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Retendering Carillion public contracts 'could take months'

Carillion public sector works could be without a contractor for at least two months as contracts are retendered, according to a leading procurement expert.

A government-appointed official receiver is working with PwC to keep Carillion’s 450 public sector contracts going while new contractors are sought.

Clyde & Co partner and procurement expert David Hansom told Construction News that while simple works such as FM procured on frameworks could have new operators in place within a “couple of weeks”, appointing contractors on larger, more complex projects could take at least two months.

Mr Hanson said the process would be unavoidably lengthy due to the numerous stages of public procurement.

“If you put a notice out tomorrow, allow 15 days for the tender, say two weeks to evaluate tenders, plus 10 calendar days for the standstill period, that’s two months,” he said.

“And that’s without any backwards or forwards on the contract terms.”

Mr Hansom said this timeframe was also based on the assumption the public body involved invoked “urgency provisions” to reduce bidding time and had tender documents already prepared.

A government spokesperson said they could not provide timeframes for new appointments on Carillion contracts, but that the official receiver was not under any time pressures on this issue.

Mr Hansom said he believed contractors would want to avoid contracts simply being novated to them to provide a quick resolution.

This was because such a move would give them little scope to alter contract terms, leaving the prospect of work going back to market for tender.

The government does have the option of going to a contractor to take over a contract without competition under Regulation 32 of the Public Contracts Regulation.

This could be invoked in an “extreme emergency brought about by unforeseen events”, but Mr Hansom believes it would not be widely used.

“My view is that that is a narrow gateway that can’t be used for everything,” he said.

“You can often spend longer negotiating with one contractor, because they are never happy to just accept what was there before.”

Some individually tendered contracts could be re-procured under a framework and Mr Hansom said this this could be a common solution where fast solution is needed. 

Scape head of procurement John Simons said: ”Frameworks can be a faster and more cost-effective option for public sector organisations that wish to move quickly in appointing a new contractor without undertaking a full procurement process.”

The final option would be for public bodies to take contracts in-house, something Labour leader Jeremy Corbyn has advocated, saying the public sector should “take back control” of Carillion and other outsourced contracts.

This would remove the time delay of finding a new contractor, but Mr Hansom said it would bring other problems.

“When a public sector client takes over a contract it becomes a project manager,” he said.

“And very often, in stretched public services, you don’t have the internal resource to manage the contracts. To go from managing one big contract to 120 small ones can be unwieldy.”

Mr Hansom said that on more complex contracts, such as JVs and PFI deals, there are interface issues with clients, financers and other contracts, which can make the situation harder to resolve.

“If you’re one contractor on a joint venture or a PFI, then you falling out might have knock-on effects for the rest of the supply chain.”

In these situations, any new incoming contractor could be faced with renegotiating every single contract with every subcontractor on a job, he added. 

Readers' comments (2)

  • Bringing contracts in house is not really a problem as the existing (ex-Carillion) managers are ready and waiting and without their head office constraints will probably do a better job. The cost goes down as there is no longer the Carillon mark-up on labour and sub-contractors and no cost of servicing debt. Very quick and if EU regulations interfere as they did with TATA can't we just ignore them (this would also demonstrate to the EU that a free trade deal with a UK unfettered by EU restrictive practices might just be a good idea).

    David

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  • The in house approach certainly can be very successful. We were subbing on a large hotel project when the main contractor went under just as it was coming out of the ground. The client kept on all the site team and paid us all directly. Keeping the guys on board that know the job inside out is the key. As David said, the Client didn't have to pay the main contractor mark up and we were all happy as at least we got some profit back from what was initially a bad situation. And they paid a lot quicker than or initial terms.

    Philip

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