Strategic Suppliers Contents


Successive Governments have contracted out public services to the private sector and other third-party organisations.

Government contracts involve vast sums of public money, and have significant impacts on the lives of citizens. The Government cannot divest itself of responsibility when it contracts out the delivery of public services. Many of the companies that we have looked at rely on the public purse for a significant proportion of their revenue. Those companies need to be accountable to Parliament and taxpayers once they decide to take public money.

The Public Accounts Committee has too often seen examples of businesses which have bid for contracts in areas where their understanding of the sector is weak and their expertise is not well suited. The emergence of a small group of large companies which are expert at winning public contacts but who do not always deliver a good service is a concern.

Contracting out was originally for two reasons: to save money for taxpayers and to encourage innovation in the delivery of services. We have concluded that too often these are not being met. There is a wider public value to delivery of services than just the bottom line cost. The Social Value Act will be a test for Government about how it assesses the value of the billions of taxpayers’ money it spends on outsourcing.

Companies incentivised to bid by strong financial margins are now concerned that margins are too tight. We heard from a number of strategic suppliers that are no longer bidding for contracts where they consider margins to be too low. Most deny “low balling” where they bid low for contracts. But the money that could be made on contract variances has delivered healthy profits.

We have seen the Government’s assessments of its largest suppliers. These show how many contracts at any one point are performing badly but not so badly that termination is an option. We have chosen not to release these papers because, while much of the information is in the public domain, we are clear that revealing the Government’s rating of a business could have a severe impact on its smaller supply chain businesses and on the jobs of many workers.

We have long raised concerns about the impact on the end user of services. Contracting out has become a transactional process that too often ignores quality of service and the knock-on cost of poor service on users.

If the Government wants to demonstrate a commitment to driving up value for money in contracting it should heed this report and the work of other Parliamentary committees.

Published: 24 July 2018