Serco - one to watch

The rising trend in public-private-partnerships as a means of supplying public services is benefiting a handful of companies around the world. One British company - Serco - has become a world leader in this market, specialising in military contracts and, in April 2000, became part of the private consortium that manages Britain's nuclear weapons site AWE Aldermaston. Janet Kilburn reports.

Hospitals, schools, aviation, railways, "defence", prisons, and nuclear weapons: in Britain there are two things these all have in common:
1. taxpayers money funds them (in part, if not all)
2. if they have been outsourced to private companies, there is a strong possibility that one company will have picked up the profit

In 1964 Serco was awarded the first private contract for managing a British military site, the maintenance of the UK Ballistic Missile Early Warning System at RAF Fylingdales. This was a radical move in 1960s Britain, where nationalised industries and state control of "vital" sectors such as defence was the expected norm. The notion of outsourcing must have been controversial and this "pioneering" approach to exploiting the market in public services was well ahead of its time.

Right here, right now

In 2004 the company continues to profit from militarism - though now globally rather than just in Britain - with around 26% of its turnover relating to military contracts worth £2.5bn (1). However, during the last 40 years the company's horizons have broadened significantly to encompass most public service sectors and it now offers the following rather abstract-sounding business services (2):
1. Total Organisational Management
2. Business Process Management
3. Asset and Facilities Management
4. Consulting
5. Training
6. Specialist and Technical Services

In recent weeks Serco has become one of the few British companies to pick up a small but potentially lucrative reconstruction contract in Iraq (3) (apparently they will restore air traffic control to Baghdad and Basra - something which they failed to do in their doomed bids for a stake in the privatised UK project for air traffic control (4) … and that under rather easier conditions). Apparently the firm hopes that getting a foot in the door in Iraq will lead to greater things. According to the UK Guardian "Confirmation of the 18-month contract came as Serco claimed to be successfully 'exporting' private finance initiative models abroad."

Their success becomes more likely as the global nature of public-sector funding is transformed.

Capital and revenue

As governments worldwide feel the squeeze on public borrowing to supply public services, companies like Serco have manoeuvred themselves into positions that enable them to profit massively from the resulting Public-Private-Partnership (PPP) schemes such as Private-Finance-Initiative (PFI).

These public-private funding arrangements essentially allow governments to hide collective debt by letting private companies raise the finance for projects that, traditionally - in countries like Britain ? have been entirely state-funded.

In some cases the pay-off for getting someone else to raise the capital has been to pass over ultimate ownership of capital assets to the contractor: "The public sector does not own an asset (such as a hospital or school) but pays the PFI contractor a stream of committed revenue payments for the use of the facilities over the contract period […] Once the contract has expired, ownership of the asset depends on the terms of the original contract, either remaining with the private sector contractor, or returning to the public sector." (5).

Profiting from plutonium

Since 1993 British nuclear weapons production has taken place under a GOCO system, that is, Government-Owned Contractor-Operated. This means that while the state owns the physical sites of production and retains a "golden share" in AWE plc, private companies, in consortia, manage the day-to-day functions of warhead production and maintenance. They are also responsible for the decommissioning of old British nuclear weapons, such as the Chevaline warheads (from Polaris submarines) and the WE-177 free-fall bombs (now decommissioned in entirety).

In April 2000 a new 10-year contract to manage Aldermaston, worth an estimated £2.2bn of British taxpayers money, was awarded to a joint venture company called AWE ML. This comprises: the 100% British government- owned, and somewhat beleaguered, British Nuclear Fuels Plc (BNFL); US arms giant, Lockheed Martin; and Serco.

In January 2003, AWE ML's 10-year contract was extended to 25 years and the value of the contract rose to £5.3bn (6). Serco have stated that their share of the extended contract amounts to £1bn (7).
Essentially the joint venture company AWE ML exists to try and turn a profit out of the UK nuclear weapons programme and associated "services". Hard to believe? Well, its true!

Apart from the bad taste in profiteering from genocidal weapons of mass destruction, Serco's image (and that of their partners in crime) isn't too bad (outside of refugee, union, antinuclear, antimilitarist, prison reform, railway, education and health campaigner circles!), though their Iraq contract highlights their war profiteering in a particularly acute and modish way.

Laugh? You could weep!

There are rumours that some customers are backing out of prospective PFI deals with Serco, but for now the company is laughing all the way to the bank. Their rate of growth seems unstoppable and their global market share just keeps expanding. In July 2003 the company reported that they were working on 12 current PFI contracts - with an asset value £0.7bn. They currently employ more than 35,000 staff and have a £10.3bn forward order book.
And as Secretary to the Treasury, Paul Boateng MP, commented in a June 2003 speech (something Serco are always keen to remind people of):

"In the [UK] Government we see the Private Finance Initiative as one of our most important policy successes in our wider modernisation agenda.

The Private Finance Initiative is central to this Government's radical agenda to deliver public services that are not just better than they are now but truly world-class, as is right for one of the world's largest and richest economies." (9)

With their hope for increased "exports" of PPP schemes worldwide, Serco look set to continue making a killing for a long time to come.

Shareholder action

For anti-nuclear campaigners working in opposition to British nuclear weapons programmes, Serco's involvement in managing the UK Atomic Weapons Establishments presented an opportunity: here is a public company floated on the stock exchange. For the first time it has become possible to explore a different path of resistance to British weapons of mass destruction - "The Way of the Shareholder".

Since 2000 women from the Aldermaston Women's Peace Camp(aign) (AWPC) have taken on the role of "rogue" shareholders in the company. With just one share each, a group of around a dozen women have made it their mission to ask difficult questions, disrupt meetings and bring "normal" shareholder's attention to the nuclear aspect of the company's portfolio.
With concerns at the possibility of a new generation of nuclear weapons being developed at Aldermaston in the near future (10), women from the camp(aign) are stepping up their efforts to work against Serco (11).

The recent London-Aldermaston march (Easter 2004, see http://www.aldermaston2004.net) has highlighted Britain's nuclear weapons programme in a way not seen for several years and AWPC hope that the current public awareness about WMDs will present greater opportunities for women-led disarmament work.

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NOTES: 1. See http://www.serco.com/our_business/markets/defence/index.asp for an overview of current Serco defence contracts
2. See http://www.serco.com/our_business/services/index.asp
3. See April 2004 Guardian article http://www.guardian.co.uk/Iraq/Story/0,2763,1160808,00.html
US government list of "prime contractors" in Iraq reconstruction
http://www.export.gov/iraq/pdf/contracts03_print.pdf
4. See March 2002 Guardian article on National Air Traffic Control Services http://www.guardian.co.uk/airlines/story/0,1371,661883,00.html
5. See http://fesportal.fes.de/pls/portal30/docs/FOLDER/BERATUNGSZENTRUM/WIPO/ppp-ukdebate.pdf for Penny Bochum's thorough examination of UK PPPs.
Also, for a simple outline of PFI schemes (esp refinancing) http://education.guardian.co.uk/schools/story/0,5500,519038,00.html
6. Hansard (re £5.3bn contract) http://194.128.65.4/pa/cm200203/cmhansrd/vo030122/wmstext/30122m01.htm
7. Serco 2003 highlights http://www.serco.com/media/presspacks/2004/prelims2003.asp
8. Paul Boateng speech http://www.hm-treasury.gov.uk/newsroom_and_speeches/speeches/chiefsecspeeches/speech_cst_100603.cfm
9. See http://www.aldermastonwpc.gn.apc.org/tng
10. This year's AGM will have taken place by the time this pack is published. To find out how it went, see http://www.aldermastonwpc.gn.apc.org/camp_news/

Further reading:
Previous JK art http://www.peacenews.info/issues/2442/244222.html
2000 Ethical Consumer article http://www.ethicalconsumer.org/magazine/corpwatch/serco.htm