Postscript

Perhaps Emma Harrison should have waited before selling A4e.  The Tory victory in the election sent the price of shares in outsourcing companies skywards.  G4S's rose by 7.35%, Serco's by 5.95% and Capita's by 6.72%.  Ah well, £20m will have to do.

The outsourcing scandal revealed

When it was revealed that G4S and Serco had been overcharging by millions on the offender tagging contracts we were assured by Chris Grayling that they would be barred from bidding for any more contracts until a thorough investigation had been carried out (including an investigation by the Serious Fraud Office).  But then, a few days after G4S were pronounced "cleared" (though not be the SFO)
they were included in the list of bidders for the probation contracts - so they must have been tendering while supposedly barred.  Well, it's now clear; they were never barred in the first place.  That's just one of the revelations to come out of the latest hearings of the Public Accounts Committee.  As the Guardian reported on Monday, the chair of the PAC, Margaret Hodge, was shocked.  The hearings continued today, and the shambles which outsourcing has become was laid bare.  Two of the top civil servants in the procurement area are fairly new in the job, and have bags of experience.  They were interviewed today, and said they had found that the people doing the work didn't have the skills, experience or competence for the job.  There was no contract management.  Applications to vary the contracts were numerous, and with one particular contract there had been so many that no one could now remember what the original contract specified.  Basically (although they didn't put it like this) the companies have been running rings round the government.
There is obviously a lot more to come out about specific contracts.  Right at the end Margaret Hodge reduced the G4S chap to quivering silence when she demanded to know if it was true that in the probation contracts it was specified that if the contract was terminated by either side before it was completed, the company would get the full amount of the contract.  Apparently it is true - and she didn't like it.
The last Labour government started this outsourcing bonanza.  When the coalition got in they didn't stop to find out whether the competence was there to do it; they just went ahead and outsourced everything that hadn't already been flogged off.  And we have been paying the price.

Down the drain

With all that's going on, who is taking any notice of outsourcing?  Even the galloping privatisation of the NHS receives no attention from the mainstream media.  It's down to the "left-wing" papers to bring the occasional bit of news to our attention, but unless you read Polly Toynbee's excellent article in the Guardian back in May you would have little idea that anything significant was happening.
We don't know the situation with A4e, but the chances are that its finances haven't improved much, if at all, since March 2013, the date of the last published accounts.  And they're not the only ones in trouble.  Both Serco and G4S have gone into the red, and the publicity is all negative.  Quite right too; think of those electronic tagging contracts which both companies used to rake in money they weren't entitled to.  They've had to pay it back, but there have been no prosecutions.  Why?  For two reasons, I think.  One, that a court case would have exposed the fact that it was government processes which allowed them to overcharge by millions.  And two, that they have become indispensable to government.
Let's go back a bit, to the heyday of the last government when outsourcing became all the rage.  Some companies, like A4e, chose to concentrate on particular areas of business, in their case where the commodity was people.  Others, like Capita, specialised in "back-office" functions, focussing on IT systems and processes.  Serco and G4S both started life as security firms, and cashed in on the bonanza that was outsourcing in that field.  But they soon branched out into anything that was going.  They learned that there are a number of rules to the game:

1. Bid for everything.  That means employing a large number of bid-writers who know exactly how to write the tender.
2. Bid low.  Offer to do the job for so little that not only can you not make a profit but you can't fulfil the contract either.  It doesn't matter.  Just get the contract.
3. Renegotiate.  Having embarked on the job, announce that you need more money to complete it.

So Serco in particular have scooped up contracts for everything from prisons to council call-centres, trains to welfare-to-work, electronic tagging to forensic science laboratories.  How can they possibly know enough about any of these specialist areas?  Simple.  They take over a service that's already being run by someone else and employ their staff (not all of them, of course, got to keep the costs down).
But now they are coming unstuck.  Serco announced a little while ago that it was pulling out of the healthcare market altogether.  This comes after it made a mess of the GP out-of-hours contract in Cornwall and had to hand it back; and now we learn, from the Independent, that it has been overcharging the NHS by millions for pathology services through a firm it set up in partnership with two London hospitals.
But healthcare is just one area.  There are plenty of companies ready to step into that market.  Meanwhile Serco, along with G4S, Capita and the others move on to the next contract.  Sometimes they don't even have to go through the tedious bidding process; contracts are just handed to them.  Often now the whole outsourcing procedure is tailored to the demands of these few companies, making the idea of competitive tendering a nonsense.
If some companies go under, others will step in.  The competition comes now not from UK firms but from overseas companies like Atos, who've discovered just how easy it is here if you know the rules.  And we, who pay for it all, can do nothing about it; we can't even know what's happening because of "commercial confidentiality".  All we know is that it's money down the drain.

Carrying on

On the day of the reshuffle the DWP put out its independent report into the way the bedroom tax is working.  It's a process known as burying bad news.  But it was noticed, particularly by the Liberal Democrats, who decided that it was just too bad to defend any longer.  And it's that, unfortunately, which has been the news story, rather than the contents of the report itself.  Let's skip the politics and look at the facts.
You can read it all here - "Evaluation of Removal of Spare Room Subsidy".  There's a lot of it, so you might like to copy most of the media and just look at the Key Findings from page 15.  Crucial is the fact that only 4.5% of affected claimants have moved "within the social sector" in the first 6 months of the reduction, with another 1.4% moving to the private rented sector.  There's nowhere to move to.  Most people said that they had done more to find work or better-paid work (well, they would, wouldn't they?) but hardly anybody had taken in a lodger.  41% of tenants have paid the full shortfall, 39% have paid some, and 20% have paid none.  Where have people got the money to pay the extra?  57% say they have had to cut back on essentials (like food) and 26% had had to borrow money.
And on it goes.  The RSRS (as the report calls it) is a massive failure, as everyone except IDS and Freud predicted, and all it has achieved is to plunge poor people into greater penury.  The BBC got a quote from Iain Duncan Smith: "This department is delivering some of the biggest welfare reforms in over 60 years, designed to return fairness to the system and we are on track to make the £6bn savings we had previously set out.  At the same time we are helping to make sure our housing benefit reforms have a transformative effect on the lives of those who in the past were faced with a system which trapped people into cycles of workless and welfare dependency.  The scaremongering by those opposed to our welfare reforms - in particular our housing benefit reforms - has been proven to be without substance, and we are already seeing the effects of people moving into work."  The risible DWP Press Office chaps tweeted desperately in similar vein.  But the Lib Dems decided that they couldn't defend it.

There was some barely-noticed news on the outsourcing front.   The contract for electronic tagging of offenders, previously held by G4S and Serco (both of which were found to have defrauded the taxpayer of millions) has gone to - wait for it - Capita!  Some asked why Capita; why does it always have to be these three?  But it's an inevitable part of the outsourcing business.  If you create huge contracts only the big firms can bid, and it was these three which were prepared to bid for everything.  
One lot of contracts of interest to many is Community Work Placements.  But CWP doesn't seem to be going well.  The Boycott Workfare team is doing a great job of publicising companies and organisations which agree to take part by taking free labour.  One was recently claimed by the government as a success, providing a photo-op for Osborne.  It quickly decided to withdraw when it discovered the trouble it was attracting.  It looks like the CWP contractors are targeting councils and housing associations for placements, if Seetec is anything to go by.  They say, "Examples of such projects include estate maintenance and local renovation, groundswork, horticulture, recycling as well as administration, customer service and sales, warehousing, distribution and cleaning services. The list of potential projects is almost endless."  Sadly, it will be tempting for cash-strapped councils to go for this.  Presumably they can adapt the hi-viz jackets they use for Community Payback offenders on similar projects.

Nothing works

Remember the Work Programme?  Of course you do.  But, like so much of what this government has done, the WP has been forgotten by most of the media; and its successor, "Help to Work", is just being ignored.

But the businesses contracted to deliver the WP have to plough on until 2016.  And A4e has resumed its practice of inviting MPs into their local offices to admire what they're doing.  Rob Wilson, Tory MP for Reading East, said, “I was very pleased to hear that A4e has seen a reduction in client numbers because of the success of the Work Programme getting people back into work and off benefits.  Clients are supported by A4e staff after starting work to help ensure they are able to manage in their job.  This extra support is essential to keep people in the new job.”  John Bercow, Tory MP for Buckingham (and Speaker of the Commons) was equally impressed by A4e's work in Milton Keynes.  Another cheer-leader is Dan Finn, Professor of Social Inclusion at Portsmouth University.  He's written a piece on Serco's own website asking, "Is it working?" and concluding that it is, with a few caveats.  And yet ....  Huge amounts of money have been spent on this, with very low targets which are not being met.  It was meant to solve unemployment and certainly hasn't.

So IDS came up with "Help to Work".  It was supposed, after a delay, to start yesterday, but there's another delay.  Could that be because of the difficulties in finding placements for all those sentenced to workfare?  There's a good piece on the Ekklesia website, and another on ThirdSector's site.  A growing number of voluntary organisations and local councils have signed up to a boycott of the scheme.  If they can't find placements with charities and councils the firms with the contracts will have to offer this free labour to private companies.  But, ostrich-like, "A spokesman for the Department for Work and Pensions said: 'Referrals to the placements have begun and the placements will begin shortly. There has been no delay.  Charities are under no obligation to be in the scheme, but those who are recognise the benefits of it.'"

Despite the fact that everything he has touched has turned to dross, Iain Duncan Smith believes it's all wonderful.  If you can stomach it, read his speech on welfare reform in Berlin.  And if we needed confirmation that IDS has a headlock on the BBC, it comes in the Express.  Talking about the Tories' promise of an EU referendum, "Iain Duncan Smith lashed out at the BBC for failing to give enough prominence to Mr Cameron’s promise of an in-out vote in 2017.  The Work and Pensions Secretary said 'most people' do not even know about the pledge.  A BBC spokeswoman said: 'We are satisfied that we have covered the EU referendum promise.'"

Not accountable to anybody

A curious story popped up in my Google alerts the other day, from the Rotherham Business News website.  It reported on the new "Help to Work" programme, then went on to the fact that Rotherham Council had discussed a review into the Work Programme as it operated locally, with Serco and A4e.  The report was particularly concerned about sanctions.  Both companies were invited to take part in the review, in person or in writing, but declined, "with A4e taking the view – based on advice from their Department for Work and Pensions account manager - that it would be inappropriate to respond to the panel's questions."  I'm not entirely sure what a DWP account manager is.  But clearly A4e don't see themselves as accountable to anyone.
The DWP has shied away from investigating another provider, Seetec.  Private Eye broke the story some time ago.  Two whistle-blowers had reported fraud around Seetec's Work Choice contract.  The DWP has now "investigated" and exonerated the company.  But it didn't interview the whistle-blowers, and claimed that it had all the evidence needed in their emails - which contained no detail, just a short summary.  The Eye says that Margaret Hodge is on the case.
It's staggering that the value of outsourcing contracts has risen by 168% in the first quarter of 2014.  It's gone to £2.1bn.  In local government it's up by 60%.  And more than half the contracts are first-time outsourcing deals.  The government wants more.  Private Eye also reported in the latest issue on a meeting held by Francis Maude, the Cabinet Office minister, with bosses from G4S, Serco, Capita and Atos, to discuss "how to develop the government's commercial reforms".  Apparently they discussed "greater openness and trust between government and its suppliers".  But of course, you can't have openness when commercial firms are involved, unless you change the law.  And businesses are lobbying hard to avoid that.
There was an excellent, if chilling, article by Polly Toynbee in the Guardian last week.  Read it and weep.  Even if the Tories are rejected at the next election it will be too late to undo their sell-off of our public services.

CWP - is it a secret?

Community Work Placements are supposed to start next week.  That's the "help" for the long-term unemployed who have been failed by the Work Programme; months of unpaid work "in the community".  But there has been no announcement about which companies have won the contracts to organise this.  It seems certain that the contracts have been awarded.  G4S is advertising dozens of posts to do with CWP on the Indus Delta site.  So why are the public not being told?
Could it be that the DWP wants to avoid the inevitable media outburst which would follow an announcement that those lucrative contracts had been given to G4S?  After all, this is the company which defrauded the government (which means you and me) of millions over the tagging contracts.  It is obvious that the tendering process for CWP was going on while G4S was still supposedly under investigation and suspended from bidding.  Yet it was "cleared" just in time to be given another opportunity for oodles of dosh.  Perhaps Serco, with a similar record, is also on the gravy train.
Community Work Placements could come to grief not just on the incompetence of its providers, but also on the lack of actual placements.  We know that lots of voluntary organisations want nothing to do with it.  CWP is a popular concept with the right, but even the commercial sector could find it attracting too much bad publicity for comfort.
We will just have to wait and see.  Those of our readers who are referred to the programme will no doubt keep us informed.

G4S "cleared"

The news slipped through.  The Telegraph reported it briefly, the BBC website more fully.  But, apart from Paul Lewis on Twitter, no one else has noticed, or thinks it's important.  G4S can again bid for government contracts.  Yes, after bodging contracts and then, along with Serco, defrauding the government over the tagging contract to the tune of £109m, the company was temporarily barred from bidding for its slice of public money.  But now, "The Cabinet Office said G4S had taken steps to address weakness in its operations and its 'corporate renewal plan represented the right direction of travel to meet our expectations as a customer'."  And this comes while the Serious Fraud Office is still investigating.  So keen is the government to get G4S back into the fold that they are not even waiting for the outcome of that.  
What's the urgency?  Well, there were those prisons which Grayling wanted to privatise but couldn't because Serco and G4S, the only bidders, had been banished.  And there are more contracts coming up.  We still haven't heard who the providers are to be for Community Work Placements.  And another nice little earner is up for grabs, barely noticed.  This is the Health and Work Service (HWS), contracts to "intervene" in the lives of people who are off work sick and get them back to work.  Read about it here.  It won't be payment by results, and it needs the consent of employees.  One can expect the usual suspects, including A4e and, of course, G4S, to be bidding.
It makes no sense at all to people outside the weird world of government procurement and outsourcing that providers which have failed to deliver and have ripped you off should be welcome to bid again.  The Public Accounts Committee was astonished that previous performance couldn't be taken into account.  

Ingeus sold and WP extended

There's an interesting report in the Financial Times today about developments in the Work Programme.  Ingeus Deloitte, the company which originated in Australia, has been sold to an American company, Providence Service Corporation.  The Work Programme business, says the FT, is worth £150m a year to Ingeus, "which is understood to have won such a large share of the market by bidding more cheaply than rivals".  Despite the failure of the WP to help the vast majority of those referred to it, there are obviously profits to be made.  And Provident can simply take over Ingeus's activities by bidding for the offender rehabilitation contracts (and anything else on offer).
The other interesting point in the article is that the Work Programme contracts are due to end next year, but they are expected to be extended to 2016 "to avoid the general election".  (Labour has already said that they wouldn't renew the contracts if they get into power.)  By this stage the "attachment" payments should have ended; would we be told if they haven't?  The contracts didn't seem to be generating much profit for the providers, but Provident obviously thinks that the potential is there.  Richard Johnson, formerly of Serco, says that can only come from cutting costs, but it's hard to know how companies like A4e can cut costs any further.
It makes me wonder, again, whether A4e is in line for a buy-out.  Would Emma Harrison be prepared to sell her 85% stake in the company?

Secrets and lies

G4S is in the news again.  The outsourcing company has agreed to pay back almost £109m to the government as a settlement for its overcharging hugely on its contract to tag offenders.  It had offered £24m.  Serco, which shared the contract, has given back £70.5m.  Both companies, we're told, still face investigation by the Serious Fraud Office, and neither can bid for the flogged-off probation contracts currently out for tender.  G4S is in deep financial trouble.  But, you may say, is that it?  Is no one going to be charged with criminal offences?  After all, benefits cheats are in court very quickly.  I doubt it.  
There are several reasons why the government would not want a court case.  The relationship between people in government and those running these outsourcing companies is not the standard one of purchaser and provider; there is a much greater degree of mutual self-interest.  You don't want to put your mates in court.  These two companies in particular have been crucial to the government's exercise in creating private wealth out of public services.  And suppose there were charges.  They could plead guilty, and that would save embarrassment.  We've seen what happened, on a very, very much smaller scale with A4e.  The employees who pleaded guilty have not yet been sentenced.  That may not happen until the second batch have been tried in October.  If they plead guilty as well, we will never know the details of what they did, and what pressures or incentives they were under.  The G4S and Serco cases could follow that route, sparing the public the details of their contracts.  It wouldn't do for us to know how those contracts, and the monitoring of them, allowed the firms to overcharge on this massive scale.  If they pleaded not guilty, all that would have to come out.  The government wants this out of the way as soon as possible, and the companies back in the ring bidding for more juicy contracts.  Grayling had to cancel altogether the privatisation of a batch of prisons because the only bidders were G4S and Serco.
More secrets.  We are used to this government suppressing information if it goes against its narrative of great success in "welfare reform".  So it's no surprise to learn from Channel 4 News that it sat on a report which showed, according to independent experts appointed by the DWP, that the Work Programme isn't working.  That's hardly news, you might say.  But this report came out last September and a decision was taken to suppress it "at a ministerial level", and we know what that means.  All the things which critics said would happen, particularly "creaming and parking", are still going on.  Sanctions are not helping anything, says the report.  And the providers themselves, or 58% of them, think the WP is not helping or worse.  The DWP apparently said, "The reality is that the Work Programme is working."  That's the point at which the secrets turn into lies.
For a straightforward untruth we turn to the narrative on food banks.  The DWP has always insisted that it doesn't refer people to food banks.  There's a good reason for that.  It needs to deny that food banks have become part of the welfare state, or, indeed, that they are needed at all.  But now we have the evidence, thanks to the Guardian, that there is official guidance to jobcentres on how to give out vouchers, and one of the documents is entitled "Foodbank Referral Service".  That has now been modified; "referral" has become "signposting".  And they mustn't refer to the vouchers as vouchers.  (Orwellian newspeak is thriving at the DWP.)  There's a significant paragraph in the article: "The documents show each jobcentre is told to write down how many people have been sent to food banks on a 'slip record sheet', even though the DWP has said: 'Food banks are not part of government policy and, as such, the Department for Work and Pensions does not hold or collect information on their usage.'"
What was it David Cameron once said about being the "most transparent government ever"?

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.

"Contractorisation"

"Contractorisation" - a hideous word coined by David Cameron when he was questioned recently by a parliamentary committee.  He was asked about Chris Grayling's statement that companies which are guilty of malpractice or gross failure could be ruled out of future contracts.  (Think Serco and G4S.)  Would this happen?  Cameron was vague, but said he was in favour of more "contractorisation".  Of course he was vague.  Because it won't happen.  For one thing it would be a legal minefield, and for another, who else is there?  He was also asked about the timetable for bringing in Universal Credit, and was equally vague, leading people to conclude that he and the government know it's not remotely on schedule, and only Iain Duncan Smith thinks it is.
With the start of the party conference season, we can see very clearly that there is consensus among the main parties about welfare and outsourcing.  Clegg waffled this morning about "making work pay" and dodged a question about the deepening poverty of those on benefits.  This is the Tory attitude as well; they believe that they have won the argument.  Tales of hardship can be brushed aside, because a majority of the electorate have accepted the propaganda.  Michael Gove caused a bit of a fuss by saying that he thought people who used food banks were just bad at managing their money.  Various Labour MPs are willing to put a different point of view, but their party would not alter anything the Tories have done.  Nor would they call a halt to the outsourcing.
Cameron, Gove, Clegg et al are not necessarily bad people.  They have good intentions towards people whose lives they cannot begin to understand.  When they are confronted with the truth they can't accept it.  And now that the economic figures aren't quite as bad as they were, they can proclaim that they were right.  It's grim.

Still watching

I was taken to task recently for not writing about A4e on a blog devoted to A4e.  As I said at the time, there is no news about A4e.  But, when you think about it, that in itself is noteworthy.
I started the original website (which A4e got closed down) and then this blog because A4e had a very high profile, and I believed, drawing on my own experience, that the reality didn't match the hype.  And the reality needed to be out there.  Others obviously agreed.  But the tide of publicity rolled on, as did the number of contracts scooped up by the company.  Allegations of fraud had little impact, except to raise the profile even higher.  Emma Harrison revelled in all the publicity, basking in the glow of her own celebrity, collecting her CBE and being appointed adviser to government.  Her fall from grace came suddenly and unexpectedly, and the new bosses had to pick up the pieces.  That meant seeking as little publicity as possible, a strategy that was common sense as well as, surely, the advice of the PR person brought in to help, George Bridges of Quiller.
It worked for a while.  But then Harrison was lured back into the limelight by Channel 4 News, and gave that car crash of an interview.  Less spectacular, but of no help at all, was the behaviour of Jonty Olliff-Cooper, with his offensive tweets.  But the publicity dies down, and no one apparently cares any more.
But it's a different world out there for A4e.  The competition is much fiercer in those sectors they used to find most profitable.  The contracts aren't just handed to them any more.  Companies have come in from overseas, and the really big guns here - Serco, G4S, Capita - have spread their tentacles into what was once A4e's core business.  The smaller-scale stuff from local councils has dried up.  The last financial results available, as of March 2012, showed A4e in trouble.
So we carry on watching A4e, wondering if the company will even survive.

Lessons in outsourcing and bias

The last few days have seen a graphic example of the perils of outsourcing.  As the NHS is gradually auctioned off, one of the pieces up for grabs was the GP out-of-hours contracts.  Serco got the job in Cornwall, and were recently slammed for providing a substandard service.  Next came the 111 helpline.  The bidders had to work on assumptions about call volumes and length, since they were going to be paid per call.  NHS Direct, which won a lot of the contracts, has given one back shortly after starting it, and the rest before even starting.  The assumptions were wrong, and they can't make them viable.  For a minor player like NHS Direct, this is terminal.  They can't exist while making big losses.  But the major players can carry on regardless.
The journalist John Harris wrote a long article in the Guardian on Monday about Serco in particular and outsourcing in general.  He's got all the main points, and writes clearly and passionately.  But he misses one serious issue.  Contracts handed out by one government run for a lot longer than the government itself.  An incoming government in 2015 cannot cancel existing contracts except at immense cost.  So our fragile notion of democracy is further undermined.  We can get no further, because the politicians on all sides are not going to back away from outsourcing.  More local councils are looking at hiving off many of their services.  Government will flog off anything it can.  There are vast amounts of money to be made, and that's all that matters.

There was a hilarious article in the Telegraph yesterday.  Back in November 2011 the BBC's John Humphrys presented a radio programme called The Future of the Welfare State.  It was a personal view, from his Welsh home town.  But there were complaints that it was not based on evidence, and was politically biassed.  The BBC Trust has just ruled that it failed to back the views presented with figures, and breached the rules on impartiality and accuracy.  Cue outrage from Iain Duncan Smith, who obviously loved the original programme, and sees the Trust's verdict as typical left-wing bias.  Ironically, he felt the same about Humphrys interview of him about the benefits cap recently; and he professes himself "staggered" about the way the BBC reported the High Court's judgement on the bedroom tax yesterday.  Yes, IDS is ridiculous.  But he's also very dangerous.  The only acceptable stance, as far as he's concerned, is for the BBC to parrot the government's line uncritically.  Yet another chip out of the structure of democracy.

As I was saying ......

Last week I speculated about the future of outsourcing, and pointed out some of its perils.  Now comes vindication with the story of G4S and Serco having overcharged the government massively on their contracts to tag offenders.  Because G4S is apparently not co-operating fully with the government's investigation, Chris Grayling is calling in the cops.  With new contracts in the pipeline, Serco have said they won't bid for them - but Capita plans to do so.  Unless a foreign company throws its hat in the ring, that's it.  There are no other companies in a position to bid.
We learned today that, between them, Serco and G4S get £1.5 billion a year from the may contracts like this that they have.  And in total outsourcing is worth more than £80 billion a year.  That's our money.  Some are now putting the blame for messes like the tagging contracts on the poor skills of those civil servants who are supposed to manage and monitor them.  Well, maybe, but that's inevitable.  They are hugely outgunned by the companies.

The future of outsourcing: can A4e survive?

Many people may have wondered how the dismal failure of the Work Programme to achieve its targets for the second year in a row has been hailed as a great success by the government which is paying for it (with our money).  But in fact the lies have shown the flaw at the heart of outsourcing.
Public sector bad, private sector good: that's one of the basic tenets of a free market system.  The private sector, with profit as its driver, will always be more efficient and innovative than the public sector.  Evidence for this assumption is hard to come by.  The real rationale is actually much closer to what Thatcher believed - that an industry or service should always be making money for someone.  The last Conservative government privatised everything for which the public paid directly; transport, for instance, and the utilities, most of which are now owned by foreign companies.  The Blair government followed by outsourcing those services which were paid for out of the public purse, whether locally or nationally.  In theory it makes sense, at least initially. You don't have to have an army of staff, with all the attendant costs and hassle.  You specify what you want and contract with the cheapest company to provide it.  If they don't deliver, you don't pay.
When this bonanza started, A4e were well placed to benefit.  But in a few short years the problems with the model started to appear.  In their chosen sector the company was soon scooping up contracts, to the bemusement of their competitors.  Was A4e simply undercutting its rivals?  Or did they have some sort of favoured status with government?  In other sectors, similar things were happening with companies like Capita, G4S and Serco.  It costs a lot of money to put a bid together; if a company can't see a possibility of ever getting a contract, it will cease to compete.  The success of the big players meant the demise of competitors.  The supposed free market was rapidly becoming an illusion.  When the government recently announced that it was to outsource most of the functions of the Probation Service, everyone assumed that the only bidders would be G4S and Serco.  All the outsourcing companies left standing have diversified into fields in which they have no previous experience, including welfare-to-work, where they have been joined by foreign companies.  A4e is no longer the top player.
The targets written into the contracts, and promised by the private companies, became notional at best.  The strange procurement process meant that previous performance couldn't be taken into account, so companies could fail and fail again, but still get new contracts.  There was no risk.  A good example of this was G4S's incompetence over the Olympics security contracts.  Their reputation took a temporary knock, and their profits stumbled, but it did no lasting damage.  Fortunately, on that occasion there were the police and the army to step in.  The G4S event was also an example of how dangerous the private sector practices can be. The company had to recruit a lot of temporary staff, and did so in good time; but they didn't want to pay them until they absolutely had to, and so by the time they called in their recruits many of them had made other plans and weren't available.
Occasionally a contract would prove to be such a bad deal for the company (usually because it had made a bad bet) that it had to cut its losses and give up the contract.  A4e did that with a number of prison education contracts, after badly miscalculating the costs and incurring big losses.  More recently we've seen NHS Direct pull out of two of its 11 medical helpline contracts because they are "financially unsustainable".  Other companies must step in and pick up the pieces.  But what happens when there are no other companies?  When you have closed down the public sector departments and got rid of the staff, you can't bring a service back in-house except at enormous expense.
The power should lie with those commissioning the services; with government departments or local authorities.  But as the number of players shrinks, the power shifts.  The design of contracts is negotiated with the providers, who have the upper hand, as we saw with the Work Programme.  We've even seen A4e being paid to tell government how to design contracts!
The answer, from this government, is Payment by Results.  But that has simply made matters worse.  It automatically limits the numbers of companies which can bid to the largest and most financially well-endowed; those able to sustain a period without any profits.  From the outset, it wasn't quite what it was supposed to be.  An upfront "attachment fee" was negotiated, which kept the companies ticking over without any results whatever.  However, PbR satisfies the free marketeers, who disregard the fact that if a service is not being delivered, it's the service users who suffer.
It is very much in the interests of government that outsourcing should succeed.  They don't want to have to admit that they got the whole process wrong and have spent our money to no good purpose.  That was what made Emma Harrison such an embarrassment when it was revealed just how much money she had pocketed in profits.  She had to go.  And it's why the Work Programme data has been so misrepresented.  So the private companies and the government have a mutual interest in pretending that black is white, if necessary.  It's also why the companies employ people who have a direct line to government (think Blunkett and Olliff-Cooper at A4e).
A4e's last published accounts showed their business shrinking, and perhaps struggling.  The accounts for the year to March 2013 won't be published until the end of the year.  Will it survive?  Outsourcing isn't going away, so much will depend on whether the company can adapt to the changing environment.

The failing Work Programme - the PAC report

It's all over the papers this morning; the report of the Public Accounts Committee into the Work Programme.  We already knew its conclusions, but the various newspaper articles highlight different aspects of it (when they can be bothered to go beyond the press release).  The Telegraph, for instance, reports that some of the companies are in danger of being stripped of their contracts and even of going out of business.  The Guardian points out that all 18 organisations involved have been put on "performance improvement plans", with 7 of them being sent formal warning letters.  Margaret Hodge was also angry that the DWP had published unvalidated data from the ERSA.  We do learn that the next set of performance data is due to be published in March.
It would appear that Richard Johnson, formerly of Serco, is now the go-to person for an opinion on all this.  He was the man who was in charge of WP stuff for Serco, but now that he no longer works for them he's free to criticise.  He said, on the BBC Today Programme this morning, that the design of the contracts made "creaming and parking" inevitable.  I notice that the BBC is asking for experiences of the Work Programme, so perhaps they are planning a proper investigation of the subject.  Let's hope so.

Scaremongering?

That was Mark Hoban's response to the Public Accounts Committee's roasting of the DWP for the misery caused by Atos.  The BBC reports it straightforwardly.  Margaret Hodge put the blame on the DWP rather than on the company, saying that it regarded the appeals process as an inherent part of the system, when it was actually damaging vulnerable people.  Hoban replied that they'd failed to recognise that changes had been made and that independent reports said that the whole thing was fundamentally sound.  Mind you, according to a tweet by Jonty Olliff-Cooper, Hoban has described Jobcentres as "the last vestige of the command and control economy", so are we to expect that they will soon be handed over for private profit?  (JOC calls this comment "pretty fruity from a minister", which must be public school speak for something I don't understand.)

There's an excellent article by Zoe Williams in the Guardian yesterday, in which she describes the "shadow state" created by the outsourcing of public services.  I won't quote from it because you need to read the whole of it.  Last week another Guardian article by Toby Lowe described payment by results as "a dangerous idiocy that makes staff tell lies".  Again, spot on.  And if we needed any more practical examples of how things can go spectacularly wrong, there's the report from the Commons Justice Committee on the "shambolic" situation with court translation services (something Private Eye has been going on about for ages) and the Care Quality Commission's report into Serco's out-of-hours doctor service in Cornwall, which failed the sick by not having enough staff to answer calls.

But all of this is presumably just scaremongering.

The press we deserve?

It's the middle of the night and I can't sleep, so I'm checking the news feeds ahead of the release of the performance data at 9.30 am.  There's plenty of interpretation already.  But the prize must go to the Express: "Jobs scheme 'helps 20,000 a month'".  Yes, they've taken the ERSA's spin and published it as the facts, ignoring deliberately the reality that this is people who've found any sort of work, temporary, part-time, which got them off the books for a little while.  "Almost a third of those who started the Work Programme in June 2011 have been supported into a job so far, said the ERSA. More than 64,000 people found work under the programme in the three months to September, it was reported."  (The words "helps" and "supported" will startle many people who know that the providers had nothing to do with it.)  But this is what Mark Hoban and the government wanted, of course.  Don't bother with the facts - that the figures for sustained jobs are appalling - just spin dizzily so that Express readers get the propaganda.
The Independent goes with "Government's Work Programme only helps one person in three find a job".  They do report the ERSA's figures, but understand the spin.
The Guardian has published the full data which the private companies have put out and asked readers if they can do anything with it.  Good for them.
The Financial Times yesterday had access to the actual figures and reported that the best-performing company, Serco, earned nearly double what the worst-performing, Prospects, earned.
So as as we await the actual figures (and I hope I can get some sleep in before then) we can already see what the press are going to make of it.  Accurate reporting?  Some papers don't know what that means.

Odd bits of news

You may be interested to know that A4e is ranked 164th in the Sunday Times top 250 league table of medium sized private companies.  Apparently the table is of companies which reported increased sales or operating profit.

Another bit of news concerns the civil servant Alan Cave, who was in charge of welfare-to-work schemes.  he has now taken a job with Serco.  Paul Flynn MP, a member of the Public Accounts Committee, condemned the move as an "egregious example of the revolving door" between government and industry.  There is nothing to stop the move, because Cave is apparently "not senior enough" to come up against the government's Advisory Committee on Business Appointments.  So that's all right, then.

You might have missed this in the Telegraph today.  "120,000 troubled families could be legally banned from spending benefits on alcohol and tobacco."  It doesn't matter how often this lie is exposed, it keeps coming back, because it's so convenient to press and government.  The 120,000 figure was plucked out of the air, a guesstimate done for completely different purposes some years ago.  It gave Emma Harrison her temporary exalted position as family tsar.  Now, local authorities identify those households which cause a lot of problems and are involved with lots of different agencies.  Some councils have been doing it for some years, and assigning a single officer as the conduit for all services and advice.  But of course the government wanted the private sector to have a profit opportunity, so private companies are now contracted to do this.  So those families, however many of them there are, will now not be able to spend their benefits as they wish. No more fags, booze or drugs.  And all spending on essentials to be done through designated supermarkets. So no more buying clothes in charity shops, or household essentials in the pound shop.  Go to Tesco or wherever, present your card at the till and proclaim to the checkout girl and everyone around you that you're a troubled family.  You can bet it won't stop there.  The far right want all benefits claimants to be paid in this way, and if it doesn't come before the next election, it will surely come after it if the Conservatives get in.