MPs criticise 'badly managed' overhaul of contracts to provide asylum seeker housing

Will Green is news editor of Supply Management
23 April 2014

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24 April 2014 | Will Green

A Home Office (HO) overhaul of contracts to provide asylum seeker accommodation was “poorly planned and badly managed” and is “unlikely to yield the savings intended”, according to MPs.

The Public Accounts Select Committee (PAC) has criticised the switch in 2012 from 22 separate contracts with 13 suppliers to COMPASS, which involved six contracts with three suppliers. Two of those suppliers – G4S and Serco – had not provided asylum accommodation before, while Clearel was an existing provider.

In a report the PAC said the move was intended to save £140 million over seven years, against a total spend of £700 million, but in the first year the savings were just £8 million.

The PAC said the decision to rely on fewer, larger contracts was “risky”, “inconsistent” with the government’s wider aim of encouraging more SMEs to supply services, and led to delays in providing suitable accommodation.

The transition to the new contracts was “poorly managed” and contractors did not inspect the properties they inherited, while the HO “did not facilitate an exchange of information between outgoing providers and the new contractors”.

MPs said additional costs were incurred by the need to extend existing contracts during the transition period, while “poor data contributed to flaws in some of the contractors’ key assumptions which underpinned their bids”.

The PAC said the HO did not penalise suppliers for “failing to get contracts up and running in time” during the transition period and there was no incentive regime “so the providers were under no financial pressure to deliver on time”.

The report said the quality of accommodation provided under the COMPASS contracts is “still not up to standard” and the HO only began to extract penalties from all three contractors for poor performance from July 2013. In January 2014 the HO had “only just reached agreement on the level of penalties owed by G4S and Serco for the period January to June 2013, amounting to over £3 million”.

Margaret Hodge, PAC chairman and Labour MP, said: “The change was poorly planned and badly managed and is unlikely to yield the savings intended.

“Instead of brokering a smooth transition between outgoing and incoming contractors and with local authorities, the Home Office short-sightedly decided to take a hands-off approach and only allowed three months to get the new contracts up and running.

“The knowledge of experienced specialist providers has been lost and there are fewer alternative options available to the department if the contractor fails.”

The service provides accommodation for around 23,000 asylum seekers, at a cost in 2011/12 of £150 million.

A HO spokesman said: “Our new COMPASS contracts are generating vital savings to the taxpayer – £8 million was saved in the first six months of operation and further significant savings are predicted for 2013/14. 

“A recent National Audit Office report also found that the transition to our new providers was well-managed and noted that operational performance is improving.

“While we accept there are challenges with the contracts, we are disappointed with the PAC’s findings and will respond in due course.”

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