Review of G4S and Serco contracts reveals 'deficiencies in key controls'

Will Green is news editor of Supply Management
20 December 2013
A review of government contracts with Serco and G4S has uncovered “some immediate and significant risks” in the way contracts are managed.
 
The Ministry of Justice (MoJ), which launched a review of 15 contracts worth a combined £3.9 billion with a range of suppliers after overcharging was discovered on electronic tagging contracts, found “long-standing and significant weaknesses in contract management”.
 
The review found issues which “give rise to the risk of material errors or irregularities in charging, or a significant operational failure” across prisoner transport services provided by Serco, facilities management provided by G4S, and electronic tagging provided by both companies.
 
These issues included understanding of roles and responsibilities, lack of readily available management information, verification of services delivered and lack of measurement of end-to-end delivery.
 
A report said: “In nearly all instances, at a contract level, the governance processes and controls typically expected on contracts of the size and complexity of those reviewed could not be readily produced.”
 
The MoJ said it had referred two G4S contracts covering court facilities management to the Serious Fraud Office following the review. Serco has agreed to pay the MoJ £68.5 million as a settlement over the electronic tagging contract.
 
Meanwhile, a separate Cabinet Office (CO) review of a further 28 Serco and G4S contracts with the government worth £5.9 billion, launched in the wake of the tagging scandal, found “no evidence of deliberate acts or omissions by either Serco or G4S leading to errors or irregularities in the charging and billing arrangements”.
 
“However, across the majority of the contracts the review found that there were deficiencies in key controls being applied to the invoice and payment processes and there is therefore a risk that over-charging may have occurred,” said the report.
 
Government CPO Bill Crothers said: “We need the very best commercial skills to be able to make the most of these opportunities and we know that these skills are not yet strong enough across government. We are determined to take action on each of the areas raised in this report.”
 
Serco said the improvement work it had carried out meant it would be retaining the prisoner transport contract. Alastair Lyons, non-executive chairman, said: “The contract issues that were identified should never have happened and we apologise unreservedly for them.”
 
G4S, which has been asked by the government to complete a “corporate renewal plan”, said in a statement: “We take the MoJ’s concerns very seriously and the company has recently strengthened the service management team on the court FM contracts and continues to work closely with the MoJ to ensure that G4S delivers a facilities management service to the courts that reflects the high standards of performance which G4S expects to provide to all customers.”
 

 

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