The MPs have called for the veil of secrecy that surrounds these contracts to be lifted and says that it is supported in this by the contractors themselves.

It says that it is only the government that wants to keep the commercial terms of these contracts secret.

PAC chair Margaret Hodge said:

“There is a lack of transparency and openness around government’s contracts with private providers, with ‘commercial confidentiality’ frequently invoked as an excuse to withhold information. It is vital that Parliament and the public are able to follow the taxpayers’ pound to ensure value for money. So, today we are calling for three basic transparency measures:

• the extension of Freedom of Information to public contracts with private providers;
• access rights for the National Audit Office; and
• a requirement for contractors to open their books up to scrutiny by officials.

“The four private contractors we met – G4S, Atos, Serco and Capita – all told us they were prepared to accept these measures. It therefore appears that the main barriers to greater transparency lie within government itself.”

While the committee did not specifically look at construction-related or technical services, it did examine numerous scandals in the sort of services that construction companies with big facilities management arms, such as Interserve, are increasingly moving into.

Mrs Hodge said:

“Recent scandals illustrate the failure of some contractors to live up to expected standards. These include the astonishing news that G4S and Serco had been overcharging the Ministry of Justice on their electronic tagging contracts for eight years, including claiming for ex-offenders who had actually died – and the complete hash that G4S made of supplying security guards for the Olympics.

“These failures have also exposed serious weaknesses in the Government’s ability to negotiate and manage contracts with private companies on our behalf.

“We looked at Serco’s misreporting of the performance of its out-of-hours GP services in Cornwall, where the contract was so poorly written that not only did Serco not lose the contract, but they continued to receive bonus payments. When Capita failed to fulfil its contract to provide court translation services it was fined a mere £2,200 – despite the substantial extra costs to the criminal justice system of delayed trials.”

The PAC said that an absence of real competition had led to the evolution of privately-owned public monopolies that have become too big to fail. Some public service markets such as for private prisons, asylum accommodation or disability benefit assessments, are now controlled by just one or two major contractors. Small and medium enterprises (SMEs) have been crowded out by the complexity of the contracting process, excessive bureaucracy and high bidding costs.

The Confederation of British Industry (CBI) backed the report’s recommendations. Director-general John Cridland said:

“The private sector plays an increasingly important role in running public services, as this report notes. The public has a right to know how its money is being spent and the industry has pledged to meet a higher bar on transparency.

“Businesses running public services agree that open book contracting should become the norm. The National Audit Office should also be able to audit government contracts as long as this is done in a systematic way with the triggers for inspection, like missed performance targets, agreed from the outset.

“Rather than relying on individual freedom of information requests, we think FOI should be built into contracts when they are agreed.

“As the report highlights, it is often the government which pushes for transparency, so the onus is now on it to open contracts to scrutiny. It also faces a critical challenge that means making sure it has the right skills and capacity to manage competitive, accountable and transparent public services markets.”

The full rpeort can be downloaded atwww.publications.parliament.uk/pa/cm201314/cmselect/cmpubacc/777/77702.htm