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back to article NAO: £4bn of gov work doled out to just 4 outsourcing giants

In spite of the Cabinet Office's tough talk about binning hefty suppliers whose performance is crappy, four outsourcing giants caught up in contractual issues have amassed £4bn of government business. The fabulous four include Capita, Serco, G4S and Atos, which collectively banked £1.05bn in profits globally in 2012. Between …

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Gold badge
Unhappy

So 25% profit on turnover, of which 8.1% comes back as tax.

Nice work if you can get it.

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Anonymous Coward

Re: So 25% profit on turnover, of which 8.1% comes back as tax.

Somebody is being screwed. And paying through the nose for the benefit of being screwed.

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Re: So 25% profit on turnover, of which 8.1% comes back as tax.

Thats their total global profits from all work throughout the world. So no it's not 25% profit on the UK government work, and much of their global work will have been taxed overseas so will not be shown as part of the £81 million they paid on UK profits.

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Good idea gone bad

On the face of it, you'd think it would be a simple matter for Invitations to Tender to stipulate that the bidding companies must not be currently under investigation (or that their parent companies mustn't be, either) for tax irregularities in their registered country.

However it would appear that a rule such as this would make it impossible for HMG to outsource anything to any of the "usual suspects". Whether that would open the door for a new generation of independent, squeaky-clean, contractors to pick up - or whether any new contenders would only qualify since they hadn't yet been given the opportunity to screw-over the taxpayer, is questionable.

Could the solution be a compromise where companies would only be barred from future government contracts if they were really, really corrupt? Or would that still disqualify all the exisiting players?

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Bronze badge

In case anyone thought this report were going to change anything

Having gathered evidence the OFT has launched a market study into the supply of public sector ICT services. However as we may read here (pdf)

"The OFT is aware of an allegation of anti-competitive behaviour by some (unnamed) ICT suppliers made to the Public Administration Select Committee (PASC) in 2011. No respondents to our CFI provided evidence to support the allegation made to the PASC"

So we can ignore Francis Maude's reported admission that there was an oligopoly by promising to end it:

"We will end the oligopoly of big business supplying government IT by breaking down contracts into smaller, more flexible projects. This will open up the market to SMEs and new providers."

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Pirate

Corporate PAYE

Why don't government departments just deduct tax when paying these companies and hand it straight to HMRC? Then the corporations can try claiming it back...

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Corporate PAYE and the slippery excuses for its non-application/politically incorrect avoidance

Why don't government departments just deduct tax when paying these companies and hand it straight to HMRC? Then the corporations can try claiming it back... .... Red Bren Posted Tuesday 12th November 2013 18:54 GMT

I second that e-motion, Red Bren, and look forward to listening to/reading valid arguments which would be used to justify denial of HMRC fees generally recognised as being fair and reasonable and due.

And that be a prime starter question for ten and No10/11 and the Giddy One, George Oliver Osborne, methinks, to avoid answering at all costs I presume.

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Re: Corporate PAYE

This would be a tax on revenue but the UK operates a system that taxes profits.

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Re: Corporate PAYE

> This would be a tax on revenue but the UK operates a system that taxes profits.

That's fine, but with the profit to revenue ratio being so small, they have no reserves to cope with problems, which is the reason small contractors are usually excluded.

Don't tell me you are a stable company if you make tiny profits.

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Bronze badge

Re: Corporate PAYE

Course you are; that's normal, especially for body shops whose costs (staff salaries) scale with income (from renting out staff).

Generally unless you sell a cheap to manufacture product (e.g. software) your profit to revenue ratio is the inverse of your time in business: you'll start off with high profits on your low revenue, and you'll end up after ten years with big revenue but a much lower proportion of profits.

That's even before the bean counters get through with reclassifying your business as a charity EU farm that just happens to have a weapons manufacturing division, or whatever.

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Anonymous Coward

Or to give them their proper name

The Four Fuck-wits of the Apocalypse.

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Re: Or to give them their proper name

It sounds as though the fuckwits are with the NAO and HMRC.

How is it almost impossible to hide anything from HMRC for most people and easy to be less than transparent for these outsource giants who are well known for their fuck ups and tendencies to be economical with their honesty?

In the '90s I had some experience of two of these companies which showed them to be inefficient, poor employers, liable to tell less than the truth about how they would manage a contract and to argue endlessly about variations to the original wording and how much more that meant they were owed.

There were also rumours of 'encouragement' to Local Government officers to view their tenders favourably.

Plus between the four of them they only paid 2% tax on the 4 billion they received? I'm fairly sure where the fuckwits are and also sure where the tax evasion is coming from.

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Anonymous Coward

Re: Or to give them their proper name

Why? Because there is a steady stream of ex-civil servants / ministers picking up jobs in the private sector that they once awarded contracts to or whom they once had regulatory control over. Why bite the hand that will one day feed you.

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WTF?

Is outsourcery worth it then?

Is not the critical issue whether has handing over government critical functions to private sector reduced costs, improved performance and given a faster response time to implement change ? If not stop it. When in a hole, first, stop digging.

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Gold badge
Unhappy

Re: Is outsourcery worth it then?

"Is not the critical issue whether has handing over government critical functions to private sector reduced costs, improved performance and given a faster response time to implement change ? If not stop it. When in a hole, first, stop digging."

True.

But you also hand over all the pension responsibilities of the govt from the civil service.

That's even bigger

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Anonymous Coward

Re: Is outsourcery worth it then?

No, outsourcing IT never works - superficially it's a way of controlling costs in the short-term but actually is just storing them up for the long-term. Outsourcers will either charge a premium for doing a great job (this never happens because the contract always goes to a cheaper bidder) or they charge a minimum for doing virtually nothing other than produce monthly SLA reports.

The SLAs are usually met because the Outsourcer applies no updates - ie: makes no changes, so the environment (which was probably 4-5yrs out of date) becomes ever more decrepit. Once the environment has become unmanagably ancient and the SLAs start to fail, the client and the outsourcer inevitably part company and all thats left behind is a mess.

But on the plus side, the CxO(s) in the client made a great bonus for signing the Outsourcing deal just before their retirement and the salesman made a killing - so at least someone comes out smiling :-)

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This sort of thing is core flaw in 'open' markets. Doing everything transparently makes it a real bitch to fluff your buddy's company. Sooner or later the shifty, inefficient dealings get aired. Things were much simpler and certainly no more ineffecient when everything was done in the backroom.

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Anonymous Coward

this is how it works

1. The government decides it needs to save x amount of money (say, 200 trillion)

2. The government outsource the job previously handled by a gov department (invariably, badly) to one of the BIG BOYS who have promised to deliver heaven on earth (aka up to 200 trillion).

3. The BIG BOYS tell the people who do the actual work: from now on you take a 30% cut, or fuck off.

4. Some people who do actual work agree meekly (generally aware of the good old saying: you pay peanuts, you get monkeys, and from now on applied accordingly) and the standard of delivery of whatever service they provide goes into a freefall.

5. As some people people who do actual work tell the BIG BOYS to fuck off, the number of people who agree to a paycut is not enough, which means, that the BIG BOYS find themselves in the position of the Coyote (remember the Roadrunner?) suspended in mid-air. While in freefall, they deploy a well-measured technique of grabbing at whatever body they can manage at their low price point to do the job, never mind the peanuts and monkeys. Then they crater, wipe off their silly grin and carry on as if nothing happened (the "nothing happened" is what you experience in real life, when you go to a doctor, or need a court translator, or want to walk safely on the street protected by a private sector company). Thus we have made, all in a breeze, budget savings worth 200 trillion and everybody's happy.

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Here's an idea

Ban any organisation from competing for projects funded out of the public purse, which is engaged in significant (amoral? immoral? ) amounts of artificial tax avoidance. Set up an independant body to scrutinise the tax arrangements of anyone submitting a tender, and to work out whether the public purse would not be better-served by awarding the contract to a different organisation that returned a greater slice of its earnings as taxes. 30 outgoing, 10 back as tax, beats 28 outgoing, 5 back as tax.

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