27 June 2014

A new report examines the £8.9bn spent by central and local government on 20 top suppliers. It sheds much light on the relationships – but greater transparency is needed to ensure the information is accurate and the money is used effectively

Where does public money go? Specifically, which private companies are receiving most revenue from government in exchange for providing goods and services? Thanks to the government’s commitment to open data, and Spend Network spending some 16,000 hours analysing more than 38 million government transactions, we now have some idea and have published a major report. Based on public procurement data published by government and from what we’ve ascertained in the last 24 hours since publishing, it appears that the top 20 suppliers to central and local government received at least £8.9bn between them in 2013. IT companies account for six of the top 20, including Capgemini and HP. Outsourcing’s supposed ‘Big Four’ – Atos, Capita, G4S and Serco – do not currently occupy the top four slots, and not all of them feature in our top 20. Analysing the spending statements published by 17 core Whitehall departments and local government in England above district council level also gives us some other insights. We can see that some suppliers are heavily dependent on one Whitehall department for their government business, though many also work with private sector clients. Others (notably Capita) have a more diverse base. Most of the ‘top 20’ get the bulk of their government income from central government contracts, although some (such as Kier, Willmott Dixon and Veolia) get most from local government. Local government appears to spend far more with SMEs than central government, although some of the companies central government contracts with will pass down some of their revenues to smaller sub-contractors. This analysis, by Spend Network and the Institute for Government’s Whitehall Monitor team, simply would not have been possible a few years ago. The government should certainly be commended on opening up data around contracting with independent suppliers. But our research also found gaps in and problems with the spending data as currently released. When we asked the companies named in the report whether our figures matched theirs, many said they did – but others said they didn’t. This was often because public data does not allow you to work out the ultimate beneficiaries of joint venture and private finance initiative deals. Some data is redacted – for national security reasons and ‘commercial confidence’. There is no requirement to publish most transactions under £25,000. Some data is published without simple categorisation, like dates or descriptions; some data is simply incorrect; some is simply missing. This is why we recommend lowering publication thresholds, introducing reporting regimes for joint ventures and PFI and publishing data in useful and machine readable formats, which would further improve the accuracy of analyses such as ours. The volume and complexity of the spending data can also lead to problems. The Department for Work and Pensions contacted us only yesterday, pointing out a discrepancy between their figures for spend with HP and ours. As a result, we’ll be verifying figures further and publishing an updated report later this year. But contract transparency isn’t just about simple spending. After all, we care about value for money (how well suppliers are performing and what their terms are) as well as costs. There are at least three areas where further information could be released. Contractual transparency – publishing actual documents – would allow us to see who bears liabilities in the event of failures. Performance transparency would allow us to see suppliers’ performance. Supply chain transparency would allow us to see what was subcontracted to others, on what terms and against what performance indicators. This would give us more accurate figures on spend with SMEs, but also look at value for money through the whole of the supply chain. What we’ve seen from recent contracting scandals is that government doesn’t always pick up on problems itself. Having to publish the data would not only make them look at it more frequently, but create the potential for businesses like Spend Network and organisations such as the Institute for Government to hold them to account. Our own analysis remains a work in progress, but publishing more and better data will help the government fulfil its ambitions for greater transparency. As representatives of the Cabinet Office told the audience at our launch event, open data has already helped strengthen accountability and democracy, encourage economic and social growth and improve public services. As the IfG previously argued in Making Public Service Markets Work, further transparency on government contracting wouldn’t just help us work out where public money goes, but how well it’s spent. And it would benefit all of us – government, business and the public alike.