Outsourcing giant Serco has been forced into an embarrassing u-turn following FD Andrew Jenner’s demand for a 2.5% rebate from its largest suppliers.
The service company, which lists the government as its biggest client, “apologised unreservedly” for the move and withdrew the demands after the cabinet office expressed its anger over the weekend. In October, Serco had promised cabinet office minister Francis Maude it would not cut costs with suppliers.
In September Jenner wrote to 193 of the company’s biggest suppliers asking for a rebate of 2.5% on contracts for the first half of 2010.
“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,” he wrote in the letter.
Serco says that by the time it made its commitment to the government its plans had already “evolved” but that it had failed to communicate this to its suppliers.
“We deeply regret this action and apologise unreservedly,” said a company statement.
The Serco statement in full
“Serco yesterday reaffirmed to the Cabinet Office that Serco’s most recent offer of savings to the UK Government will not result in any of the Government’s cost saving programme being passed on to our suppliers.
Serco has an ongoing procurement process with our supply chain partners, which has been underway for more than five years. This is part of our regular management system.
More recently we have also been working with the Cabinet Office as part of their efficiency programme, which has involved discussions with our leading suppliers. As a result our plans evolved and 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. We are now communicating this to our supply chain partners and retracting the letters.”
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