1. Conclusion: The government will not achieve value for money from its contracts until it pays much more attention to contract management.
2. In 2013, government discovered that G4S and Serco had been overcharging the Ministry of Justice on its electronic monitoring contracts for years. The contracts have since been referred to the Serious Fraud Office along with two other G4S contracts with the Ministry of Justice. A further Ministry of Justice contract with Serco has been referred to the police and all investigations are ongoing. The two companies have since repaid some £180 million. Government described the electronic monitoring experience of 2013 to us as a "wake-up call" for its contract management.[3]
3. The Government reviews, launched after the discovery of overcharging on electronic monitoring, found widespread evidence of poor contract management across departments. They found weaknesses in many areas, including governance, capability, incentives, performance management and understanding of risk.[4] These are all areas where, despite this Committee's recommendations for improvement in 2009, we have seen problems time and again in the evidence brought before us since then.[5] Despite government's acceptance of our recommendations in 2009, and the availability of the NAO's 2008 good practice framework for contract management, the NAO found that government's focus on improving contract management had since "drifted away". The NAO also set out the consequences of weaknesses in contract management, which include more scope for fraud and error, more contractual disputes, and a failure to penalise poor performance or achieve cost savings.[6]
4. The NAO reported some positive signs of change with, for example, major spending departments having recently launched significant programmes to improve contract management and the Cabinet Office stepping up its support for departments. But, as the NAO stressed, there is a lot still to be worked out and "there needs to be widespread change in the culture of the civil service and the way in which contractors are managed."[7]
5. It is encouraging that government has now started to take the issue seriously. The Cabinet Office assured us that contract management has moved up the agenda at the top of the civil service. It told us how a senior group chaired by the Cabinet Secretary is overseeing improvement and how the new chief executive of the civil service will also have a role in delivering change.[8] We also heard how departments such as the Home Office and Ministry of Justice are making significant changes to the way they are managing contracts.[9]
6. Recommendation.: The Cabinet Office must lead efforts to make sure that the current emphasis on improving contract management is embedded across all departments and that tendering processes did not discriminate against small and medium sized enterprises. It must not lose focus and should report back to this Committee by the end of 2015 on the progress made in implementing reforms across government.
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3 AQ 116 (HC 585), BQ 91 (HC 586); C&AG's report, Transforming government's contract management, Paragraph 7
4 C&AG's report, Transforming government's contract management, Paragraph 9
5 Committee of Public Accounts, Central government's management of service contracts, HC 152, Session 2008-09, 23 March 2009; C&AG's report, Transforming government's contract management, Paragraph 2.7, Figure 8
6 C&AG's report, Transforming government's contract management, Paragraphs 10, 11
7 C&AG's report, Transforming government's contract management, Paragraph 20
8 BQ 77-78, BQq 93-94
9 AQ 143-144, C&AG's report, Home Office and Ministry of Justice, Transforming contract management, Paragraph 11