Serco contract for prisoner transport under investigation

I suspect there was some midnight oil burnt in the offices of Serco last night as another public sector contracting scandal involving the firm hit the press. “Fraudulent behaviour” has been uncovered by the Ministry of Justice in connection with Serco’s contract in London and East Anglia  to escort prisoners to and from courts. Apparently Serco employees have recorded prisoners as having been delivered when they weren’t.

One worrying aspect is that this doesn’t even sound like a fraud designed to enrich individuals. According to the Guardian,

“... some Serco staff were recording prisoners as having been ready for court when in fact they were not. This data is a key performance measure for the contract that could determine whether or not it is terminated...It is thought the "potentially fraudulent behaviour" has been going on since last summer, when persistent delays in transporting prisoners between jails and courts led to an official improvement notice being issued... It is alleged that instead of ending the delays, Serco staff simply fiddled the paperwork”.

This is serious – in a sense, if it were a few individuals doing something for personal gain, you can position it corporately as the “few bad apples” argument. But the perpetrators by the sound of it herewere taking action to benefit the firm, not themselves, which suggests something more corporate in nature. Chris Grayling, the Justice Minister, has said that “we have not seen evidence of systemic malpractice up to board level,” but just how far up the management chain did this go? That’s a key question.

It appears that this came to light because of the review of contracts following the recent issues around over-charging for prisoner tagging services, in which both Serco and G4S were implicated. But both customers and the Serco Board must be wondering – what else might come out? I suspect any public organisation that has contracts with Serco will be considering their own audit now. And if they’re not, perhaps they should.

Serco has agreed to pay back £2 million profit on the contract to the Ministry. The FT points out that the £40m contract accounts for less than 0.9% of Serco’s annual turnover, but of course the reputational damage this could do is far greater than that.

It does make you wonder how many other horror stories there are around major public sector outsourcing, and whether this drip feed of bad news will undermine public confidence in outsourcing government work in general.   And whilst it is good news for the taxpayer that this has been found now, it suggests again that contract management in the public sector needs to be strengthened. But that isn’t a new thought - here’s a couple of headlines (there are many more in a similar vein) from a National Audit Office report dated  December 2008 on the subject:

“There are weaknesses in key performance indicators and limited use of financial incentives to drive supplier performance”.

“Central government’s management of service contracts is not consistently delivering value for money”.

At the same time, a good  practice framework for contract management was developed and issued, but the Office of Government Commerce never really picked up on the actions from the NAO work and until recently, Cabinet Office and ERG in this administration again didn’t show much interest in contract management.  Yes, I have mentioned it before and you can probably guess why*.

Anyway, the big question today is – do I sell the Serco shares I hold in my personal pension scheme? Or should I ride out the 10% fall we’ve seen this morning?

*Reader, I wrote that framework.

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Voices (2)

  1. Ian R:

    I agree entirely that contract management skills and the measurement of them is of great importance in these situations and in need of improvement.

    I feel two further factors play a part in these issues going either undiscovered or unpunished:

    1. Bodies. The number of contracts with very complex PI’s and outcomes makes it extremely difficult to measure data and performance easily with the amount of people dedicated to procurement and contract management in the public sector.

    2. The appetite for cancelling these contracts or using penalties (financial or otherwise) has in the past been low. Due in part, I think, to the fear of potentially being dragged into a protracted dispute and also having to go through another rigorous procurement.

    A contractor shouldn’t be volunteering to pay back some money, which is the impression I got from the news item I saw (if that isn’t the case why are G4S waiting for the outcome of the audit?) – smacks a bit of Starbucks’ offer to make a donation to HMRC in the hope that we will forget about the real issue, and judging by the lack of recent news on this, it may be a great strategy….

  2. Dave Sheldon:

    You mention that “One worrying aspect is that this doesn’t even sound like a fraud designed to enrich individuals.” however the individuals may also have pay/bonus incentives to get prisoners there “ready for Court”.

    An easy way of management is to incentivise everyone to achieve the overall contract goals but this means there needs to be some internal control/inspection of the work being undertaken. It may be that SERCO needed to pay a little more attention to their internal performance management.

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