G4S make £14.3m profit from Brook House contract despite serious failings

• National Audit Office Report: The Home Office's management of its contract with G4S to run Brook House immigration removal centre
• Inquiry: Immigration detention
• Home Affairs Committee

The NAO found:
 
G4S made £14.3m gross profit from its Brook House contract between 2012 and 2018, with gross profit rates of between 10% and 20% per year. Following the Panorama programme, G4S's profits fell because it started to spend more on delivering the contract. G4S made an annual gross profit on the contract of 18% to 20% until 2016, falling to 10% in 2017 and 14% in 2018.

• Until 2018, the Home Office did not have the people in place to properly verify or validate G4S's reported level of performance. The on-site monitoring of G4S's contractual compliance was part of one junior civil servant's role. This was insufficient to enable the Home Office to properly examine or challenge G4S on its management of the centre.
  • Since Panorama, the Home Office has increased the size and role of its contract monitoring team.
  • The 2018 review by Moore Stephens LLP found G4S's billing was free from material errors in the level of staffing, service levels and costs savings achieved.
• The 84 incidents of physical and verbal abuse identified from the Panorama footage were not classified as a contractual breach and did not lead to any significant penalties.
  • Following the Panorama programme which revealed shocking levels of abuse against detainees, the Home Office fined G4S £2,768 – less than 0.5% of the monthly fee – for eight incidents, four of which should have been previously reported.
  • The NAO found that G4S has broadly delivered to the terms of the contract.
• The Home Office now considers the contract, which was extended for 2 years in August 2018, after the Panorama programme had been broadcast, to be “not fit for purpose”. The Home Office is currently procuring a new contract to manage Brook House from 2020 to 2028.

The NAO concluded that:

• "It is worrying that the normal contract monitoring and incident reports did not communicate the gravity of what was shown by the documentary".
• "The inability of the Home Office to impose any significant financial consequences on G4S for the abuse of detainees highlights limitations in the contractual approach".
• "It is vitally important that the Home Office continues its new approach of managing its provider to both the letter and spirit of its contracts"

Chair's comments

Chair of the Home Affairs Committee, Rt Hon Yvette Cooper MP said:

"For G4S to be making up to 20% gross profits on the Brook House contract at the same time as such awful abuse by staff against detainees was taking place is extremely troubling. Given that profits reduced when G4S had to increase staffing and training after the Panorama programme, this raises very serious questions about G4S'' running of the centre to make higher profits whilst not having proper staffing, training, and safeguarding systems in place.
 
We asked the NAO to look into this contract because the Home Office would not give us complete information about it or about the way they were managing it. This report shows we were right to do so.
 
The NAO's findings call into serious question the Home Office's management of this sensitive contract and raise real problems about the contract itself. They are right to say how worrying it is that Home Office monitoring did not reveal the gravity of the incidents taking place at Brook House. 
 
Our report on immigration detention has already identified a shockingly cavalier approach by the Home Office to immigration detention and a lack of proper oversight to ensure effective, safe and humane management of IRCs. 
 
We will be pursuing further questions now with G4S and the Home Office now in the light of this report".

Background

In September 2017 the Home Affairs Committee began an inquiry into the management of Brook House, later expanded into an investigation of all Home Office immigration detention. During this inquiry, the Committee received testimony from a former employee alleging that G4S had been inaccurately reporting its activities in order to generate profits over 20%. To investigate these claims, in March 2019 the Home Affairs Committee asked the National Audit Office to look into the Home Office's management of its contract with G4S to run Brook House.
 
The report finds that G4S have been making significant profits on the Brook House contract. Between 2012 and 2018, G4S had made £14.3m gross profits, (before deducting a share of company overheads, such as human resources), with gross profit rates of between 10% and 20% each year. Once such deductions are made, G4S were still making a net profit each year between 6% and 15%. The NAO also finds that Brook House has been the least profitable of G4S's facilities at Gatwick. For example, the gross profit G4S was making on its contract to run Tinsley House immigration removal centre ranged between 26% and 43% between 2012 and 2016.
 
The Home Office pays G4S a monthly fee to operate the Brook House contract, which it can reduce if G4S fails to perform against any of the 30 separate measures set out in the contract. The NAO finds that, although some deductions are made almost every month, typically the value of these deductions are small (at under 1.5% of the fee it receives). Under the contracts the Home Office is not entitled to a share of G4S's profits, yet the Home Office has agreed not to apply a deduction in almost half of all possible cases, due to extenuating circumstances.
 
The 84 incidents of physical and verbal abuse identified from the Panorama footage were not classified as a contractual breach and did not lead to any significant penalties. The inappropriate use of force and the use of inappropriate language are also not included as performance measures in the Brook House contract. A fine of £2,768 pounds was made by the Home Office (less than 0.5% of the monthly fee) for eight incidents, four of which should have been previously reported. The NAO concludes that “the inability of the Home Office to impose any significant financial consequences on G4S for the abuse of detainees highlights limitations in the contractual approach.”
 
Although the Home Office had teams on-site at Brook House, actual on-site monitoring of G4S's contractual compliance was part of one executive officer's role, who focused mainly on monitoring G4S's level of staffing. The NAO finds this was insufficient to enable a proper examination of G4S's self-reported performance, or to challenge G4S on its management of the centre.
 
The Home Office had been due to award a new contract to operate Brook House in late September 2017. Following the Panorama programme and the subsequent Action Plan, the Home Office decided to cancel the Brook House procurement and start it again. To facilitate this, it agreed an extension on the current Brook House contract to May 2020. According to the NAO, the Home Office has now concluded that the Brook House contract as written is no longer fit for purpose, given the lack of scope to impose financial penalties and enforce improvements in conditions and treatment. The Home Office intends that any new contract will include new performance measures covering staff recruitment, induction, training, mentoring and culture, and establish a contractual role for the Home Office to monitor the appropriateness of the use of force against detainees, and the care of staff and detainees following an incident.

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