Department for Work and Pensions has particular problem with private firms says damning report on government contracts

Iain Duncan Smith's Department for Work and Pensions is facing "meltdown" over three of its biggest projects, Margaret Hodge, chairman of the Commons public spending watchdog, has said.

Ahead of a damning report on government contracts with private firms, Hodge singled out the DWP as a department particularly struggling with the delivery of welfare changes, which involve managing a relationship with private IT contractors, back-to-work providers and benefit assessors.

The public accounts committee report turns up the pressure on ministers to allow all government contracts to be subject to freedom of information (FOI) laws and examined by the National Audit Office (NAO).

Given that half of all spending on public services now ends up in the hands of private providers, departments must stop hiding behind "commercial confidentiality" when people want to know more about how these contracts work, it said.

The committee said two examples of contracts that the public deserved to know more about were the scandal of G4S and Serco charging for the electronic tagging of offenders who were in prison or dead, and the "complete hash" that G4S made of supplying security guards for the Olympics.

Following a stretch of negative publicity, the major outsourcing companies – G4S, Serco, Atos and Capita – are now willing to be subject to FOI laws when it comes to public sector contracts, but the government is still resisting, it said.

"Time and again when we see failures ... it's a failure of government to manage contracts," Hodge said, adding that departments "simply have to up their game and get a grip".

The committee said the DWP is particularly bad when it comes to private firms' involvement in public services, including Universal Credit, its new IT system that will deliver an overhaul of benefits, the Work Programme, its back-to-work scheme, and the personal independence payment (PIP), the replacement for disability living allowance.

"All their programmes are on the verge of meltdown," she said at a briefing to launch the report.

On Monday, a leaked internal review from the DWP said the government's ambitious welfare strategy is at risk because of the speed and depth of the cuts imposed on the department, while a recent NAO report said the new PIP payment will cost almost three and a half times more to administer than the existing scheme.

Hodge said it was deeply ironic that if the DWP had been more open about the Universal Credit scheme – which she said was a "good policy" – there would have been a far better chance of the programme being implemented. Instead, she said, it was being "appallingly handled".

A spokesman for DWP said the department has a "track record of delivery". "We've already successfully launched the benefit cap, Universal Credit and the new personal independence payment. The industry tells us that the work programme has got almost 500,000 of the hardest to help into jobs. We are bringing in our reforms safely and responsibly," he said.

John Cridland, director-general of the CBI, a business lobby group, said the report notes that the the private sector "plays an increasingly important role in running public services".

"The public has a right to know how its money is being spent and the industry has pledged to meet a higher bar on transparency," he said. "Businesses running public services agree that open-book contracting should become the norm. The National Audit Office should also be able to audit government contracts as long as this is done in a systematic way with the triggers for inspection, like missed performance targets, agreed from the outset.

"Rather than relying on individual Freedom of Information requests, we think FOI should be built into contracts when they are agreed.