The case of G4S and Serco overcharging the Ministry of Justice (MoJ) by tens of millions of pounds on electronic tagging contracts was “not isolated”, according to the Public Accounts Committee (PAC).
In a report released today, MPs hint at endemic mismanagement of the £90 billion worth of public services delivered by the private sector, which accounts for half of all public expenditure on goods and services.
The committee concluded problems with contracting services such as ICT in Whitehall are “widespread, long-standing and rooted in the culture of the civil service”.
The report welcomed existing initiatives to improve contracting, but warned “there is a long way to go” before the government can claim to be achieving value for money from its contracts. The current approach “gives too much advantage to contractors”, PAC chair Margaret Hodge MP (pictured) warned.
She said: “Departments have taken their eye off the ball and placed too much trust in contractors and relied too much on the information contractors supply.
“Contracts need to be managed at a sufficiently senior level, with strong accountability in place, by people with the right commercial expertise. Government must guard against quasi-monopoly suppliers becoming too important to fail, and encourage competition.”
Open book accounting
The PAC made a number of recommendations to enable government to avoid contract management issues in future.
It called for improved transparency, for example by publishing all service contracts and requiring open book provisions so that the government can see suppliers’ accounts.
All Whitehall contracts should set and regularly review performance targets and have “robust” sanctions for underperformance, the report added.
Accounting officers should remain responsible for spending throughout the lifetime of a contract, scrutinising cost, progress and performance and applying sanctions and rewards, it said.
The civil service needs to improve its commercial nous and commercial careers needs to be more attractive in terms of pay, status and career development, according to the PAC.
In addition, to help avoid over-reliance on a small number of firms in specific public markets, the Cabinet Office should review barriers to SMEs and develop a plan to address each one, the MPs said.
The Cabinet Office told the committee it has increased the amount of business Whitehall does with SMEs by £1.5 billion or 20 percent since 2010. However it did not provide figures or data when asked by ComputerworldUK.
The government aims for 25 percent of its spending to go to SMEs by 2015 but has not published a regular, annual report on progress since August 2013.
A Cabinet Office spokesperson said: "Despite our excellent progress over the past four years, we have long argued that there is more to do, including to strengthen transparency further and support SMEs. Public service providers should act with integrity and our action over the past year shows how seriously we take breaches of those high standards.”
Last year the government discovered Serco and G4S had overcharged the MoJ by “tens of millions of pounds” for electronic tags for people who had returned to prison, moved abroad or even died.
The Serious Fraud Office is currently conducting a criminal investigation into both firms. Together, they have repaid over £133 million in compensation to the government for the scandal.
The PAC described the case as a “belated wake-up call” and a “stark illustration” of the government’s failure to safeguard taxpayers’ money and contractors’ failure to work in the public interest.
Matthew Fell, competitive markets director at the CBI, said that the government had suffered by focusing too much on the lowest cost deals over those providing best value for money.
He said: “The government is working hard to become a better customer, but turning this supertanker around is slow. It needs to be clearer on the outcomes it wants to achieve and attract people with the right commercial skills to manage markets effectively.
He added that businesses need to do “more to win the trust of government and the broader public” and must work to strengthen transparency.