In his editorial last week – Beware the hungry contractor hoovering up Carillion work – CN editor Tom Fitzpatrick rightly emphasised the need for caution over contractors taking on former Carillion projects.
However, it overstated the downside and paid insufficient 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 undoubtedly an opportunity for other contractors – you never know precisely what you are taking on until you ‘hit the phones’ and engage with the client.
There’s no reason why doing so should be considered a significant risk. Contractors are keen to expand and here is an opportunity for both new projects and new clients and to take on what is undoubtedly an excellent workforce and subcontractors – all of whom have all been very badly let down.
Yes there will be re-negotiation of existing contracts; I would be surprised if anyone took on existing commitments without a detailed assessment. Indeed, clients should be demanding that themselves.
There will be plenty of QS hours spent calculating precisely where the contracts are up to and what needs completing. In many cases, this will reduce the overall risk, as an assessment conducted halfway through is much more accurate than when the project was just a name and a greenfield site.
“A more open system of risk assessment, both at the beginning of the project and during the lifecycle, is needed”
Equally, I cannot believe the companies that formed JVs with Carillion were unaware of the risks – especially newer ventures such as HS2.
Question of risk
Carillion has turned out to be a huge bad apple that could probably have been avoided (or minimised) with better government oversight. Passing risk to the supply chain needs more, not less, management if anything, because risk cannot be given away. But by passing it down the supply chain, its management becomes more remote.
A more open system of risk assessment, both at the beginning of the project and during the lifecycle, is needed. Giving away risk and then putting your head in the sand by thinking the problem has largely gone away is not a viable strategy.
We are a tier three subcontractor that de-registered from the Carillion supply chain when its terms changed to 120 days. In hindsight, we were fortunate to have that choice open to us.
And this leads to the real risk for government and UK plc: the likelihood that hundreds if not thousands of tier two and tier three suppliers won’t survive losses incurred through these contracts.
If that isn’t a reason for better oversight and a review of legislation to see how it can better protect smaller organisations, I don’t know what is.
Simon Burras is managing director at Applied Industrial Systems