CIPFA urges stricter open-book contract rules to halt outsourced scandals

THE “OVERCHARGING FOR SERVICES by G4S and the failure to deliver NHS contracts by Serco” are just some of the reasons why a compulsory open book contract management (OBCM) system should be implemented when delivering significant public services through private companies.

That’s the hard-hitting call by the Chartered Institute of Public Finance and Accountancy (CIPFA), which argues that if the British public are to have any confidence in the way public money is used when spent through private contractors, a radical approach to enforcing OBCM is needed.

The “underperformance of Capita in court services” is another case that underscores the call, says the body. Accountancy Age’s recent exclusive story revealed that US outsourcing firm Concentrix had used some of the £75m it had received from HMRC for a three year tax credit contract to pay staff who did no work for nearly three months because of a systematic IT failure.

CIPFA said its example, and others, “illustrate the pressing need to strengthen the management of the significant amounts of public money which are spent each year on contracted out services”.

Open book contracts provide transaprency on the cost of the work undertaken and the margin applied by the supplier.

In a policy briefing the body is proposing that in order to be awarded any major public sector contract, “businesses should agree to follow rigorous OBCM rules to ensure that costs are kept down; the contract is delivered in the intended way and that taxpayer resources are used effectively.”

CIPFA argues that, in particular, as a condition of winning a large contract businesses should agree that their own external auditors will provide a report to the public sector body commissioning the service, confirming that the amounts charged have been costed properly, are consistent with the contractor’s own financial management and external reports.

CIPFA chief executive Rob Whiteman said: “The amount of taxpayers’ money being spent through third parties to deliver public services is increasing. Meanwhile there are a growing number of scandals and disappointing contract failures which demonstrate just how significant the risk is to the public sector when these arrangements go wrong.

“It is therefore far too important an area for government to just let slide, and it needs leadership and direction from those who decide where public resources are spent.

“This is why CIPFA is calling on the civil service and government ministers to seriously consider enforcing OBCM as a way not just to mitigate the risk of failure of private contracts but to improve efficiency and delivery and to make sure that every pound of public money is spent well.”