Government outsourcing: Nobody said it was easy

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“THIS has been an absolute earthquake and a disaster for Serco,” Rupert Soames, the boss of Britain’s biggest provider of outsourced government services, told Parliament in September. He was referring to a 2013 scandal in which his firm, along with its peer G4S, continued to charge for electronic tagging of prisoners even after some had died. But it turned out that Serco’s misfortune was just beginning. On November 10th it wrote off £1.5 billion ($2.4 billion) relating to losses on contracts and acquisitions, cut its profit forecast, cancelled its dividend and announced plans both to sell some assets at a loss and to raise £550m through a share issue. Its share price fell by a third.Serco’s travails are largely self-inflicted and unusually grave. But its “cautionary tale”, as Mr Soames puts it, should give pause to any company thinking of entering a growing market for the hard end of outsourced government services: not cleaning, catering or maintaining computers, but such things as guarding prisoners and dealing with welfare claimants.Britain has long been a pioneer in outsourcing public services. But Australia has…

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