By Richard Johnstone | 26 June 2014
\More than £21.2bn of public spending went on contracts to 20 large outsourcing firms in 2012 and 2013, an analysis of 38 million government transactions by the Institute for Government has found.
Credit: iStock
The examination, undertaken by the IfG’s Whitehall Monitor team, and the Spend Network, which scrutinises government data, found that large outsourcing firms Capita and Serco were among the top firms for contracts.
Publishing the provisional data, Spend Network managing director Ian Makgill said the analysis – which covered all Whitehall government departments, many central agencies and a majority of local authorities – could be used to reduce waste, create efficiencies and deliver better public services.
‘However, our research also found that the source data government provides could be improved,’ he added.
An update of the confirmed figures is expected soon.
Gavin Freeguard, who led the research for the IfG, said it reflected well on government that it was possible to produce an analysis of the amount of public spending across outsourcing contracts for the first time.
‘Nonetheless, this research shows how difficult it is to analyse who is contracted to provide our public services and what it costs,’ he said.
‘Cost is also just one part of contract transparency – government needs to be equally transparent about contract terms and the performance of suppliers funded by taxpayer money. We hope our analysis will prompt government to improve the quantity and quality of the data it shares so future analysis becomes ever-more accurate.’
According to the analysis of deals with more than 180,000 suppliers, IT providers were the biggest single sector of outsourcing, with deals across the two years worth £8.8bn. Construction companies had deals worth £4.9bn, while outsourcing firms were third with more than £2.2bn.
The analysis found that some departments rely heavily on just a few suppliers and it showed local government spent more than central government on contracting directly with small- and medium-sized firms.
However, the report concluded that greater transparency was needed to get a full picture across the public sector.
Among the changes that could improve the data was a lowering of the £25,000 threshold for publication of public sector transactions to £500. New transparency arrangements should also be put in place for outsourcing to allow for more information on contractual terms, levels of performance and sub-contracting arrangements to be made public.
Jim Bligh, head of public services at the CBI, who had previously told Public Finance that more information needed to be made public, said the government’s ability to design effective contracts depended on understanding the current composition and effectiveness of its supplier markets.
‘More spending data are available than ever before, but often government is data rich while being information poor,’ he added.
‘This report is a welcome and overdue analysis of government spending with external suppliers. It illustrates the scale and complexity of government contracting, and underscores the need to ensure government commercial capabilities are fit for purpose.’
