Monday, 15 July 2013

The Justice of paying tag in procurement

If yesterday’s Sunday Times is correct it appears G4S will have an up hill struggle in gaining future public sector business -  is that justice and would it stand up under public procurement regulations?

Now don’t get me wrong, I have not been afraid to cast stones at G4S and some aspects of their performance, but is this latest concern about tagging the right one to pick a fight about and would justice be seen to be done? Would the demise of G4S be something any government would want to celebrate?

While it may be fashionable to rake up the past of G4S’ Olympics security debacle, who was actually the client for that contract? I can’t see any connection with the MoJ, nor can I believe that MoJ have had full view of all the relevant facts and agreements. That being the case, is it justice to use that as a basis for withholding other contracts? Equally, why act now, given that there were calls for G4S to be blacklisted at the time?

But let’s consider the specifics of the tagging contract. G4S claim they had previously provided information to MoJ auditors for scrutiny, yet have not received any feedback. Given that there’s always a cost in providing information and no feedback has been received which could have helped G4S address issues - is it fair and reasonable to treat a refusal of G4S to volunteer to submit to a forensic audit? Should the evidence of abuse not be presented by the MoJ?

It appears that G4S have completed their own audit and found only a comparatively trivial over-charge. I am not condoning any overcharge, but it does strike me that any form of comprehensive audit of invoices from any supplier is likely to have a fair probability of revealing a small number of mistakes. Questions should be asked ‘Has there been a deliberate strategy of over-charging?’ ‘Is it a frequently occurrence?’ and ‘Is the amount significant?’

But supplier generated release of payments rarely happens. Most public sector organisations require the Accounts Payable function to match and approve the invoice (although some have only random checks below certain thresholds). That being the case, it seems the chances of an over-charge of any significance from G4S having been approved by MoJ must be astronomically low.

The Justice Secretary allegedly provided G4S with two option, one the forensic audit and the other a referral to the Serious Fraud Office. Has the Justice Secretary really identified a high likelihood that significant fraud has taken place? That seems hard to believe given that the Justice Secretary says he is unaware of any evidence of dishonesty. What is the basis of the referral and what is deemed the likely probability of an outcome which the Justice Secretary will view of benefit to the taxpayer? Indeed has any evidence whatsoever been uncovered which justifies the ostracising of G4S?

We also hear that the Government CPO is on the war path for companies who are making super-normal returns and is leading a review to ensure G4S and Serco contracts are well managed and in good order - now who would be at fault if they are found not to be in good order and well managed? While I can appreciate the concern with super-normal returns, no one forces the government to accept a bad deal, they are perfectly within their rights to say that price isn’t acceptable and walk away. The government could also have benchmarked against other countries for the price of tagging prior to accepting a G4S offer – so if the government signed a particularly bad deal, is it not fair to say 'caveat emptor'!

Of course perhaps it could be suggested that Serco and G4S engaged in some sort of cartel to distort prices. Given that there’s nothing to suggest that there was any such referral from the government, and even if there had, there clearly hasn’t been a conclusion reached that a cartel was operating, that seems unlikely to be defendable.

So G4S have chosen not to go accede to the Justice Secretary's suggestion of a forensic audit and have
decided against withdrawing from the next round of bidding for tagging (unlike Serco) - why on earth would they if there is no evidence of any wrongdoing?

Another question worth asking is, ‘What will happen if G4S' tagging contract is exposed to every conceivable from of scrutiny and they are actually found blameless, what would represent justice for the global loss of reputation, fall in share price and potential loss of other business directly attributable to the Justice Secretary’s allegations – what would be just? Heaven forbid that anyone suggests vested interests or vengeance. 

Of course the Justice Secretary must recognise the procurement regulations – how would you advise the Justice Secretary? If you were in the public sector would you be brave enough to ‘blacklist’ G4S on the strength of this? Of course we recognise that if a firm makes their own decision to withdraw from bidding that is their choice, regardless of the pleasure that might bring a buyer, but does that represent justice, and good value for money? Maybe the best approach would be to really sort out procurement risk management and contract management in the public sector.

1 comment:

  1. I think you'll find that the Olympic debacle was also down to dreadful contract management, not solely down to G4S....