Whitehall slammed for poor IT contract management

National Audit Office says savings of £290m were easy to achieve, but failed to materialise

Poor contract management sees savings slip away

Government departments have been rapped for failing to deliver savings of up to 2.5 per cent through managing contracts for services, such as IT, according to a National Audit Office (NAO) report.

Between £160m and £290m in savings could be generated on £12bn worth of service contracts covering 16 departments, 16 executive agencies and quangos and one special health authority examined by the NAO.

Nearly all the organisations surveyed believed that improvements could be made in quality and quantity.

Public Accounts Committee chairman Edward Leigh argued that the findings prove that government departments do not treat contract management with sufficient importance.

"It beggars belief that, where the services provided are found to be wanting, government departments do not always invoke penalty payments on suppliers, even when the contract stipulates that they can do so," he said.

Tory shadow Treasury chief secretary Philip Hammond said the report reveals that the government "could make large savings by better managing its contracts for services such as IT", describing it as "yet more evidence of government procurement being badly managed and millions of pounds of public money going to waste as a result".

Services surveyed ranged from IT to facilities management and cleaning. The NAO's conclusions were reached following workshops with some of those involved, including BT Group, Fujitsu Services, Intellect, Logica, Northgate Information Solutions, Oracle Corporation and Tata Consultancy Services.

Among anecdotal evidence included in the report was the disclosure that Home Office officials saved £17m a year, about 20 per cent, on a contract with Fujitsu simply by benchmarking the service against market prices.

And in a stable door exercise, the Driving Standards Agency is reviewing risk management within its datacentre following the loss of a hard drive containing personal information.

The report also noted that the bulk of contract managers had no professional qualifications.

Over a third let suppliers get away with under performance by failing to impose penalties provided for in contracts, many claiming to fear damaging their relationships with suppliers.

A large proportion were also unable or unwilling to conduct benchmarking or market testing exercises to ensure they were getting value for money.