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Investigations into procurement contracts up 14% as Government looks to stamp out wasted spending

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Investigations into procurement contracts up 14% as Government looks to stamp out wasted spending

Investigations into procurement contracts up 14% as Government looks to stamp out wasted spending

  • Nearly a third of investigations resulted in contracts being adjusted last year
  • Most complaints over contracts come from SMEs
  • Billions of pounds said to be wasted

The number of investigations launched following complaints over government procurement contracts has increased 14% in a year, to 92* in 2016/17 up from 81 in 2015/16, as the Government looks to stamp out wasted expenditure, says EMW, the commercial law firm.

This increase in investigations follows a widely-publicised report from the think-tank Reform in 2016 which claimed that the Government was wasting ‘billions of pounds on procurement’ each year. Estimates of annual Government spending on suppliers range from £40bn - £60bn.

EMW says complaints over Government procurement contracts often relate to:

  • The tendering process for the contract: many complaints stemmed from the onerous pre-qualification questionnaires (PQQs), which have since been simplified for some contracts.
  • Timescales over which a contract must be completed: measures have been introduced to split contracts into smaller jobs to make timescales more manageable.
  • The management of contracts, including payments to suppliers and subcontractors: to crack down on late payments, targets have been set for Government departments.

Complaints are made anonymously through the Crown Commercial Service’s Mystery Shopper service, which investigates and addresses these concerns. Legislation passed in 2015 strengthened this service by providing a statutory basis for investigations.

EMW says the increase in investigations also reflects how seriously the Government takes complaints over contracts. Indeed, 57% of total complaints (92 of 160) were investigated last year and nearly a third (26) of these investigations resulted in live contracts being adjusted.

There have been several high-profile adjustments in recent years; for example:

  • HS2 was reported to be ready to cancel a £170m contract with engineering company CH2M following complaints from rival bidder Mace, had CH2M not withdrawn;
  • Security company G4S was temporarily banned from bidding for all government contracts in 2013 after the SFO launched an investigation into the firm.

EMW says many complaints over procurement contracts come from SMEs, who often face the highest barriers to bidding. This is because smaller firms may lack the resources to complete lengthy tender processes and long-term contracts.

Although the majority of Government commercial spending is with large companies, measures have been introduced to address this imbalance. The Government intends to increase spending with SMEs from 25% of total expenditure in 2015 to 33% by 2020.

James Geary, Principal and Head of Commercial Contracts at EMW, says: “It’s good to see the Government tackling contract complaints head-on.”

“Healthy competition in the bidding process is key for the best results and the Mystery Shopper service has played an important role in directing complaints to where they will be heard. The extension of the service to conduct spot-checks on procurement processes is also welcome.”

“Moving forward, it is important a balance is achieved between Government spending with large companies and with SMEs. Increasing direct spend, rather than indirect, with SMEs will also help integrate them better into procurement processes and supply chains.”

“The Government could look at measures to level the playing field, such as by ensuring SMEs are paid on time and by standardising the procurement process between different departments.”

*Cabinet Office 2017, FOI