By Tony Collins
It’s rare for truth to emerge from the ashes of a failed contract.
The disastrous contract between Siemens and the BBC (the so-called Digital Media Initiative) was a rarity. Various reports provided confidence that the relevant facts had emerged.
It’s more usual for MPs to report that they haven’t got to bottom of what happened after a Whitehall contract failure.
Indeed today’s report by the Public Accounts Committee says of its inquiry into PA Consulting’s contract with the UK Trade and Investment:
“We cannot remember a previous inquiry in which so many witnesses corrected their evidence after a public session.”
UK Trade and Investment, now the Department for International Trade, helps UK businesses to export more goods and services and encourages overseas organisations to invest in the UK.
It is funded by the Department for Business, Innovation & Skills and the Foreign & Commonwealth Office.
In May 2014, UK Trade and Investment’s officials entered into a three-year contract with PA Consulting for the supply of consultants in a contract that involved ICT support.
On small example of unclear facts: in its bid, PA stated that cost categories including ICT were “already included in the costings and will not be charged for separately”. This implied that ICT would be included in the consultants’ day rates. Today’s Public Accounts Committee report says,
“However, there were separate charges in the pricing schedule for HR, ICT, legal and professional, quality, and knowledge management.”
After the contract had started, officials became concerned about:
- the way PA had priced the contract
- PA’s transparency in its communications with Whitehall.
The contractual relationship eventually broke down and officials terminated the contract in January 2016.
The two sides agreed a settlement in which the taxpayer would pay the balance of PA’s outstanding invoices less a £3m reduction. Officials paid £18.8m for the first 11 months of the contract.
Labour MP Meg Hillier, chairman of the Public Accounts Committee, said today (5 April 2017),
“Even now, ten months after the parties reached a settlement and four months after we took oral evidence, our Committee cannot say with confidence that it has got to the bottom of what happened.”
Even the National Audit Office was unable to obtain a full picture. The NAO said in its 2016 report on PA’s contract,
“Understanding exactly what happened in letting and negotiating this contract is difficult due to the lack of proper documentation, the disagreement between parties and, now, the absence of a number of people who were involved on either side.”
MPs on the Public Accounts Committee say that Whitehall officials:
- did not keep proper records
- negotiated significant changes to the contract with PA when they should have gone back to the market
- pushed for a signing of the contract before they had finished negotiations.
For its part, PA “fell well short of the appropriate duty of care that we expect contractors to demonstrate when in receipt of taxpayers’ money”.
According to the Public Accounts Committee, PA
- took advantage of the department’s poor decision making
- sold Whitehall a service it is not clear it needed
- failed to give the fair breakdown of its costs and profit that officials had asked for
- used the negotiations to pass on costs to Whitehall that it had said in its bid that it would bear
- increased its profit from the contract while telling officials that its profit had not increased.
PA Consulting obfuscation?
The Committee says in its report,
“PA has not convinced us that it takes full responsibility for its actions. Its many explanations of its charges both at the time and since have been loosely worded, inconsistent and seemingly designed to obfuscate.
“It is unclear to us how such behaviour would be possible in a well managed professional practice.”
The Committee adds,
“Government’s lack of commercial expertise to get the best deals on behalf of the taxpayer has been a regular cause for concern for this Committee.”
In 2015 RSM UK Consulting produced a draft report on the contract. It included a finding that PA had “consistently made incorrect and misleading representations relating to £3.9m of the overheads charged”.
PA disputed RSM’s findings, stating that it had invoiced according to the agreed charging mechanism.
Overly long contract?
The contract was 596 pages – “difficult to read, understand and use, for a relatively simple service”. The Committee adds,
“The contract incorporates the ITT and bid, both of which are focused on the outcomes and how they will be achieved, and not on the way the contract would actually be run and charged for.
“Furthermore, the bid and contract are not clear on important aspects of the pricing and are often self-contradictory.”
[One would have thought that after decades of practice, Whitehall departments would understand how to commission a clear and unambiguous contract.]
There is not even any evidence that some key decisions by Whitehall officials were approved by any formal decision-making body.
This and other findings by the National Audit Office and the Public Accounts Committee are astonishing, not because of their momentousness but because of they are almost routine.
There were similar findings after National Audit Office investigations into early spending on the Universal Credit IT programme.
It’s beginning to look as if Whitehall officials can sometimes hand over money to the private sector without any firm controls at all, which could encourage corruption and, at the least, incompetence and waste.
What’s the civil service’s solution?
To make sure that no officials are held responsible. The civil service is all about collective responsibility. In other words no responsibility.
Is the civil service’s message to the private sector now clear: “Get whatever Whitehall business you can because though the terms of the contract may be tough, what we pay you afterwards may be, for us, a matter of indifference.”