21. Research by the Committee of Standards in Public Life shows that the public believes that public services should be delivered to high ethical standards, regardless of whether they are being delivered by government or by a contractor working on government's behalf.[33] Both G4S and Serco accept that they made serious mistakes in their overbilling of government on their electronic monitoring contracts and expressed regret to us. G4S told us "… we made the wrong judgement and we got it wrong, for which we are sorry" and, from Serco, "What happened was totally unacceptable and unethical; frankly, we are deeply ashamed of it".[34]
22. But electronic tagging is not an isolated case of unethical behaviour and disregard for taxpayers' money. For example, two other G4S contracts have been referred to the Serious Fraud Office to investigate, and another Serco contract has been referred to the City of London police. We have previously reported on Serco's altering of performance data on its contract for out-of-hours GP services in Cornwall.[35]
23. We questioned whether the incentive cultures within contractors had driven such disregard for taxpayers and service users. G4S told us its staff bonus schemes had been 75% dependent on financial results. Serco did not believe bonuses were a driver of unethical behaviour in its organisation.[36] The Comptroller and Auditor General highlighted how large diversified contractors such as G4S and Serco face particular challenges controlling behaviours and performance across their many operations and subsidiaries.[37] The Ministry of Justice told us it now looks specifically at contractors' bonus schemes, because it does not want contractor staff incentivised in a way that encourages them to game the contract and damage value for money to the government.[38]
24. It is not in the long-term interests of any private sector provider to behave unethically. Serco described the fallout from overcharging for electronic tagging as "a disaster" and the CBI made the point that "Good behaviour goes hand in hand with operating in this marketplace … and if you do not do that over a sustained period of time, that is not good business sense."[39] Contractors are recognising the need for cultural change and we were pleased to hear Serco's Group Chief Executive tell us that "there should be a new dispensation, a new way of thinking about how companies do business with the Government, which is that companies owe a duty of care to the taxpayer."[40]
25. The NAO has recommended that government should get "written representation from contractors on the integrity of the services they supply, covering the control environment for maintaining ethical behaviour and public service standards. Such statements, while not necessarily carrying additional legal implications, would have symbolic and reputational importance, and give Parliament clear accountability."[41] We put this to the CBI who told us that this was perfectly feasible as every company has a process around governance, controls and behaviours, while also emphasising that such a requirement would need to be clearly laid out in contracts.[42] The Committee on Standards in Public Life made a similar recommendation in its June 2014 report, when they called for Accounting Officers to actively seek assurance that public money is being spent in accordance with the high ethical standards expected of all providers of public services. The Chair told us that his Committee was particularly keen on this as a potential means to push for a culture in providers which recognises and rewards high ethical standards.[43]
26. Recommendation: The Cabinet Office should work with industry to define what obligations a duty of care should entail, what sanctions would apply should performance fall short, and require senior executives to attest annually to the strength of their internal controls over public contracts and to be personally accountable to Parliament for performance.
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33 Committee of Standards in Public Life, Ethical standards for providers of public services, paragraph 6
34 AQq 22, 52
35 AQ 15, BQq 53-54; C&AG's report, Transforming government's contract management, Paragraph 7; Committee of Public Accounts, The provision of the out-of-hours GP service in Cornwall, HC 472, session 2013-14, July 2013
36 AQq 41, 51
37 AQq 38, 60, BQ 18
38 AQ 200
39 AQq 26-27, BQ 23
40 AQq 67-70
41 C&AG's Report, Transforming government's contract management, para 3.17
42 BQ 12
43 BQ 11; Committee on Standards in Public Life, Ethical standards for providers of public services, June 2014, page 9