Government 'lacks expertise' to manage complex contracts

18 July 2013

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19 July 2013 | Will Green

The Institute for Government (IfG) is calling on Whitehall to “slow down” on plans to expand markets in public services because civil servants “lack the expertise to design and manage complex contracts effectively”.

In-depth research by the think tank across a number of areas of government has revealed commissioners lack information, manipulation of contracts by suppliers, reluctance to sack underperforming providers and funding imbalances.

A report, called Making Public Service Markets Work, concluded: “The pace of the current shift towards using markets to deliver key services outstrips the ability of those in Whitehall charged with designing and implementing them.”

The report follows lord chancellor and secretary of state for justice Chris Grayling’s criticism of contract managers in his department after it was discovered tens of millions of pounds had been overpaid on offender tagging contracts.

Tom Gash, director of research at the IfG and report lead author, said: “It’s important that contracts are competed for by a number of different providers.

“The problem the Ministry of Justice faces is there are very few with experience of electronic tagging who are competing for the next round of contracts. That has lessons for other contracts.

“That something has been going on for so long, under both Labour and the coalition government, is a bit of an indictment.”

He said close monitoring of contracts and early intervention was the way to avoid problems.

“You have to develop a package that you can constantly gain information on what’s happening,” he said. “You need a relationship with the provider and constant dialogue about these things. It’s much better to resolve these things in a sensible way than to have massive headlines.”

The IfG calls for an “urgent cross-government review” to “ensure public service markets are truly competitive and not dominated by a few providers”.

It says a “competition impact assessment” should be published ahead of any outsourcing programmes worth more than £100 million, while a lead official should be put in charge of each public service market worth more than £100 million a year, to stay in post for at least three to five years.

The IfG – which says public sector markets are now worth £100 billion – also says contracts should have “full transparency” with more flexibility including performance-related break clauses.

The research covered employment services, care for older people, schools and probation services. The last concerned offender rehabilitation and not electronic tagging contracts.

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