07/21/2012

Airport security and outsourcing

In Britain the G4S company contracted to engage security staff for the Olympics has failed disastrously. In Geneva airport the baggage control staff have expressed worries.


Outsourcing contracts are often used to employ security personnel, in particular for the checking of baggage. The persons employed are clearly in an important position: if they fail in their task, or even if they act in a corrupt fashion for some reason, they may permit explosives to be smuggled onto aircraft, with potentially disastrous consequences. However, the companies which win the contracts do this for commercial reasons, which implies that they wish to maximise profits. At the same tiime, the airports naturally look for the cheapest contracts meeting the expressed conditions and requirements.

In Britain, the company G4S has completely failed to engage and train the number of people required for proper security for the Olympic Games. Various reasons have been evoked, including the failure of a computerised system to tell the personnel where and when to report for duty. However, it is possible that the relatively low pay offered has played a rôle in this failure.

Unsurprisingly, everyone blames everyone else. The British Government believed that all employees would be paid at least £10 per hour, the Olympic Organising Committee LOCOG believed that it would be between £9 and £12, but G4S claimed that LOCOG had forced them to drop the minimum to £8.50 per hour. The chairman of the parliamentary Public Accounts Committee, Margaret Hodge, questioned why security staff, some of the poorest people in London, were being paid apparently less than the market rate and not what the committee had been told.

This story came to my mind when I read that the people who check baggage at Geneva Airport are worried about what might happen when their current contract with the company ICTS terminates at the end of September 2012. They will be re-employed by a firm called Custodio, but it appears that the exact terms of this re-employment have not yet been made public.

The common denominator in these two affairs is that large enterprises often, and for various reasons, wish to outsource some activities at the lowest acceptable rate. In turn, the companies which have obtained outsourcing contracts wish to maximise their own profits. Under these conditions, it is clear that sometimes the actual employees are squeezed!

One reader's letter in The Times, in discussing the perils of outsourcing, gave various golden rules which should always be obeyed. The first rule is not to outsource mission-critical activities, and the second is "don't outsource activities that you do not manage yourself". A third rule, for cases where some elements of mission-critical activities are nonetheless outsourced, is that the accountability for success should be kept in-house. This includes contractual specification of pay rates, number of employees required and training requirements.

My final comment on this, which relates to pay rates, is that old saying :-

If you pay peanuts then you get monkeys working for you!

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