Influential committee says taxpayers 'deserve better' from public procurement system
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The government has created a culture encouraging companies to bid for contracts at undeliverable prices, a committee has warned.
After the collapse of Carillion MPs raised concerns about the emergence of a cluster of large companies that are expert at winning public contracts – despite not always delivering good service.
The public accounts committee (PAC) claims little consideration is given to whether businesses can meet the demands of the contract at the right price.
Around £250bn of public money is spent through commercial relationships each year, but a report by PAC says the taxpayer “deserves better” than the “secretive or opaque” contracts which account for much of this spending.
“The government has created a merry-go-round procurement culture that encouraged a small number of companies to bid for contracts that they knew they would be unable to deliver for the agreed price,” it adds.
“The government has allowed a culture to develop in which a small number of large companies that believe that they are too big to fail pursued new business with little apparent consideration of their ability to deliver the right service at the right price.”
Carillion, the UK’s second largest construction company, collapsed under a debt pile of £1.5bn on January 15.
It had employed 43,000 people, including about 20,000 in the UK.
The PAC said Carillion’s collapse had “brought to a head” concerns about the government’s approach to procurement, which covers contracts on everything from medical assessments for benefits claimants to building nuclear weapons.
It said that outsourcing was carried out to save money and encourage innovation but “too often” the aims were not being met.
The committee has seen government assessments of its largest suppliers that show how many contracts at any one point are performing badly.
But it has not released the information over fears it could have a severe impact on smaller supply chain businesses.
MPs warned, however, that Whitehall’s red-amber-green rating system is not working “either as a carrot or as a stick”.
A cabinet office spokesman said a new raft of regulations introduced around public procurement was designed to build a “healthy and diverse marketplace of companies bidding for contracts”.