Defence support contractor Carillion fighting to stay afloat

[Melchett01]

The news isn’t looking particularly rosy for Carillion’s future, with potential serious implications for the MOD who have in recent years awarded the company billions in contracts for support services and estate management functions including accommodation & Messing.

https://uk.reuters.com/article/uk-carillion/uks-carillion-to-discuss-rescue-with-creditors-on-january-10-idUKKBN1EV0IK

There are already enough problems in Defence support without a key service provider failing with all the uncertainty of how bases and infrastructure will be maintained. It also highlights some of the issues with the thinking that it’s cheaper and better to contract out.

So where do we go from here? Plough much needed funding into Carillion to keep it afloat (is this why the MOD awarded further contracts after Carillion announced profits warnings last year?) Find a replacement supplier (at what premium as we will be over a barrel) and lose already sunk costs? Or accept that contracting out of key strategic functions isn’t always the best plan, but at risk of increasing pressure on an already creaking budget.

Not a good start to 2018, especially on sites heavily reliant on patching and ongoing maintenance.

[POBJOY]

I am not sure what happens at the MOD, but down here the company had contracts based on lowest quotes;but in the end the 'claims' made it well over budget. Me-thinks things are too cozy in the contract/quotes/job/final claims dept that runs all across civil engineering, and also MOD contracts. Look at the nonsense with the ATC Glider fleet. The MOD paid for a 'service' that failed, and ended up paying again for the rectification, which is still not finished or providing the product that has already been paid for TWICE. When its PUBLIC MONEY 'watch out' no one seems to have their eye on the ball, or watertight contracts that can reclaim the waste/overspend.

[Heathrow Harry]

"Analysts have estimated the company has debt including provisions, pensions and accounts payable of about 1.5 billion pounds ($2.04 billion) compared with its market capitalisation of about 70 million pounds, according to Thomson Reuters data."

Also under investigation about the timing of announcements........

Not a good bet IMHO

[Melchett01]

They provide facilities support across 360+ sites and maintain 50,000 married quarters, along with being a key provider in the Army Rebasing Programme. Not a good bet is looking like an under-statement.

But given the multi-billion size of the MOD contracts awarded in recent years you have to wonder what’s gone wrong to give such a relatively low market capitalisation.

[Heathrow Harry]

"
Howson and the board managed to safely navigate an annual general meeting in May. But on 10 July the charade was over, after a partial review by auditors KPMG identified £845m of contract write-downs.
Analysts worried further hits could be on the cards once the review was completed. They estimated shareholders would be asked for £500m. Howson was shown the door and hopes were pinned on the experienced Cochrane to steady the ship.
“The balance sheet is a mess,” wrote Liberum analyst Joe Brent. Peel Hunt’s Andrew Nussey advised Carillion’s “shares are best avoided until management provides further insight”.
The Carillion insider says the reaction from within the firm was one of shock. “There was disbelief from the staff generally. Nobody on my management team could believe the scale of the issues at hand.”


“We all knew the accounts were questionable; it was the most shorted stock in Europe,” a leading City analyst told City A.M. “But the extent of the problems were gobsmacking.”"

[banterbus]

When will we learn?! :ugh:

[Planet Basher]

Sounds like a standard privatisation strategy. same old, same old.

[rolling20]

"
:We all knew the accounts were questionable; it was the most shorted stock in Europe,” a leading City analyst told City A.M. “But the extent of the problems were gobsmacking.”"
This has been going on for months. I hate to say it, but some Hedge Funds will have made decent profits from it.

[Lima Juliet]

Good, I thought PriDE were bad until this lot came in. Cold in quarters and now cold at work. Pretty much every station I go to the heating is busted with no one fixing it. Sadly, no chance of taking them to the cleaners to get our money back though...

[Bing]

This has been going on for months. I hate to say it, but some Hedge Funds will have made decent profits from it.

To be fair, that's the point of hedge funds, if they didn't exist a lot of people's pensions would be worth a lot less. They're there to minimise losses when things go wrong which has always struck me as pretty sensible.

[POBJOY]

And what were all the accountants doing whilst this was going on !!!!
Amazing how we have massive pension 'black holes' and suchlike plus all this (paid for but not delivered) services and the gravy train rolls on.

[Heathrow Harry]

Apparently they have serious cash flow problems due to late payments by QATAR for the World Cup work....

With the spat ongoing with the UAE & Saudi a lot of Qatar money is staying close to home and they are deferring payments on all sorts of deals -

"
One of the biggest problem projects was a $650m development preparing Qatar for the 2022 FIFA World Cup.
The client, Qatar Foundation-backed Msheireb, had not handed over any cash for a year. Carillion believed it was owed £200m (http://www.cityam.com/274666/carillion-locked-gbp200m-row-over-contract-prepare-qatar).
The Qataris, concerned at the prospect of Carillion not being able to complete the works, thought they were owed money – and withheld payment.
Attendees of cash conference calls, which were now happening three times a week instead of the normal two times a month, heard first-hand of the trouble involved in extracting cash from Middle East clients, saying simply that it appeared “impossible”."

[Vendee]

Good, I thought PriDE were bad until this lot came in. Cold in quarters and now cold at work. Pretty much every station I go to the heating is busted with no one fixing it. Sadly, no chance of taking them to the cleaners to get our money back though...

The heating in our hangar at Wattisham has been bust for years. The heating itself works but the thermostat doesn't so the heating has two modes, fully off or fully on. In winter when the heating is fully on, the hangar gets to around 30 degrees and the only way to regulate the heat is to open the hangar doors fully. This is great news for the rest of Suffolk who get to feel the benefit. The amount of gas/money that has been wasted could have paid for the thermostat replacement a hundred times over but obviously these two things are on different budgets. Meanwhile we are still being encouraged to turn off our computer monitors at night to save energy :ugh:

[Momoe]

Not MOD but I am employed by Carillion.

Site I work at has a £25k non availability clause, this has been invoked 3 times in 2 months due to lack of investment in infrastructure. Boilers/pumps/Air con all non-operational.
Private contractors all owed money so trying to get anyone in to fix stuff is very difficult as most are now pricing jobs ridiculously high.

They do appear to have a habit of pitching too low on contracts to get customer base but are now suffering and are rumoured to be selling on contracts to improve cash flow.

[4mastacker]

....................and are rumoured to be selling on contracts to improve cash flow.


Not a rumour. This is from their own web-site.

Update on proposed disposal of UK healthcare facilities management business (https://www.carillionplc.com/news-and-media/update-on-proposed-disposal-of-uk-healthcare-facilities-management-business/)

[brokenlink]

LJ, PRIDE delivered OK as far as I am aware, the issue appears to be the ongoing maintenance etc of the estate once responsibility was passed to Carillion.

[rolling20]

To be fair, that's the point of hedge funds, if they didn't exist a lot of people's pensions would be worth a lot less. They're there to minimise losses when things go wrong which has always struck me as pretty sensible.. I have to disagree. Most Hedgies are fueled by High Net Worth individuals. Mr Smith in the street should not be putting his money into a hedge if it is his pension pot. One well known London funds saw its flagship fund half in value last year. Hedgies are closing at an alarming rate.....This from 2016: In fact, 2016 had the highest level of hedge fund closures and lowest level of openings since 2008, the year of the financial crisis. And for the second year in a row, the rate of hedge fund closures outpaced that of hedge fund openings, with 1,057 hedge funds closing in 2016,while 729 hedge funds were launched, according to HFR.

So will hedge funds have another rough year in 2017? It’s possible that select funds will do well, though the industry as a whole has underperformed the market every year since 2008. The rising frustration among investors over high fund fees and inconsistent returns? That’s not likely to go away any time soon........2017 was not a good year for most of the hedge community. Most HNW individuals now look at Private Equity.

[Heathrow Harry]

like most Financial deals - they are invented, a few people make a zillion, a load of copycats pile in and the market them to the average well off and - SURPRISE - the returns drop to average (or worse)

Reversion to mean ..................

[unmanned_droid]

What percentage of the liability is pension?

I think pension liabilities will become a huge concern for both private and public institutions.

What percentage of your council tax is dedicated to employee pensions?

[Heathrow Harry]

Torygraph in November


19 November 2017 • 7:45pm

Around 28,000 pensioners who used to work at Carillion could end up owning a stake in the construction company under plans to keep it afloat.

The outsourcer, which is now worth just a tenth of what it was a year ago, warned last week that it expects to breach covenants by the end of this yea (http://www.telegraph.co.uk/business/2017/11/17/carillion-warns-profits-says-will-breach-banking-covenant/)r following delays to asset sales and cost-cutting efforts.

Carillion’s shares tanked by as much as 64pc on Friday as investors reeled at a third profit warning in just four months.

Analysts now expect a recapitalisation of the business, which is working on the HS2 rail link, is inevitable with a highly dilutive debt for equity swap considered to be the most likely option.

Carillion has said that “some form of recapitalisation” which could include a restructuring of the balance sheet, will take place during the first quarter of next year.
The company’s debt pile is forecast to swell to £925m, compared to its shrunken market value of just £107m.

Meanwhile, its pension deficit is also estimated to grow to £800m from its £587m in June. (http://www.telegraph.co.uk/business/2017/10/24/carillion-making-right-noises-plenty-grunt-work-left-do/)

Earlier this year Carillion’s pension trustees were understood to favour a rights issue as a way of shoring up the retirement scheme. But the stricken company’s share price fall has now made that unlikely.

[unmanned_droid]

So, fully fkd then.

[NutLoose]

Pay peanuts, get monkey's..

I don't know why the MOD do not take on the Civilian approach, have several local contractors who do the work at airfields as required, with an office on base to oversee it, that way you can control costs as they compete for the work and ensure it is being done.
From what I see, this lot were simply a middleman in a lot of the tasks, and having not paid your contractors, they are on a hiding to nothing.

[Heathrow Harry]

Whoever manged to sweet talk successive Govts into the idea of "Pension Fund Holidays" must have got a vastbonus

All we need is to insist pension plans are ring fenced and fully funded BEFORE any dividends or management bonuses

[ShyTorque]

What percentage of your council tax is dedicated to employee pensions?

I hate to think. But it annoys me very much that whilst I am forced by law to pay to increase the pensions of others, in line with inflation, my own pension does not increase at all. Especially when the husband of my wife's friend boasts of going to the Mercedes factory as a guest to see his new expensive saloon come off the production line - his retirement present to himself, a council accountant who was able to take early retirement. His wife has also retired early. Meanwhile, I'm informed that myself and my wife have to work an extra year and six years respectively to help pay for it. Judging by the recent performance of my pension fund it looks like I'll be keeping my little hatchback, already almost twenty years old, when I retire in a few years.

Come the revolution......

[Heathrow Harry]

but people in the public sector don't get the same wages in most cases

they don't work so hard either

and the job satisfaction isn't there IMHO

[devonianflyer]

Anyone on here business minded enough to know if the DIO main contractor Carillion Amey is protected from the parent company troubles or not?

Given the state of DIO infra across the board, I wouldn’t be surprised to see it all go wrong as there can’t be much profit in running estate for them these days.

If so, I’d be surprised to find another contractor willing to pick up the pieces from that given the austerity world we find the MOD in now.

Or, would the fact that they’ve got such key contracts (and not just for UK MOD but schools, prisons etc) mean they’ll be bailed out by UK PLC like happened for the banks?

Interesting times ahead...

[pr00ne]

If Carillion go, CarillionAmey go.

[langleybaston]

Regardless of the short term chaos [and, from what I read, the support for bases, stations, Messes and MQs is not far short of chaotic anyway] they MUST NOT be bailed out.
We've been here before with the financial crisis.
They must if necessary go to the wall, it's called Capitalism and, like it or not, that is the system we have.

[air pig]

Regardless of the short term chaos [and, from what I read, the support for bases, stations, Messes and MQs is not far short of chaotic anyway] they MUST NOT be bailed out.
We've been here before with the financial crisis.
They must if necessary go to the wall, it's called Capitalism and, like it or not, that is the system we have.


I agree with you about the company and it's liquidation, but will the people on the stations at least in the short term be brought into the MoD workforce as there are not enough in the armed forces to fill the gaps.

[Al R]

CarillionAmey (Housing Prime) Limited is a distinct legal entitiy (Company No. 5428762) from - and operates almost entirely independently from - Carillion (Company No. 3782379). So it looks like current service delivery will continue unchanged. Which is a bit of a shame.

Military Establishments | CarillionAmey (http://www.carillionamey.co.uk/military-establishments/)

[air pig]

CarillionAmey (Housing Prime) Limited is a distinct legal entitiy (Company No. 5428762) from - and operates almost entirely independently from - Carillion (Company No. 3782379). So it looks like current service delivery will continue unchanged. Which is a bit of a shame.

Military Establishments | CarillionAmey (http://www.carillionamey.co.uk/military-establishments/)

But are CarillionAmey wholey ownded by Carillion? The new Royal Liverpool hospital build is owned by Liverpool hospital company based at Carillion's HQ.

[Al R]

Looks like it.

http://company.carillionamey.co.uk/company-news/12-january-2018-update-from-carillionamey/

[airpolice]

Unless the whole thing collapses, pensions not paid, jobs not completed and people on the scrap heap, then there will be no justice.

Anyone coming along to pick up what the MOD need done will now ask a small fortune, or even a large fortune, as the MOD is standing, back to the wall, in a bad spot.

Why would anyone run a business properly, if all you need to do is take all the money and then ask for a bailout?

All the PFI schemes should be void if the company has to go under, but were the Government lawyers smart enough for that?

[ICM]

The whole theory of "taking risk off the Treasury balance sheet" must be getting close and critical examination just at the moment.

[air pig]

The whole theory of "taking risk off the Treasury balance sheet" must be getting close and critical examination just at the moment.

We have been taking that risk since 1997, remember AirTanker?

[langleybaston]

I hate to think. But it annoys me very much that whilst I am forced by law to pay to increase the pensions of others, in line with inflation, my own pension does not increase at all. Especially when the husband of my wife's friend boasts of going to the Mercedes factory as a guest to see his new expensive saloon come off the production line - his retirement present to himself, a council accountant who was able to take early retirement. His wife has also retired early. Meanwhile, I'm informed that myself and my wife have to work an extra year and six years respectively to help pay for it. Judging by the recent performance of my pension fund it looks like I'll be keeping my little hatchback, already almost twenty years old, when I retire in a few years.

Come the revolution......

I was Her Majesty's M o D Civil Servant fot 41 years. Right at the outset my daddy told me that the job was secure, the pension was early and good, and the pay was ****e. Your choice, he said. The problem [or the advantage] is that in the early years we cannot predict how it will turn out.
**** happens, its how you dodge it that matters.

[Melchett01]

I agree with you about the company and it's liquidation, but will the people on the stations at least in the short term be brought into the MoD workforce as there are not enough in the armed forces to fill the gaps.

Well Reuters are reporting the Government have refused to step in should the banks not agree to new terms. If that happens I believe the administrators will he called in before the end of the month.

That said, part of me thinks there will be a u-turn. The political left will no doubt seize on job losses, pensions implications and impacts on infrastructure and already struggling services. The government isn’t in such a strong position either in Parliament or amongst the electorate it can be seen to be antagonising core voters when the bankers were bailed out. I know the bank bailout was under Broon’s watch, but they’ll use a lack of compassion for ordinary folk as a stick. I don’t think this is quite over just yet.

[heights good]

It's official now

Carillion to go into liquidation - BBC News (http://www.bbc.com/news/business-42687032)

[gijoe]

...the waiting for a replacement light bulb just got longer.

Shadow business sec Rebecca Long-Bailey says PFIs don’t work. No ****.

...meanwhile Middle East Peace Envoy Bliar continues to toddle off into the sun whilst stirring up a Brexit Coup.

G

[roving]

More on this

Construction group Carillion gone into compulsory liquidation and expects PricewaterhouseCoopers to be appointed as special managers, to act on behalf of the Official Receiver.

Carillion said it had talks with its key financial and other stakeholders, including the Government, at the weekend regarding options to reduce debt and strengthen the group's balance sheet.

Carillion also asked those stakeholders for limited short term financial support, to enable it to continue to trade while longer term engagement continued.

But it said that despite considerable efforts, those discussions had not been successful, and the board had concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect.

It said an application was made to the High Court for a compulsory liquidation of Carillion before opening of business today and an order has been granted to appoint the Official Receiver as the liquidator of Carillion.

The group said it anticipated that the Official Receiver would make an application to the High Court for PricewaterhouseCoopers LLP to be appointed as special managers, to act on behalf of the Official Receiver.

Chairman Philip Green said: 'This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.

'Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future and the Board is very grateful for the huge efforts made by Keith Cochrane, our executive team and many others who have worked tirelessly over this period.

'In recent days however we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.

'We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.'

[Cows getting bigger]

'In recent days however we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.

Ever wondered why? Big businesses don't just go under overnight. This has been badly managed for years. Blaming Qatar for late payment doesn't cut the mustard either. If you take a big contract, you make sure you're covered if that contract goes wrong.

I suspect that, once the dust has settled, we will see that the finances have been handled in a similar manner to my teenage daughter's piggybank; lots in, even more out.

[BEagle]

One wonders whether the RAF's PFI contractors are studying this....

Years ago at an FSTA meeting at Shabby Wood, when the subject of contractor financial stability was raised, the civil serpents dismissed it with the comment "No government PFI contractor will ever be allowed to go bust...." :rolleyes:

Today Carillion, but how looks the future for the nonsense of MFTS now?

[Finningley Boy]

They're not struggling to stay afloat any longer, that's the good news. The bad news is, the stern is about to slip below the waves and that'll be it.

FB

[tucumseh]

Years ago at an FSTA meeting at Shabby Wood, when the subject of contractor financial stability was raised, the civil serpents dismissed it with the comment "No government PFI contractor will ever be allowed to go bust...." :rolleyes:On the other hand Beags, some of us could see the problems a mile away. I was 'told' to PFI a Mission Trainer. There was a form to fill, as there always is. I wrote 'NO' in the 'overseas sales?' box, disaster was avoided, and programme delivered ahead of time, to cost and better performance. The same day, Apache rolled over on their equivalent and (presumably) said Yes to overseas sales. Not sure how many they sold. Then Tony Blair was voted in, inherited the mess, but let it ride.

Financial stability of contractors used to be a big deal. But at around the same time, a major contractor approached MoD to warn it was not going to make a profit on a major project. The project team was gathered and told to get off the company's back, they could deliver late and if it didn't work, that's ok. Senior staff approved the waiving of key elements. But there's certain things you can't just waive, as the aircraft can't fly. Westland did the work and billed the prime at the end of the job. They made an even bigger loss after that.

[mcdhu]

What Messrs T&G B did with their PFI initiative was to privatise the profit and the State own the risk - brilliant!!
We reap what we sow - taxpayers to note.
mcdhu

[dragartist]

Re your #42 Beage. The amount being charged by Tanker must well exceed the cost of delivery so they should be OK. Does anyone know if they are in profit and what sort of dividends are being paid out to shareholders or Bonuses paid out.
I note in the case of Carillion execs bonuses were protected and shareholders received a divi even though the company were in the S#1t

[Lyneham Lad]

Carillion collapses after rescue talks fail (https://www.thetimes.co.uk/article/carillion-collapses-after-rescue-talks-fail-lppct72nk?shareToken=5d3539c02e1ed78d4eaef89baa8bb3c5)

[Melchett01]

...the waiting for a replacement light bulb just got longer.



What are the odds - Op LIGHTBULB? Deployment of military personnel to support Defence infrastructure and estates.

Look on the bright side, get a squaddie in to fix your lightbulb and you might end up with Sky Atlantic bodged into your accommodation!

[gijoe]

What are the odds - Op LIGHTBULB? Deployment of military personnel to support Defence infrastructure and estates.

Look on the bright side, get a squaddie in to fix your lightbulb and you might end up with Sky Atlantic bodged into your accommodation!

I would be up for that - how hard can Op ILLUMINATE be? Oh...already self-trained for that. I sense a business opportunity running around darkened DIO estates.

As for Sky, add elec, gas, broadband to the...cough...menu. :ok:

[Percy Cute]

Carillion collapses after rescue talks fail (https://www.thetimes.co.uk/article/carillion-collapses-after-rescue-talks-fail-lppct72nk?shareToken=5d3539c02e1ed78d4eaef89baa8bb3c5)

Philip Green.
Is he a carillionairre?

[Just This Once...]

Amazed to see a government minister on the BBC reassuring Carrilion workers that those working on public programmes will still be paid and should continue to work as normal.

Meanwhile back in the real world Carrillion workers have had credit lines stopped, their procurement cards stopped, trade accounts suspended and leased assets withdrawn. I'm not sure if the minister understands what liquidation means or what happens to the assets that these workers depend on.

On the subject of 'liquid' a Carrillion worker on public contract found himself having to pay out of his own pocket for a full tank of diesel for his work van as the company payment card had been blocked this morning.

[treadigraph]

Meanwhile back in the real world Carrillion workers have had credit lines stopped, their procurement cards stopped, trade accounts suspended and leased assets withdrawn. I'm not sure if the minister understands what liquidation means or what happens to the assets that these workers depend on.

Have you got a source for that please?

[Just This Once...]

Direct from a few puzzled Carrillion workers as they did indeed come to work this morning. They pointed out that without the ability to lease heavy equipment or purchase consumables they will be at work-stop very quickly. They were also aware that a lot of these companies / sub-contractors had not been paid for a while and may also go to the wall.

[treadigraph]

OK, thanks for that.

[ricardian]

https://scontent-lht6-1.xx.fbcdn.net/v/t1.0-9/26239671_1955615694688239_7648570352238610475_n.jpg?oh=21da4 fa8d469a33bfaf2f26cc54c6ce1&oe=5ADE64CB

[Melchett01]

Well the cleaning staff in my Mess don’t appear to have been around today. Interesting to see if it’s a one off and things settle down with the Govt line that public service contracts will keep running or whether that’s it despite Govt assurances.

[4mastacker]

Moving from Pay-As-You-Dine to Cook-It-Yourself?

[BEagle]

ITV's Robert Peston is quoted as saying:
Carillion’s collapse is the definitive end of Tory and New Labour governments 25-year love affair with private provision of public services.

I also read from the BBC:

A Commons committee has announced it will hold an inquiry into government outsourcing following the demise of Carillion.

Bernard Jenkin, chair of the Public Administration and Constitutional Affairs Committee, said it would look at the "lessons to be learned from the collapse".

It will also look at wider issues in Whitehall around public procurement, IT and the relationship with non-public sector bodies.


Perhaps this will include the absurdity of MFTS?

[unmanned_droid]

Direct from a few puzzled Carrillion workers as they did indeed come to work this morning. They pointed out that without the ability to lease heavy equipment or purchase consumables they will be at work-stop very quickly. They were also aware that a lot of these companies / sub-contractors had not been paid for a while and may also go to the wall.

And that's one of the ways massive corporations like this both make money and try to escape facing reality. Screwing the little guys. If it were people it'd be classed as an abusive relationship.

[Olympia 463]

I lost my job in 1972 in the wake of the R_R debacle. We were not sub contractors to R-R, but a lot of people we subcontracted to were. They went bust as their bills were not paid. We lost several irreplaceable sources of highly specialised engineering and we eventually went bust as well as we could not fulfil our contracts. Watch for the ripples of this Carillion collapse as they spread through the little firms, who worked for the bigger firms, who worked for Carillion. This is going to be a bloodbath.

[NutLoose]

A Commons committee has announced it will hold an inquiry into government outsourcing following the demise of Carillion.

Bernard Jenkin, chair of the Public Administration and Constitutional Affairs Committee, said it would look at the "lessons to be learned from the collapse".

It will also look at wider issues in Whitehall around public procurement, IT and the relationship with non-public sector bodies.

In an ideal world these turkeys would find themselves standing outside the building in the freezing rain because the contractor servicing parliament had just gone bust.

[glad rag]

"Robert Peston is quoted as saying:"

You would have thought he'd learned his lesson :}


Hint.

http://www.dailymail.co.uk/video/news/video-1607526/Do-f-Miriam-Margoyles-prompts-apology-swearing.html

[Wander00]

I always thought Peston's rant about Northern Rock had a lot to do with precipitating the financial crisis

[Cazalet33]

https://s18.postimg.org/fvu5mkzah/Carillion.jpg

[NutLoose]

Well the cleaning staff in my Mess don’t appear to have been around today. Interesting to see if it’s a one off and things settle down with the Govt line that public service contracts will keep running or whether that’s it despite Govt assurances.

No problem....Ok this thing is called a Hoover, you plug one end into the wall and move the other end around the carpets... :E


https://dam.which.co.uk/e163bbb9-862f-48ab-babb-7f5eea4f2407.jpg

[pr00ne]

For all those banging on about this being the end of PFi deals and public sector outsourcing, you need to look at Carillion's last published accounts. The PFO and public sector contracts are all fine, heathy and very profitable.
It is on the construction side that they have made huge losses, they are the UK's second largest construction company, and it is here that they have got it disastrously wrong.

The PFI and public sector deals will be easy for the liquidator to sell on.

[Cazalet33]

https://ichef.bbci.co.uk/live-experience/cps/624/cpsprodpb/vivo/live/images/2018/1/16/8385524a-393f-44b4-8ae1-5030ad6cc66f.png

[pr00ne]

For the CEO of the second largest construction company in the UK that is hardly excessive.

[Cazalet33]

For a CEO of a company which was run into the ground by himself and his cohorts, it's massively excessive!

We've seen it before. Remember RBS?

[Olympia 463]

For all those banging on about this being the end of PFi deals and public sector outsourcing, you need to look at Carillion's last published accounts. The PFO and public sector contracts are all fine, heathy and very profitable.
It is on the construction side that they have made huge losses, they are the UK's second largest construction company, and it is here that they have got it disastrously wrong.

The PFI and public sector deals will be easy for the liquidator to sell on.

That's all very well, and at the end of the day the good bits will be passed on. However the whole firm is at a standstill and will not be paying wages so one hopes that the hapless workers have a month or two's salary stashed away. I was lucky when I got thrown on the scrapheap when my employer went into liquidation. The liquidator had a few jobs which if finished would bring in some cash. I had been a chief designer, but I worked for six weeks as a contract draughtsman while I found another job.

[Boy_From_Brazil]

Basic Contract Management Rule No 1:- Never award a major contract without performing due diligence on the Contractor.

This has clearly never been undertaken. The serious issues with Carillion have been known about for some time.

[langleybaston]

For the CEO of the second largest construction company in the UK that is hardly excessive.

It is excessive if he cocks up.

Clearly somebody upcocked. "The buck stops here"

[Melchett01]

For all those banging on about this being the end of PFi deals and public sector outsourcing, you need to look at Carillion's last published accounts. The PFO and public sector contracts are all fine, heathy and very profitable.
It is on the construction side that they have made huge losses, they are the UK's second largest construction company, and it is here that they have got it disastrously wrong.

The PFI and public sector deals will be easy for the liquidator to sell on.

I’m not entirely convinced by that, I think it will certainly intensify the debate about public/private sector outsourcing and relations. And the Tories are not in much of a position to weather another storm right now, especially if the effects spread into the extended supply chain thus exacerbating ‘contagion’ amongst the electorate. I’m politically incoherent in terms of who I support, and although my tendency is to the right in this case I think JC has raised a valid point that needs at least considering.

As for the accounts being healthy for their public sector work, that makes no odds, you have to look at the totality of the accounts to say a company is healthy. As it is, it looks as though Carillion’s finance department had been engaged in all sorts of schemes - legal I should add - to mask the dire state of their cash flow such as rising debt levels which didn’t feature in the main debt numbers on the balance sheet and mixing financing and operating cash flows. It was all there if you did the requisite due diligence, going back a good few years. Some of it apparently due to unhappy customers not paying up after bodged jobs. But in all, a very good example of why cash is king in the business world - for all their multi-billion contracts they simply didn’t have sufficient cash to keep the lights on. And when that became apparent valuations went into free fall and it was only a matter of time.

And whilst the public sector contracts will likely be sold on, it won’t be a good deal for the public purse, as I suggested right at the start, most sensible firms will see they have us over a barrel.

[NutLoose]

IT was some of the support companies featured on the news I feel really sorry for as they have already started to let staff go as they are owed a small fortune, one company was owed £1,000,000 in unpaid work.

[[email protected]]

An interesting point was made by Vince Cable on the radio yesterday - the Govt don't have specialist contract negotiators/writers (I believe we used to once upon a time) - the French have an academy for that specialisation, properly trained people with experience in due diligence and finance.

As a country we still haven't learned the warning about 'not putting all your eggs in one basket' and continue to believe that economies of scale work, both militarily or financially - that is how you create behemoths that are 'too big to fail'.

Couple that with a desire from both major parties to move things off the treasury balance sheet - welcome the PFI fiasco - and it's no surprise we have ended up here.

[tucumseh]

the Govt don't have specialist contract negotiators/writers (I believe we used to once upon a time)

In MoD this may have gone full circle. Commercial staff are encouraged to gain professional qualifications, although how they compare to industry professionals I don't know.

Setting this aside, there are two sure-fire ways to a successfully and timely contract being awarded. One, get the company to draft it. Most delays are caused by Commercial faffing around for months over terms and conditions, trying to get the company to accept unsuitable ones. It ain't a contract until MoD agrees it is, so there can never be any harm caused. Two, the technical project manager negotiates and agrees the contract, as used to be the case with anything airworthiness or repair related. Commercial don't like this as they are taught, wrongly, only they can sign a contract. Read the regs and get over it. Underpinning this, make sure the Schedule of Requirements reflects what the Service really needs and what is possible; which seldom aligns with what DEC asks for. Downside - to achieve this you need experienced, trained technical staff. Otherwise, it's straight forward.

But none of this counts for anything if you get a political over-rule, to let the contract on a company who didn't bid, who happen to be in a Defence Minister's constituency. Perhaps not a million miles from the Carillion problem.

[Olympia 463]

Sometimes politics over rules sensible debate. I left a company in the defence industry when the technical director and sales chief decided not to accept my estimate of how many man years of work would be needed to design a new tank sight. I was Chief Designer and had been hired in to buck up their design department. I had already won the contract for the image intensified night sight for the SA80 rifle for them and introduced new more efficient working practices in the design area. They over ruled me and went ahead using a lower figure which I knew could not be achieved in order to undercut our oppositon. Money was lost, the parent company sold the outfit to the French (not long after I left) and all the culprits lost their jobs.

Earlier in my career I worked for a very large blue chip company in the heavy electrical business. They had a whole department whose job it was to work how long they could delay paying their sub contractors before legal action was on the cards.

Sounds like Carillion had both these things going on.

[Wander00]

As a mere Chartered Management Accountant, our wonder what our auditing cousins were doing for the last few years

[PDR1]

It is excessive if he cocks up.

Clearly somebody upcocked. "The buck stops here"

As I understand it the current CEO was brought in last year to try to turn things around after the company got into difficulties during the time under his predecessor. Simplistic jeering about "upcocking" may not be appropriate, but it does play to the crowd.

Throw in a few knob gags while you're at it and you'll get yourself an audience.

It will be an ignorant, brainless audience, but still an audience...

PDR

[glad rag]

IT was some of the support companies featured on the news I feel really sorry for as they have already started to let staff go as they are owed a small fortune, one company was owed £1,000,000 in unpaid work.

By that stage alarm bells should have been deafening ..

[NutLoose]

The bank said that all invoices presented for payment up to Carillion’s collapse on Monday have been paid.
Carillion’s creditors, including thousands of subcontractors, also face receiving less than 1p of every pound they are owed, according to court documents.
UHY Hacker Young partner Peter Kubik said: “The secured creditors, which are mostly banks, are owed roughly £900m and will get first bite of the company’s remaining assets as it gets liquidated.
“A prescribed £600,000 will be spread extremely thinly amongst trade creditors who are owed more than £100m in total.
“We are already in conversation with several creditors who are owed in excess of £1m each and suggest anyone in a similar position seeks professional advice.”
https://www.constructionnews.co.uk/companies/contractors/carillion/banks-hit-back-at-carillion-supplier-payment-claims/10027127.article


That situation probably came about due to this


https://www.constructionnews.co.uk/markets/sectors/rail/carillion-rail-suppliers-will-not-be-paid-for-work-before-liquidation/10027117.article


In a letter obtained by CN, Carillion Rail’s supply chain manager James Charlesworth told suppliers that outstanding bills for any goods or services provided before its liquidation on Monday would not be paid
Carillion is currently Network Rail’s second biggest supplier and is currently delivering a number of key electrification projects on the Midland Main Line, the North-west hub and the Shotts line between Glasgow and Edinburgh.
A number of Carillion’s key suppliers will be exposed to the unpaid work and are likely to be hit for millions of pounds in outstanding payments.
The unpaid work would likely cover the Christmas period, a time when a large proportion of Network Rail work is carried out.
Earlier this week Network Rail had said: “Carillion’s work would continue for the time being as Network Rail works with the official receiver and special manager to ensure the continuity of its project work.”
............

[BEagle]

Failure to pay reminds me of this old joke:

A boy was at a mental arithmetic class. The teacher put the following question to him:

"Your father owes someone £10000 and agrees to pay it back every month in equal instalments for a period of 10 months. After 4 months, how much does he still owe?"

"£10000, sir"

"Rubbish, boy - you don't know your maths. What's your name?

"Maxwell, sir - and you obviously don't know my father Robert!"

:hmm:

[langleybaston]

As I understand it the current CEO was brought in last year to try to turn things around after the company got into difficulties during the time under his predecessor. Simplistic jeering about "upcocking" may not be appropriate, but it does play to the crowd.

Throw in a few knob gags while you're at it and you'll get yourself an audience.

It will be an ignorant, brainless audience, but still an audience...

PDR

I was under the impression that we were indeed discussing the emoluments of the predecessor. I certainly was. Would you take a moment to reconsider your rebuke?

[treadigraph]

"Maxwell, sir - and you obviously don't know my father Rupert!"

I think you are mixing your press barons there, BEags...

[NutLoose]

Perhaps there is a case here for someone to jump off a sinking ship.... or a luxury yacht if you prefer.

[treadigraph]

Perhaps there is a case here for someone to jump off a sinking ship.... or a luxury yacht if you prefer.

I think they would most certainly be given a helping hand Nutty.

[BEagle]

Robert, not Rupert as you pointed out, Treaders!

Hypothetical question. Let's imagine that an aspect of RAF pilot training had been contracted out to an organisation, call it 'Airflite Training'. Airflite have been awarded a contract to start this training with everything in place for the first students on 1 Jan 2018. But they haven't been able to meet the contracted date, so MoD has had to find a short term alternative in order to train their pilots.

Let's now imagine that various training providers have responded and a contract has been agreed with one of them.

Bearing in mind the Government's refusal of a state bail-out for Carillion, who now pays for Airflite's failure? Their shareholders - or the tax payer?

Surely it should be the former?

All hypothetical, of course.......:hmm:

[roving]

The answer to the question you posed BEagle is that all depends on the terms of the contract.

1. Does the contract stipulate time is of the essence?

2. Are there contractual penalty clauses for non performance?

3. Does the contract provide that in the event of non performance for any reason HMG is entitled to treat it as a breach enabling it to end the contractual arrangements?

My guess would be that if it is just a short-term delay, in the absence of express terms & conditions enabling it to do so, HMG would not be able to employ alternative contractors and recover the costs from Airfllite.

[BEagle]

Are there contractual penalty clauses for non performance?

Does the contract provide that in the event of non performance for any reason HMG is entitled to treat it as a breach enabling it to end the contractual arrangements?

Who would have been stupid enough to have outsourced such a core requirement without there being non-performance clauses in the contract?

[Yellow Sun]

Who would have been stupid enough to have outsourced such a core requirement without there being non-performance clauses in the contract?

Don’t tell him Pike!

YS

[Bigbux]

Setting this aside, there are two sure-fire ways to a successfully and timely contract being awarded. One, get the company to draft it. Most delays are caused by Commercial faffing around for months over terms and conditions, trying to get the company to accept unsuitable ones. It ain't a contract until MoD agrees it is, so there can never be any harm caused. Two, the technical project manager negotiates and agrees the contract, as used to be the case with anything airworthiness or repair related. Commercial don't like this as they are taught, wrongly, only they can sign a contract.

Was the irony intended?

[NutLoose]

You can write the strongest most bulletproof contract in the world, but if you sign it with a company that is rapidly going down the tubes and goes bust with debts of £1 billion, you might as well have written it in sand for all the good it will do you.




...

[dragartist]

Re#88 point 2.
I note from BBC News last night about the Liverpool hospital they were having to pay. £1.5m every month late. So far a year behind. No one is going to recover the penalty now!
Also wondering who will pay to complete the building. Not too much of a worry unless Carillion have been paid in advance.
I don’t fancy the job of having to unravel the mess and refinance any deals.
When companies get taken over (prior to any collapse) the new company should accept the liabilities as well. I know of cases in Defence where this never happened and we paid twice. I was always uncomfortable signing the 640s and would raise a note for my boss to sign to cover my arse.

[mikemmb]

Just read that there may be some justice in the Carillion debacle, apparently in the event of the company going bust the men in big suites have a contract clause which means they have to give any dubious money back.............!

"Carillion introduced the “clawback” provision as part of its pay policy in 2014 that would allow the company to demand executives return cash and share bonuses for up to two years after payment – a move it said brought the business in line with the updated UK Corporate Governance Code"

OH NO! .........You are not going to believe this but reading the article further, by an amazing coincidence the carillion remuneration board subsequently changed the rules on this so that "wrongdoing" has to be proved before ill gotten gains have to be returned! Who would have believed it?

Still its good news for manufacturers of Pig Troughs, Snoughts for the use of!

[flash8]

Still its good news for manufacturers of Pig Troughs, Snoughts for the use of!

One also wonders how many brown envelopes were floating around the government.

[Melchett01]

Seems Capita is also struggling. Not to the same extent as Carillion given its cash reserves, but it does beg questions about the principle of the private sector being better placed to provide public services.

[MPN11]

I seem to recall that M.P.B.W. weren't held in the highest esteem, though ;)

[Pontius Navigator]

Having written a contract with measurable outputs and performance criteria, commercial thought it overly complicated and relaxed the requirements and removed the measurable criteria. Were they being realistic knowing penalties would not be paid or as an effort to reduce bid prices?

[BEagle]

MPN11, I don't think that the Ministry of Public Blunders and Wonders went bankrupt though?

Biggest expense was probably repainting the logos on all their vehicles every time they changed their title....Ministry of Works...MPBW...Department of the Environment......Doomwatch??

[BirdmanBerry]

OH NO! .........You are not going to believe this but reading the article further, by an amazing coincidence the carillion remuneration board subsequently changed the rules on this so that "wrongdoing" has to be proved before ill gotten gains have to be returned! Who would have believed it?

Still its good news for manufacturers of Pig Troughs, Snoughts for the use of!

But the Insolvency Service would overrule any internal contract and their directorships wouldn't be protected if the IS can prove they were trading insolvently which it looks like they may have been. If they carried on trading when they knew they couldn't cover the bills then they can be fined/banned etc.

[Wander00]

Only a couple of questions


What were the auditors paid, and what did they do for it


How much will the liquidators be paid


Just asking

[unmanned_droid]

Only a couple of questions


What were the auditors paid, and what did they do for it


How much will the liquidators be paid


Just asking

I think you probably know that the answers are 'substantial'.

If the liquidators weren't paid, you'd not get anyone to do it and the situation would be even worse for those owed money and not a 'protected' creditor.

I would prefer to ask why banks are protected but small companies aren't?

[NutLoose]

I would prefer to ask why banks are protected but small companies aren't?

Especially as the banks would have a fair understanding of the companies financial state of affairs and will have lent monies at no doubt exorbitant rates based on that knowledge, where as small companies subcontracted to Carrilion wouldn't be aware of the financial risks they were undertaking.

[treadigraph]

Interesting to see how this goes - as a former Carillion employee I'd like to see them swing along with Carillion's so called senior leadership... be nice if our redundancy costs were refunded to the taxpayers.

KPMG faces £250m negligence lawsuit over Carillion

Claim expected to be first time government liquidators have attempted to sue auditors over major insolvency

https://www.ft.com/content/3b10ca83-7818-46d5-b492-8c86857ebd33

[NutLoose]

Good, they are just as guilty as Carrilion and why should the taxpayer fund their incompetence.

[treadigraph]

I wonder whether, if the OR is successful in their case, creditors who have lost out would be able to follow suit.

[Richard Dangle]

Claim expected to be first time government liquidators have attempted to sue auditors over major insolvency

In UK terms maybe, but the "big four" used to be the "big five" before Enron put paid to Authur Anderson :eek:

[treadigraph]

KPMG accused of misleading watchdog over Carillion audit

Accusations come as the Government prepares to sue KPMG over its audit of Carillion in a bid to reclaim £250m on behalf of creditors

The accounting firm is facing a formal complaint from the Financial Reporting Council (FRC) over alleged misconduct amid a long-running investigation into the failure of Carillion, which was one of the Government's biggest contractors before it imploded in early 2018 under £7bn of debts (https://www.telegraph.co.uk/business/2019/07/28/carillion-collapse-cost-taxpayer-162m-crossrail-overspend/).

Regulators' have complained about information provided by KPMG and its staff during an FRC inspection of how it audited Carillion’s financial statements (https://www.telegraph.co.uk/business/2020/09/21/watchdog-finds-potential-breaches-kpmg-carillion-audit/) in the year to December 2016.

Similar accusations have also been filed against KPMG in relation to the audit of another firm, Regenersis, in 2014.
https://www.telegraph.co.uk/business/2021/09/01/kpmg-accused-misleading-watchdog-carillion-audit/#comment