Despite being under investigation by the Serious Fraud Office, outsourcing companies Serco and G4S received new contracts as well as extensions to existing contracts, revealed through an investigation by the House of Commons Public Accounts Committee.
The Public Accounts Committee found that the two companies were awarded 14 pieces of additional work worth £350m in the ‘probation’ period for the two companies (while under investigation), that ended in February for Serco and in April for G4S.
The committee found that “the quantum of additional work that was awarded to the companies during the period was not clearly communicated to parliament at the time”. In an article in the Financial Times, Margaret Hodge MP, Chair of the Public Accounts Committee was quoted as saying “the impression the government left was that all business with these two companies was on hold until the outcome of a review. Instead, what we uncovered was that they had given extensions and new contracts.”
The report published by the committee – Transforming Contract Management, noted that the government “must guard against suppliers becoming too important to fail”, as certain suppliers have become increasingly dominant in markets. The report notes that “the way government contracts gives too much advantage to the contractors”, and calls for a rebalance in the interests of the government and taxpayers, to avoid so-called ‘quasi-monopolies’ developing, such as in the case of Serco and G4S.
The government departments which awarded contracts to the two companies included the Ministry of Justice, and several others. Chris Grayling, Justice secretary, in October 2013 told the House of Commons, “We will not be awarding the companies any new contracts unless or until those audits are completed to our satisfaction.”
The two companies are still under investigation by the Serious Fraud Office for overcharging the government (and taxpayer) on contracts for tagging prisoners electronically, which the committee’s report notes “was the starkest illustration of both contractors’ failure to work in the public interest and government failure to safeguard taxpayers’ money.”
The Public Accounts Committee has conducted previous investigations focusing on outsourcing, for example the report – Private contractors and public spending, which concluded that “the government must get its house in order”. As noted recently by the committee, the private sector delivers complex services on behalf of the public sector, to the value of around £90 billion, “representing half of public sector expenditure on goods and services”.
The award of contracts to G4S and Serco while under investigation reveals a worrying degree of contract mismanagement within a policy approach set against the interests of taxpayers, with scant regard to what is in the public interest. The contract awards in themselves are deplorable, yet without a radical change in the government’s approach to the delivery of services within the justice system, these extremely worrying cases may well appear more commonly.
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For the Financial Times article, see Plimmer, G., and Neville, S. ‘Serco and G4S won fresh work despite being ‘on probation’, Financial Times, 10 December 2014.
For the committee’s report, see Public Accounts Committee (2014) Transforming Contract Management