Experts have called for a complete overhaul of the public sector procurement service following the collapse of construction firm Carillion, which went into liquidation on Monday 15 January 2018.
Specialist Engineering Contractors (SEC) Group Chief Executive Rudi Klein said: “The Financial Conduct Authority are already doing an inquiry into Carillion… What we need to be looking at is an inquiry into the future. How are we going to improve payment security for supply chains, how are we going to improve procurement?”
Nelson Ogunshakin, Chief Executive of the Association for Consultancy and Engineering, described the current procurement system as “broken”.
It is feared that many smaller organisations will also be at risk, as the company’s debts are passed on further down its supply chain. Shadow Business and International Trade Minister Bill Esterson said: “If Carillion’s suppliers aren’t paid they will go bust too with the loss of thousands of jobs.”
Carillion was the second largest construction firm in the UK and employed over 20,000 people. The government has been criticised for continuing to award the organisation major public sector contracts despite it being technically insolvent, with debts amounting to £1.5m.
David Lidington, the House of Commons Cabinet Office Minister, has confirmed that the official receiver will investigate Carillion’s failure, including directors both at the point of insolvency and previous directors whose actions may have been to the detriment of creditors and employees.
At the start of the week, the Public Administration and Select Affairs Committee announced an inquiry into how government and the public sector manage the risks of outsourcing the delivery of public services. The government’s emergency COBRA committee has also conducted meetings with the objective of limiting damage and maintaining public services.
Mike Cherry, Chairman of the Federation of Small Businesses, called for more strategic sourcing from the government, saying that the government should instead be prioritising its target of awarding smaller firms with at least one third of contracts funded by the taxpayer.