Local authorities could stop awarding so many contracts to ‘conglomerates’ and break them up into smaller lots instead, an inquiry into outsourcing public services in the wake of the Carillion collapse heard.
Local government experts told MPs on the Public Administration and Constitutional Affairs Committee that councils could counter the ‘concentrated’ market by breaking down the tenders.
National Advisory Group for Local Government Procurement chairman Nigel Kletz said: “We are seeing a trend to break that down…we don’t want all our eggs in one basket, and we get more competition and different specialisms as well.”
Out of 450 public sector contracts held by Carillion at the time of its collapse in January, 350 contracts were with local authorities and 30 councils were directly affected, the Parliamentary inquiry was told.
Local Government Association Conservative leader and London Borough of Hillingdon councillor David Simmons told the Committee: “There are five very large suppliers that the public sector and local government is quite dependent on for a very wide variety of different things.”
“It is clear that the market has become more concentrated, and firms like Carillion, Capita, Interserve, Serco, G4S, have grown, by and large, by acquiring other smaller businesses that specialised in some particular activity …and moving those things together into conglomerates,” he said.
Kletz added: “Our key driver is to try and engage a broader market at the pre-procurement stage through market days, through consulting with local markets to try and stimulate interest, and support smaller organisations or local organisations to try and bid for opportunities.
“Our reprocurement strategy is to break that down into smaller procurement groupings, either bring it in house or break it down into smaller lots, so we’ll have more diverse supplier markets. There is quite a lot you can do to try and counter that.”
Following Carillion’s collapse industry bodies called for an overhaul of the procurement process. Federation of Small Businesses chairman Mike Cherry said: “When the dust settles on this sorry saga, there is also a wider lesson to learn about the concentration of public contracts in the hands of a small number of very big businesses”.
The inquiry is separate to the main joint inquiry being held by the Work and Pensions and Business, Energy and Industrial Strategy committees.