The relationship between the Government and private sector companies which supply services needs to be urgently reviewed in the wake of Carillion’s collapse, some of the company’s rivals will tell MPs this week.

The bosses of Mitie and Serco will appear in front of Parliament’s Public Administration and Constitutional Affairs committee today as the Government gathers evidence in an attempt to avoid another high profile collapse of a business providing core services to ­institutions such as schools and hospitals.

Rupert Soames, the chief executive of Serco, said in his submission to the committee ahead of the session that there is “an urgent need to re-think the relationship between the UK Government...</s>The Government has been accused of 'bad behaviour' by the boss of outsourcing giant Serco for passing 'unreasonable' contracts to suppliers and expecting them to shoulder the risk of law and policy changes.

Rupert Soames also said the Government was ignoring its own guidelines about 'what’s reasonable to expect firms to do', and that its decision process for awarding companies was 'shrouded in opaqueness'.

Soames' accusations come amid growing concerns about the financial stability of outsourcing companies following the fiasco of Carillion's collapse, and the struggles of Interserve and Capita since.

While he conceded that 'a lot of this' was down to bad management, he said the Government was also responsible.

In a Commons hearing on lessons learned from the collapse of Carillion, he told MPs: 'It’s not unknown for Government to behave quite badly.

'It’s a monopoly buyer, it’s also the regulator, the referee and the giver out of business.'

Serco's boss said the recent woes in the sector was 'astonishing' and added: 'It’s been a massive, massive disruption in the supplier sector, the likes of which I’ve never seen – £8billion written off of the supplier sector and billions of pounds being raised to recapitalise.'

The sector is plagued by long-term problems that hit some companies far worse than others, including historic underpricing in order to secure new contracts.

Soames said the bidding process was flawed, with the Government under pressure to choose the cheapest supplier, rather than focusing on quality and expertise.

He also said that the Government's process for deciding when to outsource and its decisions on contract bids were 'shrouded in opaqueness', but should be transparent and audited by the National Audit Office.

Mitie chief executive Phil Bentley, who was also giving evidence in the hearing, told MPs on the Public Administration and Constitutional Affairs Committee that he believed inaccurate data was also to blame for some failed outsourced contracts and called for greater data sharing and transparency.

He gave the example of the asylum seeker contract handled by Serco, which he said saw the numbers of asylum seekers 'massively underestimated' and led to hefty losses on the work.

Both company chiefs said the Government had tried to pass on the extra cost of the national living wage on some contracts, while also expecting suppliers to take the hit from any future policy changes from Brexit law changes.

He has already publicly called for 'living wills' and a new code of conduct as part of an overhaul of the public sector contracting market following Carillion’s collapse.</s>The boss of outsourcing giant Serco has accused the Government of “behaving badly” by passing off unreasonable contracts to suppliers, ignoring its own guidelines and shrouding its decisions in secrecy.

In a Commons hearing on lessons learned from the collapse of Carillion, chief executive Rupert Soames told MPs that a raft of “well run and well respected” outsourcers have lost vast amounts of money in recent years working on government contracts with “unmanageable amounts of risks”.

Mr Soames – a grandson of Sir Winston Churchill – claimed the Government has previously tried to pass off controversial and “unreasonable” contracts to outsourcing firms, while also routinely expecting suppliers to shoulder the risk of major law and policy changes.

He said: “It’s not unknown for Government to behave quite badly.

“It’s a monopoly buyer, it’s also the regulator, the referee and the giver out of business.”

He said the recent woes in the outsourcing sector, which led to the collapse of Carillion and forced a number of its rivals to raise emergency capital to bolster their finances, was “astonishing”.

“It’s been a massive, massive disruption in the supplier sector, the likes of which I’ve never seen – £8 billion written off of the supplier sector and billions of pounds being raised to recapitalise.”

He added: “A lot of this is management’s fault, but … the Government as a monopoly buyer cannot stand idly by and say ‘nothing to do with me, Gov’.”

“There’s a very good PIN (prior information notice) saying how departments should behave and what’s reasonable to ask firms to do and it is widely ignored among departments,” he said.

The Government process for deciding when to outsource and its decisions on contract bids are also “shrouded in opaqueness”, but should be transparent and audited by the National Audit Office, he added.

Mitie chief executive Phil Bentley, who was also giving evidence in the hearing, told MPs on the Public Administration and Constitutional Affairs Committee that he believed inaccurate data was also to blame for some failed outsourced contracts and called for greater data sharing and transparency.

He gave the example of the asylum seeker contract handled by Serco, which he said saw the numbers of asylum seekers “massively underestimated” and led to hefty losses on the work.

Both bosses also said the bidding process was also flawed, with the Government under pressure to choose the cheapest supplier, rather than focusing on quality and expertise.

Mr Soames added there are “no benefits for good behaviour, and no penalties for bad behaviour” in the process.

“In the commercial sector, you get a feeling people like their suppliers to behave well,” he said.

The company chiefs said the Government had tried to pass on the extra cost of the national living wage on some contracts, while also expecting suppliers to take the hit from any future policy changes from Brexit law changes.

Mr Soames has already publicly called for “living wills” and a new code of conduct as part of an overhaul of the public sector contracting market following Carillion’s collapse.

He has drawn-up a four-point plan where outsourcers handling sensitive government contracts should sign “living wills” setting out what will happen with projects in the event of the firm going bust, as well as suggesting greater transparency on project progress, with updates every six months to ensure they are held accountable.

He also believes contracts should have pre-agreed “break fees” for both suppliers and the Government to allow either to pull out if a project is not working.
The heads of Serco and Mitie are expected to appear before the UK's Public Administration and Constitutional Affairs Select Committee to testify over the collapse of Carillion.