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04
Jan

Contract disaggregation proves lessons are being learned from Carillion’s collapse


Public procurement analyst, Tussell, believes the UK Government is learning from the collapse of Carillion early in 2018 and breaking more contracts down into smaller and less risky schemes.

 

Tussell’s research, published at the end of 2018, reveals that excluding frameworks the total lifetime value of procurement contracts issued by the wider public sector in 2018 was £49.5 billion. That’s a £5 billion (10%) decrease on 2017. However, the number of public sector contracts awarded actually increased by 20%, to 40,130.

 

Gus Tugendhat, Founder of Tussell, says: “Our analysis of the top suppliers to Central and Local Government in 2018 shows positive signs that the government is learning the lessons of the collapse of Carillion. There are indicators that big contracts are being broken up, troubled suppliers are being monitored closely and there is increased engagement with SMEs and social enterprises, particularly at the Local Government level. However, government still remains quite reliant on a small number of companies, indicating that there is still more to be done in terms of reducing risk in the public sector supply chain.”

 

Eight of the Cabinet Office’s designated ‘strategic suppliers’ make the top 20 Central Government regular suppliers by value in 2018, including troubled outsourced provider, Interserve, as well as Capita and Amey. 

 

According to Tussell, Interserve was awarded contracts worth £294 million less from Central Government than in 2017, a 75% decrease in award value. Given Interserve has announced multiple profit warnings in the last two years this is an encouraging sign that the government is learning the lessons of Carillion, which was awarded several high value contracts from Central Government even after repeated profit warnings.  

 

Interserve has recently announced a financial rescue plan and changes to its structure, which will see its Citizen Services division – which comprises Interserve Healthcare, Interserve Learning and Employment and Justice – merge with its Support Services division. Interserve says the structural changes underline its commitment to its growth strategy and the aim is to provide the best possible service to customers.

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