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

Carillion inquiry demands government explain risk rating

The Carillion joint inquiry has called on the government to reveal why it decided not to rate the contractor as ‘high risk’ before its collapse, after it refused to disclose the information to another committee.

Risk assessments of Carillion made by the government’s crown representative dating back to March 2016 were released by the public accounts committee (PAC) last week.

These revealed that a recommendation to rate the company as ‘high risk’ one month before it collapsed was rejected by the government after it met with Carillion bosses.

The PAC said the government had refused to reveal the reason for rejecting this recommendation.

The joint inquiry, which was conducted the business and the work and pensions select committees, has now written to Cabinet Office minister David Liddington calling on him to explain the decision.

MPs on the committees have also asked Mr Liddington to give his view on the scope of the crown representative’s role.

The crown representative was monitoring £377m-worth of Carillion government contracts, the inquiry’s letter stated, despite the contractor recording revenue of £1.7bn from government deals in 2016.

Major PFI projects such as the Royal Liverpool and Midland Metropolitan hospitals were ignored by the representative, and the inquiry has asked Mr Liddington whether the Cabinet believes these projects should have been monitored.

The MPs have also questioned the monitoring of Carillion’s private sector work.

“There is little evidence that much, if any, consideration is given to contracts strategic suppliers hold outside of central government, yet we saw with Carillion the importance of those contracts to the survival of the business,” the inquiry said.

“While crown representatives cannot be expected to have such detailed information about these contracts, what consideration has been given to widening the scope of the risk assessments to include a broader range of risks to the strategic supplier, including contracts with third parties?”

In its report into Carillion’s collapse, the joint inquiry called the crown representative role “semi-professional and part-time”.

They have now questioned why the representative’s risk assessments appeared to use out-of-date financial figures.

In an assessment carried out in September 2016, the representative used Carillion’s turnover for 2014, despite 2015’s figure having been available for six months.

“Is this an isolated case or are all strategic supplier risk assessments based on out-of-date financial data?” they have asked.

Crown representatives monitor the performance of private companies that have government contracts worth more than £100m per year.

In January, Construction News revealed that there was no representative monitoring Carillion for at least two months last year, including the period during which the company revealed a £1.15bn half-year loss.

The Carillion joint inquiry has recommended that the work of crown representatives is reviewed “immediately”.

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.