Outsourcing giant Serco today admitted the cost of investigating its contracts in the light of its overcharging the Government for tagging criminals had spiralled to as much as £36 million.
That’s up from £27 million, and covers just the bill for its external advice — now set to be £17 million — and for checking existing contracts, up from £15 million to £19 million.
On top of those fees Serco, and rival G4S, face a major government settlement for overcharging taxpayers — they claimed to tag offenders who were actually dead, non-existent or in custody, going back to 2005.
Whitehall sources said that a settlement being thrashed out with Serco and G4S will include the repayment of more than £50 million of fees that the Ministry of Justice believes were wrongly paid.
Rival outsourcer Capita is taking over the contract — worth about £100 million a year — for the tagging of criminals until new arrangements come in force at the end of next year. And ministers are at present deciding whether to blacklist Serco and G4S from future contracts for central Government.
At Serco, these contracts represent about a quarter of revenues. The company — which still runs the Docklands Light Railway, the Boris Bikes scheme and the Atomic Weapons Establishment — is also under investigation by the Serious Fraud Office for its work on the tagging contract. Serco has also been referred to the City of London Police over alleged misreporting in a £285 million prison escorting contract, amid claims staff recorded that prisoners in London and East Anglia had been delivered ready for court — a key performance measure on the contract — when in fact they were not.
Serco today said its discussions with the Ministry of Justice over a settlement for the tagging contract were “at an advanced stage.”
But shares fell almost 3% or 11.7p to 437.1p, after crashing 17% last month when the outsourcer published a profits warning for this year and next.
