Recommendation 15

We asked the government specifically about how it ensures the taxpayer gains when a company does well partly as a result of having a government contract. The Cabinet Office told us that it publishes key performance indicators (KPIs) for its contracts, and it will be publishing more of these from October 2024 so that taxpayers can see whether the contract is delivering. It said that it was particularly challenging to assess gain share and pain share mechanisms where the government has not tested the market. It used the example of outsourcing probation rehabilitation services to demonstrate the consequences when government does not test the market to see whether, under different scenarios, the companies would survive or make undeserved profits. Ultimately, the government bore the risk when “volumes sank” and several of the companies “went bust”, leading the services to be taken in house. The Cabinet Office told us that the message from this example was to “think carefully about the payment mechanisms to make sure that we are not being overly generous on the upside and that people are not getting a free run, and neither is the scheme so punitive on the downside for things that are outside of the vendor’s control.”40 The Cabinet Office agreed that piloting was part of the answer to this problem where there is no existing external market. In response to our question about how much success it was having in promoting this approach, the Cabinet Office said that outsourcing in new areas was “relatively rare, and the presumption is that we will pilot it”.41 37 Committee of Public Accounts, Improving the Accounting Officer Assessment Process, Twenty-Eighth Report of Session 2022–23, HC 43, 24 November 2022, Summary 38 C&AG’s Report, paras 2.9, 2.11 39 Q74 40 Q75 41 Qq76–78 14 Monitoring and responding to companies in distress 2 Responding to distress situations, skills and evaluation Protecting taxpayers when making decisions on interventions