1.14 The members of MGS(O) took a robust approach in negotiations with G4S and Serco. However, government was constrained in its actions and acted as if the firms were too important to fail: if either contractor walked away it would cause severe disruption to public services and would threaten government's ability to have competition across several policy areas. Furthermore, government could not terminate its £1.8 billion a year of contracts with G4S and Serco without paying significant damages and there were not well-developed contingency plans to prevent severe disruption to public services. Under EU law, government could not easily 'blacklist' the contractors and stop them from bidding for contracts. However, it could put significant political and reputational pressure on the contractors to demand the following:
• Significant 'corporate renewal'
Including replacing senior managers, restructuring and new governance procedures, new ethical training and greater transparency. G4S and Serco separately prepared corporate renewal programmes. HM Treasury appointed Grant Thornton to assess the sufficiency of the respective programmes and to monitor their initial implementation.
• Financial settlement
In total, across the contracts referred to authorities, G4S and Serco have paid the government £179.4 million.21 This represents the total amount overbilled plus some of the previously recognised profit and reimbursement of government costs for the investigation. The SFO and police investigations are ongoing.
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21 Serco has paid £68.5 million relating to electronic monitoring and £2.0 million for prisoner escorting. G4S has paid £104.4 million relating to electronic monitoring and £4.5 million on court facilities management. Sums comprise rebates, interest and payment of government investigation costs. These amounts do not include VAT, which will be repaid but then reclaimed from HMRC.