Carillion Liqudiation

Bl4ckGryph0n

It is a race to whatever you procured.

Without knowing the ins and outs it read like that origination is no better at managing its contracts and service providers than many others. Nobody ever suggested this is limited to the private sector.

Many shy away from using the contracts, yet they can be a very useful tool as they confirm an agreed baseline at a confirmed moment in time. Too many people, organisations seem too scared to actually use them.

tapzilla2k

Having worked as a cleaner, all the client expects to see is the cleaning done to a certain standard and for the agreed to budget for wages and cleaning materials to be kept to the agreed amount. Which basically translates into, expecting a gold plated service while paying out peanuts then looking confused at the result. Which meant no end of pay being fiddled, to make it look like the budget was being kept to and cheaper cleaning materials being bought which led to the quality of the work going down. Which usually meant we the mere cleaners got verbal warnings, for the mistakes made by those higher up the chain. From what I've heard recently, things haven't changed a whole lot. I should have left that job sooner, in the end it added to mental health woes.

Service levels in cleaning usually means keeping things under budget and in the case of food hygiene ensuring hygiene levels were to the required legal standard. Outsourcing works for those who extract a profit from it, not for those who have to do the hard graft to deliver the service. The outsourcing market is broken and requires state intervention to reset the market.

As for Public Sector contracts ? There needs to be a balance between the public and private sectors, in some instances a service might well be better off being performed by the Public Sector, while another might be better suited to the private sector. It's finding that balance that is the tricky part, alongside beefing up the Civil Service to be able to deal with service contracts properly. Might require a new Ministry that focuses on the delivery of Public Service contracts (be they in the public or private sector hands).

domtheone

Sky saying Financial liabilities could have been as high as £5B

No doubt that number will include some massaging but, like so many high profile cases, how can it be left so long.   Something should have been done yonks ago.

Badly run companies really need to be let go sooner and, let better run companies step in to fill the void.

Bl4ckGryph0n

Plenty of civil servants and oversight already; heck I've written myself enough ministerial submissions and account to the public accounts committee as well. What in my opinion is missing is some backbone to actually stop projects. To actually leave contracts when they aren't performing. To actually discipline staff when they are not managing to do their job. Undoubtedly there are terrible outsourcers, but they only get away with it if they've been given terrible contracts or nobody is managing them. As per usual it is so easy to focus and gather attention for big bad private companies, but why would any legal entity do more than what they are contracted to do?

EarthRod

Government projects should be carried out by people employed by the government. All major services under government control.

Large private enterprises can compete for the hardware, materials, tools and associated machinery to manufacture, sell or hire - but the project, finance and personnel all under government control.

Greg Hook

The problem with a lot of these Government contracts is that on the Government side of the negotiation they have been dealt with by complete and utter morons.

It’s a win/win normally for the Contractor as the contract is iron clad and the Government of the day stupidly agrees to it with huge penalty or early get out clauses.

It’s like the Government just see the figure they will be paying for the service and don’t bother to actually read the rest of the contract. The amount of times you hear that something hasn’t worked out but it has to go through due to the terms of the contract.

Private companies would never sign the majority of the contracts that the Government do as they are not in their interests to do so.

Enki

Carllion are not the exception. Interserve with others teetering on the abyss...

Bl4ckGryph0n

And yet again why do can they get away with that? Because in my experience the penalties for not meeting service level agreements are less than the profits that can be made.

There are some absolutely idiots agreeing to these terms in the contracts.

Yet some here keep on blaming those greedy companies. It’s the government and civil servants that should be held to account.

Although in this particular case it’s neither, Carillion was just badly run and it seems the cause was their own management and their private sector contracts.

tapzilla2k

I'd be looking at two things -
1. Capability of the Civil Service to monitor contracts and step in when necessary if problems arise.
2. Ban company directors and those connected to them from making big donations to Political Parties, to remove the possibility of influence over Ministers decisions when it comes to awarding contracts.

The penalties need to be at least at the same level as the possible profits that can be made, if not more. It might focus the minds on delivering a contract on time and within budget where possible.

The Civil Service lacks the capability to draw up these complex contracts, let alone properly manage them. All they seem to want to do is hand out contracts and leave the mess to Ministers to sort out when the pooh hits the fan in the press. The system as it stands has set the conditions to create zombie companies that continue to trade due to Government Contracts. It's no good for the taxpayer or the Economy. Interserve is another company that might go the same way as Carillion, it's one to keep an eye on.

All 3 need to be held to account.
1. Politicians need to be held to account for decisions taken and what if any influence donations to Party coffers from those connected to outsourcing companies may have had on a Minister's eventual decision to award contracts.
2. The Civil Service requires massive reforms, it's too much of an old boys network still. The senior mandarins nearly all have Oxbridge and Etonian backgrounds. Aside from those few Civil Servants who rise through the ranks from working class backgrounds.
3. The behaviour of companies in regards to paying out to shareholders while they let pension deficits ramp up to unsustainable levels. Carillion's pension deficit was closer to £2.6 billion -
Sky sources: Carillion collapsed with £5bn of financial liabilities
Then you also have to look at the pay of CEO's and senior management figures in terms of how much they are paid and what their bonuses are. It appears that there is a reward for failure in certain parts of the private sector. We may reach a point where we'll have to make changes in the law to ban bonus payments for managers when a company is not performing to market expectations. We are not there yet, there is time for business to sort itself out on that front without needing to resort to law changes.

It's too early to say what precisely went wrong with Carillion, I expect there is a lot of detail around the collapse that's yet to come to light.

EarthRod

This 2012 Telegraph article highlights some 'incompetent' issues and blunders with public service contracts:

We can't have Sir Jeremys running the Civil Service

Major blunders have been going on for years yet nothing is being done to correct the problem.