The National Audit Office has called for a re-think of the way public bodies procure goods and service in the light of high profile failures in contract management.

The NAO has published two reports highlighting the weaknesses of current public sector procurement arrangements. There is a lack of transparency and a need for better public scrutiny of contracts. There is also a crisis in public confidence in public service procurement following several high-profile allegations of poor performance, irregularities and misreporting over the past few months. These raise concerns about whether all contractors know what is going on in their business and are behaving appropriately; and how well the government manages contracts.

The NAO says that contractors generally have often not provided sufficient value, and can contribute more to the overall austerity programme. But the general level of transparency over contractors’ costs and profits is limited. The government needs a better understanding of what is a fair return for good performance for it to maintain the appropriate balance between risk and reward.

Amyas Morse, head of the NAO, said: “Contracting with private sector providers is a fast-growing and important part of delivering public services. But there is a crisis of confidence at present, caused by some worrying examples of contractors not appearing to treat the public sector fairly, and of departments themselves not being on top of things. While some Government departments have been admirably quick off the mark and transparent in investigating problems, there is a clear need to reset the ground rules for both contractors and their departmental customers.”

Phil Dawson, CEO of Skyscape Cloud Services, said: “The NAO’s reports come as no real surprise as it has long been clear that Government procurement is dysfunctional and in many cases, not fit for purpose. An understandable, yet potentially damaging, aversion to risk is deeply embedded in Government procurement culture, which has resulted in the dominance of incumbent suppliers and a stagnant marketplace.

He added: “Quite simply, it will take time to change the excessively risk-averse culture which is embedded in public sector procurement. Yet the Government’s efforts in combating the issues are starting to pay dividends. Thanks to the G-Cloud programme, there is a new generation of suppliers of all sizes that is willing and able to do things differently, with transparency and competition at the heart of their propositions and services. In less than two years, G-Cloud has catalysed genuine change and market disruption and Government purchasers would do well to learn from this.”