Mark Leftly: Putting PwC on Serco's case adds another stink to a very smelly situation

Outlook That accountant PricewaterhouseCoopers (PwC) is investigating Serco on behalf of the Ministry of Justice is "hilarious", according to a source close to Whitehall. It's certainly a joke, but one which Serco can't be finding very funny and would be too far-fetched to be included in an episode of The Thick of It or Yes, Prime Minister.

Serco deserves the lumps it is getting for its disastrous mishandling of Ministry of Justice contracts. These disasters have led to the FTSE 100 giant being frozen out from being awarded any new government work until it can prove it has gone through a process of "corporate renewal", whatever that means.

This started off last month with allegations that Serco and G4S had overcharged the taxpayer by as much as £50m after assigning electronic tags to the dead or offenders back in custody. The investigation that followed this week unearthed that Serco staff had kept irregular records – read: possible fraud – in its prisoner-escorting contract.

And let's not forget the little matter from earlier this year of a fine for an explosion at the Atomic Weapons Establishment, one of the many parts of the public sector that Serco runs nowadays.

Serco is no position to complain, but PwC shouldn't be running the forensic audit of Serco's Ministry of Justice contracts. Margaret Hodge, the chair of the Public Accounts Committee, has accused the civil service of operating in "silos" and this is a devastating example of that claim.

PwC is Serco's opponent on one of the biggest, most controversial outsourcing deals this country has ever seen. The accountant is in the rival consortium bidding to run the £14bn-budget Ministry of Defence agency that buys the armed forces' missiles, stealth aircraft and tanks.

We've written extensively about the conflicts of interest that are causing chaos with this quasi-privatisation of Defence Equipment & Support, so I won't bore you about the future of the guns 'n ammo agency yet again.

However, it cannot be right that Serco's rival is assessing the group's contracts in a rival department, a move which could potentially give the accountant a commercial edge. The source laughs that "at least we know that PwC will get stuck into Serco".

PwC would surely have done that whether it was a rival or not, but this does give an impression that the accountant has an added imperative to sock Serco.

This isn't a suggestion that PwC has done anything wrong: if a firm is offered high-profile work it would be silly to assume that it wouldn't grab it with both hands. Rather, this shows just how poorly government continues to handle situations that involve big business.

Justice minister Chris Grayling could have chosen any of the other members of accountancy's "big four" to examine Serco's contracts, while the mid-tier firms of that sector, like Grant Thornton and BDO, are surely well-enough equipped to undertake a forensic audit.

The suspicion is that the Justice ministry simply didn't think about Serco's and PwC's work in other departments and any potential conflicts that could arise from the investigation.

That is a failure, then, of government and adds an extra stink to a very smelly situation.

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