Serco under fire for subbie cash rebate demand

Aaron Morby 12 years ago
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The Government has ordered Serco to explain why it contacted suppliers to demand a 2.5% “cash rebate” on their work this year or risk losing future contracts.

Serco made the demand to help it deliver multi-million pound savings on Government contracts, despite giving earlier assurances that suppliers payments would not be cut, according to a report in the Sunday Telegraph.

The Government’s concern has prompted Carillion and other big suppliers like Capita and G4S to reiterate their pledges not to seek savings by choking off cash to their supply chains.

Cabinet Office minister Francis Maude is leading the Government’s efficiency drive to find £800m of savings from contracts with 19 leading Government outsourcers in 2010.

In setting the challenge, he stipulated that the savings presented by firms could not come from suppliers’ payments.

But a letter sent by Serco finance director Andrew Jenner last month made it clear that the company’s call for cash was related to the Government’s demand for contract savings this year.

The later stated: “I am asking you to offer us a rebate of 2.5pc [exclusive of VAT] on Serco’s full-year spend with you for the 2010 calendar year in the form of a credit note.

“Like the Government, we are looking to determine who our real partners are that we can rely upon. Your response will no doubt indicate your commitment to our partnership but will also be something I will seriously consider in our working relationship as Serco continues to grow.”

A spokesman for Serco said that only its largest suppliers had been contacted.

“In the UK we have a supply base of 15,500 and this specific process is with our largest 193 suppliers, less than 2% of the total.

“This specific process has also evolved over the weeks to one around developing partnering arrangements with a number of our very largest suppliers,” the spokesman added.

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