News focus: No security assurance

7 August 2012

9 August 2012 | Adam Leach

Could the G4S Olympic security contract have been managed differently to better effect, and if so, how?, asks Adam Leach.

When the contract to provide security at Olympic and Paralympic venues was awarded in December 2010, Paul Deighton, CEO of the London Organising Committee of the Olympic and Paralympic Games (LOCOG), said: “G4S will help us ensure that the security provisions in place are robust and of the highest professionalism.”

It would be easy to poke fun in hindsight, but a contractor’sfailure to meet its requirements on such a high-profile deal is no joke. Especially for G4S, which expects to lose between £35-£50 million as a result, not to mention the reputational damage to the business.

The original requirement was for G4S to supply 2,000 guards and train and manage a further 8,000 personnel, a mixture of civilian volunteers, police and the military. A year later, a report carried out by Deloitte for the Department for Culture, Media and Sport (DCMS) concluded the amount of security required had been significantly underestimated and revised the total number up to 23,000. According to Committee of Public Accounts (PAC) estimates, this led to the need for G4S to provide 10,000 guards directly and manage around 13,700 extra personnel.

Last month, the company revealed it was unable to give assurances it could provide its full allotment of guards. Just under two weeks before the Games, only 4,000 guards were trained and ready, with a further 9,000 going through training and verification processes.

A worrying aspect of the situation is that nobody appeared to realise what the state of play was until so late. Even G4S CEO Nick Buckles said he only became aware of the issue in the first week of July.

Crime and security minister James Brokenshire claimed the Home Office – overseeing the operation on behalf of the taxpayer – had been challenging G4S, “really going down and kicking the tyres”, and it was “only in the past few weeks that these issues had emerged”. The Home Office refused to give SM specific details about its monitoring process.

According to Matthew Ashton, a lecturer in politics at Nottingham Trent University and researcher into defence procurement, a failure to identify potential problems in the contract might have been down to not developing appropriate policies and procedures to oversee the unprecedented contract. “There’s a view sometimes that if the procedures are consistent and uniformly applied then that works. Rarely are the procedures themselves looked at in terms of saying ‘are they any good?’.”

The ultimate size and scope of the deal has also raised concerns. Would it not have been better to break it into lots and distribute the risk?

“They should have possibly spread the task out. Instead of having one security company handling it, maybe they should have split it between two or three, each handling a different area or aspect of security,” says Ashton. “There’s an argument that too many cooks can spoil the broth, but there are good arguments for doing it. If one company fails to deliver then you’ve got two back-up companies that can potentially step in. Putting all your eggs in one basket has the potential to cause problems – as has been the case.”

This was also one of the findings of a report produced on 26 July by Valentina Soria, a research fellow at the Royal United Services Institute. In her paper, G4S and London 2012: Choosing your partners wisely?,

she pointed to evidence from the 2002 Commonwealth Games in Manchester, where security providers found it difficult to give organisers a guarantee they could provide enough guards, even though they did.

One of her recommendations was to “consider having separate security providers for key venues”.

The argument against breaking up the contract is you could miss out on potential economies of scale. As Martin Dougherty, an independent defence and security consultant, explains to SM: “It was an easier, cheaper solution to hire someone who already does this.”

He went on to say G4S was the clear candidate: “It was the obvious choice in that there isn’t really anybody else who you would expect to be able to just immediately pick up the contract and not have a steep learning curve. It should have been ideally placed to do this.”

But could the strong position of G4S have affected the competitive process? Analysis by Logue Corporate at the end of 2011 estimated the company had a

25.76 per cent share of the security market and a predicted turnover just under £500 million larger than the next market rival. “If you say: ‘We’re going to have a competitive process,’ but you know who is going to get it, that’s an issue,” says Ashton.

Awarding the increased requirement without a competitive process also raised questions. Appearing before the PAC, Deighton said: “We decided that the right thing to do was to extend their contract for the broader programme.”

MPs asked him whether quality could be maintained in the absence of competition. “That is precisely the reason why we have gone for the supply mix. So we have got one component from the private sector – G4S is very comfortable with the contribution that we will get from that marketplace – and another contribution from the military,” said Deighton.

G4S now has its regrets. “We agreed to sign the [revised] contract in December last year, confident that we could deliver it in full. We regret that it transpired we could not,” a spokesman told SM.

LOCOG has refused to answer SM’s questions regarding the contract process, citing a confidentiality agreement. But it did say the sourcing process followed strict governance processes and pointed out that there were contingency plans in place for all cases of supplier failure. This enabled the Ministry of Defence to announce the increased military involvement the day G4S’ failure became public.

But with more armed forces now deployed in the UK than in Afghanistan, it is unfortunate that this procurement process could overshadow the other 650-plus contracts worth more than £1 billion LOCOG has awarded for the Games.

Security contract timeline

● December 2010: G4S awarded the security contract (estimated to be worth £100 million by JP Morgan) by LOCOG to provide 2,000 guards and manage a further 8,000 for the 2012 Olympic and Paralympic Games.

● December 2011: Total number of security guards revised to 23,000, following a report by the Department for Culture, Media and Sport. G4S required to provide up to 10,000 guards.

● 11 July 2012: G4S informs the government it is unlikely to be able to fill required quota of guards.

● 12 July 2012: Ministry of Defence announces 3,500 troops will be deployed to help make up the shortfall.

 ●27 July 2012: London 2012 Olympic Games opening ceremony takes place.

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