Last week's BBC 'File on 4' programme posed the question: 'Britain's squalid prisons: who's to blame?' [That should of course have read 'England and Wales'. It would indeed have been illuminating to include Scotland, where these services have not been outsourced.] The answer illustrated a perennial truth of outsourcing: that behind failure (or success) by outsourcers often lies failure (or success) by the customer.
Contracting for FM services is hardly rocket science. The UK has the most developed FM services market in the world. Many organisations, public and private, outsource FM – including the BBC and the Guardian – and it's not hard to see why. If your business , say, journalism, you have no expertise in running FM directly - and no wish to. A specialist firm is likely to be both cheaper and better than building your own in house service. Margins in the sector are extremely tight so you aren't paying a lot extra to buy it in.
Agreed, there are special circumstances in the peculiar world of prisons: as the programme pointed out, some problems need fixing right away, others (broken windows, showers) have different consequences in prisons than in the outside world. But such things can be written into contracts.
Both the Amey and Carillion contracts were disastrous since the start. 'File on 4' had meticulously trawled through reports by Independent Monitoring Boards (local people who provide an external presence in each prison) and found complaint after complaint. Among the worst cases was Liverpool prison. I read this passage in the Chief Inspector's report with incredulity, shame and anger:
I found a prisoner who had complex mental health needs being held in a cell that had no furniture other than a bed. The windows of both the cell and the toilet recess were broken, the light fitting in his toilet was broken with wires exposed, the lavatory was filthy and appeared to be blocked, his sink was leaking and the cell was dark and damp. Extraordinarily, this man had apparently been held in this condition for some weeks (1)
The Justice Committee rightly gave Michael Spurr a hard time on this report at their hearing on 24 January. It looked a career-shortening session.
Why did it all go so wrong? It's pretty clear:
the costs of maintenance and services were not clearly understood by the business and consequently planning assumptions have not held true. The contract is therefore underfunded and the declared efficiency savings reduced. Financial risk within the contract can be attributed to four main areas: asset verification, asset condition, service verification and variable costs. Actions have been taken within each area that are ongoing but to date have ensured clarity on financial risk and have allowed negotiated settlements to be reached that reflect true contractual costs. Appropriate governance has been put in place that now ensures that variable costs are accurately reported and justified and that claims are assured by the Contract Management team.
MoJ concluded that the mistakes it made in contracting
may impact on service provision and declared efficiency savings (2)
So, to be clear: MoJ knew, before Carillion collapsed, that its mistakes in contracting were likely causes of unacceptably poor service. That must, I think, raise the possibility that the contractors have some legal redress against MoJ in respect of incorrect information given in the contracting process.
I note also that both companies were subject to huge financial penalties for poor performance: in Carllion's case, £4m in 18 months. Interestingly, the fines against Carillion, levied month after month, stopped suddenly in June 2017. Was this the point at which MoJ realised its own miscalculations were the root cause of the contractors problems? Did MoJ then increase increase its payments to contractors, to make good the errors in contracting? Have the companies not some legal remedy, since the fines might arguably have been in some measure caused by MoJ's incompetence in contracting on an unsound basis?
There is a lot of murkiness about the figures. Remember, MoJ said the contracts would cost £80m a year, so against about £105m for the in house operation. But a recent PQ discloses that that is the price only for fixed costs and excluded indexation and 'variable works' (3). So we don't know what the all-up cost was expected to be - or actually is. Did MoJ simply forget about variable costs? MoJ now say the £115m cost reductions will be achieved. But will any cost reduction be achieved? If not, why not? Or are MoJ asserting that their previous in house team can beat the prices of any commercial FM operator?
Would slightly higher bids have worked? Well, as it happens, we have an example. Before these contracts were let, MoJ had let FM contracts for 2 London prisons to another company, MITIE. Those prices were between the rock bottom prices bid by Amey and Carillion, which have proved unsustainable, and MoJs own internal costs. And that contract is still operating reasonably well.
The programme highlighted the way the bureaucracy of the contract created problems. Previously, if the guys turned up to do some work in a cell and a nearby cell needed fixing too, they fixed that as well. Now, they must go away while the customer raises another order form, sends it to the contratcor's management and that then goes down to the guys again but by that time they are somewhere else.
What happens now? Since we now know, and MoJ has admitted, that the contract was underfunded, one must expect the cost of the service to increase. It will be interesting to see by how much. Would such an increase brings the price close to the bid by MITIE, which we now know was deliverable, but rejected in favour of too cheap bids?
'File of 4' raised one other matter, which is an impact on staff, not prisoners. Two long serving works staff at Liverpool prison, transferred to Amey when the contract started, spotted that Amey's 'efficiency' of requiring staff members to do work in a cell alone, rather than in twos, created a potential security risk through theft of tools while staff were up ladders etc – and that for 'tools', read 'weapons'. They went to see the Governor, who had previously been their Governor, to raise the issue. Amey then sacked them for 'bringing the company into disrepute'. You couldn't really make it up, could you? But the men surely have a cast iron defence. I mean, how could anyone bring Amey more into disrepute than it already is?
There is much about this scandal that is still concealed from the public, and from Parliament:
What is so disturbing about this scandal is that these should have been about the most straightforward contracts you could think of. Hundreds of FM contracts are let every year. Yet MoJ found them too difficult. Same with the tagging contracts, which MoJ had been letting for 20 years without trouble, but which fell apart a few years ago in a series of botched procurements that have cost the tax payer millions (4). Same with the contracts for rehabilitation of short term prisoners, which in the opinion of the auditors, were so bad they might as well never have been let – and which did not require the contractor to achieve anything in the real world, but merely to produce bits of paper (5). Not to mention the (much more ambitious) botched probation contracts which have almost destroyed a service which MoJ itself reported was functioning well in 2010, and so placed the public at additional risk (6). Or the audit of MoJ procurement published as far back as which revealed a Department with massive, systemic weaknesses in every aspect of procurement (7).
MoJ have been 'learning lessons' of successive procurement disasters and promising to improve performance for too many years now. And not just procurement – prisons, probation, courts, sentencing policy, wherever you look, MoJ is failing. It is in fact a failed Department, like a failed school, or failed hospital, or even a failed prison. Thing is, when a school or hospital fails, Whitehall removes the top management and takes it over. But when Whitehall fails, as MoJ so clearly has, who takes that over?
In a move which has delighted penal reformers, faced with a prison system in crisis – inhumane overcrowding, rising violence and self harm, union unrest – the Government has at long last decided to implement an ambitious and radical strategy for prison reform to address the fundamental problems of the prison system, defying criticisms from the Right-wing press that it is 'soft on crime'.
The programme comprises:
These reforms were announced by the new Minister of Justice in recent weeks.
This article is about France. Come on, whatever did you think?
"The government knew of a plan that could have retrieved more than £360m from Carillion.....but the Cabinet Office, responsible for oversight of government contractors, did not apply any pressure on Carillion’s directors to adopt the proposals" (Guardian, today).
Don't you just love that word: 'oversight'?
A rare balanced and informed article in the FT today on private prisons:
It ends with a comment which for me, sums up exactly where we are, as incompetence on the part of operators and customers alike, plus of course Corbynism, seems to spell the end for outsourcing:
"we’ll spend the next 20 years relearning the downside of self-serving union-dominated public service monopolies.”
That isn't the whole story of course, for there are sectors, like the armed forces, where not even the fanatics of the Right think competition can be applied (although having said that, I fear Rees Mogg may at this very moment be planning a return to medieval mercenary armies). And one of the many delightful internal contradictions on this issue is that the further Right you are, the more wonderful you think those public service monopolies are.
And the fundamental issue is surely not public v private, but this - in cash strapped times (and everyone except John McDonnell knows money is scarce and will remain so indefinitely), how do you run public services of consistent quality, how do you adjust the service to realistic levels given tight funding, how do you manage public expectations, what do you prioritise and what do you not prioritise, how do you give proper accountability and transparency? That it seems to me is the debate we are so determinedly not having, while the Tories deny that funding cuts have caused unacceptable service, and Labour maintain there is money enough to meet every demand.
Note: I am re-posting here with permission this article by Penelope Gibbs, Director of Transform Justice, because I have not seen this point made about evidence of the potential injustice of video hearings, especially (but not only) when imposed compulsorily; and the point is all the more important at a time when MoJ is aiming a huge expansion in hearings by video links to save money on court productions. So it seems important that the point is properly considered, and by her account it is being ignored . The original is at:
"The absence of the applicant in the court automatically depersonalises him/her. His/her feelings and emotions are contained within the detention centre, hence not being felt on a more personal level at the court. Consequently, the applicant becomes a mere ‘detainee’ in the video. This disadvantage is compounded in cases where applicants required interpreters. In some instances, due to reasons such as the incompetency of the interpreter or limited time given to interpret court discussions, the hearing of the case seemed to only be happening among the parties present in the court” (Cardiff University Law School Bail Observation Project 2015-16).
The justice system is fractured, but access to justice and effective participation are important in all jurisdictions. So its good and bad that video hearings seem to be having just as negative effects in immigration bail hearings as in criminal hearings – good because it strengthens the evidence base, but bad because it indicates systemic problems.
Those detained in immigration detention centres like Campsfield and Yarlswood usually apply for bail so they can lead a (semi) normal life while waiting for their next court hearing. Nowadays nearly all those applying for bail do not get transported to the tribunal in secure vans, but appear via video link into the court room. Everyone else involved – judges, lawyers, interpreter, public observers etc are in the court room.
The detainees get no choice as to whether they appear on video or not, and there is no provision for those with physical or mental health problems to be assessed so that reasonable adjustments can be made. And the problems involved are similar to those experienced by defendants and prisoners.
“In video link hearings, the legal representative gets only 10 minutes to talk to the applicant at 10 a.m. or at 2 p.m. before the listed hearings start. By contrast, the representative of an ‘in-person ’applicant can talk to them at any time in the cells for as long as they need. This is not equal treatment. Video link may be effective when the judge enables the applicant to participate actively in the process, when interpreting is not needed and when the machinery functions efficiently. But it is not usual for the judge to act in this way, and on far too many occasions the technology was defective, with poor lighting, noisy feedback, sound distortion and mechanical breakdown. Our major criticism of the video link process, however, concerns the impact on applicants. They are at a distance from the court, and all those in it. Unless they are directly engaged by the judge they may have no opportunity to speak, and unless the judge ensures that there is full interpreting for those who need it, they may miss much of the substance of the hearing. It could be argued that video link does not constitute a hearing in the judicial sense, unless it can be demonstrated that there is no detrimental effect for the applicant” (Still a Travesty: Justice in Bail Immigration Hearings 2013)
These problems mirror those Transform Justice found in its research on video hearings from prison to court and from police station to court.
This would matter less if outcomes of hearings were the same whether or not people appear on video. But there is evidence that outcomes are very different. A study done by the Ministry of Justice in 2010 showed that defendants who appeared on video from the police station were more likely to be imprisoned than those who appeared in the physical courtroom (this was either the direct effect of appearing on video or the indirect effect of more defendants on video being unrepresented). And research done on immigration video hearings in England and Wales backs this up. A fantastic group of volunteers observed bail immigration hearings in 2012 and found that the success rate of bail applications was 21 of 41 when the detainee appeared in person (51%), and 54 of 170 (32%) when by video link. As with video links for criminal hearings, there is no official data for video immigration bail hearings so we do not have access to bigger numbers.
But there is corroboration from across the pond. Professor Ingrid Eagly studied the effect of putting immigration detainees on video in USA for court hearings and found that those who appeared on video were more likely to be deported than those who appeared in person. This wasn’t however because the judges appeared biased against them, but because the detainees on video were more likely to disengage from the process – “less likely to retain counsel, to apply to remain lawfully in the United States, or to seek an immigration benefit known as voluntary departure”.
Its clear from all the research that has been done that video hearings can have a negative effect on outcomes. The pity is that no government research from England and Wales is recent, the best bit of government research is seemingly ignored, and other research is on small numbers.
However anecdotal evidence is important and even the current Lord Chief Justice has experienced how the behaviour of defendants changes when faced by cameras. At his annual press conference Lord Burnett was asked about the filming of sentencing hearings and said he was “afraid some people behave differently - not judges - but some people behave differently in court if they know that something is being recorded”.
If the Lord Chief Justice is convinced the behaviour of someone in court changes simply because there is a video camera there, he undoubtedly also countenances that appearing on video whilst completely isolated from the courtroom may significantly affect the behaviour of defendants/detainees?
Meanwhile HMCTS, which has three senior judges on its board, is piloting a fully virtual immigration court which will have no one in the court room at all.
In outsourcing it takes two to tango - customer and supplier. Both share in success, and in failure.
Thus questions are now being asked about the role of Government in the massive failure of Carillion: in allowing the company to bid so low that its margins were unsustainable, and in continuing to award contracts last year long after it was clear that the company was in deep trouble and might fold.
As the FT argues today, outsourcing in such circumstances risks becoming a Ponzi scheme, where contracts are inherently worth little, but a steady stream of new contracts is needed to maintain the illusion.
To be sure, incompetence was another factor, with cast cost overruns on major projects driving up debt.
All of this a very far cry from the Left orthodoxy that private companies are coining vast profits from outsourcing. That was so sometimes so in the 2000s, but certainly not today. Indeed, the impact of austerity on the private sector outsourcers needs to be better understood. By both parties.
Interesting NAO report on commercial relationships across Government, accounting for a third of all public spending (1). If you read that the big spenders are MoD (Type 45s), Transport (Network rail and franchises), MoJ (probation, tagging) , DBEIS (nuclear energy), you will be unsurprised at the conclusion that there are profound long standing weaknesses in Government procurement, but - and this has been said ever since I were a lad - 'government is now starting to address the issues'. 'Addressing' the easy part, 'delivery' another.
But it isn't as simple as just bringing work back in house. All those Departments have serious problems with direct management as well. 'Management' indeed is just the problem. Plus bringing work back will carry huge bills, eg for migrating all staff onto public sector pensions.
The conclusion I come to: Government should stop trying anything clever or innovative in contracting , because it'll almost certainly cock it up. Make sure you can walk before you try running - never mind hop, skip and jump.
Berwyn Prison near Wrexham, which began operations in February this year, will be the biggest prison in the UK by some margin, with very tight staffing. It is in several ways something of an experiment.
The privately operated Oakwood and Northumberland prisons – also Cat C male, so these are all the same type – have been criticised by opponents of the private sector both for being too large, and having high staff/prisoner ratios, thus causing unsafe conditions.
But Berwyn will be much bigger - but not quite so tightly staffed (1):
capacity operational staff per prisoner (2)
Oakwood 1605 1:5.9
Northumberland 1318 1:6.8
Berwyn 2106 1:5.5
It will be interesting to see what happens, as Berwyn builds up numbers – it is currently only at about a third of capacity .
If it manages to maintain a stable, safe regime, that may put in question the assumption that staffing cuts are the main cause of the worst prison crisis in a generation. Might it also suggest that MoJ has found the 'sweet spot' where staffing is lean, but still safe? No: since prisons with similar or lower ratios are in deep trouble. Even so, MoJ's 9 'new for old' prison programme assume still further staffing cuts, to generate net savings in operating costs. But might it not also suggest that MoJ as customer has driven staffing ratios too high in private sector prison contracts - such as, indeed, Oakwood and Northumberland? (3)
If, on the other hand, Berwyn turns out to be chaotic and unsafe, it will validate the hypotheses about low staffing - and call in question the judgement of those who planned it. And - here's the difference relative to the privately run prisons, which are held to contact - staff numbers may have to increease.
There are differing views about mega-prisons. I haven't any expertise in the matter. They offer economies of scale, so are cheaper per place. Opponents say they will be factory-like and impede the relationships essential to good prisons. Advocates say that 3 or 4 units for different types of prisoner within a mega jail, each with their own identity, management and staff, would in fact be a series of smaller prisons, not one big one, and would have benefits for prisoners eg better specialist healthcare on site. Maybe: but I suspect that despite that, it will still feel like a mega jail, and something will be lost. Their sheeer size means that prisoners cannot be held as close to home as would the case if we built a network of small community prisons instead, though that would cost more.
Berwyn marks a major change in accommodation policy. Hitherto, we had always aimed at one man to a cell: that was how overcrowding was measured - how many were held two or even three to a cell. In Berwyn, many(I think the majoirty) will be housed two to a cell, albeit one designed for double occupancy, whether they like it or not. No credible reason is advanced for this, other than packing more in, and driving down construction and operating cost per place. I am surprised how little comment there has been on this historic change. It should be independently evaluated.
I haven't mentioned cost. The headline figures are:
annual cost per place, £
Berwyn (est., when when full) (1) 14, 000
Oakwood (4) 14, 348
Northumberland (4) 14, 548
So why are privately run prisons more costly, even though they have leaner staffing? Because they aren't. To compare like with like, you'd need to make several additions to the Berwyn figure:
Past experience of trying to ensure a level playing field in competition suggests an addition of around 2% for item 1 (6).
MoJ accounts show the on cost for item 2 is 25% for the private sector but 60% for the public sector, thus we should allow 15% differential on cost to the public sector (7).
3 is unknowable - but pension experts think that even under the reformed PSC scheme, the combined employer and employee contributions are likely to be 5% short of actual costs even on current assumptions, and it could be much more. But we'll never know – that's the beauty of the thing. Uncosted and uncostable (8). As so often nowadays - pensions, nuclear power, climate change, the NHS, social care, the ageing housing stock - when long term costs look too big to ever be affordable, we just ignore them.
That suggests the true comparison requires an additional 22 % for the public sector, thus:
annual cost per place, £
Berwyn (when full) 17, 500
Oakwood 14, 348
Northumberland 14, 548
About 5-7% of the higher cost in the public sector is having more operational staff; the rest is a a mix of higher (though hidden) pension costs, more non operational staff, higher pay, longer holidays, more sick absence, shorter working weeks, less flexibility, or more costly supplies and service contracts including central services (6). Of course, if we were looking at operational cost, rather than cost to the public purse, the gap between sectors will be even larger, because of the profit margin.
The significance of these figures is considerable. It means that in stating to Parliament that public and private prisons are equally efficient, Government has told an untruth (9); indeed that Government doesn't actually know what the true comparison is (10); and that in terminating competition on the bogus basis that there is no longer significant cost difference between sectors, MoJ has shown precisely the kind of 'producer self interest' which might be expected, given that the public sector has, until recently, both awarded contracts for prisons and has also been the biggest competitor in those competitions. (11)
It also implies that on a true cost comparison, the private operators could provide a better service than the public sector for the same money – but is not allowed to, because its costs are being mis-represented, relative to the public sectors.
No wonder the companies I worked for were so wary about competing against public sector prisons! (12). The match is rigged.
MoJ's prison programme can't work as planned - and even if it did, wouldn't address the causes of the prison crisis. Time to dare to....think?
FT article today
Plan to overhaul UK jails faces £1.6bn shortfall Overcrowding and building delays mean problem of prison violence ‘will not be resolved’
Britain's prison populationhas almost reached full capacity, at nearly 90,000 people
A plan to tackle overcrowding and violence in Britain’s prisons is underfunded by £1.6bn over the next five years and will not work, according to a former finance director of the prison service. Julian Le Vay, who was the service’s finance director for five years until 2001, suggested that a higher-than-expected prison population and delays to building plans for new prisons mean that the present levels of unrest and violence will not be solved without fresh funding. The most recent prison population figures show 86,075 people in prisons in England and Wales, only just short of the 87,411 total capacity.
The Prison Reform Trust, which released his analysis, said it showed the fundamental problems with efforts to resolve overcrowding by providing new spaces, rather than by cutting down the numbers of offenders sentenced to prison. The severe overcrowding of prisons has helped to produce a significant rise in violence, with 27,193 assaults or serious assaults in the year to June and a 25 per cent rise in attacks on guards. Many analysts also believe that overcrowded prisons lead to worse rates of reoffending on release. After trying the same failed policy for nearly four decades, the time has surely come for a change Peter Dawson, Prison Reform Trust
Mr Le Vay said he believed a shortfall in cash means the government’s 2015 plan to build nine new prisons “is not going to do what they want it to do.”. The plans for the five years to 2020 were meant to provide around 10,000 new places in five new prisons, at a capital cost of £1.5bn. The project was meant to be funded largely by closing old, expensive-to-operate city-centre prisons such as London’s Holloway and selling the sites for housing. But so far the government has done no more than identify the sites of four new prisons and, in March, told parliament only that it would be submitting planning applications in future.
Mr Le Vay said that, based on the experience of Berwyn Prison, near Wrexham, which opened in February this year, the service could expect a 3½-year gap between planning application and partial opening. That meant none of the new prisons would be open before 2020, while the prison population is expected to grow by 1,600 by 2022. He added that because the facilities would not open on time, it would be impossible to close the city-centre prisons on the anticipated schedule and the money for those sites would not be received as planned.
The study highlights the dilemma that the government faces as courts respond to increasingly tough criminal law by sending growing numbers of offenders to jail, despite a long-term decline in most measures of violent crime. Mr Le Vay calculates that spending for the 2018-19 financial year on prisons in England and Wales will be £162m more than budgeted because of extra staff costs. His projections anticipate steadily higher-than-budgeted spending over the following five years, to £463m by 2022-23. The total underfunding over the period amounts to £1.57bn.
Mr Le Vay argues that efforts to build capacity to relieve overcrowding have never been successful, since courts tend to sentence extra offenders to prison, filling up the capacity. Ministers have generally been wary of changing sentencing policy to divert offenders away from jail because of the risk of a public backlash.
But Peter Dawson, director of the Prison Reform Trust, said the UK was continuing to “throw” taxpayers’ money at prison building, at a time when many developed countries were reducing their prison populations. “After trying the same failed policy for nearly four decades, the time has surely come for a change,” Mr Dawson said. The Ministry of Justice said the analysis was “pure speculation”. It said it was investing to create “high-quality, modern establishments” and closing older prisons that were not fit for purpose. “This will help deliver prisons that are more safe and secure, so our staff can work more closely with offenders to change their lives and turn their back on crime for good,” it said.
Copyright The Financial Times Limited 2017. All rights reserved.
Difficult times at the MoJ - everything going badly, less money every year, everyone saying you're not doing enough to put things right. Still, David Lidington and his Perm Sec, David Heaton, have found a solution: just don't tell anyone what you're doing. I was searching the other day for the usual Departmental and Agency Plans and Strategies spelling out what they aim to do, the key dates, key targets, how they money will be used - and they no longer exist. All there is now is a super-bland statement of nothing much (https://www.gov.uk/government/publications/moj-single-departmental-plan-2015-to-2020/single-departmental-plan-2015-to-2020).
As for Parliament, that great bulwark of our liberties, they simply haven't noticed. Too busy 'taking back control', I expect...
I was formerly Finance Director of the Prison Service and then Director of the National Offender Management Service responsible for competition. I also worked in the NHS and an IT company. I later worked for two outsourcing companies.
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