A new guide from the public finance watchdog says the government currently spends around £225bn a year on contracts with private and third-sector providers, and says significant work is required to make the contract work effective, ensure it meets service standards, and provide better value for money.

Government Commercial and Contracting: an overview of the NAO’s work available to read in full below summarises lessons from recent NAO and Public Accounts Committee publications and highlights areas for improvement for the civil service.

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While the NAO acknowledges that advances have been made in the government’s management of contracts in recent years, it stresses that “there is much more to be done”, particularly in the field of matching public sector contracting skills with those of commercial providers.

A fundamental area of concern is the civil service’s ability to properly oversee contracts, which in many cases have evolved from the simple provision of goods and established services to innovative commissioning arrangements in the fields of health and justice.

Poor management of contracts is cited as a longstanding issue, and the guide says that despite 2014’s contract management improvement plans and last year’s commercial capacity reviews, “the problems are systematic, deep rooted, and cultural, so will take sustained effort to address”.

According to the NAO, there is a particular need for reform to departmental governance to ensure that contracts are properly overseen, as well as an “enhanced and more credible” commercial profession with a clearer role in managing providers, and better professional development. 

The guide also flags up shortcomings with departments’ ability to use technology to monitor contracts. It suggests that — as a matter of priority — the civil service also needs IT and information systems capable of supporting end-to-end contracting, performance and management systems, and data on spending.

And it says a further area for urgent work must be better integration of commercial specialists with the operational staff responsible for frontline oversight of service provision.

The guide concludes by encouraging managers to push for increased transparency on performance and costs in commercial contracts through the use of open-book clauses, as proposed in the government’s 2015 policy paper “Transparency of Government and Suppliers to the Public”.

However, the NAO adds: “Although government’s aim is to be transparent, it is not clear it has the ability to be.

“Its ambition and ability to publish transparency information remains hampered by weak information systems that mean that contract information, spend data and performance information cannot easily be brought together.”

Speaking to PublicTechnology sister publication CSW earlier this year, civil service chief executive John Manzoni admitted that the organisation had, “over a period of years” allowed “our own capability inside the civil service to atrophy” on the commercial front.

In response to that problem, the Cabinet Office has recently published 14 new commercial standards for government, with all departments asked to build and implement dedicated “commercial capability plans” and work towards having “a fully resourced and appropriately skilled, trained and experienced commercial function”.

The NAO last month announced that it was carrying out its first in-depth review into the work of the Crown Commercial Service, the central government body that was set up to to sharpen Whitehall’s commercial skills and use departments’ combined clout to strike better deals with suppliers.