Serco backtracks on rebate demand

1st Nov 2010 11:08

Pressure from ministers has forced outsourcing group Serco to scrap its demand that suppliers pay it a 2.5% rebate to help cover the cost of coalition spending cuts.The company, which runs prisons, nuclear facilities, schools and ports for the government, sent a letter to about 200 businesses requesting cash rebates and appearing to warn them that they risked losing future contracts unless they agreed.After a furious response from all quarters, an embarrassed Serco retracted its request and said it wished to "apologise unreservedly" to those companies involved.Government officials and Minister for the cabinet Office Francis Maude were said to have hit the roof when news of the letters broke."We decided not to seek or accept any contributions from our suppliers, who had recently received letters asking for rebates. As a company that values our relationships with all our supply chain partners, large and small, we deeply regret this action and apologise unreservedly to them for the concern that this has caused" read a statement from Serco Monday morning.Last month's Comprehensive Spending Review set out wide-ranging cost-cutting measures that would put pressure on outsourcing companies to find savings themselves, but this is not what officials had in mind.Today's events followed a letter to suppliers from Serco finance director Andrew Jenner."I am asking you to offer us a rebate of 2.5% (exclusive of VAT) on Serco's full-year spend with you for the 2010 calendar year in the form of a credit note. Like the government, we are looking to determine who our real partners are that we can rely upon," he wrote."Your response will no doubt indicate your commitment to our partnership, but will also be something I will seriously consider in our working relationship as Serco continues to grow."