MPs probe PwC’s ‘cosy’ contract for ‘flawed’ Covid loan management system

Senior civil servants from the Department for Culture, Media and Sport (DCMS) have been quizzed by MPs over the decision to hand PricewaterhouseCoopers (PwC) a £1.9m contract in February 2023 to develop a data collection and storage platform to manage its Covid-era loan book.

Questions over the appointment of accounting, tax and advisory services firm PwC and whether it had delivered a serviceable system were raised at a Public Accounts Committee hearing on Monday (10 February).

During the hearing, MPs examined DCMS’s handling of Covid loans totalling £474m issued to 120 borrowers from October 2020 to March 2022, including £256m that went to 37 culture bodies through the repayable finance strand of the Culture Recovery Fund.

Although all decision making remains with DCMS, Arts Council England (ACE) is one of two of its arm’s length bodies, along with Sport England, appointed as agents for the loan book, responsible for day-to-day management of the scheme and relationships with their respective borrowers, supported by a loan management system developed by PwC.

‘That does sound a bit cosy’

PwC’s loan management system (LMS) has been operational since June 2024, 15 months later than initially planned and with a broader scope than initially agreed after the contract value was increased to £2.9m.

Labour MP Clive Betts was one of several committee members to ask why DCMS decided to hire a company that is “not a specialist in loan management” when it needed additional specialist help.

DCMS permanent secretary Susannah Storey explained that the department initially engaged PwC as a professional service provider in 2020 to supply options analysis and help the department with its approach to the loan book.

“That does sound a bit cosy,” said Betts, “They’re helping you design the system, and then, ‘“Oh, we are going to give you some more work to help to manage it’.”

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Storey, who was appointed in 2023, said: “I think they gave us the original advice on the different ways of running this scheme. And then when we came to do the loan management system, there was an open procurement, and they were the winning party.”

Betts asked: “So they devised the scheme that they then tendered for?” to which Storey said: “I don’t think it was exactly that simple in the sense that other people also could have bid for it, so obviously anybody who was the winning bidder would have to meet the required criteria.”

Storey also said that when PwC’s contract expires next month, DCMS, which will retain the IP for the LMS, could engage a third party to take over.

‘Mission creep’

Labour MP Nesil Caliskan also quizzed the panel over PwC’s role, asking whether the contract was managed tightly enough to prevent “mission creep”, which broadened the scope of work, resulting in delays and increased costs and whether the platform was fit for use when it launched.

Citing a December report from the National Audit Office, which revealed ACE had needed to maintain spreadsheet records that the LMS was meant to replace, Caliskin said that when the loan management system was launched in June 2024, “it didn’t go well”.

“There were still, for example, borrowers who were reporting that they weren’t able to log on to the platform.

“[ACE} reported that the loan management system didn’t provide certain functionality… it didn’t even recalculate borrowing interest payments, which is quite a basic function; a million pounds extra is quite a lot of money to then have something launched for it not to work.”

Storey said that the LMS was “incredibly useful” and that it was DCMS which made the decision to expand its scope.

“That was one of those difficult choices,” said Storey. “I think it would have been the wrong choice not to extend the scope when we thought it was the right thing to do. Even though it meant we missed a deadline.”

However, she conceded that she wouldn’t describe the delayed rollout as a success for the department and that, “Unfortunately, it is sometimes the case when the new systems are launched that there is a kind of learning and testing period.”

She continued, “We obviously want to ensure, now the system is running, the borrowers are more familiar with it and that it is functioning, that we minimise those kind of things.”

Nicola Hewer, director of the visitor economy, heritage, loans and art collection at DCMS, confirmed that the system is undergoing further improvements by PwC to provide additional functionality at an extra cost of £300,000.

She also said she was confident that the system would be able to cope with an increasing number of borrowers starting to make their first payments later this year.

Retendering process

Looking ahead, Labour MP Lloyd Hatton asked the panel how they would avoid repeating “the mistakes you’ve made so far” when retendering the LMS contract next month.

“PwC has got more and more money from the taxpayer, and yet it has not really delivered the best service in return,” said Hatton.

“As we have seen, there have been mistakes, so how will you make sure that, if we do make a decision to go with PwC in the future, it will actually provide good value for money and not a flawed system?”

Hewer disagreed with the characterisation of the LMS as “flawed”, saying that periods when borrowers couldn’t access certain functions were “short-lived”.

Polly Payne, director general of policy at DCMS, said the department now has digital data and technology expertise “embedded” in its loans team, which it didn’t have previously.

Storey added, “Also, I think every time you do a procurement, the second time around, you have extraordinarily useful and very current learning. So rest assured, we will be bringing that learning when we do it.”