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Network Rail IP boss sought Carillion reassurances

Network Rail’s Infrastructure Projects MD met with Carillion’s interim CEO Keith Cochrane to receive reassurances about the troubled contractor in the aftermath of its £1.15bn half-year loss.

In an exclusive interview with Construction News, Francis Paonessa said his commercial team was “always looking at [its] supply base and coming up with contingency plans”.

Last month Carillion revealed a £1.15bn pre-tax loss for the six months to 30 June 2017, sparking fears for the future of the troubled contractor. 

Mr Paonessa confirmed that he and Network Rail’s chief financial officer Jeremy Westlake had crunch talks with Carillion’s interim chief executive Keith Cochrane in the week following the contractor’s half-year announcement, with Mr Cochrane making assurances the firm could continue to deliver for the client.

“We have to be confident in our supply chain and we do that in lots of different ways,” Mr Paonessa said. “The issues with Carillion are not unique to them; we have broad range of suppliers we have a range of issues with.”

A week before it posted the £1.15bn loss, Carillion was revealed to be Network Rail’s second biggest supplier by work value, recording more than £372m-worth of work in the 12 months to April 2017.

Carillion has been beset by issues following a shock profit warning in July which saw its share price plummet from 192p on 7 July to 46.50 at the time of writing.

Wates chief executive Andrew Davies will take over from Mr Cochrane in April to lead the UK’s second largest contractor.

Francis Paonessa: The full interview

The full story behind CP5’s setbacks, the reaction to Carillion’s woes, and how the £48bn CP6 will learn from past mistakes.

Despite the issues facing Carillion, Mr Paonessa was keen to stress that Carillion did a “great job” for Network Rail and saw potential positives for the operator from changes Carillion may put in place.

“Carillion do a really good job for us. If they can be insulated from the broader issues around and focus on doing the job then that’s great; if they focus more on the UK, then that is great for us too.”

However, Mr Paonessa said that while Network Rail’s framework model would mean the replacement of a supplier would not have to go through the OJEU process, a significant problem at one of its major contractors would undoubtedly have an impact.

He said: “It very much depends on what the firm is delivering for us as to whether we can get that work delivered elsewhere.

“The beauty of framework contracts [is] we don’t necessarily have to go through OJEU process which will put time into process, but clearly if one of your major contractors has problems you are not going to sail through that and not notice.”

Among the projects Carillion is currently carrying out for Network Rail are the £49m electrification of the Shotts line between Glasgow and Edinburgh, parts of the North-west electrification programme, and the Sheffield tram-train.

The IP boss emphasised that the rail body was not afraid of making tough decisions about whether to work with firms if their performances in certain areas was not up to Network Rail’s standards.

He said: “It wasn’t long ago we actually put a number of suppliers in breach of their principal contractors’ licence for safety performance; we said, ‘You have got six months to come up with a plan to improve this, or you won’t be working for us’.”

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