The firm has been accused of letting the country down just two weeks before the Games, with soldiers forced to cancel family holidays to ensure venues are protected. But a senior Government source told The Independent that the contract with G4S did not include a penalty clause.
The revelation appears to contradict a statement by the Home Secretary Theresa May in the House of Commons. She told MPs that while the contract was between G4S and the Games organisers Locog, she understood that there were "penalties within that contract".
A source said that in fact it was a pro-rata agreement where G4S were paid for each extra security guard they supplied – and not penalised if they did not make the overall target. "The person who negotiated the contract should be shot," the source said.
This has always been my problem with outsourcing, and Milton Friedman (pbuh) warned about this years ago. The government does not get good value. No-one running a business would contract a company to provide security without there being a penalty clause of some sort (the penalty might just be "you're fired" on a rolling contract). But the state didn't even think about it. G4S could just hire as many people as it thought was profitable and forget the rest, and because the Olympic contract requires the government to underwrite everything, the government would pick up the slack.