Union says giving contracts to troubled Interserve ‘irresponsible’

18 Mar 19

Handing public contracts to Interserve despite profit warnings was the “height of irresponsibility”, a union has said.

Interserve, which went into administration on Friday, has been awarded government contracts worth £665m since 2017, according to analysis from the GMB union.

After going into administration, Interserve was successfully sold to debt holders including HSBC Bank, RBS as well as a range of hedge funds – a move that will see an injection of £110m “providing continuity of service for customers and suppliers”, according to its website.

But the troubled company now holds £2.1bn of public contracts – a total which has grown despite issuing profit warnings in May 2016, October 2017 and November 2018. The figures come from Tussell, a data provider on UK government contracts.

The biggest contract awarded to Interserve in 2018 was a £66m deal to provide facilities management for the Foreign and Commonwealth Office.

Rehana Azam, GMB national secretary, said: “Awarding hundreds of millions in taxpayer funded contracts to troubled outsourcing companies is the height of irresponsibility.

“Interserve was clearly in trouble, and yet ministers saw fit to hand it hundreds of millions of pounds of public money.

“This government’s obsession with outsourcing has now put another 45,000 jobs at risk, along with thousands more in the supply chain.”

In December 2018, with debts approaching £700m, the company announced a ‘debt for equity’ rescue deal, which was subsequently rejected by shareholders in a vote on Friday.

Since the rescue deal was announced, Interserve has been handed £6m in public contracts, the analysis found.

Azam lambasted the government for not learning lessons from the collapse of Carillion in January 2018, which cost the taxpayer £148m, according to a National Audit Office report.

“The outsourcing sector is descending into chaos as companies underbid each other for contracts in a race to the bottom, which will see a serious decline in public services,” Azam added.

A Cabinet Office spokesperson said: “Our priority is to deliver quality public services while ensuring value for money for taxpayers. The awarding of contracts follows a robust process, including financial checks, and we are reforming our approach to outsourcing, so that services are set up to succeed.”

See here PF’s investigation into public sector outsourcing, which shows it is becoming less popular with local government

In December, John Manzoni, permanent secretary at the Cabinet Office claimed that Interserve’s troubles were “very different to Carillion”.

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