What is your next IT renewal really worth?

Many public sector IT contracts don’t end with a competition. They end with a renewal notice, a price uplift and a tight deadline. The service works well enough, the incumbent knows the estate, and switching looks risky. So the contract is extended or rolled over, and nobody checks whether the new price is fair.

That habit has a cost. In its July 2023 report, Lessons learned: competition in public procurement, the National Audit Office (NAO) noted that government had produced illustrative scenarios suggesting annual savings of £4 billion to £7.7 billion from increased competition. These figures come from the impact assessment for what became the Procurement Act 2023. They are estimates across the whole of government, not savings anyone has achieved, but they show how much value is at stake.

For an IT or commercial lead, the national figure matters less than a simpler question: when did you last test your incumbent supplier’s price against the market?

What the NAO found

The report is worth reading in full. Several of its findings apply directly to IT renewals:

• A lot of spend is not competed. Government spent £259 billion on goods and services in 2021-22. Of the more than £100 billion of contracts awarded by major departments that year, about two thirds was competed in some form. By value, most of the rest were contract extensions.
• Late planning weakens your position. The NAO quotes government guidance that being forced into an extension because planning started too late is a “very weak position”.
• Competition is often thin, even when it happens. Of 235 large contracts recorded on Find a Tender between January 2021 and January 2023, 23% received only one bid. For contracts run as open competitions, 20% had a single bidder.
• Market knowledge makes the difference. The NAO advises authorities to collect market information, including from existing suppliers, and to use it before the contract ends to shape the next procurement.

The message for IT teams is clear. Most of the value is won or lost before the contract is signed, and most of the risk comes from arriving at renewal without evidence.

Why IT renewals are especially exposed

IT contracts have features that make incumbent pricing hard to challenge:

• Switching costs, real and perceived. Data migration, integration, retraining and service risk all make the status quo look safer, and suppliers know it.
• Licensing complexity. Bundles, tiers, true-ups and different metrics (per user, per core, per device) make like-for-like comparison difficult.
• Automatic uplifts. Indexation clauses, list-price rises and changes to support charges build up year after year without a formal decision.
• Estates that change but contracts that don’t. User numbers fall, services are retired and cloud usage shifts, yet licence counts and capacity commitments stay the same.
• Little time. Once a renewal is weeks away, there is no time to run a credible alternative, so the incumbent’s offer becomes the only one.

Warning signs that your renewal needs testing

• The contract has been extended or rolled over at least once without a market test.
• The renewal quote is higher than last year and the supplier has not explained why.
• You are paying for licences, capacity or service levels you no longer use.
• Only one supplier bid last time, or the route to market was a direct award.
• Nobody in the organisation can say confidently what a fair market price would be.

If any of these apply, the proposed price has probably not been properly tested.

What good benchmarking looks like

Benchmarking isn’t about finding the cheapest supplier. It gives you an evidence-based view of fair value, so you can decide whether to renew, renegotiate or re-compete. A robust approach usually includes six steps:

1. Baseline what you actually pay. Pull together invoices, order forms, uplifts and variations to get the true annual cost, not just the headline contract value.
2. Match scope to real use. Compare contracted volumes and service levels with what the organisation uses today and expects to need over the next term.
3. Normalise for comparison. Put the incumbent’s pricing on a like-for-like basis with the market, adjusting for scope, service levels, term and risk transfer.
4. Test against real market data. Compare unit rates and total cost with current market pricing and suitable framework benchmarks.
5. Check compliant alternative routes. Identify frameworks, further competitions and other compliant routes that could deliver the requirement, and how long each would take.
6. Build the negotiating position. Turn the evidence into clear asks, target prices and a fallback plan before you talk to the incumbent.

This isn’t just about price. The NAO is clear that authorities must also weigh quality, whole-life cost and wider benefits. A good benchmark covers service performance, contract terms and exit arrangements as well as rates, because a cheaper contract with weak service or no exit route is not good value.

Timing matters more than most teams expect

The best time to benchmark is well before the renewal notice arrives. As a rough guide:

• 12 to 18 months before expiry: review current spend, usage and supplier performance, and start collecting market information.
• 9 to 12 months before expiry: complete the benchmark, agree the options and decide whether to renegotiate or re-compete.
• 6 to 9 months before expiry: negotiate from an evidenced position, or start a compliant procurement with enough time to run it properly.

Complex or business-critical services may need longer. The aim is to avoid the “very weak position” the NAO describes, where an extension is the only option left.

The Procurement Act raises the bar

Since the Procurement Act 2023 came into force in February 2025, contracting authorities have had to publish more information across the lifecycle of contracts procured under the Act. That includes notices when contracts are awarded directly or changed. More transparency means more scrutiny of decisions to extend, modify or directly award IT contracts. A documented benchmark gives you a clear, defensible record of why a price was accepted, or why it was challenged.

What could a better-tested renewal be worth?

The table below shows the annual effect of modest reductions on different levels of addressable IT spend.

These are illustrations, not forecasts. They are shown before fees and implementation costs, and actual results depend on the contract, the market and the route taken.

Across a multi-year term the numbers grow. A 5% saving on £2 million a year is £100,000 a year, or £300,000 over a three-year contract, which can be reinvested in frontline services or in modernisation work that would otherwise go unfunded.

Frequently asked questions

What is supplier benchmarking in public sector IT?
It means comparing the price, scope and terms of an existing IT contract with current market data and suitable alternatives. The goal is to find out whether the incumbent’s offer is fair value before you renew.

When should we benchmark an IT contract before renewal?
Ideally start 12 to 18 months before expiry. That leaves time to negotiate from an evidenced position or run a compliant procurement if the price isn’t competitive.

Does benchmarking mean we have to change supplier?
No. Often the result is a better-priced renewal with the same supplier. What matters is that the decision is based on evidence and that you have a credible alternative.

Are the £4 billion to £7.7 billion savings cited by the NAO guaranteed?
No. They are illustrative, government-wide estimates from the Procurement Bill impact assessment. They show the scale of the opportunity, not savings that have been achieved.