Cabinet Office Minister Francis Maude has announced that going forward no IT contract will be allowed to be worth over ￡100 million in value - unless there is an exceptional reason to do so.
A number of "red lines" for IT contracts have been published for departments to follow, in a bid to increase competition in the sector and free departments from longstanding inflexible contracts with IT providers.
The announcement follows a string of procurement reforms introduced by the Cabinet Office that aim to squeeze out the 'oligopoly of suppliers' that have dominated central government IT in recent years, following a series of high profile failures.
It is hoped that departments will begin to work with more SMEs and reduce costs as a result.
Some recent reforms include a commitment to introduce fewer frameworks going forward (with three being cancelled as a result) and the introduction of more agile, competitive frameworks, such as the G-Cloud and the Digital Services framework.
Both these frameworks have a high number of companies signed up that have never done business with government before, as well as a high proportion of SMEs listed.
The Cabinet Office also created the Crown Commercial Service, which will be responsible for all common departmental spend, and aims to restore the government's poor track record of negotiating good value for money deals for departments.
"Big IT and big failure have stalked government for too long; that is why this government is radically rethinking the way it does business," said Maude.
"We are creating a more competitive and open market for technology that opens up opportunity for big and small firms. These red lines will ensure the government gets the best technology at the best price and we will be unashamedly militant about enforcing them to provide value for hard-working taxpayers."
The other "red lines" published include:
Companies with a contract for service provision will not be allowed to provide system integration in the same part of government
There will be no automatic contract extensions; the government won't extend existing contracts unless there is a compelling case
New hosting contracts will not last for more than two years
The Office of Fair Trading is also conducting an investigation into the supply of ICT goods and services to the public sector and is engaging with IT suppliers, central and local government and other public sector organisations, trade bodies, academics and business organisations.
The government has said that "smarter purchasing" delivered savings of ￡3.8 billion in 2012 to 2013 and a drive to digitise services has saved a further ￡500 million.
Liam Maxwell, the government's CTO, said: "To create the efficient and responsive services that the public demands, government must have access to the most innovative, most cost-effective digital solutions.
"That means going to the widest range of suppliers, and giving ourselves every opportunity to renegotiate and reassess contacts. It rarely makes sense to simply extend a contract based on yesterday's technology and prices and these red lines make clear that we are doing business in a different way."
(Derek du Preez)