Government is failing to manage private companies that provide outsourced services and these contractors need to be more ethical when dealing with government, according to a highly critical Public Accounts Committee (PAC) report.
The report follows hearings with major suppliers Atos, Capita, G4S and Serco, and later with the Cabinet Office, Department of Health, Ministry of Defence and the Ministry of Justice.
“Government is clearly failing to manage performance across the board, and to achieve the best for citizens out of the contracts into which they have entered,” said the report.
“Government needs a far more professional and skilled approach to managing contracts and contractors, and contractors need to demonstrate the high standards of ethics expected in the conduct of public business, and be more transparent about their performance and costs.”
The report said that all four major suppliers accepted they needed to be more open and held to public account.
“They accepted that open-book contracts should be the norm. They also accepted that the NAO (National Audit Office) should have access to all the relevant information associated with contracts with the public sector. And they were content that Freedom of Information provisions should apply to public sector contracts with their companies,” said the report.
It added that the government needs to engender this approach: “Since the contractors confirmed that they would agree to these changes it appears that the barriers lie instead with government itself.”
Government spends £187bn on goods and services with third parties each year and IT products and services are a major component.
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Margaret Hodge, chair of the committee of public accounts, 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.”
Recent failures such as G4S and Serco overcharging the Ministry of Justice on their electronic tagging contracts for eight years, and G4S’s failure to supply the security guards for the London Olympics that it was contracted for have “exposed serious weaknesses in government’s capability in negotiating and managing private contracts on behalf of the taxpayer.”
Hodge also singled out the Department for Work and Pensions for particular criticism, telling journalists that, "All their programmes are on the verge of meltdown." She cited the problems with Universal Credit IT as an example.
The PAC commissioned a National Audit Office (NAO) report in November that said £6.6bn was spent by the public sector on four outsourced service providers including IT services suppliers.
In the report, The role of major contractors in the delivery of public services, the NAO revealed the UK public sector and central government spent £700m with Atos, £1.6bn with Capita, £3bn with Serco and £1.3bn with G4S. The first two are major providers of IT to the public sector.
In October the Office of Fair Trading (OFT) launched a formal investigation into the market for supplying IT and communications to the public sector. The OFT is examining whether competition in this sector could work better and the reasons why it may not be working as well as it could.
This followed a call to suppliers and buyers of IT services to the public sector to provide information about their experiences. It found that: some suppliers appear to have a large share of contracts in some areas of the sector; there are high barriers to entry and expansion, especially for smaller IT companies; and there are difficulties and high costs in switching from one supplier to another.