View all newsletters
Sign up to our newsletters

Support 110 years of independent journalism.

  1. Business
  2. Economics
17 July 2013

Serco’s troubles spread to the US

The company is facing questioning over an Obamacare contract thanks to its problems in the UK.

By Alex Hern

The Government review into Serco and G4S is making waves in the US, where the former company has just been awarded a $1.2bn contract to manage key elements of Obamacare. The Washington Post’s Sarah Kliff writes:

That contract, announced in late June, is among the largest Affordable Care Act grants made so far, expected to cover the hiring of 1,500 workers who will process a wave of health coverage applications…

Serco’s $1.2 billion contract with the Center for Medicare and Medicaid Services is the firm’s first health law award, Hill said. The company does, however, have experience handling large U.S. government jobs through contracts with the State Department to process visa applications and with the U.S. Patent and Trademark Office, where it oversees patent requests.

I was surprised to hear that Serco was involved in Obamacare, since the British branch was – I thought – mainly involved in areas like transport and security. But no. Their Wikipedia page lists interests in home affairs, transport, science, detention, defence, aviation, health, education, drivers’ licensing, leisure, web development, it infrastructure, and waste collection.

How can one company be so good at all of these varied functions to continually win contracts? It’s a broad mix, but it’s not one that’s completely unheard of elsewhere. General Electric is probably the most famous example in the private sector, a corporate titan which spans jet turbines to finance, through healthcare, consumer electronics and energy. As Ben Thompson writes, “the competitive advantage of such companies is usually in their management acumen and capital reserves, and the preferred employee is a generalist, able to quickly master any job with a refined set of skills.”

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

But that doesn’t fully explain companies like Serco. If it’s just equivalent to General Electic, and its advantage comes from management and capital, then why doesn’t GE take more government contracts, and why doesn’t Serco work outside the outsourcing sector more?

In case it’s not clear – and if you’ve read Alan White’s series on the shadow state, it should be – what companies like Serco do very well is deal with Governments. That’s their comparative advantage, and it’s a big one. There may be very little in common between the procedures for designing a website and a running a train service – but there’s a lot in common between the procedures for obtaining the contracts. Once you know how to bid for a contract, which performance targets matter, and who to take out for dinner, the difficult part is done.

That’s not to say that outsourcing companies are doomed to be bad at their job. For every major scandal, there’s a contract which is quietly ticking along successfully. But it exposes the contradiction at the heart of the process: if it’s more important for their success that outsourcing companies be good at winning contracts than it is that they be good at fulfilling the contracts, then the justification for offering the goods up in the first place gets confused.

And so Serco moves into Obamacare, and the march of the outsourcers continues.

Content from our partners
The promise of prevention
How Labour hopes to make the UK a leader in green energy
Is now the time to rethink health and care for older people? With Age UK

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU