MoJ ‘did not do due diligence’ when contracting Carillion

26 June 2018

The Ministry of Justice did not do due diligence when contracting Carillion to provide facilities management for the prison service, the Minister for Prisons has inferred.

Speaking to the Justice Committee today, Rory Stewart MP said Carillion “underbid” by around £15m a year on the cost of the work, and that Ministers at the Department – which was, at the time, under the leadership of Chris Grayling – were too quick to accept a deal that was too good to be true.

He also suggested all Departments are potentially at risk of choosing an “unsustainable” bid if they are seduced by a low cost.

“What effectively happened there, I believe, is that we had a contractor come in to us – and this is something that is a vulnerability with all private sector contractors – who effectively offered, at their own risk, to do our maintenance for considerably less money than it would cost us to do – in effect, £15m less.

“We signed up to that, and in retrospect … more weight should have been given to the facts and saying ‘wait a second? What is Carillion proposing here? They’re basically proposing to do this and lose £15m a year. Is that really sustainable? Or are we going to end up back in a situation where we are paying for it?'”

The actual cost of providing facilities management services is £65m a year, he said, which will now be covered by the state, landing the taxpayer with an unexpected bill of £50m by 2020. Chair of the Committee, Robert Neill, also pointed out that there was an additional, unquantifiable cost in terms of the impact on both prisoners and workers of Carillion’s poor performance in its role.

“We did not get the deal Carillion was proposing to give us because it turned out what Carillion was proposing to us was completely unsustainable in terms of their finances,” the Minister added.

“This is a real, real lesson, which is that we need to be absolutely clear about what people’s costs are and we need to be more honest internally that something that looks like too good a deal may be too good a deal and that, realistically, in terms of human nature if people are actually losing money on a contract they’re going to start disinvesting.”

The evidence session, which was held by the Committee as part of its Prison Population 2022 inquiry, also revealed that the number of people currently incarcerated has doubled since the 1990s and there is a 65% chance it will reach 85k by 2022.

Shadow Justice Secretary, Richard Burgon, responded: “From the crisis in prisons maintenance to the failings of our probation services, the Tories’ obsession with privatisation and outsourcing has caused widespread damage to our justice system – and it’s the public who’ve had to foot the bill.”