Accounts Committee Slam Government On Contracting & Procurement

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25 July 2018 | Updated 27 July 2018

A failure to ensure contractors could do what they were bidding for at the price they were bidding, its relationship with Carillion and an abject failure to encourage SMEs to engage, have seen the Public Accounts Committee slam the government over its contracting and procurement mechanisms.  

A Public Accounts Committee report issued on July 24  has found that the procurement process focused on tendering and winning bids - not ensuring right supplier.

The report also highlights further concerns regarding contract specification, transparency, use of SMEs and role of the Cabinet Office.

Chair's comments

Committee Chair, Meg Hillier MP, said: "The Public Accounts Committee has long highlighted weaknesses in government contracting and the lessons it must learn if it is to outsource effectively for the benefit of service users and taxpayers.

"The collapse of Carillion in January sharpened our focus on the relationship between Government and its Strategic Suppliers - companies that receive over £100 million in annual revenue from government contracts.

"Vast sums are invested across vital public services, with far-reaching impacts on the lives of citizens. It is critical that their money is spent wisely and with their best interests at heart."

Recommendations

Hillier continued: "This report, which follows our publication of Government’s Carillion risk assessments and new evidence taken from Government and Strategic Suppliers, makes important recommendations. In particular, we have identified a need for Government to be more assertive in shaping the markets in which it operates, with a renewed focus on driving value for taxpayers’ money.

"It 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, according to Hillier. For example she said: "There must be clearer specification of contracts, properly scoped, so that when any deal is signed there is an agreed understanding between Government and the supplier of what is being paid for, and over what timescale.

"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."

Summary of the report

• Successive Governments have contracted out public services to the private sector and other third-party organisations.

• Government contracts involve vast sums of public money, and have significant impacts on the lives of citizens. The Government cannot divest itself of responsibility when it contracts out the delivery of public services. Many of the companies the Committee looked at rely on the public purse for a significant proportion of their revenue. Those companies need to be accountable to Parliament and taxpayers once they decide to take public money.

• The Public Accounts Committee has too often seen examples of businesses which have bid for contracts in areas where their understanding of the sector is weak and their expertise is not well suited. The emergence of a small group of large companies which are expert at winning public contacts but who do not always deliver a good service is a concern.

• Contracting out was originally for two reasons - to save money for taxpayers and to encourage innovation in the delivery of services. The Committee have concluded that too often these are not being met. There is a wider public value to delivery of services than just the bottom line cost. The Social Value Act will be a test for Government about how it assesses the value of the billions of taxpayers’ money it spends on outsourcing.

• Companies incentivised to bid by strong financial margins are now concerned that margins are too tight. The Committee heard from a number of strategic suppliers that are no longer bidding for contracts where they consider margins to be too low. Most deny 'low balling' where they bid low for contracts. But the money that could be made on contract variances has delivered healthy profits.

• The Committee has seen the Government’s assessments of its largest suppliers. These show how many contracts at any one point are performing badly but not so badly that termination is an option. The Committee has chosen not to release these papers because, while much of the information is in the public domain, it is clear that revealing the Government’s rating of a business could have a severe impact on its smaller supply chain businesses and on the jobs of many workers.

• Contracting out has become a transactional process that too often ignores quality of service and the knock-on cost of poor service on users.

Monday July 23 - Official Receiver's Carillion Update

As has become the custom over the past few Mondays, the Official Receiver has given an update on employment within the Carillion group in liquidation.

A spokesperson for the Official Receiver said: “A further 65 jobs have been transferred to new suppliers over the past week, taking the total number of jobs saved to just under 13,500 positions. Regrettably, 15 people will be leaving the business as their roles are no longer required."

“I would like to thank all staff for the professionalism they have shown throughout the liquidation and we will continue to engage with staff, elected employee representatives and unions as arrangements are confirmed.”

Stats

• The 65 roles transferred to new suppliers taking the total jobs saved to 13,495 jobs (73% of the pre-liquidation workforce) and 2,422 (13%) jobs have been made redundant through the liquidation.

• A further 1,270 employees have left the business during the liquidation through finding new work, retirement or for other reasons

• This information does not include jobs attached to contracts where an intention to purchase has been entered into but has not yet formally occurred.

• Just over 1,000 employees are currently retained to enable Carillion to deliver the remaining services it is providing for public and private sector customers until decisions are taken to transfer or cease its remaining contracts.

Picture: A Public Accounts Committee report issued on July 24  has found that the procurement process focused on tendering and winning bids - not ensuring right supplier.​

Article written by Brian Shillibeer | Published 25 July 2018

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