1.We and our predecessor Public Accounts Committees have reported on projects and programmes across the whole of Government and the wider public service. That work has frequently involved considering the quality and effectiveness with which private companies have delivered against public-sector contracts.
2.Successive governments have contracted out public services to large private companies. The Public Accounts Committee (PAC) has long been raising concerns about the state of Government contracting and its impact on public services.
3.The PAC’s role is to examine the efficiency, effectiveness and economy of Government spending. This is taxpayers’ money spent on public services—the citizen and user experience as well as the taxpayer is at the heart of our work. Our criticisms are not new but Carillion has sharpened thinking in Government.
4.We examine the worst failures. The House of Commons vote to release the Government’s own risk assessments of large contractors has given the Committee an inside view of how contracts are performing across the piece. We also called in several the Government’s strategic suppliers.
5.Outsourcing is at a significant crossroads. The collapse of Carillion has brought to a head concerns about Government’s approach—both from a policy and a practical perspective.
6.Government maintains that the collapse of Carillion was managed successfully and demonstrates that no company is too big to fail. But it was clear that Carillion believed until the end that it was too big to fail.
7.Government has been keen to trumpet its delivery of a contingency plan which enabled most of the public services delivered by Carillion to continue the day after it went into liquidation. But it cannot rest on its laurels. It faced a huge task assessing the contracts at risk and the detail of the supply chain. Had Carillion collapsed in December there would have been serious problems—the game of brinkmanship was a close-run thing.
8.And although Government is now developing plans to manage any future collapse, the pool of suppliers is shrinking. A contingency plan in case of failure relies on there being other suppliers who could step in if a company collapses.
9.The knock-on effects of Carillion’s collapse are yet to be fully understood. We need to be clear about the real costs to the public purse of the Government’s management of the collapse and understand the impact on Carillion’s supply chain and the SMEs it sub-contracted to.
10.The Government needs to consider how it responds to a number of its main suppliers experiencing severe financial pressure, and in the case of Carillion becoming insolvent. The market created and sustained by public sector contracts is not working—for the companies involved, for those who rely on those contracts being effectively delivered, or for the Government, which must ultimately pick up the tab.
11.Carillion plc, a major supplier to the public sector, collapsed on 15 January 2018. Nine days later the House of Commons debated and agreed a Resolution that required the Government to release confidential risk assessments of its main suppliers to this Committee. The risk assessments relate to companies with contracts across several Government departments worth more than £100 million per year, or deemed significant to a sector—designated as Strategic Suppliers by Government.
12.There are currently 27 Strategic Suppliers providing services across the public sector. The risk assessments, compiled every six weeks by Crown Representatives in the Cabinet Office, highlight significant concerns about performance against contracts; summarise financial and market information; and assign a Red-Amber-Green (RAG) risk rating.
13.The risk assessments provided to this Committee offer an assessment of each company’s financial status and performance against contracts, which are encapsulated in a Red-Amber-Green (RAG) rating, augmented by a Black ‘High Risk’ or exemplary Platinum rating. The documents are compiled by each company’s Crown Representative. The Cabinet Office considers publication of the documents could affect market confidence and harm companies.
14.We published our Report on the Government risk assessments relating to Carillion on 23 May 2018. In that Report we concluded that, as the company was no longer trading, the documents did not contain live and material commercial risks.
15.We announced our inquiry into Strategic Suppliers on 24 May 2018. We took evidence from John Collington, Baroness Ruby McGregor-Smith CBE, representatives of Interserve, G4S, Serco, Sodexo, Atos, Capita, and the Cabinet Office. We held a joint session with the Public Administration and Constitutional Affairs Committee to hear evidence from former executives from Carillion. We received written evidence from most of the Government’s current Strategic Suppliers and from other interested parties. We are grateful to all those who have assisted the Committee in this inquiry. We have drawn on this Committee’s and the National Audit Office’s (NAO) previous Reports on public-sector contracting, and recent work by Public Administration and Constitutional Affairs, Work and Pensions, and Business, Enterprise and Industrial Strategy select committees.
16.This Committee’s principal purpose is to hold Departments to account for the way that they spend taxpayers’ money. Most of our work focusses on individual projects or programmes that are of concern. We are therefore familiar with individual public-sector contracts that have run into difficulties. In this inquiry we have had the opportunity to consider the contracting landscape across the whole of Government to identify how Government departments and the Cabinet Office might improve their performance.
17.This Committee is part of the established accountability regime for Government Departments as set out in Managing Public Money. That regime requires Accounting Officers and Senior Responsible Officers to appear before the Committee. Companies that contract with Government have become increasingly familiar with being called to account for their actions in front of Parliament’s select committees. Those companies have a different relationship to Parliament and a different set of priorities and pressures to civil servants, but are ultimately funded by taxpayers and provide a public service.
1 See for the most recent list.
2 Q 718
3 The Crown Representatives are civil servants sitting in the Crown Commercial Service in the Cabinet Office. Each Strategic Supplier has a Crown Representative, who acts as their liaison with central government.
4 HC Deb, 24 January 2018, col 341.
5 Committee of Public Accounts. Forty-First Report of Session 2017–19, , HC 1045
6 Sector Director, Public Sector, Alexander Mann Solutions and former Chief Procurement Officer at the Cabinet Office
7 Former Chief Executive Officer, Mitie
8 11 June 2018: Peter Neden, Chief Executive Officer, Care and Justice Services and Public Sector, G4S, and Debbie White, CEO, Interserve; 13 June 2018: Rupert Soames, Group Chief Executive Officer, Serco, Philip Chalmers, Senior Vice President, Public Sector and Health, Atos, and Sean Haley, Regional Chair, UK and Ireland, Sodexo; 18 June 2018: Jonathan Lewis, Chief Executive Officer, Capita plc, Stephen Sharp, Executive Officer, Capita Government Services
9 John Manzoni, Chief Executive, Civil Service and Permanent Secretary, Gareth Rhys Williams, Government Chief Commercial Officer, and Coleen Andrews, Director, Markets and Suppliers, Cabinet Office
10 , HC (2017–19) 851
11 Managing public money is the UK Government handbook on the handling of public funds and sets out department’s responsibilities in respect of parliament. See HM Treasury, , July 2013 (with annexes revised as at March 2018)
Published: 24 July 2018