The outsourcing argument

The National Audit Office has come up with some facts about the profits of the outsourcing companies, and the risks of contracting out our public services.  There's a brief summary in the Independent and a longer analysis in the same paper.  The focus is on the profit margins of G4S, Serco and Capita, but the second piece also says that Atos and G4S pay no corporation tax.  The NAO is making a number of important points, which Margaret Hodge MP summarises: " These reports together raise some big concerns: the quasi-monopolies that have sprung up in some parts of the public sector; the lack of transparency over profits, performance and tax paid; the inhibiting of whistleblowers; the length of contracts that taxpayers are being tied into, and the number of contracts that are not subject to proper competition. The recent fraud allegations surrounding the Ministry of Justice's electronic tagging contracts with G4S and Serco are also a reminder of how important it is that government properly scrutinises and monitors its contracts with private providers.”

In an interesting piece by the BBC's Robert Peston the journalist points out that much of the information in the report was given voluntarily by the companies because they don't have to disclose any of it, despite representing 15% of public spending.  He looks closely at the profit margins, and says that the balance of risk is changing.

Last week the Cabinet Office chief procurement officer, Bill Crothers, said that the government spent too little time making firms "deliver what they said they would do" for the price, and needed qualified, experienced people to do that.  Although he didn't say so, the Work Programme is an example of that failure.  The DWP has relied on the incentive of profit and explicitly promised the contractors that it wouldn't ask questions about what they were doing.

A4e doesn't figure in these discussions by name, because it's not one of the big four.  But that doesn't mean that A4e is out of the game.  The big cake on the table at the moment is the Transforming Rehabilitation contracts (they'll have to come up with a better name than that) and A4e wants a slice.  There's an interview here with Jen Byrne, their "Development Director for Justice".  Will the bidders offer suicidal discounts, as they did with the Work Programme?  Probably not.  But at least now attention is being paid to some of the shortcomings of flogging off public services.