Contract Liabilities

Mark Prisk Excerpts

Friday 13th September 2013 Written Statements

[The Minister for Housing (Mr Mark Prisk)]

I wish to inform the House of spending that the Government have been forced to undertake as a result of poor decisions made by the last Administration.

The Department for Communities and Local Government has two service concession contracts with Landmark Information Group for the operation of the domestic and non-domestic energy performance certificate registers. These commenced in 2007 and 2008 respectively. The contracts, signed under the last Administration, were let on the basis that the revenue from the fees paid whenever an energy performance certificate or related document is entered onto the registers would cover the full cost of operating the registers.

As a result of low transaction volumes, due to the economic down turn under the last Administration following the financial turmoil in 2008 and 2009, and a number of enhancements to register services, the revenue from fees for entering documents onto the registers has not been sufficient to meet the full cost of operating the registers.

This has left the current Government with a contractual obligation to meet the cost of services that had been delivered through the register contracts but which had not been covered by revenue from fees for entering documents on to the registers. As a result, the Department has reluctantly agreed to make a payment of £5.7 million to cover these costs to April 2013. It is the view of Ministers that it is clearly unacceptable that contracts were drawn up and operated which outsourced a service to the private sector, but left taxpayers with unreasonable commercial risks.

Ministers in the Government have acted decisively to address this situation and safeguard the future operation of the registers for the benefit of consumers and industry. Fees were revised in April 2013 to cover the full cost of operating the energy performance certificate registers and will be reviewed annually to ensure that remains the case. The recent payment has ensured that these fees were not higher for property owners, and that current service users are not paying for services delivered in the past.

The contracts have now been extensively reviewed in order to deliver improved value for money. This has included a reduced margin for the contractor and enhanced scrutiny of any future proposals for changes to energy performance certificate register services to minimise future liabilities for the taxpayer.

This is not the first botched contract that the coalition Government has been forced to fix. As Ministers indicated in the answer of 19 July 2011, Official Report, column 829W, the last Administration’s poor drafting of the tenancy deposit protection scheme contract similarly resulted in a £13 million liability for taxpayers, again as a result of commercial risk from an outsourced service being left with taxpayers.

Hon. Members and the broader public will rightly wish to scrutinise the poor decisions of the last Administration. I will arrange for redacted copies of the old and the revised contracts to be placed in the Library of the House in due course.