National Audit Office finds five contracts are being investigated and warns there could be more cases of overbilling

This article is more than 6 years old

This article is more than 6 years old

Poor management of £40bn worth of outsourced public contracts has left the government exposed to the possibility of widespread fraud and overcharging, according to a report from the government's official auditors.

A total of five government contracts are being investigated by the police or the Serious Fraud Office, the National Audit Office found in a review of contract management procedures in government, released on Friday.

But poor control over lucrative deals with the private sector means it is "probable" that there are more cases of overbilling across other government departments, it has concluded.

The report, which was ordered following revelations last year that G4S and Serco had allegedly overbilled the Home Office and the Ministry of Justice for tagging services and the movement of prisoners, has been welcomed by MPs.

Margaret Hodge, who chairs the public accounts committee, said: "More and more of our public services are now being delivered by private companies, who between them received a huge £40bn last year from contracts funded by the British taxpayer. These companies must be held to the same high standards as any government department, so that the public can have confidence that they are delivering the quality of service we are entitled to expect.

"Not all senior civil servants have taken these contracts seriously, with data to monitor and understand performance still not good enough because departments think their responsibility ends once a contract is signed."

A test sample of 60 government contracts found that more than half – 34 – had "issues in the amount billed".

Auditors also tested 73 contracts against a good practice framework and found many elements of the deals were at "material risk" of overbilling, but the problem could be far wider.

Departments rely on the information supplied by the outsourcing companies rather than carrying out their own checks, according to the report.

It also found that in some government departments no one could say which civil servant, if anyone, was in charge of making sure that an outsourcing firm was honouring a particular contract.

Auditors said the government had been constrained in the way it could respond because the firms were "too important to fail" as their collapse would create widespread disruption to public services.

Serco has repaid £70.5m and G4S £108.9m across all of its contracts referred to authorities since the tagging scandal.

Amyas Morse, head of the NAO, said: "There is much to do, and the acid test will be whether the resources and effort needed for sustained improvement are carried through into the future performance of the departments in procuring and managing contracts."

A Cabinet Office spokesman said: "The NAO acknowledge our work to overhaul government's commercial activities, which saved taxpayers £5.4bn last year alone, against a 2009/10 baseline.

"Compared to 2010, when there was no central grip on procurement, we are now taking a hard-hitting business-like approach to managing contracts with suppliers."