Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Outsourcing should not die with Carillion

Andy Milner

The gap that exists between infrastructure need and actual spend is now a chasm that every nation must find a way to bridge.

According to the Global Infrastructure Hub, the discrepancy sits at $3.7tn every year.

Connected autonomous and electric vehicles are on the brink of forever changing highways networks globally.

Meanwhile, remote sensors, digital technology and data analytics are transforming asset management from the workaday business of digging holes and mending things that are broken to a slick, forward-thinking infrastructure management process.

New technology brings new opportunities. But it also brings fresh challenges and it is unrealistic to expect the public sector to shoulder this responsibility alone.

The solution, in my view, must lie in government engaging the private sector to support it through outsourced management of many of these complex systems.

Government needs to engage with private sector specialists so they can bring forward and invest in the new ideas, which will drive down costs and add vital social value to outcomes.

Carillion’s long shadow

The collapse of Carillion has unsettled the market and made the term ‘outsourcing’ a byword for corporate greed and incompetence for the public.

But the reality is that contracting and outsourcing remains a permanent feature of governments in mature economies across the world, and never more important in the UK, with some £251bn spent last year by central and local government with external suppliers.

The current backlash by both politicians and the public over a perceived imbalance between private sector returns and public benefits delivered by private outsourcing contractors has raised serious questions over whether such arrangement should continue.

“The collapse of Carillion has unsettled the market and made the term ‘outsourcing’ a byword for corporate greed and incompetence for the public”

Rightly so. Whether this backlash is through public perception or reality is largely immaterial; we must react to these legitimate questions with open discussion and, where appropriate, change our approach.

We must accept that there should be scrutiny over the way private sector companies are run and over how they operate on behalf of the public. Taking disproportionate profits from contracts without delivering tangible – or recognisable – social value to communities being served is not on and is not sustainable.

We are all taxpayers. It is entirely reasonable that the money deducted from the nation’s payslips is demonstrated to being spent wisely and prudently.

Value and profit are not mutually exclusive

There is also, however, work to do on the client side.

As the House of Commons Public Administration Committee pointed out, despite the UK leading the world with innovative private sector outsourcing for 30 to 40 years, there has been a depressing inability of central government to learn from repeated mistakes, with a patent inability to understand the design, letting and management of contracts.

Public procurement has long been driven by price and unrealistic risk transfer, as well as an inappropriate view of what constitutes a quality outcome.

There is a fundamental lack of understanding about private sector motivations and the way that we operate in the market.

As an industry, we need to be clearer about what we stand for. That means encouraging and embracing robust partnerships with demanding, flexible, forward-looking clients. Fundamentally, being profitable is not the same as profiteering.

The goal, on either side of a contract, can never simply be to do things more cheaply and strip out value. To be successful we all have to remain focused on finding the best, most socially appropriate infrastructure solutions.

We also have to, when the conditions are right, put up our own money and invest in resources to stimulate economic return for the nation – not simply operating in short term, low technically demanding operations in which cost not value is the deciding factor.

Private sector investment and innovation will work in partnership with the public sector to build on our historic asset networks to bring new services and opportunities to customers – be they vehicle charging points, smart meters or widespread hyper-fast broadband services.

Robust partnerships between the public sector and private expertise will be critical to ensuring that these new services are delivered and that value is delivered to the public – value that goes beyond simply measuring financial impacts and embraces longer term community and social impact.

Andy Milner is CEO of Amey

Carillion – One year on

This week, Construction News will publish a range of news articles, features and comment pieces exploring the impact of Carillion’s collapse, one year on.

Tomorrow, CN head of content Zak Garner-Purkis tells the untold stories of subcontractors who chose not to speak out and how they were affected, while revealing a disconnect between government and bank funds set up to support victims and those people affected.

On Wednesday, CN takes a look at a major project that suffered from Carillion’s collapse, where the client outlines how they managed to keep work going and the lessons learned. Features editor Binyamin Ali also sets out eight key lessons learned from the debacle that will shape the industry’s future.

On Thursday, news editor Ian Weinfass and Binyamin Ali explore the projects and people affected.

Subscribe to CN now for the best construction sector coverage.

 

Readers' comments (1)

  • The argument for 'Outsourcing' isn't helped when the public are becoming ever more aware of the blatant scams being perpetrated upon the public purse; one only has to look to the NHS where big Pharma business is squeezing the public purse to the tune of 5% in year on year cost growth whilst failing to deliver the new drugs we really need https://www.independent.co.uk/news/uk/politics/revealed-big-pharma-links-to-nhs-policy-with-senior-mps-saying-medical-industry-uses-wealth-to-9120187.html Carillion was just another passenger on the gravy train of public spending/ private siphoning of tax payers money into the pockets of the greedy, self-serving Board members. Until we grasp the nettles of pay inequality and huge payments for those responsible for cataclysmic corporate failure it is entirely right and proper that the public remain wary of the awarding of further contracts to private sector companies.

    Unsuitable or offensive? Report this comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.