Auditor general Amyas Morse flags up three key issues that government must focus on to improve its work with private-sector suppliers

Credit: Jacob Edward/CC BY 2.0

The government’s unrealistic transformation goals are likely to prompt an “ugly scrambling for resources” among public-sector entities in the coming years, according to the head of the National Audit Office.

Sir Amyas Morse, NAO comptroller and auditor general, said in a blog post that the government’s expectations for the public sector to implement ambitious programmes to transform service delivery while achieving instant cost savings “are often too optimistic and not really viable”.

He added: “Even before the EU exit decision, the government’s overloaded programme of change placed strain on affordability, management, and scarce technical skills.”

Morse pointed to the key role that external suppliers must play in delivering major transformation projects, and gave recommendations in three key areas that he believes “underpin the current public–private sector relationship”.

The first of these is “government must be ruthless in its focus and realistic in its ambition and use of resources”.

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Morse claimed that, while government has improved the level of centralised coordination in its management of change initiatives, it requires continued “hard-headed prioritisation” if it wants to keep a grip on its resources while ensuring it delivers the most essential programmes of work.

This, he said, will entail “realistic assessment” of the capacity and limitations of the current technological, operational, and political infrastructure, as well as of the viability of spending plans.

The second recommendation is that “major and rapid change and complex contracts demand more careful risk management”.

The current level of risk and complexity of government work is being amplified by “an environment of widespread change and… decisions [being] made at pace”, Morse said. 

“Government must take a view about where – again, as a whole – it is willing to accept risk, and where it needs to act quickly and decisively to lessen it,” he added. “As it simply cannot avoid taking on a lot of risk through complex programmes, especially the EU exit process, it is important that sufficient contingency budgets are available.”

Suppliers, meanwhile, are sometimes guilty of bidding for work and entering engagements but neglecting to consider the viability of their delivering all of the project’s aims, Morse claimed.

“Sometimes contracts are agreed with insufficient understanding of the risks. Sometimes the risks are known, but ignored,” he said. “Sometimes risks are transferred that cannot be reasonably managed by the supplier. Sometimes risks that matter most, such as customer service, are not appropriately incentivised or managed. And sometimes contractors pass the risk back or demand a bailout when they can’t deliver.”

The NAO chief’s third and final recommendation is that “mutual understanding is needed between government and suppliers”.

He added: “Government and suppliers need to talk to each other more and understand their profound differences, as well as their shared interests.”

Morse claimed that suppliers may not take account of the greater risk of “reputational damage” that comes in light of a troubled public-sector project, when compared with similar engagements they may undertake with commercial customers. 

“On the government’s part, the collapse of Carillion illustrates that it still has a way to go in appreciating the commercial pressures on its industry partners,” Morse added.

The auditor general concluded that a lack of in-house skills on the part of the government is likely to mean that external providers will continue to play a significant role in the delivery of services.

He said: “I expect private and third sector provision is going to be a large part of delivering public services in future because the government just doesn’t have either the skill or the financial capacity to take back much delivery in-house. But for this provision to be successful, government needs to be realistic, work within the available resources, manage risks and understand its suppliers.”