Serco: A case study in outsourcing community service delivery

Carrying the loadWhy Serco?

Six years ago Serco was described as “probably the biggest company you’ve never heard of”[1] and this is still the case for many people. It’s a multinational corporation that specialises in providing public services under government contract. Serco operates and maintains a surprisingly large and diverse range of services in both the UK and Australia, as well as in several other countries. Its website lists some examples of the scale of its operations including: traffic management systems covering more than 17,500kms of roads worldwide, managing 192,000 square miles of airspace in five countries, managing education authorities on behalf of local governments, and providing defence support services worldwide.[2] Serco also manages a number of hospitals, prisons and detention centres, and is involved in a host of other services.[3]

Private sector involvement in the delivery of public services (often referred to as privatisation, outsourcing, or commissioning, as well as many other terms) is a significant part of Big Society thinking. The argument usually made in support of privatisation is that it provides better value for public money, since the competitive environment of the private sector rewards the ability to provide equal or better services at a lower cost. Arguments have also been made that it results in more locally appropriate services by encouraging a diversity of providers,[4] and that accountability is greater in the private sector.[5] These arguments may well be correct in some cases. However, it is a mistake to think that privatisation will always deliver these benefits, and therefore that it is always appropriate.

Focussing on the company Serco, there have been numerous reports of instances where its service provision has been sub-standard, high-cost, has eliminated diversity, or has lacked accountability. Putting this focus on Serco’s faults is not to say that it is any more prone to failures than other corporations in this area, or that it is always unsuccessful in its service provision. Rather, the point is to show clearly the dangers of privatisation, and why it must not be accepted as a universal good.

Concern: Social Justice/Human Rights

In the delivery of essential public services, sub-standard performance can result in serious injustices and even the violation of human rights. Serco has come under particularly strong criticism in its management of prisons and detention centres. In Australian immigration detention centres there have been cases of children having their crayons banned,[6] detainees referred to only by ID number,[7] and a suicide after a detainee was denied social contact and refused permission to attend an important religious event.[8] There has also been evidence of security personnel with inadequate (or even no) qualifications,[9] and a lack of mental health training for staff associated high rates of detainee self-harm and suicide attempts.[10]

In the UK Serco run prisons have been found by a government inspection to have a culture of “institutional meanness”[11] which included converting two-prisoner cells to hold three by putting a bed in the shared toilet.[12] And Serco-run youth detention centres have been found by the courts to have perpetrated a decade of unlawful abuse.[13] The worst case was that of a fourteen year old boy in a juvenile detention centre, who hung himself after being unlawfully assaulted by Serco-trained guards.[14]

Although most of the reports of sub-standard service provision have come out of prisons and detention centres, Serco has also come under criticism in other areas; such as the removal of an out-of-hours GP service from a UK community without any consultation, which raised concerns that lives could be put at risk.[15]

Concern: Value for money

The argument that privatisation will provide better value for taxpayer money is problematic in two ways: Firstly, in seeking the lowest cost model, service quality might suffer significantly. This may be the cause of some or all of the instances of sub-standard service mentioned above. As one Union representative put it: “Serco’s track record in Australia in the detention centres is that they run their services very lean as far as staffing goes and that’s how they make their money”.[16] Secondly, the private sector is not somehow immune to inefficiency. For example, Serco and another company (G4S) have been accused incurring excessive costs in running secure units for youth offenders,[17] and of paying excessive salaries to their CEOs.[18]

Given the complexity of many public services it is often difficult to tell whether private providers are really providing better value, and sometimes this assessment is itself outsourced leading to further problems. Last year Serco won a tender to run a youth prison in Western Australia, as part of the tender process an estimate was made of the costs if the public sector were to run it. This estimate was made by the firm KPMG, which has previously worked with Serco on a number of projects and may have been advising Serco and the State Government at the same time.[19]

Even where assessments of value are not outsourced, private providers have the independence and financial ability to influence the process. In Bradford (UK) Serco took over the management of all state schools, it missed the education targets set out in its original contract, but convinced the council to lower the targets and award the company a performance bonus.[20] In Australia, the New South Wales State Premier has received advice from the head of the Serco Institute (its research think-tank) on “ideas to save money”.[21]

Concern: Diversity

Despite claims that “opening up” the public sector will result in a diversity of organisations competing to provide public services,[22] this does not always occur in practice. There are a number of service areas in which Serco has managed to become the sole provider. In Western Australia they were recently the only bidder to run a new youth prison and currently hold all major justice contracts in the state.[23] They also run all of Australia’s immigration detention centres, immigration residential housing and immigration transit accommodation.[24] In the UK Serco has various monopolies including running Dublin’s traffic lights and looking after Briton’s entire nuclear arsenal from creation to decommission.[25] One English newspaper has commented: “In some parts of Britain it has taken over so many local services it is virtually indistinguishable from the council.”[26]

The Serco Institute itself has said that for public service market to work requires competition amongst private providers.[27] And yet Serco’s actions have sometimes undermined competition, for example, by promising in a bid for service provision to cooperate and pass money on to charities and voluntary organisations, and then failing to do so;[28] also Serco continues to buy up smaller outsourcing corporations.[29]

Concern: Accountability/Transparency

Compounding the above concerns is a lack of transparency and accountability in many privatisation arrangements. It is possible that numerous other cases have not been revealed that involved violations of social justice, poor value for money, and/or a lack of diversity.

The problems in Australian detention centres have come to light largely due to a sustained effort by one media outlet, New Matilda. During this investigation they found a number of serious flaws in the accountability processes. Under the contract to run detention centres, clinical depression, childbirth, and voluntary starvation for under 24 hours, were considered “minor” incidents, which mean only 10% of the responses needed to be audited, and then only internally by Serco.[30] However, unauthorised media access was considered a “critical” incident.[31] There was no obligation to comply with an independent audit, and the system relied on self-report of incidents.[32] This means that reports could simply not be filed, and there were allegations by staff of underreporting of incidents,[33] including self-harm and suicide attempts.[34]

The lack of transparency prompted one senator to ask in a hearing: “So the contract whereby the list of requirements that Serco has to fulfil is not for public disclosure, the possible items that would qualify as a breach is not publicly disclosed, the performance of whether they are actually upholding or breaching that service delivery performance is not publicly disclosed — where in this process is there the public interest and transparency of this contract?”[35]

No efforts similar to New Matilda’s have been focussed on Serco’s other operations, but indications of transparency issues have been reported, such as a memorandum of understanding with the UK government being kept secret,[36] and a high-profile charity of which Serco was a major donor, deleted part of a report that criticised privatisation due to concerns over the company’s reaction.[37]

[1] Martinson, J., 24/2/06, ‘Happy, touchy-feely and driven by God’, The Guardian [retrieved 6 March 2012]

[2] Serco, 25/11/11, ‘At A Glance’, Serco Website [retrieved 6 March 2012]

[3] Storrar, K., 25/2/06, ‘So you thought it was Tony and Gordon in charge? Well, think again, and meet the men from Serco who really… Run Britain’ Mirror  [retrieved 6 March 2012]

[4] Dearden-Phillips, C., 7/3/11, ‘How will the Any Willing Provider model affect public services?’ The Guardian [retrieved 6 March 2012]

[5] Nelson, F., 23/2/12, ‘The private sector exposes fraud where the state only lets it fester’ The Telegraph (UK) [retrieved 6 March 2012]

[6] Needham, K., 7/1/12, ‘Serco drops ban on coloured pencils and crayons for asylum-seeker children’ The Sydney Morning Herald [retrieved 6 March 2012]

[7] Martin-Iverson, V., 28/4/11, ‘“Stripping people of their humanity”’ New Matilda [retrieved 6 March 2012]

[8] Chan, R., 28/10/11, ‘Shooty was one of the strong ones’ New Matilda [retrieved 6 March 2012]

[9] Loewenstein, A., & Farrell, P., 9/11/11, ‘Serco hires untrained guards’ New Matilda [retrieved 6 March 2012]

[10] Cordell, M., & Hooke, P., 8/12/11, ‘Serco warns of “self-harm culture”’ New Matilda [retrieved 6 March 2012]

[11] Travis, A., 12/4/06, ‘“Squalid” private jail was too mean to buy toilet seats’ The Guardian [retrieved 6 March 2012]

[12] Gaines, S., 22/7/08, ‘Inmates sleep in toilets at overcrowded prison’ The Guardian [retrieved 6 March 2012]

[13] Macdonald, K., & Buckley-Carr, A., 15/1/12, ‘Judge raps Serco for abuse of juveniles’ The West Australian [retrieved 6 March 2012]

[14] Daily Mail, 11/1/11, ‘Youngest person to die in custody, 14, was unlawfully hit by guard hours before suicide’ [retrieved 6 March 2012]; Papas, C., 16/12/11, ‘Serco to run youth prison’ New Matilda

[15] Cornish Guardian, 21/12/11, ‘“GP service move will put lives at risk”’ [retrieved 6 March 2012]

[16] O’Brien, A., 1/12/11, ‘“Overwhelmed” Serco uses admin staff as security guards’ The Australian [retrieved 6 March 2012]

[17] MacKenzie, C., 17/12/11, ‘Scandalous cost of justice: £861 a night to lock up young crime suspects… £650 to stay at the Ritz’ Daily Mail [retrieved 6 March 2012]–861-night-lock-young-crime-suspects—650-stay-Ritz.html?ito=feeds-newsxml

[18] Laurance, B., 13/3/11, ‘Revealed: The new public service Fat Cats and why they’re immune from the cuts’ Daily Mail [retrieved 6 March 2012]

[19] Papas, 16/12/11.

[20] Laurance, 13/3/11.

[21] Aston, H., 27/2/11, ‘Axemen advise O’Farrell’ The Sydney Morning Herald [retrieved 7 March 2012]

[22] Cabinet Office (UK), 2012, ‘Big Society – Overview’ [retrieved 7 March 2012]

[23] Papas, 16/12/11.

[24] Australian Government Department of Immigration and Citizenship, 2012, ‘Detention services provider contracts’ [retrieved 7 March 2012]

[25] Clair, P., 2/12/09, ‘Serco: Running nukes and prisons for profit’ Hungry Beast [retrieved 7 March 2012]

[26] Laurance, 13/3/11.

[27] Dempster, Q., 7/4/06, ‘From “PPP’s” to “PFP’s”’ Stateline [retrieved 7 March 2012]

[28] Boffey, D., 21/1/12, ‘Charity slams David Cameron’s Work Programme for unemployed’ The Guardian [retrieved 7 March 2012]

[29] Maidment, N., 31/10/11, ‘Serco buying Excelior for up to A$13.2 million’ Reuters [retrieved 7 March 2012]

[30] Loewenstein, A., Cordell, M., & Farrell, P., 9/11/11, ‘Exclusive: Our contract with Serco’ New Matilda [retrieved 7 March 2012]

[31] Loewenstein, Cordell, & Farrell, 9/11/11.

[32] Loewenstein, A., & Farrell, P., 9/11/11, ‘No audit requirement for Serco’ New Matilda [retrieved 7 March 2012]

[33] Loewenstein, & Farrell, 9/11/11.

[34] Cordell, & Hooke, 8/12/11.

[35] Brereton, A., 24/5/11, ‘Department admits “no one watching Serco”’ New Matilda [retrieved 7 March 2012]

[36] Laurance, 13/3/11.

[37] Maguire, K., 28/11/03, ‘How British charity was silenced on Iraq’ The Guardian [retrieved 7 March 2012]