Show us the money, PAC’s Hodge warns contractors

PAC chairman Hodge – ‘There is a lack of transparency and openness around government’s contracts with private providers’.

A government report into private contractors who deliver public services has suggested the government is to blame for the lack of transparency that has led to serious shortcomings in value for money for taxpayers.

“These failures have exposed serious weaknesses in the government’s ability to negotiate and manage contracts with private companies on our behalf,” public accounts committee chairman Margaret Hodge said at the release of the PAC’s report on private contractors and public spending. The report may have implications for contracts worth £1.4bn BT has signed with county councils to deliver next generation broadband.

The PAC report looked at contracts with G4S, Atos, Serco and Capita. Some, such as the G4S and Serco contracts to tag prisoners electronically, and G4S to supply security to the 2012 Olympics, have become notorious for their abuse of the spirit of partnership, in particular for over-charging.

“There is a lack of transparency and openness around government’s contracts with private providers, with ‘commercial confidentiality’ frequently invoked as an excuse to withhold information,” Hodge said.

The PAC earlier identified these traits in the BT contracts, all of which are subject to non-disclosure clauses and restrictions on speed and coverage details and financial information.

“These failures have also exposed serious weaknesses in the government’s ability to negotiate and manage contracts with private companies on our behalf,” Hodge said.

“It is vital that parliament and the public are able to follow the taxpayers’ pound to ensure value for money. So, today we are calling for three basic transparency measures:

• the extension of Freedom of Information to public contracts with private providers;
• access rights for the National Audit Office; and
• a requirement for contractors to open their books up to scrutiny by officials

“The four private contractors we met – G4S, Atos, Serco and Capita – all told us they were prepared to accept these measures. It therefore appears that the main barriers to greater transparency lie within government itself.”
Hodge said an absence of real competition had led to privately-owned public monopolies that had become “too big to fail”.

Small and medium enterprises (SMEs) had been crowded out by the complexity of the contracting process, excessive bureaucracy and high bidding costs.

Contracting had led to the evolution of privately-owned public monopolies, who largely, or in some cases wholly, relied on taxpayers’ money for their income. “The state is then constrained in finding alternatives where a big private company fails,” she said.

“We intend to return to this issue. Government is clearly failing to manage performance across the board, and to achieve the best for citizens out of the contracts into which they have entered. Government needs a far more professional and skilled approach to managing contracts and contractors, and contractors need to demonstrate the high standards of ethics expected in the conduct of public business, and be more transparent about their performance and costs,” Hodge said.
“With the government choosing to contract out more and more public services to the private sector, these issues become ever more important. This report is intended as a recipe for better services, better governance and greater openness. We hope the government will take heed of our recommendations.”