Drive to improve Whitehall commercial skills has not reached agencies, say MPs

Written by Richard Johnstone on 5 April 2017 in News

Public Accounts Committee calls for forensic audit of spending at UK Trade & Investment after concluding contractor took advantage of arm’s-length body

A government drive to improve commercial skills in the civil service must be extended to arm’s-length bodies and agencies in order to deliver procurement improvements across all of government, MPs have said.

This is the conclusion of a report by the Public Accounts Committee which examined a botched consultancy contract awarded by UK Trade & Investment to the firm PA Consulting.

MPs called for an audit of spending at the UK trade body following what they called a “sorry saga” of the contract, which was entered into in May 2014 but which collapsed in January 2015.

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Under the terms of the contract, PA Consulting was to provide UKTI with trade and investment specialists. The agency, which was then part of the Department for Business, Innovation and Skills but became part of the Department for International Trade last July, paid £18.8m for the first 11 months of services.

During this period, UKTI became concerned about the way PA Consulting had priced the contract and about the firm’s transparency in its communications with UKTI. Following a breakdown in the relationship, UKTI terminated the contract in January 2016, and a commercial settlement was reached in May 2016. This saw UKTI pay the balance of PA Consulting’s outstanding invoices, less a £3m reduction.

PAC chair Meg Hillier said that both UKTI and PA Consulting must share the blame for the failings in the procurement and operation of this contract, adding that even now the committee “cannot say with confidence that it has got to the bottom of what happened”.

She added: “This clearly leaves us with serious concerns and we urge the government to commission the National Audit Office to conduct an independent forensic audit of both UKTI and PA to fully determine what took place.”

The report said that UKTI displayed poor governance and did not keep proper records for the deal, as well as making “a simple matter as complex as possible”.

It negotiated significant changes to the contract with PA when it should have gone back to the market, according to MPs, while also pushing for a revised contract to be signed before it had finished these negotiations. All this was unfair to other bidders and left UKTI exposed to being exploited by PA Consulting.

The report highlighted that the government’s lack of commercial expertise had been a regular cause for concern for the committee across parliaments, and it had heard several times about how government is seeking to improve the commercial capability of central government departments.

“But it is worrying that these capability-building initiatives have not been extended to arm’s-length and devolved bodies like UKTI when such bodies do a large proportion of procurements carried out on behalf of the taxpayer,” MPs stated.

PA Consulting was criticised by the committee for falling “well short of the appropriate duty of care that we expect contractors to demonstrate when in receipt of taxpayers’ money”. MPs said that the firm took advantage of UKTI’s poor decision making and sold the agency a service that may not have been needed. Further, the report says that PA Consulting used the negotiations to pass on costs to UKTI that it had said in its bid that it would bear, and to increase its profit from the contract while telling UKTI that its profit had not increased.

Responding to the report, a spokeswoman for DIT said: “This contract was an isolated incident and we took swift action to resolves issues as soon as they were uncovered. Since being established in July 2016, DIT has reinforced commercial best practice across the whole department to ensure the best value for money for the taxpayer.”

A statement by PA Consulting Group said it welcomed an independent forensic review into the contracting and commercial aspects of the contract with UKTI and it was confident this will find that the firm charged in accordance with the agreed contract.

“PA won this work in open competition, in response to a government procurement  process, responding to a requirement set entirely by UKTI. UKTI acknowledges that PA over-delivered against the target outcomes, including creating or safeguarding 29,010 jobs.

“We have accepted our share of the responsibility for misunderstandings between us and our client. We have conducted a review, and assured Government that there are no other misunderstandings on existing contracts. We have taken the necessary steps to ensure that such misunderstandings will not happen again. PA has worked successfully for government for over 70 years, always seeking to act ethically, transparently, and in the best interests of our clients and UK citizens.”

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Richard Johnstone is CSW's deputy editor and tweets as @RichRJohnstone

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