Our Research and Policy Assistant, Matt Ford, points out that the Ministry of Justice is still paying huge amounts of public money to G4S and Serco for providing electronic monitoring
The revelations in July 2013 that G4S and Serco had been overcharging the government for electronic monitoring for almost a decade caused widespread public outrage. It was just one of a series of scandals involving outsourcing companies in recent years, including G4S's bungling of contracts to provide security at the 2012 London Olympics.
It ended with both companies pulling out of the bidding process to deliver a new generation of tagging contracts, and agreeing to repay a total of £180 million. A criminal investigation by the Serious Fraud Office is still ongoing.
But what if I was to tell you that since all this was uncovered in mid-2013 - two years ago now - both companies have continued to receive millions of pounds for providing electronic monitoring to the Ministry of Justice?
The story so far...
First, a little recap of the story so far. The contracts to deliver electronic monitoring of convicted law-breakers were awarded to G4S and Serco in 2005. They were originally under the auspices of the Home Office, but were passed over to the Ministry of Justice after its creation in 2007.
Between 2005 and 2013 the government spent over £700 million - in cash terms - on electronic monitoring. These contracts were due to expire in April 2013, and as part of the process to award new ones the Ministry of Justice asked for supporting information from bidders, including G4S and Serco.
Anomalies were found in the data G4S handed over, and the explanations given by the company didn't satisfy the assurances required by the Ministry of Justice's procurement team. The Ministry subsequently called in the accountancy firm PricewaterhouseCoopers to carry out a forensic audit in May 2013. The audit was later extended to include Serco.
Serco withdrew its bid to manage the new tagging contracts on 11 July 2013, followed by G4S on 6 August after initially refusing to. Serco agreed to be scrutinised more thoroughly as part of the forensic audit, but G4S didn't, so the Ministry of Justice referred its case to the Serious Fraud Office.
Serco agreed to repay £68.5 million in December 2013, followed by G4S who agreed to repay £109 million in March 2014. On 4 November 2013, the Serious Fraud Office announced that it was opening a criminal investigation into overcharging in the tagging contracts.
The former justice secretary, Chris Grayling, announced on 12 December 2013, that another outsourcing giant, Capita, would take over the electronic monitoring contracts on an interim basis by April 2014. They would continue to use G4S and Serco's monitoring equipment until a new system was designed and the new contracts in place.
The new contracts were to be different to the previous arrangements. Instead of companies managing the entire process, it would be split into four lots delivered by a consortium of firms. The tagging technology firm Buddi would be responsible for designing and producing new GPS-enabled equipment; Airbus Defence and Space would provide the satellite-mapping; Telefonica would supply the network; and Capita would manage the overall service.
Buddi was dropped by the Ministry of Justice in March 2014, and a spat between the two ensured. The Ministry then initiated a 'rapid new contracting process' and in July 2014 it announced that Steatite Limited would replace Buddi as the developer and manufacturer of the tagging equipment. The new system was supposed to be up and running by December 2014.
Now, back to the money. The government releases transparency data as part of its commitment to opening access to governmental information. In autumn 2014, as part of the leg-work for our annual UK Justice Policy Review, I was looking through the National Offender Management Service spend over £25,000 data series the government releases. It includes spending on various criminal justice activities that cost over £25,000, including electronic monitoring.
I was initially puzzled by the lack of data on payments to companies for tagging between May and December 2013. As I rooted around the media coverage of the scandal and pieced together the story I've outlined here, it began to make sense. But then I noticed the ongoing payments to G4S and Serco for electronic monitoring from March 2014, long after overcharging by the two firms had been exposed.
I originally calculated that in total, between March 2014 and February 2015 - the last month for which data is currently available - G4S received £17,120,925.20, and Serco £13,860,266.72 for providing electronic monitoring to the Ministry of Justice. The Ministry later issued a clarification about the data. They informed me that some of the payments made in this period were for services provided before the old contracts were terminated. Therefore, G4S actually received £8.7 million and Serco £4.5 million for electronic tagging equipment supplied to the Ministry of Justice between March 2014 and February 2015; still a lot of money.
To be clear I'm not suggesting that anyone has lied about these payments, as the Ministry of Justice has repeatedly said publicly that the two companies would still be involved in providing electronic monitoring services in the interim period. Indeed, it seems that there weren't any other companies with enough tagging equipment to cover the entire population of monitored convicted law-breakers.
But the amount of public money that has been paid to these two companies for services that they have been found to be managing at best incompetently, and at worst, possibly fraudulently, raises yet more serious questions about the nature of markets in public services, and what happens when they go wrong.