UK government must improve commercial transparency and market knowledge, watchdog says

By on 21/07/2021
The National Audit Office has issued updated guidance on UK government procurement for goods and services. Credit: Geof Sheppard/Wikimedia.

The UK government’s “established processes” for commercial contracts lacked resilience under the pressure of the COVID-19 pandemic and it must improve transparency and its understanding of markets, the independent public spending watchdog has said.

The guidance, published this week, analysed 350 commercial projects over the last 20 years. As part of its findings, the National Audit Office (NAO) says the government “encounters frequent legal challenges in relation to its adherence to existing regulations”, while departments “fall short of good practice too often.”

Such is the level of improvement required within the UK government, which spends around £206bn (US£281bn) on goods and services a year, the NAO predicts that “substantive reviews of procurement and commercial activity” will continue to be a mainstay of the watchdog’s work.

Transparency

The NAO’s publication, Good practice guidance: managing the commercial lifecycle, sets out the areas for improvement as well as its expectations for government.

Transparency is one of the four strategic sections in the guidance. The government must address its “issues” with the incomplete disclosure of statutory information, the report says, pointing to contracts awarded during the early part of the COVID-19 pandemic that were not published in a “timely manner”.

A previous investigation into pandemic procurement by the NAO, published in November 2020, found that the UK government had spent £18bn (US$25bn) on the COVID-19 response by the end of July last year. Some £17.3bn (US$23.6bn) was spent on new contracts, it found, of which £10.5bn (US$14.3bn) was awarded without any competition.

The updated guidance notes that basic information on contracts should be published in a reasonable time to allow for scrutiny and transparency and to avoid potential conflicts of interest. And when direct awards and urgent procedures are used, a robust justification should be recorded.

It says that the UK government should ensure that transparency rules are “consistently followed in full”, with benchmarks, price indices and market intelligence to be used to work out accurate costs.

There is also a focus on data in the guidance. For example, NAO expects government to ensure collection of data is transparent and to establish a data specification to ensure data is “easy to share and use”. It should “consider open data standards, including common taxonomies and unique contract identifiers”, the guidance says.

Strategic spending

The NAO says commercial strategies need to match the objectives of government departments or wider public policy more consistently, highlighting the government’s vaccine procurement strategy as a case study of good practice.

The decision to procure vaccines ahead of regulatory approval and pump £914m (US$1246m) into supporting clinical trials and manufacturing showed a clear alignment between organisational policy and intended outcomes, says the report. This was also helped by early engagement between commercial teams and the market.

Preparing for the worst

But the government also needs to improve its understanding of the market, according to the NAO. “There should be consistent awareness of when and how to engage with the market, including improving understanding of competition and financial resilience of the commercial landscape,” the guidance notes.

For example, it says that stakeholders do not have enough visibility across the adult social care market. The NAO expects the government to analyse the capacity and capability of potential suppliers and the impact of any potential contracts on the market.

The NAO also points to the government’s handling of the collapse of Carillion as an example of how to prepare, transition and exit from precarious commercial contracts. Carillion, a major government contractor, collapsed in 2018 with debts of £7bn (US$10bn) in one of the UK’s biggest corporate failures.

The previous year the Cabinet Office had co-ordinated contingency planning across departments, as Carillion’s finances looked increasingly shaky. The Cabinet Office received 65 contingency plans, so when the firm did collapse it was not forced to provide a financial bailout. It opted to support the company through its Insolvency Service until contracts had been transferred. The NAO said this highlights the importance of having access to transition information and contingency plans.  

The government is expected to streamline its procurement processes under the Procurement Bill published in May this year.

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