David Lidington says Carillion collapse shows need to increase range of suppliers working with public sector

Cabinet Office minister David Lidington has said that the government will change its procurement rules so that “social value” will be included in all assessments of providers for government work.

In a speech to the Reform think tank today, Lidington acknowledged the need to increase the range of suppliers providing the government with technology and other services, after the collapse of outsourcing giant Carillion. 

Bu the minister insisted that the high-profile closure of Carillion, which hit the wall in January after months of speculation that it was unable to service its debts, would not dim the government’s commitment to private and voluntary sector delivery of public services.

“We are determined to build a society where people from all parts of our country can access the best public services, and for those services to run efficiently and smoothly for them and their families,” he said. “Whether that service is delivered by public, private or voluntary sectors, what matters is that it works for them and their everyday needs, while providing value for money for the taxpayer.”

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Lidington added: “And whether it is operating our call centres, building our railways, or delivering our school meals, the private sector has a vital role to play in delivering public services – something this government will never cease to champion.”

However, he acknowledged that the failure of Carillion meant that changes were needed to ensure a diverse range of companies were able to bid for government contracts.

Following its collapse a number of other outsourcing firms, including Capita and Interserve, have also issued profit warnings, leading Labour to warn of an “outsourcing crisis”.

In his comments today, Lidington said the government wanted to see “public services delivered with values at their heart, where the wider social benefits matter and are recognised”.

He added: “That means government doing more to create and nurture vibrant, healthy, innovative, competitive and diverse marketplaces of suppliers that include and encourage small businesses, mutuals, charities, co-operatives and social enterprises – and therefore harness the finest talent from across the public, private and voluntary sectors.”

Today, Lidington said that the government will extend the provisions of the Social Value Act, which currently instructs government departments to consider wider social values when awarding contracts, to ensure that these evaluations are explicitly made in procurement decisions.

“By doing so, we will ensure that contracts are awarded on the basis of more than just value for money – but a company’s values too, so that their actions in society are rightly recognised and rewarded,” he said. 

This will help level the playing field for mutuals, cooperatives and social enterprises bidding to win government contracts, he said.

The government will also require outsourcing companies to publish more details on their own equality and diversity by making this a requirement to provide services. They will also need to maintain “living wills” that set out how services will be maintained if the provider hits difficulties.

“If we are to build a fairer society, in which the public has greater trust in businesses not just to make a profit, but also to play a responsible role in society, then we must use the power of the public sector to lead the way,” Lidington said.

“We will now develop proposals for government’s biggest suppliers to publish data and provide action plans for how they plan to address key social issues and disparities – such as ethnic minority representation, gender pay, and what they are doing to tackle the scourge of modern slavery.”

Lidington called on industry to help the government to rebuild trust.

“We need them to put right failings where they have occurred; demonstrate their ability to respond to changing circumstances; and show their capacity for innovation and creativity as well,” he said. “By doing so, we will go some way to restoring trust between government, industry and the public – and build public services that have the confidence of the people they are there to serve.”