G4S back in frame for UK public contracts – has its exile been successful for government ?

So G4S, the huge security and outsourced services provider, is officially off the naughty step with the UK government and back in the frame for government contracts. What are the likely effects of this whole exercise, whereby the government banned the firm from bidding for new contracts based on poor performance and even some questions of illegal activity by staff in (allegedly) falsely reporting data? As so often is the case in this complex world, there are two sides to the story, so let’s look at the pros and cons of the steps that the government took.

Positives

  • If we were very cynical, we might suggest that bearing down hard on suppliers has enabled the government to show it is tough on private sector firms that don’t deliver value to the public sector  – whereas the Conservative Party generally is seen to be on the side of ‘big business.’ I don’t honestly think this was the main driver, but it hasn’t done the political positioning of the Party any harm at all.
  • Making an example of G4S, and costing it £100 million plus, might have an effect on not just its performance but on other suppliers: using G4S  ‘pour encourager les autres’ as  said. Has it made other firms think hard about everything from how they report performance to how open they are around FOI and sharing information? Yes, I think it probably has, which one might think should benefit the taxpayer.
  • We certainly welcome the increased focus on contract management, driven   at least in part by the well publicised issues with G4S (and Serco, A4E, etc).  And there was a personal thrill in seeing the contract management framework I developed with National Audit Office in 2008 promoted by the top two civil servants in the UK, all in response to incidents such as the G4S failings.

Negatives

  • Is it right that a government minister can in effect determine the fate of a FTSE-100 Chief Executive?  It certainly appeared that Francis Maude made it essential for G4S to get rid of  Nick Buckles, its previous CEO. Does that set a dangerous precedent? Might it even suggest future routes through which corruption or political favours could be managed?
  • The recent events have, we suspect, made some firms think hard about whether they  want to do business with government. Now it’s  not a bad thing if firms realise that there isn’t easy money to be made any longer from government. But if it discourages good firms ... not so good.
  • And linked to that, the market for major business process outsourcing is pretty thin in terms of good, credible suppliers. (As we commented here, on Capita’s success.) Have the actions of Cabinet Office discouraged new entrants and ironically made the public sector even more reliant on a small number of firms?  Has the G4S action made Capita and a handful of others even more powerful?

Putting all these points into our virtual scales, and noting which way the balance falls, the government and Cabinet Office deserve credit rather than criticism, we believe. We might have been somewhat less public than they were with some of the hostility towards the major suppliers such as G4S, but clearly things were happening that should never happen with a strategic supplier, so firm action had to be taken.

And we’re still not sure anyone has really got to the bottom of why some of these things happened – there was probably a mix of cultural, reward and psychological issues within the firms that still hasn’t been bottomed out, but would explain why G4S and others did ‘bad things.’  Perhaps we’ll never know, but like many others, we’ll be watching the progress of G4S with interest.

 

 

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