PAC launched its investigation into the government’s strategic suppliers after the sudden collapse of Carillion ©REUTERS/stock.adobe.com
PAC launched its investigation into the government’s strategic suppliers after the sudden collapse of Carillion ©REUTERS/stock.adobe.com

Government outsourcing a ‘merry-go-round’ of big suppliers

The government has been criticised for allowing a “merry-go-round” procurement culture where a small number of large companies chase government contracts without considering their ability to deliver.

As part of its enquiry into how government handles strategic suppliers, a Public Accounts Committee [PAC] report has said government procurement processes did not focus enough on the quality of provision and have incentivised businesses, who thought they were “too big to fail”, to focus on winning bids.

It called on government to be “more assertive” in the way it shapes the procurement market and to focus on driving value for money.

Meg Hillier, chair of the PAC, said: “[Government] must look with fresh eyes at the motivations of companies currently bidding for central government work, and develop a strategy that requires contract-awarding bodies to look beyond bottom-line costs. Crucial to this will be to embed procurement best practice across departments.

“For example, there must be clearer specification of contracts, properly scoped, so that when any deal is signed there is an agreed understanding between government and supplier of what is being paid for, and over what timescale.”

The PAC launched its investigation into the government’s strategic suppliers after the sudden collapse of Carillion. It has taken evidence from Interserve, G4S, Serco, Sodexo, Atos and Capita.

This latest report called on government to improve its market intelligence to help it create the right incentives in its procurements and to create a “playbook” for attracting new entrants into the market.

“There are many areas in which the Cabinet Office can drive compliance across departments, not least turning its proposed ‘playbook’ of guidelines, rules and principles for contracting into a set of mandatory requirements,” said Hillier.

The report also said the Social Value Act, which was recently expanded to require central government to explicitly evaluate the social value of major procurements, would be “a test for government about how it assesses the value of the billions of taxpayers’ money it spends on outsourcing”. It said government should start enshrining the social value commitments of winning bidders into contracts and KPIs.

A Cabinet Office spokesperson said the government was “committed to building a healthy and diverse marketplace” of companies bidding for government contracts. As well as expanding the Social Value Act, the spokesperson said government was consulting on improving the Prompt Payment Code and introducing “further measures” to encourage small businesses.

“We will respond formally to this report in due course,” they said.

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