[Closed] Carillion

I feel most for the subbies and employees because they're the ones who will feel the pain worse. No doubt it'll finish off some of the smaller subbies.

TBH, I have no idea why anyone would be a subbie because they shafted so hard by the main contractors. It's a funny old industry.

I have a friend who is also a QS who works for them and was working on One Chamberlain Square in Birmingham.

Lets be very clear about this, and other statements that are along similar lines, the responsibility of the board of a company to act in the best interests of the shareholders,[b] not the employees. You (plural not just TJ) may not like that fact but that is the law

Which law is this?

FuzzyWuzzy - Member
I can't believe how low some of the margins are on these contracts, especially as they're often the type of thing that has unforeseen overruns (unless a substantial contingency has been built in but then you risk pricing yourself out of the bid).

Balfour Beatty Rail, when it was loaded with work, based things on a 3-4% margin with scope for aggressive commercial variation to bolster this as the 3-4% was basically unachievable; this back fired when contracts (with NR) changed from fixed cost or cost plus to a pain / gain format where any gains over margin are shared by the client and the PC and any losses equally so. This was going on to the point where BBR hadn't made any profit off their own backs for 5 years prior to 2015 and had been bank rolled by Balfour Beatty Construction.

I can imagine this is what was going on at Carillion, but the bank rolling was based on loans gained on a back of their order book, but ultimately they couldn't pay? Feel free to correct me if I'm wrong

From working in the IT industry I strongly feel that a significant barrier to increasing productivity is the relentless drive to save money which leads to outsourcing to the lowest bidder, which leads to failed projects and poor performance

From working in the IT industry I strongly feel that a significant barrier to increasing productivity is the relentless drive to save money which leads to outsourcing to the lowest bidder, which leads to failed projects and poor performance.

This is true for all services.

Friend was working as an IT troubleshooter for the DWP on Universal Credit
He quit after they ignored his report that the IT companies would never complete the task on time or at the budget they bid and the gov had no comeback.
That was a few years ago and UC is nearly a decade late and £13bn overbudget

With significant experience in transformation and IT governance, this is something I have often done internally and for external organisations. When you are ignored - it’s cathartic to see that you were right.

From working in the IT industry I strongly feel that a significant barrier to increasing productivity is the relentless drive to save money which leads to outsourcing to the lowest bidder, which leads to failed projects and poor performance.

True, but just because you pay more doesn't always mean you get a better service. I've seen some higher cost contracts deliver poor output quality and go way over budget. Hence, I totally understand why companies and government often go for the lower cost option. Also don't forget that on paper the technical skills of different companies can look very similar to key decision makers unfamiliar with the exact nature of the project, so cost becomes the king.

jamj1974 - Member
With significant experience in transformation and IT governance, this is something I have often done internally and for external organisations. When you are ignored -

off the back of it he started his own company that looked at legacy systems for big companies, despite the ridiculous fees he charged the big companies more often than not ignored his advice, I do wonder if its just something that happens in big institutions, where it becomes easy to ignore the red flags as long as everyone else does

Which law is this?

Companies Act 2006 talks about responsibility to the company and mainly mentions shareholders with employees cropping up here and there.

Also don't forget that on paper the technical skills of different companies can look very similar to key decision makers unfamiliar with the exact nature of the project, so cost becomes the king.

Indeed. But, if you hadn't outsourced all your skills, you'd have your own skilled people who can call out when your contractors are being shit.

So it says the company has a responsibility to the shareholders, but doesn't exclude other stakeholders as well?

I suspect it is often used as an excuse, and an inaccurate excuse, for companies to exercise poor governance and unethical behaviour to other stakeholders, when that isn't what the law really says or intends. But I am not familiar with the companies act 2006, so can't say for sure.

Oxfordshire council have put the fire service on standby to deliver school meals if the worst happens.

http://www.bbc.co.uk/news/uk-england-oxfordshire-42687748

and over in liverpool all workers at the new late royal liverpool hospital pfi white elephant have been sent home for the day, told to return tomorrow, wonder how many self employed will not return and how many suppliers will be removing supplies/ equipment in the morning.

Which law is this?

Companies Act s172 mostly, as interpreted by courts over the years. Although s170 makes clear that these duties are owed to the company and not the shareholders (but then they are the owners...).

More recently, we have seen this distorted to mean "success until the next dividend and no further".

Also don't forget that on paper the technical skills of different companies can look very similar to key decision makers unfamiliar with the exact nature of the project, so cost becomes the king.

Balfour beatty are reporting a big hit on joint projects due to the failure of carilion.

various building construction mags are also saying a lot of smaller suppliers are going to failing next few months due to monies owed.

more info here https://www.pwc.co.uk/carillion

Irrespective of the party political bickering that could be gone into, I know who will end up paying the cost.

Tossers.

News already filtering through at work today of projects being cut, and to my knowledge we don't do a lot of work directly with them. This is going to have a huge knock on effect in the construction industry which has already seen investment levels drop thanks to brexit. On the positive side my chances of being made redundant are looking up.

I see the wages will only be paid for 48 hours. Looks like I'll be working from home on Wednesday.

@project - Carillion's 'standard' payment terms of 120 days will exacerbate this.; any subbies on Carillion rail jobs will be less badly affected due to Network Rail's 30 day payment charter which is imposed on all of their contractors and means that subbies are paid on 30 days end of month terms.
Subbies to other Carillion divisions will be on 120 days.
Those terms were implemented 4 or 5 years ago and were widely seen as Carillion trading on the margin.

An example of their mindset in recent years.
I have worked for them as an interim in 4 different sectors/divisions and have seen their changing attitude to pricing/winning jobs.
In their rail business, which is part of UK construction services, there was a stated objective to grow t/o with Network Rail to £500million pa quickly; what wasn't publicly stated was that they were totally unselective about what to bid for - it was all about volume and t/o.
I have no reason to assume the same thought process did not prevail in all other divisions.

Empty words from David Lidington this afternoon will be no consolation to employees, subbies, other stakeholders, clients.

Companies are an artificial construct, and only exist because we (our laws) permit it.

The problem with company structures is that they are amoral.

It's time we fixed that, and also time we had a govt appointed independent director with real powers in big listed companies. Might help cut tax evasion too.

4 month payment terms, who in their right mind would accept those terms, theres going to be wholescale walkouts from sites no matter whos running them, would anyone on here stay working at what was carillion in the present climate.

@project - subbies made noise, rightly, about extended payment terms but accepted them because they needed the work.
Carillion's position as no2 contractor in uk construction allowed them to lever their position - and they did.

surely all those sub contractors are not going to see a penny of what they are owed ?

[url= https://farm5.staticflickr.com/4631/39712350151_05ea8d0781_b.jp g" target="_blank">https://farm5.staticflickr.com/4631/39712350151_05ea8d0781_b.jp g"/> [/img][/url]

That would make sense, epic, but is it true? Do you have any links, surely it would be all over the news if it was that transparent, or maybe not.

@cchris - I fear that many subbies will lose significantly and force some into administration.
I worked with several Carillion directly employed PMs, senior PMs, QS', MQS - all good guys; having said that as soon as you look at the people who are/were one or more steps removed from project delivery it was a different story. With every step further away from project delivery the worse it was.

PwC have been retained by Gov to advise on disposals etc. That is anything but reassuring. PwC, EY and the other audit/consulting advisers - aka vultures - specialise in playing off both ends against the middle; they are duplicitous, lying, venal, amoral, deceitful, dishonourable. Other than that they're (possibly) ok.

Carillion played by the rules.
Message is clear - the rules are in need of a major rewrite.

Lidington says '...day1 has gone pretty well'; what a lying scrote.

@epic you should go and live somewhere without any companies and where products produced by companies are not available. The Amazonian rainforest springs to mind.

@mols all those skilled people will be available to be hired by someone else now. If these contracts where run by Government / state you’d have pension costs close to treble those of the private company. Costs to the state would be much higher.

Jamba - Carillion were a 'management contractor' who won jobs and then subbed out all of the work packages; they project managed scheme delivery.

You wrote.....@mols all those skilled people will be available to be hired by someone else now. If these contracts where run by Government / state you’d have pension costs close to treble those of the private company. Costs to the state would be much higher.

Fact - guys on the tools in sub contractors are hugely at risk.
TUPE rights will disappear.
A replacement contractor on a project will not just accept the design developed by Carillion irrespective of what stage the delivery has reached; they will be looking for indemnities and warranties.

Lidington sounds calm but I doubt he has a clear understanding of the details - and PwC will make the right noises to suit their corporate objectives which include long term revenue streams and enhanced profitability.

mols all those skilled people will be available to be hired by someone else now. If these contracts where run by Government / state you’d have pension costs close to treble those of the private company. Costs to the state would be much higher.

Well firstly, state run businesses don't NEED to have high pension costs, do they? It was part of their recruitment model. Indeed, I am not sure they still give civil servants massive pensions anymore, do they?

Secondly, there's going to be a shitload of upheaval, misery and insecurity for everyone involved - service consumers and providers.

Thirdly, don't talk about pension costs when Carillion were raiding the pension pot. Employees paid for the pensions and if the government bail them out the state will have to pay for them as well. Meanwhile tons of cash was siphoned out of the system into rich people's pockets.

This is a shit show from top to bottom, it's utterly indefensible Jam.

That would make sense, epic, but is it true? Do you have any links, surely it would be all over the news if it was that transparent, or maybe not.

It is a fact that the government gave contracts after three separate profit warnings. Not sure about the donor bit but it should be pretty easy to confirm.

How much will this cost the taxpayer?

Government minister on Newsnight refused to say it would cost anything, analysts seem to think it will cost millions.

Plays into Corbyns hands, renationalisation was already popular with voters.

jambalaya - Member
@epic you should go and live somewhere without any companies and where products produced by companies are not available...

But they need to be kept under control and not allowed to work against the interests of the people of the country, ie make it as near impossible as possible for cowboys to run them.

@kimbers - far too early to make the vaguest guesstimate on that one.
Will take years to properly unwind and quantify.
This will be the biggest hit yet on the PPF; uncertain business/economic future - Brexit et al; likely that PPF levy will increase.
I hope this leads to a full review of whether or not PFI works in the 'public interest' rather than the interests of a small number number of companies who transfer the benefit to their shareholders.
PFI was well intentioned but the law of unintended consequences resulted in unintended beneficiaries coining it.
Corbyn & McDonnell will never bring all PFI contracts back under Gov control if labour become the governing party; there are too many, the cost will be enormous, the complexity of unwinding some of the contracts is beyond their capabilities.
They could bring some under Gov control but most will remain unchanged and run their course.
Major review and restructuring of how new contracts will operate is required.
Look at McQuarrie - australian banking/outsourcing company; only in uk because of PFI. There are many others.

Cameron knighted Green in 2014 ( for services to business) he was a Tory supporter who was one of the 100 captains of industry that wrote a letter in the 2015 election saying we should all vote Tory and that voting labour would put jobs at risk

http://www.telegraph.co.uk/news/politics/labour/11507586/General-Election-2015-Labour-threatens-Britains-recovery-say-100-business-chiefs.html

[img] [/img]

May took him on board to advise on responsible business, despite having been found of illegally blacklisting
Not sure of greens donated to them

Government minister on Newsnight refused to say

So technically we have our answer already.

Corbyn & McDonnell will never bring all PFI contracts back under Gov control if labour become the governing party; there are too many, the cost will be enormous, [b]the complexity of unwinding some of the contracts is beyond their capabilities[/b]

That's not stopped the Tories from pursuing Brexit 😉

As an official stw lefty even id not want to see everything under gov control, but would like to see nationalised providers as an alternative in the right industries.

Kimbers - Osbo was photographed innumerable times in branded PPE with every company he thought may support the tories
As for the blacklisting, I'm sure you're aware that the full list is very lengthy; Carillion were on the list as were most, if not all, of the UK's tier1 civils and construction contractors.

Mattyfez - 'refused to say' means 'I don't have the slightest idea'.
As I posted ^^^ this will take tears to unravel and quantify.

It will take years - as well as tears - to unravel.

Kimbers - don't disagree with your view about tories and brexit.
Tories have proved themselves to be generally incompetent in Gov.
I don't believe that labour have any higher level of competence.

So Corbyn thinks have an unprofitable construction company publicly owned is a good idea, really?

Have the Scottish government had much to say yet, as it was Transport Scotland that awarded the Aberdeen bypass contract, and that seems to be one of the projects that's gone wrong financially at least.

It is a fact that the government gave contracts after three separate profit warnings. Not sure about the donor bit but it should be pretty easy to confirm.

The way I understand it. The government kept giving them the contracts in the hope the banks would continue to extend/renegotiate the finance, the banks did not do either as they wanted/expected the government to provide a bailout as they believed Carillion was too big to fail and the government would step in.

So Corbyn thinks have an unprofitable construction company publicly owned is a good idea, really?

Saying much of the work should never have been outsourced in the first place.

Forced to bid so low it's unviable, now employees & taxpayers suffer, for the short term 'benefits' of austerity.

As I said doing Corbyns work for him

We need a moderate centrist government like the lib dems.

The tories are.. Well bat shit crazy.

And Labour are.. Well bat shit crazy.

Dragon - if the Scottish government lawyers were smart enough (you never know!) then because the Aberdeen bypass is awarded to a consortium / joint venture the risk of a member of the consortium failing may (should) pass to the other members not the gov. No idea if that is the case, or how big Carillion role was in the whole project and what the end effect of that could be on the others who got into bed with them.

IHNRAT but I saw a mention this morning a suggestion that lots of contractors worked through umbrella companies (no great surprise based on the STW experience). Where does the liability lie for paying the subbie then? Could it take a few umbrella co’s down with it? (No bad thing).

I wonder how many people would be having a go at the Tories if they stopped giving Carillion contracts months/years ago when they issued profit warnings and the company went under then - I bet a lot of people would be saying they probably would have survived if they hadn't had the rug pulled from under them etc.

Don't get me wrong, the Tories have a lot to answer for and I expect back-scratching etc. went on (and heads should roll but likely won't), I just don't think it's as simple as they should have stopped awarding them contracts when they issued a profits warning

Dragon - if the Scottish government lawyers were smart enough (you never know!) then because the Aberdeen bypass is awarded to a consortium / joint venture the risk of a member of the consortium failing may (should) pass to the other members not the gov. No idea if that is the case,

Is the case here, Balfour Beatty have taken a hit as partners in Aberdeen. They announced yesterday they expect the knock on effect to cost them about £45M. They were also quick to point out that this was their only financial exposure to Carillion. They are obviously worried about their own value if they get tarred with this brush