Managing departmental resources: contracting

Transcription

1 Managing departmental resources: contracting More and more public money is being spent on outsourcing and private providers supplying and running public goods and services. The National Audit Office (NAO) estimates that around 187bn is spent by the public sector annually with third-party providers. Around 40bn of this is by central government (local government and the NHS spend more), with MoD spending nearly six times as much ( 19.95bn) as the next department (DWP, 3.45bn). Research conducted by open data start-up Spend Network with the Institute for Government used publicly available data to work out the top 20 suppliers of goods and services to central and local government in 2012 and It found that IT and construction companies accounted for most value in the top 20, and that DWP spent the most with them (given that much of MoD spending is not published due to security issues). We also found that some of the big suppliers are dependent on contracts with single departments and that local government spending with small and medium-sized enterprises (SMEs) is much higher than that of central government. The differences in the NAO and Spend Network figures show that, while the Government has made more information on contracting available as part of its open data and transparency drive, this data has limitations. These include some data not being published, some not being recorded, some being suppressed or redacted, and some being published without useful categorisations. This makes it difficult to analyse definitively the extent and effectiveness of government contracting and to generate exact figures for how much is spent by government with private providers. About the data The National Audit Office published two reports on government contracting in November 2013, including Managing Government Suppliers. Its estimates of government spending with third parties are drawn from a number of different sources from different time periods: Whole of Government Accounts from ; Department of Health accounts from ; monthly data returns from departments to the Cabinet Office, which do not appear to be public; and quarterly returns from 40 strategic suppliers to the Cabinet Office for Some of these are partial: the Cabinet Office returns are estimated to cover only 90% of central government expenditure, while the strategic supplier returns cover only 24 of those 40 strategic suppliers. 1 Spend Network analysed public spend statements published by 247 central and local government entities between January 2012 and. In total, this consisted of more than 40 million transactions across 6,711 different files with a total value of more than 1.2trn. Supplier names were then matched with Companies House records. Building the database and website took more than two years and 16,000 hours of work. Our research found that the source data provided on government transactions is incomplete and difficult to analyse the data contained in this chapter is therefore an estimate based on the spend identifiable from the data published by government. Indeed, significant data discrepancies came to light when we published our previous Whitehall Monitor, Government Contracting: Public data, private providers (June 2014) the figures in this report aim to update those ones. 2 GET THE LATEST DATA 94

2 Outputs: Managing departmental resources: contracting National Audit Office: central government spends 40bn; local government and NHS spend more Figure 9.1: NAO estimate of annual spending with third parties Source: Institute for Government analysis of Managing Government Suppliers (NAO, 2013). According to NAO estimates, 187bn is spent annually by the public sector with private sector providers: 40bn by central government, 84bn by local government, 50bn by the NHS and 13bn by devolved and independent bodies. Of central government departments, MoD is by far the biggest spender ( 19.95bn), spending nearly six times more than DWP ( 3.45bn). Figure 9.2: NAO estimate of annual spending with private sector providers Source: Institute for Government analysis of Managing Government Suppliers (NAO, 2013). 95

3 Spend Network: IT and construction make up most of top 20 suppliers Figure 9.3: Twenty biggest suppliers to central and local government, January 2012 to Suppliers ordered by 2013 spend. According to public data, Capgemini was the largest recipient of spending from central and local government in 2012 and 2013 (more than 80% of it from the Aspire contract, a project to overhaul the IT systems within HMRC). Of the top 20 suppliers, six were construction companies and six IT. The fact that defence comes bottom of our seven categories, despite the NAO s figures showing MoD to be the biggest spender with private providers, underlines the issue of not all spend (especially defence spending) being published. Figure 9.4: Twenty biggest suppliers to central and local government by category, January 2012 to 96

4 Outputs: Managing departmental resources: contracting Figure 9.5: Spending by department with top 20 suppliers, January to Public data shows DWP as the biggest-spending department with the top 20 suppliers in 2013 ( 1.7bn), followed by MoD and HMRC. Again, the fact that MoD publishes only some of its data means we may not have recorded its full spend with the top 20 (we know, for example, that the public data does not show MoD s full spend with Babcock). Figure 9.6: Suppliers revenues from central government by department, January to Source: Institute for Government/Spend Network analysis of top 20 suppliers to central and local government. Suppliers receiving less than 250m from central government have been excluded. Departments are named where they provide 5% or more of a supplier s spend. Some of the top 20 suppliers rely strongly on one government department for their central government revenue such as Babcock (MoD), Telereal Trillium and HP (DWP), and Capgemini (HMRC) while others have a more diverse supply base (such as Capita, across 17 departments). 97

5 Figure 9.7: Monthly spend with SMEs by central and local government, January 2012 to Local government spends much more per month with SMEs than central government. However, some central government spend with SMEs is not visible in our data because of a lack of published data further down the supply chain government might publish its spend with the prime contractor, but any subcontracting by that contractor with SMEs won t show up in our data. Government has an aspiration to award 25% of central government business by 2015 to SMEs. It claims it is on track to meet that target, 3 with an increase in direct spend from 3bn in to 4.5bn (10.5%) in , and a further 4bn (9.4%) of indirect spend where SMEs are subcontracted as part of the supply chain in A lack of transparency over those calculations and supply chain spending generally means we cannot replicate that research. More supply chain transparency would help the Government achieve its open data aims of accountability and democracy, economic and social growth, and better public services, as would greater contractual transparency (contracts and terms, including who will bear financial liabilities in the event of failures) and performance transparency (how well contractors perform, allowing value for money to be assessed). 98