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Public Policy: Using Market-Based Approaches Table 9.2 DCMF contracts Tender Winning Prison(s) date Competitors bidder Altcourse 1994/95 GSL, Premier, Securicor, UKDS, SCS. GSL Parc 1994/95 GSL, Premier, Securicor, UKDS, SCS. Securicor Lowdham Grange 1996 GSL, Premier, Securicor, UKDS, CSC, SCS, Cornell, Bobby Rose. Premier Bronzefield 1997 Premier, Securicor, UKDS. Premier Forest Bank 1997 GSL, Premier, Securicor, UKDS, CSC. UKDS Rye Hill 1998 GSL, Premier, Securicor, CSC. GSL Dovegate 1998 GSL, Premier, Securicor, CSC. Premier Ashford 2001 GSL, Premier, Securicor, UKDS, CSC. UKDS Peterborough 2001 GSL, Premier, Securicor, UKDS, CSC. UKDS Notes: ‘Competitor’ is defined as a firm that pre-qualified and submitted a bid. Not all competitors were short-listed. Source: •econ report, Competition Commission (2002), NOMS. SUPPLY The majority of UK prison services are self-supplied by HMPS. There are currently four private firms supplying prison services in the UK: ● Group 4 Securicor, an international security services company formed from the merger between Securicor Plc and Group 4 Falck A/S’s security business, completed in July 2004. Group 4 Securicor is listed on the London Stock Exchange, with a secondary listing in Copenhagen. ● GSL, a UK-based firm providing security and other support services in the UK, South Africa and Australia. Following the de-merger and divestment of Group 4 Falck A/S in May 2004, GSL is now owned by private equity investors Englefield Capital and Electra Partners Europe. ● Premier, owned by Serco, a UK company listed on the London Stock Exchange. Previously a 50:50 joint venture between Wackenhut Correctional Corporation (WCC) and Serco, it has been owned and managed solely by Serco since Group 4 sold its shares in WCC in 2003. ● UKDS, a subsidiary of Sodhexo Alliances SA, a French company listed in Paris. All have an international presence and supply services to governments in other countries. Between them, these four companies currently manage eleven different contracts listed in Table 9.3. 78
Table 9.3 Companies providing prison management services in the UK Source: •econ report, Group 4 Securicor website There are 17 firms providing prison-management services globally, of which only six currently operate outside of the US. 71 Introduction of a market mechanism PERCEIVED FAILING Section 9 – Competitive Tendering of Prisons Firm MO contract DCMF contract Group 4 Securicor Parc GSL Wolds Altcourse Buckley Hall (until 1999) Rye Hill Premier Doncaster Lowdham Grange Ashfield Dovegate UKDS Blakenhurst (until 1999) Forest Bank Ashford Peterborough Outsourcing was introduced into prison services in the 1980s. Changes in sentencing practice in the 1980s led to a growth in the prison population that public-sector capacity at the time was unable to meet. There was also a belief that the public sector was inefficient and that private-sector provision would allow for the cost-efficient expansion of capacity. A feasibility study into privatesector involvement in prison services was carried out by the House of Commons Home Affairs Committee (the ‘Committee’). The Committee identified problems in the prison service including the age of prisons, the state of over-crowding, sanitary conditions and the slow pace of modernisation. 72 In 1987 the Committee visited the US to report on the effects of private-sector involvement in prison management there. The Committee recommended that the Home Office experiment with contracting out management of new prisons in order to meet the demands of a growing prison population. A study was then carried out assessing the feasibility of introducing private-sector provision in prison management. This study concluded that the private sector could be used to increase the number of available prison places whilst delivering cost efficiency and spurring innovation. As noted in Part III, private sector providers are motivated by profits and so have a stronger incentive to reduce costs than their public sector counterparts. Private sector providers also face sharper incentives to innovate because they are able 71 Data from http://web.crim.uft.edu/pcp/census/2001/Market.html 72 House of Commons Home Affairs Committee (1987) Contract Provision of Prisons, London: The Stationery Office. 79
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DTI ECONOMICS PAPER NO.14 Public Po
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DTI ECONOMICS PAPER NO.14 Public Po
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Contents Acknowledgements vi Forewo
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Contents Section 11 Emissions Tradi
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Foreword There is increasing intere
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SECTION 1 Introduction and summary
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Public Policy: Using Market-Based A
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SECTION 2 Using market mechanisms U
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SECTION 3 Lessons for the design an
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Page 36 and 37: Public Policy: Using Market-Based A
Page 40 and 41: SECTION 4 Introduction This part of
Page 50 and 51: SECTION 7 Market-Based Mechanisms W
Page 78 and 79: SECTION 8 Framework for assessing m
Page 81 and 82: Part IV Case Studies 73
Page 83 and 84: ● the Green and White papers behi
Page 85: A prison failing to deliver on its
Page 89 and 90: Section 9 - Competitive Tendering o
Page 91 and 92: detect any deviation from a collusi
Page 93 and 94: at HMPS began as an equal mix of th
Page 95 and 96: (e.g. lighting). This impact could
Page 97 and 98: MARKET POWER The full benefits of c
Page 99 and 100: However, it should be noted that te
Page 101 and 102: on competition is uncertain. The ab
Page 103 and 104: Controlling for problems of asymmet
Page 105 and 106: Procurement process design One way
Page 107 and 108: however, financial deductions are m
Page 111 and 112: The Independent Monitoring Board at
Page 113 and 114: Figure 9.1: Difference between the
Page 115 and 116: ‘While there were staff in the pu
Page 117 and 118: design the invitation to tender and
Page 121 and 122: and demand conditions. Second, we d
Page 123 and 124: DEMAND Anyone can apply to a local
Page 125 and 126: ● Rent deposit guarantee by the l
Page 127 and 128: The Green Paper stated the Governme
Page 129 and 130: It was not an objective of ODPM or
Page 131 and 132: DESCRIPTION OF MARKET MECHANISM The
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Page 135 and 136: DEVELOPMENTS OVER TIME The major mo
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Concerns about capacity constraints
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from those already located within t
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In several areas, registrations by
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Controlling for information problem
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extent though, it was competition b
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Section 10 - Choice-Based Letting i
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levels are reducing and new tenants
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desired effect of limiting points-c
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efficiency savings in some areas. T
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SECTION 11 Emissions Trading Introd
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Section 11 - Emissions Trading coex
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Section 11 - Emissions Trading emis
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A more detailed and diagrammatic de
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The costs of monitoring and reporti
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INITIAL ALLOCATION OF PROPERTY RIGH
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only 242 in the second year. The di
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COST-EFFICIENT EMISSIONS REDUCTIONS
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consultants to Defra of £11 per to
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Participation has helped us to rais
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Section 11 - Emissions Trading emis
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SECTION 12 Issues in the implementa
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