The UK government is regularly ignoring its own procurement guidelines, set up in the wake of the collapse of Carillion, and risks a repeat of a similar scenario, according to a report.
Carillion: Two Years On, by the Institute for Government, said the government had failed to address the problems that led to Carillion’s collapse two years ago.
It warned that if the government did not implement reforms set up in the wake of the firm’s liquidation, it risked having contracts fail, with wide social and economic fallout.
When Carillion collapsed in 2018 it held more than 400 public sector contracts and while the company’s recklessness and arrogance was mainly to blame for its demise, the report said government contracting practices also bore responsibility.
“Through its contracting of both construction and services, government supported the creation of increasingly low-margin, high-risk markets,” it said.
It said that while in the 2000s suppliers may have “made off like bandits” and made excessive profits due to the commercial naivety of the government, since 2010 the pendulum had swung too far back the other way.
Many contracts had become loss-making and contractors were struggling to break even, while the government often tried to transfer all contract risks to suppliers and often failed to carry out due diligence to understand whether suppliers could even deliver contracts.
Since then there had been five enquiries into Carillion’s collapse and numerous recommendations made.
However despite attempts to bring new commercial expertise from outside government and the establishment of new guidelines, called the Outsourcing Playbook, many suppliers still complain of poor practice.
“Several departments continue to ignore aspects of the new guidance, and many have not updated their internal policies,” said the report.
“There is little evidence of improvements to the way government assesses risk and balances cost and quality. And scrutiny of departmental plans is not yet rigorous enough, meaning good practice is still dependent on individual ministers and senior officials.”
The report did praise signs of progress and the Cabinet Office had done well to improve relationships with large suppliers and roll out training.
But the reforms were patchy, far from embedded, and urgently needed political support and investment if problems with outsourced contracts were to be avoided in future.
“The new Johnson administration must commit to delivering those changes. Without continued political support, they will be forgotten amid other priorities,” it said.
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