G4S and Serco respond after government pledges to review their contracts

Shares in G4S and Serco have plunged after the government has said that it will launch a review into contracts with the two outsourcing firms.

The government said that it had found evidence that both had been overcharging for work tagging criminals. Serco has released a statement in response (release):

The initial findings of the audit have highlighted to the MoJ matters of potential concern in relation to billing practices. Serco has therefore agreed with the MoJ that a detailed investigation into the contract should continue with Serco's full cooperation. The MoJ has stated that the current estimate of the amounts involved are in the low tens of millions of pounds in total for both companies since 2005. We have confirmed that we will repay any amount agreed to be due.

Now G4S have responded (release):

The Ministry of Justice (MoJ) is an important customer and G4S is committed to addressing and resolving the MoJ's concerns as soon as possible.

G4S has co-operated fully with the PwC audit and is committed to co-operating with all audits of current contracts to the full extent provided under those contracts.

G4S has requested full details of the PwC audit findings and looks forward to receiving these in order to address any findings.

The Justice Secretary has confirmed that, following the PwC audit, he has no evidence of any dishonesty in relation to the EM contracts. G4S is conducting its own review, assisted by external advisers, and is not aware of any indications of dishonesty or misconduct. G4S believes that any evidence or indication of dishonesty should be referred to the relevant authorities including, if appropriate, the SFO.

G4S has not received a claim for a refund. Our own review continues and if we identify any evidence of overbilling, then we will reimburse the MoJ as we would with any customer.

It is alleged that overcharging by G4S and Serco has amounted to tens of millions of pounds. The justice secretary told MPs that the firms had continued to charge the Ministry of Justice for electronic monitoring, even when offenders had returned to prison, left the country, or died, and that this may have been going on as far back as 1999. This follows an audit by PricewaterhouseCoopers (PwC), who were commissioned by Grayling after billing discrepancies were found during a re-tendering process.

Grayling said:

The audit team is at present confirming its calculations but the current estimate is that the sums involved are significant, and run into the low tens of millions in total, for both companies.