Privatisation and "contingency capacity"

[John Ashworth]

Nothing specifically to do with railways, but an interesting comment on privatisation by a Tory minister (no less), which could arguably be applicable to the privatised railways. It seems to me that he is recognising that privatised companies are trying to deliver everything as cheaply ("cost-effectively") as possible, which is probably fine when everything is going well, but it means they have no slack capacity to react when something goes wrong. The military (and arguably the old nationalised railways) have under-utilised spare capacity which may not be "cost-effective" on a routine day-to-day basis but which comes into its own when there is an emergency situation which requires extra resources at very short notice.

G4S Olympic effort shows limits of private sector, says Philip Hammond

Defence secretary praises military rescue of Games security and says lessons can be learned

guardian.co.uk, Tuesday 14 August 2012 08.28 BST

The failure by G4S to meet the Olympics security requirements has shown the limitations of private sector companies taking on public sector contracts, the defence secretary, Philip Hammond, said.

In an interview with the Independent, he 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."

Hammond said as two models of how to approach a problem "you could not get two greater extremes than the G4S model and the military model".

"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.

"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.

"A very lean structure, with lots of dependence on self-motivation by the people in the workforce; scheduling their own shifts, for example, by accessing an internet site.

"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."

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.

"Given the scale and importance of this once-in-a-generation event, including the forthcoming Paralympics, it is right that all across government play a part in ensuring the success of the Games.

"This includes the armed forces who have done a fantastic job while continuing to deliver on other standing tasks and duties."