Why a root and branch overhaul of procurement policy is a must

I’m Peter Webster, chief executive of Corps Security, and this is where I examine the issues affecting the security industry. My thoughts and opinions are intended to generate debate and whether you agree or disagree with them, you’re welcome to post your comments below.

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As someone who is proud of the security industry and the contribution it makes to the safety of the nation and its people, I’m both disappointed and angry that, once again, its reputation within the country has been negatively impacted.

I am, of course, referring to the discovery that G4S and Serco have been allegedly overcharging the Ministry of Justice for electronic tagging services. According to press reports the tagging of 18,000 individuals was being paid for when only 15,000 were being monitored.

Regular readers of my blogs will know that I always avoid criticising Corps Security’s competitors and I would like to reiterate my view that there are many good and talented people working for both the companies that are at the centre of this row. Equally, I’m not in the business of trying to defend the companies involved without a true account of the facts but it is clear that charging for the tagging of individuals who had moved abroad, returned to prison or even died is unacceptable and fully deserves a thorough investigation.

At the time of writing G4S had defended itself by saying that the issue has been ‘taken out of all proportion’ and that it must receive specific instructions from the courts or a prison to suspend or close a curfew order, and if none are given then it keeps charging. The only question I would raise about this is would G4S have noticed if they were doing more tagging than they were being paid for?

Surely any business big or small must reconcile its cost with its revenue to ensure it is not undercharging. If this accounting task was completed then they must have realised that in fact they were overcharging and therefore they should have a responsibility to bring this to the attention of their customer? However – somebody, somewhere, made the decision to keep quiet.

In light of its damaged reputation since the London 2012 fiasco, the public could be forgiven for thinking that when it comes to G4S there is ‘no smoke without fire’. Sadly, as it is the biggest company in the security sector, its actions also have far-reaching implications for the rest of us.

However, we mustn’t neglect to look at the bigger picture. While I would agree with Margaret Hodge MP, who said there should be more ‘openness’ in the contracting of public services to private providers, I think that the real problem here comes down to the fact that that these valuable government security contracts are only being awarded to large companies.

Successive governments have maintained a policy of issuing contracts that are so big that only a small number of huge service providers can possibly consider taking them on. To put this into perspective, and to highlight the scale of the problem, last month figures showed government spending on contracts with G4S had risen by more than £65m in 2012 to £394m.

This flawed logic is based around the idea that the more that is done, the cheaper it becomes to do it. While this is fine for manufacturing, the same principles cannot be applied to the service sector, as it leads to corners being cut in areas such as management and back office support. Given that the tagging furore appears to be the result of a back office failure, it is clearly not wise to try and cut costs here.

It is my firmly held belief that inviting a greater number of companies to handle these large contracts would increase attention to detail, transparency, competiveness and innovation. Just as importantly, being able to benchmark across a whole range of suppliers would keep prices in check. This is in stark contrast to the status quo, which offers no impetus to innovate and simply engenders a culture of complacency.

While I accept that having more companies doing the same job will cost more to administer, the potential benefits in cost, efficiency and quality are many-fold and far reaching.

Regrettably, I can’t see things changing and the forthcoming revisions to The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) that I highlighted in a previous blog tell us a great deal about the type of thinking that is prevalent in Westminster at the moment.

The government are pressing ahead with these TUPE changes driven by the desire to reduce costs at the point of outsourcing public sector activities.

The latest claim that it makes it better for SME’s to compete for contracts is just not true as the contracts will carry far greater risks as TUPE will be ill-defined. So once again, large companies who can take the risks and have the financial muscle to pay for expensive legal battles will benefit.

Another issue that has not been recognised is the potential redundancy costs for companies who took contracts on under TUPE on the basis that when they lose the contract there would be no redundancy liability. They could now face huge redundancy costs never planned or costed for in the original contract and again this will hit SME’s hardest. In future, companies are going to have to cost in the potential redundancy liabilities thereby increasing prices to private industry customers.

The only benefit will be to the government when they outsource public sector activities and the private sector will carry increased risk and cost burdens. The claims of benefiting SMEs is due to either incompetence by government and their advisors or a blatant attempt to mislead. Either way the large outsourcing companies gain and we have the potential for another tagging scandal.

Until a more sensible procurement policy is put in place, one can only wonder just how many more events like the electronic tagging debacle are yet to be discovered.

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