Savings wasted by poor government contract management

27 April 2009

28 April 2009 | Jake Kanter

Central government buyers risk becoming too "cosy" with suppliers and are not directing enough attention to the management of services contracts, according to a new report by the Public Accounts Committee (PAC).

The group of MPs said public sector purchasers are placing more emphasis on agreeing deals than on managing them after they are signed.

Performance measures for suppliers were not included in every major services contract, the central government's management of service contracts report said.

The findings follow a review by the National Audit Office (NAO) last year that estimated the government could save up to £290 million through better management of the deals (Web news, 24 December 2008).

The PAC did not give an updated figure of the cost of the problem but laid out recommendations for government departments and the OGC.

In 2007-2008, central government departments spent more than £12 billion on services contracts, such as facilities management and business process outsourcing.

The PAC report said departments had failed to enforce financial penalties on under-performing vendors in some cases, meaning there was a risk that relationships were too cosy.

It added that central government buyers did not "routinely test" if deals were delivering value for money and no department rated their resources for contract management as "good" in the NAO report.

Edward Leigh, chairman of the PAC, said: "As the pressures on public finances increase to ever higher levels, it cannot be countenanced that opportunities for saving money are being missed in this way."

The committee advised departments to assign specialised contract managers to major projects and adopt and update supplier performance measures. It also said the OGC should issue better guidance on contract management.

A spokesman for the OGC said: "Every effort must be made to achieve the best results from these contracts, and to support this goal we have updated existing guidance and developed new tools."

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