Posts Tagged ‘Connaught’

From 2010: Private Eye on the Failures of Jarvis, Vertex, Liberata and other Private Contractors

April 10, 2014

This is the from the Eye’s issue for 17th -30th September 2010:

Outsourcing

A Private Dysfunction

Government cost-cutting plans to outsource more and more services could herald a series of cock-ups as companies running the services go the same way in tough economic times as PFI and rail maintenance company Jarvis and, last week, housing maintenance company Connaught.

Alongside the usual suspects of Capita, Serco et al, many previously unheard of outsourcers are eying up contracts even though they have limited track records and shaky finances. Several are owned by a private equity industry that sees outsourcing as the next quick buck and are accordingly borrowed up to the eyeballs. Fine if they succeed, quick disaster if they don’t.

One such outsourcer is Vertex, chaired by Sir Peter Gershon. As David Cameron’s productivity adviser before the election, Gershon counselled: “a new government faces a massive and complex agenda of driving savings to close the deficit. It ought to simplify this agenda by deciding that all back office transactional functions will be outsourced within 18 months …” Coincidentally, this will hugely benefit his employer Vertex, which already has “contact Centre” and other service contracts with JobCentre Plus and councils including Westminster and Hertfordshire.

Vertex needs all the business it can get. In the two years ended 31 march 2009 it lost £43m, largely because of £35m in finance costs brought about by the huge debts (£215m in 2009) that come with private equity ownership, and which leave Vertex with liabilities exceeding its assets. Since 2008 Vertex has been owned by a consortium of US private equity firms.

Another firm in even firer financial straits is Liberata, which runs finance, payroll, IT, maintenance and any number of other services for councils from Somerset to Manchester and in Whitehall for the Justice ministry and culture department, among others. it is owned by private equity outfits General Atlantic Partners Ltd and GAP-W International, and groans under liabilities exceeding its assets by £67m and losses in the last two years running to £91m. Most arose on its pension schemes, which by last year had run up a combined deficit of £81m. In September, Liberata brought in a Serco and Crapita veteran, Dermot Joyce, to turn things round.

When Jarvis failed to turn things round and went into administration earlier this year, 1,000 “outsourced” workers lost their jobs and there was no money left for redundancy payments. With public services thrown at the mercy of a volatile private equity market, they might well not be the last.

Several of the care homes, which were in the new a year or so ago for poor care and appalling abuse inflicted to their miserable inmates were similarly owned by private equity firms. These firms regarded them solely as a source of profit, and were not interested in providing good quality care to their disabled and mentally retarded wards. They may also have been in similar perilous financial condition.

As for Gershon’s relationship with David Cameron, this seems to be the norm with Tory party politics and privatisation. The Skwawkbox blogged earlier this week about the connection between George Osborne and one of the companies that made a massive profit from the privatisation of the Royal Mail. It’s time this was all stopped.