This posting has been updated, 14.07.12
For previous reports: Hard times for Caterpillar and Veolia
Security company’s loss of EU contract shows penalty of servicing occupation
Background note: G4S
The reputational damage suffered by security firm G4S could jeopardise its chances of winning UK government contracts in the future.
By Chris Marshall, citywire.co.uk
July 12, 2012
Shares in G4S (GFS.L) are among the biggest fallers on the FTSE 100 today amid concerns of potential long-term reputational damage to the private security contractor after reports that it will not be able to deliver the number of staff it promised for the Olympics.
G4S has confirmed reports doubting its ability to supply 10,000 guards for the Olympics, out of a total of 23,700 staff – the rest were to be a mix of students, military and volunteers – that are thought needed to provide security at the London games.
The military has been asked to provide 3,500 extra troops to cover the shortfall.
G4S, formerly Group 4 Securicor, has admitted in a statement that it has faced ‘delays in progressing applicants’, but added that ‘we are working extremely hard to process these as swiftly as possible’.
UBS analyst Jaime Brandwood warned that whether or not G4S meets its deadline, ‘politicians are seeing this as an area ripe for political “points scoring”’.
G4S’s success in winning UK government outsourcing contracts is one reason why it is widely tipped by brokers, the majority of which say the shares are a ‘buy’. The company drew the ire of shareholders last year after finally abandoning an unpopular plan to acquire Danish cleaning firm ISS, but shares have moved higher – up 4% so far this year, bettering the wider FTSE 100 – since a strong set of first quarter results published in May.
‘The key now, regardless of risk to sales/profits on Olympics work, has to be to avoid reputational damage that could hurt its chances of securing future events work and a fair share of a burgeoning UK government’, Brandwood added in a research note today, while holding his buy recommendation for the shares.
Caroline de La Soujeole, an analyst for Seymour Pierce, disagreed. She said today’s share price fall was ‘overblown’, noting that the group’s sales totalled £7 billion last year, compared with the £200 million plus in sales that G4S expects to bring in from the Olympics.
G4S shares are down 9.1p or 3.1% to 281p.
Spending watchdog rounds on Lord Coe; G4S under pressure from shareholders
By Roger Blitz, Helen Warrell and David Oakley, Financial Times
July 13, 2012
G4S on Friday night expressed “deep regret” over its failure to supply enough security guards for the Olympics as David Cameron vowed to seek compensation for the fiasco and big shareholders demanded emergency talks with management.
In a lengthy statement, the private security group admitted responsibility for the additional costs facing Olympic organisers after the government called up 3,500 more troops to fill the staffing shortfall, less than two weeks before the games begin.
“We are deeply disappointed that we have not been able to fully deliver against our contract,” said Nick Buckles, chief executive. “We are working flat out around the clock to resolve the situation.”
The prime minister had earlier said: “I’m absolutely clear that if companies don’t deliver on their contract then they should be pursued for that money.”
Big investors said they planned to meet with G4S management in the coming days to quiz executives over the failure.
“We are not demanding resignations, but clearly something has badly gone wrong,” said one top 20 shareholder.
Another said: “We have had discussions with the company over the mishandling of the security situation and hope to meet senior executives in coming days so they can spell out why this happened and where we go from here.”
G4S warned that it faced estimated losses of £35m-£50m on the botched contract, under which the group was supposed to supply more than 10,000 guards to patrol Olympic sites and search spectators entering venues.
It said it had “encountered significant difficulties in processing applicants in sufficient numbers through the necessary training, vetting and accreditation procedures”.
The fiasco is especially damaging for G4S because, with more than £1bn of annual revenues from contracts in the UK public sector, the British government is one of the group’s biggest outsourcing customers.
Its services range from running prisons to children’s homes and it has been seeking to expand into new areas such as helping with frontline police work.
G4S executives will face a grilling from MPs next week at a hearing of the House of Commons home affairs committee.
“We want to know, why did it take so long to ask for help and what’s going to happen now that [G4S’] obligations are not being fulfilled?” Keith Vaz, committee chairman, told the Financial Times.
G4S vowed to conduct a full review of its Olympic failure after the games are finished.
Ministers have also faced heavy criticism for the security farce but some politicians believe Locog, the privately-run London Olympic organising committee responsible for putting on the games with a budget of £2.2bn, should also bear part of the blame.
“Locog has got a lot of questions to answer,” said Ian Swales, Liberal Democrat member of the public accounts committee. “The Home Office should have had a better overview, but they asked senior Locog management who said everything was all right.”
The head of the parliamentary spending watchdog accused the London organising committee of a lack of transparency over its contract with G4S. “Where public money is being used, hiding behind commercial confidentiality is simply not good enough,” Margaret Hodge, chair of the public accounts committee, told the BBC.
Lord Coe, Locog chairman, on Friday sought to play down the embarrassment. “It’s only when the rubber hits the road that you understand some of things that you need [to] address,” he said.
Senior politicians became aware of G4S’s problems only this week, but Locog, which has received more than £150m of taxpayers’ money to fund operational costs, admitted it became apparent there were problems “earlier this month”.
Channel 4 news
July 11, 2012
As 3,500 more troops are drafted in to police the Olympics, a G4S duty manager tells Channel 4 News that some staff contracted to provide security have not been trained or deployed.
The company contracted by London 2012 organisers Locog to provide security staff for the Olympics, G4S, has been unable to supply the 10,000 trained staff it was contracted to deliver – 16 days before the start of the Olympics.
The most recent staffing levels were apparently released to the Home Office late last week and because they were so far below the required level, Theresa May has begun talks with the Ministry of Defence over whether it could provide security personnel.
A G4S source also told Channel 4 News the company has also been contacting ex-police officers to try and increase numbers.
Defence Secretary Philip Hammond will announce more details about the extra troops on Thursday, the Home Office said.
A spokeswoman went on: “We have agreed to offer help to G4S by revising the level of military support.
“The government are committing £553 million for venue security and we remain confident that we will deliver within budget.”
She added: “The focus of the government and everyone involved is on delivering a safe and secure Games.”
The military is already providing up to 13,500 staff for the games, supporting the police and venue security. If they are all called on to back up Olympic staff, they will be providing a total of 17,000 personnel.
Locog originally contracted G4S to provide 2,000 security guards out of the 10,000 required. But when Locog re-estimated the total number needed to 23,700, G4S agreed in December to supply 10,000 personnel total out of 23,700. The new contract is worth an estimated £284m.
Channel 4 News understands that G4S are subject to a penalty fine per venue, per day if they ultimately fail to meet the agreed staffing levels and that senior managers have been demoted as a result.
In a statement, G4S said it accepted that the government had decided to organise additional staff.
“We have encountered some issues in relation to workforce supply and scheduling over the last couple of weeks, but are resolving these every day and remain committed to providing a security workforce for the start of the London 2012 Games,” said a spokesman.
A duty manager contracted by G4S to work on the Olympic site told Channel 4 News that delays in training and vetting staff had resulted in the company being far behind schedule.
“Staff taken on don’t yet know the first thing about any of the procedures, and that poses a huge security risk. How can a risk management company not have any continuity plans in place for the Olympics?,” the manager said.
Some staff were told that the company was waiting for security clearance, but then the SIA, which manages private security licensing, had no record of their applications, Channel 4 Newswas told.
“It’s been absolutely diabolical from start to finish,” she added.
At a recent Public Accounts Committee hearing on Olympic costs, Liberal Democrat MP, Ian Swales criticised the amount of money made by G4S in its Olympic contract: ”
I feel like issuing a press release to say “The first winner of Olympic gold in 2012 is G4S.” It feels as if there is a massive profit margin; it is public money.”
A spokesman for London Mayor Boris Johnson said: “The Mayor takes the issue of Olympics security extremely seriously.
“Having the finest, bravest servicemen and woman in the world at our disposal during the Games should be a source of great comfort.”
But shadow Olympics minister Tessa Jowell said it was important to know “whether this affects army commitments elsewhere, which units are providing people and what terms and conditions are given for those who will likely lose periods of leave”.
G4S considers bringing in more staff to cover Olympic security shortfall
Private firm puts employees on other contracts on standby as time runs out to train and accredit London 2012 guards
By Matthew Taylor, guardian.co.uk
11 July 2012
The private security firm due to supply thousands of guards for the Olympics is considering bringing in staff from other parts of its business empire amid growing fears of a security shortfall.
With just over two weeks until the opening ceremony, it was revealed on Wednesday that the military has been asked to provide 3,500 extra troops to help guard the London Olympics amid fears G4S may be unable to supply 10,000 guards it promised to deliver.
G4S, the world’s largest security company, said it had put employees working on other contracts on standby as time runs out to train and accredit the number of guards needed to secure Olympic venues.
The company, which runs prisons and immigration removal centres in the UK, was unable to say exactly how many guards it still needed but added it had the option of moving staff from other parts of its UK businesses. Earlier this week it was reported that it was as many as 9,000 guards short and was calling in retired police officers to fill vacant roles.
The decision to consider transferring G4S employees has raised concerns that key parts of the UK’s criminal justice system could be left short-staffed.
Keith Vaz, chair of the home affairs select committee, said people should not be moved from “crucial posts” to fill a shortage at the Olympics.
“I am deeply concerned by reports that G4S is considering removing staff from its other areas to fill a gap in Olympic security officers. This not only highlights an inability to hire, accredit and train the required number of security staff in time for the Olympics, but may now leave other areas underresourced.”
He said he would be writing to the home secretary about the matter.
G4S, which was originally enlisted to provide 2,000 guards, increased its contribution in December and is now due to supply more than 10,000, managing the training for 23,700 personnel – including the military – in a contract worth £284m.
To ensure security arrangements run smoothly the firm says it needs to recruit and train thousands of extra guards on top of this figure to cover for illness and recruits that drop out.
G4S declined to give a specific figure in relation to the number of guards it still needed, saying the picture was constantly changing. A company spokesman added it remained confident a “robust workforce” would be in place for the start of the games.
“Our programme to train and deploy our security workforce for the 2012 Games is continuing and has stepped up in the past few weeks. Issues we have faced over scheduling and deployment are being worked out and we are continuing to work hard to get a robust workforce in place for the start of the Games.”
Anxiety around Olympic security arrangements has put growing pressure on G4S. According to a company source, senior figures at the firm have been locked in emergency talks over the past few days and the company is understood to be in daily contact with Home Office officials.
In an indication of the level of anxiety in Whitehall, it is understood that the home secretary, Theresa May, called senior G4S executives on Friday after the firm failed to supply enough staff for patrols last week at venues in the Olympic Park, east London.
G4S employs 657,000 staff in more than 125 countries and is one of the world’s largest private-sector employers. Its turnover has almost doubled since 2005, standing at £7.5bn in 2011. In the UK it is playing an increasingly prominent role in sectors previously run by the government, including prisons, immigration and policing. In April it began work on a£200m contract in Lincolnshire where it will design, build and run a police station in a deal that has seen more than 575 public-sector police staff transfer to the company.
Citizens fighting £1.5 billion police privatisation highlight security companies’ human rights violations
Clare Sambrook, Open Democracy
July 12 2012
As G4S and Serco, both accused of human rights abuses, bid for a contract tendered by two English police authorities, protestors rally to pressure the West Midlands Police Authority to reject the bids on grounds of ‘grave misconduct’.
West Midlands Police Authority, gathering today in Birmingham to consider radical privatisation plans (they call it Business Partnering for Police or BPP) will encounter protests and citizens arguing that some of the companies bidding for the contract should be disqualified on account of their human rights violations.
A group calling itself “West Midlands Against Policing for Profit” has written to Police Authority chairBishop Derek Webley (he is a Bishop of the New Testament Church of God) pointing out that according to The Public Contracts Regulations 2006, bidders who have committed “grave misconduct” ought to be disqualified from the £1.5 billion West Midlands and Surrey police procurement process.
The citizens point to Mr Justice Foskett’s findings in a High Court Judgement earlier this year that large numbers of children were unlawfully restrained over years in child jails run by G4S and Serco. And they remind the authority thatG4S was successfully prosecuted by the Australian Department of Commerce last year for failings that led to the horrible demise of Aboriginal leader Mr Ward — cooked to death in the back of a badly maintained van.
The group cites these and other examples of “grave misconduct”, urging the Police Authority to “exclude all bidders which have been complicit in acts of grave professional misconduct from the bidding process”.
But Police Authority members may have more pressing concerns. A report on the “Programme Schedule” from the Chief Executive and the Chief Constable,drafted with help from privatisation consultancy Impower, reminds members that:
Critical to the overall success of a potential partnership is the ability to maintain bidder confidence. . . .Creating uncertainties in the timeline potentially damages the Authority and Force’s reputations, credibility and increases uncertainty for the bidders and increases their costs.
‘Given its track record, why was the company ever considered an appropriate guardian?’
July 13/14, 2012
The news that G4S has failed to provide adequate numbers of security personnel to the Olympics is no surprise given its track record of incompetence and human rights abuses. G4S lost its contract to deport refused migrants from the UK last September after 773 complaints of abuse and the death of Jimmy Mubenga, an asylum seeker in its care. In addition, G4S provides equipment to prisons inside Israel to which Palestinian political prisoners from the occupied territories are transferred in violation of the Geneva conventions.
Given this track record, why was the company ever considered an appropriate guardian of the Olympics in the first place? Awarding control of the police, justice and prison systems to an incompetent company with such a blatant disregard for basic human rights, as the government has shown its willingness to do, is truly frightening.
Sara Callaway Women of Colour in the Global Women Strike,
Sarah Colborne Palestine Solidarity Campaign,
Michael Deas Palestinian Boycott, Divestment and Sanctions National Committee,
Sean Flint Stop Deportation,
Rachel Harger Defend the Right to Protest,
Michael Kalmanovitz International Jewish anti-Zionist Network,
Nina Lopez Legal Action for Women,
Diana Neslen Stop G4S campaign,
John Snowdon Boycott Israel Network
S Wilson No Borders London
Naomi Wimborne-Idrissi Jews for Boycotting Israeli Goods
Shiar Youssef Corporate Watch