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The Great G4S Olympic Fiasco

July 14, 2012

From The Guardian:

The security firm had been committed to supply 13,700 guards as demanded in its contract, worth £284m, which it now says it is unlikely to be able to fulfil. Overall, the 23,700-strong security force for the Games will include a mix of military, private security guards and at least 3,000 unpaid volunteers. [Chief executive Nick] Buckles said it would cost G4S between £314m and £324m to fulfil its contract and pay penalties.

Let’s do a little bit of maths…

Firstly, we need to know how much G4S were proposing to pay their security guards. Here’s more from the Guardian:

He said he had been given verbal commitments that staff would be paid £14 an hour, but that the contract he received said he would be entitled to £6.05 an hour for working outside the venues, and £8.50 for working inside the stadium.

I’m going to go with the figure on his contract – £8.50. We will assume (unrealistically) that G4S pays all of its 13,700 guards to work 24 hours a day for 4 weeks (i.e. 28 days) . What is their wage bill?

Well, a day’s wage for a guard is £8.50 * 24 = £204.

Multiply that by 28 days to get the total salary of one guard: £204 * 28 = £5712. Does this seem about right? More Guardian:

One student applicant said he had already spent £650 on travel and hotel bills to attend training and was now worried that, because he had not received any accreditation or rota from G4S, he might not be given the shifts that would enable him to cover those costs. He said he had expected to earn about £2,000 over the period of the Games.

So it looks as if we’re in the right sort of ballpark. So, what is the total wage bill 13,700 guards? £5712 * 13700 =  £78,254,400. Lets call this around £80m (if you use the higher figure of £14 / hour, it comes out at around £129m).

Obviously, there’ll be some administrative costs on top of that but it stands to reason that, as a private sector company, G4S must be extremely efficient because, well, that’s what private sector companies are. But lets pick a number out of the air and pretend that the administrative overheads are 50% of the wage bill. So, 50% of £80m is £40m and so we’re up to a total cost to G4S of £120m (or, for the higher figure of £14 / hour, it would be around £193m). And remember that these are probably too high because we’re assuming all guards paid constantly to work for a month straight without sleep.

The contract is apparently “worth” £284m, yet the total cost to G4S seems to be substantially less than this. Is there something fundamentally wrong with my maths? Or were they expecting to make upwards of £100m in profit on this?

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