UK Trade and Investment (UKTI) has been criticised for a litany of shortcomings in its procurement practices following a probe into its dealings with a consultancy tasked with attracting inward investment and supporting exporters.
In 2014, the non-ministerial department – which sits within the Department for Business, Innovation and Skills – appointed PA Consulting to three 3-year specialist services contracts worth a combined total of £18.8m in their first 11 months alone.
But UKTI auditors subsequently raised the alarm after discovering that poorly-documented contract alterations made it “impossible” to reconcile invoices with the arrangements in place.
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The contracts were cancelled in January this year after a report commissioned by UKTI from accountancy network Baker Tilly – now RSM UK Consulting – said PA had “consistently made incorrect and misleading representations relating to £3.9 million of the overheads charged”.
According to a new review by the National Audit Office spending watchdog, payments of PA’s invoices were suspended when the issues came to light.
The NAO’s 48-page report on the affair says UKTI’s governance of the procurement was “weak” and that it failed to maintain the minimum level of documentation, leaving it “exposed to not understanding what it had agreed to”.
It added that PA Consulting had been insufficiently transparent over the procurement, and “did not make clear the amount of corporate overheads built into its price”.
NAO head Amyas Morse said the issue had only become apparent because of the tenacity of a new contract management team drafted in at UKTI.
“It is clear that, on this contract, both UKTI and PA have fallen well below the standards expected in managing public money,” he said.
"UKTI has made significant improvements to its commercial practice since then" – UKTI spokesperson
“UKTI should have been in control of the procurement and understood the pricing; PA should have been more transparent in its dealings with UKTI. There are serious lessons to be learned on both sides.”
Institute for Government programme director Dr Jo Casebourne said the case was the latest in a “growing list” of high-profile government contracting failures that would further undermine public confidence.
“The public services industry is worth approximately £90bn today, and is still growing,” she said.
“To get to grips with contracting, clear leadership and responsibility at the centre of government is needed.
“It is unacceptable for the government to make the same mistakes over and over again with taxpayers money.”
UKTI said it recognised the existence of procurement shortcomings in its team, but had taken “decisive action” to resolve the contract problems as soon as they had been identified.
“This was an isolated incident which took place over two years ago and UKTI has made significant improvements to its commercial practice since then,” it said in a statement.
“We have brought in expertise from elsewhere in government to manage commercial activities, put in place fundamental changes and expanded the commercial team, started a review of all contracts and developed bespoke training for those in UKTI working on commercial activities."
A statement from PA Consulting admitted there had been “misunderstandings on both sides” as part of the process of changing its contract with UKTI.
The firm also said it recognised it “could have explained better the pricing of the amended contract“.
“PA remains proud of the results of the work delivered as part of the contract,” the statement continued.
“PA won the contract with UKTI in an open competition and throughout the contract PA exceeded the targets, and delivered at less than the cost agreed, in the original contract. An independent review by Baker Botts, an international law firm, confirmed that PA invoiced in accordance with the contract.”