Mitie’s chief executive has told MPs that Carillion’s collapse serves as a warning not to contract with high-risk construction companies on outsourcing contracts.
Giving evidence to the public administration and constitutional affairs select committee, Mitie boss Phil Bentley was asked by MPs if there were any lessons from Carillion’s collapse.
He replied: “Don’t contract with companies that have huge construction risk if you are outsourcing.”
Mitie provides facilities and property management for central government and across the public sector.
During the hearing, which was looking at lessons for public contracts from Carillion’s demise, Mr Bentley repeatedly blamed the contractor’s woes on its construction division.
He described Carillion as “a construction company with some government outsourcing contracts on the side of it”, repeatedly arguing that its problems had originated in its construction business.
Asked for further thoughts on Carillion’s demise towards the end of the hearing, Mr Bentley told the committee that “Carillion’s problems began with construction cost overruns”.
This prompted an interruption from chair Bernard Jenkin MP, who said: “I think you’ve made that point already.”
In his evidence to the committee, Mr Bentley said the fact that Carillion’s outsourced public contracts were quickly snapped up by competitors proved they were good value and were not to blame for Carillion’s liquidation.
“It was not a failure of contracts outsourced from government central departments,” he said.
“The very fact the contracts were taken on almost seamlessly suggests that they were good contracts, otherwise no-one would have picked them up.
“The supply chain was available and ready to take on these contracts, there has been very little disruption that I’m aware of linked to the provision of services.”
Serco CEO Rupert Soames, also giving evidence to the committee, argued that the government should consider whether an outsourcer had a construction arm.
“It doesn’t matter if your builder goes bust because you get another builder in to finish; it really does matter if the company supplying your school meals goes bust because you won’t get your school meals on a Monday morning,” he said.
“I think government in its mind needs to differentiate them.”
Mr Soames, whose company provides various services across the public sector, also praised the political response to the contractor’s collapse.
“The government’s done really well on Carillion. I know this is an unfashionable view,” he said.
“[But] I think they got in there early, they worked out a contingency plan, they worked out what would happen when it went bust so that when Carillion tried to put a gun to their head and said, ‘You’ve got to back us,’ the government knew what would happen if they went into receivership.
“I know not of a single storey of a hospital floor that’s not been cleaned or a school meal that’s not been delivered, because government did its contingency plans before.”