Government can't show value for money on billions in public procurement, MPs warn

"Significant issues" with contract data could be costing the taxpayer billions, Public Accounts Committee says
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Poor record keeping means the government is unable to demonstrate value for money across billions of taxpayer pounds of public procurement, the Public Accounts Committee has said. 

The MPs have found “significant issues with the quality and completeness of data on contracts” related to the £259bn government bodies spent procuring goods and services in 2021-22, according to a report published today.

A lack of data on contracts being awarded is making it harder for government to solve procurement issues, capitalise on value-for-money benefits and evaluate the functioning of competitive, innovative, and open markets, PAC said.

More effective use of competition in public procurement could save the public purse between £4bn and £7.7bn, according to the report.

“These savings could generate value for money benefits by potentially reducing the cost of public sector contracts, through more efficient, streamlined, and flexible procedures including pre and post tender, driving commercial excellence and improving commercial capabilities,” it said.

The report also raised concerns about the way in which framework agreements are used. These agreements – which set out an overarching set of contract terms and prices for particular goods or services – have become the “most prevalent route for public authorities to buy common goods and services”, according to the report.

However, PAC said the government commercial function has not provided sufficient guidance to address the potential risks to competitive benefits of these agreements. In particular, the MPs warned that “inappropriate use of frameworks may lead to limiting competition either by not having enough suppliers for a mini competition or too many suppliers to effectively award a contract”.

Again, they pointed to a lack of data on the number of contracts that are awarded directly through these agreements without reopening competition.

“Given the level of government spending and the increased trend to use framework agreements to get the most competitive benefit, at least administrative cost, it is imperative that government, local authorities, and arm’s-length bodies make the right decision, at the right time, and take account of the multiple opportunities to use competition in public procurement to achieve value for money,” the report says.

“However, government has not been fully capturing data on procurement, much less using the analytics from the collected data to draw insights on how competition in public procurement is operating within government and give context to purchasing decisions.”

In the report, they have urged the Cabinet Office to publish a “Framework Playbook” within six months, setting out guidance on when to use frameworks; how to manage them effectively; and how to collect data needed to assess outcomes.

The report notes that the Procurement Act, which gained royal assent in October, provides an opportunity to address some of these issues, as one of its aims is to improve the collection of public procurement data.

The act aims to create a “simpler and more flexible” commercial system; make public procurement more accessible to new entrants such as small businesses and social enterprises; and increase transparency.

However, the report warns that the government “may not have sufficiently considered the time, money, and resources” needed to provide the commercial capabilities to successfully implement the regulations.

With secondary legislation in the works, the new regulations are expected to be implemented fully by the end of 2024.

But the government commercial function does not have data on all relevant staff within contracting authorities – such as arm’s-length bodies and local authorities – that need to be upskilled on the requirements of the act, it says.

The function and the Cabinet Office have yet to set out a timeline of steps needed to ensure that the wider public sector has the commercial skills, or a plan for investment, it adds.

The MPs have asked for the two bodies to set out how they will manage the transition from the existing public contracts regulations to the new ones; as well as a learning and development plan to ensure government buyers have the commercial capabilities they need.

To address data gaps, the report calls on the Cabinet Office to set out how it will use data to evaluate competitive trends and issue guidance for government bodies on how to collect and publish data on contracts. The guidance should cover the requirements for timeliness of reporting information on the government’s contract database; the collection of data to assess outcomes; and collecting data on suppliers’ performance to inform future procurements.

This should take place within three months of the Procurement Act becoming law, and come alongside a “comprehensive report setting out a suite of measures designed to improve the publication of contract details”, PAC said.

PAC chair Dame Meg Hillier MP said the Cabinet Office must "act swiftly to dispel any continuing lack of transparency around publicly funded contracts, so that taxpayers are able to see clearly how their money is being spent and not find this hard to discover".

"Given the change-making impact that public procurement can have, the government’s approach here is disappointing. Be it in tackling climate change, reducing waste, creating new businesses, jobs and skills, or improving supplier diversity, innovation and resilience, we found no evidence that government is consistently using its purchasing power to shift the dial," she said.

"We hope with the help of the recommendations in our report the government works swiftly to successfully implement the Procurement Act to achieve far-reaching changes in the public procurement landscape.”

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