After reading this week’s Construction News article – ‘Beware the hungry contractor hoovering up Carillion work’ by Tom Fitzpatrick, I thought it was important to share my views on this issue. For anyone who has yet to read it, here’s a link to the original: Hungry Contractors and Hoovers
I appreciate that the article is aiming to make a point through a word of caution, but I have to say I think that it over states the downside and does not give enough respect to the vast majority of contractors who do know how to run their business. We work with plenty of them.
Carillion going bust IS an opportunity for other contractors – you never know precisely what you are taking on until you ‘hit the phones’ and engage. I can’t see why doing so is considered a significant risk. Contractors are keen to expand their business and here is an opportunity for both new projects and new clients and to take on what is undoubtedly a good workforce and sub-contractors – all of whom have been very badly let down.
Of course there will be negotiation of existing contracts – I would be very surprised if anyone took on existing commitments without detailed assessment. Indeed, I expect clients will demand that themselves – do they really want to risk coming back here?
There will be plenty of QS hours spent working out precisely where the contracts are up to and working out what needs to be completed. In many cases, this will reduce the overall risk because an assessment half way through is going to be much more accurate than when the project was just a name and a green field site.
Also, I cannot believe that the companies that formed JVs with Carillion were unaware of the risks – especially those who formed JVs lately, such as for HS2. Joint and Several liability means just that – are you suggesting it was not fully considered?
Carillion has turned out to be a huge bad apple that could probably have been avoided (or minimised) if there had been better government over sight.
Passing risk to the supply chain needs more (not less) management if anything, because ultimately the risk cannot be completely given away. What is required is a more open system of risk assessment both at the beginning of the project and during the life cycle. Giving away the risk and then putting your head in the sand is clearly not a viable strategy.
We are a Tier 3 sub-contractor who de-registered from the Carillion supply chain when they changed their terms to 120 days. I guess we were fortunate that we could do that and we did.
And it is here we come to the real risk for the government and the UK plc – the likelihood that hundreds if not thousands of Tier 2 and Tier 3 suppliers will not survive the losses that they incur through these contracts. If that isn’t a reason for better oversight and a genuine review / consideration of legislation and how it can be introduced / improved to protect smaller organisations I don’t know what is.
Simon Burras, Managing Director of Applied Industrial Systems