Contract management - time for action, talk is cheap

The recent Public Accounts Committee report on contract management made for interesting reading over the holidays with some important lessons for local government contained within it.

In launching the Committee's findings, its Chair, the Rt Hon Margaret Hodge MP, pointed to the fact that £90bn of taxpayers' money is spent each year on the private sector supplying public goods and services. She quite rightly stressed that, with this amount of public money at stake, it is vital that the highest ethical standards are practised by contractors.

Given the range of recent high profile scandals, such as massive overcharging by G4S and Serco for the Ministry of Justice electronic tagging contracts, it is no surprise that the Committee concluded that, ‘too often the ethical standards of contractors have been found wanting' and 'some suppliers have lost sight of the fact that they are delivering public services and should do so in accordance with public service standards’.

Whilst local government may think it is better at procurement than central government departments, I can think of numerous similar examples which have occurred in council outsourced contracts in recent times and therefore the report's recommendations are well worth reading.

The report calls for a much greater emphasis on contract management, investment in training, financial monitoring of cost and profit and a greater transparency in performance information. It also calls for a contractor’s duty of care to the taxpayer to be developed by the Cabinet Office. A third finding is that a much more robust management of public service markets is needed in terms of intervening where consolidation is taking place and enforcing sanctions when under-performance occurs. Past performance should also be considered when awarding contracts. The final point is the need to rebalance contracting in favour of the taxpayer with greater openness and transparency around cost and profit information.

These findings chime with much current thinking in local government around ensuring value for money from every penny spent. Building and retaining core capacity is also important – one of the most powerful mechanisms for encouraging compliance is the threat of insourcing the service, as many authorities have successfully done in recent years.

Perhaps the loudest message for contractors within the sector, however, is that talk of corporate renewal is cheap, but it will be their actions in responding to the many legitimate criticisms within the Public Accounts Committee's findings that determine whether their reputations improve over the coming years.