The Cabinet Office needs to “ensure its authority is better felt” in procurement by making its contracting guidelines mandatory for departments, MPs have said.
The Public Accounts Committee said that following the collapse of contractor Carillion it is crucial that government embeds procurement best practice in departments.
In a new report the committee found that current processes incentivise a focus on successful tendering, rather than ensuring the right supplier is awarded a contract.
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Carillion was the sixth largest supplier to the government until it entered liquidation on 15 January, following months of speculation that it was unable to service its debts. Its collapse prompted fierce debate about the outsourced public services market, which is dominated by a few large companies that critics say can seem “too big to fail”.
The PAC’s report follows another post-Carillion parliamentary report from the Public Administration and Constitutional Affairs Committee, which said that Cabinet Office procurement guidance is inconsistently followed and that government often attempts to push risks it does not understand onto the private sector.
It also follows assurances from Cabinet Office minister David Lidington that government will change its procurement rules so that “social value” is now included in all assessments of providers for government work.
The PAC has long criticised government’s approach to contracting, which it concluded does not often achieve its original twin goals of saving money and encouraging innovation in service delivery.
The committee’s concerns include a lack of transparency, and the emergence of large companies who are expert at bidding for contracting but do not always deliver a good service or bid for work in sectors where their expertise is not well suited.
The MPs said the Social Value Act will be a test for government on how it assesses the value of money spent of outsourcing, which it said should be about more than the bottom line.
They welcomed the Cabinet Office’s announcement that a “playbook” of guidelines, rules and principles will be issued to departments, with the aim of encouraging new suppliers to bid for government work.
But they said the “Cabinet Office lacks sufficient leverage with other departments. Departments continue to act in separate silos, failing to share information or adopt the appropriate multidisciplinary teams that combine frontline knowledge, commercial skills and project management”.
The Cabinet Office should upgrade its “playbook” and other guidance to the status of mandatory requirements, they added.
Meg Hillier, chair of the PAC and a Labour MP, said: “The collapse of Carillion in January sharpened our focus on the relationship between government and its strategic suppliers – companies that receive over £100m in annual revenue from government contracts.”
She said the committee had taken evidence from government and its strategic suppliers and made a series of recommendations, including the “need for government to be more assertive in shaping the markets in which it operates”.
There needs to be a “renewed focus on driving value for taxpayers’ money”, she said.
“[Government] 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,” Hillier added.
“Crucial to this will be to embed procurement best practice across departments. For example, there must be clearer specification of contracts, properly scoped, so that when any deal is signed there is an agreed understanding between government and supplier of what is being paid for, and over what timescale.”
The Cabinet Office can drive compliance across departments in many areas, including through its proposed “playbook” of guidelines, she said.
Among its other recommendations, the PAC called for wider use of standard contracts throughout government, and for the Cabinet Office to make the crown representative system more attractive to prospective candidates, to tackle the high staff turnover.
There was no crown representative in post covering Carillion for months before its collapse, despite the company having issued two profit warnings.
A Cabinet Office spokesperson said: "The government is committed to building a healthy and diverse marketplace of companies bidding for contracts to deliver quality public services at good value for the taxpayer.
"As such we have recently announced a wide package of new measures to further improve how we work with our vendors. This includes extending the requirements of the Social Value Act in central government to ensure all major procurements explicitly evaluate social value, as well as consulting on improvements to the prompt payment code, and further measures to encourage small businesses to win contracts.
"We will respond formally to this report in due course."