PAC chair Meg Hillier slams “fiasco beyond belief” over agency's lost contract paperwork

MP calls for further investigation into a contract between UKTI and a consultancy firm which was cancelled after officials raised concerns over invoicing

By Suzannah Brecknell

29 Nov 2016

The Public Accounts Committee chair has described the loss of key documents relating to a controversial UK Trade and Investments contract as a “fiasco beyond belief”, telling officials they are “insouciant” about contract failings at the former BIS agency.

Meg Hillier was speaking at a committee hearing investigating contracts with PA Consulting for specialist consultancy services, let by UK Trade and Investments in 2014. The contracts were cancelled in January this year after UKTI auditors discovered that poorly-documented contract alterations made it “impossible” to reconcile invoices with the arrangements in place. 

An external report commissioned by UKTI found PA had “consistently made incorrect and misleading representations relating to £3.9 million of the overheads charged”.

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And a subsequent National Audit Office investigation into the contract found that UKTI’s governance of the procurement was “weak” and that it had failed to maintain the minimum level of documentation, leaving it “exposed to not understanding what it had agreed to”.

The NAO also found that a negotiation process which happened immediately after the contract was signed led to an increase in revenue and profit for PA – though the company’s CEO Alan Middleton disputed this finding at the hearing.

“Most of you involved at the time have been willing to admit incompetence – and yet almost insouciantly" – Meg Hillier

After a hearing lasting nearly four hours with both current and former officials, as well as the CEO of PA consulting, Hillier said: “We’ve seen what is frankly sloppy behaviour [from PA], possibly sharp practices – [it’s] difficult to judge completely.”

Middleton maintained that he did not believe there had been a deliberate attempt to mislead UKTI. 

Rather, he argued, the team involved on PA’s side had not been clear about the fact they had decided to offset losses in one part of the programme against profits generated by reducing costs in another.

“The consultants in PA who work in the UK public sector do it because they love it, they don’t do it to rip people off,” he said.

“What they determined was they could use some of that [profit], still within the sum of the overall profit of the contract […] to deliver more on the programme side and deliver a better result. That was the intention of the team.”

Addressing the witnesses in her summing up, Hillier said: “Most of you involved at the time have been willing to admit incompetence – and yet almost insouciantly. Incompetence that has led to a loss of taxpayer money, but has not led to serious consequences for any individual as far as we can see.”

"Collective failure"

Dr Catherine Raines, director general at the Department for International Trade – which swallowed up UKTI in Theresa May's summer rejig of Whitehall – had earlier told the committee that she believed the contract troubles, pre-dating her time at UKTI, had been “a collective failure of the organisation at the time, which was naïve in its approach to commercial negotiations and contract management".

She said that no individual had been held to account, adding that: “The individuals with whom we might have wanted to share learning most directly have left the organisation.”

“We have made changes to the organisation to make sure that naivety is not carried forward,” she added.

Hillier described the loss of key documents such as the business case and contract itself as a “fiasco beyond belief which we were just completely puzzled by”.

The business case was eventually given to the NAO just a day before its report was published, MPs heard. 

Dr Matt James – who also joined UKTI after the contract had been cancelled and is now managing director of commercial at the DIT – told the committee that it was not clear whether this document, which had been "buried" in the department, was a draft or final version.

SNP committee member Philip Boswell suggested that further investigations may be needed to fully understand what happened, particularly since key individuals from PA Consulting have now left the firm and were not at the hearing.

“I am no lawyer, but I am certainly concerned enough to go on record to suggest that this committee needs to consider that this investigation be escalated to another authority or hold another session to see additional witnesses to get the answers we have not been able to get today.”

Boswell had previously asked Raines and James whether they believed the lack of documentation meant UKTI had not been able to secure a more generous settlement from PA after the contract was cancelled.

Raines said UKTI was given legal advice that they achieved “the best settlement we could hope to achieve given level of documentation”, while James said “negotiations on the settlement were made harder because we didn’t have all the documentation".

Correction: An earlier version of this story referred to an £18.8m loss, but this figure was the value of the contract and does not relate to any losses. 

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