An official report into the collapse of Carillion has shown “fundamental flaws” in the government’s approach to contracting.
The report by the House of Commons public administration and constitutional affairs committee found that the government try to spend as little money as possible and force contractors to take high levels of financial risk.
“It is staggering that the government has attempted to push risks that it does not understand on to contractors and has so misunderstood its costs,” said Sir Bernard Jenkin, who chairs the committee.
“The Carillion crisis itself was well-managed, but it could happen again unless lessons are learned about risk and contract management and the strengths and weaknesses of the sector. Public trust requires that outsourcing better reflects public service values. The government must use this moment as an opportunity to learn how to effectively manage its contracts and relationship with the market,” he added.
The report was published on Monday and found that has had to renegotiate over £120 million of contracts since 2016 in order to ensure the continuation of public services.
Carillion collapsed in January under £1.5 billion worth of debt. The government refused to bail the construction company out.
The group’s collapse means major construction projects, including the £335 million scheme to construct a new Royal Liverpool hospital, have been badly affected.
The project has been put on hold until a new builder and funding can be allocated.
A separate report in January blamed the collapse on Carillion’s “recklessness, hubris and greed.”
A Cabinet Office spokesman has said that the government will respond to the most recent report.
“The government is committed to ensuring a healthy and diverse marketplace of companies bidding for government contracts and we have recently announced a wide package of new measures to further improve how we work with our vendors,” said the spokesman.
