Serco is one of the world’s leading outsourcing companies, employing over 50,000 people and operating across four geographies: UK & Europe, North America, Asia Pacific and the Middle East. The group employs 31,700 people in the UK and delivers services in defence, justice and immigration, transport, health and citizen services.
Serco began working with the NHS in non-clinical contracts, such as facilities management, but in 2006 the company moved into the NHS clinical services market. However this was short lived as in August 2014, the company announced that it would be withdrawing from the NHS clinical services market completely.
By September 2015, the company had handed over all its clinical services contracts to new providers, often leaving a contract before the end date. The clinical services market has not been an easy or profitable one for Serco; the company reported in late 2015 that on its three major clinical contracts – out-of-hours in Cornwall, Suffolk community health and Braintree Hospital – it had made a loss of about £18 million and two of the major contracts have been dogged by controversy and problems.
For the NHS, Serco’s clinical contracts were associated with cost-cutting, fraud, poor management and inadequate staffing levels, which in at least one contract contributed to the deaths of two children.
Serco’s major business is with public sector organisations worldwide. The company has followed a policy of expansion into every area of the public sector worldwide. The UK provides around 60% of its business. The company’s business in continental Europe began with IT support contracts in Italy, Belgium and the Netherlands, and in the Middle East contracts revolve around the company’s aeronautical, transport and airport technical services expertise. In the Asia pacific region, Serco has operations in Australia and New Zealand, a presence in Hong Kong and in India. Serco entered the North American market in 1993, and is now a leading provider of services to federal government.
In October 2013, following a scandal concerning Serco's UK government contracts for tagging and escorting prisoners, Serco split its UK government contract business into a separate operating business.
Serco is a public company with shares traded on the London Stock Exchange.
Serco posted revenues of £3,048 million for the 2016 financial year, and an underlying profit of £82 million. Serco's revenue for healthcare (worldwide) is approximately £0.4 billion.
Although Serco has withdrawn from the clinical services market, the company still has a number of contracts with the NHS in the areas of facilities management, care coordination and business process outsourcing. These contracts are primarily with hospital trusts. Facilities management includes cleaning, catering, portering, security, waste management, switchboard, pest control, staff accommodation, helpdesk and ward housekeeping. Business process outsourcing includes IT, procurement and payroll and pensions management.
Recently signed contracts include a June 2017 contract with University Hospital Southampton NHS Foundation Trust worth £125 million over 10 years and a May 2017 contract with Barts Health NHS Trust worth £600 million over 10 years. The latter contract has already run into problems.
Barts Health NHS Trust
Serco was awarded a £600 million ten year facilities management contract in December 2016 for Barts Health NHS Trust, beginning services in May 2017. Serco ran into problems almost as soon as the company took over the contract. The company scrapped cleaners paid 15-minute breaks and 120 cleaners stopped work until the breaks were restored and Serco scrambled to reverse the change.
In July 2017, 1,000 cleaners, porters, caterers and security staff went on strike for better pay. Serco had raised the worker’s salary in line with the London Living Wage to £9.75 an hour, a move they described as “generous”.
The living wage is the minimum amount calculated than an individual can cover the basic costs of living.
The strikers demanded a 30p an hour increase in pay in line with inflation and an end to proposed job cuts amongst porters at Whipps Cross hospital and a reduction in their overall workload.
The Guardian has reported that some cleaners workload was doubled since Serco took over, some were not provided with the correct cleaning equipment and that workers had to take annual leave to visit the GP for injuries incurred in the job.
The move is widely regarded as a cost-cutting measure by the NHS Trust after the PFI financed redevelopment of the Royal Hospital London and St Barts ended up costing £6 billion more than the development actually cost to build.
The Trust had the largest financial deficit of any UK health trust in 2016 of £135m and the hospital was put under special measures. According to St.Barts, the Serco deal would save “millions of pounds” and the trust has halved its deficit to £69.5m in the 2016-17 financial year.
Rupert Soames, CEO of Serco: brother of the longstanding Conservative MP Nicholas Soames, MP for Mid Sussex
Lord Glendonbrook (Conservative): owns shares in Serco.
There have been and still are major concerns with Serco's contracts both for the NHS and other government departments, including prisons and detention centres. The clinical NHS contracts were associated with dangerous cost-cutting measures and under-staffing. In several cases, Serco was awarded a contract but as soon as the company realised it was not making a profit, it attempted to extricate itself from the contract. Companies leaving contracts early increases the cost to the NHS - a new tender for the contract is needed - and cause confusion and instability in the local area.
Cost-cutting, understaffing and overcharging in the NHS
Cornwall out-of-hours contract
In April 2006 Serco was awarded a five year contract to provide out-of-hours service in Cornwall and the Scilly Isles valued at £6.1 million. In 2011 the contract was renewed for a further five years valued at £6.4 million. Prior to 2006 the contract was run by a consortium of local GPs for £7.5 million; Serco’s bid was considerably cheaper and the consortium failed in its bid to gain the contract in 2011. However, the contract did not run smoothly and by 2013 Serco was trying to leave the contract. The company eventually extricated itself from the contract in May 2015, almost eighteen months early. Following information received from whistleblowers and investigations by the Care Quality Commission (CQC) Serco’s OOH service in Cornwall is now known to have been badly managed and frequently under-staffed, and was a contributory factor in the deaths of two children.
A major problem for Serco was the introduction of a new cost-saving NHS IT system to the out-of-hours service in 2011, enabling it to replace skilled clinicians with call-handlers without medical training who follow a computer-generated script to assess patients. The move triggered a fourfold increase in ambulance call-outs.
One of the first widely reported major incidents that led to Serco coming under scrutiny was in June 2011 when a six year old boy died as a result of a burst appendix which was not accurately diagnosed. The father of the boy was asked to examine his son in the hospital car park by Serco’s call handlers and advised to visit the GP the next day. An inquest heard that the triage nurse did not ask enough questions and was subsequently put on six months close supervision.
Whistleblowers then reported on the frequent under-staffing of the service, alleging that more than once there had only been one GP available to cover the whole county from midnight until 8am. Investigations by the CGC eventually led to a highly critical report in July 2012. The report highlighted that the service had a shortage of "qualified, skilled and experienced staff to meet people's needs". Serco was also found to have falsified records to make the service appear faster than it was.
The CQC’s damming report also noted that a quarter of staff had not completed mandatory training. Although Serco said all their GPs received formal clinical supervision, not all staff had received regular appraisals. Inspectors noted that "the provider did not have an effective system to assess and monitor the quality of service that people receive". The report was highly critical of the number of staff on duty, stating that "there was a shortage of clinical staff at times". The CQC inspectors found that on one particular weekend, some doctors were working double shifts which consisted of 13-hours through the night, and others were working 11-hour daytime shifts.
Although regulators reported that Serco’s service had improved following the CQC report, it did not improve sufficiently for one young boy. William Mead died of sepsis in September 2014 within 12 hours of the call to Serco’s 111 helpline. A report published in January 2016 found that there were four missed opportunities to save William’s life, including a call to the 111 helpline hours before his death and visits to out-of-hours GPs. The report said the “tickbox” system used by call handlers failed to include “sepsis red flags” despite the fact that it is one of commonest causes of death among children.
By 2013 Serco was seeking to get out of the contract in Cornwall. The company first tried to unsuccessfully sub-contract the work to Devon Doctors, the GP consortium that had failed to win the original bid. Then in December 2013 Serco announced that its contract to provide out-of-hours care in Cornwall would end 18 months early in May 2015. In June 2015 two GP provider companies, Cornwall Health and Kernow Health, took over the service. GP-led social enterprise Devon Doctors, which already runs the Devon out-of-hours services, is behind Cornwall Health, while Kernow Health is run by Cornish GPs as a community interest company.
Suffolk Community Care
In March 2012 Serco was awarded a three-year £140 million contract to provide community health services for NHS Suffolk. Serco was to provide community and specialist nursing, the management and operation of community hospitals, speech and language therapy, specialist children’s services and equipment services. After winning this contact, Serco announced it was to cut 137 health jobs. At the time, Unison said it was "deeply worried" about the affect the staff cuts would have on the level of care. Tim Roberts, from Unison, said: "We warned at the time that the only way they would be able to deliver the contract would be by making drastic cuts and that's exactly what they are now proposing.”
In January 2014, Suffolk County Council issued a report criticizing Serco’s service in the county; Serco was found not to be hitting three of their key performance indicators (KPI) in community health response times. By August 2014 Serco had determined that clinical care services was not a profitable business area and made the decision to withdraw from this market. Serco eventually handed over the community care contract in Suffolk to new providers in September 2015. A Serco spokesperson noted that the £140 million the company was paid for the contract was "not adequate" for the work required.
This contract for Braintree Hospital began in 2011. By 2013 Serco had realized that it was not going to make a profit on the contract and was trying to leave. The company reported that the hospital contract had an operating loss of £2 million in 2013 and as there was little scope for increasing the profitability of the hospital, the company was no longer interested in the contract. Serco terminated the contract a year early in January 2014.
In 2009 Serco formed GSTS Pathology a joint venture with Guy's and St Thomas' NHS Foundation Trust providing pathology services. The 50:50 joint venture was under a ten-year contract valued at around £250 million to Serco. King's College Hospital Foundation Trust joined the venture in 2010. The company is now known as Viapath.
In August 2014 an investigation by The Independent and Corporate Watch found that Viapath had overcharged NHS hospitals by millions of pounds for the pathology service. Leaked documents indicated that three of its fifteen laboratories had overcharged by £283,561 in a three-month period, with its invoicing and billing systems deemed to be “unreliable” and containing “material inaccuracies”. It was that the overcharging could have amounted to £1m in 2012 alone. The service has also been criticised for cost cutting by not adequately replacing staff and introducing pay cuts, which have affected the quality of the laboratories’ output.
Outside the NHS
Prisons and Detention Centres
Serco has come under fire in Australia with regard to its business in prisons and detention centres. Serco staff have been criticised for their actions over the death of refugees following the sinking of a refugee boat off Christmas Island in 2010. There have also been inquests into suicides and beatings of detainees at other detention centres in Australia run by Serco.
In the UK, Serco had a major contract with the UK government for the electronic tagging of prisoners. However, following an audit of the contract, Serco was found to have charged for tagging of prisoners who did not exist, were dead or were still in jail. Serco is the subject of a criminal investigation by the Serious Fraud Office, which led to the cancellation of the privatisation of three prisons in Yorkshire, for which Serco was the lead bidder. Serco has subsequently paid back £68.5m to the government after it became known that it had overcharged on its contract for the remote tagging of offenders, with the scale of its overcharging being revealed as three times greater than it was initially estimated.
Serco is also to be investigated by MPs after a secret internal report into alleged sexual abuse by a member of staff against a detainee at the Serco operated Yarl's Wood detention centre came to light following a four-month legal battle for its publication between the company and The Guardian, which ended with the high court ruling for its disclosure. There is concern over the way that Serco handled the investigation into the allegations including the way it dealt with evidence from another member of staff and the assertions by management about the credibility of the alleged victim.
The decision to award Serco a further eight year, £70m contract to run the Yarl’s Wood women’s detention centre has been heavily criticised by human rights groups, in light of the allegations of mistreatment by staff at the centre. It was awarded a new contract despite the fact that it is the subject of an investigation by the home affairs select committee into its running of Yarl’s Wood.
In light of these concerns, and others, relating to criminal justice contracts, The Howard League for Penal Reform has called on Serco to be barred from applying for new contracts until investigations into the controversies surrounding company have been completed.