UPDATE 1-UK government alleges fraud in Serco prisoner contract
LONDON Aug 28 (Reuters) - British outsourcing firm Serco could be banned from bidding for UK government contracts after the justice ministry asked police to investigate alleged fraudulent behaviour by some Serco staff working on a prisoner escorting contract.
Britain's Ministry of Justice (MoJ) on Wednesday said an investigation into the Serco-run prisoner escorting and custodial services (PECS) contract had showed some staff recording prisoners as having been delivered ready for court when they were not - a performance measure for the contract.
In the light of this evidence, the MoJ said it would put the contract under immediate "administrative supervision" and warned Serco it could terminate this contract if any corporate involvement was proved.
Serco said it had agreed to repay all past profits made on the PECS contract and would forgo any future profits. The company added that no member of its board had knowledge of this practice.
"We have not seen evidence of systemic malpractice up to board level, but we have been clear with the company, unless it undertakes a rapid process of major change, and becomes completely open with government about the work it is doing for us, then it will not win public contracts in future," said Chris Grayling, Britain's Secretary of State for justice.
"The taxpayer must know that their money is being properly used."
The PECS contract covers a range of services including transporting prisoners between court and prison in London and East Anglia in eastern England.
Serco was awarded the seven year contract worth 42 million pounds ($65.25 million) a year in March 2011. The MoJ has an option to extend the contract by three years if it is satisfied with Serco's performance.
The MoJ said it had also ordered Serco to overhaul the management responsible for the contract and to open its management and accounting information on government contracts to much more intense government scrutiny.
After a three month period, the changes they have put in place will be assessed by a specially convened committee of government non-executive directors.
If the committee is not satisfied that the changes made by the company are sufficient to guarantee the future integrity of government contracts, Serco will face exclusion from all new and future work with the UK government, the MoJ said.
Earlier this year the British government placed all contracts held by outsourcing firms G4S and Serco under review after an audit showed they charged for tagging criminals who were either dead, in prison or never tagged in the first place.
Serco is due to report second-quarter results on Thursday.
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