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Carillion: Government to scrutinise payment term oversight

 

 

Business secretary Greg Clark has admitted that government oversight of all public sector contracting must be scrutinised following Carillion’s collapse, after his Labour opposite number questioned why 30-day payment was not enforced.

Responding to a question from shadow business secretary Rebecca Long-Bailey on why regulations requiring 30-day payment terms on public contracts were not enforced on Carillion, Mr Clark said: “The scrutiny of what went wrong in Carillion […] and the oversight that took place across the whole of the public sector in terms of contracting, need to be looked at and will be looked at.”

He added that the government would take action where it was deemed to be required.

Carillion implemented an early payment facility in March 2013 than required suppliers to adopt 120-day payment terms.

Ms Long Bailey questioned why warnings from the Federation of Small Businesses and the Specialist Engineering Contractors Group over Carillion’s terms in July 2017 were ignored.

Earlier this week the Insolvency Service chief executive Sarah Albon told a select committee hearing into Carillion that liquidation special managers PwC, when dealing with future payments for subcontractors, would move away from 120 days and would look to meet “industry standard” payment terms.

Responding to questions from MPs about the money lost by businesses in Carillion’s supply chain following its collapse, Mr Clark said he had met representatives on the day Carillion fell into liquidation and their “first request” was for “leniency” from the banks.

The business secretary told the Commons that banks had “explicitly committed to help” affected customers and they had pledged to “deal individually with those hit by the contractor’s demise”.

Mr Clark also promised to look at the idea of holding money owed to small firms in project bank accounts.

Yesterday CN revealed that subcontractors on Carillion’s problem Royal Liverpool Hospital job had been left “in the dark”, with PwC reportedly failing to provide details of how the project can restart.

Readers' comments (8)

  • It’s not only Carillion guilty of that they all treat subcontractors the same
    It’s been highlighted time and time again but nothing is done to prevent subcontractors being used as funders/credit facilities for them

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  • https://www.gov.uk/government/news/prime-minister-announces-supply-chain-finance-scheme

    It is reassuring to see the Minister's concern here. As attached, the extended terms and Reverse Factoring arrangement was 'announced' and promoted by the Government in 2012, alongside Carillion, amongst other household names. Whilst hardly a new idea, it was heralded as a means of improving the SME Suppliers access to low cost. Perhaps in most instances it was driven more by the one off cash flow benefit to the Large Client firms with them pushing longer and, in Carillion's case, unreasonable 'standard terms' and asking suppliers to pay for 'early' payment.
    One Public client who has worked hard and successfully to ensure decent back to back terms are adhered to for suppliers is Network Rail.

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  • i do whole heartedly agree with the previous comments, this is not reinventiing the wheel here its the client walking away from deals done at tender stage, lets firstly get some common contractural terms agreed, no 1 in my book is project bank accounts, client agrees the tier 1 margin and what it is going to deliver in house, then the supply chain gets paid from the bank account at the same time as the tier 1, the client can monitor the rates the sub contractor is working for and the margin the tier 1 contractor has on their rates

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  • StreetwiseSubbie

    Why have Construction News deleted our comment calling for a Public Inquiry into construction?

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  • Yes, why did the Government let Carillion get away with 120 Terms on their subcontractors when the Regulations said 30? And why has Barry's comment been deleted? There will be many who will be asking the same thing. He works his backside off trying to look after the interests of SME's who have been treated so badly for many years by some. Their failure to monitor what was going on was a disgrace and yes it is time something was done about it. As for the banks being lenient, what does this mean exactly? How many are looking at their bank account in despair today and wondering how they're going to pay their workforce and suppliers?.

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  • Hi Streetwisesubbie, we've had a check and we've not deleted any comments on this story from you, thanks

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  • StreetwiseSubbie

    Thanks Zak I will post it again below.

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  • StreetwiseSubbie

    "Enough's Enough - It's Time For Truth!"

    Thousands of lives are going to be impacted by the Carillion liquidation

    It's time to stop ignoring the payment abuse, and the shameful and degrading way that some of the big players treat their subcontractors and suppliers!

    Those that have the power to change things are choosing to ignore the shameful way that professionals, Sub-Contractors, and suppliers go unpaid or under paid, for work properly and professionally carried out.

    Enough's enough, let's all work together for real truth and real change. So, here is what we would like you to help us with;

    Support our call for a Public Inquiry

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