The Public Administration Select Committee (PASC) has said the government must take small IT suppliers more seriously, after its reliance on an 'oligopoly' of large vendors created a "recipe for rip-offs".
The government was frequently overpaying for technology and related services, a situation worsened by the fact it had failed to nurture in-house IT skills, the committee noted.
"Too often" poor IT procurement excluded smaller suppliers and resulted in "late, over budget IT systems that are not fit for purpose", it said. Several supplier sources told the committee, in the course of its investigation, that the government often paid as much as ten times the going commercial rate for its work.
An "obscene" amount of taxpayers' cash was being wasted, it said, with the Cabinet Office paying £3,664 per PC.
Bernard Jenkin, chair of the committee, said some witnesses even "described the situation as a cartel".
The government needed to take four steps to break the dominance of the leading suppliers, the PASC said. Firstly, it needed to improve the information it holds on IT expenditure, without which it is "unable to secure the best possible price".
The government also needed to publish more information about its IT projects, including costs and how systems are run. The aim would be to allow external experts to challenge what is being done.
The size of the government's contracts must be reduced, the committee said, alongside taking steps to simplify the procurement process in order engage with smaller businesses. Finally, the government needed to work in a more "agile" manner, taking on more iterative development methods that enable IT programmes to adapt to ever-changing circumstances.
"To address these challenges successfully the government needs to possess the necessary skills and knowledge in-house, to manage suppliers and understand the potential IT has to transform the services it delivers," said Jenkins.
"Currently the outsourcing of the government's whole IT service means that many civil service staff, along with their knowledge, skills, networks and infrastructure have been transferred to suppliers. The government needs to rebuild this capacity urgently."
While the government had set out to reform how it uses IT, this was "like many before it", the committee said. While it was "greatly encouraged" by the plans, it said it "will need to wait and see" what the effects are.