The government has given Interserve a red rating as a strategic supplier, meaning it has “significant material concerns” about the company.
Interserve’s rating was revealed by chief executive Debbie White during questioning by MPs on the public accounts committee (PAC) on Monday.
She revealed that towards the end of 2017 Interserve was meeting with its crown representative – which liaise between government contractors and departments – and other Cabinet Office officials once a fortnight.
The frequency of these meetings increased to once a week at the beginning of January.
“We were told when [the rating] went to amber, and we were told when it went to red,” Ms White told MPs.
A red rating means the government has “significant material concerns” about the company’s delivery of contracts, but Interserve has not been made aware of the specific reasons for the change.
Ms White also revealed that the Cabinet Office threatened to move the company up to a ‘black – high risk’ rating.
“We had a letter sent to us, not dissimilar to the Carillion letter which I have seen from other committees, about moving us to ‘high risk’,” Ms White said.
The main grounds for such a move would be “serious and persistent underperformance on contracts” or “financial distress”, according to information released by the PAC.
The Interserve chief executive wrote back to the Cabinet Office arguing that the move was not appropriate, partly due to the company having established “full transparency” with the government on its financial situation.
The Cabinet Office then told the company it would not be moved to ‘high risk’, but would remain on its red rating.
Construction News understands that the change to a ‘red’ rating and the threat to be moved to ‘high risk’ were made in late 2017.
Every one of the 27 strategic suppliers who carry out government work worth more than £100m a year is given a colour-coded rating for its performance and overall health by a designated crown representative.
The PAC is collecting evidence about how the government interacts with its strategic suppliers and whether they provide good value for money to the taxpayer.
Ms White said Interserve has regular contact with its crown representative and last week discussed with them how the company could improve its rating from red to amber and eventually to green.
A report by the PAC criticised the government for not moving Carillion to ‘high risk’ in December after it backed away from the move following a meeting with the contractor’s executives.
Carillion was given a red rating in September last year – two months after its £845m writedown.
During an evidence session with MPs that lasted almost two hours, Ms White also discussed Interserve’s payment to suppliers, the shorting of Interserve’s shares, and the FCA’s investigation into the company’s disclosure of information.
Interserve declined to comment.