'˜Scandal' as £3.6bn handed to three firms

A report by the Taypayers’ Alliance singles out civil servants for their inability to take on private company negotiators and to monitor and manage contracts that often run into tens of millions.

In 2015, 167 contracts worth 100m euros or more were advertised by UK councils and official bodies, compared with just 29 in France, 25 in Italy and five in Germany. In those countries, contracts are typically split up and handed to small, local firms.

In contrast, the British system put £3.6bn in the pockets of just three large companies, Capita, G4S and Serco, the TPA said, despite government ambitions to help more small and medium-sized businesses win public contracts.

The report said the country was in “dire need” of a system for partitioning contracts.

Serco announced earlier this month that it had secured £4bn of new contracts in the past year. But at the same time, 700 of its workers at London’s Barts Hospital NHS trust, which pays it £600m to provide cleaning, reception and other services, were striking in protest at its refusal to pay a 30p per hour rise to keep pace with inflation.

Last month, G4S was awarded a £25m contract for the electronic tagging of offenders, despite an ongoing investigation by the Serious Fraud Office into a previous contract, during which it was alleged that the government had been billed for the tagging of criminals after they had died.

The TPA said: “Outsourcing titans continue to dominate public procurement despite well-publicised failures.”

It called for an overhaul of contract procurement in the public sector, and warned that “weaknesses in the ability of the civil service and the contracting authorities to effectively monitor and manage” multi-million pound contracts was “a serious impediment to efficient public procurement”.

The report said that since the beginnings of contracting-out in the 1980s, the market had become “increasingly uncompetitive” in the hands of a small group of large outsourcing companies” and had descended into “scandal and after scandal, failure after failure, undermining public trust.”

In Yorkshire, controversy has surrounded the award of a contract worth £2bn to a single company, Amey, for the management of streets in Sheffield, with some protesters claiming that the firm has been handed a licence to cut down healthy roadside trees as a cheaper alternative to repairing their surroundings.

Jan Zeber, policy analyst at the TaxPayers’ Alliance, said: “One of the reasons these contracts run into trouble is that the mindset is very different in the public and private sectors. There is a mismatch when it comes to commercial skills and negotiation.”

He said the “burdensome” system of bidding should be converted to an online operation that could be used by smaller, local firms that did not have the resources to enter into a complex bidding process for a contract they may not win.

The Commons Public Accounts Committee has previously warned that the government “must guard against quasi-monopoly suppliers”.