MPs challenge Cabinet Office over outsourcing monitoring

MPs have accused the Cabinet Office of failing to learn lessons from the collapse of Carillion, saying there remains a risk that those responsible for monitoring future government outsourcing contracts ‘could have the wool pulled over their eyes by an unscrupulous supplier’

The joint works and pensions and BEIS committee which led an inquiry into Carillion’s insolvency wrote to the Cabinet Office asking it to consider a review of the role and responsibilities of the Crown representatives in the light of their failure to recognise warning signs indicating the company’s financial problems.

MPs are now claiming that the Cabinet Office reply does not address the issue. Its letter said: ‘While the representatives are very senior, experienced people, they can only react to information given to them by the company. If the information that the managers and directors we interact with have been given is incorrect, or if those managers fail to pass that on to us correctly, then problems can of course arise.’

The select committee suggested that this meant in effect, that they can have the wool pulled over their eyes by an unscrupulous supplier. In response, the select committee has written again asking for action. 

This letter stated: ‘There is no question that the current system of monitoring suppliers was not able to identify or prevent the precarious state of Carillion and its decline and collapse.

‘It is astonishing that there has been no indication of any government action to resolve this. Your letter acknowledges that an increased number of Crown representatives would allow wider coverage of suppliers, but gives no commitment even to examine—as we recommended— whether the current level of resourcing should be increased. We would be grateful for a more substantive response on this point.’

The select committee also highlighted an apparent contradiction in the Cabinet Office letter, which admitted that for three months during 2017 there was no Crown representative in place to monitor Carillion.

The committee stated: ‘While we accept that there are limits to the information a Crown representative may be able to access for any supplier, the relationship with Carillion and the surprise nature of its profit warning does call into question their value.

‘Your response highlights their “important role”; however, you also claim that the lack of a Crown Representative for Carillion “did not compromise our ability to recognise Carillion’s problems and construct an appropriate response”.’

Rachel Reeves, chair of the BEIS committee, said: ‘The reality must be that either the Crown representative system failed for Carillion or it has never worked at all.

‘Whichever is true, the government urgently needs to tackle the central issue which is to get a grip on its suppliers and protect the interest of taxpayers and those who rely on these businesses.’

Cabinet Office letter is here.

Select committee letter is here.

Report by Pat Sweet

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