Taxpayers' money is being squandered on public sector outsourcing deals where costs are ballooning up to 75 per cent more than the going market rate, reports Silicon.com.

Compass Management Consulting claims that lacklustre controls on spending over the full lifetime of government outsourcing contracts are leading to "poor value for money" because public sector organisations are lured by low upfront costs, rather than longer term savings.

The consulting group made its claims in a submission to the government's Public Services Industry Review (PSIR) that is looking at how to improve efficiency in the £40bn-a-year public outsourcing market.

Compass said that managers and systems need to be put in place to work with supplier to monitor performance and control spending once the contract gets underway, similar to the setting up of a vendor management office.