Expert Examines Key Issues From Aftermath Of Contractual Issue

Both the public and private sector can learn significant lessons from the major problems which have emerged in relation to the Government’s Olympics security contract with G4S, according to a corporate legal specialist at Irwin Mitchell.

The issue of G4S’s failure to meet the terms of its contract over providing staff to support the upcoming sporting event in London has barely been out of the headlines this week, after it emerged that troops were on standby following concerns the required number of trained staff would not be provided in time.

Ministers have since suggested that penalty clauses in the contract may be activated in an effort to recoup some of the costs, while the Commons Public Accounts Committee has described the problems as “chaos” and called on both the Government and Olympic organisers to “get a grip” on the issue.

According to Laurence Gavin, a corporate and contract law expert at Irwin Mitchell, the whole debacle has highlighted a number of issues which public sector bodies need to bear in mind when it comes to contract management, as well as other aspects for the private sector to consider.

The Public Sector

He explained: “The key issue for the public sector when it comes to any contract of this kind is examining how to ensure that a supplier can deliver for you. The procurement process is an important starting point on this, as stringent guidelines should ensure that only the most suitable suppliers are able to participate and eventually proceed to the latter stages.

“Following the introduction of the Big Society concept and Public Services (Social Value) Act 2012, this kind of process is now set against a backdrop of public sector bodies being urged to buy local. So often, on a local level, authorities need to consider the scalability of the firms which are battling for a contract.

“One of the other issues which arose with G4S was how the Olympic Delivery Authority and ministers only found out about problems in recent weeks. This problem demonstrates how important it is for provisions to be in place that allow public sector bodies to identify any potential capacity issues at the earliest possible stage.

“In addition, any contract of this kind should include clauses and items such as step-in rights and liquidated damages. Such terms would go some way to offering certain levels of protection and, hopefully, ensure smooth delivery of the contracted services.”

The Private Sector

While there is much for the public sector to learn, Laurence added that there are a few issues that the private sector should also consider following the problems.

He outlined: “Quite simply, the reputational damage and embarrassment which can be caused by failing to deliver on a major contract is potentially huge. Because of this, it is important that firms always ensure they are fully capable to deliver on the work that they bid for.

“Important points to consider include the strength of the supply chain of sub-contractors that you work with while, contractually, ensuring that any losses would be passed on to those who do end up being responsible for any faults.

“A Force Majeure clause which widely covers a number of potential problems could prove particularly important, as it would cover unforeseen issues such as changes in regulations which impact on a deal or any of your sub-contractors or suppliers running into difficulties.

“Ultimately, it is vital that both local authorities and businesses take care when it comes to entering into contractual agreements. Anyone with doubts on the issue should consider speaking to legal specialist for advice on the issue.”