Central government could make savings as large as 300 million a year by better managing its contracts for services including IT and security, according to a report published today by the National Audit Office (NAO).
The report found better contract management - in these and other procured service areas like catering and cleaning - could potentially generate estimated savings of between 160 million and 290 million a year, across total annual expenditure on service contracts of around 12 billion.
In addition, nearly all the organisations surveyed for the report thought that better contract management could improve the quality and/or quantity of the services provided by suppliers.
Edward Leigh, chairman of the Committee of Public Accounts was damning in his response to the report. "Each year central government spends billions and billions on external support services in such areas as IT and facilities management," he said.
"Despite the huge amount of cash lavished on these services, government departments do not take the process anywhere near as seriously as they should. Often, they do not have people with the right experience and skills managing these contracts, nor do they have oversight of how good the services being provided are. Which results in a great deal of waste."
The report referenced its previous criticism of the Rural Payments Agency and the difficulty its contractors experienced in implementing the IT systems for administering the single payment scheme for farmers. "The more recent delays in the marking of SATS tests have further highlighted the important role contractors play and the impact service failure can have," it added.
But the report also highlighted a number of cases where central government organisations were applying good practice, which needed to be shared more widely including IT procurement agency, the Office of Government Commerce (OGC).
It said a benchmarking exercise saved the Home Office 17 million a year on its IT contract, amounting to around 20 per cent of the total annual contract expenditure.
But it also found that much of this supplier development activity is uncoordinated with only 53 per cent of contract managers having a formal plan for supplier development. A further 37 per cent of the contract managers surveyed for the report did not have a risk register and 56 per cent had no contingency plan in case of supplier failure.
Leigh concluded: "It beggars belief that, where the services provided are found to be wanting, government departments do not always invoke penalty payments on suppliers, even when the contract stipulates that they can do so."
