Construction News readers have made their reactions clear this week following Carillion’s liquidation. Here are some of the key talking points from the comment sections of CN’s coverage.
‘This industry is losing itself’
Initial reactions to the news of Carillion’s liquidation on Monday focused on the causes behind its collapse, with many readers’ comments citing its tendering practices.
Responding to Tom Fitzpatrick’s editorial on the firm’s demise, John Butler put it bluntly: “Carillion should have been liquidated years ago.
“They have been quoting for contracts at cost or below cost just to get the work and then they try to recuperate a profit by variations to contract or screwing the subcontractors.”
Another reader was quick to agree: “[Carillion] are not the only ones that take this approach. This does nothing but undermine the construction industry, which is starting to lose itself.
“Poor tendering gives clients a false perception of the cost of the construction market and puts more and more pressure on an industry running on tight margins and fraught with ridiculous contractual and financial risk.”
Amid news of Balfour and Galliford Try’s potential losses, Stuart Brown picked up on the issue of low-cost bidding. “When one company is winning most of the contracts by coming under under price on all of its competitors again and again, some alarm bells should be ringing,” he said.
“You can have an advantage over the rest some of the time, but not all of the time.”
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‘Who the hell is pricing these works?’
As the fallout widened, the focus on tendering narrowed to government contracts, with several questioning Westminster’s actions in recent months.
“How did the government let this state of affairs go on?” asked one reader, commenting on CN’s coverage of the immediate impact among subcontractors. “Why are they doling out works after the profit warnings – who the hell is pricing these works in the first place if they can lose that amount of money?”
“Who is going to pay the thousands of subcontractors while they sit on site trying to find ways to squeeze every penny they can”
Reacting to the government defending its decision not to bail Carillion out, Jonathan Crowther pointed out a potential flaw in Whitehall’s reasoning: “Interesting that a Cabinet Office minister has stated, ‘Taxpayers should not, and will not, bail out a private sector company for private sector losses, or allow rewards for failure’.
“Obviously his memory must be short, as I recall about 10 years ago the Royal Bank of Scotland and Lloyds Bank being publicly listed companies yet the then government bailed them out to the tune of approximately £500bn.”
But amid the political repercussions, it was the consequences for the supply chain that dominated debate.
‘Treated like dirt’
Reports emerged of subcontractors being left in the dark or prevented from accessing Carillion sites.
“Who is going to pay the thousands of decent, hardworking suppliers and small subcontractors who make up their workforce while they sit on site with their clipboards trying to find ways to squeeze every penny they can out of them for their own ends,” one reader fumed.
“Some of these companies are a disgrace and the lads who do the work and have made them their money are seen as disposable and treated like dirt.”
“Early payment facilities should be viewed as a desperate policy by any company using anything similar”
Uproar over Carillion’s actions took a fresh twist on Wednesday, when a war of words erupted between its former boss and its banks over the contractor’s controversial early payment facilities.
One reader argued: “The EPF system was the fundamental problem – not how the banks behaved around it. The fact that Carillion needed this was a large warning to the industry and their supply chain.
“It’s an awful process, and the culture and payment process problems it creates are toxic. It should be viewed as a desperate policy by any company using anything similar.”
‘Slap on the wrist’
As the spotlight turned to Carillion’s management and its executive pay packets, Andy Dowden summed up the thoughts of many readers: “They need to answer the question as to why the company was still paying dividends to its shareholders (and including themselves no doubt) when it was haemorrhaging money and losing hundreds of millions of pounds.
“What we need to see is the people in power – directors – made to pay back all their salaries and benefits”
“That money rightly belongs to the subbies who are losing their retentions and the suppliers who were on 120-day payments. It is nothing short of a scandal. They must be held to account.”
News of a fast-tracked investigation into the collapsed contractor’s directors prompted several responses.
“It is ok having a fast-tracked investigation,” said Malcolm Elders. “But will the report ever see the light of day? Creditors are never allowed to see IP reports on directors as a rule. Are they going to make an exception in the case of Carillion, or is it time these reports were always shared with creditors?”
One anonymous comment suggested: “What we need to see is the people in power – directors – made to pay back all their salaries and benefits. Like that is going to happen – [they will get a] slap on the wrist and told they can’t hold a directorship for, say, a year.”
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‘This has to change – and quickly’
Attention is now shifting towards what will happen rather than what did, and many readers have a clear eye on the implications – both for the industry’s existing pipeline and for its long-term business model.
Responding to one expert telling CN that retendering contracts could take months, David Roberts said: “Bringing contracts in-house is not a problem as the existing (ex-Carillion) managers are ready and waiting, and without their head office constraints [they] will probably do a better job.
“The cost goes down, as there is no longer the Carillon mark-up on labour and subcontractors and no cost of servicing debt.”
Another anonymous reader called for fundamental change in the approach to work and the relationship between tier ones and the supply chain: “This has to change and quickly.
“Work should be spread around fairly amongst the hundreds of other main contractors who may do a much better job than these huge management companies.”