Getting value for money for the taxpayer

Ongoing economic strife, combined with political uncertainty, has led some to question whether Italy is governable. But whatever government emerges from its political impasse, it will have to grapple with a burgeoning fiscal deficit and ensure that state spending delivers real value for money.

Italy has been in recession for the last 18 months. This followed a sustained period of very low growth. Italy’s contraction in 2012 is now estimated at 2.2%, and GDP is forecast to decline by a further 2% in 2013. Meanwhile, the country suffers from one of the Eurozone’s highest debt-to-GDP ratios.

In the February 2013 elections, the expected narrow, but decisive, majority for the center-left Democratic party did not materialize, as support drained away to fringe parties. No party appears able to assemble a sustainable coalition, amid fears that Italy is ungovernable at a time of “austerity fatigue.”

Every euro of government spending will come under renewed scrutiny. Control will not be asserted just by reducing welfare payments or cutting health budgets. Reassessing how the state spends, and ensuring that it gets the best value for money, is a powerful weapon in the fight to tame the fiscal deficit.

Consip, a public company owned by the Italian Ministry of Economy and Finance (MEF), is a useful example of how reassessing the way in which public money is spent can drive efficiency and bring savings.

When Consip was established in 2000 as Italy’s national procurement agency, its objective was to control the country’s large levels of public spending and make savings. The MEF’s policy objective was to rationalize public expenditure, and Consip was the mechanism for delivering it.

A number of consulting firms worked concurrently with Consip, each working on their own distinctive objectives. The aim of Ernst & Young’s work with the company was to design a model that helped establish purchasing practices, introduce rules and procedures for buying and selling goods and services, and establish an eProcurement digital platform.

So, what has Ernst & Young helped Consip to achieve? From 2001 to 2009, Consip was responsible for the direct management of spending totaling €12.1b. During this time, it has generated savings of €2.6b. This is a saving of 22%. Meanwhile, Consip’s costs are less than €0.5b. The program is used regularly by more than 11,000 public entities, and has managed more than a million orders.

The complete article was written by:

  • Federico Maffezzini
    Head of Mediterranean, Procurement and Supply Chain, Ernst & Young, Italy
  • Diego Pavoni
    Director, Advisory Services, Ernst & Young, Italy

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