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Whitehall not permitted access to two thirds of outsourcing contracts – report Whitehall not permitted access to two thirds of outsourcing contracts – report
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More than two thirds of contracts held by outsourcing firms are not being scrutinised properly by the government, the public spending watchdog has found.More than two thirds of contracts held by outsourcing firms are not being scrutinised properly by the government, the public spending watchdog has found.
The National Audit Office examined £35bn worth of public contracts held by private firms and found that just 31% allowed profit margins to be scrutinised by Whitehall.The National Audit Office examined £35bn worth of public contracts held by private firms and found that just 31% allowed profit margins to be scrutinised by Whitehall.
The move comes in the wake of a series of difficult contracts that have highlighted the government’s difficulties in managing complex outsourcing deals.The move comes in the wake of a series of difficult contracts that have highlighted the government’s difficulties in managing complex outsourcing deals.
Rows over contracts such as the West Coast railway franchise to the referral of G4S and Serco to the Serious Fraud Office for alleged overcharging on electronic monitoring contracts has increased calls for further scrutiny of relationships between suppliers and government. Rows over contracts such as the west coast railway franchise and the referral of G4S and Serco to the Serious Fraud Office for alleged overcharging on electronic monitoring contracts have led to increased calls for further scrutiny of relationships between suppliers and government.
For the purposes of the report, auditors focused on whether government departments had introduced the principles of “open-book accounting” which is meant to open up the books to greater scrutiny. For the purposes of the report, auditors focused on whether government departments had introduced the principles of “open-book accounting”, which is meant to open up the books to greater scrutiny.
They concluded that far from opening up the books, civil servants are continuing to try to monitor contracts from Whitehall instead of going into the field and trying to understand their suppliers and promote value for money.They concluded that far from opening up the books, civil servants are continuing to try to monitor contracts from Whitehall instead of going into the field and trying to understand their suppliers and promote value for money.
A survey of government contracts worth more than £1m was conducted by auditors, the report said.A survey of government contracts worth more than £1m was conducted by auditors, the report said.
They found that 31% of contracts have a clause allowing government to receive data giving access to information on profit margins. They found that 31% of contracts have a clause allowing the government to receive data giving access to information on profit margins.
This estimate includes the Ministry of Defence, which has used open-book accounting for much longer than the rest of government. Excluding the Ministry of Defence reduces the overall figure to 23%, the report said. This estimate includes the Ministry of Defence, which has used open-book accounting for much longer than the rest of the government. Excluding the MoD reduces the overall figure to 23%, the report said.
Exactly half of contracts worth more than £50m, excluding contracts with the MoD, allow scrutiny of profit margins, the report found.Exactly half of contracts worth more than £50m, excluding contracts with the MoD, allow scrutiny of profit margins, the report found.
Meg Hillier, the chair of the public accounts committee, said that it was surprising that the government does not have access to profit information on 31% of public sector contracts. Meg Hillier, the chair of the public accounts committee, said it was surprising that the government did not have access to profit information on 31% of public-sector contracts.
“The fact that in most cases the government does not know how much profit is being made by outsourced companies from public services suggests government needs to move forward its thinking on this,” she said.“The fact that in most cases the government does not know how much profit is being made by outsourced companies from public services suggests government needs to move forward its thinking on this,” she said.
Amyas Morse, the head of the National Audit Office, said: “Contract management is not a desk job. For government to be accountable for contracted-out public services; for it to understand its suppliers; for it to exercise oversight; and for it to promote value for money, it requires its contract managers to take a ‘hands-on’ approach and go to see for themselves what their suppliers are doing.” Amyas Morse, the head of the National Audit Office, said: “Contract management is not a desk job. For government to be accountable for contracted-out public services; for it to understand its suppliers; for it to exercise oversight; and for it to promote value for money, it requires its contract managers to take a hands-on approach and go to see for themselves what their suppliers are doing.”
In April, the Financial Times disclosed that the Cabinet Office has been accused of trying to gag outsourcing firms which hope to share information about government contracts.In April, the Financial Times disclosed that the Cabinet Office has been accused of trying to gag outsourcing firms which hope to share information about government contracts.
Bill Crothers, chief commercial officer at the Cabinet Office, sent a letter to major government suppliers which aimed to set up government departments as a “single point of contact” for information. Bill Crothers, the chief commercial officer at the Cabinet Office, sent a letter to major government suppliers which aimed to set up government departments as a “single point of contact” for information.
A Cabinet Office spokesperson welcomed the NAO report and said it is trying to develop further means of opening up its books to scrutiny. A Cabinet Office spokesperson welcomed the NAO report and said it was trying to develop further means of opening up its books to scrutiny.
“The Cabinet Office is developing open-book guidance to support and share expertise with departments through the Crown Commercial Service,” she said.“The Cabinet Office is developing open-book guidance to support and share expertise with departments through the Crown Commercial Service,” she said.