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In 2007-08, the government signed service contracts for computers, cleaning, catering and security worth £12 billion, and spent £240 million on managing those contracts

Commenting on the publication of the Commons public accounts committee report on the government’s management of service contracts, South Norfolk MP Richard Bacon, a member of the committee, said: “Last year, the government spent nearly a quarter of a billion pounds on managing contracts for services such as computers, security, cleaning and catering.”

“Sadly, the moment the ink on the contracts was dry, the government appears to have lost interest in doing the job properly.”

“This report reveals a litany of cut corners and complacency.  Some 41 per cent of contract managers did not check to see if new services were providing taxpayers with value for money, while over half the contracts did not have a ‘Plan B’ in case of supplier failure.” 

“A good contract should include both sticks and carrots in order to encourage suppliers to improve their game, but only a third of contracts had the ‘carrot’ of financial incentives and 38 per cent of contract managers failed to use the ‘stick’ of financial penalties.” 

“Taxpayers do not expect the government to give under-performing suppliers a free ride at their expense, especially not in the current economic climate.  If the government is serious about cutting back waste, then it needs to wake up and start paying attention to the proper management of service contracts.”

Mr Bacon was speaking as the Commons public accounts committee published its report on the government’s management of service contracts.  In 2007-08 the government spent £12 billion, primarily in the areas of IT and communications, facilities management and business process outsourcing and an estimated £240 million on managing these contracts.

The report finds that 41 per cent of contract managers had not tested the value for money of new services purchased under an existing contract.  There was no documented plan for managing 28 per cent of contracts and 56 per cent of contracts did not have a contingency plan in case of supplier failure. 

The report also finds good contract management should include financial incentives to encourage suppliers to improve performance.  However, over a third of contracts surveyed by the National Audit Office had no provision for such incentives and that 38 per cent of contract managers do not always apply financial penalties where suppliers under-performed.   

28 April 2009

See also:::
NAO REPORT: Sustainable procurement

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