The Cabinet Office has committed to releasing details of outsourcing firm Carillion’s central government contracts following concerns that the implications of its collapse are not being made clear enough to the public.
The department also revealed that the government has given £150m to the official receiver to fund its work overseeing the company’s liquidation and the renegotiation of its contracts – 450 of which were in the public sector and where a third of its revenue, £1.7bn, came from.
Key Cabinet Office figures were questioned at a session of the House of Commons liaison committee, which is made up of all select committee chairs, about their role in the demise of Carillion, which went out of business last month.
They defended the government’s decision to grant around seven contracts to the firm despite its profit warnings, and months of speculation over its ability to service its debts.
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Asked whether a list of contracts, including their value and the implications of changes, could be released to the public, Cabinet Office minister David Lidington said only about 100 of Carillion’s 450 public sector contracts were with central government. Many of the others were with local authorities.
“I’m perfectly happy to send this committee as comprehensive a list of such contracts as we have available,” he said.
Cabinet Office perm sec John Manzoni also spoke at the hearing, adding that in some cases the official receiver would take a view on the release of information because some contracts involved an SPV – a special purpose vehicle, often a bank or private company – that would need to be consulted prior to publication of details.
The official receiver today confirmed that 930 staff, across the public and private sector, had been made redundant as a result of Carillion’s collapse. It said that 2,250 jobs had so far been saved.
Yesterday, Lidington revealed that the Treasury has provided £150m to support the work of the official receiver on Carillion. But he added that the “net figure” – the total cost to the taxpayer – would depend on the price at which the official receiver manages to re-let Carillion’s public sector contracts.
A further £1bn has been made available by private lenders to assist Carillion’s former subcontractors that are struggling following its collapse.
Civil service chief commercial officer Gareth Ryhs Williams, who was questioned by MPs at the same hearing, defended the government’s decision to let around seven contracts to Carillion after the company had issued a profit warning in July. A second profit warning was issued in September.
He said that in the case of two large HS2 contracts let as part of a consortium last year, Carillion had been subjected to a further round of financial tests following its profit warning. Having passed those, the Department for Transport had also asked Carillion’s contract partners to sign up to a joint liability clause.
Manzoni added that the government had “certainly stepped up our engagement with them”, and that there had been 25 meetings with Carillion since July. He said that both the government and the company itself had been surprised at its failure.
Conservative MP Bernard Jenkin, chair of the Public Administration and Constitutional Affairs Committee, asked about the possibility of bringing more Carillion contracts back in-house, as has happened with its contract to run facilities management in prisons.
Ryhs Williams explained that in the case of the prisons contract the direct customer was government itself – the Ministry of Justice – and a mutual was set up because the “volume” of work could be guaranteed. Where contracts were owned by SPVs, he said, it was more complicated because those companies had the right to terminate their contracts following Carillion’s bankruptcy.
Manzoni said it may be possible to take other work in-house, but added that it would take more time and the priority was to keep staff in their jobs and services running as smoothly as possible.
Rhys Williams also made a point about the need to acquire more contracting and commercial professionals within government. Brought in to build up the civil service’s commercial function two years ago, he said he had increased government’s expertise in this area.
But he added: “If ministers want to take that extra step, then we need to go further in terms of how many people we’ve got to do that sort of work.”
Earlier yesterday, MPs questioned the former executives of Carillion and branded them "delusional characters" after listening to a series of excuses as to why the firm collapsed.