And Polly fails the G4S test

G4S shares plunged as police were drafted in to guard the Olympics amid warnings more soldiers will be needed. Yet another outsourcing company collects profits when all goes well and the state picks up the pieces if the company fails.
….
Some are – but there is no evidence that siphoning profits into private companies is any panacea. One thing is certain. These contracts create moral hazard on a grand scale, where profits are private but losses are ours.

G4S is, as they should be, coughing up the cash for those soldiers and policemen.

In what manner are the losses \”ours\”?

40 thoughts on “And Polly fails the G4S test”

  1. Indeed, people were spouting the same bollocks when Southern Cross went bust, and for various PFIs that failed. I think they’re just too halfwitted to spot that if a private sector company signs a contract it can’t deliver and goes bust, then that’s a win for the taxpayer to the value of the bankrupt company’s debt plus equity.

    (the honourable exception award goes to the Tube PFIs, where thanks to the infinite wisdom of Baroness Vadera and her investment banking friends, the failed consortia’s debt was guaranteed by TfL rather than by the contractors.)

  2. Ye gods, reading that comment stream made we want to reformat a lot of people’s “brains” (” marks because a great many commenters don’t seem to be using their brains as such).

    Nearly all seem to ignore the fact that G4S are paying for the shortfall, and there’s no loss , yet anyway, to the taxpayer. Are they simply gob-shite ignorant or so partisan that any excuse will do for a rant. Probably both I suppose.

  3. They’re not paying for the shortfall, they’re just not receiving the full contracted amount. Because they didn’t fulfil the contract.

    So the tax payer is paying for another corporate balls up.

    You half wits

  4. Arnald, if you can take your tongue out of my arse for long enough to read the Guardian, you’ll see this:

    ‘G4S has promised to meet all the extra police and military costs including the bill for sending officers to cover for G4S staff failing to turn up for work.’

    You half wit.

  5. I suspect what will eventually be shown to have happened is that lots of unemployed layabouts turned up for interviews, as a kind of don’t-stop-my-dole exercise, said, sure, you can count on us, we’ll show up for work, and then failed to show, because they are unemployed layabouts.

    This happens ALL THE TIME to small businesses who need to take people on (including, in my own experience, to people who are offering considerably more than the national average wage for unskilled but quite hard labour); the variation on the theme is that they turn up for one or maybe two days and then you never hear from them again.

    But of course, they ‘want to work; because ‘they’re grafters’.

  6. G4S will be using the money that was given to it by the tax payer to do the job the tax payer would have paid for if it hadn’t given it to a corporate failure. You half wit.

    meanwhile the heads of that company will still get the bonuses for delivering the service because it has used the money given to it by the tax payer to fill the short fall. you half wit.

    G4S is taking no financial hit. Only a reputational one.

    And guys like you want corps like that to run our prisons and police forces.

    you half wits.

  7. Arnald, G4S is doing two things:

    1) not being paid money it would otherwise have been paid as part of its contract for failing to deliver on its commitments.
    2) being invoiced by LOCOG for the costs that LOCOG is incurring for paying cops and soldiers to fill in.

    It is taking a double financial hit, mitigated slightly (but far less than the costs incurred) by the fact that it won’t have to pay the people it hasn’t hired.

    The heads of the company will not get the relevant bonuses; indeed, shareholders and the chairman of the board are openly discussing the possibility of firing the CEO once the Olympics are over (as with the BP fiasco, there’s no point in firing the CEO while the crisis is still ongoing).

    Who’s the halfwit? (clue: you).

  8. “G4S will be using the money that was given to it by the tax payer to do the job the tax payer would have paid for if it hadn’t given it to a corporate failure.”

    Well, yes, of course. Taxpayer was going to pay £280m to G4S (or some equally stupidly large sum) to get its 10,000 security bods. Its now going to pay £280m to G4S less the cost of the f*ckup caused by G4S. So my logic says this f*ckup hasn’t actually cost the taxpayer any extra money, over what was already agreed.

    Now you could argue that £280m for 10,000 bods for a month or so is a big wedge of bunce, and you’d be right. As ever the State proves to be terrible purchaser of goods and services. Spending other peoples money is too easy.

  9. Hello everyone

    My name is Arnald. Perhaps you’ve seen me commenting on this blog before.

    I apologise in advance for the level of expletives you see in my post. I’m not the sharpest knife in the drawer and when I can’t understand a quite simple argument my frustration mutates itself into calling people who have a different opinion other than mine, including ths blog’s author various epithets including ‘halfwits’, ‘ignorants’, ‘nonentities’ and the like.

    I really don’t mean any harm by it. You see I’m a believer in the Courageous State and it takes real courage to sit by a keyboard and type out insults rather than engage in a civilised debate. If I’ve been an especially good boy and slated enough Neoliberals my Uncle Ritchie will give me a cookie after tea as a treat before I go to bed.

  10. Jim, that’s what I’m saying. But rather than the State being a bad purchaser, it proves that the private sector is simply not up to the job. Time and again the private sector wastes tax payers money delivering shoddy services with no accountability.

    john b

    G4S will not ‘lose’ much at all out of this. It will pay bad wages to 7000 badly trained jobsworths, it will have been paid over the odds for a shoddy service, and the penalties will come out of that payment.

    The CEO will leave, maybe, with a healthy sum. See Bob Diamond or any of the other failed private sector CEOs and board members.

    This is a gross failure by the private sector, all the while reassuring the government that ‘there’s nothing bad to see here’.

    It’s another bail out.

  11. But there is no civilised debate.

    There are only people swearing at people they don’t agree with.

    Can’t you read?

  12. From the FT:

    The upshot here is that they’re going to lose up to £50m on a contract that was only ever going to earn them £10m.

    In other words, they deliberately bid for this contract with a low expected margin (because it is actually quite difficult to do this work, hence how they’ve managed to stuff it up), and will now spend far more on fixing it than the profit they would have made if they had achieved it. They will make an outright loss of fifty million quid.

    So obviously Arnald is wrong, but Jim’s actually quite off-beam too.

    We know from the shareholder guidance as reported by the FT that the costs incurred by G4S on the contract if all had gone according to plan would have been in the region of GBP270m. The price negotiated by LOCOG was GBP280m. That’s a fantastic deal, reflecting the potential prestige that G4S would have got if they’d been able to deliver. Instead, they have turned it into a PR disaster that will cost them future work at home and overseas, *and* will end up making a large loss on the deal.

    Now, imagine what would have happened if the government had tried to go through the same recruitment process in its own right. There is no earthly reason to assume it would have been costed any lower than G4S’s internal cost forecast, so the total saving if everything went well would have been the GBP10m difference between G4S’s bid and G4S’s internal cost forecast.

    D’you want to estimate the chances that everything would have gone well had this been handled internally rather than outsourced? Because I’m pretty sure they’re higher than 27:1, which is the ratio that would be required for tendering out to G4S to be a bad move.

  13. OK Arnald. Let’s take this entirely on your terms.
    G4S is indeed a shit company. The State ( for the purpose of this discussion we will regard the State & the Olympics as being synonymous) have been had over by said shit company. But the company will be obliged to return much of its ill gotten gains & heads may roll. (albeit the rolling lubricated by shareholders’ dosh) Dividends will suffer & thus shareholders will be casting a jaundiced eye over future management. Lessons will have been learned, as the phrase goes.

    So let’s turn to the public sector in which cock-ups are not unknown to happen. We could start a list, couldn’t we? Start with defence procurement or the FSA & work down through NHS databases, Border Agency, Haringey Social Services…. It would always be an incomplete list because new entries would be appearing on the bottom faster than it could be compiled. And what happens when these cock-ups cock-up? The taxpayers’ money is just written off & the authors depart, well compensated, to surface in short order in yet another lucrative position within the public sector. Questions about their fitness to do so, ignored.
    And you’re in favour of this?

  14. I seriously wonder at Arnald’s mental state. Or, maybe it’s just that he’s not reading the words and thinking about the facts before he writes.

  15. rather than the State being a bad purchaser, it proves that the private sector is simply not up to the job. Time and again the private sector wastes tax payers money delivering shoddy services with no accountability.

    The public sector does not have an unblemished record. In 2007/08 (last I looked) we heard “less than a third of government IT projects were successful”. This very week we hear the Border Agency laid off too many people too soon, which has led to delays at border control and apparently lots of terrorists entering the country.

    Both ‘sides’ are guilty of facile arguments. The primary causes of project failure are common to public and private sectors. The OGC and NAO wrote at least one report about it, years ago, which interested people ought to read. What is important is that the risks are mitigated, “lessons learned”, etc.

  16. “But rather than the State being a bad purchaser, it proves that the private sector is simply not up to the job. Time and again the private sector wastes tax payers money delivering shoddy services with no accountability.”

    Who is responsible for getting value for money, the supplier, or the purchaser? If I buy a car and do a terrible deal, pay over the odds for last years model, who is at fault? The salesman who saw a nice profit walking into his showroom, or me, who is an idiot?

    The State is a terrible getter of value for money. Time and time again they get done over, and usually it is entirely their fault (someone did tell me that G4S were only told they needed to get 10,000 staff in January, when Locog changed the requirements, anyone know if this is true?) because their either don’t foresee something, or change the spec after signing up.

  17. Jim, read the linked blog. Yes, the requirements were changed in December, but the contact was still good value for money – g4s was on course to make a tiny margin even had all gone well.

  18. ukliberty,

    Both ‘sides’ are guilty of facile arguments. The primary causes of project failure are common to public and private sectors. The OGC and NAO wrote at least one report about it, years ago, which interested people ought to read. What is important is that the risks are mitigated, “lessons learned”, etc.

    But people only learn lessons when it matters to them. Who got fired for Connecting for Health throwing a couple of billion of public money down the drain? Who will get fired for blowing £9bn+ on the Olympics? No-one. So, what’s their incentive for doing a better delivery next time?

    The private sector do things differently because they have incentives. So, they minimise exposure to experimentation, monitor the results of decisions carefully and if things are failing, fix them or kill them quickly.

  19. yeah….like CSC have been doing for that NHS contract….

    As for ‘who is the idiot…’, why would a company want to screw a country? It’s counterproductive, unaccountable and anti-democratic. That’s what you libertarian cretins want.

    Systems run by shysters looking to screw the vulnerable. The public sector relies on good, informed advice. Not some dodgy bastard offering bungs to get their substandard deal through.

    Surely the aim is progress, not a quagmire of litigation and reputational degradation. It makes the UK look like a mug. The private sector- banking, G4S, CSC, fucking you name it – make the UK look like a dog’s breakfast.

    That’s what happens when the State is run by hired spokespeople for these shits.

    Libertarians do not believe in democracy. No one would have voted for a party that said that they were going to deliver something as crucial as Olympic security to a company that can’t even motivate a few thousand people to turn up for work.

    Why the hell are you defending any of it?

    Any of them?

    The whole shambles of ‘expert outsourcing’?

    It all plays into Richard Murphy’s argument and all you can do is call him a WGCE (which is the shittest insult ever invented)(some american geek was probably calling his first grade teacher that in the eighties).

    You have nothing to counter these fiascos.

    The only incentives the private sector has for screwing the public is to get paid more. Sod the service, give us the cash.

    Look at Care Uk running NHS services. Fucking abysmal. Yet you cream your pants at the opportunity of sacking workers and creating social division.

    You lot are sick.

  20. What strikes me about the G4S affair, is that they don’t seem to have got the staff to appear at the right time. They had 100,000 applicants, but a huge proportion of those selected didn’t appear when required. Is that the fault of G4S, or are the staff workshy? G4S should know what they are doing, surely? They must have encoountered this before. Though it does seem something of a cockup, I doubt a public authority would have been any better, and the cost could not have been apssed on to shareholders.

    Of vourse, some idiot MP was not concerned by any of this, just wanting to know that the CEO felt “embarrassed and humiliated”. “Yes or no?” Just where does that petty vindictive victory get us?

  21. “why the hell are you defending any of it?”

    Um, they aren’t. They are pointing out that G4S is :

    a. Going to cover any extra costs incurred by the public purse to cover for their poor service; and
    b. Will be paying a financial costs for their poor service.

    Which is in direct opposition to your claim that:
    a. The public purse will lose out over it; and
    b. G4S won’t lose out over it.

  22. Hello everyone

    I apologise in advance if I’ve offended anyone. As I said the Public Sector runs on good, informed advice. I’m sure any if you that have had cause to have any dealings with the local tax office, the Police force or the NHS will know that it would be hard to match their efficiency, drive, commitment, speed and quality.

    As I said earlier, in the Courageous State where I’m from everyone is happy, there is no corruption, people sing happy songs and the air is Fresh and clean. Anyone who wants to know where it is can find it on a Global Map at 39 Degrees 1′ 10″ N and 125 degrees 44′ 17″ N

  23. I said the public sector relies on that advice. The advice that comes from private sector ‘experts’.

    Considering the volume of interactions, the NHS does pretty well, I think you’ll find.

    Not sure where you get your info from, but it looks like myopic bias.

    And you’re not very funny.

  24. Hello again everyone

    It seems people are using nasty insults so excuse me whilst I get angry.

    You’re all a lot of right-wing, ignorant, Liebetarian, swearing cunts who don’t know anything about the real world, and I am a cutting edge comedy genius who manages to disproves your arguments merely by saying ‘fuck’ a lot.

    There. Now I feel better.

  25. I said the public sector relies on that advice. The advice that comes from private sector ‘experts’.

    Sometimes ‘the public sector’ ignores expert advice – not just from private sector experts – which is possibly a reason for project failure. The public sector – read, the government – ignores the advice when it’s not agreeable. Sometimes the government even marginalises and traduces the experts for offering disagreeable advice.

    The NHS IT programme and ID cards scheme provide examples:

    “One of the slides marginalised the 23 leading academics, many of them professors in computer-related sciences, who have called for an independent review of the NPfIT.”
    http://editthis.info/nhs_it_info/Department_of_Health#Confidential_briefing_to_Tony_Blair_on_the_NHS.27s_National_Programme_for_IT_.2831_Jul_2007.29

    Academics ‘bullied’ over ID cards
    http://news.bbc.co.uk/1/hi/uk_politics/4643467.stm

  26. The NHS IT programme and ID cards scheme provide examples:

    They provide examples of a procurement process dominated by seconded management con.sultants, shaping policy thru a revolving door. Ditto MOD. Using NHS IT to bash “the NHS” is disingenuous – nobody on the [clinical] shopfloor asked for Blair’s topdown holy vision, just as most of ’em objected to the monstrous white elephant that is PFI.

    In emergency surgical admissions today, we’ve had a pretty heavy shift – but everything got sorted because we (the extended ‘we ‘- GPs, ambos, A+E, theatres, ITU) all co-operated to sort stuff out – despite not being paid a salary anything like the wierdly-coiffeured Buckles, whose utter lack of grip is astounding. More fool us for letting him anywhere near the Polis.

    Still, won’t it be marvellous when G4S, Crapita and Serco run, you know, everything?

  27. @johnb: I read your post and I think it makes my point for me. What sort of idiot gets 6 months from a major international event and suddenly demands one of its major suppliers produce five times what it was expecting to have to produce? With the best will in the world that just isn’t going to fly. G4S were stupid to agree to it, at any price. They should have said ‘Sorry, can’t do that at this short notice, find another fool’. Instead they got greedy and thought they could pull it off. And failed miserably. And will suffer the consquences.

    But who made that decision 6 months ago to quintuple the security requirement? Will they suffer any consequences? Of course they won’t. G4S will carry the can, and the anonymous State placeman will carry on regardless to the next procurement fiasco. Which is always the way.

  28. Using NHS IT to bash “the NHS” is disingenuous –

    Um, I didn’t use NHS IT to bash the NHS. I was pretty explicit I blamed the government. I am saying to Arnald the public sector is not free from fault: the common causes of project failure in the private sector are the same causes of project failure in the public sector.

    None of this is controversial to anyone who follows such things with an open mind. The NAO and Public Accounts Committee have published a number of reports on it.

    nobody on the [clinical] shopfloor asked for Blair’s topdown holy vision, just as most of ‘em objected to the monstrous white elephant that is PFI.

    I’ve commented / complained elsewhere, including my blog, that frontline medical staff were not consulted – “lack of effective engagement with stakeholders” happens to be in the OGC’s list of eight common causes of project failure.

  29. But who made that decision 6 months ago to quintuple the security requirement? Will they suffer any consequences? Of course they won’t.

    Why should they? Their decision has paid off.

  30. Its a bit sick that anyone can find anything good to say about GS4 or sympathise with their “embarrassing” position when people like lost nurse are doing” heavy shifts”in emergency surgical wards in return for low pay ,every penny of which is begrudged by those who idealise the private sector. Are BUPA fees affordable by the majority of people?
    Of course libertarians always declare, as a reflex,
    that they are not getting at nurses, teachers,firemen,soldiers (while doing their damnedest to get them laid off or cut their pay),it is the bureaucrats they want rid of..
    There is a plausible argument ,initiated bythe razor blade King Gillette, that competing firms increase bureaucracy which becomes apparent when they merge and rationalise,leaving a slimmed down back office..

  31. DBC – I think you might find companies needing back office functions. But not necessarily needing double the back office function staffing when two companies merge and rationalise. HR, payroll, IT, contract, cleaning etc – plus don’t necessarily need more management of certain grades. Not a sign of increased bureaucracy in competing firms, more a sign that firms growing larger through merger do not necessarily need to grow back office function staffing at the same rate.

  32. Um, I didn’t use NHS IT to bash the NHS

    Fair enough – and you are bang on about the lack of engagement with the frontline (be they clinical or IT techs, the latter being especially scathing ).

    But there is a tendency in these ‘ere parts to conflate such piss-poor procurement with “the public sector” – when it’s really the inevitable consequence of letting Mckinsey et al stick their fingers in multiple DoH/MOD pies . They sure as hell don’t speak for me or my colleagues.

    As for Buckles: on his salary, his performance should be fcuking gleaming – nothing less. I just wish they’d played the cringeworthy Securing your world theme tune during the parliamentary Q & A (“G4S! protecting the world/G4S! so dreams can unfurl”).

  33. @MD Surely the situation is simpler than that:after mergers, people doing the same thing get sorted out. The following is the orthodox depiction of the post-merger scenario as outlined by the EU agency Eurofound under title “ERM case studies…” (On Net)
    “Reductions in employment tend to be frequent occurrences following mergers,especially if they involve companies in the same industry.In this case there is scope for rationalisation and the elimination of duplicate functions being performed ,particularly in respect of administration ,where the operators of the two businesses can,if the they are combined ,be supported in most cases by fewer staff than employed by the two companies separately.”
    Common sense I would have thought:there would be little point in merging if you did n’t eliminate “duplicate functions”.However does tend to indicate that pre-merger ,a lot of people were duplicating each other and swelling bureacracy in aggregate.
    I can get to be pretty much of a bore on the “Myths of competition”, as on other things ,and would only be too pleased to deliver a few thousand words on the subject.

  34. lost_nurse,

    But there is a tendency in these ‘ere parts to conflate such piss-poor procurement with “the public sector” – when it’s really the inevitable consequence of letting Mckinsey et al stick their fingers in multiple DoH/MOD pies . They sure as hell don’t speak for me or my colleagues.

    I think both ‘sides’ are guilty of generalising. I don’t think it’s sufficient to point the finger at McKinsey and their ilk, because they are hired by people in the government or public sector. It wasn’t CSC, EDS etc that decided the NHS IT programme should be guesstimated on the back of a fag packet on Tony Blair’s sofa, experts marginalised and traduced by Government Ministers and NHS trusts prohibited from finding their own way. A big part of the problem is the politics of the project – as you aptly described the NHS IT programme, Blair’s “topdown holy vision”. I certainly do not blame frontline medical staff for the failures of the NHS IT programme, not least because they were not allowed to be involved in it.

    As for G4S, there is an argument that more than one company should have been engaged, to reduce the risk of having eggs all in one basket, and companies that had experience of organising staff for similar things, like festivals. Again, a government decision, not a private sector decision. I imagine a number of smaller companies would have jumped at the opportunity to be involved.

  35. “G4S is, as they should be, coughing up the cash for those soldiers and policemen.”

    Here’s what Hugh Robertson said:-

    Speaking a day after G4S chief Nick Buckles was questioned by a committee of MPs, Mr Robertson insisted that money would try to be recouped from the world’s largest security firm.

    He said: “We are working through that at the moment. But all the penalty clauses that are in the contract will be activated.”

    So, they’re going to try to recoup what they can, but right now, haven’t checked what’s in the contract in terms of penalties. Which means there is not a guarantee that they can get G4S to pay for it.

  36. I think both ‘sides’ are guilty of generalising…they are hired by people in the government or public sector.

    Maybe so, but there’s no getting around the fact that decisions at Dept level are influenced by an unhealthy amount of ‘seconded’ interest – it’s a joke, frankly. PFI had the grubby fingers of big gun accountants/consultantancies all over it – and they are equally delighted with the rolling privatisation of services. The Olympics is a high vis example of the gathering clusterfcuk, but there’s plenty more.

  37. There appears to be an implication above that Blair was some kind of big government Socialist.In fact the whole emphasis of his reforms was to involve the private sector more.He called this” progress” and talked about the scars on his back from dealing with those like Brown who opposed progress ,which included, he’d decided,joining the Eurozone . With all their talk, and some action, about infrastructure ,the Coalition is much more big government and, dread word, Statist than Blair.

  38. lost_nurse, I don’t deny there is influence, quite possibly undue influence, but politicians and civil servants do have a choice about which projects to support and the contracts they sign. No-one had to say to Blair, “yes Tony, it will definitely definitely only cost £2bn and take a couple of years to replace all the computer systems in the NHS and create new processes and train staff how to use all the new hardware and software, we really ought to go ahead with the wonderful plan on the back of this fag packet. By the way, can I clean this shit off my nose now, or do you want me to use my tongue?”

  39. politicians and civil servants do have a choice

    For sure, it’s a shame more in the CS didn’t stand up to Blair – on NHS IT & many other things (including war). And Brown took to PFI with a kind of eager madness. But it seems to me that too many of those involved in formulating such decisions have arrived/are leaving via said revolving door.

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