Cabinet Office minister Francis Maude has sent a letter to all Cabinet ministers in the last week detailing new processes for blacklisting high risk suppliers that have underperformed in the past.
This follows a meeting Maude held with 20 of the government's top suppliers last month, where he informed them that supplier performance would now be monitored and made available at the start of, and during, the procurement process.
The letter, as seen by Spend Matters UK/Europe, details Maude's view that government has not always taken existing performance into account, which has 'too often' resulted in suppliers winning new business, even when they were underperforming on critical work elsewhere in government.
"[The] chief secretary and I have agreed a mechanism for officials to recommend that a supplier be regarded as 'high risk' where material and substantial underperformance is evident," said Maude.
"In these cases, departments will be asked to engage with the Cabinet Office at each stage of any procurement process involving the affected supplier to ensure that performance concerns are taken fully into account before proceeding."
Spend Matters has since reported that two government suppliers have already been tarnished with the 'high risk' label, but sources would not confirm which suppliers these were. A Cabinet Office spokeswoman was not willing to confirm or deny this.
Public sector commentators have noted that Maude's new approach may also cause problems for ministers in the future, as it may discourage vendors from wanting to work for the public sector, for fear of a damaged reputation, with no guarantee of future work.
Suppliers take risks working for the public sector because failures are always incredibly well publicised. In the past this hasn't worried suppliers as much because there has been said to be an 'unwritten rule' between government and the private sector that there will always be future contracts in the pipeline.
The Cabinet Office said: "Back in June the minister for the Cabinet Office made it clear that the Government was improving the performance management of its strategic suppliers. Too often in the past performance history was not properly taken into account when awarding new contracts.
"That is why he announced that the government was stepping up the formal performance management of its large, strategic suppliers. This will include formal reporting on performance and the identification of any high risk suppliers so that performance issues are properly taken into account before any new contracts are given."
This being said, the news is likely to raise concern for suppliers such as CSC and G4S, both of which have had high-profile public sector contracts in recent years that have failed spectacularly.
CSC was responsible for the failed National Programme for IT (NPfIT) and was lambasted last year by MPs on the Public Accounts Committee (PAC) after it was revealed that the IT services company had delivered a full patient administration system to just three trusts in nine years. CSC may have to write off the entire Â£957 million investment it made in the programme.
More recently G4S' CEO, Nick Buckles, confirmed to MPs that problems with the company's scheduling system is partly to blame for the shortfall of over 3,000 security staff for the London 2012 Olympic Games.
Tola Sargeant, director at analyst firm TechMarketView, highlighted when Maude first met with suppliers to inform them of the new stringent policies that it may hold repercussions for the likes of CSC.
She said: "Obviously this does have implications for suppliers like CSC. They are not the only one, there are always examples of suppliers in areas of the public sector where things go wrong, but at the moment CSC is the first one to spring to mind because it was such a big contract and the problems have been ongoing for a long time."