Outsourcing Britain’s reputation isn’t working
There is a curse on any company supplying services to the Government. If the firm does well and expands, it’s profiteering. If it bids too low and then collapses, it’s irresponsible and should never have been given any contracts in the first place. In some cases, like Carillion, politicians somehow argue both sides at once.
In a smaller way, the sector that supplies foreign policy services to the Government is undergoing a slow-motion crisis not unlike Carillion’s. In recent months, two suppliers have gone bust and larger companies are retrenching. And despite the Government’s attempt to outsource all risk, the fallout has inevitable consequences for British policy aims when things go wrong.
The two collapsed firms illustrate different sides of a trend. The first to go, Maxwell Stamp, had been advising the Foreign Office and Department for International Development for decades. According to former staff, it failed to adapt to the much lower-margin market created by government cuts. It refused to bid on unprofitable contracts and, as a result, became increasingly unable to get work.
Not long later, another supplier to the Foreign Office, DFID and Home Office went under. Aktis Strategy was in some ways the mirror image of its rival Maxwell Stamp. It was much smaller, founded in 2013, and keen to win business. So keen, in fact, that it took on lowmargin work that couldn’t make money. That, combined with financial mismanagement, sank the company in March this year.
A government should drive a hard bargain, of course. But that hardly excuses the mess the system is in. DFID has a target to procure more from small businesses, but its procurement process pushes the other way. In one case, a supplier recalls, the department tendered for a project in Sierra Leone and bidders spent six months working up their proposals whereupon, at the end, the whole project was scrapped.
In two other projects, one in Iraq and one in Uganda, instead of running proper tenders, the Foreign Office just temporarily extended contracts for months on end because of problems getting decisions through its bureaucracy. The result is dozens of staff working on highly sensitive briefs, often in dangerous places, not knowing if they will have a job in five weeks’ time.
With the aid budget rising and Britain trying to invest more in foreign policy, it’s counter-intuitive that the sector executing many of its projects is getting into trouble. When a firm collapses or a contract is uncertain, it’s the UK whose reputation suffers. Getting value for money is one thing. But driving your suppliers out of business while trying to reorient the entire country’s foreign policy? It’s an odd way to operate.