6 The Cabinet Office, HM Treasury, and the Ministry of Justice reacted strongly in handling G4S's and Serco's overbilling. However, government was constrained in its actions and acted as if the firms were too important to fail: their failure could create widespread disruption to public services and government wanted their ongoing participation in competitions. They referred both companies to the Serious Fraud Office (SFO), whose investigations are still ongoing. They demanded that both companies change, and both companies proposed formal processes of 'corporate renewal'. These included changes to management, organisational structures, ethical training and controls. There was no official ban on letting new contracts to the companies, but departments had to get the Minister for the Cabinet Office to approve new contracts and the companies withdrew from several tender processes.
7 Government secured payments of £179.4 million from the contractors related to overbilling issues. Government negotiated payments of £104.4 million from G4S and agreed £68.5 million from Serco covering rebates, investigation costs and interest relating to the overbilling on electronic monitoring. Following reviews of further contracts, G4S paid government £4.5 million in respect of billing issues on 2 court facilities management contracts, which were also referred to the SFO. Serco paid £2.0 million relating to its prisoner escorting and custodial services contract, which has been referred to the City of London Police.
8 Government's reviews provided evidence of further billing or reporting errors across government contracts, though no evidence of deliberate wrongdoing. The government reviews were thorough, but only 60 central government contracts were tested for overbilling, of which some 34 had issues in the amount billed. These issues included both under- and overbilling. Given the flaws in contract management controls across government, it is in our view probable that other instances of overbilling have occurred across government's wider contract portfolio. We cannot be sure of the extent of such overbilling or whether it is material.