Contract Waste in Government Spending
News
A UK National Audit Office report revealed that £3.2 billion of government procurement spend was exposed to poor oversight due to inadequate contract performance systems. These failures resulted in delays to public infrastructure and misaligned incentives in outsourced services—waste representing up to 7% of total program value in some cases.
Across governments worldwide, billions are spent each year on contracted services—yet many public entities lack the systems to track whether those services are delivered on time, on budget, or to specification. A report from the UK’s National Audit Office (NAO) estimated that approximately £3.2 billion in public procurement funding was exposed to inefficiency or loss due to inadequate contract oversight and weak performance tracking. These findings aren't outliers. They reflect structural weaknesses common across jurisdictions, especially in sectors like infrastructure, health, and social services.
In one widely cited example, the Ministry of Justice was forced to terminate and repurchase outsourced probation services after contract performance fell far short of expectations. What went wrong? Deliverables were not systematically tracked. There was limited internal visibility on performance metrics. Reporting lines were ambiguous, and frontline contract managers had little to no data to guide decision-making. In another case, public housing contracts were renewed without evaluation, despite evidence of missed delivery targets and compliance breaches.
The cost of inaction can be profound. On a $100 million annual contract budget, a conservative estimate of 3–7% waste implies $3 to $7 million lost per year. This is before factoring in the costs of reputational damage, political fallout, or remedial action. However, there is a proven path forward. Introducing automated milestone alerts, linked obligations, and supplier performance scoring into contract oversight can significantly reduce leakage and strengthen the integrity of procurement. When agencies can see what’s working—and what’s not—they are better placed to defend public value, meet social procurement goals, and avoid recurring underperformance.
Source: National Audit Office (UK), Lessons learned from Major Programmes”, HC 960 (13 Nov 2020).
https://www.nao.org.uk/wp-content/uploads/2020/09/Lessons-learned-from-Major-Programmes.pdf