Public-sector suppliers are not being penalised when they fail to deliver, according to the government's spending watchdog.
According to a report published on Tuesday by the Public Accounts Committee (PAC), dealings between government and the vendors who provide the public sector's IT, facilities management and BPO services are far too comfortable.
"The failure to enforce financial penalties whenever suppliers underperform increases the risk that relationships between central government and suppliers are too cosy. Central government organisations should apply financial penalties when contracts entitle them to do so unless there are very exceptional circumstances why they should not," the report said.
The PAC found that 38 percent of contract managers did not always apply financial penalties when suppliers did not measure up.
Conversely, the spending watchdog also found that central government is only making "limited use" financial incentives to encourage suppliers to increase their performance.
While £240m was devoted to managing the government's £12bn of service contracts in 2007/2008, not one government organisation rated the level of resources devoted to contract management as 'good'.
"As a result, opportunities for securing better value for money may be missed and risk may not be managed effectively," the report said, adding: "Central government organisations are not providing adequate support to their contract managers."
The PAC report recommends better risk-management procedures for regular reviews of contract management for the largest contracts, along with better training and information sharing for contract managers and value-for-money testing on contracts every three years.