Government reverses Bain & Company's public sector ban

In 2022, Bain & Company was barred form bidding for government contracts, due to its role in a state capture scandal in South Africa. However, while the government maintains a “strong legal case” surrounding Bain’s alleged conduct, the firm has had its ban lifted after promising to ‘improve’ its internal governance.

In September, Bain & Company was banned from bidding for Cabinet Office contracts for three years – with then-Minister Jacob Rees-Mogg recommending the UK government bring in a ban of the firm across all its arms. The move came as the strategy giant encountered an international backlash for its connection to a major political scandal in South Africa.

In 2014, Bain was commissioned to evaluate the operations of the South African Revenue Service (SARS), and offer recommendations on improvements. A year later, this led to the restructuring of SARS, then directed by Tom Moyane, which resulted in the destruction of a large part of its capacity. Four years later, new President Cyril Ramaphosa set up an inquiry to evaluate what had been going on regarding the previous administration’s private-sector dealings. The subsequent Nugent Commission saw revelations about Bain’s involvement in the dismantling of SARS first emerge.

Bain tasked long-time employee Athol Williams with reporting to the Nugent Commission on the reliability of a review conducted by Baker McKenzie into how Bain obtained its contract. However, despite repeated requests, he was not granted access to the results of the law firm’s investigation by Bain, and was unable to give a complete opinion. In late 2019, Williams went on to blow the whistle on Bain, stating that the company had withheld relevant information from the commission.

Williams later offered his services to the resultant Zondo Commission, drafting a 700-page affidavit. The document led him to the conclusion not only had Bain hidden a number of serious elements from investigators, but it had masterminded “state capture”, in order to repurpose state institutions to the advantage of the firm, the government and its private sector allies.

Later in 2021, Williams fled South Africa due to fears of reprisal, having implicated dozens of individuals. In his time in exile, Williams collaborated with veteran anti-apartheid campaigner Lord Peter Hain, to draw global attention to Bain's activities in South Africa. The pressure from this campaign eventually saw the Cabinet hand down a ban on Bain taking state contracts.

While initially, Cabinet Office officials advised that no action against the company was necessary, Minister Rees-Mogg sought further advice, including from an external QC. Following that, he informed Bain he was particularly concerned at the way Bain’s South African division “colluded” with the regime of former president Jacob Zuma to undermine the country’s revenue service, adding that the affair had rendered the company’s integrity “questionable”. As such, the Cabinet Office would not accept tenders from the Boston-based consultancy for three years.

Overturned

Bain quickly announced it was not accept the ban, and issued a legal challenge, while maintaining its innocence in the case. Just six months into that three-year exclusion, the Cabinet Office has subsequently reversed its decision, with Jeremy Quinn commenting in a written House of Commons statement that the ban would be lifted for Bain’s – though it would remain in place for its South African arm.

Quinn was installed as Cabinet Office Minister in October, following the crumbling of the short-lived premiership of Liz Truss, who had appointed Rees-Mogg. While British officials told the Financial Times that the government maintains the previous administration had “a strong legal case”, given the professional misconduct that was said to have occurred in South Africa, it would be adopting a new position as Bain had agreed to improve its corporate governance. The company will be closely monitored for at least two years, to ensure these improvements occur.

The statement from Quinn reinforced this position, noting, “Bain & Company has welcomed this robust external challenge, to help ensure that going forward their corporate governance is of a consistently high standard, that the self-cleansing actions put in place are operational and that any new issues arising are being managed and communicated transparently.”

Bain welcomed the news, the decision to reinstate it “as a trusted supplier to the UK government”. However, the news comes as a disappointment to critics who believe Bain should face stern punishment for its actions in South Africa, though. Lord Hain, who had previously called Bain’s behaviour “despicable”, commented that he was “very disappointed” by the lifting of the firm’s ban.

Others have questioned the consistency of the precedent this sets, noting that if the government remains convinced its initial decision was legally sound, the future behaviour of Bain is a moot point. If individuals were to commit a serious crime in the UK, they would likely face a prison sentence, whether or not they pledged not to do it again in the next two years.

Bain is not the only consulting firm to have been embroiled in the SARS case, though. Several other international consulting companies’ South African wings remain entangled in the allegations. These notably include MBB rival McKinsey & Company, which agreed in 2020 to repay $39 million to the South African Government, after irregularities were found in contracts it had entered into, with a local partner at government-owned companies. Meanwhile, Big Four firm KPMG has publicly apologised for “mistakes” it made with work it performed for businesses tied to the Gupta family – a family who stands accused of serious corruption via its ties to Jacob Zuma.