Pure Gold

I don't seem to have had time to catch up with the shenanigans that's been going on at the Public Accounts Committee this week, but as numerous contributors on here have noted, Margaret Hodge and her colleagues have been digging up pure gold. Here's the Guardian from Monday explaining that, despite what we were told by the government, there never was a ban on G4S and Serco getting extra contracts:-  

Hodge accuses government of 'shocking complacency' over G4S and Serco

Margaret Hodge has accused the government of "shocking complacency" after it emerged that two outsourcing firms being investigated for alleged fraud over Ministry of Justice deals worth more than £200m have been bidding for further contracts while potentially facing criminal charges.

The chair of the public accounts committee said it was "utterly extraordinary" that G4S and Serco were allowed to do so while being investigated over contracts worth more than £200m by the Serious Fraud Office and the City of London. Three G4S contracts worth more than £110m are being investigated by the SFO. They are a Ministry of Justice contract to administer tagging of prisoners on probation as well as two contracts for the management of "invoicing, delivery and performance reporting". One Serco contract worth more than £40.5m is under investigation by the SFO. Another contract for the escort of prisoners to and from courts worth £49.3m is being investigated by City of London police.

Chris Grayling, the justice secretary, wrote to his Labour shadow, Sadiq Khan in September 2013, saying the two firms would not be awarded contracts. "I am strongly of the view that we should not award new contracts for the two companies until we have established the facts about both their performance and their corporate behaviour. "That is why I have requested an audit of every contract that MoJ holds with G4S and Serco," he said.

But executives from both firms told the committee on Monday that they had both put together bids for more government contracts since inquiries by the authorities began. Hodge said in response: "I am shocked … Shocked that this can carry on. I think you should be dropped until the SFO has finished its inquiries. I do wonder what on earth the government is doing dealing with you if you are not, as you say, too big to fail. You have been found to have overcharged. In these cases if you are not too big to fail it is best to say 'hang on'," she said.

Peter Neden, the regional UK and Ireland president of G4S, said his company had continued to put forward bids for contracts but had not been awarded any during that time. Rupert Soames, the group chief executive of Serco, said the government was restricted in what it could do by EU law. "I understand that part of the problem around an outright ban was a ban under EU law which we would not have challenged anyway … We did not win any new business," he said.

The multimillion-pound tagging scandal, which emerged in July 2013, triggered a Cabinet Office review of all government contracts worth more than £10m held by G4S and Serco. Observers have claimed that there are very few other firms large enough or willing to bid for this type of work if Serco and G4S are excluded.

A National Audit Office report last week found that poor management of £40bn worth of outsourced public contracts had left the government exposed to the possibility of widespread fraud and overcharging. A test sample of 60 government contracts found that 34 – more than half – had "issues in the amount billed". Auditors also tested 73 contracts against a good practice framework and found many elements of the deals were at "material risk" of overbilling, but the problem could be far wider. Departments relied on the information supplied by the outsourcing companies rather than carrying out their own checks, according to the report. It also found that in some government departments no one could say which civil servant, if any, was in charge of making sure that an outsourcing firm was honouring a particular contract.

This from the Watching A4E website:- 

When it was revealed that G4S and Serco had been overcharging by millions on the offender tagging contracts we were assured by Chris Grayling that they would be barred from bidding for any more contracts until a thorough investigation had been carried out (including an investigation by the Serious Fraud Office). But then, a few days after G4S were pronounced "cleared" (though not be the SFO) they were included in the list of bidders for the probation contracts - so they must have been tendering while supposedly barred.

Well, it's now clear; they were never barred in the first place. That's just one of the revelations to come out of the latest hearings of the Public Accounts Committee. As the Guardian reported on Monday, the chair of the PAC, Margaret Hodge, was shocked.

The hearings continued today, and the shambles which outsourcing has become was laid bare. Two of the top civil servants in the procurement area are fairly new in the job, and have bags of experience. They were interviewed today, and said they had found that the people doing the work didn't have the skills, experience or competence for the job. There was no contract management. 

Applications to vary the contracts were numerous, and with one particular contract there had been so many that no one could now remember what the original contract specified. Basically (although they didn't put it like this) the companies have been running rings round the government.

There is obviously a lot more to come out about specific contracts. Right at the end Margaret Hodge reduced the G4S chap to quivering silence when she demanded to know if it was true that in the probation contracts it was specified that if the contract was terminated by either side before it was completed, the company would get the full amount of the contract. Apparently it is true - and she didn't like it.

The last Labour government started this outsourcing bonanza. When the coalition got in they didn't stop to find out whether the competence was there to do it; they just went ahead and outsourced everything that hadn't already been flogged off. And we have been paying the price.

This from Hugh Muir in the Guardian:-

More news of the overactive justice secretary: Chris Grayling’s empire has devised a cunning plan. After triumphs at the Department for Work and Pensions he moved to the Ministry of Justice, where his enthusiasm for contracting-out knows no bounds. Most offender management is being outsourced, save for the hardest cases and those involving celebs, which will continue to be supervised by a rump public probation service. 

Mindful that the coming months may bring regime change, MoJ negotiators have been told to insert into contracts a proviso that if a future government tries to break them, it would have to guarantee contractors the equivalent of the profit they would have made for the duration of the contract. In some cases this could be as much as £400m. 

So if Labour were elected in 2015 and tried to pull out of Grayling’s probation arrangements, it could face huge financial penalties. Huge financial penalties. A few weeks ago the American company Raytheon won £750m from UK taxpayers after the Home Office pulled out of its busted e-borders contract. So even when the Gray-man is gone, he might cost the nation a pretty penny.

As this piece in the FT confirms, there's a growing chorus of concern regarding further privatisations:- 

Half of voters feel that no one takes responsibility when outsourced public services go wrong, according to a leading think-tank, which is urging the government to focus on fixing “broken” public service markets. The finding, in a poll commissioned by the Institute for Government, came as it called on politicians to increase transparency in the way such markets worked and ensure there was clear accountability for failure.

The survey, by Populus for the IfG, also found a widespread scepticism that parties would deliver on their election pledges in government. Only 15 per cent were confident that parties knew how they would fulfil their promises, while almost two in three thought political parties in the UK “generally do not keep their election promises”. Fewer than one in five thought the political parties were good at explaining how their proposed policies would be implemented or paid for.

Peter Riddell, IfG director, said that whoever took office after next May’s general election would have to govern differently if they wanted to build public confidence. Mr Riddell added: “Crucially, this does not mean a shift to a technocratic or managerial view of government; rather the reverse. Our advice is about how to get the politics right in order to achieve political goals. ”Publishing a “manifesto for effective government” for parties wishing to win public trust, it noted that about £90bn of public services was now delivered by private and voluntary organisations. Yet, said IfG, more complex outsourcing projects often underperformed because of “perverse contractual incentives, weak public sector oversight, and a lack of transparency and competition”. It cited recent scandals in areas such electronic tagging, where Serco and G4S were both forced to repay millions of pounds to the taxpayer after they were found to have overcharged for some services. The IfG said that “worryingly” half the people in the survey it had commissioned “felt that no one takes responsibility when problems occur in outsourced services”.

In order to improve public services, the think-tank renewed calls for government to “slow down on outsourcing more services to allow greater focus on fixing broken and underperforming public service markets”. It should “share information on the costs and performance of providers with the public and parliament to show that government is in control, and increase the focus on ensuring value for money”. Government should also increase the scrutiny of new outsourcing deals, particularly those worth more than £100m, to ensure they were “sensible”, adds IfG. It recommends seeking “independent, formal advice on competition issues” from the Competition and Markets Authority, which has a brief to ensure competitive markets.

These exchanges are particularly revealing:-  

Q165 Mr Bacon: I am not interested in the philosophy; I am interested in the hardcore reality of the fact that for every year of the contract that Ms Beasley was talking about, systematic over-billing was going on, and that when there was reform to try to improve the situation, the amount of over-billing actually went up. That has nothing to do with philosophy.

Dame Ursula Brennan: And the cost went down. It is a complicated story.

Q166 Mr Bacon: I am really not interested in the philosophical heebie-jeebies; I just want to get to the root of this and understand at a practical level how it is that they can do it but apparently it is less easy to do it in-house.

Dame Ursula Brennan: At a practical level, you are talking about two distinct things. One is about the ability to recruit and retain people and what you pay in order to get that expertise. The second is the advantage you get when you outsource a service, which is not simply that you get the same service back for a cheaper rate. When you outsource a service, it is usually because you want something done differently in a different kind of way by people with a different set of—

Q167 Chair: Richard’s point is that you could do it differently in-house.

Dame Ursula Brennan: And there are certain services where we do do it differently in-house. If you take the Prison Service, we currently have a regime in which we have some outsourced prisons and some where we are driving down cost internally. But to come back to the point about what we pay for people, there are occasions when you are operating in the public sector in a period of pay restraint which completely makes sense across the public service as a whole, but which gives you difficulties in certain specific areas. One of the things that we have done in recent times is to create in the centre—in the Cabinet Office—a new capability to lead policy on contract management, and I think you are going to be hearing from Bill Crothers and his colleagues about all that later in the week. One of the things they are doing is looking at how we can recruit some of these people who are expensive to recruit and retain, because, otherwise, we have to pay—

Q168 Mr Bacon: My point is these private sector people are obviously recruiting and retaining these more expensive people, yet they are still able to do the job better for less.

Dame Ursula Brennan: That is because they—[Interruption.] Well, one could have an interesting debate about—

Mr Bacon: Please finish the sentence; that is what I want you to do.

Dame Ursula Brennan: That is because they structure their organisation in a completely different way, so that their pay regime includes paying higher rates of pay for extremely scarce resource and lower rates of pay for people doing more basic jobs. The pay structure, the pension structure and the organisational structure of private sector companies and the public service are quite different, so simply saying, you know—

Mr Bacon: I don’t know. If I knew, I would not be asking the questions.

Dame Ursula Brennan: I think it would be an interesting debate about why we outsource.