MPs have condemned two “catastrophic” failures by private contractors running vital Whitehall services which could only be remedied by taking back the work in house.
HM Revenue and Customs has also been slammed by the Commons Public Accounts Committee for its handling of a contract given to Concentrix which led to 29,000 people wrongly losing tax credits
And the UK Trade and Investment agency (UKTI) which provides vital help to British firms seeking to export goods – which will become vital after Brexit – is condemned for managerial incompetence in handing over its specialist work to a private company, PA Consulting.
On HMRC the report says: “Neither HMRC nor its contractor Concentrix is prepared to take full responsibility for mismanaging the process, it is beyond doubt “that between them they provided a totally inadequate service to claimants”.
The MPs describe the contract as a catastrophic failure, and Meg Hillier MP, Chair of the PAC, said: “The dreadful human consequences of this contract are well-documented but the story does not end with its termination.
“Having taken the work contracted to Concentrix in-house, it is critical that HMRC now delivers for tax credit claimants.
“It must also put right the damage done. That means fully reinstating the awards of all claimants who wrongly lost their tax credits and ensuring they are properly compensated for any impact on their entitlement to other benefits.
“But there are broader lessons too. HMRC was woefully ill-equipped to design this contract.
“Clearly it placed too little importance on customer service. But it was also driven by an inappropriate payment-by-results model, was renegotiated on terms less favourable to the taxpayer, and ultimately achieved less than a fifth of the savings expected.
Public and Commercial Services union general secretary Mark Serwotka said: “We agree with the committee that these failings were entirely predictable and the contract model was flawed, which is precisely why we opposed it from the start.
“Private profit and payment by results have absolutely no place in our welfare system that should be impartial and run by public servants for the public good.”
MPs describe the contract between UKTI and PA Consulting as “a sorry saga from beginning to end.”
“UKTI displayed poor governance and did not keep proper records. It made a simple matter as complex as possible. It negotiated significant changes to the contract with PA when it should have gone back to the market. It pushed to sign the contract before it had finished these negotiations. All this was unfair to other bidders and left UKTI exposed to being exploited by PA.
“For its part, PA fell well short of the appropriate duty of care that we expect contractors to demonstrate when in receipt of taxpayers’ money; instead of looking out for its client, PA took advantage of UKTI’s poor decision making. It sold UKTI a service it is not clear it needed and failed to give the fair breakdown of its costs and profit that UKTI asked for.
“Instead, it used the negotiations to pass on costs to UKTI that it had said in its bid that it would bear, and to increase its profit from the contract while telling UKTI that its profit had not increased. Our inquiry has been hampered by the lack of proper records from all parties concerned.
“We cannot remember a previous inquiry in which so many witnesses corrected their evidence after a public session.”