Carillion becomes carrion
Glass Times editor Nathan Bushell weighs up the potential knock-on effects following the collapse of Carillion
No matter how many times it has been said, or by whom, the popular model for construction procurement is unfair, unwieldy, and unsustainable – surely the collapse of Carillion is a wake-up call.
I can see why a design and build route is popular for the government, especially when you include a finance and operating element (more commonly known PFI): the client effectively hands over all control to the cheapest bidder, and the design, build, finance, and ongoing management is taken care of.
What happened in the case of Carillion, it appears, is that that the government also backed away from all responsibility – left to their own devices, the Carillion board members have racked up huge debts while paying shareholders large dividends, left some employees without a full pension, left many more without a job, and could force the closure of many companies that supplied the firm with products and services.
When the news broke, I was both gobsmacked and unsurprised: gobsmacked because it wasn’t as though the warning signs weren’t there for all to see, yet the government continued to hand Carillion work; and unsurprised because something like this was going to happen sooner or later.
Brian Berry, chief executive of the FMB, said: “Carillion’s liquidation is terrible news for all those who work for the company and it will have serious knock-on effects for the many smaller firms in its supply chain, some of which will be in serious financial danger as a result of Carillion’s demise.
“Carillion’s liquidation raises serious questions for the government, not least about its over-reliance on major contractors.”
Brian also makes the point that there are other – better – ways of working.
“The government needs to open up public sector construction contracts to small and micro firms by breaking larger contracts down into smaller lots,” he said.
“That way, it can spread its risk while also reaping the benefits that come from procuring a greater proportion of its work from a broad range of small companies. Construction SMEs train two-thirds of all apprentices and are a sure-fire way of spreading economic growth more evenly throughout the UK.”
Iain McIlwee, CEO of the British Woodworking Federation, said: “This debate is not about whether the state should bail out Carillion, but whether government can in all conscience turn its back on a supply chain of SMEs who will end up carrying the can for poor procurement, bad business management and an endemic failure by the government to address some of the archaic procurement practices surrounding late payments and retentions that place risk unfairly on SME sub-contractors.
“Many of the creditors are SMEs and the sums, while likely to be significantly lower than the liquidators will take, could define the future of these businesses – it would be a gross injustice if their money unfairly held is lost in this process.”
My hope is that this debacle will shine a spotlight on the wider construction industry – not just public-private partnerships – and that all suppliers will be given the opportunity to develop products and services, employ a dedicated loyal workforce, train the next generation of professionals, and grow their businesses without their futures being held to ransom by disconnected corporate behemoths.