G4S locked out of prison contracts – but more outsourcing scheduled

After today's NAO report on Hinchingbrooke hospital, more big news from public sector contracting with announcements from the Ministry of Justice about prison management.

The news gives credibility to the view that they're pursuing a mixed economy here, driven by  analysis of value rather than ideological beliefs. A good thing, I would argue.  So four of the prisons being considered will proceed to the next and final stage of competition for potential private sector management, with Serco, Sodexo and MTC/Amey still in the frame. The Ministry of Justice says -

“This competition process produced a compelling package of reforms for delivering cost reduction, improvements to regimes and a working prisons model in these prisons”.

But this was not the case for three other prisons, so Coldingley, Durham and Onleyree will stay under public sector management. And one, Wolds, will return to the public sector in July 2013 having been run by G4S.

That last aspect of course is stealing the headlines. Is this payback for the Olympic security issues with G4S? No, say the Ministry, and it is likely that the poor report on the Wolds prison from the Inspectorate earlier this year had more to do with the decision than the Olympics. As the BBC reported -

A report by HM Inspectorate of Prisons in August said HMP Wolds had "clear weaknesses", with poor behaviour and high levels of drug use among inmates.

Given that damning report, Wolds perhaps isn't a big surprise. But G4S must be bitterly disappointed not to be shortlisted for the other prisons though - it does show that sometimes being the incumbent has disadvantages, particularly if it is perceived that you haven't performed!

Perhaps most significantly in the long run however is the decision to look at more outsourcing across all public prisons. That might suggest a move away from outsourcing management of entire prisons to a more dis-aggregated approach. (Regular readers will know we think there may be a theme emerging here…) From the Ministry press release:

All public sector prisons will be obliged to make additional efficiency savings and the prison service will make collective savings by competing ancillary services, such as maintenance and resettlement services. The Ministry of Justice has estimated that these changes will generate £450m savings over the next six years.

Will this be prison by prison competitions? That will be very heavy on procurement – and bidders’ – resources. Or will they be national / regional contracts? And an expectation of savings is fine, but isn't resettlement the sort of activity where we should be looking at some sort of payment by results? Isn’t that linked to re-offending rates - where already we're seeing some experimentation with incentives for providers to help reduce such rates?

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