Carillion held contracts worth nearly £3.6bn before it went into liquidation, transport secretary Chris Grayling has revealed.
In a letter to the transport select committee, Mr Grayling listed deals worth £3.6bn between Carillion and the government’s arm’s length transport bodies (ALBs) such as Network Rail, Highways England and HS2.
Mr Grayling’s response followed questions by the committee on the Department for Transport’s actions in the lead up to Carillion’s collapse, and the impact the liquidation would have on UK transport.
Of the 36 transport contracts listed, five were handed out following its July 2017 profit warning (see full table).
These included the two HS2 civils contracts handed to the Carillion / Kier / Eiffage JV in late July, and a £260m contract to electrify the line between London and Corby.
When asked by the select committee whether Carillion was regarded as a “high-risk supplier” when these contracts were awarded, Mr Grayling said Carillion was deemed able to deliver these contracts.
“Assessments of a company’s ability to deliver its obligations are performed during each procurement exercise before the award of contracts,” he said.
“Before contracts are signed there are various layers of governance across the ALBs, department, Cabinet Office and Treasury depending on each procurement.”
It was revealed today that Mr Grayling had employed auditing firm EY to carry out extra financial tests on Carillion ahead of awarding its HS2 contracts.
The letter said EY was hired to carry out checks on the company’s liquidity, interest cover and gearing. Carillion passed all of these extra checks, Mr Grayling said.
The transport secretary came under fire from MPs today over his decision to appoint EY, despite the auditing firm also advising Carillion on its turnaround plan at the time of the appointment.
Following Carillion’s collapse, the DfT said there had been “no operational issues” on any transport projects, and only Network Rail had reported productivity issues on some sites.
The response also chronicled the steps the DfT took in the lead-up to Carillion’s collapse, including to mitigate any impact on projects or costs.
Mr Grayling said his department tested its ALBs’ contingency plans across Carillion’s suite of contracts and came up with a “day one” scenario if the company collapsed.
He said: “The department worked with the ALBs to develop contingency plans to mitigate any potential impact on programmes.
“This included plans for a ‘day one’ situation if Carillion were to enter liquidation.”
Mr Grayling said the department had brought in a number of extra processes to try to lessen the impact of future liquidations of its strategic suppliers.
These included the creation of a Heads of Procurement Board (HoPB) which will collate and submit contingency information for suppliers deemed at risk.
“The HoPB is creating an agreed group-wide contingency planning approach that can be used to assess strategic suppliers and incorporate lessons learned from previous emergency situations like Carillion,” Mr Grayling said.
Carillion transport contracts held at time of collapse
|Contract||Client||Contract let||Expected completion||Value||Other parties involved|
|Main works civils lot C2 (North Portal Chiltern Tunnels to Brackley)||HS2||31/07/2017||28/10/2022||£724m||Eiffage and Kier|
|Main works civils lot C3 (Brackley to South Portal of Long Itchington Wood Green Tunnel)||HS2||31/07/2017||08/11/2019||£616m|
|A1 Leeming to Barton||Highways England||n/a||01/12/2017||£308m||Morgan Sindall|
|L2C Electrification Midland Main Line||Network Rail||01/09/2014||01/12/2018||£260.2m||Powerlines|
|North West Electrification||Network Rail||01/09/2015||01/01/2020||£187.9m|
|CDF contract (Smart motorways): M6 J13-15||Highways England||07/07/2015||31/03/2019||£166.4m||Kier|
|CDF contract: A14 Cambridge to Huntingdon package 3||Highways England||15/09/2015||01/04/2020||£164.5m||Balfour Beatty|
|Crossrail: Old Oak Common to Paddington approaches||Network Rail||01/07/2013||01/07/2019||£138.2m|
|CDF contract (Smart motorways): M6 J16-19||Highways England||07/07/2015||01/11/2019||£128.5m||Kier|
|Western Inner Track Improvements||Network Rail||01/06/2013||01/02/2018||£123.8m|
|CDF contract (Smart motorways): M23 J8-10||Highways England||07/07/2015||30/11/2020||£116.9m||Kier|
|East London Overground Maintenance||Transport for London||30/03/2009||31/03/2018||£80.6m|
|M40 Denham to Warwick maintenance||Highways England||06/01/1997||05/01/2027||£65m|
|Shotts Electrification||Network Rail||01/11/2015||01/05/2019||£62.6m||Powerlines|
|Kettering to Corby works||Network Rail||01/04/2015||01/03/2018||£62m|
|London to Corby Midland Main Line||Network Rail||01/02/2017||01/03/2020||£61.8m|
|Sheffield Tram Train main works||Network Rail||01/04/2015||01/11/2018||£50.5m|
|CP5 Renewals Oxford||Network Rail||01/12/2015||01/12/2018||£36m|
|Oxford Corridor Track Works||Network Rail||01/09/2016||01/11/2018||£34m|
|Market Harborough line speed improvements||Network Rail||01/03/2016||01/04/2018||£32m|
|Plain Line Track Renewals London North East 16/17||Network Rail||01/04/2016||01/03/2017||£24.7m|
|Plain Line Track Renewals London North East 17/18||Network Rail||01/04/2017||01/03/2018||£22.8m|
|Kentish Town Improvements||Network Rail||01/03/2016||01/07/2017||£21.8m|
|Waverley Area Works||Network Rail||01/10/2016||01/12/2018||£21.8m|
|L2C T&C Midland Main Line||Network Rail||01/03/2017||01/10/2018||£21.1m|
|Manchester Smart Motorways: M60 improvements||Highways England||01/05/2014||01/07/2018||£17m||Balfour Beatty 33%, Carillion 22%, Costain 22%, Morgan Sindall/Bam 22%|
|Area 7 Temporary Traffic Management||Highways England||17/05/2016||31/05/2020||£8.5m||Multiple suppliers framework|
|Splott Road Bridge||Network Rail||01/08/2015||01/07/2018||£8.3m|
|IEP Gauging Priority 2 sites||Network Rail||01/05/2017||01/05/2020||£7.6m|
|Knottingley Area Renewals||Network Rail||01/06/2015||01/09/2018||£7.6m||Bombardier|
|Brent Cross station||Network Rail||01/03/2017||01/09/2018||£7.4m|
|Area 13 Temporary Traffic Management||Highways England||23/01/2017||31/03/2021||£7.1m||Multiple suppliers framework|
|Historical Railways Estate Examination||Highways England||15/03/2016||15/03/2019||£2.4m||Carillion part of framework with Balfour Beatty|
|Collaborative Delivery Framework (CDF) contract: Lot 3B advice||Highways England||15/01/2016||31/12/2019||£0.5m|
|CDF contract (Smart motorways): M20 J3-5||Highways England||07/07/2015||30/11/2020||£0.1m||Kier|
|A1 Elkesley Junction||Highways England||n/a||01/12/2017||£0.05m|