Force supply firms' prices down, Whitehall urged
The government is "not fully using" its buying power to ensure its contractors provide value for money, MPs have said.
The Public Accounts Committee also urged ministers and officials to make companies pay their "fair share" of taxes or lose lucrative work.
Chairwoman Margaret Hodge said the Treasury and Cabinet Office had been "half-hearted" in implementing change.
But the government said Whitehall was becoming "leaner" and "more efficient".
Earlier this month, Prime Minister David Cameron indicated companies with "broken" cultures could be blocked from bidding for government work.
This followed private security companies Serco and G4S overcharging by tens of millions of pounds for tagging criminals, including for monitoring dead offenders.'Strong action'
G4S had also failed to provide enough security guards for the 2012 London Olympics, and the government had uncovered potentially fraudulent behaviour in Serco's management of its £285m prison-escorting contract, the MPs said.
Their report stated: "While it is long overdue, we welcome the co-ordination of the management of major suppliers across government.
"However, government is still not fully using its negotiating position as a large customer to challenge those who pay little UK tax on their profits or those who have failed to deliver effectively in previous contracts.
"The Cabinet Office should consider how suppliers' performance and record of paying their fair share of tax impact on procurement decisions."
The committee suggested top civil servants should be held more accountable.
It criticised the Cabinet Office and Treasury for "failing to act together as a strong corporate centre".'Improved'
Mrs Hodge, a Labour MP, said: "The need for more efficient administration in public services has never been more pressing. Strong action is essential to minimise the impact of real terms cuts in public spending on the quality of public services."
She added: "For too long these two central departments have been half-hearted in their dealings with spending departments and have failed to achieve best value for the taxpayer.
"Tougher leadership from the centre of government is required. The central departments should take on the challenge with renewed vigour and imagination, and take responsibility for instituting change across government and holding spending departments to account."
She also said: "Government could save money and improve people's lives by investing more on early action to stop things going wrong and encouraging more co-operation across the departments."
A Cabinet Office spokesman said: "The steps we have taken to transform Whitehall into a leaner, more efficient machine, managing its finances like the best-run businesses, generated £10bn of savings for the taxpayer last year alone.
"At the time of the last election, government procurement was unco-ordinated and bureaucratic. We've stripped out unnecessary procedures, improved the way we buy, and enforced sensible controls on spend."
The spokesman added that "clear plans" would further improve the situation.