The parliamentary Public Accounts Committee (PAC) has ordered the government to "get its house in order" with IT and other outsourcing companies, demanding that contracts should now be subject to the Freedom of Information Act, to enable greater scrutiny.
Margaret Hodge, chair of the PAC, said, "Private provision of public services has become big business, with half of all public spending on goods and services going to private providers of contracted-out services.
"We believe government needs to urgently get its house in order so that this expenditure is properly open to public scrutiny, and that measures are put in place which will improve services and secure a better deal for the taxpayer."
Hodge cited recent scandals that she said illustrated the failure of some contractors to live up to expected standards. These included G4S and Serco overcharging the Ministry of Justice on their electronic tagging contracts for eight years - including claiming for ex-offenders who had actually died - and the hash that G4S made of supplying security guards for the Olympics.
"These failures have exposed serious weaknesses in the government’s ability to negotiate and manage contracts with private companies on our behalf," said Hodge.
"There is a lack of transparency and openness around government contracts with private providers, with ‘commercial confidentiality’ frequently invoked as an excuse to withhold information," she said.
The PAC has therefore called for the extension of the Freedom of Information Act to cover public contracts with private providers, access rights for the National Audit Office, and a requirement for contractors to "open their books up to scrutiny by officials".
Hodge said outsourcers G4S, Atos, Serco and Capita had all told the PAC they would accept these measures.
Speaking on the BBC Today programme, in response to the PAC report, Cabinet Office minister Francis Maude, said, "We are turning the supertanker around but a lot of this is about change of attitude and culture and mindset, and that does take time."
Maude said the government was aiming to eventually publish the details of all outsourcing contracts.
At an "open contracting" debate at a conference last year, Maude said, "Earlier this year, we decided to publish the first reports of our Major Projects Authority, two hundred or so of them, and for most of them we published the rankings. This was very uncomfortable and we knew that we were giving a great story to the media.”
He said, “We just have to take a deep breath and go through that. The truth is, once you start being routinely transparent, a lot of the data you put out is really boring and it becomes routine. The value comes from the exploitation, the mining, the analytics, which others will do.”