By Richard Johnstone | 12 November 2013
Government action is needed to address the public’s lack of confidence in outsourcing deals, including concerns that private sector firms are making unfair profits, the National Audit Office has said today.
In two reports examining Whitehall’s use of private firms, auditors said contracting with third parties was an important part of public service delivery.
However, existing deals lacked transparency over the role of contractors in service delivery. It urged the government to work with providers to ensure taxpayers’ interests were protected.
Auditor general Amyas Morse said action was needed because outsourcing was a fast-growing and important part of delivering public services.
‘But there is a crisis of confidence at present, caused by some worrying examples of contractors not appearing to treat the public sector fairly, and of departments themselves not being on top of things,’ he added.
‘While some government departments have been admirably quick off the mark and transparent in investigating problems, there is a clear need to reset the ground rules for both contractors and their departmental customers.’
The reports come after controversy dogged a host of high-profile contracts, including those for private providers undertaking fitness for work assessments, and overcharging by providers selected to electronically tag and monitor offenders.
Central government spent £40bn in contracts with third parties in 2012/13 but the NAO said not enough information was currently provided about the performance of firms providing public services, and whether the profits they make represent a fair return.
A proper understanding of contractor profits is important to identify whether their interests are aligned with taxpayers’, but there is only ‘limited’ information about the rewards contractors make.
The spending watchdog also raised concerns about the way the outsourcing market operated, including whether tenders were competitive. It questioned whether the dominance of four major contractors – Atos, Capita, G4S and Serco – was in the public interest.
While there was praise for the ‘strong response’ shown by the Cabinet Office and Ministry of Justice in response to the overcharging found in electronic monitoring contracts with G4S and Serco, challenges remained in developing a more mature approach and greater transparency across all deals, auditors added.
Responding to the report, a Cabinet Office spokesman said the government’s commercial reforms and outsourcing saved £3.8bn last year alone.
‘We know that the civil service lacks commercial capability and that contract management needs to be improved,’ he added.
‘Our reform programme seeks to address this but we must accelerate change to save taxpayers more, create better quality public services and promote growth.’
The CBI business lobby agreed reform was critical to build up public confidence and a vibrant competitive market place.
Director general John Cridland said: ‘The NAO identifies problems on both sides which need to be put right. When businesses are working on behalf of the taxpayer the highest standards are expected of them.
‘The public has a right to know how its money is being spent and businesses must be transparent and accountable.’
