Serco's troubles spread to the US

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

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."

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.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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David Cameron’s speech: a hymn to liberalism from a liberated PM

The Prime Minister spoke with the confidence of a man who finally has a full mandate for his approach. 

At every one of his previous nine Conservative conference speeches, David Cameron has had to confront the doubters. Those Tories who rejected his modernisation of the party from the start. Those who judged it to have failed when he fell short of a majority in 2010. Those, including many in his own party, who doubted that he could improve on this performance in 2015. Today, rather than confronting the doubters, he was able to greet the grateful. As the first majority Conservative prime minister for 18 years, he rightly savoured his moment. "Why did all the pollsters and pundits get it so wrong?" he asked. "Because, fundamentally, they didn't understand the people who make up our country. The vast majority of people aren't obsessives, arguing at the extremes of the debate. Let me put it as simply as I can: Britain and Twitter are not the same thing." Labour should pin that line to its profile. 

With a full mandate for his approach, Cameron went on to deliver his most unashamedly liberal speech to date. Early on in his address, he spoke with pride of how "social justice, equality for gay people, tackling climate change, and helping the world's poorest" were now "at the centre of the Conservative Party's mission". A lengthy section on diversity, lamenting how "people with white-sounding names are nearly twice as likely to get call backs for jobs than people with ethnic-sounding names", was greeted with a standing ovation. Proof, if needed, of how Cameron has changed his party beyond recognition. The former special adviser to Michael Howard, who avowed that "prison works", told his audience that prison too often did not. "The system is still not working ... We have got to get away from the sterile lock-em-up or let-em-out debate, and get smart about this." From now on, he declared, the system, would "treat their [prisoners'] problems, educate them, put them to work." 

There were, of course, oversights and lacuna. Cameron reaffirmed his commitment to a budget surplus but glossed over the unprecedented, and many believe undeliverable, that will be required to achieve it (and which may fail to do so). He hailed the new "national living wage" with no mention of the tax credit cuts that will leave the same "strivers" worse off. His "affordable" starter homes will be unaffordable for average-earning families in 58 per cent of local areas. But it is a mark of Cameron's political abilities that it was easy to forget much of this as he spoke. Like George Osborne, he deftly appropriated the language of the left ("social justice", "opportunity", "diversity", "equality") to describe the policies of the right. Cameron is on a mission to claim ownership of almost every concept associated with Labour. The opposition should not sleep easily as he does so. 

There was little mention of Labour in the speech, and no mention of Jeremy Corbyn by name. But when the attack came, it was ruthlessly delivered. "Thousands of words have been delivered about the new Labour leader. But you only really need to know one thing: he thinks the death of Osama bin Laden was a 'tragedy'". The description of Corbyn as the "new Labour leader" shows the Tories' ambition to permanently contaminate the party, rather than merely the man.

There are plenty of potential landmines ahead for Cameron. The comically lukewarm applause for his defence of EU membership was a reminder of how divided his party is on this issue. But today, he spoke as a man liberated. Liberated by winning a majority. Liberated by not having to fight an election again. Like a second-term US president, he was able to speak of how he was entering "the second half of my time in this job". Tributes to Osborne (the "Iron Chancellor) and Boris Johnson (greeted with a remarkable standing ovation) alluded to the contest to come. But whoever succeeds him can be confident of assuming a party in good health - and more at ease with the modern world than many ever thought possible. 

George Eaton is political editor of the New Statesman.