Archive: December, 2013

More on overcharging

The scandal over offender tagging and prisoner transfer contracts has been widely reported this year, not least in this blog (see “Overcharging” dated 30 October 2013). G4S and Serco were found to have charged the Ministry of Justice for services that had not been performed. So far the scandal has cost both firms their CEO and Serco has agreed to pay the MoJ £68.5 million as a settlement over the electronic tagging contract.

The MoJ released their report this month called Contract Management Review Findings and Recommendations. The report was led by Tim Breedon, a former CEO of Legal & General and now a non-executive director of the authority. He also had input from Bill Crothers, the Government CPO.

The report offers a clear and comprehensive review of the MoJ’s approach to outsourcing high value and high risk contracts. I suspect that the finding apply to many large organisation that have a similar appetite for outsourcing – approximately 40% of the MoJ’s budget of over £8bn is spent on services delivered through third parties – but few are publically accountability and have been exposed to fraud on such a scale.

The review makes 21 key findings that are grouped into seven common themes:

· Governance, process documentation, decision making and escalation;

· Definition of roles and responsibilities;

· Resource capability and capacity;

· Management information, reporting and contract data;

· Collaboration and communication;

· Performance management, measurement and monitoring of service delivery; and

· Validation and assurance of supplier delivery and charges.

It should be noted that a separate Cabinet Office review of a further 28 Serco and G4S contracts with the government worth £5.9 billion, launched in the wake of the tagging scandal, found “no evidence of deliberate acts or omissions by either Serco or G4S leading to errors or irregularities in the charging and billing arrangements”. “However, across the majority of the contracts the review found that there were deficiencies in key controls being applied to the invoice and payment processes and there is therefore a risk that over-charging may have occurred,” said the report.

Despite this, both reports will be uncomfortable reading for Bill Crothers. In response he admitted that the Government needed better procurement skills: “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.”