Government outsourcing allowed contractors such as Carillion to “spread themselves very thin”, the head of the civil service has said.
John Manzoni, permanent secretary for the Cabinet Office and chief executive of the civil service, said in the past government lacked the sophistication in procurement to award contracts to anyone but the lowest bidder.
He said: “We have allowed an era where companies have spread themselves very thin, bid low just to win contracts, and in part because we have not had the sophistication internally to do much other than go for price.”
Giving evidence to MPs on the Public Administration and Constitutional Affairs Committee, as part of their enquiry into what public sourcing lessons should be learned from the collapse of Carillion, Manzoni said that markets were now correcting this problem. “That [focus on price] has fed itself over a period which has resulted in some of the market rebalancing and market restructuring that is happening today.
“All of the household names are a part of that. They’ve all, in the last year or two, changed their management, changed their strategies.”
Also giving evidence to the committee was David Lidington, minister for the Cabinet Office, who said the government was looking to foreign companies as a way to expand the market for large government contractors.
Responding to a question on whether government was too dependent on a small number of suppliers, Lidington said: “We are examining ways in which we can seek to enlarge that market. It may not be just looking at UK-based providers, it may well involve looking at reputable providers outside the United Kingdom, but that is something that we would want to do.”
He added that government was also looking at how it incorporates qualitative social factors into contract awards, and said there might be a review of the Social Value Act.
“One of the things we’re doing post Carillion is having another look at how social factors can be taken best into account when awarding contracts, and [the Department for Digital, Culture, Media and Sport] is consulting on a new civil society strategy that may lead to a formal review of the Social Value Act.
“This is something that we are actively looking at as part of our lessons-learned process and we hoping to say something about it a bit later this year.”
Earlier this year Carillion, a major government contractor, went insolvent, leaving thousands of jobs and the provision of dozens of government services in question.
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