Public bodies hand out AI deals for £500m without competition

Public bodies have been handing out a flurry of AI contracts without competition since Labour came to power, inking in deals for more than £500m.

Data from the procurement intelligence firm Sell to State suggests that government departments, councils, quangos and other public bodies have signed more than 280 AI deals without any competitive process, with a further 42 agreed with only limited competition.

According to UK procurement law, public bodies wouldn’t have had to put 60% of the contracts in this dataset out for tender. Thresholds which require competitive processes are set very high, varying between £207,720 for subgovernmental units like local councils up to £5,193,000 for defence and security works contracts. So contracts for millions of pounds have been issued without any need for competition at all.

More than a third of the contracts in the Sell to State dataset were made through direct awards or without publication of a call for competition, including a £12m contract between the Ministry of Defence and startup firm Adarga, for a military AI platform. 

While most of these contracts were issued under Keir Starmer’s leadership – a period when the former minister Peter Kyle was pushing AI systems into the UK state – several were signed after Andy Burnham took over in July.

The Sell to State figures give a conservative estimate of how many public contracts for AI-related products and services have been issued without competition, as they exclude long-term agreements with pre-approved suppliers. They also only include contracts with AI-related keywords such as AI, LLM and the names of models like ChatGPT in description. So controversial contracts, such as Palantir’s £20m contract with Britain’s National Energy System Operator or its £240m contract with the Ministry of Defence – both handed out without competition – are not included.

The Cabinet Office handed out the biggest contract in the dataset last month, a joint deal with KPMG and Ernst and Young. The “National School” will see the consultancies training the civil service “in priorities such as digital and artificial intelligence, leadership and management”. It seems that Labour’s promise to slash spending on external consultancies has been trumped by the party’s enthusiasm for AI. 

Many of these contracts have been given to US tech giants such as Open AI, Google, Microsoft and Amazon, flying in the face of warnings from parliament’s science and technology committee that the government “must protect its tech sovereignty”.

The Cabinet Office failed to explain why public bodies are handing out so many AI contracts without competition.

According to Good Law Project’s tech and data lead, Duncan McCann, these figures show that ministers have fallen for the tech industry’s AI hype.

“Sneaking AI contracts through without competition doesn’t just put taxpayers’ money at risk,” McCann said, “it also puts our privacy on the line by shipping sensitive data off to tech firms around the world.”