MOB – wrong Philip Green; you’re referring to the retailer.

Nope.

https://en.wikipedia.org/wiki/Philip_Nevill_Green

What exactly do you think share holders took out this company ? We lost 100%… This could have gone into administration (of which there is a way out of)! Liquidation….. everyone got shafted… total fu@k up for everyone. The culprits were the board of directors and the shorters (they are not share holders and have no voting rights)

The government puts projects out to tender, private firms bid on them. If they don’t like the terms of the eventual contract they’re not being forced to sign it.

Except the public sector, unlike most private sector contracts, looks mainly at the bid cost. And very often, both sides know that the bid value doesn’t really relate to the actual costs because some reason will be found to escalate them. It’s a completely hopeless way of working and a private company that tried it would go bust. But government and civil service and local authorities keep on doing it.

It happened in defence some time ago (Nimrod/Astute, etc) and MoD has learned some lessons (but still a lot of room for improvement). Contract structure these days is nothing like it used to be, vastly reducing the risk on the taxpayer.

It seems the rest of the public sector hasn’t learned anything. If they did a half decent tender and acted like a proper customer, you wouldn’t end up with so many messes.

Pension Funds now managed under PPF so that’s safe, though the deficit of £600m will undoubtably remain just that. So those that put into the Fund probably won’t receive the full term amounts.

The standing of an individual scheme has no effect on benefits from the PPF.

The PPF has clearly defined rules and employees will receive exactly what they are entitled to under those rules. 100% for current pensioners, 90% of benefits up to a cap of £38k for active/deferred members. So they will get less, but that is down to the PPF guarantee and nothing else.

The deficit has nothing to do with that, any pension that goes into the PPF gets the same. It also isn’t taxpayer support – the PPF is paid for by its member schemes. The PPF will join the list of creditors to fund the shortfall.

coconut – Member

What exactly do you think share holders took out this company ? We lost 100%…

dividends. Money that if kept in the company would have kept it afloat

Of course the small investor is shafted as they had to pay for the shares unlike the board who get given them

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).

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

Indeed. Hence the question of why they signed up to a fixed price contract on the AWB. Are we really supposed to believe that a CEO and board of directors with god knows how much commercial experience were so incompetent that they couldn’t see what anyone with a basic knowledge of the construction industry would?

adviser on “corporate responsibility” apparently…

Carillons dividend was cut last summer when the first issues appeared. The dividend was about 7% . Bit like saying rbs should never have payed interest on any current accounts. Carillion’s value as a PLC was the share price times the number of shares in existence. The wipe out of a billion pound company went to a few huge select hedge funds… Blackrock investments, kite and Marshall wace… they got stinking rich off this and added heavily to the decline. No one would lend to carillon, and in part this was due to the way shorters manipulated this down… hence the practice being banned in Germany. This could have been rescued no question!

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).

Part of the Carillion MO is to trim/remove the risk allowance to make their bid lower.

Don’t often agree with him but Simon Jenkins in the guardian nails it.

“The company’s demise is attributable to favouritism, cost escalation, excessive risk, obscene remuneration and reckless indebtedness. Carillion and its bankers clearly thought it too big to fail. Whitehall behaved accordingly. It was like a pre-2008 bank.”

Part of the Carillion MO is to trim/remove the risk allowance to make their bid lower.

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.

I can’t believe how low some of the margins are on these contracts

Which then leads to squeezing the sub contractors, cutting corners and manipulating the specification whilst offering the client a perceived saving. None of which are a benefit in the long run to the end client/general public.

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.

Haven’t done their job very well then….

Carillons dividend was cut last summer when the first issues appeared. The dividend was about 7%

I’m sure Carillions board knew they were in trouble before then. I guess they were thinking of the tax saving when announcing the write down. If they had announced their troubles earlier then they might have struggled to reach the tender requirements. Plenty of other construction companies manage to operate in the same marketplace as Carillion did, IMO Carillion were not well run. Actual Carillion dividend total for 2016 was 18.45p

According to dividendmax.com
2016 = 18.45p x 430.3million = £79.390 milllion on T/O of £4.395 billion.
2017 = 12.65p

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.

Amen

I worked on a bid to do a job for a company. I worked with a guy from Germany from the vendor of the software being worked with. He’d been employed as one of a small team of specialists directly working with the client, and crucially on time and materials. They were able to take time sorting the issues out properly, and the whole thing was a total success.

The UK company on the other hand invited tender from a number of companies, one of which was a notorious outsourcer who quoted fixed price for 1/4 of our estimate. They don’t have anything like the skills we do, and the project is chock full of unknowns by its very nature. They have under quoted by assuming everything’s going to be easy and using cheap resources.

Can’t see a problem there, can you?

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, 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

I actually work for an IT services company that does a lot of outsourcing and yeah there’s a lot of it in the industry. We actually have a process in place where we won’t bid on contracts below a certain margin, not sure how many deals we lose on price but I suspect quite a few. One company we took over a few years back left us with a contract we were losing money delivering services the client didn’t want but both bound by a nightmare contract, thankfully that nonsense has now ended…

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?

Corporate Governance Code.

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.

Very much this. We are a web agency that puts UX/UI/process at the heart of all we do so our costs are not the cheapest. More recently we have been losing out to companies charging much less – but it’s because they don’t go through the same process as we do (they will just make a ‘pretty’ site). It isn’t that what they are doing is wrong, it’s just different to how we do things yet the people we tender to don’t see this – they just see ‘website price A £X,000’, ‘website price B £Y00’ and go for the cheaper option.

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 ?

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.