Top official pushes back on 'uncompetitive' procurement claims

Chief commercial officer says PAC report implies "extending a competed contract is always poor commercial practice"
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Government’s chief commercial officer has pushed back at claims that money is being wasted because a large number of public contracts are not awarded through competitive tenders.

Insufficient competition was among a number of issues with public procurement identified in a Public Accounts Committee report last year that said government could not demonstrate value for money across billions of pounds of spending. More effective use of competition could save the public purse between £4bn and £7.7bn, the MPs said.

The report found that “around a third of the total contract value of more than £100bn awarded by major departments during 2021-22 were not subject to competition”.

But in a letter to PAC chair Dame Meg Hillier, government CCO Gareth Rhys Williams said he did not believe the estimate “fairly represents the actual position”.

He said it was a “misunderstanding” that may stem from a National Audit Office report that showed two-thirds of the £100bn worth of contracts awarded by major departments 2021-22 were subject to competition in some form.

“It is not the case that a third of major contracts awarded by major departments during 2021-22 were not subject to competition, and the actual figure is a lot lower,” Rhys Williams said.

The NAO report in question showed that when looking at the monetary value of contracts awarded that year, 34% of the £100bn figure was spent through contract extensions and just 5% was through uncompetitive direct awards.

However, when looking at the number of contracts, contract extensions accounted for just 13%, while 24% were direct awards.

“Aside from a small proportion (less than 5%) originating from direct awards, all of these contracts would have been competed at the point of initial tender. And many of them will have had commercial provisions which allow for safeguards and protections for taxpayers, for instance; pre-agreed prices for the extension period, or retaining the option to renegotiate or to re-compete on the open market,” Rhys Williams said.

“I worry therefore that the implication of extending a competed contract is always poor commercial practice; in fact it can offer real value for money. I would be as concerned as you would be if indeed we were not competing such a large volume of work; unfortunately that is the impression left with the reader of the release, and has been picked up by the press.”

While the NAO report did not suggest contract extensions were never appropriate, it did say they “may indicate missed opportunities for competition” and noted that there were “many cases of departments choosing non-compliant extension of contracts, rather than the competitive procurement process, which should be the default”.

It also said: “Government procurement guidance states that where departments have been forced into extensions through failing to plan early enough, this is a very weak position.”

Both the NAO and PAC reports raised concerns about gaps in procurement data. “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,” the PAC report said.

It said “significant issues with the quality and completeness of data on contracts” were making it harder to solve procurement issues, capitalise on value-for-money benefits and evaluate the functioning of competitive, innovative, and open markets.

And writing for CSW last year, Matthew Rees, a director at the NAO, warned: "Until the government has clearly defined the parameters for competitive procurement, and makes better use of procurement data, it will continue to spend unnecessarily at a time when departmental budgets are under pressure."

In his letter, Rhys Williams said “we are the first to concede that our data is incomplete, particularly outside of central government”.

“However, the press release fails to mention that the GCF does not currently have the regulatory rights to obtain much of the information that we all agree that we need, and consequently doesn’t have the mechanism with which to collect, store and process it,” he said.

He said the Procurement Act, which recently received royal assent, would help to “plug this gap” as it requires that contracting authorities publish that information.

“I am keen to avoid the perception by the committee or the public that this analysis is currently unavailable through lack of effort or will,” he added.

"I absolutely share your zeal for enhanced public sector efficiency and value for money. The implementation of the new Procurement Act offers us a huge opportunity to transform public procurement, and now it has received Royal Assent we have an implementation plan, with milestones, in place," he said.

"I’m pleased to say that 8,000 colleagues have already looked at the first set of the training material, and we are making good progress at briefing industry groups."

'A reasonable inference'

In a response to Rhys Williams, Hillier said she was "encouraged" by the progess described in his letter, including the training and efforts to plug data gaps, but did not agree that there was a problem with the committee's interpretation that “around a third of the total contract value of more than £100bn awarded by major departments during 2021-22 were not subject to competition”.

"I am satisfied that this was a reasonable inference based on the information available," Hillier wrote.

She cited the NAO report's finding that "63% were competed to some extent, comprising 61% of the total value", and added that both the NAO and PAC reports had been "generous in assuming that in all cases calling contracts off of a framework counts as competition".

The PAC report raised concerns about the way in which framework agreements are used, saying 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”.

In her letter to Rhys Williams, Hiller reiterated the committee's finding that the use of frameworks has soared from 20% of contracts by value in 2018-19 to 68% in 2021-22.

"I note the information in your letter about the figure for ‘non-competed’ contracts including contract extensions. This was not addressed in my committee’s report," she added.

"However, had it done so we may have pointed to the worryingly high volume of these extensions and the weakness that suggests."

Hillier said she looked forward to receiving a more detailed response to the committee's proposals through the Treasury minute process.

This article was updated at 16.12 on 31 January to include Meg Hillier's response

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