THE firm at the centre of the Olympics security shambles has lost its contract to run a jail and failed to win any further prison contracts it was bidding for, the Ministry of Justice has said.
G4S, which failed to provide enough guards for the London 2012 games, will stop running the Wolds prison in East Yorkshire and it will return to the public sector from next year.
Competitions to run Northumberland prison and the South Yorkshire group of jails - Lindholme, Hatfield and Moorland - will now move to the final stage, with contracts likely to be awarded next spring, the MoJ added.
The competition process for the four prisons "produced a compelling package of reforms for delivering cost reduction, improvements to regimes and a working prisons model in these prisons", the MoJ said.
The competition process will continue for these with the three remaining bidders, Sodexo, Serco and MTC/Amey. But this was not the case for the Wolds prison in East Yorkshire, which is currently run by G4S; Coldingley prison in Surrey; Onley in Northamptonshire, or Durham jail, the MoJ said.
The ministry also said it has found "further and faster ways of securing future cost reductions", with all public sector prisons "obliged to make additional efficiency savings".
Collective savings will also be made by putting services such as maintenance and resettlement services out to competition, the MoJ said. Overall these changes should save £450 million over the next six years, the MoJ estimated.
Justice Secretary Chris Grayling said: "The cost of running our prisons is too high and must be reduced. We can do this by being more innovative and efficient, and without compromising public safety.
"That is why I have decided to take a new approach to how we compete prison services and reduce unit costs across the prison estate that will lead to better value for the tax-payer, linked to more effective services to reduce reoffending. This is a challenge the public sector must rise to. The approach I am announcing today does not rule out further prison-by-prison competitions in the future."
The Wolds prison, a category C training prison holding up to 395 men, has been run by G4S since it opened in 1992. But it will return to the public sector at the end of the current contract in July 2013, the MoJ said.
© Press Association 2012