Comment Blog 28 March, 2019

The current state of outsourcing in the UK

As Chair of Parliament’s public spending watchdog, the Public Accounts Committee, I see time and time again the same issues with government procurement and contracts.

Government cannot simply absolve itself of responsibility when it contracts out the delivery of services to the private sector. These contracts involve vast sums of tax payers’ money and often deliver front line services to the public.

A recent example is the British Army’s 10-year partnership with Capita to recruit new soldiers, worth £495 million. Capita missed the Army’s annual recruitment targets every year since 2013 by quite some margin, with a shortfall that ranged from 21 per cent to 45 per cent. It turned out that the contract was overly complex and poorly implemented, with both the Army and Capita in the frame. The Army took a hands-off approach in managing its partnership with Capita and specified the contract badly in the first place. For its part, Capita took on the contract acknowledging that it was more interested in “chasing revenue” and underestimated the complexity, and the Army were far too slow to address under-performance.

Rail franchising is an area where we have seen repeated failures, with passengers bearing the brunt. The way in which the Department for Transport designed the Thameslink, Southern, Great Northern and Gatwick Express franchise meant Govia Thameslink Railway lacked the incentives to maintain performance levels for passengers. The East Coast franchise has now failed three times. With its most recent failure due to wildly inaccurate passenger growth forecast and was bought back under Government control in May 2018.

These are just a few examples among many. The Public Accounts Committee has a long-standing concern about the ability of the civil service to not only draw up contracts, but also to manage them. In the civil service commercial capability tends to be concentrated within the Cabinet Office. We have seen some improvements in commercial capability in the civil service in recent years but are concerned that the expertise and guidance is not being effectively shared more widely, both across government and the wider public sector. Government departments are still not learning from each other’s mistakes and sharing their own across Government to avoid them happening again.

Another area we are becoming increasingly concerned about is contractor failure. The Government has allowed a culture to develop in which a small number of large companies believe that they are too big to fail. The 2018 collapse of Carillion remains a stark example of this. Those running the company had convinced themselves they were too big to fail and too important to Government to be let go. With Carillion the warning signs were there but not acknowledged until crunch time when the Government chose not to step in and prop up the company.

It is against this backdrop that I welcome Reform’s new guide to procurement in the UK. It is not only timely, but a matter of high importance if tax payers are to see the value they should expect from government expenditure.