How secrecy designs waste and failure into Govt contracts

Government secrecy over the outsourcing deals it does with private firms is self-defeating, and creates a culture of laxity where officials can make mistakes or abuse their power with impunity, says a report.

Citing the embarrassing case of the Bruce Stadium in Canberra, Australia, which led to the downfall of a regional government, waste of public money and the undoing of a prominent politician, a paper* in this months' Accounting, Auditing and Accountability Journal explains some of the events that led subsequently to the banning down under of the commercial-in-confidence excuse so beloved of British politicians.

"The requirement to make all contracts over a low threshold open for public inspection has largely cleaned up Australian Government outsourcing," Professor Allan Barton, of the Australian National University in Canberra told The Register.

"However, some problems remain at the State Government level, particularly in PPP [Public-Private Partnership] contracts. I believe there are many similar problems with PPPs in the UK," he added.

His paper argues that the use of commercial-in-confidence negated the reason for outsourcing in the first place by creating a bubble of secrecy in which abuses could happen, which in turn created inefficiency instead of making improvements.

The basic arguments are school syllabus stuff: "The secrecy surrounding contracts removes the pressures required to achieve efficiency and effectiveness in service delivery, thereby defeating a primary purpose for the outsourcing of services."

Cynical watchers of the government's long record of ambitious IT projects might cite the NHS' multi-billion pound National Programme, the establishment of which we will all learn about in June when the Audit Commission publishes its long awaited investigation of the project; or the fledgling ID cards system, which has its lack of scrutiny protected by law.

Australia's most famous "fiasco" was of the redevelopment of the Bruce football Stadium, which went (altogether now) over budget and over time.

The paper argues that there is such a thing a democratic principle by which elected politicians make decisions on behalf of the electorate, which should be able to scrutinise how money is used on itsbehalf.

The implication of this might be that public services, as their "transformation" is catalysed by the private interests, become less accountable.

The paper also argues that there is such a thing as the public good, which should ensure that public services are, as tradition would have it, non-excludable and non-rival - that is, available to everyone without limit on their genuine need.

It also argues that scrutiny is to public services what the invisible hand was to Adam Smith's view of the market - that competition prevents any one entity from abusing its position. That argument might also favour the private provision of public services.

Indeed, the self interest that fuels private business, tethered to the public good, might be a benign force of considerable strength, as our entrepreneurs demonstrate.

But private provision does not do away with the need for scrutiny. According to this paper, it begs for more. Official Australian reports prior to the 2003 decision found that a vast majority of public contracts were obscured by commercial-in-confidence, most often at the behest of the government, and not, as is usually claimed, the private partner. Yet few contracts could justify the secrecy, so it was recommended that transparency be the rule and commercial-in-confidence should be justified whenever it was called upon.

Secrecy had become a political reflex because, "[It] suited the personal interests of ministers and senior bureaucrats in avoiding the onerous task of being accountable for their activities."

Moreover, it begs, how confident can we be in the private provision of public services without proper scrutiny?

Before the Australians banned government secrecy the Victoria Public Accounts and Estimates Committee said it was "one of the greatest challenges to public administration today".®

* Public sector accountability and commercial-in-confidence outsourcing contracts