Senior procurement officials at the Ministry of Justice did not read a consultants’ report warning of the risks in a £42m contract to provide courtroom interpreters, it emerged at a parliamentary hearing yesterday.

The House of Commons Public Accounts Committee was taking evidence on the procurement and implementation of the courts contract with Applied Language Solutions, now Capita Translation and Interpreting. The hearing follows a National Audit Office report which described the company’s initial contract performance as ‘wholly inadequate’.

Three senior officials, including head of procurement Ann Beasley, admitted that they had not read a report from a financial data company advising them not to do business worth more than £1m with Applied.

Margaret Hodge, the committee’s chair, described the admission as ‘shocking evidence’ and said the three had ignored a ‘very obvious and basic bit of due diligence’. She told Beasley: ‘You are in charge of procurement and I do not think you understand what you are procuring’. Hodge questioned how the MoJ would be able to do a better job negotiating larger private sector contracts if it made mistakes on this relatively small one.

Committee members accused officials of having had the ‘wool pulled over your eyes’ by Applied, which it said had at best ‘misrepresented’ its readiness to be able to deliver the service.

Conservative member Stewart Jackson said the lack of sanctions taken against Applied for its alleged failures signaled to other companies that they could ‘take a punt’ on MoJ contracts that they might not be able to fulfil in the knowledge that they would face no sanction.

Chief executive of HM Courts and Tribunal Service Peter Handcock said that lessons had been learned and that with hindsight, ‘a whole load of things’ could have been done better. But Hodge described as ‘astonishing’ the fact that, even with hindsight, the three officials maintained that they had not been wrong to pursue the contract with Applied.

Beasley said that the service being provided by Applied is improving, but admitted that it is ‘not yet in a good enough place’. Hodge told the Gazette after the session: ‘This is one of the worst contracts I’ve seen. The scary thing is that it exemplifies the problems and challenges the government faces as it contracts more with the private sector.’

The contractor, which did not attend yesterday’s hearing, has been summoned to give evidence to the committee on 29 October.