Will someone think of the taxpayer? UK.gov needs to stop burning billions on shoddy procurement, says Reform

Growth or Real Cost?

My experience of government procurement (infrastructure projects) is that gov has a strategy of negotiating a requirement that's less than what's required so that the cost fits into the budget. Once the contract is awarded there follows an almost continuous struggle between gov and supplier as the gov fights to grow scope to meet the real requirement and the supplier fights to get paid for it. In the gov accounts this will show as cost growth against the original budget, but in reality it's the true cost of delivering the real requirement plus the cost of running a very inefficient project. It would be interesting to know how many of these £billions is not really waste, but the real cost of procurements if they had been fully specced in the first place

Government has lost the capability to commission outsourced contracts

Of the £292 billion the UK government spends each year to purchase goods, services and labour from the private sector, about £57 billion goes to privately-owned entities specialising in outsourced public services – an amount which is only set to rise in the coming years, as more and more public service provision work is outsourced by this, and successor governments.

However, there is a question mark over the ability of central government departments to commission and oversee the proper functioning of outsourced service provision contracts to the satisfaction of external auditors, not least, because they simply do not have adequate numbers of suitably qualified and experienced staff on their payroll.

Asked by the Chair of the Public Administration and Constitutional Affairs Committee, Bernard Jenkin on what confidence Parliament can have in government making rational decisions, based upon evidence about whether to outsource or not, the then Comptroller and Auditor General Sir Amyas Morse* gave this astonishing reply:

“….. I think there are a lot of areas where Government does not have the capacity to do anything else but outsource. The Government are not set up to deliver all these contracts themselves, and that has been the case for a number of years. Therefore, the capacity, the volume of resource they would have to have internally to do this work, is not there, and has not been there for some time. Not only that, but in many parts of government, the capability of even acting as a prime contractor is not necessarily there. That is not a fault. It has been a choice that parts of government have made over time.”

Sir Amyas Morse, who has just completed 10 years as C&AG, has had a ringside view of the inner workings of government and is therefore extremely well-positioned to comment on the outsourcing experiment.

One of the reasons for this almost non-existent capability in Whitehall is that public servants who used to perform these tasks have ended up on the payroll of outsourced public service providers in the private sector, via the ‘revolving door’.

This is because the Business Model of early pioneers of outsourcing was predicated upon the belief that there will always be a willing and limitless supply of people coming over from the state sector to execute the contracted work, without requiring any investment to be made in conversion training, as they were already accomplished in the job in the public sector. Of course, this was true during the early days of privatisation, but it is no longer valid now, with the source of cheap and ready labour having all but dried up – which would explain why outsourcing contractors’ businesses are in such big trouble.

This mass influx into the private sector would also explain why staff on outsourcing contractors’ payroll today is made-up entirely of people who were previously in the pay of the State. Which begs the question, what are the tens of thousands of people currently in Whitehall doing?

But the real tragedy about this outsourcing experiment is that people who were previously in the pay of the State have replicated the same failure in the private sector, as recent examples have all too clearly demonstrated.

At this point, it is as well to reflect upon the reasons why the government went down the road of outsourcing public services in the first place – because, people in the pay of the State who were charged with doing this job had, for many decades, failed abysmally to show any improvement in their performance, notwithstanding persistent demands from the governing elite, of all political persuasions.

@JagPatel3

* See answer to Q496, oral evidence from Sir Amyas Morse before the Public Administration and Constitutional Affairs Committee, Inquiry into Sourcing public services: lessons to be learned from the collapse of Carillion, HC 748, 24 April 2018 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-administration-and-constitutional-affairs-committee/sourcing-public-services-lessons-to-be-learned-from-the-collapse-of-carillion/oral/82098.html

Nice try sisters and brothers, but...

Sorry, but this will not work. The real problem is that departmental procurement policies are hopelessly outdated and unworkable. The more you threaten sanctions, the more the droids follow those policies to the letter. For example a certain large government organization I worked in had an IT procurement policy over ten years old and half the approved companies on it didn't even exist any more.

Getting the policy updated must in turn follow a vast and labyrinthine review process, consume huge resources in its own right and take years to work through, there are never sufficient resources or priority to do so and even if it were done the outcome would be out of date before it was signed off. The fact that the No.1 approved company also wrote the unworkable review procedure, effectively locking itself in place, is not taken into account. Even exhortations and threats from the Cabinet Office cannot open anything up, all they can do is rearrange a few tower contracts deckchairs.

There is in theory a very simple way out: a legally binding diktat from the top to abandon all Departmental IT procurement policies and follow a single centrally-maintained one.

Of course, in practice the drafting of that new policy will be put out to tender under an existing policy....

An independent watchdog capable of imposing fines

on independent watchdogs capable of imposing fines

"create a regulator with teeth and deeper pockets" - It's only taken circa 30 years...

Until circa 1989 the CCTA had teeth with respect to IT procurement. M.Thatcher and her advisors decided it was preventing the operation of (their idea of) a free market and removed its teeth; the rest is history...

Ha

The gov is throwing your money away, so they should throw some at me. Good sales pitch.

However a simpler solution would be the gov getting less of our money. Force it to shrink to more manageable levels.

Nonsense. Cutting income tax and VAT would focus the 'minds' of govt. depts.

Creation of a regulator for this is an excellent idea. What are the odds that responsibility for running it will get outsourced to Capita? Place your bets now.

The real cost?

"...a 20 per cent increase on predicted costs"

"...a 50 per cent increase on original cost estimates"

"Ofpro would cost between £30m and £90m a year...the think tank estimated"

So, how much would Ofpro really cost?

"We're spending too much money!"

"Spend money on a new quango to counter it!"

Typical government.

I recommend Ronald Coase

https://en.wikipedia.org/wiki/Ronald_Coase

One of the greatest economists a non economics person has never heard of.

Back in *1937* he wrote "The Nature of the Firm" and that essay was one of the first works on why companies exist rather that groups of independant traders and why they only get so big.

It looks like that some time ago govt got just too big and complex to be efficient.

Outsourcing probably does not fix that.

Devolving control to smaller independent entities _might_

Government logic

"Will someone think of the taxpayer? UK.gov needs to stop burning billions on shoddy procurement, says Reform

The solution: create a regulator with teeth and deeper pockets".

In plain English: how can we stop wasting so much money? Answer: spend lots more money.

Reform praised the work of the National Audit Office and Public Accounts Committee, but called for a body with more teeth to impose fines. An independent procurement regulator – the Office for Public Procurement (Ofpro) – could help tackle the wastage, it said.

So you want yet another regulator setup to waste even more money.

How much would Ofpro really cost us tax payers?

Where do the procurement staff come from?

One interesting question would be whether the costs of procurement are reduced by having so many private sector contractors working for the procurement agencies, or are they increased?

I retired a few years ago, but worked as a prospective supplier on bids managed by, amongst others, MoD Abbey Wood, the MoJ, the Cabinet Office, and indeed I worked on a bid for e-Borders, though not with Raytheon.

In all these cases, many, if not most, of the procurement staff that we dealt with were contractors, from our competitors. Indeed one question was always "Do we want to put people into that procurement organisation, getting steady money but disqualifying us from bidding for the programmes, or do we take the riskier but potentially much more rewarding approach of bidding for the programmes?".

Precedent

Not remotely surprised to see other commentards have already expressed some of the obvious cynicism.

But we can do better: what about all those useless watchdogs that already exist? Like the financial regulator, known as the Fundamentally Complicit Authority. Or perhaps even the Serious Fraud (coverup) Office.

It looks like the Civil Service is full of problems.

This looks like an echo of Jim Hacker's "Department of Administrative Affairs", which functioned as an excuse for that TV show to mock anything.

We can at least hold a General Election, if we have an incompetent government. There seems to be little we can do about a Civil Service that fails.