Background to UKTI and PA contract
UKTI is the UK's international trade and inward investment promotion organisation which, since July 2016, has formed part of the Department for International Trade.
It provides a network of advisers and experts to support UK exporters of goods and to help overseas-owned firms locate and build business in the UK.
In May 2014 UKTI entered into a three-year contract with PA for the provision of trade and investment specialists, and paid £18.8 million for the first 11 months of services.
Concerns over pricing and communications
After the contract had started, UKTI became concerned about the way PA had priced the contract and about PA's transparency in its communications with UKTI. The contractual relationship eventually broke down and UKTI terminated the contract in January 2016.
In May 2016, UKTI and PA reached a commercial settlement under which it was agreed that UKTI would pay the balance of PA's outstanding invoices less a £3.0 million reduction.
PAC heard evidence for its inquiry on 28 November 2016; a transcript and written submissions are available on the inquiry's page.
Meg Hillier MP, Chair of the PAC, said:
"UKTI and PA must share the blame for the dismal failings in the procurement and operation of this contract.
Even now, ten months after the parties reached a settlement and four months after we took oral evidence, our Committee cannot say with confidence that it has got to the bottom of what happened.
This clearly leaves us with serious concerns and we urge the Government to commission the National Audit Office to conduct an independent forensic audit of both UKTI and PA to fully determine what took place."
In January 2016 UK Trade & Investment (UKTI) terminated its specialist services contract with PA Consulting (PA). The story of the original procurement and subsequent operation of the contract is one of a series of failings for which both parties must share the blame.
UKTI displayed poor governance and did not keep proper records. It made a simple matter as complex as possible. It negotiated significant changes to the contract with PA when it should have gone back to the market. It pushed to sign the contract before it had finished these negotiations. All this was unfair to other bidders and left UKTI exposed to being exploited by PA.
For its part, PA fell well short of the appropriate duty of care that we expect contractors to demonstrate when in receipt of taxpayers’ money; instead of looking out for its client, PA took advantage of UKTI’s poor decision making. It sold UKTI a service it is not clear it needed and failed to give the fair breakdown of its costs and profit that UKTI asked for. Instead, it used the negotiations to pass on costs to UKTI that it had said in its bid that it would bear, and to increase its profit from the contract while telling UKTI that its profit had not increased.
Inquiry hampered by lack of proper records
The contract between UKTI and PA Consulting is a sorry saga from beginning to end. Our inquiry has been hampered by the lack of proper records from all parties concerned. We cannot remember a previous inquiry in which so many witnesses corrected their evidence after a public session.
These events do not inspire us with confidence that we have got to the bottom of what happened. The incompetence by all parties involved in letting the contract, managing the contract and keeping records is an extraordinary coincidence. Such a lack of competence across the board leaves us with serious concerns.
We recommend that the Government commission the National Audit Office to conduct an independent forensic audit of both UKTI and PA Consulting to get to the bottom of what happened. It is not enough to describe incompetence at a Parliamentary committee especially when information and explanations have changed before, during and after our public session. We need to see a rigorous pursuit of the truth.
Government's lack of commercial expertise a "regular cause for concern"
PA has not convinced us that it takes full responsibility for its actions. Its many explanations of its charges both at the time and since have been loosely worded, inconsistent and seemingly designed to obfuscate. It is unclear to us how such behaviour would be possible in a well managed professional practice.
UKTI appears to have learnt some of the lessons, but it is worrying that it has taken this episode to make it realise it needs better commercial capability.
Government's lack of commercial expertise to get the best deals on behalf of the taxpayer has been a regular cause for concern for this Committee.
Commercial capability has not extended into arm's-length bodies
We and the previous Committee of Public Accounts have heard several times from Government about how it is seeking to improve the commercial capability of central government departments and we concluded in our March 2016 report Transforming Contract Management: progress review that it is making some good progress.
But it is worrying that these capability-building initiatives have not been extended to arm's-length and devolved bodies like UKTI when such bodies do a large proportion of procurements carried out on behalf of the taxpayer.
In the last year we have reported on NHS Digital's General Practice Extraction Service, where the contractor also took advantage of a weak client, and the Cambridgeshire and Peterborough clinical commissioning group's UnitingCare Partnership contract, which collapsed after the rush to sign a contract before resolving what it would actually cost.