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Howson accuses government of withholding Carillion cash

Richard Howson has accused the government and public sector bodies of withholding payment to Carillion and contributing to its collapse as a result.

Carillion’s former chief executive made the allegation in a three-page response to the final report from the Carillion joint inquiry, released in May.

He said the business and the work and pensions committees had failed to “understand the complexity of the contracts or markets” the company faced during their inquiry into the firm’s collapse.

The ex-Carillion boss suggested the committees did not consider the role that public bodies played in Carillion’s failure due to their payment practices.

“In investigating the causes of the failure, the committee should have asked Carillion’s government and public sector customers how much was properly due to Carillion under the contract,” he said.

He alleged that the company was owed “substantial amounts” by the government and public sector bodies when he left the firm in September last year, and claimed that this was still the case when the firm collapsed in January.

Those clients alleged to have owed Carillion money included Highways England, the Ministry of Defence, Network Rail and Transport Scotland, he said.

Network Rail rejected the claim, with a spokeswoman saying: “We can confirm that at the point of Carillion’s liquidation that Network Rail had paid all monies owed under the various contracts and had not withheld any sums.

“Due to the financial distress that Carillion was under at the time, Network Rail had put in place additional measures to ensure that prompt payment was made for monies owed.”

Transport Scotland said Aberdeen Roads Limited – the joint venture between Balfour Beatty, Carillion and Galliford Try – said it had been paid everything it was due according to its contract to build the Aberdeen Western Peripheral Route.

A spokeswoman said: “As stated previously, all payments due for completed sections, which currently covers the Parkhill to Blackdog and Craibstone Roundabout and Dyce Drive, have been paid.

“The contractor is only paid for sections which are complete.”

A spokesman for Highways England said its use of project bank accounts ensured contractors were paid on time.

The Ministry of Defence has been contacted for comment.

Mr Howson said Carillion had not taken legal action against the government over outstanding payments because the company had been “threatened” with being barred from future work.

He claimed that the company had been “constantly chasing up its government and public sector customers” for payment on contract variations that were needed due to poor data provided by the bodies during tendering.

This led to the company shouldering extra costs in order to complete the jobs, he alleged.

He used the example of an FM contract for the Ministry of Justice, on which he alleged Carillion discovered that the size of the estate it was servicing was 60 per cent larger than the government had estimated in its tender information.

Mr Howson also said the MPs’ joint inquiry should have focused more on how Carillion was run after he left in September last year.

He alleged that the firm’s executives had failed to pursue cash from clients in the final months.

“I have had numerous concerns raised with me, from those there to the end, that amounts owed were not pursued by senior and executive management, and that they appeared to ignore the fact that those on the other side of the negotiating table expected executive management (given the seriousness of the situation) to be present to lead the collection of cash or conclusion of accounts,” Mr Howson said.

Responses from company’s other directors and chairs to the Carillion joint inquiry report have also been released by the business and work and pensions committees.

They raised concerns over how their evidence had been presented by the inquiry, with several saying they disagreed with some of the conclusions presented in the final report.

The directors did not expand on this, however, saying it would not be appropriate due to ongoing investigations.

A response to the inquiry from the Insolvency Service has also been released.

It revealed that PwC invoiced £22.9m for its work from 15 January to 31 March.

The Insolvency Service said the amount would have been higher, but it had negotiated a £5.7m discount with the consultant.

It is estimated by the official receiver that PwC will earn around £50m by the time the liquidation is complete.

The responses were published ahead of a House of Commons debate on Carillion this afternoon.

A Cabinet Office spokesperson said: “Throughout this process, the government has been clear that its priority is to ensure that public services continue to run smoothly and safely.

“The plans we put in place have ensured this, and we continue to work hard to minimise the impacts of the insolvency, having safeguarded over 12,345 jobs to date.”

Readers' comments (3)

  • In other words, it was everybody else’s fault.

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  • If you look at Carilion's OWN figures in their last accounts they were taking 173 days to pay people on average and getting paid in 19 days on average. Many of the other big players are not much better. Seems churlish to blame their customers, although under payment is a significant problem by many construction clients.

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  • Carillion historically had a dreadful payment record. On the contracts I worked we were told remember " Carillion don't pay Subbies in December". Going back many years the Financial papers reported there great cash balances in January. Easy to address Mr. Howson's claims about slow payments if it were true. Sometimes a subcontractor is worth more dead than alive which Carillion practised.

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