The PAC report, ‘Contracting out public services to the private sector’, urges government to introduce greater transparency in all its contracts and to “explore how the Freedom of Information (FOI) regime could be extended to cover contracts with private providers, including the scope for an FOI provision to be included in standard contract terms”.
It also calls for the creation of greater competition and less reliance on a small number of outsourcing giants to provide public services.
PAC chair Margaret Hodge (pictured above) said: “Private provision of public services has become big business, with half of all public spending on goods and services going to private providers of contracted-out services.
“We believe Government needs to urgently get its house in order so that this expenditure is properly open to public scrutiny, and that measures are put in place which will improve services and secure a better deal for the taxpayer.”
Hodge said that recent scandals involving failures by security firm G4S and Serco to deliver on their contracts “illustrate the failure of some contractors to live up to expected standards” and have “exposed serious weaknesses in the government’s ability to negotiate and manage contracts with private companies on our behalf”.
Today’s report also notes that the government has a “tendency to make managing contractors’ performance overly complicated” and calls on the Cabinet Office to provide guidance to departments on how to ensure that contractors deliver on their promises.
It recommends that departments should consider sharing savings from potential efficiencies achieved through better contract management with suppliers.
When drawing up contracts, the PAC added, departments should include a clause requiring suppliers to have whistle-blowing policies in place and nominate designated officials in departments to receive disclosures from these whistle-blowers.
The CBI, which represents 240,000 businesses, welcomed a call the greater transparency. This follows its recent call for all government contracts to be published online and audited by the National Audit Office.
CBI director general John Cridland said that “rather than relying on individual Freedom of Information requests, we think FOI should be built into contracts when they are agreed”, adding: “Businesses running public services agree that open book contracting should become the norm. The National Audit Office should also be able to audit government contracts as long as this is done in a systematic way with the triggers for inspection, like missed performance targets, agreed from the outset.”
Tom Gash, director of research at the Institute for Government, also welcomed the drive for greater transparency, adding “real efforts are now required to help rebuild public trust in the government’s ability to manage contracted services. A good first step would be to introduce standardised transparency clauses in all government contracts, ensuring providers publish details of cost, services, performance and details of any work they sub-contract to others.”
TUC general secretary Frances O’Grady said: “We strongly back the Committee’s call for more openness about private sector contractors, but the real remedy will only come when governments understand that it is just plain wrong to assume that the private sector always knows best.”
See also: CSW's recent interview with Margaret Hodge, PAC chair