G4S need to pay for their failure to fulfill a key Olympics contract

July 19, 2012 10:13 AM

If a company fails to deliver on a contract with another firm in the private sector, there are normally three kinds of consequences: they don't get the money they would have been paid; they will have to pay additional compensation either thanks to legal action or penalty clauses in the contract; and they will lose out on future business thanks to the damage to their reputation. The same needs to go for G4S, who have spectacularly failed to deliver on a key contract to provide security staff at the Olympics, even though their customer is the effectively public sector London Organising Committee of the Olympic and Paralympic Games (LOCOG). I argued that on Sky News yesterday and you can watch the interview above.

We can't just accept a cheque from G4S to pay for the army's costs in covering for this failure. If that was good enough, we could have just paid the military to handle security from the start. While the soldiers will almost certainly do the same professional job as in their other duties, this will disrupt their plans and an already stretched but vital pattern of leave, training and deployment. There may have been contingency plans in place but having to use those plans will disrupt the Army's other work.

There needs to be a further sanction to discourage firms misleading the public sector with unrealistic estimates of what they can deliver or failing to manage their commitments adequately. They didn't just get unlucky after all, there is increasing evidence they have completely mismanaged the staff who should have been doing the work, some of those involved called the management a "shambles". Risk in a contract needs to lie with the party best equipped to manage it and that clearly wasn't LOCOG and the taxpayer.

Unfortunately at this stage we don't seem to know a lot about what penalty clauses might be available. Hopefully the Government will find what they need, the Press Association report that they are looking. G4S is an enormous company, the third largest private employer in the world after Walmart and FoxConn, and the firm can and should pay up. Public sector contracts like this should really be public but, thanks to the lame pretense that LOCOG is a private body, they aren't in this case. That means taxpayers can't find out what options are available now, and couldn't scrutinise the terms of the contract in advance.

Finally, we really need to hope that the procurement rules don't mean that, next time G4S apply for a similar contract, this dismal failure can't be taken into account. While we shouldn't rule them out of future contracts entirely forever, they should have to go above and beyond in order to win any future business from the public sector for some time until they have restored their battered reputation by delivering what they promise.If a company fails to deliver on a contract with another firm in the private sector, there are normally three kinds of consequences: they don't get the money they would have been paid; they will have to pay additional compensation either thanks to legal action or penalty clauses in the contract; and they will lose out on future business thanks to the damage to their reputation. The same needs to go for G4S, who have spectacularly failed to deliver on a key contract to provide security staff at the Olympics, even though their customer is the effectively public sector London Organising Committee of the Olympic and Paralympic Games (LOCOG). I argued that on Sky News yesterday and you can watch the interview above.

We can't just accept a cheque from G4S to pay for the army's costs in covering for this failure. If that was good enough, we could have just paid the military to handle security from the start. While the soldiers will almost certainly do the same professional job as in their other duties, this will disrupt their plans and an already stretched but vital pattern of leave, training and deployment. There may have been contingency plans in place but having to use those plans will disrupt the Army's other work.

There needs to be a further sanction to discourage firms misleading the public sector with unrealistic estimates of what they can deliver or failing to manage their commitments adequately. They didn't just get unlucky after all, there is increasing evidence they have completely mismanaged the staff who should have been doing the work, some of those involved called the management a "shambles". Risk in a contract needs to lie with the party best equipped to manage it and that clearly wasn't LOCOG and the taxpayer.

Unfortunately at this stage we don't seem to know a lot about what penalty clauses might be available. Hopefully the Government will find what they need, the Press Association report that they are looking. G4S is an enormous company, the third largest private employer in the world after Walmart and FoxConn, and the firm can and should pay up. Public sector contracts like this should really be public but, thanks to the lame pretense that LOCOG is a private body, they aren't in this case. That means taxpayers can't find out what options are available now, and couldn't scrutinise the terms of the contract in advance.

Finally, we really need to hope that the procurement rules don't mean that, next time G4S apply for a similar contract, this dismal failure can't be taken into account. While we shouldn't rule them out of future contracts entirely forever, they should have to go above and beyond in order to win any future business from the public sector for some time until they have restored their battered reputation by delivering what they promise.

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