G4S and Serco won Government contracts when they were meant to be out in the cold

There are only a few companies big enough to take on all the work the Government is throwing at the private sector.

by Rachel Savage
Last Updated: 10 Nov 2015

A big song and dance was made last year about temporarily banning outsourcers G4S and Serco from bidding for new Government contracts, after it was revealed in July 2013 that they had overcharged for tagging criminals. And although the scandal (among others) saw to the heads of both companies’ chief execs, it turns out the Government was still quietly awarding them work when they were publicly in purdah.

The two companies won 14 contracts worth £350m before Serco was publicly taken off the naughty step in January and G4S was brought in from the cold in April, according to an investigation by the Public Accounts Committee.

The report warned that some outsourcers risked becoming ‘too important to fail’. ‘Quasi-monopoly suppliers are emerging who squeeze out competition, often from smaller companies with specific experience,’ it said.

‘For competition to be meaningful, there must be real consequences for contractors who fail to deliver and the realistic prospect that other companies can step in.’

That’s all well and good, but the committee, chaired by London mayoral wannabe and Labour MP Margaret Hodge, doesn’t seem to have any bright ideas as to how competition should actually be injected into public sector outsourcing other than the Government should ‘intervene’.

The Cabinet Office said it hadn’t been able to fully blacklist companies due to EU competition law, although that was reformed in January after UK Government pressure to make it easier to freeze out firms that fail to deliver.

And while chopping up contracts to make it easier for small businesses to win is a good idea in principle, it’s going to take time and deeper reform before that makes any difference. The Government struggles to deal with the contracts it already has to manage, let alone a shedload more, particularly when the Tories are doing their darndest to shrink the public sector.

Moreover, around £90bn of Government services is now outsourced, roughly half of public sector expenditure, and big companies are just better placed to win what’s up for grabs, even with all the irscrew-ups.

But with Serco divesting businesses left, right and centre (Sky reported this morning that its waste management division is up for grabs for around £75m) after writing £1.5bn off the business last month, and both it and G4S still under investigation by the Serious Fraud Office over the tagging scandal, there is a window of opportunity for small outsourcers, especially if the Government opens it further for them.

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