Government cannot demonstrate value for money for untold billions of taxpayer-funded procurement, say MPs
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Poor quality and incomplete contract data prevents Govt evaluating
competitive trends in markets No evidence Govt consistently uses
purchasing power to create new businesses, jobs and skills, or to
tackle climate change and reduce waste Government is unable to
demonstrate value for money across billions of taxpayer pounds of
public procurement. The Government spent £259bn procuring goods and
services in 2021-22, but a Public Accounts Committee (PAC) report
published today...Request free trial
Poor quality and incomplete contract data prevents Govt evaluating competitive trends in markets No evidence Govt consistently uses purchasing power to create new businesses, jobs and skills, or to tackle climate change and reduce waste Government is unable to demonstrate value for money across billions of taxpayer pounds of public procurement. The Government spent £259bn procuring goods and services in 2021-22, but a Public Accounts Committee (PAC) report published today finds that it is unable to demonstrate that it is achieving value for money in public procurement, due to significant issues with the quality and completeness of data on contracts. Public bodies are required to publish large amounts of data on prospective and awarded contracts. Based on recent National Audit Office analysis showing incomplete, tardily published or inconsistent information on a significant minority of contracts, the PAC is calling on the Cabinet Office to set out clear directions and guidance for contracting authorities. These data issues also mean Government is unable to evaluate competitive trends in markets. Of 235 large contracts recorded on Find a Tender between January 2021 and January 2023, 20% of contracts using open competition received only one bid. Around a third of the total contract value of more than £100bn awarded by major departments during 2021-22 were not subject to competition, though estimates suggest Government could achieve savings of up to £7.7bn per year through increased competition. The PAC’s inquiry also found no evidence that Government is consistently using its purchasing power to create new businesses, new jobs, and new skills, to tackle climate change and reduce waste, and to improve supplier diversity, innovation, and resilience. The way that social value requirements in contracts are implemented can create artificial constraints that can create barriers to entry especially for smaller businesses from bidding on public contracts, and the report calls for more details on how the Government will revise its approach in this area. The Procurement Act, which received Royal Assent in October 2023, offers opportunities for improvements to the procurement process, including in the collection of public procurement data, but the report raises concerns that the Government may not be prepared to successfully implement the Act. The report found no clear plan for the investment required, or a timeline of necessary steps to ensure that the wider public sector has the critical commercial skills required to achieve the intended far-reaching changes to the public procurement landscape. Dame Meg Hillier MP, Chair of the Committee, said: “The Government’s purchase of goods and services is equivalent to the cost of building multiple HS2 rail lines every year. It is therefore clear that public procurement is deserving of the most thorough oversight to ensure value for taxpayers’ money. The Cabinet Office needs to act swiftly to dispel any continuing lack of transparency around publicly funded contracts, so that taxpayers are able to see clearly how their money is being spent and not find this hard to discover. Departments are also not doing enough to ensure robust competition for their contracts, leaving untold billions in savings every year on the table. “Given the change-making impact that public procurement can have, the Government’s approach here is disappointing. Be it in tackling climate change, reducing waste, creating new businesses, jobs and skills, or improving supplier diversity, innovation and resilience, we found no evidence that Government is consistently using its purchasing power to shift the dial. We hope with the help of the recommendations in our report the Government works swiftly to successfully implement the Procurement Act to achieve far-reaching changes in the public procurement landscape.” PAC report conclusions and recommendations Government is unable to evaluate competitive trends in markets or demonstrate that it is achieving value for money in public procurement, due to significant issues with the quality and completeness of data on contracts. Departments and other public bodies are required to publish information on prospective and awarded contracts on two databases, Contracts Finder, and Find a Tender. The Cabinet Office, including the Government Commercial Function and the Crown Commercial Service, acknowledge that the data they hold and publish is not good enough. An analysis of publicly available contract award notices on Contracts Finder, one of two contract databases, for the period 2018 to 2022 found that 6% of large contracts did not have basic information on the procurement procedure used. The Government Commercial Function agreed that it is important to maintain good data to track the trend of key performance indicators on whether contracts are delivering. But the poor quality and incompleteness of data means government is unable to evaluate competitive trends, understand how effectively markets are open to small and medium enterprises (SMEs) and other companies outside government’s strategic suppliers, or set out clear directions and guidance for contracting authorities. The Cabinet Office expects the Procurement Act to help address the data issues, alongside the implementation of a single source of data. Recommendation 1: Within three months of the coming into force of the Procurement Act, the Cabinet Office should define how it will use data to evaluate competitive trends and set out clear directions and guidance for contracting authorities on:
In order to enhance transparency, within the same timescale it should also provide a comprehensive report setting out a suite of measures designed to improve the publication of contract details, including in particular how the two contract databases (Contract Finder and Find a Tender) can be populated with complete and timely information. Public authorities have often not been effective in engaging with markets and potential suppliers, and government has not provided clear guidance on how to meet requirements to treat suppliers equally while best supporting value for money. Departments and other public bodies often take an overly cautious approach to engagement and are not always clear on how to understand the markets and suppliers they buy from. Engaging with potential suppliers throughout the commercial lifecycle can help departments and other public bodies understand what the markets can provide, while providing suppliers with an opportunity to highlight potential innovations and efficiencies they can bring to the contract. Without this engagement, it is harder for departments and other public bodies to craft sufficiently clearly defined requirements that the market is able to provide. Overambitious requirements can reduce competition and distort the market by limiting the potential supplier pool. Particularly deterring smaller businesses that may think they cannot meet the requirements from engaging with public bids. Recommendation 2: The Government Commercial Function and Cabinet Office should set out, as part of its Treasury Minute response, further details explaining the guidance and mechanisms that it has put in place to promote best practice for public authorities to appropriately conduct early engagement, without distorting the market, such as:
Framework agreements have become the most prevalent route for public authorities to buy common goods and services, but the Government Commercial Function has not provided sufficient guidance to address the potential risks to competitive benefits. Framework agreements involve an initial competition for suppliers to gain access to a framework, followed by a shortened call-off process for contracts to be awarded to one of those framework suppliers. Government use of frameworks for large contracts increased from 20% of contracts by value in 2018-19 to 68% in 2021-22. Inappropriate use of frameworks may lead to limiting competition either by not having enough suppliers for a mini competition or too many suppliers to effectively award a contract. The Crown Commercial Service is the largest provider of frameworks for common goods and services, across the public sector. But there are gaps in the data provided by authorities which mean that the Crown Commercial Service lacks data on the number of direct awards made without re-opening competition. The Cabinet Office agrees that it needs more structured data and more effective processes to track procurement from frameworks through the commercial lifecycle to monitor savings effectively. Recommendation 3: The Cabinet Office should issue guidance, for example a ‘Framework Playbook’, within six months to provide central guidance for government buyers on key policies about:
Government has not demonstrated that it has consistently used its purchasing power to support local and national policies and objectives, or to drive healthy and competitive markets, including buying from SMEs. Government could not provide evidence that it is consistently using its purchasing power to create new businesses, new jobs, and new skills, to tackle climate change and reduce waste, and to improve supplier diversity, innovation, and resilience. The way that social value requirements are implemented can leave smaller businesses, as well as larger companies unable to meet them constraining their ability to bid on public contracts. Public authorities are not yet approaching this consistently to support SMEs to develop and build resilience to a level where they can bid on public contracts. Crown Representatives have helped government to understand its markets, but further work is needed to support SMEs. Recommendation 4: The Cabinet Office should set out, as part of its Treasury Minute response, details explaining how it will revise its Sourcing Playbook and support government buyers towards achieving a consistent approach to balance achieving economic, social, and environmental wellbeing with unnecessarily imposing artificial constraints that create barriers to entry for SMEs. We are concerned that the government may not have sufficiently considered the time, money, and resources required to provide the commercial capabilities to successfully implement the Procurement Act 2023. The Procurement Act received Royal Assent on 26 October 2023. Government has announced plans for the Act’s secondary legislation, and the new regulations are expected to be implemented fully by the end of 2024. However, the Cabinet Office and Government Commercial Function do not yet have a clear plan for the investment required, or a timeline of necessary steps to ensure that the wider public sector has the critical commercial skills required to achieve the intended far-reaching changes to the public procurement landscape. Departments and arm’s length bodies need to understand how to establish the right conditions for effective competition, varying approaches as needed across sectors and procurements. The Government Commercial Function does not have data on all relevant individuals within contracting authorities, such as arm’s length bodies or local authorities, that should be upskilled on the requirements of the Procurement Act. This could impede the process of implementation across the public procurement landscape. Recommendation 5: The Government Commercial Function and Cabinet Office should set out, as part of its Treasury Minute response, further details explaining arrangements for:
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