchasing individual products rather than investing in adaptable cloud-based platforms or AI tools that evolve with user needs.
“Government has an ambitious vision for digital transformation, but this will only succeed if procurement and funding keep pace with innovation”, said Heather Cover-Kus, associate director for central government at techUK.
“We must move beyond one-off, compliance-led procurement models and embrace flexible approaches that focus on outcomes and long-term impact”, she added.
TechUK’s report recommended a series of practical changes, including breaking large contracts into modular components and boosting in-house digital skills to avoid over-reliance on major systems integrators.
The stakes of digitisation remain high for the public sector. A government-commissioned review back in January found nearly a third of central government IT systems were ‘legacy’. In some areas, that figure rose to 70 per cent.
This means the system is unsupported, insecure, and unable to meet current needs.
Maintaining outdated tech costs up to four times as much as modern systems, but tight budgets and political short-sightedness mean upgrades are often delayed or postponed.
Ambition and delivery gaps
Ministers have keenly aimed to position the UK as a leader in emerging technologies like AI.
Data centres are planned, AI supply chains are under review, and officials insist the public sector will “lead by example”.
But experts warn that these promises risk being undermined if the state’s IT plumbing is left with a leak.
“Fixing broken IT is never as sexy as AI”, said Gavin Freeguard, a former digital government lead at the Institute for Government. “There is a danger of thinking AI can just paper over the cracks – when in fact you have to fix the cracks first”.
TechUK’s report pointed to more constructive forms of government-industry collaboration, arguing that when departments and suppliers work together, pilots can be adapted and scaled without costly failures.
Its five guiding principles —competition, flexibility, collaboration, pro-innovation, and value for money—are presented as a blueprint for a forward-looking procurement culture.
Yet, scepticism remains about whether such ideas will gain traction.
The National Audit Office (NAO) has previously criticised Whitehall’s reliance on mega-deals with American cloud providers, warning of “vendor lock-in” and lost bargaining power.
Smaller UK firms, once touted as key beneficiaries of reforms, have struggled to win contracts.
Matt Evans, techUK’s chief operating officer, said: “Government can continue with its current approach, procuring standalone products that risk being left on the shelf, or it can take a proactive step towards outcome-focused delivery that supports growth, innovation and user needs”.
With the Procurement Act now in force, a Spending Review looming, and the new Digital Exchange marketplace promising to speed up purchasing decisions, the pressure is on ministers to show that rhetoric about efficiency and innovation can translate into reality.
For now, the gulf between Whitehall’s ambitions and the daily frustrations of public sector IT remains wide.
The test will be whether reforms like those proposed by techUK can shift the system before the next scandal erupts.