Open-book accounting (OBA) should become standard practice for all major government contracts to ensure greater transparency  and better management of  deals with suppliers, according to a report by the Public Accounts Committee (PAC) on private contractors and public spending.

The report states that only one third of government contracts currently require the use of OBA, and even where such provisions exist, they are rarely used. 

In addition, government departments lack the ability to use OBA and would need to improve their capability ‘significantly’ to make this work in practice.

PAC identified ‘a lack of transparency and openness’ around government contracts with private providers and said ‘commercial confidentiality’ was frequently invoked as an excuse to withhold information.

PAC said evidence from the contractors themselves suggested they had no objection to OBA requirements being built into contracts and said it was ‘surprising’ that such an 'easy-win' to improve transparency over large sums of expenditure has not been implemented.

The committee wants to see OBA made mandatory for contracts above an agreed level of expenditure and for the Cabinet Office to develop guidance for departments on how and when to use this approach. The disclosures should include information on the company's approach to taxation, contractors' performance and the way they manage public services across government.

It also said departments should adopt disclosure as their ‘default position’ and routinely publish information on contracts with private providers including, for example, contract duration, value and performance against key indicators.

It also wants an extension of Freedom of Information provisions so they automatically cover public contracts with private providers and better access rights for the National Audit Office to scrutinise the overall performance of contractors, rather than individual projects.

PAC was highly critical of central government’s approach to contract management and governance, describing it as ‘very weak’. The report noted that while it was ‘scandalous’ that  the contractors G4S and Serco had overcharged by tens of millions of pounds for electronic tagging, it was ‘shocking’ that the Ministry of Justice did not spot this for eight years.

It also recommended  that accounting officers should take responsibility for and show leadership in contract management, rather than devolving the role to relatively junior staff who lacked the necessary skills to work closely with contractors to improve the quality of services.