The Ministry of Justice has been condemned for “egregious behaviour” in hiding from Parliament that it had awarded two new electronic tagging contracts worth more than £500 million to two companies that had been investigated by the Serious Fraud Office, fined £57.7 million, and had to repay £70.5 million to the ministry for fraudulent claims.

A House of Lords report found that the MoJ ommited Serco and G4S’ handling of previous contracts, in which Serco billed it for tagging prisoners on release who had died, and multiple times for the same person. Serco faces a deferred prosecution if this is repeated. Both Serco and G4S overcharged the ministry for the same service.

The disclosure of Serco’s past behaviour came to light when junior Justice Minister, Gareth Bacon, laid regulations to allow the MoJ to award new contracts to the firms.

But the explanatory memorandum did not mention Serco or G4S’ past contracts which were condemned by judge Mr Justice William Davis in 2019. He said Serco “engaged in quite deliberate fraud against the Ministry of Justice in relation to the provision of services vital to the criminal justice system”.

The MoJ said the new contracts were awarded "following a fair and open process and include far greater oversight". Photo: ZUMA Press, Inc/Alamy

Peers pursued this and received supplementary information revealing the past history of Serco Geografix, the subsidiary that was awarded the contract. The MoJ explained that Serco had received the new contract because it agreed to a "self-cleaning process to make it eligible to bid again for public sector contracts”.

“The House may wish to ask the Government what 'self-cleaning' involves in this context, and how it makes a company 'reliable'," the Lords Secondary Legislation Committee report states.

"It appears to us remarkable that a contract can be awarded in circumstances where a company has been investigated by the SFO and is subject to a deferred prosecution agreement.”

The report also questions whether the MoJ is up to the job of monitoring private contracts after a House of Commons’ Public Accounts Committee report in 2022 revealed that the management of electronic tagging contracts had led to avoidable mistakes, was based on outdated technology which was no longer supported by manufacturers, and had wasted £98 million of taxpayer’s money.

It also criticised the MoJ for having “a light touch” to monitoring private contracts. It demanded that HM Prison and Probation service wrote back to the committee when they engaged new private contracts to explain how they would be monitored.

Last October, Amy Rees, chief executive of HM Prison and Probation Service, wrote to the Public Accounts Committee revealing the organisation was about to grant new contracts to both companies and promising new controls.

“The approach to oversight of supplier delivery and performance, the definition of roles and responsibilities, and the engagement both between the two new suppliers and with HMPPS has been informed by previous experience and lessons learned, as well as government best practice,” she wrote.

She added: “This will ensure there is senior level oversight of progress and risks.”

Serco says it has cleaned up the company.

According to Rupert Soames, group chief executive, “those of us who now run the business are mortified, embarrassed and angry that, in a period between six and nine years ago, Serco understated the level of profitability of its electronic monitoring contract in its reports to the Ministry of Justice".

He added: "Serco apologised unreservedly at the time, and we do so again. Nobody who sat on the board of Serco Group, or who was part of the executive management team at the time these offences were committed, works for the Group today.

“Over the last six years, we have worked extremely hard to regain the trust and confidence of government, implementing in its entirety a corporate renewal programme, which was approved by government, and which has helped us to transform our corporate culture, processes and governance.”

A spokesman for the Ministry of Justice said: “These contracts have been awarded following a fair and open process and include far greater oversight than was the case a decade ago. They will allow us to continue delivering our innovative tagging scheme to protect the public and divert offenders away from a life of crime, while ensuring best value for the taxpayer.”

Lord Rowlands, a Labour member of the Lords Secondary Legislation Committee, added: “The Ministry of Justice has granted new public contracts to these companies worth over £500 million but chose not to inform the House of its previous history with these companies.

"We find that omission inexcusable… We wonder why the Ministry of Justice seems so reliant on companies which have been fined for misconduct.”