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Serco and G4S repay

The Justice Secretary Chris Grayling confirmed yesterday that it had agreed a settlement with Serco to repay the taxpayer £68.5 million excluding VAT for the overcharging found in an audit of Ministry of Justice contracts. arrangements.

Following the discovery of billing discrepancies for prisoner tagging contracts, the Cabinet Office ordered a review 28 of the largest contracts held by G4S and Serco across all departments, worth £5.9 billion in total with the support of PWC, Moore Stephens and a highly experienced Oversight Group.

The £68.3 million figure is reimbursement for money owed on the electronic monitoring contract and for other costs incurred, including the cost of investigating these matters. It also includes £4.2 million which will be set against future costs for the transition to new electronic monitoring.

Over the past few months Serco has engaged constructively with government, setting out a corporate renewal plan that the government describes as ‘well advanced’. The government is expected to provide a final opinion on the adequacy of the plan in January, following input from the Oversight Group and Serco’s independent advisers, who will continue to monitor implementation.

The review also confirmed that, in certain circumstances, G4S Care & Justice Services (UK) wrongly considered itself to be contractually entitled to bill for monitoring services when equipment had not been fitted or after it had been removed. G4S has apologised to the Ministry of Justice and issued credit notes totalling £23.3 million for amounts incorrectly billed between 2005 and May 2013. A further credit note of £0.8 million will be issued for billings for the period from June 2013 to date.

Separately, the Ministry of Justice published its review of its 15 major contracts across all suppliers – with a total value of £3.9 billion. The review identified 21 findings, which align to the seven themes of the cross-government report. MoJ’s audit of G4S contracts has uncovered problems with two further contracts held by G4S for facilities management in the courts. Specifically, the audit revealed serious issues relating to invoicing, delivery and performance reporting against both contracts. While at this stage the department does not have evidence to confirm that dishonesty has taken place, they have, following legal advice referred both matters to the Serious Fraud Office in order to establish whether this is the case.

The government also confirmed that it has asked G4S to produce and implement a Corporate Renewal Plan which will be advised on by the Oversight Group and the independent advisers.

The broader review found no further evidence of wrongdoing or malpractice, but did highlight areas of focus for departments as the civil service continues its efforts to improve commercial expertise across government. Themes such as performance management, change management processes and incentives for service improvements were pulled out as priorities for the government.

Commercial reforms being led by the newly-created Crown Commercial Service include:

  • establishing a Chief Procurement Officer based in the Cabinet Office
  • running a programme of supplier renegotiation
  • introducing Crown Representatives and a Commercial Relationships Board
  • publishing details of government contracts online as part of the transparency agenda
  • working to ensure that the whole of government operates as a single customer
  • collecting rigorous data and management information on suppliers
  • improving commercial capability through the civil service reform programme

Francis Maude, minister for the Cabinet Office, said:

“It’s good news for taxpayers that Serco has agreed to recompense £68.5 million for overcharging. We are confident that the company is taking steps to address the issues which our review has identified.”

Alastair Lyons, non-executive Chairman of Serco, said:

“We are very pleased to be making strong progress in further rebuilding the confidence of our UK Government customer. Serco’s cooperation with the intensive series of audits and reviews, alongside the significant steps we are taking as part of our renewal programme, demonstrate our commitment to this. The contract issues that were identified should never have happened and we apologise unreservedly for them. We are doing everything in our power to make sure that such issues cannot reoccur anywhere in our business around the world. Our objective is to deliver excellent public services with openness and transparency, and I believe the actions we are taking will support this now more than ever.”

Commenting on the findings, Ashley Almanza, G4S Group Chief Executive, said:

“The way in which this contract was managed was not consistent with our values or our approach to dealing with customers. Simply put, it was unacceptable and we have apologised to the Ministry of Justice.

“As part of a wider programme of corporate renewal, we have changed the leadership of our UK business and we are putting in place enhanced risk management and contract controls. We remain committed to working with the Ministry and the UK Government to resolve this matter and to provide enhanced oversight of service delivery and contract performance.”

Bill Crothers, Chief Procurement Officer for the government, who led the review, added:

“Opening up public services to a diverse range of suppliers means that we can access the innovation that the public sector, private companies and the voluntary sectors can bring. 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.”






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