Government buyers "too cosy" with IT suppliers

IT suppliers are not being penalised for under-performing

Government contract managers have been accused by MPs of getting "too cosy" with companies involved in £12bn-worth of IT and facilities service contracts.

A Commons Public Accounts Committee (PAC) report has accused managers of raking in an estimated £240m for overseeing contracts while making limited use of financial incentives to encourage improved performance, not testing the value for money of new services provided, and failing to enforce financial penalties when suppliers under-performed.

PAC chairman Edward Leigh said it was "a disturbing finding that, where services being supplied are sub-standard, nearly 40 per cent of departmental contract managers choose not to apply financial penalties to the supplier - even though they are entitled to do so".

No explanation was offered for the willingness of senior civil servants to allow suppliers to get away with under-performance, except a claim by Whitehall buying agency the Office of Government Commerce (OGC) that it was not surprising managers did not always apply fines, and a denial of the "too cosy" charge, because where officials were working closely with suppliers to improve performance, applying penalties would not be helpful.

But the OGC admitted there were cases when suppliers should have been penalised.

The committee ordered departments to apply financial penalties when contracts entitle them to do so "unless there are very exceptional circumstances why they should not" and demanded guidance from the OGC as to what constitutes exceptional circumstances.

"The expectation should be that the value for money of ongoing services provided under major service contracts should be tested at least every three years. All significant changes to major service contracts should be tested as a matter of course," said the PAC report.

Leigh criticised central government organisations for failing to routinely check the value for money offered by service contracts and warned: "As the pressures on public finances increase to ever higher levels, it cannot be countenanced that opportunities for saving money are being missed in this way."

Leigh said the late marking of SATS tests and prolonged delays paying Education Maintenance Allowance to cash-strapped sixth-form students showed the serious effect that blunders in outsourcing services can have on ordinary citizens.

The criticism followed a National Audit Office report that estimated up to £300m a year could be saved by better contract management.