The report follows an inquiry carried out by the committee in the wake of the Carillion collapse.

SEC Group, which gave written evidence to the committee, said the report reflects many issues raised in its submission regarding protection for SMEs, especially those acting as sub-contractors in the supply chain.

Recommendation 12 in the report demands urgent action from government on improving payment security.

It reads: “There is no excuse for small and medium supplier businesses not being paid on time. We recommend that the government considers a project bank account approach and reviews the impact on small businesses. We expect the government’s proposals for supporting SMEs to include measures to address:

“We recommend that the government consult with SMEs on the most appropriate way to incorporate these measures in contracts.”

SEC Group’s chairman, Trevor Hursthouse, said that he was delighted with the committee’s report but queried how many more reports and recommendations were needed before the government got the message.

He said: “Over the years we have warned government of the financial fragility of its strategic suppliers and, as the committee acknowledged, these kind of warnings were ignored.

“We have provided government with a comprehensive set of proposals that will support SMEs on government contracts and hopefully we can now have a productive dialogue with government as a result of this report.”

Publishing the report, committee chair, Meg Hillier MP, said: “The Public Accounts Committee has long highlighted weaknesses in government contracting and the lessons it must learn if it is to outsource effectively for the benefit of service users and taxpayers.

The collapse of Carillion in January sharpened our focus on the relationship between Government and its Strategic Suppliers—companies that receive over £100m in annual revenue from Government contracts.

“Vast sums are invested across vital public services, with far-reaching impacts on the lives of citizens. It is critical that their money is spent wisely and with their best interests at heart.

This report, which follows our publication of government’s Carillion risk assessments and new evidence taken from government and strategic suppliers, makes important recommendations in this direction.

“In particular, we have identified a need for government to be more assertive in shaping the markets in which it operates, with a renewed focus on driving value for taxpayers’ money.

“It must look with fresh eyes at the motivations of companies currently bidding for central government work, and develop a strategy that requires contract-awarding bodies to look beyond bottom-line costs.

“Crucial to this will be to embed procurement best practice across departments.

“For example, there must be clearer specification of contracts, properly scoped, so that when any deal is signed there is an agreed understanding between government and supplier of what is being paid for, and over what timescale.

“There are many areas in which the cabinet office can drive compliance across departments—not least turning its proposed ‘playbook’ of guidelines, rules and principles for contracting into a set of mandatory requirements.

“We encourage it to respond positively to the recommendations set out in our report and take the necessary steps to ensure its authority is better felt.”