Source · Select Committees · Public Accounts Committee
Recommendation 3
3
Despite previous experience of contractor failures, CCS and the Department did not act on lessons...
Recommendation
Despite previous experience of contractor failures, CCS and the Department did not act on lessons from previous cases. The Department, CCS and NHS Business Services Authority (NHSBSA) assessments of risks did not flag issues with having a single supplier on the Supplier Early Payment Solution framework or that taxpayers’ The pharmacy early payment and salary advance schemes in the NHS 7 funds may be required in the event of supplier failure. We do now know that this risk crystallised, as Greensill Capital eventually failed. Although CCS considered the risk of Taulia failing, and requested a financial guarantor, it did not consider the risk of Greensill Capital failing, and Greensill was the key sub-contractor. This Committee has reported before that understanding what capability government still lacked in letting and managing contracts was an important strategic issue and identifying and plugging these gaps may have helped to avoid the lack of a proper risk assessment on supplier resilience and the consequences of Greensill Capital’s failure for government Issues around the continued challenges in quality, accessibility and integrity of data raised by the inquiry into the collapse of Carillion reverberate here, as we now know that the predicted savings for the NHS cannot be reliably measured. The lack of a business case to support the decision made in July 2020 to reimburse pharmacies even earlier than previous arrangements also points to a continuing challenge in the quality, accessibility and integrity of data. Recommendation: The Department and CCS should establish a cohesive and robust methodology for assessing suppliers’ risk profiles and resilience and develop steps to improve information sharing between the two organisations and across government. Procedures should include processes for assessing contractors’ financial viability; potential to deliver the required goods and services; and that assessments are reviewed at appropriate intervals, such as when cont
Government Response
Acknowledged
HM Government
Acknowledged
3.1 The government agrees with the Committee’s recommendation. Recommendation implemented 3.2 Suppliers bidding for CCS contracts are subject to robust financial checks as part of each framework procurement. CCS teams also then regularly monitor risk to suppliers and 22 consider their resilience during the life of the contract, making use of media and market reports and other intelligence. Based on emerging information on Greensill Limited, CCS opened discussions with Taulia about identifying an alternative funder for Supplier Earlier Payment Solutions prior to Greensill Limited’s collapse and engaged with NHS Business Services Authority. CCS and the Cabinet Office Commercial Central teams have well- established links across the Government Commercial Function (GCF), to ensure robust information sharing on key suppliers. 3.3 In line with GCF recommended practice, the department classifies all contracts and suppliers using a tiering approach which assesses contracts as Bronze, Silver and Gold based on risk, value and criticality (for example, from low risk to high risk). This assessment of the contract determines the extent of mitigations to be put in place. The impact of a failure in service continuity on service users and the department must also be considered. 3.4 On the award of a contract, the frequency of checking on the financial health and viability of a supplier is driven by this contract risk tiering approach as well as the assessed risk of failure regarding a supplier. Where the department is contracting with strategic suppliers to the government as a whole, the relevant officials engage with the Markets and Suppliers team in the Cabinet Office, which provides the overall financial health checks for these suppliers. For other important suppliers to the department, commercial officials undertake the financial risk assessments throughout the contract life.