Yahoo Finance Hammond: G4S Row Shows Private Sector Limits
The G4S security fiasco ahead of the Olympics revealed the shortcomings of relying on the private sector, Defence Secretary Philip Hammond has admitted.
Thousands of extra troops had to step in when G4S (Other OTC: GFSZF.PK - news) admitted days before the Games that it could not supply enough security guards.
Some 18,000 troops were ultimately involved in the Olympic effort after the firm, which was paid almost £300m for the contract, failed to deliver.
Mr Hammond said he had gone into government with a "starting prejudice" that the private sector could be instructive about how to approach projects.
But he said problems with G4S had proven it did not always have a better strategy and that sometimes only state organisations such as the Army can be relied on.
His comments will be welcomed by critics of the Government who fear there is an increasing reliance on private firms as the public sector faces major cuts.
Mr Hammond, speaking to The Independent, said: "I came into the MoD with a prejudice that we have to look at the way the private sector does things to know how we should do things in Government but the story of G4S and the military rescue is quite informative.
"I'm learning that the application of the lean commercial model does have relevance in areas of the MoD but, equally, you can't look at a warship and say, 'How can I bring a lean management model to this?'
"As two models of how to approach a problem, you could not get two greater extremes than the G4S model and the military model," he continued.
"The G4S model says 'here is a cost envelope within which I have to deliver an outcome and therefore I have to do it incredibly leanly. I have to do it with very little resilience'.
"So G4S were literally hiring people and expecting to deploy them three days later, into a live situation; trying to build up a management structure overnight, at the beginning of the operation ...
"The military comes at it from the exact opposite extreme: 'What's the job that needs to be done? Ok, we'll do it. Whatever it takes we'll pour in massive over-resourcing, massively heavy structures of management.'"
He added: "What the military primarily deliver is contingent capability and I haven't been able to think of a single large-scale example where a private organisation delivers a contingent capability. You pay for it, year in, year out, but you probably never use it for what it's designed for."
Meanwhile, the senior officer in charge of the military's Olympics planning has warned that it could take the Army two years to recover from the extra troop deployment.
Wing Commander Peter Daulby said the Games had shown the need for an army large enough to cope with emergency requirements and the dangers of drastic cuts.
"We were originally planning to provide niche capabilities," he said. "When the requirement for venue security was doubled, that was a bit of a game changer.
"We had to generate 18,000 people. That does not mean that there are 18,000 spare people. It means that the Government has prioritised (the Olympics).
"It will take two years to recover from this, to get back to normal, to get everything back into kilter. You can't expect them to go back to normal routine very easily."
Wing Cdr Daulby said the Olympics showed the country needs a military for more than war fighting.
"If we shrink the military, do we really understand what we are losing? Look (Munich: 867225 - news) at the speed with which we pushed up the throttle. It proves the military offers the country a huge amount of resilience," he told The Guardian.
An MoD spokesman said: "The defence contribution to the Olympics was always planned to avoid an impact on current operations.
"So, while some individual training and leave may need to be rescheduled, this will be managed and will not impact on operations, including the ongoing mission in Afghanistan."
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