The government is wasting up to £290 million every year through a lack of contract management that is so poor it “beggars belief”, a powerful group of MPs has said.
Whitehall spends around £12 billion each year on IT, security, catering and cleaning deals, but could save significant amount of money and improve services if it managed suppliers better, the National Audit Office said.
The report, called ‘Central government’s management of service contracts’, said Whitehall’s supplier deals were not “consistently” delivering value for money.
Major problems included the “difficulties” the £37 million overspend by the Rural Payments Agency after an Accenture system failed to administer farmer subsidies properly.
Edward Leigh MP, chair of the committee of public accounts, which also audits government spending, accused the government of being “blasé” and failing to employ people with the right experience to monitor suppliers properly.
“Despite the huge amount of cash lavished on these services, government departments do not take the process anywhere near as seriously as they should,” he said. “And it beggars belief that, where the services provided are found to be wanting, government departments do not always invoke penalty payments on suppliers, even when the contract stipulates that they can do so.”
Some 37 percent of contract managers in government do not have a risk register, the NAO said, and 56 percent had no contingency plan in case of supplier failure. Over a third of contract managers fail to invoke payment deductions allowed in their contracts when suppliers underperform.
Nevertheless, the government was applying good practice in some instances, the NAO said. It highlighted good senior level engagement with suppliers, the use of price benchmarking to reduce costs, and work with suppliers to improve services and reduce costs.
A benchmarking exercise at the Home Office resulted in it saving £17 million a year on its IT contract with Fujitsu, a discount of around one fifth. And the Office of Government Commerce’s management and monitoring of IT suppliers should be extended to other suppliers, the NAO said.
The government did not immediately provide comment.
Just this week, the Department for Transport was accused of "stupendous incompetence", and one of the worst cases of project management "ever seen", for a shared services project that is expected to lose £81 million instead of saving £57 million.