Head of home affairs select committee says private security contractor should waive fee for failing to deliver on the London 2012 Olympics guardian.co.uk

The private security firm G4S should be the first name on a government blacklist of "high-risk" companies that have failed to deliver public services, a cross-party investigation into the Olympic security shambles has concluded.

The Commons home affairs committee says G4S should forgo its £57m management fee for the contract that it still insists on claiming and has a "moral duty" to pay those people whom it trained but failed to use as venue security guards.

Keith Vaz, the committee chairman, said: "Far from being able to stage two games on two continents at the same time, as they recklessly boasted, G4S could not even stage one. The largest security company in the world, providing a contract to their biggest UK client, turned years of carefully laid preparations into an 11th-hour fiasco."

He said the government should learn from the experience and establish a register of "high-risk" companies that had failed in the delivery of public services.

The MPs' recommendation brought an immediate response from the Cabinet Office, which said that since June it had had a policy of taking the performance history of suppliers into account when contracts were being decided.

"While we will not publicly name the companies involved it will mean that suppliers with poor performance may find it more difficult to secure work with [the] government in future," it said.

G4S has announced a £50m loss on the Olympics contract, which saw nearly 5,000 troops drafted in just before the start of the Games when the company failed to provide enough security guards. Investment analysts have warned that the damage to G4S's reputation is a "critical medium-term driver" of its fortunes, with rehabilitation likely to take some time.

The damning Commons inquiry says the company itself agreed that the blame for the debacle lay "firmly and solely" with G4S.

"There is no suggestion that Locog [the Olympic organising committee], the Home Office or anybody else involved in the process contributed to the problem in any way. All our witnesses, including those from G4S, were in agreement on this point," says the MPs' report, published on Friday.

"It is understandable that G4S, having taken a £50m loss on the Games, alongside a significant fall in its share price, should now seek to minimise the scale of any further losses. But we believe that the company should look to the bigger picture, and its long-standing relationship with its biggest client in the UK: the taxpayer."

The MPs say the company should waive its £57m management fee, noting that it represents only a fraction of the £759m in other public contracts G4S held in 2010/11. They say such a move would send a strong signal to the public that the company was serious about offering "fair and reasonable redress" when things go badly wrong.

"By doing so, the company would accept, and be seen to accept, responsibility for its failings in respect of this extraordinary and uniquely high-profile contract, and therefore to draw a line between that failure and the continued fulfilment by this important UK company of other contacts, both in the UK and internationally."

The MPs say they were shocked by the "apparent reluctance" of the company's chief executive, Nick Buckles, to grasp this point when he appeared before them.

The committee says government departments, police forces and other public bodies should not place too much weight on a company's size and reputation when deciding future contracts.

Many of those recruited for employment during the Olympics were severely let down by G4S, the MPs add, and the company has a moral duty to pay those who were trained but did not work or were expected to pay for their own uniforms.

The longer-term future of G4S is more likely to be affected by the committee's call for those who commission police and criminal justice services to examine the track records of prospective providers.

"We recommend that the government establish a register of high-risk providers who have a track record of failure in the delivery of public services. This would provide a single source of information for those conducting procurement exercises about companies which are failing or have failed in the delivery of public contracts," they conclude.

G4S responded to the report by again accepting full responsibility for their failure but declining to forego the £57m management fee and insisting it was not profit but costs they had incurred.

The company said it had agreed with the GMB union a process to compensate staff who had been trained but not paid because they had not been offered work at the Games. Negotiations over the final financial settlement are still going on with the Olympic organising committee.

"The company acknowledges and regrets the serious failing of not identifying the workforce shortfall at an earlier date," it said. "As soon as the company knew that it could not assure the full workforce numbers in the build up to the Games, the relevant people at LOCOG and the Home Office were informed.

"G4S has a longstanding track record of delivering on government contracts to a consistently high standard. Everyone connected with the company is extremely disappointed that G4S was unable to deliver on its full commitments on this contract, but this does not reflect the high standards G4S delivers continuously in its other work for the UK government every day."