Jul 202012

The State Always Steps In When Things Go Wrong

How do we know that we are getting value for money from the commercial contracts that are signed to deliver public services? There is a growing weight of evidence that many of the contracts that national and local government give out to companies are actually costing us more than if they were done in-house. According to Steve Richard’s in The Independent “the deeply embedded assumption that a slick, efficient, agile, selfless private sector delivers high-quality services for the public is being challenged once more in darkly comic circumstances.” Steve is of course referring to the G4S security shambles, were the Army and Police are stepping in to cover for a private company who can’t deliver what they promised.

Commercial contracts are negotiated and awarded every day by local authorities and public bodies up and down the country. But can we be sure that we are getting value for money when so much of these contracts are surrounded in secrecy? How much of a contract goes on management fees? Ten per cent? Twenty Percent? Fifty Percent? We will never know because private companies aren’t obliged to reveal this information to the local councils who award the bids.

Changing the law is going to be difficult, but it would help of we ended the sealed-bid process, in which companies bids are discussed in private and the details of the competing bids are never revealed. But if it is public money that is being paid to provide a public service, then why should this process not be transparent? Local councils have to provide open accounts for the services that they run, so why not companies bidding for public work?

The coalition government has introduced a new duty on local authorities to consider the ‘social benefit’ of the contracts that they award. According to the Local Government Lawyer website the new duty, which was made into law in 2012, places an obligation on local authorities to consider “how what is being proposed to be procured might improve the economic, social and environmental well-being of the relevant area.” But what is meant by ‘social benefit’? Who is going to decide the best way to compare social benefits between different contracts? When times are tough will it be the bottom-line that takes over?

Every organisation who makes a bid for funding to provide public work, be it bin collections, support for job seekers, building schools and hospitals, or even providing security for the Olympics, should expect, therefore, that their bids are made public. It is easy to do this online now, all at the same time. Rather than deciding these bids in the back rooms, with lawyers pouring over them, they should be put out to public consultation and scrutiny. All the details, costs and expected profits of the contract bid should be included in the published documentation so that we, the taxpayer, can make our own minds up about what is value for money and what is waste.

As Steve Richards points out “Instead of focusing on the arduously unglamorous task of making the public sector more efficient and adaptable, ministers, like their New Labour predecessors, prefer still the deceptive swagger of the incompetent entrepreneur.” Commercial confidentiality is all too often a shield used by incompetent businesses to rip-off the taxpayer. In the end, like G4S, these incompetent businesses know that government will always have to be ready to step-in if they get it wrong. The risk is all on the taxpayer, and the benefits are all for the companies. The balance is clearly wrong.

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