Government procurement suffering ‘crisis of confidence’

Gurjit Degun
12 November 2013

There is a “crisis of confidence” in procurement in the UK government, with contractors not appearing to treat the public sector fairly.

That’s according to two reports on public services contracts from the National Audit Office (NAO), calling on the government and its private sector suppliers to work together more effectively.

The NAO said there is a lack of transparency over the role suppliers play, the business they do, the rewards they earn and their performnce.

In The role of major contractors in the delivery of public services, the NAO raised questions about the way public service markets operate. This included whether contracts are “sufficiently competitive” and whether the rise of a few major contractors is in the public interest.

The report also questioned whether contractors’ profits reflect a fair return. “Transparency over rewards that contractors make is at present limited,” the study said.

The question of whether contractors’ services are to the high standards expected was also examined. “In particular, government needs to ensure that large companies with sprawling structures are not paying ‘lip-service’ to control and that they have the right culture and control environment across their group,” the study noted.

The NAO called for transparency over contractors’ performance and contractual entitlement to information, audit and inspection. It added that firms should be penalised financially or barred from future competition.

“We therefore welcome the strong response by the Cabinet Office and Ministry of Justice once contracting issues were uncovered with the electronic monitoring contract,” the NAO said.

In the Managing government suppliers memorandum, the NAO welcomed the Cabinet Office’s move to assert the government’s position with contractors because it has helped it get “greater value from contracting and has sent signals that government is willing to be tough on underperformance”.

But it found the government still faces a number of challenges in developing a “more mature” approach. It said the Cabinet Office’s current focus on short-term savings has helped it report significant savings from contract renegotiations. “However, this approach will become harder over time, and risks missing out on achieving longer-term value for money through innovation and investment,” the research added.

With regard to the Crown Commercial Service, the NAO said there is a risk that the Cabinet Office does not currently have the right resources in place. “[The Cabinet Office] has gaps in commercial experience and expertise below senior levels, while its information on its 40 strategic suppliers is inconsistent and incomplete,” the report said.

Amyas Morse, head of the NAO, said: “Contracting with private sector providers is a fast-growing and important part of delivering public services. But there is a crisis of confidence at present, caused by some worrying examples of contractors not appearing to treat the public sector fairly, and of departments themselves not being on top of things.

“While some government departments have been admirably quick off the mark and transparent in investigating problems, there is a clear need to reset the ground rules for both contractors and their departmental customers.”

Chair of the Public Accounts Committee Margaret Hodge, who asked the NAO to carry out the research, added: “It is the government’s policy to outsource delivery of public services, but what it cannot do is outsource responsibility. Departments have a duty to ensure that the taxpayer is not being ripped off and that people, not profit, remain at the heart of our public services.”

In response to the reports, CBI director-general John Cridland said: “The government needs to raise its game to be an intelligent customer. It needs to get better at managing procurement, contract performance and supplier relationships. And when things go wrong it must work with suppliers to tackle the problem head on.”

A Cabinet Office spokesperson said: “Like previous governments we do not take a dogmatic view that the state is always the best provider for services. We are looking beyond the stark choice between in-house provision and full-scale privatisation by supporting other models, including mutuals and the voluntary sector. One example is our recent announcement of a joint venture to deliver shared services which will ensure taxpayers share in any success.

“We know that the civil service lacks commercial capability and that contract management needs to be improved. Our reform programme seeks to address this but we must accelerate change to save tax payers more, create better quality public services and promote growth.”

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