Bad government procurement means ‘Carillion could happen again’, MPs warn

The UK government forces contractors to take on unacceptable levels of financial risk while spending as little money as possible itself, a committee of MPs has found.

The Public Administration and Constitutional Affairs Committee said the government had a "damaging" approach to outsourcing, made worse by the fact that the information government uses to inform the process can be "either incomplete or simply incorrect", reports Construction Manager.

The committee’s report also found that the government has had to renegotiate over £120m of contracts since the start of 2016 to ensure public services would continue.

And the committee claimed the government was unable to provide significant evidence for the basic assertion behind outsourcing that it provides better services for less money or a rationale for why or how it decides to outsource a service.

And it added: "This was especially true for PFI. Shockingly, the government admitted to the Committee that the ‘entire [PFI] structure is to keep the debt off the balance sheet’."

Chair of PACAC, Sir Bernard Jenkin said: "It is staggering that the government has attempted to push risks that it does not understand onto contractors, and has so misunderstood its costs.

"It has accepted bids below what it costs to provide the service, so that the contract has had to be renegotiated.

"The Carillion crisis itself was well-managed, but it could happen again unless lessons are learned about risk and contract management and the strengths and weaknesses of the sector.

"Public trust requires that outsourcing better reflects public service values. The government must use this moment as an opportunity to learn how to effectively manage its contracts and relationship with the market."

Image from Carillion

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  1. We need to re-nationalise all public services. energy production and supply, transport systems and production and supply of all essential products and services. We also need to recoup all the costs of rebuilding our communities, from the greedy capitalists and their pet politicians who have systematically detroyed our country since 1979.

  2. Contractors go bust all the time and I was working for one of them when it did. This typically happens when they “buy work”: ie when they put in a low price to win the Project to maintain cash flow

  3. There should be no surprise at the comments made in the article. Successive Governments and Local Authorities have consistently promoted and followed a “Lowest Price Wins” procurement process. This approach being at odds with the “Best Value” approach advocated by the Construction Industry.

    A Best Value approach includes a realistic apportionment of risk – that being the risk is assigned to the party best placed and most capable of managing it. The Government (as others) should always remember that whilst the responsibility for a risk can be passed onto another party, the act of doing so is no guarantee that the Government will be protected from the negative effects of the risk becoming reality.

    Unfortunately, for matters to improve, there would need to be a complete overhaul of the Government led procurement system; and the instructions and advice issued to Local Authorities – with the best will in the world, this will simply not happen, at least not in the short / medium term.

    The Government can; and should, consistently promote “Best Value” procurement. In doing so it should also ensure that all parties are aware of what constitutes Best Value on a project by project; programme by programme basis. If this approach is followed, it could become the catalyst for Government and Local Authority projects achieving the “win-win” scenario advocated so well so many years ago.

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