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Failed firm 'used Carillion smokescreen' for payment problems

Collapsed subcontractor Vaughan Engineering has been accused of using Carillion’s liquidation as a “smokescreen” to hide its own poor payment record.

Vaughan Engineering entered administration two months after Carillion’s collapse, citing non-payment and reduced pipelines relating to its work for the failed contractor as a major factor. 

Rob Ditchfield, the managing director of M&E firm Bmech, which lost around £52,000 due to Vaughan’s administration, said Vaughan had used the Carillion scandal to deflect from its own subcontractor debts.

“[Vaughan] just used the Carillion thing as a smokescreen,” he told CN.

“Anything they had to do with Carillion had no relation to them not paying us, they weren’t even working for Carillion at the time [that Bmech began experiencing payment problems with Vaughan],” he claimed.

Upon entering administration in March, Vaughan Engineering said it was owed £600,000 by Carillion for completed jobs, including £300,000 for its work on the Heath School in Runcorn, which had been finished in December.

It claimed it had also lost out on £1.1m-worth of future work with the liquidated tier one.

statement from the company at the time quoted finance director Gavin Vaughan, who said: “It is especially painful for all of us involved in this to know that none of it is our fault.”

Administrator KPMG subsequently revealed that Vaughan had entered administration owing subcontractors and suppliers £9.2m, with the accountant warning creditors that they were unlikely to receive any money.

Vaughan Engineering was a subsidiary of parent company Vaughan Group. Vaughan Group and its Northern Ireland business, Vaughan Engineering Services, and UK business, Brankin, are not in administration.

Mr Ditchfield said he was angered by the company’s suggestion that Carillion was to blame for its demise.

He alleged to CN that Vaughan employed different tactics to delay or avoid payment to subcontractors, claiming that the firm often used its multiple offices across the UK as a means of diversion.

“They were Warrington-based, but they had another office up in Scotland, but the head office was in Ireland, so they just pointed to different people [as to who was responsible for payments]. They would say, ‘It’s not us, it’s up to the guys up in Scotland’.”

Mr Ditchfield said the firm sent cheques without sufficient postal costs, so his firm had to pay to pick them up at a post office. 

Bmech first worked for Vaughan around 2014 on an airport hangar project.

At the end of the job, Mr Ditchfield claimed Vaughan owed the firm 5 per cent of its fee in retentions, which he said took three years to settle.

The MD told CN he believed the only reason his firm was paid was because it had begun work for Vaughan on three new projects in 2017.

Mr Ditchfield said he had at one point decided not to work for Vaughan Engineering again, but took on the 2017 work on the advice of a trusted friend who said it had improved its payment practices.

However, Mr Ditchfield claimed the final payments for the 2017 jobs were never made.

“The three jobs all finished up around the same time so the final payments just never got paid,” he alleged. “They even sent us payment notices that said we’ll pay you that money and it just never came.

“We’re not a big company so that’s a hell of a lot of money to us, so the past year has been a nightmare for us. It wasn’t far off putting us under, to be honest.”

The administrator’s report for Vaughan Engineering lists Bmech as a trade creditor for the sum of £19,325 and as being owed £15,168 in retentions.

Mr Ditchfield added that he felt the treatment of those further down the supply chain showed how the smallest firms suffered.

“It’s us smaller companies at the bottom of the ladder that pay for it,” he said. “It’s annoying to be in a system where that can happen. You grow up just seeing these things happen so you kind of put up with it.”

Vaughan Group declined to comment and referred CN to the administrator’s report.

This article has been amended to clarify Mr Ditchfield’s claim that Vaughan “weren’t even working for Carillion at the time”. In this quote, “at the time” referred to when Mr Ditchfield claims Bmech began experiencing payment problems with Vaughan, rather than the time of Carillion’s collapse as originally stated.

Readers' comments (1)

  • The simple truth seems to be that large companies don't pay on time because they have no money! Is sickening that they seem to be using their subcontractors money and retentions as a free overdraft facility. How many small SME's will go under or are feeling the immense mental pressure due to non-payment, and how many directors of these large insolvent companies will just walk away with their huge bonuses and get away with it.

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