Shine A Light

This market isn't working. UK government contractors exploit secrecy and weak competition

The government keeps taxpayers in the dark about billions paid to private contractors. A Parliamentary watchdog demands transparency and proof that competition exists.

Richard Garside
17 March 2014

"Government spends £187 billion on goods and services with third parties each year, around half of which is estimated to be on contracted out services." So claims a report by the House of Commons Public Accounts Committee (PAC), published last week, on the contracting out of public services to the private sector.

'Estimated' is the operative word here, for a cloak of secrecy shrouds government contracts. The Public Accounts Committe, whose job is to ensure that the public gets value for money, notes:

"Too often the government has used commercial confidentiality as an excuse to withhold information, often in response to Freedom of Information (FOI) requests from the public and MPs."

Greater openness in government contracts — "transparency, not commercial sensitivity, as their default position" — is one of the committee's five 'areas for improvement' in the way government does business.

The MPs also calls for greater competition in the market for government business:

"Some private sector providers have grown significantly in recent years, often through buying up competitors or other organisations in their supply chain... But the government has not analysed directly the implications on the operation of the marketplace, and on the delivery of public services. Some public service markets, such as for private prisons, asylum accommodation or the Work Programme are now dominated by a small number of contractors, and the government is exposed to huge delivery and financial risks should one of these suppliers fail. At the very least, limited markets lack the competition required to ensure that taxpayers get the best deal."

The Centre for Crime and Justice Studies' own research in this area, published in the latest edition of UK Justice Policy Review (UKJPR), backs up this claim.

As the figure below suggests, the marketplace in contracted out services in relation to prisoner escort, prison management and electronic monitoring is dominated by two companies: G4S and Serco.

suppliers to NOMS.jpeg

If we were to put a positive gloss on this, we might say that beneath the two dominant companies is a diversity of smaller providers that in principle could contribute to the development of a competitive marketplace.

But who are Bridgend Custodial Services, the third largest company in the figure, or Fazakerley Prison Services, the fourth largest?

If you have never heard of them, don't worry. Nor had I until we started looking at the data. Both are better known for the prisons they run: HMPs Parc and Altcourse respectively. They are also part of the G4S network of companies, as are Onley Prison Services, which runs HMP Rye Hill.

What about Moreton Prison Services, Lowdham Grange Prison Services, Pucklechurch Custodial Services and BWP Project Services? These companies are responsible for, in order, HMPs Dovegate, Lowdham Grange, Ashfield and Thameside. All are part of the Serco empire.

Agecroft Prison Management, Ashford Prison Services and Peterborough Prison Management are part of another outsourcing company - Sodexo - and run HMP/YOI Forest Bank, HMP Bronzefield and HMP Peterborough.

UKJPR 3 Combined operations figure.jpg

Once we unpick this complex network of companies, the G4S and Serco stranglehold on the market is even more apparent: accounting for three quarters of the contracting pie. Sodhexo comes in a distant third, with 16 per cent of contract value.

The data we used to draw up this analysis is partial in a number of respects. It includes only contracts with a value of more than £25,000.

And it stops at October 2012. In response to a Freedom of Information request by the Centre for Crime and Justice Studies the government claimed it intended to release more recent data. None has been forthcoming.

Data problems aside, it provides as good a sense as any of the current state of the marketplace in prison and probation services: one dominated by a couple of multinational companies with tarnished reputations.

As the government continues to press ahead with plans to privatise the probation service, this only adds to concerns that there are simply not enough credible and experienced organisations out there that can competently undertake the complex work involved.

Apart from the one that already exists of course. It's called the probation service.


This article appears concurrently on the Centre for Crime & Justice Studies website.


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