Bain & Co takes legal action to overturn UK state contract ban

Bain & Co has asked a court to overturn a ban on tendering for UK public sector contracts for three years that was imposed by the government because of the management consultant’s “grave professional misconduct” in a major corruption scandal in South Africa.

Boston-based Bain said on Friday that it had applied for a judicial review of the decision, as it seeks to repair some of the reputational damage caused by the ban, arguing it was “was based on a flawed process”.

Jacob Rees-Mogg, cabinet office minister, informed Bain in a letter last month that the company’s role in undermining the South African Revenue Service had rendered its integrity “questionable” and that he was not convinced it had taken its role in the scandal “sufficiently seriously”.

The UK action was the first by a western government against Bain for its involvement in South Africa’s biggest post-apartheid corruption scandal.

This year, an official South African inquiry found that during the presidency of Jacob Zuma the management consultancy had helped to undermine the country’s revenue service that crippled its ability to carry out investigations of tax evasion. Zuma has denied any involvement in corruption.

Other professional services firms, such as McKinsey and KPMG, have also been involved in corruption scandals in South Africa, but avoided similar bans from winning UK government contracts.

Rees-Mogg was well aware of the possibility of his decision being challenged and his allies said he was meticulous in studying documents relating to Bain’s involvement in the South African corruption scandal.

Initially, Cabinet Office officials advised that no action against the company was necessary, but Rees-Mogg sought further legal advice — including from an external barrister.

The UK government said it would “strongly defend” its position. A judicial review is a type of legal action allowing a court to quash a public body’s decision if it has not followed a proper process.

The consultancy has been awarded UK public sector contracts worth up to £63mn since 2018, including £40mn worth of Brexit consulting work for the Cabinet Office. It had been paid about £20mn under those contracts, said a person familiar with the matter.

Rees-Mogg’s intervention last month came after pressure from Lord Peter Hain, the veteran anti-apartheid campaigner and former Labour cabinet minister, who had urged the government to punish Bain for its “despicable” behaviour.

Hain said on Friday that Bain’s decision to challenge the ban was “absolutely shameful,” adding that he planned to write to US President Joe Biden to ask him to take similar action.

The South African government is working on its own ban. “What [Bain has] done is akin to treason,” Ismail Momoniat, the acting director-general of South Africa’s Treasury, told the Financial Times last month.

While no national or provincial government department in South Africa had worked with Bain since 2017, “We are looking to formally ban them from procurement from the state”, Momoniat added. “We should have done it a long time ago . . . we are totally committed to banning them.”

Bain’s work on a restructuring of the South African revenue service was “a clear example of how the private sector colluded” with the breakdown of public institutions, the inquiry found this year. Bain has previously admitted failings in its work in South Africa and repaid fees, but said that the inquiry’s findings mischaracterised its activities.