Olympic committee stops payment to G4S

G4S training centreJeff Moore/Jeff Moore/Empics Entertainment

The Olympic security farce is continuing to wreak havoc at G4S. The company has already lost a reported £50 million over disastrous failures in the contract, and now LOCOG has stopped payments to the firm.

So what's going on? And what does it mean for G4S?

The crisis

Things were looking rosy for G4S when it was contracted to supply security guards for the Games in March 2011. However, a crisis erupted on 11 July this year, as G4S admitted it had fallen far short of its recruitment targets and wasn't going to be able to provide the full 10,400 security staff it was contracted to supply to the games. G4S said at the time that it would cost the company £50 million.

The following day, the Defence Secretary announced that 3,500 extra troops would be brought in to protect Olympics visitors, and by 13 July the company had lost an incredible £150 million of its share price. Subsequent no-shows at various events around the country, and a notable incident where the keys to Wembley Stadium were mislaid added to the company's reputational woes.

Even by the end of August, chief executive of G4S, Nick Buckles, said he was taking "each week at a time" and could not comment on what had caused the problems until a review had been carried out by Pricewaterhouse Coopers. This is due later this month.

Stopped payments

Now, Paul Deighton, chief executive of LOCOG has told the Home Affairs Select Committee (which is conducting its own review into what happened) that it stopped payments to the firm back on 13 July. At that point, the organising committee had already paid it £90 million of the the total £240 million agreed in the contract.

During the Games, how far the firm fell short varied from day to day. At worse, it was short of 35% of staff it had promised: at best it was 4% short. However, it met all its targets for securing the Paralympics.

Deighton told MPs that it was in negotiations with G4S as to any further payment. G4S admitted that it was in discussions over penalties, but expected to be paid for the staff it provided. Buckles said: "I'm not going to sit here and say we did a great job, but we delivered a significant proportion of the contract. I expect them to pay us in line with the terms of the contract."

The future

Deighton absolved LOCOG of any blame, saying: "We had absolutely clear and consistent reassurances from the senior management that they'd be able to deliver ... up until that fateful day on July 11. We shouldn't over-complicate this. They just failed to deliver because their own processes broke down."

The G4S share price remains in the doldrums. It fell again yesterday to 255.6p - down from a high of 290p before the crisis broke. Analysts say that the 'rehabilitation' of the firm is likely to take some time.

The future for Buckles and G4S will remain in the balance until the PWC report emerges. However, as Buckles has repeatedly said, he must take the blame as chief executive for any failings from the firm. It means that there is every chance that his future with the firm is unlikely to be as secure as it was before the problems emerged.

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Olympic committee stops payment to G4S

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