Government procurement chief accuses suppliers of accounting tricks

The government’s chief procurement officer has said that some of the largest suppliers to government often “play games” with their public sector accounts and branded those playing tricks as “disingenuous”.

Bill Crothers’ comments came during a Public Accounts Committee(PAC) hearing, where the possibility of introducing open book accounting for all major government contracts was being discussed.

Crothers and the government’s chief operating officer, Stephen Kelly, who was also giving evidence, argued that the problem largely lies with the government’s own in-house capabilities – where relatively junior officials managing contracts don’t have the experience to recognise when a supplier is playing the accounts to their advantage.

A recent assessment of a government contract was highlighted, where a supplier was deducting depreciation from revenues to get to its gross margin figure, which Crothers said is not standard accounting practice.

“The junior officials didn’t have that accounting experience. You need to know what you are doing because they [the suppliers] are experienced at it, and our guys often aren’t. The suppliers often play games,” said Crothers.

“They claimed that they were being open, but they were being disingenuous.”

An example of questionable accounting carried out by major suppliers can be seen in the ongoing dispute between the Ministry of Jusice, G4S and Serco, where the companies are accused of over-charging on an electronic tagging contract.

An audit found that the suppliers may have over-chargedthe department by tens of millions of pounds, where wrongful billing practices have been brought into question.

Chair of the PAC, Margaret Hodge, is also calling for the National Audit Office to have access to the open accounts so that it can work as an additional mechanism to ensure that the contracts are being managed properly.

Kelly agreed with Crothers that the government needs to boost its skillset in order to put the public sector on a level playing field with large suppliers.

“We spend too much time focusing on procurement, but not enough time on contract management. There should be an annual review [of contracts] to check we are getting the services we require and getting value for taxpayers’ money,” said Kelly.

“The challenge for us is that we need to raise our capability significantly. We need domain experience [industry specific experience], we need financial accounting experience, and we need contract management experience.”

Crothers pointed to the recently established Crown Commercial Service, which will manage common departmental spend (approximately £10 - £12 billion annually) and aims to fill the skills gap in Whitehall.

The Crown Commercial Service is running a recruitment seminar this week and it hopes to hire near to 100 new civil servants that have the commercial capabilities that are in demand across government.

Crothers’ and Kelly’s comments come amidst growing tension between traditional suppliers to government and Whitehall, as a number of procurement reforms have been introduced in recent months to squeeze out the ‘oligopoly’, drive down costs, and introduce more SMEs into the public sector IT ecosystem.

Copyright © 2013 IDG Communications, Inc.

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