Failing Olympics firm G4S still wants £57m ‘management fee’ from government

G4S bosses insisted today they would be claiming tens of millions of pounds in management fees despite being 100% responsible for a “humiliating shambles”.

Nick Buckles, chief executive of the world’s second largest private sector employer, admitted he was sorry and “deeply disappointed” after the firm failed to deliver on its £284 million Olympics security contract.

But he repeatedly insisted the firm still intended to claim its £57 million management fee for work over the last two years, even though it cannot provide the guards needed for the Games.

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Keith Vaz, chairman of the Commons Home Affairs Select Committee, said it was “astonishing” and called on G4S to waive the fee and any others associated with the contract.

Mr Buckles is under pressure to quit his £830,000-a-year job over the fiasco, which has resulted in the emergency deployment of soldiers, marines, airmen and police officers and seen £400 million wiped off the market value of G4S.

He admitted he could not deny that the debacle was a “humiliating shambles for the company” and the firm’s reputation was now in tatters.

Tory MP Nicola Blackwood said Mr Buckles’s performance before the MPs “would lead quite a lot of people to despair”.

“I had very little confidence in G4S fulfilling this contract before this session started and now I don’t have any confidence at all.”

Labour MP Bridget Phillipson told Mr Buckles she was left with the feeling that he was “making it up as you go along”.

Tory MP Michael Ellis added that the public was “sick of huge corporations like yours thinking they can get away with everything”.

Mr Buckles promised the firm would pay all police and military costs caused by G4S’s failure, would cover any accommodation expenses and would even consider paying bonuses to individual officers and troops if considered appropriate.

But asked by Mr Vaz why the firm still wanted to claim its management fee, Mr Buckles said: “We’ve managed the contract and we’ve had management on the ground for two years.

“We still expect to deliver a significant number of staff.”

Mr Buckles said he told organisers Locog on July 3 that his firm experienced a shortfall in staff over the previous weekend, in part due to its scheduling system not working properly.

It was monitored daily at meetings with Locog and the Home Office but it was not until an Olympics Security Board meeting, chaired by Charles Farr, director general of the Office for Security and Counter-Terrorism, on July 11, that the firm said it was not going to meet its contract obligations.

Asked for the reasons behind the eight-day delay, he said: “On the 3rd of July we informed Locog and we then set up a daily working party with Locog and the Home Office to work through the issues we were experiencing.

“We were very transparent about the issues we were experiencing, but it was very difficult right through that process on a daily basis to see - we were still confident early on that we were going to produce the numbers.

“But the more and more we dug into the data, looked at the process, looked at the scheduling, day by day we started to realise that the pipeline and the people we thought we would be able to deliver - we couldn’t.

“It was a daily evaluation of what was coming through in terms of what we could and couldn’t deliver and we were sharing that quite openly.”

The shortfall only became clear at the meeting on July 11, he added.

Mr Buckles refused to comment on whether Mr Farr should have referred the problems to ministers on July 3.

G4S took on the Olympics contract to boost its reputation, not its profits, Mr Buckles said.

“Financially, it’s not a huge issue for us in improving our profit,” he said.

But he insisted the £50 million loss the firm now faces was not insignificant, saying it was a “huge amount”, representing 10% of the company’s annual £500 million profit.

“It was a hugely important contract,” he said.

Mr Buckles denied the firm had failed to give the contract sufficient priority, insisting it was “hugely important” and there had been “exclusive management focus on this contract for two years”.

It was a separate subsidiary within the firm, with an exclusive management team and a project board to review its progress every month, he told MPs.

Mr Buckles said it was a “complete and utter shock” when he was told on July 3, while on holiday in the US, that there would be problems delivering the contract.

He returned to the UK the same day, he said.

The problem was that G4S did not have enough staff, rather than that its staff were simply not turning up, he said.

And he conceded he could not even guarantee how many security guards would turn up on the first day of the Olympics.

But he said it was his “expectation” that 7,000 G4S staff would turn up.

“We’re still confident, together with the military and the police, that we can deliver a safe and secure Olympics,” he said.

He added that 500 extra troops were also being held in reserve, in case they were needed.

Some 5,500 accredited employable guards were currently on the G4S database and on average about 70% of these accept employment when offered, Mr Buckles said.

Around a further 500 people are being added to this database each day, he added.

G4S has £600 million of private sector contracts with the Home Office, Mr Buckles said.

“We’ve had a strong track record in delivering contracts,” he said.

“This has been a major challenge to us.”

He also agreed the Olympics security debacle was bound to count against the firm.

“At the moment, it’s not a good position to be in,” he said.

But G4S admits 100% responsibility and would now do whatever it could to help the military and police provide a secure Games, he added.

Mr Buckles also confirmed that the firm had never had to resort to the police, military or others for help before.

He also revealed that G4S decided last week not to compete for the contract to run security at the 2014 World Cup and the 2016 Olympics in Rio, Brazil.

Culture Secretary Jeremy Hunt told Sky News that the idea that failings in Olympic security were ultimately his responsibility was “ridiculous”.

While the debacle was “humiliating” for G4S, he said that the Government had always had contingency plans in place.