The British firm caught up in the latest Affordable Care Act stumble is a long-established, deeply rooted company that provides management, technical and consulting services to governments around the world.
Serco Group plc, which is based in England and traded on the London Stock Exchange, has tentacles that reach from Europe to New Zealand, the Middle East, India, Africa and the Americas.
Its lucrative government contracts in more than 30 countries involve all sorts of military, intelligence and homeland security activities; air traffic control; the operation of trains, subways and ferries; the shipment and handling of nuclear fuel and weapons; and the running of prisons, hospitals and schools.
With about 100,000 employees worldwide, Serco also has put its outsourcing efforts and information technology skills into post offices, call centers, back offices, street maintenance and other tasks for which a government or private company might need a helping hand.
Its myriad activities include assisting Britain’s anti-ballistic missile system, providing harbor and offshore services to the Australian Royal Navy, operating a metro rail network in Dubai, reducing the radar interference of England’s wind farms, and even enforcing parking meters in Chicago.
Serco Group reported revenue of about $8.6 billion in 2013. “Its range of activities, here and abroad, is truly mind-boggling, taking in no end of things that were once done by the state, but are now outsourced to private companies,” The Guardian, an independent British newspaper, has written about Serco.
Yet in the last couple of years, Serco has fallen on hard times.
First, it faced headwinds due to the British government’s austerity measures.
In 2012, independent researchers concluded that Serco’s operation of British pathology labs had led to a decline in the quality of services, including medical errors.
Last year, Serco was embroiled in a billing scandal in which it was accused of overcharging the British government tens of millions of British pounds on a prison contract through its monitoring of offenders who were already dead. British authorities launched a criminal probe.
By late April of this year, Serco’s stock price had plummeted more than 20 percent and its profits also plunged. Serco’s chief executive and finance director had departed, and the firm attempted to raise $287 million in emergency cash.
On May 1, Rupert Soames, a grandson of former British Prime Minister Winston Churchill, took over as chief executive and vowed to repair the “severe damage” from the contract scandal and to lead Serco back to recovery.
“One of the really interesting things about this company is they seem to run into trouble in a lot of the places they go,” said Bill Allison, a senior fellow at the Sunlight Foundation, a nonprofit nonpartisan group in Washington that’s committed to government transparency.
“They were accused of fraud in England, and now there’s the question here of whether they were really doing the work they were paid for in running these call centers” to process applications for the health insurance marketplaces, he said. “If a company is big enough and they’re active in more than one country and they spend a lot of money on campaign contributions and lobbying, they’re almost too big to ban from government work.”
Serco’s roots date to 1929, when the Radio Corporation of America founded a British subsidiary, RCA Services Limited, to support the growing motion picture industry. The firm was renamed Serco Services Limited in 1988.
In 2008, Serco Group acquired SI International Inc., a publicly held company based in Reston, Va. — giving Serco entree to prime U.S. contracts.
Now called Serco Inc., the U.S. subsidiary employs more than 8,000, according to the company. In July 2013, it was awarded a contract, worth up to $1.25 billion, to verify and process applications for the new health exchanges.
“They don’t have the public face of a McDonald’s or Wal-Mart or Target, but they have the biggest consumer in the world, the U.S. government, as their customer,” the Sunlight Foundation’s Allison said. “Serco’s very good at catering to this customer.”
He said that Serco employees, family members and the company’s political action committee spent $214,000 on the 2008 elections. In 2011, Serco spent $300,000 on Washington lobbyists. Last year, the company spent more than $500,000 on lobbyists.
“Basically, this is a group that has very quickly ramped up its Washington operations and spending money on Washington influence,” Allison said.
In a statement Thursday, Serco spokesman Alan Hill said the company is “performing mission critical work to enable millions of Americans to obtain health insurance. Serco is proud to provide the business services that support this important effort.”
The breadth of Serco’s services from military operations to the transportation, energy, education, criminal justice and health sectors, puts it in the league of other prominent U.S. contractors such as SAIC, Lockheed Martin, Booz Allen Hamilton, and CACI International Inc.
Russ Choma, an investigative journalist with the nonpartisan, Washington-based Center for Responsive Politics, chalked up Serco’s footprint as substantial yet not extraordinary.
“They do lobby and they do have a PAC. Neither is a huge operation. It looks like a solid Washington influence operation,” he said. “They don’t spend an extraordinary amount of money, but they do spend. They’re people who clearly know that they need — to be playing the game in Washington.”