Eh, have I read this right? An example of incompetence shows that ALL outsourcing is bad? Does that mean if I can come up with one example of a non-outsourced screw-up then non-outsourcing becomes discredited? In which case – and sticking with the Olympic theme – I give you UKBA’s performance at LHR. They should have given it to Serco…

On the substantive points:
1. Outsourcing the security for the games did not ‘put profit first’. It put efficiency first, with the idea of a saving to the taxpayer. Hasn’t really worked in this instance as it goes, but I think that says more about this particular contract’s implementation that the whole model.

2. ‘Short-termism as a disaster’ is an interesting point of view. Would it be better if these security staff had been on a three year degree cousre in Security Studies? Or if they continued to be used as Olympic security guards after the games have finished? Isn’t the short-termism here more a reflextion of the fact that the games are, inherently,a short-term issue? And the training being given is presumably a reflection of the fact that while the security bods have an important role to play, it probably doesn’t take that long to impart the right way to check a bag…

3. I’m really not sure what to make of this notion that we should continue to employ Olympic security staff once the Olympics are finished. Bit weird really. Or are you proposing a new agency of the govt to provide security at other events – so the Olympic security team could turn up at Glastonbury and Wimbledon (etc.) next year. Still not sure there would be enough demand.

4. The value here is not ‘cash profit’. The value is a safe games. Government is still doing lots of this (missiles on roofs/ MI5 leave cancelled etc.) – and they had attempted to palm the stuff that doesn’t require specialist skills onto non-specialists.

None of this should obscure the fact that G4S have blundered massively, and should be made to pay for doing so. One hopes the contracts have been drafted so that govt can recover costs incurred plus penalise G4S – and I’d guess that it won’t be in their favour when they bid for future work. But me thinks that Mr Murphy may have seen something he didn’t like and used it to confirm his personal prejudices, rather than actually thinking for a second. We all do that of course; it’s just that these thoughts needn’t become a silly blog post.

John Reid, Director, G4S Regional Management (UK & Ireland) Limited
John Reid, or Lord Reid of Cardowan, as he prefers to be known, joined G4S in 2009, having previously been Tony Blair’s Home Secretary and Secretaries of State for Health and Defence. The £50,000 a year it is giving the New Labour hard man quickly paid off for G4S as it landed a multi-million pound, four-year contract to supply private security guards for around 200 Ministry of Defence and military sites across the UK just three months after it took him on.[14]i Since then he has been diligent in ensuring the hi-tech security used by his employers is a feature of parliamentary debates whenever possible.[15]

says all I need to know and why labour are not saying very much….

@1. It is a lovely argument Murphy is making, isn’t it?

A very short term and temporary demand for stewarding services should not be met by short term and temporary employment of stewards.

“The state has the ability to create that value through commitment.”

How long should that committment be? A lifetime on the State Stewarding Service perhaps? Seems a bit over the top given that the last time we needed Olympic stewarding was in 1948.

I’d second @1 and @3 here. The article doesn’t really offer a substantive reason as to why outsourcing doesn’t work, which is weird really because the biggest issue is pretty clear: outsourcing rarely delivers value for money.

In this sense, the G4S scandal is the superlative example. G4S themselves lose £50M, and the UK public foots the bill for the deployment of the military which, I suspect, is not going to be cheap.

Wait, this is the one that proves outsourcing ends up shite? What about hospital ward cleaning? The BBC’s outsourced internal phone system, which failed miserably? The NHS national records database which after costing several billion over 5 years or so produced no change whatsoever? PFI in general? Hell, why not include the whole rebuilding Iraq sub-contracting farce?
The main problem with outsourcing is that once the ink has dried, any new conditions that arise (be it feature creep or otherwise) will have to be paid through the nose to get them sorted, something which you don’t need to worry about when it’s your own staff and internal project.

Still, with all the armed forces on the street maybe the Olympics will be pretty green zone…

The OP is confusing two things. Firstly, whether outsourcing IN GENERAL is a good idea: and secondly, whether using an external supplier to provide additional staff for a one-off event (instead of recruiting them directly) is a good idea.

As others have noted on this thread, there are many examples of outsourcing that have proved disastrous. We always hear about those. We don’t hear nearly so often about outsourcing that DOES work – precisely because it works. Management theory is pretty undecided as to the benefits or otherwise of integrated supply chains, and in the end it usually becomes a political decision as to which is preferable. When I worked in housing, I saw some pretty disastrous lettings and works practices, none of which were outsourced. Inefficiency and corruption can exist both in outsourced and in-house practices.

As far as this particular event is concerned, there’s no doubt that G4S have made a complete hash of it. But that’s not an argument either against outsourcing per se or against use of private companies to provide short-term staff. A different company might have done much better. Recruiting staff directly might have been even worse. We simply don’t know.

I do have an issue with the notion that recruiting people on a short-term basis to cover a one-off event is somehow bad. I’ve been an employee with no role. It is horrible. Far better in my view that people who are needed for a particular event are recruited on short-term contracts. That way they know where they stand and are not led to believe that there will be similar work for them after the event.

Outsourcing is a bad idea – doesnt matter whether you are a govmt department or a trading company, it takes time and investment to build up teams with particular skills and once those functions are outsourced those skills are gone at a stroke and you are forced to deal with other organisations’ ideas of what those skills should be.

More specifically, private sector provision of public services can only be a slippery slope to degraded provision. Companies operating in the market must constantly look for ways to increase profits, and personnel and equipment costs are always first in the firing line. We are endlessly told that we shouldnt care about who provides NHS care since it’s free at the point of use: well, in a few years time it`ll also be crap at the point of use!

The cost of staging the Coca Cola games in London has now hit £11 billion according to some reports – but instead of being good for the UK’s economy, or the people who are actually paying for it (i.e. us) it seems to have benefited many others through outsourcing.

91% of the Olympic souvenirs weren’t manufactured in Britain. China alone manufactured two-thirds of the 194 products you can buy on the London 2012 website.

Team GB’s Olympic gear, designed by Stella McCartney, was made in a sweatshop in Indonesia.

The British ale industry was left high and dry as Olympic officials picked Dutch lager Heineken as the official beer of London 2012.

The contract to install loose furniture like seats in the Olympic Village went to Australian firm Ramler Furniture.

In February, an Arkansas-based firm bagged the contract to print 11 million Olympic tickets. Trade union Unite branded the move as “a slap in the face, a kick in the teeth and a two fingered salute to print workers and businesses in the UK”.
http://www.londonlovesbusiness.com/business-news/london-2012-olympics/not-made-in-britain-how-the-olympics-got-outsourced-overseas/2956.article

Outsourcing is always going to hold appeal for firms who can target either vulnerable job seekers in the domestic market (i.e. those who in the main belong to the wrong class, or went to the wrong schools) or overseas labour who are used to being exploited through the usual sweat shops and unregulated industries.

“The state has the ability to create that value through commitment”

Is that why 1200 NHS patients died at Mid-Staffordshire Hospital ? And why the people in charge got promotions ?

http://www.telegraph.co.uk/health/healthnews/5007652/Stafford-Hospital-execs-land-higly-paid-jobs.html

Have you never heard of “producer capture” ?

I’m sure G4S was a case of a low-bid contract win followed by an effort to produce competent and trained staff on the cheap – meeting the usual fate of such attempts. To extrapolate from that to “state good, private bad” is a leap too far.

7 Limiting Factor

We are not talking about outsourcing existing functions. We are talking about creating a new function specifically for a particular event that will not be repeated. Once that event is over those jobs will not exist.

I understand your concern about the NHS, but really it has nothing to do with this.

Bingo: I believe that G4S are paying for the deployment of the military, hence their supposed loss of £50million. I’d like to see the figures before I was prepared to believe that they have made that kind of a loss. Originally there were to receive over £20,000 per person for about a month’s work! (and that’s not including the free labour from workfare programmes). It’s hard to see how even with this mess, they could lose that much money.

It is true though, in the defence of G4S, that the Olympics organising company header by Sir Lord Coe changed the goalposts on security only a few months ago, and the number rose enormously (along with the fee).

What I can’t understand is that the G4S management only knew 9 days ago that there was a problem. If my company had a contract to supply 10,000 people I’d be on the responsible staff like a rash, checking up on them, weekly reports on numbers.

By the same token, I’m surprised that Coe’s staff weren’t checking up and getting at least monthly reports. Given the importance of security, I’d also like to know why the Olympics minister didn’t know anything about it, nor did the Secretary of State for Sport…and finally, the Home Secretary seems to have washed her hands of it, and given her seeming lack of knowledge why didn’t the prime minister want to know what was going on?

As a recruitment person, I can see the massive problems in recruiting so many people for short term contracts. It probably shouldn’t have been given to one company alone.

You can’t help thinking that it has been done on the cheap (and with many people supposedly doing it for nothing, or on a government employment scheme …with little or no chance of a job) and that it was inevitable that the MoD would have to take over.

Outsourcing and privatisation of public services has nothing to do with “efficiency”. It used to be justified on that basis but nobody even bothers to pretend that any more.

No, the driving force behind it, is that corporations have eyed up public services as a nice cash cow, from which they can milk near risk free profits at the taxpayers expense, and have spent millions lobbying governments to ‘open up public services to outside providers’, no doubt offering politicians directorships on their board as a sweetener.

Meanwhile, the public gets to fund the profits of multinational corporations through their taxes, whilst getting a piss poor service at vast expense in return!

Commenters @ 1, 3, 4, 6 and 10 explain very simply and clearly what is wrong with Richard Murphy’s silly OP, and yet people on here continue to Tweet the link to the piece as though it contained some great insight, which it obviously doesn’t. Twitter encourages a herd mentality. Whatever happened to critical thinking?

Interesting that we can’t get people off JSA in the area at £300/week. I would have thought that there would be a lot of people after that sort of money, and there would be no need to attract people who can’t speak English well enough.

I’m not supporting G4S, but I’m not happy paying my tax to allow people to turn down jobs that pay better than mine in order to stay on JSA. Something seems wrong here.

@ 13 TONE

“Whatever happened to critical thinking?”

I once made a mistake when engaged in critical thinking, and that shows that critical thinking does not work!

@ 14 JC

“Interesting that we can’t get people off JSA in the area at £300/week. I would have thought that there would be a lot of people after that sort of money, and there would be no need to attract people who can’t speak English well enough.

I’m not supporting G4S, but I’m not happy paying my tax to allow people to turn down jobs that pay better than mine in order to stay on JSA. Something seems wrong here.”

Agreed. Do you have a link? Because this could equally be down to inveterate slackers turning down all offers of work regardless, or disabled people being classed as able-bodied and then expected to stack shelves with crippling back pain. Or more likely a bit of both.

the logic of recruiting people a few weeks before the games and sacking them immediately thereafter shows that the logic of cheap labour inherent in outsourcing is dependent upon mass unemployment and the expendability of people. No wonder the Tories are doing nothing to tackle unemployment.

Let me see if I get that.

The Tories are deliberately keeping unemployment high so that outsourcing firms can have a ready pool of cheap labour to exploit.

Hmm. That’s going to need a bit of work.

It would be tempting to suggest that Richard would be better advised to stick to economic matters but of course that would be to imply he knows something about them…………

Chaise @16

A link to what? Are you saying that G4S aren’t paying £300/week, or are you suggesting that unemployment is so low in London that there really isn’t anyone available for the work?

Nevertheless, I reiterate; I earn £6.50/hr and pay tax and NI at a rate of 33% on anything I earn above £8000/year or so. I am not happy paying this large proportion of tax to help support someone who would prefer not to take a job paying £8/hr.

What’s wrong with that? Should I be keen to help those better off than me, and if so, why shouldn’t we all want to help the better off? Alternatively, we should want to help the poor (poor being defined as those worse off than us).

“I do have an issue with the notion that recruiting people on a short-term basis to cover a one-off event is somehow bad”

How could you possibly do this any other way?

“or are you suggesting that unemployment is so low in London that there really isn’t anyone available for the work?”

Without looking into this, I’d say the main reason is people frightened that taking a temporary job will mean they lose benefits. The benefits system has yet to catch up with the idea of casual /agency style work. It takes 2 months on average for the local authority to catch up with your circumstances and award housing benefit. So somebody currently on benefits who takes the job for say 1 month loses their benefits, then has to re-apply once the games are over. In the meantime they have 2 months when they can’t pay the rent. JSA is also not the full amount for the first week of any new claim, so there is a loss there. It’s simply not worth the risk for such a short period of work.

Other issues I could think of (again without checking):

- Security staff needing to hold certificates, therefore restricted supply
- It takes a few weeks for a CRB check.
- G4s thought it would be cheaper to sub-contract to an agency, but didn’t do so in time.
- G4S have a crap HR department that needs to be fired

CG @ 15:

“I once made a mistake when engaged in critical thinking, and that shows that critical thinking does not work!”

That raised a wry smile on a Monday morning! Thank you (even if you think I’m an ‘arsehole’, as you put it on a previous thread. – Btw, why be so abusive?).

More generally – and I doubt you’ll disagree – but (a) critical thinking and (b) debate about (a) leads us – asymptotically, http://en.wikipedia.org/wiki/Asymptote – to reasonable grounds for truth. See J S Mill. When all political parties are united – that consensus beloved of the BBC – you can almost be certain that the policy is mistaken – eg our policy towards the EU…

@ 18 JC

I wasn’t sure where you were getting the £300 figure from.

I certainly agree that we should resent supporting people who are simply slacking off. However, it’s not clear how many people on benefits could work for G4S. Potential problems:

1) They might have disabilities that prevent them from doing the job, as mentioned above.
2) They might not live close enough to make the job viable once you take into account transport costs.
3) They might not have the relevant skills.

There’s also the problem of what we do about slackers. Every solution I’ve seen has erred on the side of fucking over the vulnerable, such as labelling disabled people as “fit to work” when they’re not, or exploiting people into working for less than £2/hour.

@ 20 TONE

“even if you think I’m an ‘arsehole’, as you put it on a previous thread. – Btw, why be so abusive?”

IIRC, and I may not because I can’t remember the specific thread, I called you an arsehole because you were being patronising and passive-aggressive, two things that I find exceptionally annoying in debates. I’d actually rather someone started a reply to me by saying “Look, you wanker…” than by saying “Obviously you lack the ability to understand that…” or whatever.

Abusiveness is just one form of bad etiquette and I think it’s roughly equal to the above, which are basically just ways of insulting people while maintaining plausible deniability. So I tend to fight fire with fire.

(Also, as a general rule, if I call you an arsehole I mean you’re being an arsehole *at the moment*, not that you have arseholosity as an endemic character trait.)

“More generally – and I doubt you’ll disagree – but (a) critical thinking and (b) debate about (a) leads us – asymptotically, http://en.wikipedia.org/wiki/Asymptote – to reasonable grounds for truth. See J S Mill. When all political parties are united – that consensus beloved of the BBC – you can almost be certain that the policy is mistaken – eg our policy towards the EU…”

I do disagree, actually. Most of the things that our parties agree on are things we’d all agree with, and hence aren’t considered worthy of discussion. For example, all parties agree that randomly assaulting passers-by should be illegal, and that the Earth goes around the Sun. If anything consensus suggests that policy is correct as there’s no sensible alternative on the table.

However, political parties are a specific group and thus have similar interests in some areas. Therefore all parties might be united in wrongness on a policy that generally benefits MPs. If all the big parties support A but the majority of the electorate prefer B, to me that suggests one of two things. Either A is in the personal interests of MPs, or the public in general is fairly ignorant about the issue and isn’t aware of the full ramifications of pursuing B.

@ TONE again

…So I guess that really means that I DO agree with you, but that I think the issue is more tempered than “consensus = wrong”.

@ 12. Graham

I think you will find that the driving force is EU law. EC procurement directives have applied in the UK since 1993.

I think the main problem with the procurement and competitive tendering of public sector contracts for goods and services is supply rationalisation and that seems pertinent in this case. The public sector rightly want to reduce their costs in the tendering process. This tends to mean that they have progressively gone down the route of awarding larger contracts to reduce costs. Only larger firms have the size and capacity to bid for the contracts as smaller firms are excluded through the size of the contract. The bundling of contracts leads to the same outcome.

Moreover, the public sector getting better at specifying their requirements in contracts actually leads to more bureaucracy as contacts get longer. Again this disadvantages smaller firms and leads to a barrier to entry. The bureaucracy means they do not even bid as their internal lack of expertise means they would incur significant costs with no guarantee of success.

This all leads to supply rationalisation in competitive tendering. One gets to the situation where it is the same large firms winning all the work that the public sector are putting out to competitive tendering. In fact, a situation where some nominally private sector firms balance sheets are entirely dependent on winning public sector contracts. Value for money for the public sector but because of the subsequent supply rationalisation not truly competitive tendering.

Not many firms could have had the capacity to supply that many security guards. Making it one contract would have been the best value for money option. However, splitting the work between multiple firms would have made more sense but been more expensive.

19 Planeshift

Well, exactly. These jobs won’t exist after the Olympics. Temporary contracts are the only possible way of staffing them.

CG @ 23:

Yes, I agree, it’s more tempered than “consensus = wrong”. The problem is when our political system (or establishment, if you prefer) shuts down debate on a subject, then the likelihood of wrong decisions increases strongly – simply because there is no debate! Debate is very important in a democracy…

Dogmatic rejection or advocacy of outsourcing is inappropriate. It can and does produce benefits for providers and consumers; and outsourcing needs to be debated sector-by-sector, case-by-case. That said, Richard Murphy’s idiocy/propaganda* (*delete as appropriate) is a (largely useless) part of that wider debate…

@ 26 TONE

I think debate in this country is rarely if ever shut down. However, the refusal of major parties to discuss certain issues causes similar problems (e.g. the fact that all three parties avoided talking about immigration in the 2010 debates until Brown put his foot in it). However, I can’t think of a topic where you’re actually not allowed to express your opinion, even though we’re moving a little bit in the direction of oppression with recent cases on online comments (I hope this is a blip).

Of course, a lot of people *claim* you can’t discuss immigration and so on, but they’re wrong as a simple point of fact. What they probably mean is a) that they live in a fantasy world where the words of stupid newspaper pundits outweigh their actual experience, or b) they confuse freedom of speech with the right to espouse their views without criticism.

I missed one thing in my last comment, which is that bad political consensus could also arise from perspective, even without personal interests coming into effect. So you could say that the Tories are callous to the poor because they don’t know what it’s like to be poor, or that Labour are too easy on scroungers because they don’t know how good scroungers have it, etc.

“Not many firms could have had the capacity to supply that many security guards”

There are several firms that specialise in providing security for large one off events such as music festivals, and it would have made sense to use one of these. To my knowledge G4S don’t do festivals or carnivals, and this probably explains the fuck up. I know from at least 10 years ago when I was doing security at festivals that showsec have a large workforce of people who get enough work to make it a full time job, and many more students/casual workers on their database after additional pocket money from a summer job. I doubt their way of working has changed much.

The main difference is largely that G4S do a lot of public sector work and are used to the process of competative tendering. Showsec by and large do private sector events so probably don’t have the expertise necessary to win the contract.

And if all else fails you just ask the hells angels.

I think I am going to coin a term. It is called the “Murphy Quantum Leap” (MQL). It is where something happens (be it good or bad), then Richard Murphy gets hold of it and through a process only understood by him, we arrive at an unrelated conclusion.

One failure (and the G4S situation is not a complete failure) of outsourcing and we come to the MQL conclusion that all outsourcing is doomed to fail.

…wow, must be really tough for his wife to make dinner…”honey what would you like for dinner?”……..”I believe the dinner plates to be constructed in an inadequate manner by a company that avoids tax and therefore it is not advisable we eat dinner off them, no dinner”

Planeshift

Or you draft in the nation’s stock of nightclub bouncers.

@30. Frances_coppola: “Or you draft in the nation’s stock of nightclub bouncers.”

Err, can we follow that a few Olympic employees (not all of them) are bouncers, but we presume that most stewards attend as helpful people; stewards, for the most part, are eyes and ears, and their primary role is to help people. Stewards, looking after ordinary people, are likely to notice people who are unordinary.

@24 Richard W

I think you will find that the driving force is EU law. EC procurement directives have applied in the UK since 1993.

Now I’m not an expert on EU directives, but from what I’ve read the procurement directives of which you speak only set out common rules to be followed in government procurement to prevent favouritism towards local suppliers, they don’t make it compulsory for every service to be outsourced.

http://www.legislation.gov.uk/uksi/1993/3228/made

To talk of the wider point, I can think of a number of reasons why outsourcing on a large scale is a bad idea. Here are just a few I can think of:

1) It weakens democratic accountability over public services.
2) It makes sensible management extremely difficult and unwieldy, as everything is governed by a complex and arcane set of contracts which are drawn up and only understood by (very expensive) lawyers. Thus things that should be relatively straightforward such as a change in requirements of the original contract become complex, expensive nightmares.
3) It introduces a large potential source of corruption into public life which didn’t exist before, as contractors vie for lucrative contracts (cynics might say this was quite deliberate!)
4) It creates a wholly corrupt symbiotic relationship between the state and “private” contractors. The extreme examples of this are the millitary industrial complex or even more sinister prison industrial complex which has developed in the US.
http://en.wikipedia.org/wiki/Prison-industrial_complex
5) It rarely produces the efficiencies or improvements claimed of it.

That’s just a few. If anyone can think of more please add them.

The error here was in choosing to appoint G4S in the first place and telling them they only wanted 2000 staff. Why was this figure then changed later to 10,400? Surely there was a giant screw up by the organisers of the games (and their state security advisers) who are not a profit-making company. Does that mean all non-profit making companies are incompetent (as well as the state has so often found to be), by the same logic? G4S have now rightly lost their reputation and a lot of shareholder value through this fiasco. How has the state ever suffered for its serial incompetence?

@ JC – Update for you

G4S have stated that 100,000 people applied for the 10,000 jobs available. So clearly people not wanting the jobs isn’t the issue here – looks like a case of crap management.

Here’s an interesting alternative viewpoint. This writer reckons that the G4S foul-up is proof positive that outsourcing DOES work – magnificently. Read and enjoy!

http://www.johnband.org/blog/2012/07/17/why-the-g4s-olympics-screw-up-proves-that-outsourcing-is-good/

To those who complain about unemployed people not doing these jobs:

Firstly, over 100,000 applied for positions with G4S at the Olympics. That looks like a lot of unemployed people wanting a job.

Secondly, the system discriminates against temporary jobs like this. As soon as you are employed, your benefits stop – but you may need to wait up to 4 weeks for your first pay packet. As soon as you become unemployed again, you have to go through a long drawn out process to regain your previous benefit entitlement – often resulting in delays of several weeks. The result is you cant eat, and may get kicked out of your accomodation.

[35] ‘This writer reckons that the G4S foul-up is proof positive that outsourcing DOES work – magnificently’ – that is an assumption since contract details are protected by commercial sensitivity (even though it is public money going into a private company’s coffers), neither do we have a comparator to assess success or failure.

You could try a FOI request to but I would be surprised if G4S supplied you with any numbers (vis-a-vis the direction of the flow of monies).

A&ECN: you could try reading the piece. We know from G4S’s statement to the LSE (and it’s illegal and regularly prosecuted to lie in such statements) the levels of losses that it’s expecting.

[38] ‘A&ECN: you could try reading the piece’ – OK, we have SOME info from ‘leaked documents’ although the general principle stands that outsourced work cannot be scrutinised in the same way that state provided services can due to contract confidentiality.

Some have claimed that outsourcing is a great success but according to the torygraph, ‘G4S has had its fee for managing civilian security staff for the Games rise from £7.3 million to £60 million – the fee the company takes for running its Olympic office has risen more than 10 times faster than its spending on recruitment.

Most outsourced work has two recurring characteristics – as much dosh as possible for those at the top, as little as possible for those at the bottom.
Obviously there are different pay structures in state services as well but the disparity between those at the top and those on the botton is less pronounced.
http://www.ted.com/talks/richard_wilkinson.html

Amusing that both Tory and New Labour (Reidite?) types are desperate to rubbish this article. Beginning of the end for outsourcing, lobbying etc?