Transparency in government contracting

NCVO has long campaigned  for the government to come clean about the contract and grant funding it gives to charities and companies for delivering public services.  Recently we have been joined by some powerful allies who yesterday persuaded the government to get real on transparency by committing to greater transparency in large government contracts.

Can we persuade the government that gets elected in May to make transparent contracting work for the voluntary sector?

The transparency clause idea

This week saw the publication of a report by the The Institute for Government  recommending that the government introduce a standardised transparency clause into its model services contract, revealing:

• the amounts paid to government suppliers (and their performance)
• details of major subcontracting arrangements.

The clause would apply to government contracts for more than £10m.

The transparency clause is a laudable attempt by IfG to tackle the widespread crisis of public confidence in the government’s ability to get large private sector providers to deliver public services properly.

You may remember G4S and Serco over-charging the Ministry of Justice for electronic tagging over a period of eight years, G4S messing up on security guards for the Olympics, and Serco misreporting on its out-of-hours GP service but still getting its end of year bonus!

In high-profile cases like these, companies and the government have tried to use the Freedom of Information Act  and concerns about commercial sensitivity to avoid disclosing information to the public about cost, price and performance. IfG’s idea is that a transparency clause could commit both of them to routinely publishing this sort of information.

What the government has agreed

In response to this initiative, Francis Maude has just launched two sets of principles to improve the transparency of government contracts. These principles are important because they commit the government for the first time to a presumption in favour of disclosing rather than withholding information about these big contracts.

The government has said that suppliers will now be asked to provide revenue and margin information on the government contracts they hold over a value threshold, which potentially paves the way for much greater transparency about the role of charities in delivering these contracts.

Why the clause matters to the voluntary sector

NCVO agrees that taxpayers have the right to follow their money, especially when it is being spent in ways that give rise to public concern. But we are especially interested in the transparency clause idea for its potential to shine a spotlight on how large private sector companies are currently treating the charities within their supply chains.

Our sector plays an important role in public services delivery, receiving around £14bn from government to deliver services across a wide range of sectors, but recent years have seen a decline in the value of our government grants and contracts. Most charities are small and cannot deliver large contracts, especially when they are awarded largely on the basis of cost and price alone, rather than quality and wider social value.

In this context, many voluntary sector organisations have had little choice but to become supply chain partners of large private sector companies. Experience with the last Work Programme  indicated that this leaves us at risk of being used as ‘bid candy’ to win contracts, but not subsequently provided with sufficient funds to do our public services work well. In the case of the Work Programme, this has led some charities to withdraw from providing services altogether.

Big Society Capital has highlighted similar problems with the latest round of Transforming Rehabilitation contracts. They have been sold to the public as entailing significant charity involvement, when in practice charities are only receiving limited funding and relegated to a relatively minor role.

The potential of the transparency clause

NCVO thinks the transparency clause could help the government build a diverse market of future providers of public services that includes a place not just for those large private sector companies, but also for both large and small voluntary sector organisations. By driving real improvements in the way charities get funded in supply chains, the clause might be able to achieve what other government initiatives like the Merlin standard  have so far failed to do.

However, realising this potential will likely depend on the clause disclosing much more detailed information on sub-contracting than the major sub-contracting flows that are recommended for disclosure in the current IfG proposal or the revenue and margin information proposed by government.

What the clause should cover

When we asked our members what you want the transparency clause to cover, you told us you want it to reveal:

• which organisations are delivering  front line services
• what funding is being passed down the supply chain to enable them to do so
• the role played by supply chain members in good or bad performance against key indicators.

You wanted particular attention to be paid to the need for the proposed transparency report to deliver an accurate and unbiased account of performance against key indicators. This could be achieved by giving sub-contractors and service users the right to comment on a prime provider’s narrative account of its performance against key indicators, to avoid the risk of poor performance being mistakenly attributed to supply chain members or prime providers providing biased or partial accounts of their own performance.

You also wanted the insertion of the clause in government contracts to be accompanied by the removal of ‘gagging clauses’ that could be used to avoid disclosing information about poor performance on the grounds of reputational risk to the government or prime provider. These clauses typically restrict the right of charities to speak publically about the work they are doing under contract where this might adversely affect the reputation of the prime or government.

NCVO also recommended a number of ways of making sure that the clause works well in practice. These include:

• early and consistent communication by commissioners of disclosure expectations and requirements
• ensuring compliance costs are accurately estimated at the outset and apportioned appropriately between the commissioner and the prime provider
• including a remedy for non-compliance to ensure providers are incentivised to fulfil their responsibilities
• planning for the survival of the transparency clause beyond expiry or termination of contract.

Why the government should do the right thing

This government says it wants to be the ‘most open and transparent in the world’  and has already taken some important steps towards full disclosure of sub-contracting.

This week for example the government unveiled a new standard pre-qualification questionnaire  that contractors will have to use for contracts above EU thresholds (£112K for central government and £173k for local bodies) which asks prime contractors to:

• provide details of members of the supply chain
• the percentage of work being delivered by each sub-contractor and
• the key contract deliverables each sub-contractor will be responsible for

Although the clause includes some wriggle room for contractors, we still think it’s a step in the right direction.

The government also acknowledged the importance of supply chain information in its Market Stewardship principles for the Transforming Rehabilitation programme and in recent guidance  that mandates the release of company or charity registration number by local authorities   when they award contracts or grants.

NCVO believes the same standards of transparency should apply to central government contracts not just for services, but also goods and works. The proposed transparency clause has the potential to realise this only if it is designed in the way just described.

The clause is not the whole story – we also need reforms to Contracts Finder

Of course, the transparency clause is only one piece of a wider jigsaw of open data on government funding to the voluntary sector that needs to be laid on the table. Our Civil Society Almanac of official statistics on the voluntary sector currently relies entirely on the financial returns submitted to the Charity Commission by individual charities in the absence of full and open data from government on which contracts are being awarded to charities.

We want the government to include a charity or company number in the awards notices that it puts on the Contracts Finder website  so everyone can see exactly how many contracts are being won by each type of provider. This would give the public a real-time picture on prime contracting to sit alongside the one on sub-contracting by charities that the transparency clause would provide.

Let’s all keep up the pressure!

Of course, IfG and ourselves are not the only ones calling for more open data from government. The Open Government Partnership  and Compact Voice both have distinguished track records in campaigning for the government to get naked on data. Just this week they were joined by the Social Mobility and Child Poverty Commission making eloquent arguments that without such data

Policy makers are left trying to make social progress “blindfolded” by limited knowledge about the problems they are trying to address and the potential impact of their decisions.

On the cusp of the purdah period leading up the general election a new announcement from government on the detail of the transparency clause or Contracts Finder looks increasingly unlikely. Let’s all hope the new government elected in May, whatever its political persuasion, does the right thing by the voluntary sector on open data by introducing these two simple reforms.