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“Tragic news”: GSA statement on Carillion

Monday, January 15, 2018

LONDON, 15/1/18: Firstly, of course, it’s only right to express our dismay at these events and to extend our deepest sympathies to the thousands of Carillion employees currently facing an extremely uncertain and worrying future. We can only hope that as many as possible of these jobs will be safeguarded by any potential rescue action, or transferred to other service providers under TUPE legislation in the usual manner.

The collapse of Carillion is, simply, tragic news: the list of major UK services companies is not a huge one and the apparent collapse of one of its number is deeply troubling for the market generally – and perhaps symptomatic of the intense pressures facing the industry today. Be that as it may, however, we have to ask: how did things get this bad for Carillion specifically? How did such a huge and hitherto successful company fail so spectacularly and at such apparent cost?

While many details have yet to emerge it appears that Carillion’s fall has resulted largely from substantial cost overruns on merely three very large contracts. There are of course countless potential causes of failure in outsourcing – but correct relationship management, constant review and a decent level of transparency go a long way towards safeguarding against such breakdowns, and any autopsy into recent events should certainly examine whether the above factors were present to the requisite standard in the three contracts in question (and, indeed, in any others which contributed to Carillion’s woes.

Properly managed, properly governed, properly scrutinised outsourcing arrangements simply should not go bad in this way – and if they do, remedial action should be taken as soon as possible, involving all stakeholders from the start. It’s easy to blame Carillion but those on all sides of these deals had a responsibility for their successful implementation and completion, and it remains to be seen to what extent the right governance was or was not lacking on the part of Carillion’s customers and partners.

We do not yet know how this situation will unfold in terms of the measures to be taken to ensure the integrity of the many services provided by Carillion to the British public; calls have already come from many corners for the company, or individual contracts, to be nationalised, but considering the government’s track record can we possibly be confident that this would be the best – or least bad – outcome?

On the other hand, allowing private sector organisations to cherry-pick still-profitable contracts whilst leaving the state to pick up the tab for bedevilled ones would surely be insurmountably unpalatable to the public and further add to the cloud hanging over the sector as a result of Carillion’s untimely demise.

Finding a solution to this crisis which appeals to all parties involved may well be impossible – but whatever the final decision, the priority now must be safeguarding the provision of those public services for which Carillion has up to now been responsible, and protecting as many as possible of those jobs whose future is now in doubt. Anything less would be a failure more significant even than the collapse of one of the country’s most important and most prominent service providers.

Kerry Hallard
CEO, Global Sourcing Association (GSA) UK

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