The government's procurement system makes it almost impossible for SMEs or new entrants to bid for contracts, a Whitehall committee has heard.
Speaking to the Public Administration Select Committee, chief executive of the British Computer Society, David Clarke, said that the government's insistence on tendering for very large-scale contracts over long periods of time has had a negative impact.
"It's very expensive to bid for large projects because of the sheer scale of a lot of government contracts, so it excludes all but the very largest companies," he argued.
"The UK rigorously follows EC procurement directives, to be more transparent and have more competition, but the effect is it takes much longer and makes it more expensive and makes less people want to bid."
He added that he felt this was the "fundamental issue about the procurement process" and that if it wasn't addressed it would be hard for the government to achieve any of its other aims to overhaul its use of IT systems.
Clarke added that ever since the government outsourced the necessary skills required to manage large-scale procurements in the 1980s there was the risk of failure when considering IT systems.
"Government has got to get the skills to stop this happening. The difference between government and private sector is that this would never happen in the private sector," he added.
Sureyya Cansoy, the director of public sector IT at Intellect, agreed with Clarke's assessment but added that she was pleased the government was at least aware of the issue and was looking to address the problem.
"The current procurement system does not help smaller companies or new entrants coming into the market, but by improving procurement we can open up the market to not just smaller companies but to new organisations," she said.
"But we are encouraged the government is taking the SME agenda seriously and the measures government has made so far are encouraging and we're looking forward to being able to work on some of the details of those new initiatives."
Steve Latchem, vice president of the solutions group at tier two outsourcer Mastek, said the marketplace for government contracts is opening up for smaller providers.
"Four or five years ago there would be five or six providers competing for direct procurement but now there are fifty or sixty expressing an interest," he argued.
"There has also been a shift in the tier one mentality, so where before they'd wander past the sub-£3m deals, now the big companies have all formed small deal teams."
However, he argued that despite the noises being made by the coalition to create a "level playing field" among outsourcing providers, and the hard line on cost cutting laid down by the Cabinet Office, many large providers continue to be favoured, with a number of "framework renewals" having been negotiated.
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