Government ministers, local councils and liquidators are scrambling to keep UK public services operating after Carillion, which managed hundreds of public sector projects and vital public services, collapsed into liquidation.
Specialist construction partner, Peter Kitson, suggests that the Public Contract Regulations are key to understanding Carillion’s market position:
”The procurement rules (the Public Contracts Regulations) which govern public sector procurement are central to understanding what has happened here. Almost all Carillion contracts have been competitively tendered under those procurement rules.
The rules require public sector clients to investigate and possibly to exclude any tenderer whose bid is ‘abnormally low’. One contributory factor here may be that Carillion has tendered at very low margins, possibly unsustainably low, in order to win these huge volumes of work.
If such bids have succeeded, that can only mean either than the Regulations themselves are ineffective or that public sector clients lack the confidence or the expertise properly to enforce those rules.
Following this morning’s announcement, I am sure that many of those public sector clients will be seeking advice on the extent to which those same procurement rules allow short term emergency replacement contracts to be let without formal procurement.”
View Peter's comments and more on The Guardian's live updates on the Carillion liquidation.
Peter specialises in non-contentious construction and procurement law. He drafts and negotiates development agreements, building and engineering contracts and professional appointments as well as advising on procurement and contract strategy. Peter also provides on-going advice and support in relation to the effective management of existing construction contracts.