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You could have contracted 5 small firms for £400k each (which, for this project seems frankly seems excessive) and even if a couple failed to deliver you'd have gotten 3 separate products to choose the best quality one from, £148k to legally chase up the firms who failed to deliver, and still had £2 million left over.

I agree a good solution isn't easy to come up with, but the status quo is certainly an outrageously awful one.

The large firms' reputation isn't really at stake though. They keep doing crap like this and it never harms their ability to get more contracts.

There are dozens of "small firms" with plenty of reputation at stake. Or how about a "medium-sized firm". There's quite a few, probably a few hundred-thousand, options inbetween "PWC" and "my mate's nephew studying computer science".