A new independent body with powers to impose penalties could help cut the cost of outsourcing fiascos such as the offender tagging contract, according to a new thinktank report.
Reform has proposed that an Office for Public Procurement (Ofpro) would focus on value for money rather than the current "politicised" scrutiny agenda.
The report, The Price of Poor Procurement, says the collapse of outsourcing giant Carrillion in January last year marked a turning point in the scrutiny of public-private partnerships.
In the 19 months following Carillion’s demise, 41 official investigations were carried out, producing an average of one report every two weeks. But it claims that investigations are too often driven by politics rather than the amount of money wasted.
"Health, for instance, saw a disproportionately high number of investigations compared to the additional costs identified in health contracts,” the report says. “Twelve investigations into health were published between June 2016 and July 2019, making it the joint second most scrutinised policy area, and yet only £41.2 million of additional costs were incurred by those investigated contracts."
Massive costs
These additional costs are minor compared with those incurred by other procurements, the report states. It identifies five contracts which incurred proportionately massive additional costs - ranging from 81.9% of the contract value in the Seaborne Ferries procurement and 81.9% in the project to decommission nuclear submarines to 46% in the offender tagging contract.
Meanwhile the Emergency Services Network accumulated £3.1 billion in additional costs, amounting to 50% of the original contract value.
While these cases were investigated, probes tend to focus on high value projects rather than those with the highest ratio of additional costs. Reform states: “Ensuring that the emphasis remains on value for money, and that the most inefficient contracts are examined as regularly as the most expensive, is crucial to a thorough regulatory system."
It identifies 11 official organisations, bodies, or watchdogs involved in examining procurement or outsourcing issues. Although the National Audit Office does "sterling work", neither it nor parliament's Public Accounts Committee has the ability or authority to enforce changes to the extent that regulators and watchdogs such as the Competition and Markets Authority or Ofcom can.
This leads it to assert the NAO’s bark "needs to be accompanied by a body with more bite: an independent regulator".
Options
The proposed Ofpro could either be a non-ministerial Government department or an independent regulator along the lines of the Financial Conduct Authority. It should have a "substantial, statutory ability to intervene and respond to issues that pose a financial, political, reputational or physical risk to either citizens, a public sector market, or a public body".
This would include powers to impose penalties such as fines and enforcement orders on individuals and to bar companies from bidding for contracts if found guilty of failing to adhere to guidance or best practice.
Ofpro would cost between £30 million and £90 million a year, a sum that would be far outweighed by the procurement savings, Reform claims.
