G4S has not been paid for its Olympic Games contract since July 13, shortly after it emerged that the world’s biggest security provider was unable to provide enough security guards for the games.
Paul Deighton, chief executive of the London 2012 organising committee and a new minister, told MPs on Tuesday that the company had been paid £89m-£90m by organisers so far but that the rest of the £236m contract was “up for negotiation”. The company did receive “some revenue” from the contract in 2011.
The company was strongly criticised by MPs after a surprise shortage of security guards was exposed on July 11, just weeks before the games began. It had to pay for an emergency military deployment of 3,500 personnel who were called in to fill the gap.
Mr Deighton said that on the best days, G4S was down only 4 per cent on the number of security officers it was contracted to provide, but on the worst days it was down 35 per cent.
Nick Buckles, G4S group chief executive, said in evidence to the committee that the company still expected to be paid in full for the Olympics contract.
However, he said he would consider stepping down, depending on the outcome of an internal review, commissioned from PwC.
“As far as I’m concerned, I’m group chief executive, so I must take the pain, as well as [the responsibility for] the many, many contracts that go right,” he told MPs.
Mr Buckles said he hoped that if the government were creating a black list of poor-performing outsourcers, as the Financial Times reported, the company’s “huge number of achievements” over the years would be taken into account.
In his second grilling by MPs since the debacle, he said the company had taken a £50m loss on the contract and would not be bidding for contracts managing the Olympics in Rio de Janeiro in 2016.
Mr Buckles stressed that the Olympics contract was unique, as the company was hiring staff for 49 different security roles across over 100 venues.
“This was very different contract to any other contract which has been carried out by any private sector company for security,” he said. “There was no blueprint, no book.”
Speaking earlier in the session, Charles Farr, the home office official in charge of Olympic security, laid blame for the security guard shortfall squarely with G4S, which he said had not initially been “completely open” about the problems it was having.
Mr Farr said he was disappointed the country’s potentially “outstanding performance” on games security was marred by the G4S failure.
Mr Deighton – who is soon to join the Treasury as a minister overseeing infrastructure delivery – denied that games organisers should have contracted a number of different companies to supply the 10,400 guards rather than just one.
Experience from the Sydney Olympics showed the danger of competing companies unwittingly signing up the same security personnel, which resulted in a last-minute shortage, Mr Deighton explained.
The Olympics may eventually have gone off without a hitch but G4S could still lose out on future government contracts as the Cabinet Office takes a tougher stance on underperforming suppliers.
G4S will face scrutiny as it bids for contracts to run nine prisons, worth £170m a year according to research by Jeffries, the investment bank.
But the Ministry of Justice may have little choice as G4S is one of just three groups that run prisons in the UK – alongside Serco and Sodexo – although Mitie is also bidding, in partnership with the Prison Service.
G4S has gradually become enmeshed in UK services over the past 20 years as it has won milestone outsourcing contracts.
It opened the first private sector-run prison in Wolds, East Yorkshire, in 1992 and was the first company to take over an existing detention centre when it took control of Winson Green in Birmingham last year.
The prison market is expected to be worth an estimated £1.1bn a year by 2015, as the government raises the number of private sector-run prisons from 16 to 45 by 2016, seeking cost savings of 20 per cent.