37. We heard how there was no ban on G4S and Serco winning new work after discovery of the overcharging in July 2013 and during the subsequent 'corporate renewal' period.[57] The fact that Government gave the impression that all discussion with Serco and G4S were halted whilst investigations took place, whilst in fact the companies have been awarded new contracts in other departments had existing contracts extended and were in negotiation with departments over new contracts is evidence of the over reliance on these larger suppliers.
38. The Cabinet Office told us that, while the man in the street might consider a ban to be appropriate, government had to balance that with EU law. It added that it had oversight of the control environment in government within which it was important to stop contract extensions and that it had 'paused' a number of contract requests. It had also advised the two firms that "it is probably not welcome for them to bid for new business until they get through this phase."[58] The Home Office described how, in the case of one new contract for which one of the firms would be bidding, it had made it clear that such a bid would not be welcome, and that firm had voluntarily stepped aside.[59] Serco told us that they considered themselves "unawardable" for any new work during the period through to January 2014 and both firms reported that they had suffered negative financial effects since the discovery of overbilling.[60]
39. Nonetheless, G4S and Serco continued to be awarded work, including both contract extensions and new work, whilst they were under investigation (between July 2013 and January 2014 for Serco and July 2013 and April 2014 for G4S). Written evidence submitted to us after the evidence sessions, from the two firms and from the Cabinet Office, confirmed that while the corporate renewal plans were being agreed, the Ministry of Justice, the Ministry of Defence, the Department of Health, Department for Business, Innovation and Skills and HM Revenue & Customs all awarded additional work to the firms. In its written evidence the Cabinet Office set out a chronology of relevant government statements and contract awards to G4S and Serco during the corporate renewal period, and stated "We believe that there was a robust cross-government response to the over-billing issues that emerged at MoJ, and that Government worked within legal and operational necessity constraints to limit work placed with both companies."[61]
40. We also heard the Cabinet Office describe how, in the past, it had been a matter of policy to treat each government department as a separate client, which could not therefore share information on the past performance of a contractor bidding for work with another department. The Cabinet Office told us this has changed and that they do now take account of poor performance in other departments.[62] The CBI agreed that contractors should be penalised for underperformance, and that it could be appropriate that they should be excluded from competitions where wrongdoing is absolutely proven or past performance in a specific area casts doubt over their ability to deliver. However, both government and the CBI were against the idea of blanket bans from public service markets where contractors have performed poorly or behaved unethically. Government felt this had to be balanced with EU law, while the CBI felt it could be unhelpful by reducing choice.[63] The Cabinet Office was clear that it would be obliged to stop doing business with companies which had been convicted of certain crimes, but said it could do other things if they were not actually convicted, such as not giving contract extensions.[64]
41. Recommendation: All government contracts should include robust sanctions for underperformance or weak control which should be applied rigorously when performance falls short, and performance on previous contracts must always be taken into account when awarding new work.
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57 AQq 30-33
58 BQ 46
59 AQ 221
60 AQq 4-5, 14
61 Written submissions from Serco, G4S and Cabinet Office
62 BQ 95
63 BQ 13-14. BQ 38
64 BQ 44-45