LONDON (Reuters) - Britain does not hand out its government contracts to a wide enough range of companies, stifling competition and creating the risk that some service providers become "too big to fail", a committee of lawmakers said on Wednesday.
Britain contracts out around 90 billion pounds worth of services, ranging from immigration centres to information technology support, to private sector providers such as Serco (L:SRP) and G4S (L:GFS).
After a string of problems with high-profile contracts, parliament's Public Accounts Committee on Wednesday criticised the way the government awards business.
A committee report said work is too often awarded to large firms that are insulated from market pressure to deliver the services efficiently, and that run so many contracts across government they cannot be sufficiently sanctioned for failure.
"Government must guard against quasi-monopoly suppliers becoming too important to fail, and encourage competition through, for example, splitting up contracts to encourage (smaller businesses) to bid for work," said Margaret Hodge, chair of the committee that oversees public spending.
The report also said the government needed to take a more active approach to managing the contracts once they had been awarded, citing recent problems with botched contracts.
Last year, outsourcers G4S and Serco were found to have overcharged the government on a contract to manage the electronic tagging of criminals.
Hodge said that case was "the starkest illustration of both contractors' failure to work in the public interest and government failure to safeguard taxpayers' money."
Britain has more recently moved to introduce a wider range of providers to outsourced public services.
In October, it awarded 21 criminal probation service contracts worth a total of 450 million pounds a year to firms such as Interserve (L:IRV), and Sodexo
British support services company Carillion (L:CLLN) on Wednesday predicted a slowdown in government contracts awarded ahead of next year's national election.
(Reporting by William James; Editing by Mark Potter)